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RSS Frontier Dev PLC (FDEV) Add to Alerts list Print Mail a friend Tuesday 08 September, 2015 Frontier Dev PLC Final Results RNS Number : 3406Y Frontier Developments PLC 08 September 2015 ﻿ 8 September 2015 Frontier Developments plc Year End Results Frontier Developments plc (AIM: FDEV, "Frontier", the "Group"), a leading developer of video games based in Cambridge, UK has published its full year results for the year to 31 May 2015 showing record revenues and profit following the highly successful launch of Elite Dangerous in December 2014. Financial Highlights

2015 2014 % Change 2013 Net Cash Balance £10.5m £8.4m +24% £7.2m Revenue £22.8m £9.5m +139% £12.1m EBITDA £6.1m £0.3m +1,790% £2.9m Adjusted Operating Profit/(loss) £2.5m (£3.5m) +171% £1.8m Operating Profit/(loss) £1.6m (£1.7m) +192% £1.1m EPS/(LPS) 4.9p (5.8p) +185% 4.2p Adjusted EPS/(LPS) 7.4p (11.4p) +165% 7.3p Deferred Income £0.7m £2.5m (70%) £1.3m Operational Highlights · Strategic step: The first stage of transition was successfully completed as Elite Dangerous launched. At the end of August 2015 it had sold 825,000 paid units (excluding free 'demo' units) and generated 84% of Group revenues via a self-publishing business model including associated merchandise. · Self-publishing contributed significantly to record revenues, up 139% to £22.8 million, a cash increase of £2.1 million to £10.5 million, EBITDA up 1,730% to £6.1 million and an adjusted operating profit up 171% to £2.5 million whilst still in transition. · The Group expanded the reach of Elite Dangerous through subsequent releases on Mac and Xbox One platforms in addition to PC, and via the Steam and Xbox Live distribution channel in addition to the Group's own online store. The Group's COBRA technology facilitated the significant technological and logistical achievement of simultaneous multi-platform and multi-channel releases whilst players all share the same server environment. · All remaining work-for-hire projects were completed, as Tales from Deep Space with Amazon and ScreamRide with Microsoft released. · The organisation was restructured for fully self-published operations by centralising development in the Group's Cambridge headquarters and changing the staffing mix via targeted recruitment and redundancy at a cost of £0.3 million. · The Group started the development of its second self-published franchise, Planet Coaster, which was also publicly announced. Trading Update · Up to 31 August 2015 the Group had sold approximately 825,000 units of Elite Dangerous. At the Gamescom show it announced Elite Dangerous: Horizons, a new paid-for season of expansions for the game, to a positive critical reception. Net cash balances at 31 August were approximately £10.7 million. · An early video of Frontier's second franchise Planet Coaster was shown for the first time at E3's inaugural PC Gaming Show. The game is set to be publicly released in Q4 of 2016 and is available now on a pre-order basis. David Braben, Chief Executive of Frontier Developments, said: "This has been a great year for us, and the first part of our transition has been successfully completed. The process of the beta and then release of Elite Dangerous went very smoothly and the regular delivery of new elements for the game has helped build an ever-growing fan base. With our first franchise about to enter its second season, and the announcement of our second, Planet Coaster, Frontier is in a very strong position, and very well placed for an exciting future and further revenue growth." Enquiries: Frontier Developments +44 (0)1223 394 300 David Braben, CEO David Walsh, COO Neil Armstrong, CFO Numis - Nomad and Joint Broker +44 (0)20 7260 1000 Simon Willis / Jamie Lillywhite (Nomad)

