TIDMFDEV
RNS Number : 6183C
Frontier Developments PLC
14 June 2023
14 June 2023
Full year trading update and Frontier Foundry review
Frontier Developments plc (AIM: FDEV, 'Frontier', the 'Company',
or the 'Group'), a leading developer and publisher of video games
based in Cambridge, UK, announces an update on trading for
financial year FY23, the 12 months ended 31 May 2023, alongside the
outcome of the review of Frontier Foundry, its games label for
third party publishing.
Headlines
-- FY23 revenue (unaudited) of around GBP104 million, in-line
with guidance provided in January 2023
-- Solid performance from existing portfolio of games, generating 72% of revenue
-- Jurassic World Evolution 2 was the strongest performer in the period
-- F1(R) Manager 2022 was the lead revenue generator from new releases, selling over 800k units
-- Modest accretive financial benefits from the acquisition of Complex Games Inc, as expected
-- FY24 releases to include F1(R) Manager 2023 and Warhammer Age of Sigmar: Realms of Ruin
-- Completion of the strategic review of Frontier Foundry
FY23 provisional financial results - subject to final review and
audit
Provisional, unaudited revenue, adjusted EBITDA and operating
profit before one-off amortisation adjustments were all in-line
with the guidance provided in January 2023.
Revenue of around GBP104 million was delivered through a solid
performance from the existing portfolio of games (released prior to
1 June 2022) which accounted for 72% of revenue during the period.
Jurassic World Evolution 2, created in collaboration with Universal
Products & Experiences, was the strongest performer in the
portfolio, with revenue in its first 18 months exceeding the
performance of the first Jurassic World Evolution game during its
first 18 months. F1(R) Manager 2022 was the leading revenue
generator amongst new games, selling over 800,000 units in its
first nine months.
Adjusted EBITDA, a measure of cash profitability, was in-line
with expectations. Adjusted EBITDA is earnings before interest,
tax, depreciation and amortisation charges related to game
developments and Frontier's game technology, less investments in
game developments and Frontier's game technology, and excluding
share-based payment charges and other non-cash items. The
provisional, unaudited figure for FY23 Adjusted EBITDA is a loss of
around GBP5 million, which is consistent with expectations and
reflects continued investment in future games as Frontier gears up
to deliver two new game releases per financial year from FY24
onwards.
Operating profit before one-off amortisation adjustments was
also in-line with expectations with a provisional profit figure of
around GBP2 million. However, an incremental one-off amortisation
charge relating to Foundry games, currently estimated to be around
GBP13 million (subject to audit), is expected to result in a
statutory operating loss being recorded in the FY23 accounts under
IFRS.
In November 2022 Frontier added a new development team with the
acquisition of experienced game development studio Complex Games
Inc ('Complex'), following the successful collaboration between
Complex and Frontier on the development and publication of
turn-based strategy game Warhammer 40,000: Chaos Gate -
Daemonhunters. Integration activities and growth plans for Complex
are on-track, and the acquisition delivered modest accretive
financial benefits in FY23, as expected.
Frontier remains well capitalised, with a cash balance at 31 May
2023 of GBP28 million. The net cash outflow of GBP11 million during
the period was after outflows of GBP11 million for the acquisition
of Complex and GBP3 million for the purchase of shares into the
Employee Benefit Trust.
Frontier Foundry review
In January 2023 Frontier announced a review of its Foundry games
label, due to disappointing financial performance and increased
competition amongst third-party publishers. Today Frontier confirms
the conclusion of its review, with the decision to cease all
activity relating to acquiring new third-party titles and instead
re-focus on internal titles.
Since its inception in summer 2019, Foundry has supported the
launch of seven new and diverse titles. Financial performance
across the Foundry portfolio has been disappointing, and overall,
the business has not delivered Frontier's expectations of a
positive return on investment within the first year of each
title.
As such, the Board has decided to cease all activity relating to
acquiring new third-party titles. This decision will enable an
increased level of operational focus to be applied to Frontier's
own internally developed portfolio of titles, which has delivered a
strong return on investment. Foundry games which have already been
released will continue to be supported, including those in active
post-release development.
Following today's decision, the Company anticipates that Foundry
resource adjustments during calendar year 2023 will focus on role
redeployment and the management of fixed term employment
contracts.
