TIDMFDEV

RNS Number : 1317Y

Frontier Developments PLC

12 January 2022

Frontier Developments plc

Interim Results

H1 revenue up 33%. Well positioned for an exciting 2022.

Frontier Developments plc (AIM: FDEV, "Frontier", the "Company") , a leading developer and publisher of video games based in Cambridge, UK has published its unaudited interim results for the 6 months to 30 November 2021 ('H1 FY22') and provides a trading update following the important Holiday season.

Financial Highlights

 
                                       H1 FY22            H1 FY21              FY21 
                                  (6 months to          (6 months        (12 months 
                             30 November 2021)     to 30 November         to 31 May 
                                                            2020)             2021) 
 Revenue                              GBP49.1m           GBP36.9m          GBP90.7m 
                           -------------------  -----------------      ------------ 
 EBITDA*                              GBP14.1m           GBP15.5m          GBP38.1m 
                           -------------------  -----------------      ------------ 
 Operating Cash Flow**                 GBP0.7m            GBP3.1m          GBP12.2m 
                           -------------------  -----------------      ------------ 
 Operating (Loss)/Profit             (GBP1.3m)            GBP6.9m          GBP19.9m 
                           -------------------  -----------------      ------------ 
 Operating Margin %                       (3%)                19%               22% 
                           -------------------  -----------------      ------------ 
 EPS (basic)                            (4.2p)              15.0p             55.4p 
                           -------------------  -----------------      ------------ 
 Net Cash Balance at                  GBP33.6m           GBP34.9m          GBP42.4m 
  period end 
                           -------------------  -----------------      ------------ 
 

*Earnings before interest, tax, depreciation and amortisation

** EBITDA excluding non-cash items less investments in game developments and Frontier's game technology

-- Revenue grew 33% over the comparative period to GBP49.1 million (H1 FY21: GBP36.9 million) through the release of Jurassic World Evolution 2 in November 2021 and the ongoing performance of our existing game portfolio

-- Gross profit margin of 63% reduced versus the comparative period (H1 FY21: 71%) through a higher proportion of revenue attracting IP licence royalties (Jurassic World Evolution 2) and console physical discs sales of Jurassic World Evolution 2 which achieve lower profit margins compared with digital sales

-- The combination of a lower gross profit margin percentage and game release related marketing costs resulted in a slightly lower EBITDA compared with the comparative period (GBP14.1 million in H1 FY22 versus GBP15.5 million in H1 FY21) with an operating cash inflow in the period of GBP0.7 million (H1 FY21: GBP3.1 million)

-- Exceptional non-cash foreign exchange and amortisation charges resulted in a small operating loss of GBP1.3 million in the period (H1 FY21: profit of GBP6.9 million)

-- Net cash balance of GBP33.6 million at 30 November 2021 (31 May 2021: GBP42.4 million). The net cash outflow of GBP8.8 million in the period was mainly due to an increase in working capital, with significant net cash receipts for November sales receivable from channel partners, including for the launch of Jurassic World Evolution 2, in December 2021 and January 2022

Operational & Strategic Highlights

-- Our launch and nurture strategy continues to deliver, through sustaining and growing our portfolio of genre-leading titles:

o Jurassic World Evolution 2 is the latest successful addition to our portfolio, already selling nearly 1 million base game units since release in November 2021

o Planet Coaster , Planet Zoo and Jurassic World Evolution all continue to entertain existing players whilst attracting new ones, with each title delivering material contributions to sales throughout calendar 2021

o Elite Dangerous experienced a difficult calendar 2021 following the disappointing launch of the major Odyssey expansion in May 2021. We continue to support the game and our passionate players with development updates, and we have seen an upturn in player sentiment as a result

-- Frontier Foundry, our own games label for third-party publishing, continues to grow with a number of exciting titles in discussion as well as those already signed. We have at least four titles coming in calendar 2022 including FAR: Changing Tides and Warhammer 40,000: Chaos Gate - Daemonhunters.

-- Our team continues to grow, with over 250 people joining us during 2021, taking us to a total headcount of 745 as at 31 December 2021. Our amazing people continue to operate positively through the challenges posed by Coronavirus and, in particular, in adapting so well to remote and hybrid working during the last 18 months

-- We are very well positioned for the future. This calendar year will see us enter the incredible world of Formula 1 - a truly global sport - with the first release for our annual F1 management game franchise. Furthermore, it will see Foundry continuing to build momentum to become a material contributor to the business, and we will see the release of Universal Picture's hugely anticipated Jurassic World Dominion film, and the expected corresponding benefit to Jurassic World Evolution 2

Current Trading and Outlook

December is always an important month for sales in the games industry, and we were pleased to achieve our highest ever December revenue in 2021, as expected. Jurassic World Evolution 2 delivered a strong second month of sales following its release in November 2021, and our existing portfolio of established titles all provided solid contributions.

