TIDMFDEV
RNS Number : 0563L
Frontier Developments PLC
08 September 2021
Frontier Developments plc
FY21 Financial Results
Record financial results from a strong and sustaining
portfolio
Frontier Developments plc (AIM: FDEV, 'Frontier', the 'Company',
or the 'Group') , a leading developer and publisher of video games
based in Cambridge, UK, publishes its full-year results for the 12
months to 31 May 2021 ('FY21').
Financial Highlights
FY21 FY20 Year-on-year
change (%)
(12 months to (12 months
31 May 2021) to 31 May
2020)
Revenue GBP90.7m GBP76.1m 19%
-------------- ------------ -------------
Operating Profit GBP19.9m GBP16.6m 20%
-------------- ------------ -------------
Operating Margin % 22% 22% -
-------------- ------------ -------------
EPS (basic) 55.4p 41.3p 34%
-------------- ------------ -------------
EBITDA* GBP38.1m GBP31.5m 21%
-------------- ------------ -------------
Operating Cash Flow** GBP12.2m GBP13.6m (10%)
-------------- ------------ -------------
Net Cash Balance at
period end GBP42.4m GBP45.8m (7%)
-------------- ------------ -------------
*Earnings before interest, tax, depreciation and
amortisation
** EBITDA excluding non-cash items less investments in game
developments and Frontier's game technology
-- Our established portfolio of genre-leading games, supported
by our nurturing approach to post-release development, delivered
record financial results in FY21, through continued strong
engagement with our games and our downloadable content on new and
existing platforms
-- Record revenue of GBP90.7 million (FY20: GBP76.1 million)
reflected substantial contributions from all four of our existing
game franchises, together with our first revenues from Frontier
Foundry, our games label for third-party publishing
-- Strong trading performance and effective portfolio management
delivered record operating profit, as reported under IFRS, of
GBP19.9 million for FY21 (FY20: GBP16.6 million), with operating
profit margin maintained at 22%, matching the performance achieved
in both FY20 and FY19
-- Cash balances of GBP42.4 million at 31 May 2021 (31 May 2020:
GBP45.8 million) even after investment of GBP14.0 million during
the year in Frontier and Frontier Foundry games planned for release
in future periods
Operational & Strategic Highlights
Frontier's launch and nurture portfolio strategy continues to
deliver
-- Frontier plays to its strengths by creating deep, immersive
and high fidelity games that build on its proven capabilities and
unique track record
-- Post-launch, Frontier nurtures its games for many years
through community engagement and additional content
-- FY21 saw the announcement and release of Elite Dangerous:
Odyssey, our most ambitious expansion yet for our iconic space
simulation franchise
-- Planet Coaster expanded its audience through its release on
Xbox Series X|S, Xbox One, PlayStation 4 and PlayStation 5
-- Jurassic World Evolution accelerated the growth of its player
base by launching on Nintendo Switch
-- Planet Zoo continued to delight existing fans and attract new
players, supported by a range of popular PDLC packs
-- All four games continued to deliver strong sales on existing platforms
Frontier Foundry builds momentum
-- First revenue in Frontier Foundry in FY21, our games label for third-party publishing
-- Six titles signed for future release, with at least three in
FY22, including: Lemnis Gate; FAR: Changing Tides and Warhammer
40,000: Chaos Gate - Daemonhunters
-- Set for future success as a material part of our business,
with a target of at least four titles expected to launch per year
from FY23 onwards
Our strongest ever future roadmap
-- Jurassic World Evolution 2 revealed for release on 9 November
2021 (in FY22) - a much-anticipated sequel which builds upon our
ground-breaking and immersive 2018 management simulation
-- The first of our annual Formula 1(R) management games will
release during the 2022 F1 season, as part of our exclusive licence
for Formula 1(R) management games
-- Our Warhammer Age of Sigmar IP real-time strategy game,
licenced from Games Workshop, will launch in FY23
Current Trading and Outlook
Our existing game franchise portfolio continues to perform well.
Engagement with our Elite Dangerous player community is gradually
improving, and we remain confident that more and more players will
upgrade to Odyssey over time as we continue to improve and refine
the experience. We continue to see strong sales of Planet Zoo
(supported by new PDLC), Planet Coaster and Jurassic World
Evolution, illustrating the benefits of our multi-franchise launch
and nurture model.
Our biggest launch in FY22, Jurassic World Evolution 2, will
release on 9 November 2021, and we expect it to deliver a strong
performance over the Holiday season (Thanksgiving and Christmas).
In FY22 we'll continue to support all of our existing titles. In
particular, Planet Zoo will benefit from engaging new PDLC content;
we already have seven popular packs with the Africa pack the latest
to be released in June 2021, at the start of FY22. Frontier Foundry
will deliver at least three new releases in FY22, with Lemnis Gate,
FAR: Changing Tides and Warhammer 40,000: Chaos Gate -
Daemonhunters all announced for release in this financial year.