As part of the financial review process for Foundry, the Board
has assessed the value of the intangible game assets for Foundry as
at the financial year end date of 31 May 2023, against the future
cash generation expected from each title. After taking an
appropriately prudent approach to future cash flow forecasts, an
incremental Foundry amortisation charge of around GBP13 million is
expected to be taken in FY23, subject to audit.
FY24 releases and outlook
FY24, the financial year from 1 June 2023 to 31 May 2024, will
benefit from two major new game releases: F1(R) Manager 2023 and
Frontier's first real-time strategy game, Warhammer Age of Sigmar:
Realms of Ruin, with both games on-track for release as
planned.
On 23 May 2023 Frontier unveiled F1(R) Manager 2023, the next
instalment in the officially licensed Formula 1(R) management
simulation series, with deeper management systems, more dramatic
racing, and an even greater commitment to authenticity.
Releasing in summer 2023 on PC, PlayStation(R) 5, Xbox Series
X|S, PlayStation(R) 4 and Xbox One, F1(R) Manager 2023 comes even
closer to the 2023 FIA Formula One World Championship(TM) with the
brand-new Race Replay mode, which will allow aspiring Team
Principals to rewrite key moments from throughout the 23-race
season. This new mode will help to strengthen the game's appeal to
a broader audience. Additionally, in the returning Career mode,
players will enjoy a suite of highly requested feature
developments, adding new dimensions to the sporting drama at every
turn.
On 25 May 2023, Frontier announced Warhammer Age of Sigmar:
Realms of Ruin, a major real-time strategy game coming soon to
PlayStation(R) 5, Xbox Series X|S, and PC via Steam and Epic Games
Store, in partnership with Games Workshop(R). Set in the expansive
fantasy universe of Age of Sigmar, players will command four unique
factions in dynamic real-time battles, experiencing a story-driven
singleplayer campaign and competing against warlords afar in 1v1
and 2v2 cross-platform online multiplayer modes.
Warhammer Age of Sigmar: Realms of Ruin is the definitive
real-time strategy experience based on Games Workshop's ultimate
fantasy miniatures game, and Frontier's first release in the
real-time strategy genre.
Alongside these two new major game releases, Frontier's existing
game portfolio is expected to continue to deliver substantial
on-going revenue contributions in FY24, supported by new
content.
The Board is therefore comfortable with current analyst
forecasts for FY24, with consensus revenue at around GBP108 million
and the majority of analysts projecting an Adjusted EBITDA loss in
the range of GBP5-10 million.
The Board is confident that the Company can return to attractive
levels of financial performance over the medium term, based on the
strength of its existing portfolio and planned new releases. An
update on trading for FY24 will be provided alongside the final
FY23 financial results announcement in September 2023.
Jonny Watts, Frontier's CEO, said:
"I am pleased to confirm trading for FY23 in-line with the
guidance we provided in January 2023, with a solid contribution
from the existing portfolio led by Jurassic World Evolution 2, and
a good first year performance for our annual F1(R) Manager game
series.
Our renewed focus is to select, develop, launch and nurture
genre-leading games which delight our players and deliver strong
financial performance for our investors. I am confident that we
will return to growth and profitability through the achievements of
our world class team, the performance of our existing game
portfolio and the delivery of our exciting pipeline of future
releases".
There will be a call for analysts and institutional investors at
9:30a.m. today. To register please contact frontier@teneo.com
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No. 596/2014, as
it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 (as amended). This announcement is issued on
behalf of the Company by Alex Bevis, CFO.
Enquiries :
Frontier Developments +44 (0)1223 394 300
Jonny Watts, CEO
Alex Bevis, CFO
Peel Hunt - Nomad and Joint Corporate Broker +44 (0)20 7418 8900
Paul Gillam / Tom Ballard / James Smith
Liberum - Joint Corporate Broker +44 (0)20 3100 2000
Andrew Godber / Nikhil Varghese
Teneo 44 (0)20 7353 4200
Mark Burgess / Matt Low / Alex Dart
About Frontier Developments plc
Frontier is a leading independent developer and publisher of
videogames founded in 1994 by David Braben, co-author of the iconic
Elite game. Frontier uses its proprietary COBRA game development
technology to create innovative genre-leading games, primarily for
personal computers and videogame consoles. As well as
self-publishing internally developed games, Frontier also publishes
games developed by carefully selected partner studios under its
Frontier Foundry games label.
Frontier's LEI number: 213800B9LGPWUAZ9GX18.
www.frontier.co.uk
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END
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