The video game developer's transition to a B2C business model has begun to bear fruit.
Companies: Frontier Developments Plc
Frontier Developments (LON: FDEV) have released their Full Year results for 2017 which outlines the success of the change in the Group's business model to become a self-published gaming developer.
FDEV's first two franchises, Elite Dangerous and Planet Coaster, have proven successful for the Group with FY17 profit up 550% from £1.2m to £7.8m. Revenue is also up 75% to £37m and EBITDA is up 159%.
EPS will also rise from 4.2p to 22.7p, an increase of 440%, and cash for the Group is up 47%.
The Group's third game, based on the Jurassic World franchise, is set to be released in conjunction with the new Jurassic World film in Summer 2018. Shares jumped with the news of their next instalment last month.
During the period Frontier also raised £17.7m through a strategic investment with Chinese digital entertainment company Tencent. This allows the Group to be given the opportunity to tap into the key Chinese market, as well as help scale-up their operations.
Chief Executive David Braben commented on the results
"We have successfully transitioned our business model, and I am delighted with the performance of both Planet Coaster and Elite Dangerous. Our next franchise, Jurassic World Evolution, is in development and scheduled for launch in summer 2018. We believe that developing our business to achieve repeatable success requires scale. We are continuing to grow our capability and over time we aim to double our output, from roughly one major launch every two years, to one every 12 months or so."
FDEV currently trade on a staggering PE ratio of 430x versus the industry median of 18x, with a market cap of £420m. Revenue has risen steadily in the five years to 2016, whilst net margins have shifted from losses to profits, with an operating margin of 5% last year and 21% in FY17.