Based on the anticipated ongoing performance of our existing
portfolio, combined with an exciting new release schedule for FY22,
the Board's projected revenue range for FY22 is GBP130 million to
GBP150 million, implying an annual growth rate of 43% to 65% above
the record revenue reported for FY21.
Looking further out, for FY23, the Board's projected revenue
range is GBP160 million to GBP180 million, based on the anticipated
performance of our current and future game franchises, together
with a growing contribution from our games label for third-party
publishing, Frontier Foundry.
David Braben, Chief Executive, said:
"Our team did a terrific job during FY21 - creating new content
and delivering new platforms for our existing games to support and
grow our passionate player communities. We were delighted to
achieve record financial results in FY21 from our existing
portfolio of games franchises. Our team has also been busy on our
future titles, and we look forward with confidence based on our
strong existing portfolio and our exciting roadmap of new
releases."
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
Chairman's Statement
Delivering record financial results in FY21 is a testament to
the strength of our portfolio of game franchises which is a product
of the talent and hard work of our great team of people. I'd like
to thank everyone at Frontier for their dedication and teamwork;
supporting our games, our players and each other through the
challenges of 2020 and 2021.
As we begin a trial of hybrid office/home working we can reflect
back on the terrific output from our teams in FY21 whilst almost
exclusively working from home: the continued support of Planet Zoo
through new content as it entered its second year; reaching new
audiences for both Planet Coaster and Jurassic World Evolution as a
result of adding new digital platforms to their distribution; the
successful release and remarkable technical achievement of Elite
Dangerous: Odyssey; and launching our first Frontier Foundry
titles.
Frontier's 'Launch & Nurture' strategy continues to deliver,
with our four game franchises together reporting record revenues of
GBP91 million in FY21. We believe our proven model of identifying,
and then executing upon, opportunities to establish and maintain
ourselves as genre leaders, creates one of the lowest risk and
consistently high return business models in the games industry.
Building on an existing successful game with a compelling sequel
is an example of our desire to maintain genre leadership, reduce
risk and deliver strong margins. We were therefore very pleased to
announce Jurassic World Evolution 2 in June 2021 for release later
in calendar year 2021. This launch, now confirmed for 9 November
2021, builds on the strong foundations of Jurassic World Evolution,
which we released in 2018 and is our biggest selling game to
date.
Our future roadmap is an exciting mix of support and expansion
for our existing franchises whilst creating new genre-leading
titles. We look forward to bringing our first Formula 1(R)
management game to PC and console during the 2022 F1 season as part
of our licence to release a game each year over at least four F1
seasons. In FY23 (the 12 months to 31 May 2023) we have our
exciting Warhammer Age of Sigmar real-time strategy game scheduled
for release.
Alongside our internally developed games we have a rich
portfolio of future titles through development partnerships under
our Frontier Foundry games label. We have at least three games
planned for release in FY22 which have now all been announced:
Lemnis Gate; FAR: Changing Tides and Warhammer 40,000: Chaos Gate -
Daemonhunters. Our strategy to engage our resources and experience
to bring carefully selected opportunities from other development
studios is now ready and set up for success.
We have always taken a responsible and considerate approach to
running our business, with our strategy of growing and nurturing
our games and our staff being a critical pillar to achieving
long-term sustainable success. ESG (Environmental, Social,
Governance) has emerged in recent years as a key consolidation of
important topics for consideration by company stakeholders -
usually employees, customers and investors - for many businesses
and industries. Recently we created a dedicated section of our
website which consolidates all of our ESG information into one
place. This new ESG hub enables our investors, our players and our
people to access all of the latest Frontier news, data, statements
and policies relating to ESG topics. Find out more by heading to
https://www.frontier.co.uk/ESG-hub
We have a strong and well-aligned Board of Directors, with seven
highly experienced, capable and motivated individuals. During FY21
we continued to engage together through regular meetings, almost
all through video conference calls. With the lifting of
restrictions we look forward to more opportunities to again hold
in-person Board meetings. Regardless of the format of our
interaction, there is always debate and challenge, supported by
detailed management information and facilitated by each of our
different areas of expertise, business experiences and individual
perspectives.
As a Board we believe that we have the optimal model and
long-term strategy for Frontier, which builds upon our strengths
and manages our risks. The successful execution of that strategy is
achieved through our great people, and I'd like to thank them again
for their tremendous professionalism and contribution in FY21. We
look to the future with confidence based on our great team, our
successful portfolio, our passionate player communities, our very
supportive national and international shareholders, and our
exciting roadmap of games.
Chief Executive's Statement
The games industry has always experienced, and driven,
significant change, adaptation and evolution over its many decades
within the wider entertainment industry. I believe it's that long
experience and expectation of change that has allowed the games
industry to deal positively with the challenges from the
coronavirus pandemic, that has created so much disruption and
change to the world in the last 18 months.
At Frontier we had grown used to our teams working together
closely in the same physical space to create amazing, complex and
immersive game experiences for our communities of players. In March
2020 this quickly changed to almost 100% home working - we changed
our long-established processes dramatically, with our teams
continuing to connect and collaborate with each other, but through
video conference calls and other sharing tools.
