TIDMFDEV
RNS Number : 0170M
Frontier Developments PLC
09 January 2023
9 January 2023
Frontier Developments plc
Trading Update and Notice of Results
Frontier Developments plc (AIM: FDEV, "Frontier" or the
"Company"), a leading developer and publisher of videogames based
in Cambridge, UK , provides an update on trading for the current
financial year 'FY23', the period from 1 June 2022 to 31 May 2023.
Frontier expects to announce interim financial results for H1 FY23,
the period from 1 June 2022 to 30 November 2022, on 19 January
2023.
H1 financial performance
Frontier expects to report revenue for H1 FY23 of approximately
GBP57 million (H1 FY22: GBP49.1 million). The 16% growth above the
comparative period was achieved from revenue contributions from two
new game releases, F1(R) Manager 2022 and Stranded: Alien Dawn,
alongside the ongoing material revenue contributions from
Frontier's portfolio of existing games, which accounted for around
two-thirds of total revenue in the period.
Frontier continues to benefit from a strong balance sheet, with
GBP42.6 million of cash as at 30 November 2022 (31 May 2022:
GBP38.7 million) after payment of the upfront consideration for the
acquisition of Complex Games in November 2022.
Portfolio update
F1(R) Manager 2022
F1(R) Manager 2022 , the first annual title in a major new
sports franchise for Frontier, was released at the end of August
2022. Over 600,000 units have been sold to date across PC, Xbox and
PlayStation, including both digital and physical unit sales on
console. Metacritic ratings are between 74 and 80 across the three
platforms.
Player engagement at release in August 2022 and during the
initial period after release was strong, and broadly in-line with
original expectations. Unfortunately, sales performance during key
holiday season price promotions fell materially below original
expectations, potentially due in part to increased player price
sensitivity related to worsening economic conditions.
F1(R) Manager 2022 remains a good first game in an important new
annual franchise for Frontier. We have already learned a lot from
our first F1(R) Manager launch, and we will build the F1(R) Manager
franchise over the coming years.
However, as a result of the underperformance of F1(R) Manager
2022 during the holiday period, the Board has reduced its revenue
projections for FY23 and FY24.
Our existing portfolio
The performance of Frontier's existing internally developed
games which released before June 2022, namely Elite Dangerous,
Planet Coaster, Jurassic World Evolution 1, Jurassic World
Evolution 2 and Planet Zoo, was in-line with expectations during H1
FY23. However, sales performance during key price promotions in
December 2022 fell below expectations, with some evidence of
increased player price sensitivity.
As expected, the strongest performers from our existing
portfolio in the financial year to date have been Jurassic World
Evolution 2 and Planet Zoo, which continue to be supported with
free updates and multiple PDLC (paid-downloadable content)
packs.
Frontier Foundry
Frontier Foundry is our games label for publishing games
developed by partner studios, which we started in summer 2019 with
the signing of experienced developer Haemimont Games, based in
Bulgaria.
During this financial year we successfully released Haemimont's
Stranded: Alien Dawn into early access on Steam, and announced two
new games for release in early calendar year 2023; Deliver us Mars
and The Great War: Western Front.
Following the successful release of Warhammer 40,000: Chaos Gate
- Daemonhunters in May 2022, we were pleased to complete the
acquisition of developer Complex Games on 1 November 2022. The
closer collaboration achieved through the pre-acquisition process
and subsequent deal completion can be evidenced by the successful
release of PDLC for Warhammer 40,000: Chaos Gate - Daemonhunters in
December 2022, which increased player engagement with the game
during the important festive trading period. Integration of the
Complex team is progressing well, and we are growing headcount from
the 20 people on board at acquisition.
Foundry has supported eight different games to date, with six
released games and two titles launching in the next few months.
Given our mixed experience of third-party publishing in terms of
financial success to date, we are assessing our strategy for
Foundry in light of such experiences and competitive trends in the
market. In particular, we are reviewing the return on investment
achieved by Foundry.
Whilst we remain committed to, and excited by, the titles
currently in development for release in FY23, we currently do not
have any Foundry titles scheduled for release in FY24.
Current trading and outlook
Based on the lower than expected sales contribution from F1(R)
Manager 2022, the general sales underperformance across the whole
portfolio during the holiday period, and the uncertain contribution
from Foundry in the remainder of FY23, the Board no longer expects
to achieve the FY23 market consensus forecasts for revenue and IFRS
operating profit, being GBP135 million and GBP19 million
respectively.
The outturn over the five remaining months of the financial year
is dependent on a number of variables, including the timing and
contribution from the scheduled Foundry releases and the
macro-economic environment.
The Board believes it is still possible to surpass last year's
record revenue performance of GBP114 million, particularly if one
of the upcoming Foundry titles is a conspicuous success. However,
given the number of variables and the more challenging economic
outlook, the Board's revised expectation is to deliver revenue of
not less than GBP100 million in FY23.
Profitability in FY23 will be adversely affected by the revised
lower level of sales performance. The Board believe that a revenue
outcome of GBP100 million would deliver an IFRS operating profit
margin of around 2% (operating profit of c.GBP2 million), whilst
achieving GBP114 million of revenue would deliver a margin of
approximately 9% (operating profit of c.GBP10 million).
Looking further ahead into FY24, which will benefit from
Frontier's Warhammer Age of Sigmar real-time strategy game and
F1(R) Manager 2023 , the Board has set its expectations for revenue
growth at 5% above the eventual revenue outcome for FY23, in light
of current market and portfolio uncertainties, and the absence of
new titles from Foundry releasing in FY24.
Jonny Watts, Frontier's CEO, said
"It is very disappointing to be resetting our financial
expectations.
As CEO, I am driving a change in emphasis to increase focus on
our core strengths and skills, with particular attention to
increasing the return on investment that we achieve from our
world-class teams. We intend to grow the number of our development
teams to increase the cadence of new releases, whilst continuing to
nurture our existing portfolio, to achieve sustainable growth.
We have created a strong portfolio of games and we continue to
learn and respond to challenges as we expand and nurture our
portfolio. I am grateful to our talented people for their continued
hard work."
There will be a call for analysts and institutional investors at
9:30a.m. today. To register please contact
frontier@tulchangroup.com
The information contained within this announcement is deemed to
constitute inside information as stipulated under the retained EU
law version of the Market Abuse Regulation (EU) No. 596/2014 (the
"UK MAR") which is part of UK law by virtue of the European Union
(Withdrawal) Act 2018. The information is disclosed in accordance
with the Company's obligations under Article 17 of the UK MAR. Upon
the publication of this announcement, this inside information is
now considered to be in the public domain.
Enquiries:
Frontier Developments +44 (0)1223 394 300
Jonny Watts, 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 / Mark Burgess / 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. 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
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