We start the calendar year with a great portfolio and an exciting pipeline of new titles, through both our own internal developments and through Frontier Foundry, working closely with external partners. We are building valuable long-term relationships with all of our partners and have some phenomenal projects in development, which in time will further enrich our portfolio of great games.

In the remaining five months of the current financial year (to 31 May 2022) we look forward to delivering two new games from Frontier Foundry, FAR: Changing Tides (now confirmed for release on 1 March 2022) and Warhammer 40,000: Chaos Gate - Daemonhunters, whilst supporting our existing portfolio with new content. Based on current estimates for the remaining period, the Board have narrowed the revenue guidance range for FY22 to GBP100 million to GBP120 million.

Looking a little further ahead, we have exciting plans for FY23 (the 12 months to 31 May 2023):

-- The first of our annual Formula 1(R) management games will release during the 2022 F1 season (in FY23), as part of our exclusive licence for Formula 1(R) management games

-- Jurassic World Evolution 2 is expected to benefit from the release of the Jurassic World Dominion film in June 2022 (in FY23) and all the promotional awareness that this film release will bring to the game, with multiple exciting PDLC packs planned through the year

   --    Planet Zoo will also benefit from a continuing roadmap of new PDLC packs 

-- Frontier Foundry, our games label for 3(rd) party publishing, will release multiple new titles as it continues to grow

Our Warhammer Age of Sigmar IP real-time strategy game planned for release during calendar 2023 will now release later in that calendar year, falling in FY24. This change will further improve the quality and longevity of the game, and overall make it more successful. As a result of this scheduling adjustment, the Board have revised the revenue guidance range for FY23 to GBP130 million to GBP160 million, implying 18% to 45% annual growth from the mid-point of FY22 guidance.

We have excellent prospects for sustainable long-term growth based on the longevity of our existing portfolio and our future development and publishing plans, underpinned by our world-class and growing team.

David Braben, Chief Executive, said:

"We have had an unprecedented couple of years because of Coronavirus and the resulting changes, both positive and negative. We have seen increased sales and changes to purchasing patterns, the acceleration of the transition towards interactive entertainment and digital purchasing, and changes to production that embrace home-working. Although Coronavirus challenges remain, we believe we now have sound production processes that work in the new hybrid world, as demonstrated by the on-time and high quality delivery of the excellent Jurassic World Evolution 2, and this sets us up for future success. Our team has done a fantastic job adapting to all these challenges and finding new ways of working. We have the potential for much greater growth in the next few years as we reap the benefits of all the hard work we have done to adapt to these changes and capitalise on a great portfolio of existing games together with the exciting new franchises such as Formula 1(R) management games and our Warhammer Age of Sigmar real-time strategy game. We are well set up with a great portfolio for an exciting future."

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019. The person responsible for making this announcement on behalf of the Company is Alex Bevis.

Enquiries :

Frontier Developments +44 (0)1223 394 300

David Braben, CEO

Alex Bevis, CFO

Liberum - Nomad and Joint Broker +44 (0)20 3100 2000

Neil Patel / Cameron Duncan

Jefferies - Joint Broker +44 (0)20 7029 8000

Max Jones / William Brown

Tulchan Communications +44 (0)20 7353 4200

Matt Low / Jordan McCulla / Olivia Lucas

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. Based in Cambridge, 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

Interim Results Statement

MAJOR NEW RELEASES

Our biggest new release in the period was our latest multiplatform game, Jurassic World Evolution 2, which released as planned on 9 November 2021 on PC via Steam and the Epic Games Store, PlayStation(R)5, Xbox Series X|S, PlayStation(R)4 and Xbox One, with both digital and physical formats available to PlayStation and Xbox players from day one.

The critical and audience reception from launch has been very positive, thanks to the hard work of our talented people across our development, publishing and support teams. Our player community are enjoying the enhancements we have made, as well as the new content that we have introduced, building on the strong foundations of Jurassic World Evolution. Game reviews are very good - the scores compiled by Opencritic show 67 reviews providing a Top Critic Average score of 78.

Base game sales have reached almost 1 million units after 9 weeks from release, with strong sales in both November and December. Sales rates as we start calendar 2022 are encouraging.

PDLC is an important element of the post-launch strategy for Jurassic World Evolution 2 as part of Frontier's proven launch and nurture approach to game development and publication. Two well-received PDLC packs have been released to date, with the Deluxe Upgrade pack available at release and the Early Cretaceous Pack launching a month later on 9 December 2021. Multiple exciting PDLC packs are planned for 2022.

Significant sales of both the base game and PDLC are expected from June 2022 when the Jurassic World Dominion film releases.