I am proud of how well everyone has made the best of the change
in our working arrangements, and we know that for some people it
has provided them with greater personal flexibility whilst also
allowing greater focus on individual tasks - with task-based
working hardly affected. For other things, particularly when people
work together as a creative group, we have found that there is no
substitute for collaboration within the same physical space. On our
large and complex projects, which regularly require a lot of
teamwork to identify and overcome technical and creative
challenges, human interactions work better face-to-face.
There is also the challenge of training and mentoring staff, and
enabling everyone to establish new working connections whilst
maintaining their existing ones - team building at its core.
Learning by osmosis has always been a very important element of the
development of our people alongside more structured training,
particularly for our graduates and more junior staff, but also for
new joiners at all levels. Needless to say, attempting to learn by
osmosis through Teams or Zoom calls during the pandemic has been
less than ideal.
We will soon be starting a trial period of a hybrid working
model which is a blend of studio based working and remote working
which we hope will deliver the best of both worlds; the benefits of
home working combined with the physical collaboration opportunities
that working together in the studio delivers.
Our excellent team continues to grow, increasing 22% during FY21
to 634 as at 31 May 2021 (31 May 2020: 520). By 31 August 2021 we
had further expanded to 680 people, and we continue to recruit
talented individuals to nurture our existing portfolio and support
our roadmap of future titles. We have successfully added well over
200 people to the team remotely during the extended period of home
working over the last 18 months, which is a testament to the
efforts of our managers and our onboarding process.
Our portfolio
FY21 saw the announcement (in June 2020) and release (in May
2021) of Elite Dangerous: Odyssey on PC, our most ambitious
development project to date: the addition of first-person on-foot
gameplay into our 1:1 galactic simulation of the whole Milky Way.
This meant bringing the human scale to a galaxy nearly 100,000
light years across. Completing this large and complex expansion
without the benefits of face-to-face collaboration was challenging,
and despite a successful alpha period, unfortunately the launch was
hindered by connectivity issues, and this turned the positive
reception of the alpha to one of negativity. Despite its initial
challenges, hundreds of thousands of players are enjoying the
experience. I am delighted with the underlying achievement by our
team, and remain confident that more and more players will upgrade
to Odyssey over time as we continue to refine the experience.
Our releases in FY21 related to existing games, which is a great
illustration of our model of nurturing genre-leading game
franchises post-launch. I have already mentioned the ambitious
Odyssey expansion for Elite Dangerous, and our other three
successful game franchises delivered new content too; Planet Zoo
saw three new PDLC packs during the financial year alongside free
updates; Planet Coaster came to console with Planet Coaster:
Console Edition for the Xbox Series X|S, Xbox One, PlayStation 4
and PlayStation 5; and Jurassic World Evolution benefitted from a
major new platform launch in the period, with Jurassic World
Evolution: Complete Edition coming to Nintendo Switch. I am
delighted that our post-launch support model continues to support
both our players and our investors, with a record revenue
performance delivered in FY21 from our four existing successful
franchises.
Turning to our future releases, I am really excited about our
roadmap of future releases. We have been working on Jurassic World
Evolution 2 for around two years, and so it was a lovely moment to
reveal the news in June 2021 that we would be releasing a sequel to
our best-selling game to date. It's now in its final stages of
development and will be released into the wild on 9 November 2021.
With our annual Formula 1(R) management game series starting in
calendar year 2022, and our first ever real-time strategy game
which utilises Warhammer Age of Sigmar IP a little further out, I
think it's fair to say that we have our strongest ever release
line-up, supported by our strongest ever existing portfolio.
Looking further out into 2023 and beyond, I am delighted to say
that we continue to have even more great game opportunities.
Frontier Foundry
Frontier Foundry is our own games label for third-party
publishing, which leverages our publishing capability, industry
experience, commercial partnerships, and financial resources to
supplement our own development roadmap by partnering with other
high-quality developers to bring more games to market. We take a
developer-led approach to publishing, benefitting from our long and
varied experience of a being a developer under a variety of
different business models. Our approach is resonating well with
potential partners, and we are delighted with our future line-up,
with six great titles scheduled from six different teams, including
at least three titles coming in this financial year. This makes
FY22 an important year for Frontier Foundry, as it builds to become
a material part of our overall business.
Chief Financial Officer's Statement
Our existing portfolio of games, supported by new content and
new platforms for those games through our nurturing post-release
model, delivered record financial results in FY21 with revenue of
GBP90.7 million (FY20: GBP76.1 million) and operating profit of
GBP19.9 million (FY20: GBP16.6 million). The fact that we delivered
record numbers without releasing a major new game demonstrates the
success of our 'Launch and Nurture' model. As ever our financial
performance reflects the hard work of our talented people who
continue to support our global game communities. We look to the
future with confidence based on our growing team, our great
portfolio, our exciting roadmap and our strong financials.