Finncap +44 (0) 207 220 0500 Matt Goode/Giles Rolls Tulchan Communications +44 (0) 207 353 4200 James Macey White/Matt Low About Frontier Developments plc Frontier Developments plc, listed on the AIM stock market (AIM: FDEV), is a leading independent game developer founded in 1994 by David Braben, co-author of the seminal 'Elite' game. Based in Cambridge, Frontier uses its proprietary 'COBRA' game development technology to create innovative games across videogame consoles, computers, smartphones and tablets. www.frontier.co.uk Chairman's Statement This has been a landmark year for our Company. Two years ago we embarked on a transition plan. I am very pleased to report that the first stage of that transition is now complete. Last year 81% of our revenue was derived from 2 clients on whose behalf we developed games. This financial year 84% of our sales (including associated merchandise) have come from the consumers who bought our self-published game Elite Dangerous. In 2016 we expect 100% of our revenue to be booked from consumers buying our self-published games. This transition has involved significant internal re-organisation as well as adapting from a B2B to B2C model. I take this opportunity to thank all our employees for their dedication, long hours and hard work. In 2015 we also released the last of our games developed for third parties: Tales from Deep Space on behalf of Amazon and ScreamRide for Microsoft. We thank these customers and continue to maintain a close relationship with them as they play key parts in the distribution of our self-published games. 2015 above all else has been the year of Elite Dangerous. We have built a virtual galaxy with 400 billion star systems in which players can engage with each other in combat, explore the stars and their planets, mine resources and trade them. The second step in our transition is to take the success of Elite Dangerous to become a multi-franchise game publisher. We recently announced that our second franchise, Planet Coaster, is being built on our knowledge and long experience of roller coaster games. We expect to reveal details of a third franchise once Planet Coaster is released. This will keep our creative teams busy for many years ahead. As well as developing franchises, the core of our capability must focus on remaining at the forefront of game development technology. Our COBRA engine, which enables us to release games on many platforms, remains an important effort. Elite Dangerous was one of the first games to showcase the possibilities of Virtual Reality (VR) and we intend to stay in touch with hardware manufacturers of VR systems such as Facebook's Oculus Rift, Valve and HTC's Vive, Microsoft's HoloLens and Sony's Morpheus as 3D virtual reality becomes more commonplace. Elite Dangerous has now been released on PC, Mac and Xbox One, and we will continue to invest in releases to achieve the maximum customer reach. In last year's statement I said that "In future years, starting with 2015, we will see the harvest of the seeds we have sown." We have delivered a transformation in business model, achieved a record level of revenue, sold our first developed game to 825,000 consumers (the majority through our own web store), re-engineered our development capability (from third party published to self-published) and announced a net profit in the financial year. Looking ahead I see a multi-franchise game developer / publisher with its games being distributed on the most modern and best hardware platforms, achieving sustainable returns for our shareholders. Activision Blizzard Inc and Electronic Arts are good exemplars as to where we are heading. Our Company could not achieve its success without the hard work, creative talent, dedication and perspiration from our exceptional employees. I take this opportunity to thank them on behalf of all shareholders. Equally, our transition would not have been possible without the financial support of our shareholders and backers. I take this opportunity to thank them on behalf of all employees. Chief Executive's Statement We are delighted to have returned to profit this early in our transition. We raised funds during the Kickstarter crowd-funding at pre-IPO and IPO in order to fund the transition but, with hindsight, the process has been more successful and more cash generative than anticipated. We successfully launched Elite Dangerous via our own web-based store and have continued to support it with regular significant expansions. We reached new audiences for the game by supporting new distribution channels and platforms with Steam, Mac and Xbox One. As we completed our obligations to third party publishers, the success of Elite Dangerous allowed us to start investing in a second self-published franchise in anticipation of higher future returns. Planet Coaster is a game in the 'Tycoon' genre; a teaser trailer was launched during the E3 trade show in June. Planet Coaster will launch in 2016 and will allow the Group to make use of its proven expertise in the 'Tycoon' genre, as Elite Dangerous has in its genre. The significantly higher net receipts from self-publishing Elite Dangerous compared to our previous work-for-hire business model enabled Frontier to more than double headline revenue for the year to £22.8 million, and the net cash balance increased by £2.1 million to £10.5 million at 31 May 2015. This allowed us to generate a pre tax profit of £1.6 million (EBITDA of £6.1million) whilst still in a planned transition. Just over half of our developers are working on Elite Dangerous, and the rest are now working on Planet Coaster. The second stage of our transition will be complete in late 2016 when Planet Coaster is planned to ship. Sales of our first major franchise, Elite Dangerous, are tracking well. Sales figures of Elite Dangerous have already been made public over the year, and as of the end of August 2015 stood at approximately 825,000 unit sales. In addition to our major self-published franchises, we released a port of our classic PC game RollerCoaster Tycoon 3 for iOS (Apple) devices on 13 August 2015. Our work for external publishing partners in the financial year included Amazon Game Studios release of Tales from Deep Space for Kindle Fire devices, and subsequently on iOS. We also worked for Microsoft Game Studios on the release of ScreamRide for Xbox One, digitally available via Xbox Live in March. Overall we have had a great year. This is down to the hard work of our staff, and the great support from our many fans around the world. Strategy Transition to self-publishing The first stage of Frontier's transition to self-publishing is complete. Elite Dangerous, Frontier's first major franchise, is in the market. It is earning significantly more revenue with higher margins from unit sales than by working for third party publishing partners, despite the development process being the same. Having successfully completed its obligations to third party publishers during the financial year, Frontier used the staff who had been allocated to work-for-hire contracts to start investment in the creation of a second major self-published franchise in anticipation of higher returns in the longer term. The game is a strategy / simulation genre, rollercoaster-based title - Planet Coaster - due for release in Q4 2016. Since completion of external publisher contract work with Amazon Game Studio, shortly after the end of the financial year, just over half of Frontier's developers have been working on Elite Dangerous, with the rest working on Planet Coaster. The second stage of Frontier's transition will be complete in late 2016 when Planet Coaster is planned to ship Repeatable model over multiple franchises Frontier's strategy is to build up key franchises over time. Frontier is following the pattern of successful franchises in the games industry by planning for their growth over many years, releasing new content and new platforms to extend addressable markets, while working to build a supportive fan base. Frontier has used this model for Elite Dangerous and is now repeating this for Planet Coaster, which Frontier expects to follow a similar profile over time. The company plans to begin a third franchise around the time of Planet Coaster's launch, using the same philosophy. Elite Dangerous In addition to the launch of Elite Dangerous itself, Frontier has released three 'expansions' for Elite Dangerous, called 'Community Goals', 'Wings' and 'Powerplay', with two further expansions to come in calendar 2015. This represents a 'season' of content, with each expansion creating new interest in the game. Frontier has also reached new audiences through the Valve's Steam distribution channel, and online market place, a community of 25 million gamers and added support for new platforms with Apple Mac and Microsoft XBox One. Subsequent to the end of the financial year, Frontier announced Elite Dangerous: Horizons. This is a second 'season' of major gameplay expansions for Elite Dangerous on PC, announced during the Gamescom games show in Cologne, Germany. This announcement made clear Frontier's plans for continued monetization of the Elite Dangerous franchise. Additional expansions to the game will continue to be released in paid seasons - all players will fly together in the same galaxy but access different features depending on which season they have purchased. Planet Coaster The Group has a very successful track record in developing games of the strategy / simulation genre, for example RollerCoaster Tycoon 3 and Zoo Tycoon for PC and XBox One respectively. Originally titled 'Coaster Park Tycoon', Planet Coaster was renamed to help communicate the fresh approach the game will bring to the strategy / simulation genre and differentiate it from a plethora of games in the genre with the word 'Tycoon' in their title, using the sub-title 'Simulation Evolved'. 'Tycoon' has latterly become synonymous with a perception of low-quality in the minds of today's consumers. A trailer video for Planet Coaster premiered at the PC Gaming Show held during the E3 tradeshow in Los Angeles in June 2015. This was well received and Frontier believes it was successful in both raising awareness of the new game and establishing its position in the market as a modern-day continuation of the Group's previous work on high-quality strategy / simulation titles. COBRA Elite Dangerous was created using the latest evolution of the Group's COBRA technology and tools. It included several ground-breaking features such as a novel hybrid server architecture, which offers significant cost advantages over other approaches and an ongoing player-driven story. Additionally, the Group has used the cross-platform nature of COBRA to release Elite Dangerous on new platforms such as Apple's OS X operating system for Macintosh computers (the first time this platform has been supported by COBRA) and Microsoft Xbox One. The Group's support of additional distribution channels for Elite Dangerous from Valve and Microsoft was facilitated by linking its own online store with Steam and Xbox Live, two of the leading gaming digital eco-systems. COBRA technology facilitated the significant technological and logistical achievement of simultaneous multi-platform and multi-channel releases whilst players all share the same server environment. Key performance indicators Measure of growth: Revenue (£'000) 2015 22,766 2014 9,541 2013 12,072 Measure of profitability: Adjusted Operating Profit (£'000) 2015 2,474 2014 (3,470) 2013 1,830 Investment in self-publishing Man months 2015 1,531 2014 933 2013 376 Investment in technology Man months 2015 333 2014 301 2013 190 Diversifying revenue streams % of revenue by segment 2015 2014 2013 Self-published 82% 5% 4% External Publishers 15% 81% 94% Royalties, Merchandise and other income 3% 14% 2% Outlook and Current Trading update Following the successful completion of the first stage of our transition the Board expects the Group to be well placed as it develops its IP into world class franchises. Frontier is on course to launch the Xbox One version of Elite Dangerous in September 2015 and the follow up season of expansions, Elite Dangerous: Horizons, in the fourth calendar quarter of 2015. Elite Dangerous: Horizons is a season of major gameplay expansions for Elite Dangerous, beginning with Planetary Landings on 1:1 scale worlds across the Elite Dangerous galaxy. Elite Dangerous: Horizons will continue to introduce major new features and gameplay as the season continues into 2016, enriching the Elite Dangerous experience with new activities and new ways to play. The Board expects further strong revenue growth in the current financial year. The timing of the release of Elite Dangerous: Horizons, expected to be around our half year end, will likely have a significant impact on the half-on-half phasing of the current year's revenues. As planned, Frontier has started development on Planet Coaster, set for release in the fourth calendar quarter of 2016 as a second franchise. The launch of Planet Coaster will represent the end of the next stage of our transition, delivering a fully self-published revenue pipeline that maximises returns from the use of our established expertise and pool of IP. We will also continue to identify further franchises that would make full use of our established expertise and IP in order to further build our revenue pipeline for the longer term. Up to 31 August 2015 the Group had sold approximately 825,000 units of Elite Dangerous. At the Gamescom show it announced Elite Dangerous: Horizons, a new paid-for season of expansions for the game, to a positive critical reception. Net cash balances at 31 August were approximately £10.7m.An early video of Frontier's second franchise Planet Coaster was shown for the first time at E3's inaugural PC Gaming Show. The game is set to be publicly released in Q4 of 2016. Financial Review Trading Results In the financial year ended 31 May 2015, Frontier Developments delivered the first key milestone within a planned transitional period as it 'self-published' its first major title, Elite Dangerous, on PC and Mac platforms. The Group's operating cashflow was £7.3 million (2014: £0.3 million) and its investment in non-current assets was £4.6 million (2014: £4.4 million), consequently net cash balances rose to £10.5 million from £8.4 million, and the Group was able to pay back early the interest free loan from the Atlantic Canada Opportunities Agency. The Group is once again debt free. Revenue more than doubled to £22.8 million from £9.5 million, and EBITDA rose to £6.1 million from £0.3 million. The Group delivered an operating profit of £1.6 million compared with an operating loss of £1.7 million in the prior year. Adjusted operating profit (being revenue less non-cash expenses) was £2.5 million (2014: loss (£1.3 million)). Basic earnings per share were 4.9 versus (5.8) pence loss per share in the prior year, and on an adjusted basis (this measure, set out in note 5, excludes amortisation, depreciation and R&D capitalised within the measure) the basic earnings per share was 7.4 pence, compared to a loss per share of 11.4 pence. The Group has made cashflow the primary financial statement as the Board believes it represents a clearer picture of the Group's performance. Frontier has also fine-tuned its key financial measures in conjunction with the business model transition; measuring revenue on an unadjusted basis as the differences to underlying revenue have become less material. The Group has presented adjusted operating profit as its preferred measure of profitability to provide an improved insight into performance over the transition period: adjusted operating profit seeks to add back funding related and all non cash overheads so as to measure the surplus resources available after re-investment in development costs of its self-publishing and tools and technology work. Group Trading Performance in Transition The Group continued the planned transitional investment phase to develop and launch Elite Dangerous in the year on both PC and Mac platforms, this being its first major large budget self-published title, together with associated technology development. The Group is in transition from being a developer of video games and related software technology, to becoming an independent publisher of its own video game franchises, while continuing to develop its own software in-house. By the end of the financial year the first franchise team, working on Elite Dangerous, represented approximately half of the development effort of the Company. Following the successful completion of work for external publishers, including Scream Ride for Microsoft and Tales from Deep Space for Amazon, the transition of the other half of the development effort began, developing second franchise "Planet Coaster" - this was announced at the E3 trade show shortly after the end of the financial year, receiving a very positive response from the public and press. The transitional phase is expected to complete in 2016 with the launch of Planet Coaster. In January 2015 the Group consolidated its development activity in Cambridge and took the opportunity to align the mix of skills in the business. The office in Canada was closed, leaving the subsidiary operating as a home based project support function. The cost of the re-organisation was £0.3 million. In August 2014 Frontier Developments inc, a US subsidiary incorporated in Delaware, was set up and began trading in May 2015 to distribute Frontier's video games into the US market. The Group also set up an Employee Benefit Trust in December 2014, at 31 May 2015 the Trust had an interest in 24,455 ordinary shares. Cash and Cashflow The Group's operating cashflow was £7.3 million, supported by the public release of Elite Dangerous. The Group invested £4.4 million in non-current assets, being development costs for the franchises of Elite and Planet Coaster plus the continued investment in our underlying COBRA technology. Working capital was relatively static as the Group switched revenue streams, and debt repayment of £0.2 million was made to repay the Group's (Canadian subsidiary) interest-free loan from the federal-backed Atlantic Canada Opportunities Agency, thus bringing the Group back to a debt free position. The overall impact was an increase of £2.1 million in net cash and cash equivalents to £10.5 million, continuing to support the Group's investment and growth plan. Frontier's simplified cash movements can be represented as follows: Movement in cash balances £ million 2015 2014 Sources of cash



Customer receipts 21.1 9.5 Funding and other sources 0.3 5.9 Incoming funds 21.4 15.4 Use of cash



Salaries 11.3 9.6 Overhead, Other expenses, Tax and currency differences 8.0 4.6 Outgoing flows 19.3 14.2