REVENUE

Total revenue in H1 FY21 grew to GBP49.1 million, 33% ahead of the comparative period (H1 FY21: GBP36.9 million). Jurassic World Evolution 2 was the main catalyst for growth, launching in the final month of the period. Planet Zoo also delivered growth over the comparative period, with revenue growing 14% through sales of new and existing PDLC as well as sales of the base game. Planet Coaster and Jurassic World Evolution delivered solid sales performances during H1 FY22 against a tough comparative period which included major new platform releases for each title: in November 2020 Planet Coaster expanded onto Xbox Series X|S, Xbox One, PlayStation 4 and PlayStation 5, and Jurassic World Evolution released on Nintendo Switch. The overall sales performance of Elite Dangerous in the period was below expectations following the disappointing launch of Elite Dangerous: Odyssey in May 2021. Frontier Foundry, our games label for 3(rd) party publishing, launched innovative strategic shooter Lemnis Gate during the period, with more material revenues expected in the second half of the financial year from FAR: Changing Tides, now confirmed for release on 1 March 2022, and Warhammer 40,000: Chaos Gate - Daemonhunters.

PROFITABILITY

Gross profit of GBP30.8 million was recorded in the period (H1 FY21: GBP26.2 million) with gross profit margin at 63% (H1 FY21: 71%). The lower percentage margin resulted from a higher proportion of revenue attracting IP licence royalties (Jurassic World Evolution 2) and console physical discs sales of Jurassic World Evolution 2 which achieve lower profit margins compared with digital sales.

Gross research and development expenses in the period increased by 41% to GBP22.2 million (H1 FY21: GBP15.8 million). The growth resulted from a continued growth in headcount to support Frontier's development plans, an increase in outsourced activity and investments in Frontier Foundry partner developments.

Capitalisation of development costs on game developments and game technology accounted for GBP15.8 million in the six months to 30 November 2021 (H1 FY21: GBP13.1 million). The percentage of gross research and development costs which were capitalised in the period was 71%, lower than the 83% recorded for H1 FY21 as more development staff were working on free updates (as opposed to chargeable content) during the recent period, notably the ongoing post-release support for Elite Dangerous: Odyssey. Frontier's normal expectations for capitalisation is 70-90% of gross development spending.

R&D amortisation charges related to previously capitalised development costs grew 73% to GBP12.2 million (H1 FY21: GBP7.0 million). Charges in H1 FY22 included a full six months of amortisation for major expansion Elite Dangerous: Odyssey and one month for Jurassic World Evolution 2, as well as an accelerated amortisation charge for Lemnis Gate following its relatively low sales performance at release.

Net research and development expenses recorded in the income statement in the period grew 91% to GBP18.6 million (H1 FY21: GBP9.7 million), being gross spend of GBP22.2 million, less capitalised costs of GBP15.8 million, plus amortisation charges of GBP12.2 million.

Sales and marketing expenses in the period were GBP7.5 million (H1 FY21: GBP3.4 million) with the largest element of the increase from the launch of Jurassic World Evolution 2. Administrative expenses were GBP6.0 million in the period (H1 FY21: GBP6.1 million).

Exceptional non-cash foreign exchange and amortisation charges, together with a lower gross profit margin percentage, higher net R&D expenses (including some one-off items) and game release related marketing costs resulted in a small operating loss of GBP1.3 million in the period (H1 FY21: profit of GBP6.9 million).

A net zero corporation tax charge was recorded in the income statement for the period (H1 FY21: GBP0.6 million), since for the full financial year enhanced deductions from the Video Game Tax Relief scheme are expected to offset tax charges on profits. The Group expects to provide additional corporation tax disclosures in the FY22 financial statements.

A loss after tax of GBP1.7 million was recorded in the period (H1 FY21: profit of GBP5.8 million). Basic earnings per share was a loss of 4.2 pence (H1 FY21: profit of 15.0 pence).

BALANCE SHEET AND CASH FLOW

The Company continues to benefit from a strong balance sheet, with cash balances of GBP33.6 million at 30 November 2021 (31 May 2021: GBP42.4 million; 30 November 2020: GBP34.9 million). The majority of the GBP8.8 million reduction in cash during the period was due to an increase in net working capital at the end of the period related to the release of Jurassic World Evolution 2. Trade and other receivables grew by GBP14.1 to GBP27.8 million at 30 November 2021 (31 May 2021: GBP13.7 million), with trade and other payables increasing by GBP5.4 million to GBP20.2 million (31 May 2021: GBP14.8 million). This working capital increase is expected to unwind during the second half of the financial year.

Although cash balances reduced in the period, Frontier recorded an overall operating cash inflow of GBP0.7 million in the period (H1 FY21: GBP3.1 million), defined as EBITDA excluding non-cash items less investments in game developments and Frontier's game technology.