Trading
All four of our genre-leading game franchises benefitted from
new content and/or new platforms during FY21. Our strategy of
supporting and nurturing our titles post-release continues to pay
dividends, with all of our titles providing material financial
contributions in FY21 through both base game sales and PDLC. We
supported our growing Planet Zoo player community, our most recent
game which released in November 2019, with three PDLC packs in
FY21. We now have seven packs in total as at 8 September 2021.
Alongside free content, PDLC packs help to keep the game fresh for
existing players while helping to entice new players to join the
Planet Zoo community, resulting in additional revenue from the
newly released PDLC as well as existing PDLC and the base game.
Planet Coaster and Jurassic World Evolution revenues benefitted
from new platforms, while sales on their existing platforms
continue to perform strongly. Planet Coaster, which launched on PC
in November 2016, come to console in November 2020 with Planet
Coaster: Console Edition for Xbox Series X|S, Xbox One, PlayStation
4 and PlayStation 5. Jurassic World Evolution, which released in
June 2018 on PC, Xbox One and PlayStation 4, further expanded its
audience through the launch of Jurassic World Evolution: Complete
Edition on Nintendo Switch in November 2020. Elite Dangerous
benefitted from both new channels and new content in the period. In
November 2020 Elite Dangerous released on the Epic Games Store,
including participation in Epic's Free Games Week at launch which
significantly increased the player base whilst generating
additional revenue. In May 2021 we released our most ambitious
expansion to date for Elite Dangerous, Elite Dangerous: Odyssey,
which generated launch revenues on PC in that month. The overall
reception to this major content update has been disappointing, but
we are confident that as we improve and enhance the Odyssey
experience that we will see more and more Commanders engaging with
the expansion.
Alongside our internally developed portfolio, Frontier Foundry,
our games label for third-party publishing, delivered its first
revenues in FY21 through the release of Struggling and
RollerCoaster Tycoon(R) 3: Complete Edition , with each title
launching on PC and Nintendo Switch. Frontier Foundry is set to
grow significantly in FY22 with the release of at least three new
titles.
The performance of our four game franchises together with
Frontier Foundry generated total revenue in FY21 of GBP90.7 million
(FY20: GBP76.1 million). Delivering a record sales performance
without a major new game launch shows the strength of our strategy
to support our games post-launch. Our primary sales strategy is
through digital distribution, working with key partners like Steam,
Epic, Humble and Genba on PC and with console owners: Microsoft for
Xbox, Sony for PlayStation and more recently Nintendo for Switch.
Digital sales represented 96% of revenue in FY21, with only 4% from
sales of physical discs (FY20: 3%), despite the release of physical
discs for Planet Coaster on its release on Xbox and PlayStation in
November 2020.
Gross profit was GBP63.1 million in the year (FY20: GBP51.6
million) with gross margin at 70% (FY20: 68%). Our gross margin
percentage tends to vary across different periods based on four
main factors: the split of own-IP versus licensed IP game revenue
(since licensing IP attracts royalty costs), variations in
commission rates on digital stores (for example Steam versus Epic),
revenue from subscription models such as Microsoft's Game Pass, and
the proportion of revenue derived from the sale of physical discs.
Our gross margin percentage in FY21 increased by 2% versus FY20
mainly through a higher proportion of sales from own-IP games
together with higher subscription model revenue from Microsoft and
Epic.
Gross research and development (R&D) expenses in the period
grew by 42% to GBP34.9 million (FY20: GBP24.6 million). The
substantial year-on-year growth reflected our continued investment
to support our growth strategy through three main areas: investment
in our team including significant headcount growth; investment in
our portfolio through greater outsourcing activity which allows our
internal teams to focus on the most value-adding development work;
and investment in Frontier Foundry development partner
projects.
Capitalisation of costs for game development related intangible
assets, together with continued investment in our leading game
technology, accounted for GBP27.8 million in the period (FY20:
GBP19.8 million). Costs related to new chargeable products, or the
development of technology to support new chargeable products, are
typically capitalised, subject to the usual criteria set out under
accounting standard IAS 38. Development costs associated with the
development or support of existing products are generally expensed
as incurred. Costs capitalised in FY21 represented 80% of gross
R&D expenditure which is consistent with prior periods (FY20:
80%).
Amortisation charges for game development and game technology
related intangibles grew to GBP14.9 million for the period (FY20:
GBP11.2 million). The increase reflected a full year of
amortisation for Planet Zoo, which released half way through FY20,
together with amortisation charges for releases during FY21; Planet
Zoo PDLC packs; new platform launches for Planet Coaster and
Jurassic World Evolution; and Elite Dangerous: Odyssey.
Net research and development expenses recorded in the income
statement, being gross spend, less capitalised costs, plus
amortisation charges, increased to GBP22.0 million in FY21 (FY20:
GBP16.0 million) with the majority of the rise related to
amortisation charges.
Sales, marketing and administrative expenses totalled GBP21.2
million in FY21 (FY20: GBP18.9 million) as a result of greater
investment in marketing to support our portfolio combined with the
slightly higher administration costs.
Overall net operating expenditure in FY21 grew to GBP43.2
million (FY20: GBP34.9 million) with higher costs across all three
areas: R&D, Sales & Marketing, and Administration.