Movement in net cash balances inc borrowings 2.1 1.2 Revenue The public release of Elite Dangerous prompted a significant change in the Group's revenue composition and value. Group revenue more than doubled to £22.8 million, and Elite Dangerous represented 84% of total revenue including associated merchandise. Revenue £'000 2015 2014 % 2013 Revenue 22,766 9,541 139% 12,072 Self-published revenues consisted of sales of the game and digital in-game purchases. An element of revenue from the sale of 'lifetime expansion passes' remains as deferred income and is expected to be released over the useful economic life of the franchise. External publisher revenue was lower as planned with the Group switching focus to self-publishing projects. Frontier worked on three projects of varying sizes for two key clients, and two of these games were released in the financial year 2014-15. The other project was cancelled at the client's request. At the financial year end we had no further contracted work. Royalty income continued to accrue from our agreements on Roller Coaster Tycoon 3 and Kinect Disneyland Adventures. Within the prior year revenue included 'one off' releases from Atari Interactive Inc. stemming from its re-organisation and a catch up royalty on Kinect Disneyland Adventures. Revenue mix £'000 2015 2014 % change 2013 Self-published 18,558 424 4,276% 511 External publishers 3,429 7,707 (56%) 11,355 Royalties 322 1,366 (76%) 203 Merchandise & Other 457 44 939% 3

22,766 9,541 139% 12,072 Gross Margin and Segmental Contribution Overall gross margin improved to 27% from 17%. Gross margin is stated after amortisation and expensed research and development costs. The Group has a number of revenue and cost streams where it is able to identify contribution towards gross profit: Contribution for the year ending May: 2015



2014



£'000 Revenue Cost Contribution Revenue Cost Contribution Self Published 18,558 (9,218) 9,340 428 (1,026) (598) External Publishers 3,429 (2,452) 977 7,707 (4,591) 3,116 Other income and unallocated costs 779 (4,969) (4,190) 1,406 (2,297) (891) Total 22,766 (16,639) 6,127 9,541 (7,914) 1,627 Self published Revenue: The video game Elite Dangerous represents 98% of self-published revenue recognised in the year (2014: 77%). Revenue recognised included a release of £1.5 million of deferred revenue from the balance at the beginning of the year. Deferred revenue of £0.7 million (2014: £2.2 million) was carried forward, which is expected to be released over the estimated useful economic life of the franchise, estimated at eight years. Costs: Staff costs incurred were £5.2 million (2014: £2.7 million), overheads incurred including sub contract and server costs were £2.1 million (2014: £0.1 million), and external marketing costs were £2.5 million (2014: £0.2 million). Costs capitalised into intangible assets were £3.7 million (2014: £2.8 million) and amortisation charged was £3.1 million (2014: £0.3 million for pre release amortisation and £0.5 million of amortisation and impairment of the Coaster Crazy game). Internal development costs of £5.8m are to be amortised over a period up to six years on a straight line basis, as adjusted for assessments of useful economic life. Incremental development costs for releases on additional platforms will be amortised over their useful economic life upon release. Amortisation for the acquired royalty streams of £5.1m commenced on a straight line basis from December 2014 over the expected useful life of the franchise, estimated at eight years. Self published work represented 45% of our man month development work in the year. External publishers Publisher revenues were mainly derived from completion of milestones on Scream Ride with Microsoft Game Studios and Tales from Deep Space with Amazon Game Studios, being £3.3 million (2014: £7.4 million) recognised in the year. The remaining revenue stems from sub contract recharges (which are passed on at nil margin) of £0.1 million (2014: £0.3 million). There were no work in progress balances at year end as contracts had been completed (2014: £0.3 million of deferred income). External publisher cost of sales includes staff costs of £2.4 million (2014: £4.4 million) and sub contract costs of £0.1 million (2014: £0.3 million). External publisher work represented 45% of our development work as measured in man months in the financial year. Other income and unallocated costs - Royalties, Technology & Project support The Group receives royalties from Atari for Roller Coaster Tycoon 3 on a quarterly basis and Microsoft for Kinect Disneyland Adventures on a monthly basis. Revenue is accrued upon receipt of royalty reports. Merchandise revenues of £0.5 million (2014: £0.04 million) were recorded and those for royalties of £0.3 million (2014: £1.3 million). Royalty income in 2014 was supported by a one off promotional campaign for Kinect Disneyland Adventures and some catch up royalties from Atari as they emerged from Chapter 11 administration. Technology costs are represented by the continued development costs of our COBRA technology. Project support includes the functions of senior management (including Executive Directors), marketing and customer support. The Group invested in this area during the year to support the self publishing plans. In the full year to 31 May 2015 the costs were staff costs of £3.0 million (2014: £2.0 million) and overhead of £1.2 million (2014: £0.4 million). Overhead includes third party commissions, merchandise costs and software subscription costs. Depreciation was £0.2 million (2014: £0.2 million), costs of £0.7 million (2014: £1.2 million) were capitalised, and amortisation charged represented £1.2 million (2014: £0.9 million). Of the development resource available to Frontier 10% of man months was used in the COBRA's Tools and Technology. Profitability Frontier is currently delivering a planned transition to become a sustainable self-publishing business. The Board monitors performance on an adjusted operating profit basis (replacing adjusted EBITDA) in order to focus on the cash value drivers of the business. For adjusted operating profit the adjusting items were depreciation and amortisation, R&D capitalised, share-based compensation, and tax credits due, offset against administration costs and (in the prior year) funding costs associated with the IPO. It has also been decided to include fair value adjustments on currency forward contracts and financial assets as an adjusting item. The measures of EBITDA and Adjusted EBITDA have been shown as sub totals for comparative purposes. As expected, Frontier has incurred additional costs and lower revenue because of the transition, but despite this, the Group has already become a profitable operation. Operating profit was £1.6 million compared with a loss in the prior period of (£1.7 million). EBITDA was £6.1 million compared with £0.3 million in the prior year. Adjusted Operating profit increased to £2.5 million from a loss in the prior year of £1.3 million. The public release of Elite Dangerous led to a significant increase in amortisation. An increase in share-based compensation was principally due to a one off share option grant to Directors and senior employees issued in September 2014 and vesting between 1 and 3 years. The reconciliation is as follows:

2015 2014

2013

£'000 £'000 % £'000 Operating result 1,566 (1,705) 192% 1,052 Depreciation 271 225

151 Amortisation and impairment 4,246 1,802

1,650 EBITDA 6,083 322 1,790% 2,853 Share-based compensation 767 286

416 Fair value adjustments 72 32

- (Loss)/gain on sale of investment 1 (21)

- Funding costs/listing expenses - 217

308 Dilapidations provision 37 36

37 Subsidiary set-up fees 7 -

10 EBITDA adjusted 6,967 872 699% 3,624 R&D capitalised (4,338) 4,035

(1,708) Tax credits deducted from Administration costs (163) (307)

(86) Adjusted Operating Profit/(loss) 2,466 (3,470) 171% 1,830 Finance Income Interest receivable from the Group's cash resources was relatively flat at £0.1 million, and continues to be at low levels due to the current interest rate environment worldwide. Income Tax The Group had no current tax liability and in the prior year the Canadian operation incurred a £0.04 million charge. There was a release of £0.03 million in the deferred tax credit (2014: charge £0.07 million) for tax, due to the temporary difference over R&D tax relief and a local digital media tax. The parent company continues to hold unused tax losses of £5.9 million to set against future taxable profits generated in the UK (2014: £6.7 million). Frontier are able to take advantage of cash based tax credits in both the UK and Canada; in the year we accounted for £0.2 million (absorbed as a reduction in Administrative costs) (2014: £0.3 million). Earnings per Share The basic earnings per share for 2015 was 4.9 pence per share compared to loss per share of (5.8) pence for 2014 based on a weighted average number of shares of 33.5 million (2014: 33.3 million). On a diluted basis, earnings per share was 4.7 pence compared to diluted loss per share in the prior year of (5.8) pence based on a weighted average number of shares of 35.3 million (2014: 33.3 million). The adjusted basic earnings per share is based on the adjusted operating profit. The adjusted basic earnings per share were 7.4 pence compared to the prior period's adjusted loss per share of (11.4) pence. On a diluted basis the adjusted earnings per share is 7.0 pence (2014: loss (11.4 pence)). Non-current Assets and Research and Development Expenditure Investment in the Group's own IP capitalised in the year was up 8% in line with our transition plans at £1.3 million, reflecting Frontier's commitment to a strategic software development programme in respect of Elite Dangerous and COBRA technology. Including the acquired rights, £8.2 million of self-published net book value is represented by the Elite Dangerous franchise. Investment in intangibles was focused on developing self-published titles (Elite Dangerous, with the first public release in December 2014), continuing expansion of platform versions (Mac & Xbox One) and Planet Coaster, (scheduled for Q4 2016) and further multi-platform work on COBRA. Research and development expensed was higher at £0.8 million, up from £0.4 million. Additions for tangible assets mainly comprised computer equipment for staff and durable marketing materials, for example, a model of the Cobra space ship, Share Issues Employees remain confident in the Company and converted 0.5 million share options into ordinary shares up to the end of May 2015; exercise proceeds were £0.4 million, and of these conversions 0.3 million of ordinary shares were transferred under arrangements with the newly formed Employee Benefit Trust, representing exercise proceeds of £0.2 million. The Group granted 1.5 million share options in the year (2014: 0.4 million) under CSOP and unapproved plans. This included one off grants to Directors of 0.5 million shares (2014: nil). The Employee Benefit Trust operates by way of a loan under a drawdown facility of up to £10.0 million dated 9 December 2014. At 31 May the loan balance drawn down was £0.6 million, and the trust owned 24,255 ordinary shares. Current Assets Trade and other receivables were unchanged at £3.1 million, as a reduction in publisher amounts owed was offset by amounts owed from sales made via the PC distribution platform 'Steam'. Investments held for sale include shares in Atari SA provided as part of the Chapter 11 creditor agreement for pre-petition balances; these were sold in the year at a small loss. Current Liabilities Trade and other current liabilities decreased by £0.5 million to £3.2 million, mainly as a result of deferred income release. The Group's Canadian subsidiary repaid an interest-free loan from the federal-backed Atlantic Canada Opportunities Agency of £0.2 million. Deferred income was £0.7 million (2014: £2.5 million). Deferred income not released at the launch of Elite Dangerous comprised income for lifetime expansion passes, which is expected to be released over the expected useful economic life of the Elite franchise. In the prior year £0.3 million of deferred income was for external publisher work. Non-Current Liabilities The Group fully utilised deferred tax assets (losses and provisions) to offset UK deferred tax liabilities (timing differences on fixed asset) resulting in a nil balance. An overseas deferred tax liability of £0.1 million is provided against federal investment tax credits due. Deferred income is represented by amounts expected to be recognised on lifetime expansion passes during the franchise period and more than one year. Dilapidation provisions are ongoing following the renewal of the leases in 2015 with a termination date of 2020. Consolidated statement of cashflows For the year ended 31 May 2015