CONSOLIDATED INCOME STATEMENT

 
                                                       6 months to    6 months to    12 months 
                                                       30 November    30 November    to 31 May 
                                                              2021           2020         2020 
                                              Notes        GBP'000        GBP'000      GBP'000 
-------------------------------------------  ------  -------------  -------------  ----------- 
 Revenue                                        6           49,116         36,907       90,688 
 Cost of sales                                            (18,326)       (10,747)     (27,538) 
-------------------------------------------  ------  -------------  -------------  ----------- 
 Gross profit                                               30,790         26,160       63,150 
-------------------------------------------  ------  -------------  -------------  ----------- 
 Research and development expenses                        (18,593)        (9,717)     (22,025) 
 Sales and marketing expenses                              (7,503)        (3,432)      (7,269) 
 Administrative expenses                                   (6,037)        (6,133)     (13,940) 
-------------------------------------------  ------  -------------  -------------  ----------- 
 Operating (loss)/profit                                   (1,343)          6,878       19,916 
-------------------------------------------  ------  -------------  -------------  ----------- 
 Finance costs                                               (310)          (423)        (731) 
-------------------------------------------  ------  -------------  -------------  ----------- 
 (Loss)/Profit before tax                                  (1,653)          6,455       19,185 
-------------------------------------------  ------  -------------  -------------  ----------- 
 Income tax                                                      -          (646)        2,373 
-------------------------------------------  ------  -------------  -------------  ----------- 
 (Loss)/Profit for the period attributable 
  to shareholders                                          (1,653)          5,809       21,558 
-------------------------------------------  ------  -------------  -------------  ----------- 
 Earnings per share 
 Basic earnings per share                       7           (4.2p)           15.0         55.4 
 Diluted earnings per share                     7           (4.2p)           14.4         53.3 
 
 

All the activities of the Group are classified as continuing

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 
                                           6 months to   6 months to     12 months 
                                                                                to 
                                           30 November   30 November   31 May 2021 
                                                  2021          2020 
                                               GBP'000       GBP'000       GBP'000 
----------------------------------------  ------------  ------------  ------------ 
 (Loss)/Profit for the period                  (1,653)         5,809        21,558 
 Other comprehensive income: 
 Exchange differences on translation of 
  foreign operations                              (12)            13            23 
----------------------------------------  ------------  ------------  ------------ 
 Total comprehensive (loss)/income for 
  the period attributable to the equity 
  holders of the parent                        (1,665)         5,822        21,581 
----------------------------------------  ------------  ------------  ------------ 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 NOVEMBER 2021

(REGISTERED COMPANY NO: 02892559)

 
                                                              30 November 
                                          30 November 2021        2020      31 May 2021 
                                  Notes            GBP'000      GBP'000         GBP'000 
-------------------------------  ------  -----------------  -------------  ------------ 
 Non-current assets 
 Intangible assets                    8             73,508         58,940        71,318 
 Property, plant and equipment        9              6,967          5,854         6,078 
 Right-of-use asset                                 20,296         21,920        21,108 
 Deferred tax asset                                    384          6,175           384 
                                                   101,155         92,889        98,888 
-------------------------------  ------  -----------------  -------------  ------------ 
 Current assets 
 Trade and other receivables                        27,845         14,979        13,741 
 Current tax asset                                   2,511          2,377         6,468 
 Cash and cash equivalents                          33,561         34,892        42,423 
                                                    63,917         52,248        62,632 
-------------------------------  ------  -----------------  -------------  ------------ 
 Total assets                                      165,072        145,137       161,520 
-------------------------------  ------  -----------------  -------------  ------------ 
 
 Current liabilities 
 Trade and other payables                         (20,167)       (11,940)      (14,768) 
 Lease liability                                   (1,440)        (1,337)       (1,419) 
 Deferred income                                   (1,327)        (1,972)       (2,180) 
 Current tax liabilities                                 -          (684)             - 
                                                  (22,934)       (15,933)      (18,367) 
-------------------------------  ------  -----------------  -------------  ------------ 
 Net current assets                                 40,983         36,315        44,265 
-------------------------------  ------  -----------------  -------------  ------------ 
 