Operating profit grew by 20% to GBP19.9 million in FY21 (FY20:
GBP16.6 million) which is a company record. Operating margin of 22%
was achieved in FY21, which is consistent with the performance in
both FY20 and FY19.
EBITDA (earnings before interest, tax, depreciation and
amortisation) increased to GBP38.1 million (FY20: GBP31.5 million).
However, the Company does not consider this to be a particularly
useful 'cash profit' measure of performance since it adds back
amortisation charges relating to game developments and game
technology but without also adjusting for (i.e. deducting) the
costs capitalised in the period related to those intangible assets,
producing a one-sided measure. The operating cashflow measure,
described in the later cash section, is a more appropriate measure
of 'cash profit'.
Frontier benefits from enhanced corporate tax deductions on
certain expenditures under the Video Games Tax Relief (VGTR) scheme
and under the R&D Tax Credits scheme, both of which help to
reduce taxable profits. Frontier also benefitted during the period
from tax deductions related to employee share option gains. The
combination of the enhanced tax deductions on expenditures and
share option tax deductions in the period, together with tax
adjustments for prior periods, generated a corporation tax credit
of GBP2.4 million in the income statement in FY21 (FY20:
corporation tax charge of GBP0.3 million).
During FY21, Frontier elected into HMRC's Patent Box Regime and
made a patent box claim on patent-related profits from FY19
onwards. The patent box claim had little impact on the FY21 income
statement tax credit, however, as the benefits were realised
through a substantial increase in the tax losses carried forward to
future periods. The effect of the patent box claim will therefore
be realised through cash tax benefits in the future.
Profit after tax for FY21 grew by 36% to GBP21.6 million (FY20:
GBP15.9 million) and basic earnings per share increased 34% to
55.4p (FY20: 41.3p).
Balance sheet and cashflow
We continue to benefit from a strong balance sheet, with GBP42.4
million of cash at 31 May 2021 (31 May 2020: GBP45.8 million). The
total net cash outflow during the year of GBP3.3 million (FY20: net
cash inflow of GBP10.4 million) included GBP10 million of
investment in Frontier shares purchased by our Employee Benefit
Trust, and therefore net cash would have grown by GBP6.7 million in
FY21 excluding those shares purchases. Operating cashflow, which is
effectively a measure of 'cash profit' being EBITDA excluding
non-cash items less investments in game developments and Frontier's
game technology related intangible assets, was GBP12.2 million in
FY21 (FY20: GBP13.6 million).
Intangible assets includes game technology, internal game
developments, Frontier Foundry game developments, third-party
software and IP licences. Total intangible assets increased by
GBP18.6 million to GBP71.3 million at 31 May 2021 (31 May 2020:
GBP52.7 million). The majority of the growth related to investments
in our own internally developed titles, including new content and
platform releases for our existing portfolio, together with
investments in Frontier Foundry partner developments.
Tangible assets relate mainly to IT equipment and the fit-out of
the leased office facility, which the Company occupied in April
2018. The net balance at 31 May 2021 was GBP6.1 million (31 May
2020: GBP5.9 million).
Following the adoption of IFRS 16 "Leases" effective for
Frontier from 1 June 2019, the Company's balance sheet at 31 May
2021 includes a right-of-use asset valued at GBP21.1 million (FY20:
GBP22.7 million) for the Company's lease over its headquarters
office building in Cambridge. A similar figure (the difference
related to timing of actual rental payments) of GBP22.2 million at
31 May 2021 (31 May 2020: GBP23.5 million), is recorded on the
balance sheet as a lease liability, split between current and
non-current liabilities.
Trade and other receivables totalled GBP13.7 million at the end
of the period (31 May 2020: GBP12.3 million) with the majority of
the balance related to gross revenue due from digital distribution
partners.
Trade and other payables totalled GBP14.8 million (31 May 2020:
GBP13.7 million) being mostly made up of distribution platform
commissions due on the sales transactions not yet settled, and
bonus costs and other staff related accruals.
Within non-current liabilities (amounts due after 12 months) a
balance of GBP9.2 million is held at 31 May 2021 (31 May 2020:
GBP8.2 million) which includes IP licence costs for the minimum
guaranteed royalties payable on the licences signed with Formula
1(R) and Games Workshop in FY20.
The current tax asset balance as at 31 May 2021 of GBP6.5
million (31 May 2020: GBP2.4 million) relates to the tax returns,
including VGTR claims, for FY19 and FY20, and for the draft tax
return for FY21. In June 2021 GBP4.0 million was received from HMRC
related to the FY19 and FY20 tax returns.
Deferred tax assets and liabilities have been recorded as at 31
May 2021 for the estimated values of temporary timing differences,
and the potential value of tax deductions relating to future share
option exercises. The net asset balance for deferred tax assets
less deferred tax liabilities recorded as at 31 May 2021 totalled
GBP0.4 million (31 May 2020: GBP2.1 million). Due to the expected
continued benefit from enhanced tax deduction schemes in future
periods and the streaming of profits and losses in different
trades, a deferred tax asset for carried forward tax losses has not
been recognised as at 31 May 2021 as it is uncertain when they will
be utilised. The same situation applied at 31 May 2020. The
estimated tax value of losses carried forward at 31 May 2021 is
GBP10 million (31 May 2020: GBP4 million).