31 May 2015 £'000 31 May 2014 £'000 Operating activities





Cash generated from operations (see below)

7,334 342 Finance income

(53) (63) Taxes received/(paid)

23 (1) Cashflow from operating activities

7,304 278 Investing activities





Purchase of property, plant and equipment

(289) (254) Expenditure on intangible assets

(4,385) (4,182) Proceeds from disposal of non-derivative financial assets

36 21 Employee benefit trust investment

(551) - Interest received

53 63 Cashflow from investing activities

(5,136) (4,352) Financing activities





Proceeds from convertible loan notes

- 1,580 (Repayment)/Proceeds from interest-free loan

(158) 175 Proceeds from issue of share capital

159 4,145 Cashflow from financing activities

1 5,900 Net change in cash and cash equivalents from continuing operations

2,169 1,826 Cash and cash equivalents at beginning of period

8,612 7,155 Exchange differences on cash and cash equivalents

(303) (369) Cash and cash equivalents at end of period

10,478 8,612 The following non-cashflow adjustments and adjustments for changes in working capital have been made to profit before tax to arrive at operating cashflow: Cash generated from operations

31 May 2015 £'000 31 May 2014 £'000 Profit/(loss) after tax 1,647 (1,754) Depreciation, amortisation and impairment 4,517 2,027 Atari shares - (33) Fair value adjustments 31 (32) Profit on disposal of fixed assets and available for sale assets 1 (5) Proceeds from the sale of non-current assets 16 - Share-based payment expenses 767 286 Taxation (190) (70) Foreign exchange 242 336 Operating cashflow before changes in working capital 7,031 755 Net changes in working capital:



Change in inventories 2 (15) Change in trade and other receivables 74 (882) Change in trade and other payables 190 447 Change in provisions 37 37 Cash generated from operations 7,334 342 Consolidated income statement For the year ended 31 May 2015

Notes 31 May 2015 £'000 31 May 2014 £'000 Revenue 5 22,766 9,541 Cost of sales

(16,639) (7,914) Gross profit

6,127 1,627 Administrative expenses

(4,561) (3,332) Operating profit/(loss)

1,566 (1,705) Finance income 23 53 63 Profit/(loss) before tax 6 1,619 (1,642) Income tax 24 28 (112) Profit/(loss) for the period attributable to the equity holders of the parent

1,647 (1,754) All the activities of the Group are classified as continuing. Earnings per share 25



Basic earnings/(loss) per share

4.9p (5.8)p Diluted earnings/(loss) per share

4.7p (5.8)p Consolidated statement of comprehensive income For the year ended 31 May 2015

31 May 2015 £'000 31 May 2014 £'000 Profit/(loss) for the period 1,647 (1,754) Other comprehensive income:



Items that will be reclassified subsequently to profit and loss



Exchange differences on translation of foreign operations (57) (30) Total comprehensive income for the period attributable to the equity holders of the parent 1,590 (1,784) Consolidated statement of financial position For the year ended 31 May 2015 (registered no: 02892559)

Notes 31 May 2015 £'000 31 May 2014 £'000 Non-current assets





Intangible assets 7 11,101 10,962 Property, plant and equipment 8 333 328 Total non-current assets

11,434 11,290 Current assets





Inventories 12 13 15 Trade and other receivables 13 3,046 2,964 Other short-term assets 14 50 106 Cash and cash equivalents 15 10,478 8,612 Total current assets

13,587 11,697 Total assets

25,021 22,987 Equity and liabilities





Equity





Share capital 16 168 167 Share premium account

13,963 13,805 Equity reserve

633 790 Foreign exchange reserve

(57) (30) Retained earnings

6,180 4,160 Total equity

20,887 18,892 Liabilities





Current





Trade and other payables 19 3,107 1,207 Deferred income 20 96 2,456 Borrowings 21 - 14 Total current liabilities

3,203 3,677 Non-current





Provisions 22 260 223 Borrowings 21 - 121 Deferred income 20 627 - Deferred tax 11 44 74 Total non-current liabilities

931 418 Total liabilities

4,134 4,095 Total equity and liabilities

25,021 22,987 Consolidated statement of changes in equity For the year ended 31 May 2015

Share capital £'000 Share premium account £'000 Equity reserve £'000 Foreign exchange reserve £'000 Retained earnings £'000 Total equity £'000 At 31 May 2013 127 1,847 643 3 5,775 8,395 Increase in equity in relation to options issued - - 286 - - 286 Share-based payment transfer - - (139) - 139 - Issue of share capital less expenses 40 11,958 - - - 11,998 Transactions with owners 40 11,958 147 - 139 12,284 Loss for the year - - - - (1,754) (1,754) Other comprehensive income:











Exchange differences on translation of foreign operations - - - (33) - (33) Total comprehensive income for the year - - - (33) (1,754) (1,787) At 31 May 2014 167 13,805 790 (30) 4,160 18,892 Increase in equity in relation to options issued - - 767 - - 767 Net loss on EBT shares - - (495) - - (495) Own shares held by the EBT - - (56) - - (56) Share-based payment transfer - - (373) - 373 - Issue of share capital less expenses 1 158 - - - 159 Transactions with owners 1 158 (157) - 373 375 Profit for the year - - - - 1,647 1,647 Other comprehensive income:











Exchange differences on translation of foreign operations - - - (27) - (27) Total comprehensive income for the year - - - (27) 1,647 1,620 At 31 May 2015 168 13,963 633 (57) 6,180 20,887 Selected notes to the financial statements 1. Corporate information Frontier Developments plc ("the Group") develops non-game applications and video games for the interactive entertainment sector. The Company is a public limited company and is incorporated and domiciled in the United Kingdom. The address of its registered office is 306 Science Park, Milton Road, Cambridge CB4 0WG. The Group's operations are based in the UK and its North American subsidiaries, Frontier Developments Inc, based in Canada and Frontier Developments Inc in the US. 2. Basis of preparation and statement of compliance The principal accounting policies applied in the preparation of this financial information are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. Change in accounting policies The Group adopted IFRS 10, 'Consolidated financial statements', IFRS 12, 'Disclosure of interests in other entities' and IAS 27, 'Separate financial statements' on 1 June 2014. This resulted in the Group changing its accounting policy for the basis of consolidation and definition of control but has had no further impact on the 2015 financial statements. Basis of preparation The financial information of Frontier Developments plc has been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU) and the Companies Act 2006 applicable to companies reporting under IFRS. The financial information has been prepared under the historical cost convention, except for financial instruments held at fair value. The financial information is presented in Sterling, the presentation and functional currency for the Group and Company. All values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated. The preparation of this financial information requires the Directors to make critical accounting estimates and judgements that affect the amounts reported in the financial statements and accompanying notes. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 4. Going concern basis The Group's forecasts and projections, taking account of current cash resources and reasonably possible changes in trading performance, support the conclusion that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, a period of not less than 12 months from the date of approval of these financial statements. The Group therefore continues to adopt the going concern basis in preparing its financial statements. The Group maintains a revolving credit facility to support its plans, and remains cash positive. 3. Principal accounting policies Basis of consolidation and business combinations Basis of consolidation The consolidated financial statements incorporate those of the Group and all entities controlled by it, after eliminating internal transactions. Control is achieved where the Group is exposed or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries are consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group. The entities' results are adjusted, where appropriate, to conform to Group accounting policies. a) Business combinations Business combinations are accounted for using the acquisition method under the revised IFRS 3 "Business Combinations" (IFRS 3R). The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition-date fair value of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration agreement. Acquisition costs are expensed as incurred. The Group recognises identifiable assets acquired and liabilities assumed, including contingent liabilities, in a business combination regardless of whether they have been previously recognised in the acquiree's financial statements prior to the acquisition. Assets acquired and liabilities assumed are generally measured at their acquisition-date fair values. Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred, b) the recognised amount of any non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately. b) Intangible assets Intangible assets are measured at historic cost and are amortised on a straight line basis over their expected useful economic life. They comprise three categories: • development tools; • software (self-published games) and royalty rights acquired in connection with jointly held IP; and • software (third party). An internally generated intangible asset arising from the Group's development activities is recognised only if all of the following conditions are met: • completion of the intangible asset is technically feasible so that it will be available for use in developing games (in respect of development tools) or for sale of games (in respect of self-published software); • the Group intends to complete the intangible asset and has the ability to use or license it as indicated above, thus generating probable future economic benefits; • the expenditure attributable to the intangible asset during its development, mainly salary costs, can be measured reliably; and • the Group has adequate technical, financial and other resources to complete the development and to use or sell the intangible asset. Internally generated intangible assets, consisting of direct labour costs, other specific direct project costs and attributable project support costs, are amortised on a straight line basis over their useful economic lives. The estimated useful lives of current development projects are between three and five years. When a self-published game is intended for release on multiple platforms without material content change, amortisation is based on the length of time in which that game is expected to be supported in an unchanged format with a limit of up to six years. Acquired rights are assessed for the useful 'franchise life'. For Elite Dangerous this is prudently estimated at eight years; within the sector successful franchises normally have useful lives of over ten years. Until completion the assets are subject to annual impairment testing. In most circumstances amortisation commences upon completion of the asset and is shown within cost of sales in the income statement. Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred. c) Impairment of property, plant and equipment and intangible assets At each balance sheet date, the Group reviews the carrying amounts of its property, plant and equipment and individual intangible assets for any indication that these 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. The recoverable amount is the higher of the fair value less costs to sell or value in use. Fair value is measured for self-published games by discounting future cashflows. For all other assets a review of the expected useful economic life is undertaken and compared to that implied in the amortisation rate. d) Financial instruments 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 Group after deducting all of its financial liabilities. Equity instruments do not include a contractual obligation to deliver cash or other financial assets to another entity. Any instrument that does have the obligation to deliver cash or another financial asset to another entity is classified as a financial liability. Financial liabilities are presented under liabilities on the statement of financial position. Financial assets Loans and receivables comprise trade receivables, other receivables, derivative financial instruments and cash and cash equivalents. Financial assets are recognised initially at fair value and measured subsequent to initial recognition at amortised cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised in the income statement. Provision against trade receivables is made when there is objective evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write down is determined as the difference between the asset's carrying amount and the present value of estimated future cashflows discounted at the financial asset's original effective interest rate. Financial assets at FVTPL Derivative financial instruments are financial assets measured at fair value through the profit and loss (FVTPL) and are financial assets that are either classified as held for trading or that meet certain conditions and are designated at FVTPL upon initial recognition. All derivative instruments fall into this category. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists. Financial liabilities The Group's financial liabilities include trade and other payables. Financial liabilities are initially measured at fair value and are subsequently measured at amortised cost, using the effective interest rate method, except for financial liabilities designated at fair value through profit and loss (FVTPL). All derivative financial instruments that are not designated and effective as hedging instruments are accounted for at FVTPL. Fair value measurements recognised in the balance sheet Financial instruments that are measured subsequent to initial recognition at fair value have been classified using a fair value hierarchy that reflects the significance of the inputs used in measuring the fair value of those instruments. The fair value hierarchy has the following levels: • Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and • Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable market inputs). e) Revenue recognition Revenue represents amounts derived from the design, production and sale of computer games software and related technology which fall within the Group's ordinary activities, exclusive of value added tax and other similar sales taxes. Revenue is measured by reference to the fair value of consideration received or receivable. Revenue includes income from the design and production of computer software contracted for customers, royalties from published games, income from the release of self-published games, and crowd-sourced funding pledges to support the development of self published games. Revenues on project contracts are mapped against the expected profile of costs. In most circumstances these are closely correlated. Where there is close correlation between the revenue and cost profile, the milestones within the project contracts are considered to approximate the stage of completion of the obligations under the contract and therefore recognition of revenue based on these milestones provides a sufficiently accurate approximation of recognition of revenue on a stage of completion basis, except for where there are significant acceptance requirements. Under such arrangements, revenue is recognised when the Group has substantially met all its performance obligations and the customer has approved the relevant milestone. Where there is less correlation between the revenue and cost profile, revenue from customer specific contracts recognised on the stage of completion of each assignment (milestone) at the period end date compared to the total estimated service based on the estimate of labour and other costs to be provided over the entire contract where the outcome can be estimated reliably. If a contract outcome cannot be estimated reliably, revenues are recognised equal to costs incurred, to the extent that costs are expected to be recovered. An expected loss on a contract is recognised immediately in the income statement. Additionally, project contracts may contain provision for the pass through of subcontract cost, these are recharged on a matching basis in the same period as the underlying cost. Revenue earned from royalties under distribution agreements are recognised in the period that the sales to the end customer are made, estimated on an accruals basis as royalty reports are received on a monthly or calendar quarter basis. Revenue from released self-published titles is recognised on download of the game or upon purchase of in-game digital items. Revenue from crowd-funding for self-published titles is normally deferred, then recognised when the Group meets its performance obligations. Where there is no clear performance obligation, for example, membership of a development forum, this is taken as revenue over the expected development period of the game on a straight line basis. f) Share-based payment transactions Share options are periodically granted to staff. Share options are measured at fair value at the date of grant and recognised over the vesting period of the option. Fair value is measured using the Black-Scholes option pricing model. The expected life used in the model is an estimate of the likely average expiry date of the options by reference to the current rate of exercise by employees. The share-based payment is recognised as an expense in profit or loss, together with a corresponding credit to an equity reserve. This expense is recognised on a straight line basis based on the Group's estimate of the number of shares that will vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting. Upon exercise of share options, the proceeds received up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium. Upon the exercise or lapsing of the grant a transfer of the cumulative value of the grant is made from the equity reserve to the profit and loss reserve. g) Foreign currencies Transactions denominated in a foreign currency are translated at the rate of exchange ruling at a month-end rate in order to approximate to actual rate for the relevant transaction date. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the statement of financial position date. Foreign exchange differences are charged to the income statement in the period in which they arise. The assets and liabilities in the financial statements of foreign subsidiaries are translated at the rate of exchange ruling at the statement of financial position date. Income and expenses are translated at the actual exchange rate. The exchange differences arising from the retranslation of the opening net investment in subsidiaries are recognised in other comprehensive income and are accumulated in the foreign currency reserve in equity. On disposal of a foreign operation, the cumulative translation differences are transferred to the profit and loss as a reclassification adjustment as part of the gain or loss on disposal. 4. Significant accounting estimates and key judgements The key assumptions concerning the future and other key sources of estimation uncertainty that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below: a) Intangible assets The Group invests heavily in research and development. The identification of development costs that meet the criteria for capitalisation is dependent on management's judgement and knowledge of the work done. Development costs of software tools within a project that can be utilised generically are separately identified. Judgements are based on the information available at each period end. Economic success of any development is assessed on a reasonable basis but remains uncertain at the time of recognition as it may be subject to future technical problems and therefore a review for indicators of impairment is completed by product at each period end date. The net book values of the Group and Company intangible assets including rights acquired at 31 May 2015 are £11,100,568 (2014: £10,961,795). Intangible assets are subject to amortisation and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, for example, a decision to suspend a self-published title under development. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are reviewed by project for which there are separately identifiable cashflows. Games developed to be self-published are reviewed for impairment based on the status at the end of each financial year and at the half year against a prudent level of the projected net earnings. In respect to amortisation, normally self-published titles are amortised on completion of the game, however an exception to this occurs when project funding is obtained via innovative crowd-funded platforms, such as Kickstarter. Such funding is generally seen as 'contributing to make the game happen' and requires the Company to set up a number of pledge levels which include a donation element. When 'donation and intangible' elements of pledge levels are recognised as revenue, an equivalent amount of amortisation charged reflects this 'contribution element'. The pledge levels also include delivery of a number of 'early versions' of the game, and an estimated and prudent cost of sale is applied as amortisation. In the case of Elite Dangerous 60% was used. In the financial year to May 2015 £1,220,085 of amortisation was recognised for these elements of Elite Dangerous (May 2014: £271,143). b) Revenue recognition Where self-published titles have pre-orders, recognition is made by reference to delivery of performance obligations. Revenue stemming from the sale of 'early versions' of a game are recognised from the date of release of the 'early access versions'. Where pre-orders include delivery of the final version of the game, an estimate is made of this final element, which is moved to deferred income until the final version is released to the public. For external publishing work significant management judgement is applied in determining the allocation and timing of the recognition of revenue on contracts. In this process management takes into account milestones, actual work performed and further obligations and costs expected to complete the work. Management monitors the progress and has regular dialogue with customers to confirm the project status. 5. Segment information The Group identifies operating segments based on internal management reporting that is regularly reviewed by the chief operating decision maker and reported to the Board. The chief operating decision maker is the Chief Executive Officer. Management information is reported as two operating segments, being self published work, and projects for external publishers and royalties plus merchandise. Resources are managed on the basis of the Group as a whole. The Group's revenues from external customers are divided into the following geographical areas:

31 May 2015 £'000 31 May 2014 £'000 United Kingdom 5,798 1,807 United States of America 7,687 7,470 Rest of the world 9,281 264

22,766 9,541 The Group's contribution (revenue less directly attributable costs) by each segment is as follows:

31 May 2015 £'000 31 May 2014 £'000 Self published 9,340 (598) External publishers 977 3,116 Other income and unallocated costs (4,190) (891)

6,127 1,627 For further analysis of contribution per operating segment see Finance review. At 31 May 2015 £nil of non-current assets were based in Canada (2014: £43,342), with the remainder in the UK. In 2015 there were no customers whose revenue accounted for more than 10% of the Group and Company's total revenue (2014: there were two main customers that accounted for 63% and 18% of revenue). All material revenue is categorised as either 'self-published', 'external publishers' or royalties.