 Non-current liabilities 
 Provisions                                           (49)           (34)          (41) 
 Lease liability                                  (20,008)       (21,530)      (20,739) 
 Deferred income                                         -          (230)             - 
 Other payables                                    (8,825)        (7,184)       (9,219) 
 Deferred tax liabilities                                -        (4,038)             - 
                                                  (28,882)       (33,016)      (29,999) 
-------------------------------  ------  -----------------  -------------  ------------ 
 Total liabilities                                (51,816)       (48,949)      (48,366) 
-------------------------------  ------  -----------------  -------------  ------------ 
 Net assets                                        113,256         96,188       113,154 
-------------------------------  ------  -----------------  -------------  ------------ 
 Equity 
 Share capital                       10                197            196           197 
 Share premium account                              36,368         35,772        36,079 
 Equity reserve                                    (8,635)        (9,529)       (9,351) 
 Foreign exchange reserve                             (11)            (9)             1 
 Retained earnings                                  85,337         69,758        86,228 
 Total equity                                      113,256         96,188       113,154 
-------------------------------  ------  -----------------  -------------  ------------ 
 
 
 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 
 
                                                      Share                Foreign 
                                           Share    premium     Equity    exchange    Retained      Total 
                                         Capital    account    reserve     reserve    earnings     equity 
                                         GBP'000    GBP'000    GBP'000     GBP'000     GBP'000    GBP'000 
 At 31 May 2020                              195     34,589      (925)        (22)      62,897     96,734 
-------------------------------------  ---------  ---------  ---------  ----------  ----------  --------- 
 Profit for the period                         -          -          -           -       5,809      5,809 
 Other comprehensive income: 
 Exchange differences on translation 
  of foreign operations                        -          -          -          13           -         13 
-------------------------------------  ---------  ---------  ---------  ----------  ----------  --------- 
 Total comprehensive income 
  for the period                               -          -          -          13       5,809      5,822 
-------------------------------------  ---------  ---------  ---------  ----------  ----------  --------- 
 Issue of share capital net 
  of expenses                                  1      1,183          -           -           -      1,184 
 Share-based payment charges                   -          -      1,045           -           -      1,045 
 Share-based payment transfer 
  relating to option exercises 
  and lapses                                   -          -    (1,052)           -       1,052          - 
 EBT cash outflows from share 
  purchases                                    -          -   (10,000)           -           -   (10,000) 
 EBT net cash inflows from 
  option exercises                             -          -      1,403           -           -      1,403 
-------------------------------------  ---------  ---------  ---------  ----------  ----------  --------- 
 At 30 November 2020                         196     35,772    (9,529)         (9)      69,758     96,188 
-------------------------------------  ---------  ---------  ---------  ----------  ----------  --------- 
 Profit for the period                         -          -          -           -      15,749     15,749 
 Other comprehensive income: 
 Exchange differences on translation 
  of foreign operations                        -          -          -          10           -         10 
-------------------------------------  ---------  ---------  ---------  ----------  ----------  --------- 
 Total comprehensive income 
  for the period                               -          -          -          10      15,749     15,759 
-------------------------------------  ---------  ---------  ---------  ----------  ----------  --------- 
 Issue of share capital net 
  of expenses                                  1        307          -           -           -        308 
 Share-based payment charges                   -          -      1,110           -           -      1,110 
 Share-based payment transfer 
  relating to option exercises 
  and lapses                                   -          -      (718)           -         718          - 
 EBT cash outflows from share 
  purchases                                    -          -          -           -           -          - 
 EBT net cash inflows from 
  option exercises                             -          -      (214)           -           -      (214) 
 Deferred tax movements posted 
  directly to reserves                         -          -          -           -           3          3 
-------------------------------------  ---------  ---------  ---------  ----------  ----------  --------- 
 At 31 May 2021                              197     36,079    (9,351)           1      86,228    113,154 
-------------------------------------  ---------  ---------  ---------  ----------  ----------  --------- 
 (Loss)/Profit for the period                  -          -          -           -     (1,653)    (1,653) 
 Other comprehensive income: 
 Exchange differences on translation 
  of foreign operations                        -          -          -        (12)           -       (12) 
-------------------------------------  ---------  ---------  ---------  ----------  ----------  --------- 
 Total comprehensive loss for 
  the period                                   -          -          -        (12)     (1,653)    (1,665) 
-------------------------------------  ---------  ---------  ---------  ----------  ----------  --------- 
 Issue of share capital net 
  of expenses                                  -        289          -           -           -        289 
 Share-based payment charges                   -          -      1,175           -           -      1,175 
 Share-based payment transfer 
  relating to option exercises 
  and lapses                                   -          -      (762)           -         762          - 
 EBT cash outflows from share 
  purchases                                    -          -          -           -           -          - 
 EBT net cash inflows from 
  option exercises                             -          -        303           -           -        303 
-------------------------------------  ---------  ---------  ---------  ----------  ----------  --------- 
 At 30 November 2021                         197     36,368    (8,635)        (11)      85,337    113,256 
-------------------------------------  ---------  ---------  ---------  ----------  ----------  --------- 
 