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 MAY 2021
31 May 2021 31 May 2020
Notes GBP'000 GBP'000
------------------------------------------------ ------ ------------ ------------
Revenue 3 90,688 76,089
Cost of sales (27,538) (24,532)
------------------------------------------------ ------ ------------ ------------
Gross profit 63,150 51,557
Research and development expenses (22,025) (16,014)
Sales and marketing expenses (7,269) (5,747)
Administrative expenses (13,940) (13,172)
------------------------------------------------ ------ ------------ ------------
Operating profit 19,916 16,624
Finance costs (731) (401)
------------------------------------------------ ------ ------------ ------------
Profit before tax 19,185 16,223
Income tax 2,373 (329)
------------------------------------------------ ------ ------------ ------------
Profit for the period attributable to
shareholders 21,558 15,894
------------------------------------------------ ------ ------------ ------------
Earnings per share
Basic earnings per share 4 55.4 41.3
Diluted earnings per share 4 53.3 39.4
------------------------------------------------ ------ ------------ ------------
All the activities of the Group are classified
as continuing.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MAY 2021
31 May 2021 31 May 2020
GBP'000 GBP'000
------------------------------------------------ ------ ------------ ------------
Profit for the period 21,558 15,894
Other comprehensive income
Items that will be reclassified subsequently
to profit or loss
Exchange differences on translation of
foreign operations 23 (6)
------------------------------------------------ ------ ------------ ------------
Total comprehensive income for the period
attributable to the equity holders of
the parent 21,581 15,888
------------------------------------------------ ------ ------------ ------------
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 31 MAY 2021
(REGISTERED COMPANY NO: 02892559)
Restated*
31 May 2021 31 May 2020
GBP'000 GBP'000
------------------------------------- ------------ ------------
Non-current assets
Intangible assets 71,318 52,668
Property, plant and equipment 6,078 5,926
Right-of-use asset 21,108 22,732
Deferred tax asset 384 2,137
98,888 83,463
------------------------------------- ------------ ------------
Current assets
Trade and other receivables 13,741 12,284
Current tax asset 6,468 2,377
Cash and cash equivalents 42,423 45,751
------------------------------------- ------------ ------------
62,632 60,412
------------------------------------- ------------ ------------
Total assets 161,520 143,875
------------------------------------- ------------ ------------
Current liabilities
Trade and other payables (14,768) (13,669)
Lease liability (1,419) (1,337)
Deferred income (2,180) (1,439)
(18,367) (16,445)
------------------------------------- ------------ ------------
Net current assets 44,265 43,967
------------------------------------- ------------ ------------
Non-current liabilities
Provisions (41) (27)
Lease liability (20,739) (22,198)
Deferred income - (234)
Other payables (9,219) (8,237)
(29,999) (30,696)
------------------------------------- ------------ ------------
Total liabilities (48,366) (47,141)
------------------------------------- ------------ ------------
Net assets 113,154 96,734
------------------------------------- ------------ ------------
Equity
Share capital 197 195
Share premium account 36,079 34,589
Equity reserve (9,351) (925)
Foreign exchange reserve 1 (22)
Retained earnings 86,228 62,897
------------------------------------- ------------ ------------
Total equity 113,154 96,734
------------------------------------- ------------ ------------
* Restated for a presentation adjustment as per note 2.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MAY 2021
Share Foreign
Share premium Equity exchange Retained
capital account reserve reserve earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 June 2019 194 34,390 (3,073) (16) 44,011 75,506
-------------------------- --------------- --------------- --------------- --------------- --------------- -------------
Profit for the year - - - - 15,894 15,894
Other comprehensive
income:
Exchange differences on
translation
of foreign operations - - - (6) - (6)
Total comprehensive
income/(expense)
for the year - - - (6) 15,894 15,888
-------------------------- --------------- --------------- --------------- --------------- --------------- -------------
Issue of share capital
net
of expenses 1 199 - - - 200
Share-based payment
charges - - 1,947 - - 1,947
Share-based payment
transfer
relating to option
exercises
and lapses - - (510) - 510 -
EBT net cash inflows from
option exercises - - 711 - - 711
Deferred tax movements
posted
directly to reserves - - - - 2,482 2,482
-------------------------- --------------- --------------- --------------- --------------- --------------- -------------
Transactions with owners 1 199 2,148 - 2,992 5,340
-------------------------- --------------- --------------- --------------- --------------- --------------- -------------
At 31 May 2020 195 34,589 (925) (22) 62,897 96,734
-------------------------- --------------- --------------- --------------- --------------- --------------- -------------
Profit for the year - - - - 21,558 21,558
Other comprehensive
income:
Exchange differences on
translation
of foreign operations - - - 23 - 23
Total comprehensive
income
for the year - - - 23 21,558 21,581
-------------------------- --------------- --------------- --------------- --------------- --------------- -------------
Issue of share capital
net
of expenses 2 1,490 - - - 1,492
Share-based payment
charges - - 2,155 - - 2,155
Share-based payment
transfer
relating to option
