Video game maker enjoyed stronger than expected sales over Christmas and Easter
Companies: Frontier Developments Plc
Shares in Frontier Developments jumped 12% on Wednesday after the independent video game creator told investors that revenue and profit were both now expected to beat the Board's expectations for the full-year after strong sales in November, December, and over Easter.
The firm said its two franchises, Elite Dangerous and Planet Coaster, had enjoyed bumper sales due to a roadmap of updates, additional content, new improvements, and extensions.
Consensus forecasts were expecting £32m in revenue, with £300k in pre-tax profit, but the AIM-listed firm said in a trading update that it expects revenues for the full-year to 31 May to be around £36m, a 68% increase YoY.
"The Board anticipates that the Company will achieve an operating profit margin (as reported under IFRS) of 15-20% for FY17, compared to 6% and 7% recorded for FY16 and FY15 respectively."
Broker finnCap covered the results, saying the performance was driven by Planet Coaster, which has sold 600k units according to steamspy.com. Analyst Harold Evans said that Frontier’s more mature game, Elite Dangerous, also performed well, with interest maintained "through the periodic introduction of new content". He added that the business would also benefit from operating leverage to deliver more profit:
"Thanks to the business’ operating leverage, the benefit to profitability should be more pronounced – the company has guided towards an operating profit margin 15-20% i.e. £5.4-7.2m. This is materially higher than prior periods (6-7% operating margin) and also ahead of previous guidance, with potential outperformance in the range of 22-64%."
CEO David Braben said the launch of Planet Coaster (Nov 16) had driven a "step up" in the firm's financial performance, which meant it now had two strong franchises in the market.
"We anticipate further significant revenue growth steps will be driven by the release of new franchises - our third franchise, based on an enduring Hollywood movie IP of global renown, is now in development for release in calendar 2018."
Frontier's shares rose 12% early on Wednesday, and have increased 66% since the launch of Planet Coaster at the end of last year.