 
 CONSOLIDATED STATEMENT OF CASHFLOWS 
                                             6 months to    6 months to    12 months 
                                             30 November    30 November    to 31 May 
                                                    2021           2020         2021 
                                                 GBP'000        GBP'000      GBP'000 
-----------------------------------------  -------------  -------------  ----------- 
 Cash generated from operations                    5,368         11,597       38,916 
 Taxes received                                    3,957             38           38 
 Cashflow from operating activities                9,325         11,635       38,954 
-----------------------------------------  -------------  -------------  ----------- 
 Investing activities 
 Purchase of property, plant and 
  equipment                                      (1,779)          (488)      (1,375) 
 Expenditure on intangible assets               (15,969)       (13,515)     (31,502) 
 Interest received                                    14             27           48 
 Cashflow from investing activities             (17,734)       (13,976)     (32,829) 
-----------------------------------------  -------------  -------------  ----------- 
 Financing activities 
 Proceeds from issue of share capital                289          1,184        1,492 
 Employee Benefit Trust cash outflows 
  from share purchases                                 -       (10,000)     (10,000) 
 Employee Benefit Trust cash inflows 
  from option exercises                              303          1,403        1,189 
 Payment of principal element of 
  lease liabilities                                (709)          (669)      (1,377) 
 Payment of interest element of 
  lease liabilities                                (325)          (365)        (691) 
 Interest paid                                         -           (88)         (88) 
 Cashflow from financing activities                (442)        (8,535)      (9,475) 
-----------------------------------------  -------------  -------------  ----------- 
 Net change in cash and cash equivalents 
  from continuing operations                     (8,851)       (10,876)      (3,350) 
 Cash and cash equivalents at beginning 
  of period                                       42,423         45,751       45,751 
 Exchange differences on cash and 
  cash equivalents                                  (11)             17           22 
 Cash and cash equivalents at end 
  of period                                       33,561         34,892       42,423 
-----------------------------------------  -------------  -------------  ----------- 
 
 The accompanying notes form part of this financial information. 
 Reconciliation of operating profit to cash 
  generated from operations 
                                             6 months to    6 months to    12 months 
                                             30 November    30 November    to 31 May 
                                                    2021           2020         2021 
                                                 GBP'000        GBP'000      GBP'000 
-----------------------------------------  -------------  -------------  ----------- 
 Operating (loss)/profit                         (1,343)          6,878       19,916 
 Depreciation and amortisation                    15,481          8,616       18,167 
-----------------------------------------  -------------  -------------  ----------- 
 EBITDA                                           14,138         15,494       38,083 
-----------------------------------------  -------------  -------------  ----------- 
 Movement in unrealised exchange 
  (gains)/losses on forward contracts              1,224          (298)        (223) 
 Share-based payment expenses                      1,175          1,045        2,155 
-----------------------------------------  -------------  -------------  ----------- 
 Operating cashflow before movements 
  in working capital                              16,537         16,241       40,015 
-----------------------------------------  -------------  -------------  ----------- 
 Net changes in working capital: 
 Change in trade and other receivables          (14,105)        (2,397)      (1,233) 
 Change in trade and other payables                2,929        (2,254)          119 
 Change in provisions                                  7              7           15 
-----------------------------------------  -------------  -------------  ----------- 
 Cash generated from operations                    5,368         11,597       38,916 
-----------------------------------------  -------------  -------------  ----------- 
 
 

NOTES TO THE FINANCIAL INFORMATION

   1.     CORPORATE INFORMATION 

Frontier Developments plc (the 'Company') along with its subsidiaries (together the 'Group') develops and publishes video games for the interactive entertainment sector.

The Company is a public limited company and is incorporated and domiciled in the United Kingdom, registered number 02892559. The address of its registered office is 26 Science Park, Milton Road, Cambridge CB4 0FP. The Group's operations are based in the UK and the US.

   2.     BASIS OF PREPARATION AND STATEMENT OF COMPLIANCE 

Basis of preparation

The consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting' (IAS 34), as issued by the International Accounting Standards Board (IASB) and as adopted by the UK, and the disclosure requirements of the Listing Rules.

The consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006, and have not been audited or reviewed by the Company's auditors.

The consolidated interim financial statements should be read in conjunction with the financial statements for the year ended 31 May 2021.

Statutory accounts for the year ended 31 May 2021 were approved by the Board of Directors on 8 September 2021 and delivered to the Registrar of Companies. The Auditors Report was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

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 (GBP'000) except when otherwise indicated.

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.

Impact of COVID-19 on going concern

The Board continuously monitor the performance of the Groups operational activities and the expected future prospects. As well as reviewing the current market trends and a number of downside scenarios, including any mitigations, the Board have assessed the ability to continue as a going concern during the pandemic. The results of this assessment is that the Group would be able to withstand significant changes in trading behaviour and still be able to continue operationally.