exercises
and lapses - - (1,770) - 1,770 -
EBT cash outflows from
share
purchases - - (10,000) - - (10,000)
EBT net cash inflows from
option exercises - - 1,189 - - 1,189
Deferred tax movements
posted
directly to reserves - - - - 3 3
-------------------------- --------------- --------------- --------------- --------------- --------------- -------------
Transactions with owners 2 1,490 (8,426) - 1,773 (5,161)
-------------------------- --------------- --------------- --------------- --------------- --------------- -------------
At 31 May 2021 197 36,079 (9,351) 1 86,228 113,154
-------------------------- --------------- --------------- --------------- --------------- --------------- -------------
CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE YEARED 31 MAY 2021
31 May 2021 31 May 2020
GBP'000 GBP'000
------------------------------------------------------ ------------ -------------
Cash generated from operations 38,916 32,415
Taxes received 38 -
Cashflow from operating activities 38,954 32,415
------------------------------------------------------ ------------ -------------
Investing activities
Purchase of property, plant and equipment (1,375) (666)
Expenditure on intangible assets (31,502) (21,044)
Interest received 48 330
Cashflow from investing activities (32,829) (21,380)
------------------------------------------------------ ------------ -------------
Financing activities
Proceeds from issue of share capital 1,492 200
Employee Benefit Trust cash outflows from share
purchases (10,000) -
Employee Benefit Trust cash inflows from option
exercises 1,189 711
Payment of principal element of lease liabilities (1,377) (820)
Payment of interest element of lease liabilities (691) (731)
Interest paid (88) -
Cashflow from financing activities (9,475) (640)
------------------------------------------------------ ------------ -------------
Net change in cash and cash equivalents from
continuing operations (3,350) 10,395
Cash and cash equivalents at beginning of period 45,751 35,332
Exchange differences on cash and cash equivalents 22 24
Cash and cash equivalents at end of period 42,423 45,751
------------------------------------------------------ ------------ -------------
The accompanying accounting policies and notes form part
of this financial information.
Reconciliation of operating profit to cash generated
from operations
31 May 2021 31 May 2020
GBP'000 GBP'000
------------------------------------------------------ ------------ -------------
Operating profit 19,916 16,624
Depreciation and amortisation 18,167 14,870
------------------------------------------------------ ------------ -------------
EBITDA 38,083 31,494
------------------------------------------------------ ------------ -------------
Movement in unrealised exchange gains on forward
contracts (223) (91)
Share-based payment expenses 2,155 1,947
------------------------------------------------------ ------------ -------------
Operating cashflows before movements in working
capital 40,015 33,350
------------------------------------------------------ ------------ -------------
Net changes in working capital:
Change in trade and other receivables (1,233) (7,046)
Change in trade and other payables 119 6,097
Change in provisions 15 14
------------------------------------------------------ ------------ -------------
Cash generated from operations 38,916 32,415
------------------------------------------------------ ------------ -------------
NOTES TO THE FINANCIAL INFORMATION
1. CORPORATE INFORMATION
Frontier Developments plc (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.
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 its North
American subsidiary, Frontier Developments Inc., in the US.
2. BASIS OF PREPARATION AND STATEMENT OF COMPLIANCE
The financial information contained in this preliminary
announcement of audited results does not constitute the Group's
statutory accounts for the years ended 31 May 2021 or 31 May 2020.
The accounts for the year ended 31 May 2020 have been delivered to
the Registrar of Companies. The statutory accounts for the year
ended 31 May 2021 have been reported on by the Company's auditors;
the report on these accounts was unqualified, did not draw
attention to any matters by way of emphasis and did not contain any
statement under section 498(2) or (3) of the Companies Act 2006 or
equivalent preceding legislation.
The statutory accounts for the year ended 31 May 2021 are
expected to be posted to shareholders in due course and will be
delivered to the Registrar of Companies after they have been laid
before the shareholders in a general meeting in October 2021 (date
to be confirmed in due course). Copies will be available from the
registered office of the Company, 26 Science Park, Milton Road,
Cambridge CB4 0FP and will be accessible on the Frontier
Developments website, https://www.frontier.co.uk. The registered
number of Frontier Developments plc is 02892559.
The basis of preparation and going concern policies applied in
the preparation of these financial statements are set out below.
These policies have been consistently applied to all the periods
presented, unless otherwise stated.
Basis of preparation
The Consolidated Financial Statements of the Group have been
prepared in accordance with International Accounting Standards
(IASs) in conformity with the requirements of the Companies Act
2006 and in accordance with International Financial Reporting
Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union.
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.
Prior year adjustment
During the preparation of the tax accounting for the Group and
Company for FY21, an error was identified in relation to the
presentation of deferred tax in the prior year.
