REG - Frontier Developmnts - Business Update

Frontier DevelopmentsAnnouncement

27/11/2023 07:00

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RNS Number : 6761U  Frontier Developments PLC  27 November 2023

27 November 2023

 

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

Frontier Developments plc

 

Business Update

 

Frontier Developments plc (AIM: FDEV, 'Frontier' or the 'Company'), a leading
developer and publisher of videogames based in Cambridge, UK, provides a
business update ahead of the important December trading period.

 

Warhammer Age of Sigmar: Realms of Ruin

 

On 17(th) November 2023 Frontier released real-time strategy game Warhammer
Age of Sigmar: Realms of Ruin ('Realms of Ruin') on PC via Steam, Epic, Genba
and Heybox, and on PlayStation®5 and Xbox Series X|S.  We were pleased to
see at launch that Realms of Ruin received mostly positive reviews from game
critics and from players, however, sales to date have been lower than
expected. With the December trading period approaching, and Frontier
continuing to evolve and support Realms of Ruin with post-release content,
including PDLC ('paid-downloadable content'), we expect sales to build over
time.

 

Refocusing on CMS (creative management simulation) games

 

Frontier's move to diversify its game portfolio during the last five years,
including through third-party publishing and new games in 'adjacent genres',
has not delivered the anticipated success. As a result, the Company has
refocussed on CMS games which have delivered stronger and more predictable
returns through Frontier's expertise and leadership in that genre.

 

The Company's four CMS games (Planet Coaster, Planet Zoo, Jurassic World
Evolution and Jurassic World Evolution 2) continue to perform well and have
each achieved over $100 million of gross revenue with a combined total of over
$500 million. All four games achieved profitability within one month of
release and delivered over 100% return on investment within 12 months of
release. The three games which have been in the market for four years or
longer - Planet Coaster, Jurassic World Evolution and Planet Zoo - have all
achieved a cumulative return on investment of over 250%.

 

Frontier is therefore pleased to confirm three future CMS games with one
releasing in each of the next three financial years - FY25, FY26 and FY27.
Alongside this we will continue to develop and support our portfolio of
existing games, including Elite Dangerous, our F1® Manager franchise, and
Realms of Ruin.

 

Outlook

 

Following the lower than expected sales performance of Realms of Ruin, the
Board no longer believes that the current market expectation for FY24 revenue
of around £108 million is likely to be achieved. Updated guidance is for FY24
revenue in the range of £80-95 million, with the outcome dependent on sales
performance across Frontier's game portfolio during the remainder of the
financial year, including the revenue contributions from new platform releases
for existing games.

 

Despite the reduction in revenue guidance, the Board believes that the current
market expectation for an Adjusted EBITDA* loss of around £9 million in FY24
remains achievable towards the upper-end of revenue guidance, as a result of
the cost savings achieved through the Organisational Review and an improved
gross profit margin percentage driven by revenue mix. The Organisational
Review continues to make good progress and is delivering cost reductions in
line with expectations.

 

The Board expects Frontier to at least break even in FY25 through the ongoing
performance of the existing portfolio of games, revenue contributions from
future releases including the CMS game scheduled for FY25, and the 20%
operating cost reductions from the Organisational Review.

 

Frontier continues to be well capitalised, with a cash balance at 31 October
2023 of £20.5 million. That cash figure excludes the fee from Microsoft for
F1® Manager 2023 entering the Game Pass subscription service during October.

 

Board changes

 

David Wilton, our Chairman over the last twelve months, has decided to
step-down from the Board to concentrate on other interests. Ilse Howling,
Non-Executive Director, has stepped up to take on the role of Chair, supported
by Leslie-Ann Reed's promotion to Senior Independent Director.

 

David Braben, President and Founder, said

"I'd like to thank David Wilton for his contribution during a turbulent and
difficult year for Frontier, and particularly for his help with the complex
task of restructuring through the ongoing organisational review. I'd also like
to thank Ilse for stepping up to the role of Chair."

 

Jonny Watts, Chief Executive Officer, said

"I am pleased to confirm a third creative management simulation (CMS) game on
our development roadmap. I am confident that our renewed focus on CMS will
return Frontier back to profitability, deliver stimulating games to our
players, and provide rewarding opportunities for our people. I'd like to thank
our people and our shareholders for their patience and support as we go
through a challenging period of change."

 

 

* Adjusted EBITDA is earnings before interest, tax, depreciation, and
amortisation charges related to game developments and Frontier's game
technology, less investments in game developments and Frontier's game
technology, and excluding impairment charges, share-based payment charges and
other non-cash items.

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) No. 596/2014, as it forms part of UK domestic
law by virtue of the European Union (Withdrawal) Act 2018 (as amended). This
announcement is issued on behalf of the Company by Alex Bevis, CFO.

 

Enquiries:

 

Frontier Developments   +44 (0)1223 394 300

Jonny Watts, CEO

Alex Bevis, CFO

 

Peel Hunt - Nomad and Corporate Broker   +44 (0)20 7418 8900

Neil Patel / Paul Gillam / James Smith

 

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

Max Jones / Nikhil Varghese

 

Teneo   +44 (0)20 7353 4200

Matt Low / 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. Frontier
uses its proprietary COBRA game development technology to create innovative
genre-leading games, primarily for personal computers and videogame consoles.

Frontier's LEI number: 213800B9LGPWUAZ9GX18.

 

www.frontier.co.uk (http://www.frontier.co.uk/)

 

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