The Group benefits from a strong cash position, continued demand for products and no negative impacts on debtor recoverability. Therefore the Board are satisfied that the financial statements are prepared under the going concern basis.

   3.    ACCOUNTING POLICIES 

Except for the application for UK-adopted international accounting standards, for which there are no material differences from International Financial Reporting Standards as issued by the IASB and adopted by the EU when applied to the Group, the consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the Group's most recent annual financial statements for the year ended 31 May 2021.

   4.    ACCOUNTING ESTIMATES AND KEY JUDGEMENTS 

When preparing the interim financial statements, management undertakes a number of judgements, estimates and assumptions about recognition and measurements of assets, liabilities, income and expenses. The actual results may differ from these estimates.

The judgements, estimates and assumptions applied in the interim financial statements, including the key sources of estimation uncertainty, were the same as those applied in the Group's last annual financial statements for the year ended 31 May 2021.

   5.    SIGNIFICANT EVENTS AND TRANSACTIONS 

There were no significant events or transactions in the interim period (1 June 2021 to 30 November 2021) which were not included within the interim financial statements. There have been no significant events or transactions during the period from the end of the interim period to the day preceding the date of this report (1 December 2021 to 11 January 2022).

6. 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 one operating segment, being revenue from self-published and publishing franchises and other revenue streams such as royalties and licensing.

The Group does not provide any information on the geographical location of sales as the majority of revenue is through third-party distribution platforms which are responsible for the sales data of consumers. The cost to develop this information internally would be excessive.

All of the Group's non-current assets are held within the UK.

All material revenue is categorised as either publishing revenue or other revenue. Other revenue mainly related to royalty income.

The Group typically satisfies its performance obligations at the point that the product becomes available to the customer and payment has been received up front.

 
                                            6 months to 
                             6 months to    30 November   12 months to 
                        30 November 2021           2020    31 May 2021 
                                 GBP'000        GBP'000        GBP'000 
--------------------  ------------------  -------------  ------------- 
 Publishing revenue               49,016         36,818         90,471 
 Other revenue                       100             89            217 
--------------------  ------------------  -------------  ------------- 
                                  49,116         36,907         90,688 
--------------------  ------------------  -------------  ------------- 
 

7. 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 period.

 
                                        6 months to   6 months to      12 months 
                                                                              to 
                                        30 November   30 November    31 May 2021 
                                               2021          2020 
 Profit attributable to shareholders 
  (GBP'000)                                 (1,653)         5,809         21,558 
 Weighted average number of shares       39,162,921    38,779,241     38,909,932 
 Basic earnings per share (pence)             (4.2)          15.0           55.4 
-------------------------------------  ------------  ------------  ------------- 
 

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 period as adjusted for the dilutive effect of share options.

 
                                        6 months to   6 months to      12 months 
                                                                              to 
                                        30 November   30 November    31 May 2021 
                                               2021          2020 
 Profit attributable to shareholders 
  (GBP'000)                                 (1,653)         5,809         21,558 
 Diluted weighted average number 
  of shares                              39,162,921    40,469,204     40,471,633 
 Diluted earnings per share (pence)           (4.2)          14.4           53.3 
-------------------------------------  ------------  ------------  ------------- 
 

The reconciliation of average number of Ordinary Shares used for basic and diluted earnings per share is as follows:

 
                                      6 months to   6 months to   12 months to 
                                      30 November   30 November    31 May 2021 
                                             2021          2020 
 Weighted average number of shares     39,162,921    38,779,241     38,909,932 
 Dilutive effect of share options               -     1,689,963      1,561,701 
 Diluted average number of shares      39,162,921    40,469,204     40,471,633 
-----------------------------------  ------------  ------------  ------------- 
 

The dilutive effect of share options is nil for the 6 months to 30 November 2021 because a loss was recorded for that period.

8. INTANGIBLE ASSETS

 
                                       Game technology   Game developments   Third-party   IP licences     Total 
                                                                                software 
                                               GBP'000             GBP'000       GBP'000       GBP'000   GBP'000 
------------------------------------  ----------------  ------------------  ------------  ------------  -------- 
 
 
 Cost 
 At 31 May 2020                                  9,158              72,328         1,093        10,824    93,403 
 Additions                                       1,529              11,602           384             -    13,515 
 Transfers                                           -               (347)           347             -         - 
------------------------------------  ----------------  ------------------  ------------  ------------  -------- 
 At 30 November 2020                            10,687              83,583         1,824        10,824   106,918 
 Additions                                       6,322              13,536           236           361    20,455 
------------------------------------  ----------------  ------------------  ------------  ------------  -------- 
 At 31 May 2021                                 17,009              97,119         2,060        11,185   127,373 
 Additions                                       1,254              14,557           158             -    15,969 
 At 30 November 2021                            18,263             111,676         2,218        11,185   143,342 
------------------------------------  ----------------  ------------------  ------------  ------------  -------- 
 