The presentation error identified does not change the tax
reporting to the tax authorities, nor is there any income statement
or earnings per share impact. It only affects the Statement of
Financial Position.
IAS 12 requires that deferred tax balances are presented on a
net basis where there is a legally enforceable right to offset and
the balances relate to the same tax jurisdiction. As the deferred
tax balances relate to the UK and the future recoverable and
payable amounts can be legally offset, an adjustment has therefore
been recorded to present the deferred tax on a net basis on the
face of the Consolidated Statement of Financial Position and the
Company Statement of Financial Position.
This presentation adjustment has the impact of reducing deferred
tax liabilities at 31 May 2020 from GBP4,038,000 previously stated
to GBPnil, and reducing deferred tax assets by GBP4,038,000 from
GBP6,175,000 previously stated to GBP2,037,000.
There is no change to the nature and values of the underlying
deferred tax assets and liabilities at 31 May 2020 as set out in
note 19 of the FY20 Annual Report and Accounts.
Going concern basis
The Group and Company'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 and Company has adequate
resources to continue in operational existence for the foreseeable
future, based on the Group's forecasts and projections for the
period to 30 November 2022. The Group and Company therefore
continue to adopt the going concern basis in preparing their
financial statements.
Assessment of going concern due to Covid-19
The Group's day-to-day working capital requirements are expected
to be met through the current cash and cash equivalent resources
(including treasury deposits) at the balance sheet date of 31 May
2021 of GBP42.4 million along with expected cash inflows from
current business activities. The Annual Plan approved by the Board
of Directors, which has been used to assess going concern,
incorporates the impacts and considerations to revenue and costs
due to Covid-19. The Annual Plan also reflects assessments of
current and future market conditions and the impact this may have
on cash resources.
The Group has also performed reverse stress testing on the
Annual Plan in respect of potential downside scenarios to identify
the break point of current cash resources and to identify when
current liquidity resources may fall short of requirements.
The scenarios both consider a reduction in predicted revenues,
however the reduction would need to be severe in order to prevent
the Group from continuing as a going concern and is considered to
be highly unlikely to occur. The Group have also identified
mitigating actions that could be reasonably taken, if required, to
offset the reduction of cash inflows, to enable it to continue its
operations for the period to 30 November 2022.
The sensitivities included in the reverse stress testing include
the following potential scenarios to revenue:
-- Severe operational disruption across all third-party
distributors resulting in a significant reduction of revenue for
the Group
-- Some operational disruption across all third-party
distributors resulting in a reduction of revenue for the Group
As expected, the scenarios resulted in an accelerated use of
current cash resources however, in all scenarios tested the current
cash resources were sufficient to support the Group's activities.
This is due to a variety of factors:
-- The Group currently has significant cash reserves to maintain
the current level of operations
-- The Group has been able to continue with current headcount
growth plans and has sustained a high level of recruitment to
support the roadmap
-- There has been no impact to debtor recoverability
-- Should a more extreme downside scenario occur the Group could
take further mitigating actions by reducing discretionary spend
Having considered all of the above, including the current strong
cash position, no current impact on debtor recoverability and the
continued strong trading performance for the Group, the Directors
are satisfied that there are sufficient resources to continue
operations for the period to 30 November 2022. The financial
statements for the year ended 31 May 2021 are therefore prepared
under the going concern basis.
3. 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 publishing games and revenue from other 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.
The Group typically satisfies its performance obligations at the
point that the product becomes available to the customer and
payment has been received upfront.
In both the period ended 31 May 2021 and the period ended 31 May
2020, 'Other Revenue' mainly related to royalty income.
12 months 12 months
to 31 May to 31 May
2021 2020
GBP'000 GBP'000
-------------------- ----------- -----------
Publishing revenue 90,471 75,924
Other revenue 217 165
-------------------- ----------- -----------
90,688 76,089
-------------------- ----------- -----------
4. 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.
31 May 2021 31 May 2020
----------------------------------------------- ------------ ------------
Profit attributable to shareholders (GBP'000) 21,558 15,894
Weighted average number of shares 38,909,932 38,483,762
----------------------------------------------- ------------ ------------
Basic earnings per share (pence) 55.4 41.3
----------------------------------------------- ------------ ------------
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 the dilutive effect of share options.
31 May 2021 31 May 2020
----------------------------------------------- ------------ ------------
Profit attributable to shareholders (GBP'000) 21,558 15,894
Diluted weighted average number of shares 40,471,633 40,316,894
----------------------------------------------- ------------ ------------
Diluted earnings per share (pence) 53.3 39.4
----------------------------------------------- ------------ ------------
The reconciliation of the average number of Ordinary Shares used for
basic and diluted earnings per share is as follows:
31 May 2021 31 May 2020
----------------------------------------------- ------------ ------------
Weighted average number of shares 38,909,932 38,483,762
Dilutive effect of share options 1,561,701 1,833,132
----------------------------------------------- ------------ ------------
Diluted average number of shares 40,471,633 40,316,849
----------------------------------------------- ------------ ------------
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END
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September 08, 2021 02:00 ET (06:00 GMT)
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