31 May 2015 £'000 31 May 2014 £'000 External publishers 3,429 7,707 Self-published 19,012 469 Royalties 322 1,362 Other 3 3

22,766 9,541 Adjusted operating profit/(loss) costs are adjusted for non cash expenses an funding items as a key performance indicator for the Group and are also used by the Chief Executive Officer. In the prior year Adjusted EBITDA was monitored and has been included as sub totals which are calculated as follows:

31 May 2015 £'000 31 May 2014 £'000 Operating profit/(loss) 1,566 (1,705) Depreciation 271 225 Amortisation and impairment 4,246 1,802 EBITDA 6,083 322 Share-based compensation 767 286 Funding costs/listing expenses - 217 Dilapidation provision 37 36 Fair value adjustments 72 32 Gain on investment 1 (21) US set-up fees 7 - Adjusted EBITDA 6,967 872 R&D capitalised (4,338) (4,035) Tax credits deducted from Administration costs (163) (307) Adjusted Operating Profit/(loss) 2,466 (3,470) 6. Profit/(loss) before tax

31 May 2015 £'000 31 May 2014 £'000 This is stated after charging/(crediting):



Amortisation and impairment on intangibles 4,246 1,802 Depreciation of owned property, plant and equipment: 271 225 Research and development costs expensed 287 371 Auditor remuneration:



Audit services - statutory audit 39 30 Non-audit services - tax services - 5 - corporate finance services - 61 - other services 8 7 Operating leases - land and buildings 526 527 7. Intangible assets Group The Group intangible assets comprise capitalised development tools and self-published software from internal development activities and acquired software licences. The carrying amounts for the reporting periods under review can be analysed as follows:

Development tools and licences £'000 Self-published software £'000 Third party software £'000 Total £'000 Cost







At 31 May 2013 4,950 1,789 809 7,548 Additions - arising from internal development 1,214 2,821 147 4,182 Additions - acquired separately - 5,148 - 5,148 Disposals (1,637) - - (1,637) Adjustment - (16) - (16) Impairment - (276) - (276) At 31 May 2014 4,527 9,466 956 14,949 Additions - arising from internal development 663 3,675 47 4,385 Disposals (848) - (9) (857) At 31 May 2015 4,342 13,141 994 18,477 Amortisation and impairment







At 31 May 2013 2,779 660 659 4,098 Charge for the period 883 506 137 1,526 Disposals (1,637) - - (1,637) At 31 May 2014 2,025 1,166 796 3,987 Charge for the period 1,075 2,680 116 3,871 Charge for the period for acquired rights - 375 - 375 Disposals (848) - (9) (857) At 31 May 2015 2,252 4,221 903 7,376 Net book value at 31 May 2015 2,090 8,920 91 11,101 Net book value at 31 May 2014 2,502 8,300 160 10,962 Excluding an immaterial amount of third party software amortisation that is included in administrative expenses all amortisation charges, impairments or reversals (if any) are included within cost of sales. The impairment in 2014 arose from a review of the monetisation profile of Coaster Crazy. In 2014 the additions acquired separately were the Elite rights acquired from Professional Practice Automation LLP. The net book value of the acquired rights at 31 May 2015 was £4.8 million (2014: £5.1 million). 8. Property, plant and equipment Group

Fixtures and fittings £'000 Computer equipment £'000 Leasehold improvements £'000 Total £'000 Cost







At 31 May 2013 240 1,179 10 1,429 Additions 34 220 - 254 Disposals (1) - - (1) At 31 May 2014 273 1,399 10 1,682 Additions 76 213 - 289 Disposals (116) (267) (6) (389) At 31 May 2015 233 1,345 4 1,582 Depreciation







At 31 May 2013 186 939 5 1,130 Charge for the period 45 179 1 225 Disposals (1) - - (1) At 31 May 2014 230 1,118 6 1,354 Charge for the period 52 216 3 271 Disposals (110) (261) (5) (376) At 31 May 2015 172 1,073 4 1,249 Net book value at 31 May 2015 61 272 - 333 Net book value at 31 May 2014 43 281 4 328 9. Operating leases as lessee At each period end the future operating lease payments were as follows:

Consolidated year ended



31 May 2015 £'000 31 May 2014 £'000

Minimum lease payments due within one year 670 487

Minimum lease payments due within one to five years 2,669 271

Minimum lease payments due in greater than five years 43 -

Total 3,382 758

Group lease payments recognised as an expense during the year ended 31 May 2015: £522,587 (2014: £526,599). The lease payments relate to the rental contracts for the office buildings, which expire April 2015 and August 2015. New lease agreements have now been entered into for both buildings on the Science Park and they are due to expire in April 2020 and August 2020. Both leases have flexible break clauses that can be exercised if required by the Group. The Group decided to exercise the right to the lease break clause in the Halifax office on 31 March 2015. This was carried out as part of the office closure. The lease payments relate to the rental contracts for the office buildings, which expire April 2020 and August 2020.The Group's operating lease agreements do not contain any contingent rent clauses. None of the operating lease agreements contain renewal or purchase options or escalation clauses or any restrictions regarding dividends, further leasing or additional debt. 10. Financial assets and liabilities The carrying amounts presented in the statement of financial position relate to the following categories of financial assets and liabilities:

Consolidated year ended

31 May 2015 £'000 31 May 2014 £'000 Loans and Receivables



Trade and other receivables 1,592 2,259





Cash and cash equivalents 10,478 8,612 Total 11,070 10,871 Derivative financial instruments The Group's financial instruments are measured at fair value and are summarised below:

Consolidated year ended

31 May 2015 £'000 31 May 2014 £'000 Derivative financial assets



Forward exchange contracts - held for trading 163 - Total 163 - During the financial year the Group started using forward foreign exchange contracts to mitigate exchange rate exposure arising from forecast sales in US dollars. The forward contracts are considered by management to be part of economic hedge arrangements but have not been formally designated. All forward contracts are held at fair value through the profit and loss by reference to the exchange rate at the balance sheet date as supplied by our main banking partner.

Consolidated year ended

31 May 2015 £'000 31 May 2014 £'000 Financial liabilities



Financial liabilities measured at amortised cost:



Trade and other payables 2,806 937 Designated at fair value through profit and loss:



Interest-free loan - 135 Total 2,806 1,086 The interest free loan that was due to the Atlantic Canada Opportunities Agency was repaid, in full during the financial year. This was due to the closure of the Halifax office. 11. Deferred tax assets and liabilities Deferred taxes arising from temporary differences can be summarised as follows:

Consolidated year ended

31 May 2015 £'000 31 May 2014 £'000 Accelerated capital allowances 1,493 503 Short-term temporary differences (restricted) (483) (429) Tax losses (restricted) (966) - Total liability 44 74 Balance brought forward 74 28 Effect of tax rate change on opening balance - - Effect of exchange rate change on opening balance (2) 1 Movement in year (28) 45 Balance carried forward liability 44 74 No deferred tax asset at 31 May 2015 has been recognised in the statement of financial position for the Group. The deferred tax liability at 31 May 2015 is £43,689 (2014: £73,781), being wholly attributable to the Canadian entity. The table below summarises the deferred tax assets for the Group which have not been recognised in the financial statements as only a proportion of the tax losses are anticipated to crystallise or be able to be used in the foreseeable future. Total UK tax losses available at 31 May 2015 amount to £5.9 million (2014: £6.7 million). Total UK based short-term temporary differences available at 31 May 2015 amount to £2.0 million (2014: £0.6 million).

Consolidated year ended

31 May 2015 £'000 31 May 2014 £'000 Deferred tax asset not provided



Short-term temporary differences - (125) Losses (1,122) (996) Total (1,122) (1,121) 12. Inventories Inventories recognised in the statement of financial position can be analysed as follows:

Consolidated year ended

31 May 2015 £'000 31 May 2014 £'000 Work in progress - 3 Merchandise 13 12 Total inventory 13 15 There is no material difference between the replacement cost of inventory and the amounts stated above. For the year ended 31 May 2015 a total of £453,784 was expensed for merchandise (2014: £16,061). 13. Trade and other receivables Trade and other receivables recognised in the statement of financial position can be analysed as follows:

Consolidated year ended

31 May 2015 £'000 31 May 2014 £'000 Trade receivables, gross 134 953 Intercompany receivable - - Trade receivables, net 134 953 Derivative financial instruments 163 - Other receivables 1,458 1,306 Financial assets 1,755 2,259 Prepayments 770 532 VAT and other taxes 521 173 Non-financial assets 1,291 705 Trade and other receivables 3,046 2,964 All amounts are short term. The net carrying value of trade receivables is considered a reasonable approximation of fair value. Within other receivables is an amount due from Atari S.A. for royalties arising from a distribution agreement. The terms of this agreement allow recoup as a commission from the Group distributing the product on its own e-commerce site or via non-PC platforms. This receivable has been determined by reference to Fair value measurement recognised in the balance sheet. The Group has applied the methodology in Level 3 of the hierarchy with reference to discounted cashflow of expected incomes, taking into account any costs to completion. Group



Neither past due

Past due but not impaired

Total £'000 nor impaired £'000

0-90 days £'000 >90 days £'000 May 2015 134 134

- - May 2014 953 953

- - No receivables are past their due date and the balances comprise receivables from highly credit rated customers. 14. Other short-term assets Other short-term assets comprise:

Consolidated year ended

31 May 2015 £'000 31 May 2014 £'000 Investment in shares - 33 Software applications - 6 Current tax assets 50 67 Other short-term assets 50 106 The investment in shares was acquired via an agreement with Atari S.A. (quoted on the Paris Stock Exchange) in respect to balances owing under their Chapter 11 administration process. These shares were sold during the financial year at a profit to the Group of £6,796. During 2014 software applications were acquired under the asset acquisition from Professional Practice Automation LLP; the Group disposed of this asset during the year for no proceeds. 15. Cash and cash equivalents Cash and cash equivalents include the following components:

Consolidated year ended



31 May 2015 £'000 31 May 2014 £'000

Cash at bank and in hand





GBP 7,944 5,410

USD 2,229 1,170

EUR 55 38

CAD 250 1,994

Financial assets 10,478 8,612

Cash at bank earns interest at a floating rate based on the length of deposit at standard commercial terms. The net carrying value of cash and cash equivalents equates to fair value. 16. Equity Share capital Group movements in share capital Movements in ordinary shares are as follows:

2015

2014

Number '000 Value '000

Number '000 Value '000 At 1 June 2013 and 31 May 2014









Ordinary shares of 0.5 pence (0.1 pence) 33,384 167

25,234 127 Shares issued on option exercises 196 1

338 1 Shares issued pre-IPO - -

132 1 Shares issued upon listing on AIM - -

5,678 28 Shares issued as non-cash consideration - -

2,002 10 At 31 May 2015 33,580 168

33,384 167 During the year to 31 May 2015 the following share issues were made: From 1 June 2014 to 31 May 2015 195,900 ordinary shares of 0.5 pence were allotted as fully paid at an average premium of 80.7 pence being the exercise of share options by employees. The average market value was 244.1 pence on the days of exercise. 17. Employee remuneration Remuneration recognised for employee benefits (including Directors) are analysed below. Staff costs for all employees, including Directors, consist of:

31 May 2015 £'000 31 May 2014 £'000 Wages and salaries 10,933 8,577 Social security costs 1,048 876 Pension costs 84 18 Share-based compensation 767 180

12,832 9,651 Included in the above payroll costs for the year ended 31 May 2015 is £4,021,039 (2014: £4,027,605) capitalised within intangible fixed assets (note 7). Pension costs relate to contributions to the parent company's new defined contribution scheme set up ahead of auto enrolment. The average number of employees, including Directors, during the period was:

31 May 2015 £'000 31 May 2014 £'000 Research and development 258 233 General and administrative 15 12

273 245 Remuneration of Directors

31 May 2015 £'000 31 May 2014 £'000 Directors' emoluments 540 384 Non-Executive fees 20 20 Non-Executive consultancy fees 60 42 Emoluments of highest paid Director

31 May 2015 £'000 31 May 2014 £'000 Emoluments 180 128 Remuneration of key management personnel

31 May 2015 £'000 31 May 2014 £'000 Short-term employee benefits



Salaries including bonuses 1,321 1,012 Social security 168 128 Pension contributions 12 2 Benefits in kind 7 - Total short-term employee benefits 1,508 1,142 Non-Executive fees 50 65 Share-based compensation charge 488 212 Total 2,046 1,419 Key management of the Group are the Board and senior management (functional heads).



Number of key management personnel, including Directors, at the statement of financial position date 14 14 A total of 801,000 share options were issued in the year to key management under the Company's new Company Share Option Plan. The number of options exercised for ordinary shares in the year ended 31 May 2015 was 70,000 from previous EMI grants. 18. Share options The Group has a new Company Share Option plan for employees, under which options may be granted to employees (including Directors) to subscribe for ordinary shares in the Group. The scheme was approved in January 2014. The Group operates two EMI schemes (Pre July 2013), a Company Share Option Plan (from January 2014), and an Unapproved scheme (Pre July 2013) and plan (from January 2014). The Share option grants for employees vest between one and three years with a contractual term of ten years. The option holder must be employed by the Group at the time of exercise. The unapproved options carry the similar conditions as the main Company Share option plan, except for one tranche issued on 15 September 2014 that has a shorter vesting period of one year. Date of grant Scheme type Period when exercisable Price in pence 2015 Number 2014 Number 6 December 2005 2002 EMI scheme 2006-2015 67 443,400 675,475 30 July 2013 2013 EMI scheme 2013-2011 89 789,223 1,036,523 30 January 2013 Unapproved 2014-2023 89 - 34,000 15 May 2013 2013 EMI scheme 2014-2023 95 228,000 230,000 21 March 2014 Company Share Option Plan 2017-2024 224.5 228,000 251,000 15 September 2014 Company Share Option Plan 2017-2024 257.5 291,950 - 15 September 2014 Unapproved 2017-2024 257.5 649,850 - 15 September 2014 Company Share Option Plan 2015-2024 257.5 288,350 - 10 March 2015 Company Share Option Plan 2018-2025 230 232,100 - 10 March 2015 Unapproved 2018-2025 230 8,200 -





3,159,073 2,226,998 A number of share warrants that vested immediately were issued as part of the pre-IPO and IPO process as follows. Date of grant Warrant type Period when exercisable Price in pence 2015 Number 2014 Number 8 July 2013 Unapproved pre-IPO warrants[*] 2013-2023 95 65,790 65,790 15 July 2013 Unapproved IPO warrants[**] 2013-2015 127 232,832 232,832 15 July 2013 Unapproved IPO warrants[*] 2013-2023 127 147,638 147,638





446,260 446,260 * These share options were issued to the Non-Executive Directors (including Rockspring which is a company controlled by David Gammon) at the prevailing market price. ** Of these share options 217,084 were issued to Canaccord Genuity Limited for services rendered as part of the IPO process, which were exercised in July 2015 and 15,748 to Adam Glinsman for services rendered as part of the IPO process, a pre-IPO investor upon listing at the flotation price. Movements in the number of employee and non-executive share options outstanding and their related weighted average exercise price are as follows:

Group year ended

31 May 2015

31 May 2014

Number Weighted average exercise price in pence

Number Weighted average exercise price in pence Opening balance 2,440,426 100.0

2,417,800 82.0 Adjustment - -

30,000 82.0 Granted 1,512,450 216.6

464,428 175.2 Exercised (496,375) 78.7

(337,802) 76.8 Forfeited (84,000) 210.4

(134,000) 90.0 Closing balance 3,372,501 181.9

2,440,426 100.0 Exercisable at the year end 1,674,051 87.6

2,189,426 85.6 The weighted average share price at the date of exercise of the share options was 242.1 pence. The share based compensation charge in the profit and loss was £767K of which £9K was in respect of warrants. The share options at the end of May 2015 including those for Non-Executive Directors have a weighted average contractual life as follows:



Group year ended



31 May 2015

31 May 2014 Expiry date Exercise price per share Pence Options Number Weighted average remaining contractual life Months

Options Number Weighted average remaining contractual life Months December 2015 67 443,400 7

675,475 19 July 2022 89 789,223 84

1,036,523 96 January 2023 89 - 92

34,000 104 May 2023 95 228,000 96

230,000 108 July 2023 95 65,790 98

65,790 110 July 2023 127 147,638 98

147,638 110 March 2024 224.5 228,000 106

251,000 118 September 2024 257.5 1,230,150 112

- - March 2025 230.0 240,300 118

- -













Total

3,372,501 90

2,440,426 79 Under the rules of the new Company Share Option Plan, options are not exercisable until three years from the date of the grant. There are no performance conditions attaching to the options. The only vesting condition is continued service in the Company. Fair value assumptions of share-based payments The fair value of services received in return for share options is measured by reference to the fair value of share options granted. The estimate of fair value is measured using the Black-Scholes model. Details of the fair value granted in the period, together with the assumptions used in determining the fair value are summarised below:

September 2014 March 2015 Share price at date of grant (pence) 258 230 Exercise price 258 230 Expected time to expiry (years) 8.64 8.47 Risk-free interest rate (%) 3.7 4.3 Expected dividend yield on shares (%) 0 0 Expected volatility of share price (%) 41 38 Fair value of options granted (pence) 138.4 123.4 The assumptions for the September 2014 and March 2015 rounds are based on statistical analysis of share price data from the listing on AIM Employee Benefit Trust (EBT) On 5 December 2014 the company set up an Employee Benefit Trust for the purposes of allowing employees to exercise their share options, including the choice of being able to do this on a cashless exercise basis. The exercise of options are approved by the Board at each Board meeting, outside of Share dealing Closed periods, under a letter of recommendation to the Trustees of the EBT. The fulfilment of the share option conversions, whether by issue of shares to the EBT or market purchases, is also made at the same time. The EBT is limited under ABI guidelines to holding not more than 10% of the ordinary share capital of the Group. The Trustees are appointed by Appleby Trust (Jersey) Limited, who administer the trust. The number of share options exercised by employees in the year and fulfilled as part of these arrangements was 300,475 ordinary shares. The EBT purchased 251,733 ordinary shares from the market and 73,197 ordinary shares from employees exercising under the cashless options. The EBT had no other assets or liabilities at 31 May 2015 outside of its interest in 24,455 ordinary shares, and £550,766 was drawndown from the £10 million facility provided by the Company. 19. Trade and other payables Trade and other payables recognised in the statement of financial position can be analysed as follows:

