Wakefield-based Team17 Group, a developer of video games and educational entertainment apps, said its 2023 revenues grew 12% to £159.1 million but adjusted profit before tax fell 39% to £28.7 million.

Team17 reported an overall statutory loss before tax of £1.1 million compared to profit of £28.7 million in 2022, as the company was impacted by “lower margins, weak cost controls and one-off non-cash impairment charges.”

Team17 chief financial officer Mark Crawford wrote: “FY 2023 was a challenging and highly competitive year for the gaming sector.

“Against this backdrop, the group increased revenue by +12% compared to the prior year. This growth was generated solely through revenues from existing businesses.

“The group saw strong sales growth delivered through a combination of new releases alongside continued strengthening and broadening of the back catalogue.

“However, reported results were impacted by lower margins, weak cost controls and one-off non-cash impairment charges meaning that the group delivered an overall loss before tax of £1.1 million (FY 2022: £28.7 million profit).

“Towards the back end of FY 2023, management identified a number of operational issues within the Games Label and implemented a series of more rigorous cost controls and strategic initiatives to address areas that had impacted the profitability of the division.

“A thorough review of the strategic direction of the Games Label, its cost base structure and processes was completed in the last quarter of FY 2023, resulting in a restructuring program that impacted both headcount and cost control processes.

“Most notably, the Games Label has re-focussed back to its core Indie games roots, resulting in changes to games scouting and increased rigour around development spend.

“These changes were implemented to ensure that the Games Label can return to its historical track record as a consistent performer and one of the leading developer and publishers of Indie games.”

In its outlook, Team17 said: “The group has made a pleasing start to FY 2024, although we remain mindful of the challenging competitive landscape, the ongoing cost of living pressures affecting discretionary spending and geopolitical uncertainty weighing on global markets more broadly.

“We have a solid pipeline of at least 10 new games and apps expected to launch in FY 2024 (skewed to third-party IP) and beyond, and we will continue to use our exceptional lifecycle management capabilities to drive sales growth across our back catalogue.

“Following the restructuring of Games Label, including its strategic refocus on Indie titles and the impairment of the development costs of certain titles, we enter FY 2024 on a more appropriate cost base with stricter cost controls in place.

“In addition, an action plan is in place to accelerate revenue and profit growth, which includes increasing the proportion of revenues from first-party IP over time, sharpening our greenlight process, more innovative marketing and publishing models, while pursuing an active M&A agenda.

“We remain confident that the group can deliver an improved underlying trading performance in FY 2024, in line with current market expectations, and remains well positioned for continued growth over the mid to long term.”

Team17 CEO Steve Bell said: “While 2023 presented some challenges for the Games Label, the speed and tenacity with which the teams have responded has demonstrated the exceptional talent we have at Team17.

“The Games Label is now realigned to its proven low-risk Indie model, tighter cost controls have been enforced and one-off actions taken to clean up the balance sheet.

“We are back on form in 2024, with a solid slate of games and apps, our exceptional back catalogue and a clear plan for growth across the Games Label, astragon and StoryToys. The year has started well.”