   Amortisation 
 At 31 May 2020                                  5,589              33,007           803         1,336    40,735 
 Amortisation charges                              699               6,350           194             -     7,243 
------------------------------------  ----------------  ------------------  ------------  ------------  -------- 
 At 30 November 2020                             6,288              39,357           997         1,336    47,978 
 Amortisation charges                              770               7,077           230             -     8,077 
------------------------------------  ----------------  ------------------  ------------  ------------  -------- 
 At 31 May 2021                                  7,058              46,434         1,227         1,336    56,055 
 Amortisation charges                            1,058              11,115           229         1,377    13,779 
------------------------------------  ----------------  ------------------  ------------  ------------  -------- 
 At 30 November 2021                             8,116              57,549         1,456         2,713    69,834 
------------------------------------  ----------------  ------------------  ------------  ------------  -------- 
 
 Net Book Value 
 Net book value at 30 November 2021             10,147              54,127           762         8,472    73,508 
 Net book value at 31 May 2021                   9,951              50,685           833         9,849    71,318 
------------------------------------  ----------------  ------------------  ------------  ------------  -------- 
 Net book value at 30 November 2020              4,399              44,226           827         9,488    58,940 
------------------------------------  ----------------  ------------------  ------------  ------------  -------- 
 Net book value at 31 May 2020                   3,569              39,321           290         9,488    52,668 
------------------------------------  ----------------  ------------------  ------------  ------------  -------- 
 

9. TANGIBLE ASSETS

 
                                       Fixtures     Computer       Leasehold     Total 
                                   and Fittings    Equipment    Improvements 
                                        GBP'000      GBP'000         GBP'000   GBP'000 
-------------------------------  --------------  -----------  --------------  -------- 
 
 Cost 
 At 31 May 2020                             863        2,781           5,358     9,002 
 Additions                                    -          488               -       488 
-------------------------------  --------------  -----------  --------------  -------- 
 At 30 November 2020                        863        3,269           5,358     9,490 
 Additions                                    -          887               -       887 
-------------------------------  --------------  -----------  --------------  -------- 
 At 31 May 2021                             863        4,156           5,358    10,377 
 Additions                                    -        1,779               -     1,779 
-------------------------------  --------------  -----------  --------------  -------- 
 At 30 November 2021                        863        5,935           5,358    12,156 
-------------------------------  --------------  -----------  --------------  -------- 
 
   Depreciation 
 At 31 May 2020                             396        1,999             681     3,076 
 Charge for the period                       75          318             167       560 
-------------------------------  --------------  -----------  --------------  -------- 
 At 30 November 2020                        471        2,317             848     3,636 
 Charge for the period                       75          420             168       663 
-------------------------------  --------------  -----------  --------------  -------- 
 At 31 May 2021                             546        2,737           1,016     4,299 
 Charge for the period                       75          648             167       890 
-------------------------------  --------------  -----------  --------------  -------- 
 At 30 November 2021                        621        3,385           1,183     5,189 
-------------------------------  --------------  -----------  --------------  -------- 
 
 Net Book Value 
 Net book value at 30 November 
  2021                                      242        2,550           4,175     6,967 
------------------------------- 
 Net book value at 31 May 2021              317        1,419           4,342     6,078 
-------------------------------  --------------  -----------  --------------  -------- 
 Net book value at 30 November 
  2020                                      392          952           4,510     5,854 
-------------------------------  --------------  -----------  --------------  -------- 
 Net book value at 31 May 2020              467          782           4,677     5,926 
-------------------------------  --------------  -----------  --------------  -------- 
 
 
 10. SHARE CAPITAL 
 
                                                                Nominal Value 
                                                       Number             GBP 
------------------------------------------------  -----------  -------------- 
 At 1 June 2020                                    38,911,810         194,559 
------------------------------------------------  -----------  -------------- 
 Shares issued on option exercises and warrants       377,047           1,885 
------------------------------------------------  -----------  -------------- 
 At 30 November 2020                               39,288,857         196,444 
------------------------------------------------  -----------  -------------- 
 Shares issued on option exercises and warrants        54,747             274 
------------------------------------------------  -----------  -------------- 
 At 31 May 2021                                    39,343,604         196,718 
------------------------------------------------  -----------  -------------- 
 Shares issued on option exercises and warrants        49,651             248 
------------------------------------------------  -----------  -------------- 
 At 30 November 2021                               39,393,255         196,966 
------------------------------------------------  -----------  -------------- 
 

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January 12, 2022 02:00 ET (07:00 GMT)

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