Consolidated year ended

31 May 2015 £'000 31 May 2014 £'000 Trade payables 1,014 463 Intercompany payable - - Accruals 1,792 474 Financial liabilities 2,806 937 Other taxation and social security 301 270 Total trade and other payables 3,107 1,207 Trade and other payables are due within one year. The carrying values of trade and other payables are considered to be a reasonable approximation of fair value. 20. Deferred income Deferred income in the statement of financial position can be analysed as follows:

Consolidated year ended



31 May 2015 £'000 31 May 2014 £'000

Contractual - 268

Self-published 723 2,188

Deferred income 723 2,456

£96,467 of deferred income is to be recognised within one year with the remaining £627,034 due within the next 6.5 years (expected remaining life of the franchise period).The deferred revenue is in respect of Elite Dangerous lifetime expansion passes purchased during the financial year. The deferred revenue will be released over the remaining franchise period after the first paid-for update has been released. The carrying values of deferred income are considered to be a reasonable approximation of fair value. 21. Borrowings The Group has a £1 million revolving credit facility with Barclays Bank plc; this has not been drawn upon in the financial year. In the prior year the revolving credit facility was £3 million and the Group had an interest free loan from the Atlantic Canada Opportunities Agency (see note 10). 22. Provisions for dilapidations

Consolidated year ended



31 May 2015 £'000 31 May 2014 £'000

Opening balance 223 187

Provided for in period 37 36

At period end 260 223

The dilapidation provision relates to the rental contracts for two office buildings (included within note 9). These leases expire in April 2020 and August 2020. The provision is based on the estimated costs of work to be performed to bring the buildings back to a state of repair and condition, similar to the start of the lease. 23. Finance income Finance income may be analysed as follows for the reporting periods presented:

31 May 2015 £'000 31 May 2014 £'000 Interest income from cash and cash equivalents 53 63 24. Taxation on ordinary activities (a) Analysis of the charge in the period

31 May 2015 £'000 31 May 2014 £'000 UK corporation tax based on the results for the year - (8) Overseas tax on the results for the period - 75 Deferred tax (28) 45 Tax on profit/(loss) on ordinary activities (28) 112 (b) Factors affecting tax expenses The tax assessed on the profit on ordinary activities for the year differs from the effective tax rate of corporation tax 21.5% (2014: 20.3%) as follows:

31 May 2015 £'000 31 May 2014 £'000 Profit/(loss) on ordinary activities before taxation 1,619 (1,642) Tax on profit/(loss) on ordinary activities at standard rate 347 (334) Factors affecting tax expense for the year:



Overprovision in prior period - (8) Expenses not deductible for tax purposes 236 116 Adjustments for opening deferred tax average rate (2) (1) Research and development tax credits (282) (452) Exercise of share options (163) (88) Losses to carry forward (164) 879 Total amount of tax (28) 112 Factors that may affect future tax charges The Group takes advantage of the enhanced tax deductions for research and development expenditure in the UK and expects to continue to be able to do so. From 1 April 2014 the video games tax relief became available and the Group expects that some of its projects will qualify for this relief. 25. Earnings per share The calculation of the basic earnings per share is based on the profits attributable to the shareholders of Frontier Developments plc divided by the weighted average number of shares in issue during the year. Separate calculations have been performed to adjusted operating profit as shown for adjusted items in Note 5.

31 May 2015 31 May 2014 Profit/(loss) attributable to shareholders (£'000) 1,647 (1,754) Weighted average number of shares 33,513,575 30,479,942 Basic earnings/(loss) per share (pence) 4.9 (5.8) The calculation of the diluted earnings per share is based on the profits attributable to the shareholders of Frontier Developments plc divided by the weighted average number of shares in issue during the year as adjusted for dilutive share options. For May 2014, as the effect of options and convertible loan notes would reduce the loss per share the diluted loss per share is the same as the basic loss per share.

31 May 2015 31 May 2014 Profit/(loss) attributable to shareholders (£'000) 1,647 (1,754) Diluted weighted average number of shares 35,346,221 30,479,942 Diluted earnings/(loss) per share (pence) 4.7 (5.8) The reconciliation of average number of ordinary shares used for basic and diluted earnings per share is as follows: Weighted average number of ordinary shares 31 May 2015 31 May 2014 Ordinary shares 33,513,575 30,479,942 Under option 1,832,647 - Diluted average number of shares 35,346,221 30,479,942 The calculation of the adjusted earnings per share, based on the adjusted operating profit/(loss) as shown in detail in note 5, is as follows:

31 May 2015 31 May 2014 Adjusted Operating profit/(loss) attributable to shareholders (£'000) 2,466 (3,470) Weighted average number of shares 33,513,575 30,479,942 Adjusted basic earnings/(loss) per share (pence) 7.4 (11.4) Weighted average number of shares (diluted) 35,346,221 30,479,942 Adjusted diluted earnings per share (pence) 7.0 (11.4) 26. Related-party transactions Two shareholders receive ongoing royalties or commission as a percentage of royalty sales for some of the Group's video games launched in prior periods.

Consolidated year ended

Connected party Expense paid 31 May 2015 £'000 Creditor balance 31 May 2015 £'000 Expense paid 31 May 2014 £'000 Creditor balance 31 May 2014 £'000

Chris Sawyer - royalties 58 - 40 53

Marjacq Micro Limited - sales commission 33 - 20 27

27. Financial instrument risks Risk management objectives and policies The Group is exposed to various risks in relation to financial assets and liabilities. Financial assets and liabilities by category are summarised in note 10. The main types of risks are credit risk, currency risk and liquidity risk. The Group's risk management is co-ordinated in close co-operation with the Board of Directors and focuses on actively securing the Group's short to medium-term cashflows. The Group does not actively engage in the trading of financial assets for speculative purposes. The most significant financial risks to which the Group is exposed are described below 27.1 Credit risk The Group's exposure is limited to the carrying amount of financial assets and cash and cash equivalents recognised at the year end date (as summarised in note 10). The Group's management consider all financial assets, not impaired, for each reporting date are of good credit quality, including those past due. In respect of trade and other receivables the Group is exposed to significant credit risk for a single counterparty. The Board monitors the credit risk by reference to the date of receipt compared to the contractual terms. The Group considers it has minimal credit risk for liquid funds and other short-term financial assets as cash is held with reputable UK and Canadian banks. At the year end the Group's financial assets are secured by a debenture issued in favour of Barclays Bank plc as part of its agreement to provide a revolving credit facility. 27.2 Foreign currency risk The Group's reporting currency is pounds Sterling (GBP). Exposure to currency exchange rates arises where transactions are in a currency other than the functional currency of the entity, primarily Canadian Dollars (CAD), US Dollars (USD) and Euro (EUR). The Group has entered into several forward contracts during the financial year in order to mitigate the risk of US currency movements. The closing value of the contracts has been disclosed within financial assets, and accounted for at fair value through the profit and loss. The carrying amounts of the Group's Canadian Dollar, US Dollar and Euro denominated monetary assets outside the functional currency of the entity at the reporting date are as follows:

Consolidated year ended

31 May 2015

31 May 2014

CAD £'000 USD £'000 Euro £'000

CAD £'000 USD £'000 Euro £'000 Assets 9 2,229 55

1,379 1,170 38 In addition, some of the Group's revenue and overhead transactions are completed in a foreign currency. Transaction exposure is reduced through the use of currency bank accounts. Foreign currency sensitivity analysis The following table details the Group's sensitivity to a 5% increase or decrease in the Sterling exchange rate against all relevant currencies, albeit the main exposures are USD and EUR. An increase in Sterling would lead to a decrease in income and a decrease in equity.

Consolidated year ended



May 2015 £'000 May 2014 £'000

Effect of a 5% change in relevant exchange rate on:





Income statement 202 189

Equity 192 180

27.3 Liquidity risk analysis Liquidity risk is the risk arising from the Group not being able to meet its obligations as they fall due. The Group manages its liquidity needs by carefully monitoring forecast cash inflows and outflows due in day-to-day business. Net cash requirements determine headroom or any shortfalls over the medium term. This analysis shows if there is a need to use the revolving credit facility, seek external funding or the need for securing finance from its shareholder base. The Group's financial liabilities have contractual maturities as summarised below:

Current

Non-current

Within 6 months £'000 Between 6 and 12 months £'000

Between 1 and 5 years £'000 Later than 5 years £'000 As at 31 May 2015









Trade and other payables 2,748 58

- - As at 31 May 2014









Trade and other payables 834 131

102 19 Financial assets used for managing liquidity risk Cashflows from trade and other receivables are contractually due within six months. Cash is generally held in accounts with immediate notice. Where surplus cash deposits are identified these are placed in accounts with access terms of no more than three months. 28. Capital management policies and procedures The Group's capital management objective is to ensure the Group's ability to continue as a going concern by securing sufficient funding through equity or debt. The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities. The Group manages the capital structure and makes adjustments to it in the light of changes in economic conditions and the strategic plans of the business over a rolling three-year forecast. In order to maintain or adjust the capital structure and provide funds to support the planned growth, the Group may issue new shares or raise other funds through debt. Capital for the reporting period under review is summarised as follows:

Consolidated year ended

31 May 2015 £'000 31 May 2014 £'000 Total equity 20,927 18,892 Borrowings (includes current element) - 135 Less cash and cash equivalent (10,478) (8,612)

10,449 10,415

This information is provided by RNS The company news service from the London Stock Exchange END FR EAKNXESDSEFF ENDFR EAKNXESDSEFF