REG - Frontier Developmnts - Full year trading update & Frontier Foundry review

Frontier DevelopmentsAnnouncement

14/06/2023 07:00

For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230614:nRSN6183Ca&default-theme=true

RNS Number : 6183C  Frontier Developments PLC  14 June 2023

14 June 2023

Full year trading update and Frontier Foundry review

Frontier Developments plc (AIM: FDEV, 'Frontier', the 'Company', or the
'Group'), a leading developer and publisher of video games based in
Cambridge, UK, announces an update on trading for financial year FY23, the 12
months ended 31 May 2023, alongside the outcome of the review of Frontier
Foundry, its games label for third party publishing.

Headlines

·     FY23 revenue (unaudited) of around £104 million, in-line with
guidance provided in January 2023

·     Solid performance from existing portfolio of games, generating 72%
of revenue

·     Jurassic World Evolution 2 was the strongest performer in the
period

·     F1® Manager 2022 was the lead revenue generator from new releases,
selling over 800k units

·     Modest accretive financial benefits from the acquisition of Complex
Games Inc, as expected

·     FY24 releases to include F1® Manager 2023 and Warhammer Age of
Sigmar: Realms of Ruin

·     Completion of the strategic review of Frontier Foundry

FY23 provisional financial results - subject to final review and audit

Provisional, unaudited revenue, adjusted EBITDA and operating profit before
one-off amortisation adjustments were all in-line with the guidance provided
in January 2023.

Revenue of around £104 million was delivered through a solid performance from
the existing portfolio of games (released prior to 1 June 2022) which
accounted for 72% of revenue during the period. Jurassic World Evolution 2,
created in collaboration with Universal Products & Experiences, was the
strongest performer in the portfolio, with revenue in its first 18 months
exceeding the performance of the first Jurassic World Evolution game during
its first 18 months. F1® Manager 2022 was the leading revenue generator
amongst new games, selling over 800,000 units in its first nine months.

Adjusted EBITDA, a measure of cash profitability, was in-line with
expectations. 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 share-based payment charges and other non-cash
items.  The provisional, unaudited figure for FY23 Adjusted EBITDA is a loss
of around £5 million, which is consistent with expectations and reflects
continued investment in future games as Frontier gears up to deliver two new
game releases per financial year from FY24 onwards.

Operating profit before one-off amortisation adjustments was also in-line with
expectations with a provisional profit figure of around £2 million. However,
an incremental one-off amortisation charge relating to Foundry games,
currently estimated to be around £13 million (subject to audit), is expected
to result in a statutory operating loss being recorded in the FY23 accounts
under IFRS.

In November 2022 Frontier added a new development team with the acquisition of
experienced game development studio Complex Games Inc ('Complex'), following
the successful collaboration between Complex and Frontier on the development
and publication of turn-based strategy game Warhammer 40,000: Chaos Gate -
Daemonhunters. Integration activities and growth plans for Complex are
on-track, and the acquisition delivered modest accretive financial benefits in
FY23, as expected.

Frontier remains well capitalised, with a cash balance at 31 May 2023 of £28
million. The net cash outflow of £11 million during the period was after
outflows of £11 million for the acquisition of Complex and £3 million for
the purchase of shares into the Employee Benefit Trust.

Frontier Foundry review

In January 2023 Frontier announced a review of its Foundry games label, due to
disappointing financial performance and increased competition amongst
third-party publishers. Today Frontier confirms the conclusion of its review,
with the decision to cease all activity relating to acquiring new third-party
titles and instead re-focus on internal titles.

Since its inception in summer 2019, Foundry has supported the launch of seven
new and diverse titles. Financial performance across the Foundry portfolio has
been disappointing, and overall, the business has not delivered Frontier's
expectations of a positive return on investment within the first year of each
title.

As such, the Board has decided to cease all activity relating to acquiring new
third-party titles. This decision will enable an increased level of
operational focus to be applied to Frontier's own internally developed
portfolio of titles, which has delivered a strong return on investment.
Foundry games which have already been released will continue to be supported,
including those in active post-release development.

Following today's decision, the Company anticipates that Foundry resource
adjustments during calendar year 2023 will focus on role redeployment and the
management of fixed term employment contracts.

As part of the financial review process for Foundry, the Board has assessed
the value of the intangible game assets for Foundry as at the financial year
end date of 31 May 2023, against the future cash generation expected from each
title. After taking an appropriately prudent approach to future cash flow
forecasts, an incremental Foundry amortisation charge of around £13 million
is expected to be taken in FY23, subject to audit.

FY24 releases and outlook

FY24, the financial year from 1 June 2023 to 31 May 2024, will benefit from
two major new game releases: F1® Manager 2023 and Frontier's first real-time
strategy game, Warhammer Age of Sigmar: Realms of Ruin, with both games
on-track for release as planned.

On 23 May 2023 Frontier unveiled F1® Manager 2023, the next instalment in the
officially licensed Formula 1® management simulation series, with deeper
management systems, more dramatic racing, and an even greater commitment to
authenticity.

Releasing in summer 2023 on PC, PlayStation® 5, Xbox Series X|S,
PlayStation® 4 and Xbox One, F1® Manager 2023 comes even closer to the 2023
FIA Formula One World Championship™ with the brand-new Race Replay mode,
which will allow aspiring Team Principals to rewrite key moments from
throughout the 23-race season. This new mode will help to strengthen the
game's appeal to a broader audience. Additionally, in the returning Career
mode, players will enjoy a suite of highly requested feature developments,
adding new dimensions to the sporting drama at every turn.

On 25 May 2023, Frontier announced Warhammer Age of Sigmar: Realms of Ruin, a
major real-time strategy game coming soon to PlayStation® 5, Xbox Series X|S,
and PC via Steam and Epic Games Store, in partnership with Games Workshop®.
Set in the expansive fantasy universe of Age of Sigmar, players will command
four unique factions in dynamic real-time battles, experiencing a story-driven
singleplayer campaign and competing against warlords afar in 1v1 and 2v2
cross-platform online multiplayer modes.

Warhammer Age of Sigmar: Realms of Ruin is the definitive real-time strategy
experience based on Games Workshop's ultimate fantasy miniatures game, and
Frontier's first release in the real-time strategy genre.

Alongside these two new major game releases, Frontier's existing game
portfolio is expected to continue to deliver substantial on-going revenue
contributions in FY24, supported by new content.

The Board is therefore comfortable with current analyst forecasts for FY24,
with consensus revenue at around £108 million and the majority of analysts
projecting an Adjusted EBITDA loss in the range of £5-10 million.

The Board is confident that the Company can return to attractive levels of
financial performance over the medium term, based on the strength of its
existing portfolio and planned new releases. An update on trading for FY24
will be provided alongside the final FY23 financial results announcement in
September 2023.

Jonny Watts, Frontier's CEO, said:

"I am pleased to confirm trading for FY23 in-line with the guidance we
provided in January 2023, with a solid contribution from the existing
portfolio led by Jurassic World Evolution 2, and a good first year performance
for our annual F1® Manager game series.

Our renewed focus is to select, develop, launch and nurture genre-leading
games which delight our players and deliver strong financial performance for
our investors. I am confident that we will return to growth and profitability
through the achievements of our world class team, the performance of our
existing game portfolio and the delivery of our exciting pipeline of future
releases".

 

There will be a call for analysts and institutional investors at 9:30a.m.
today. To register please contact frontier@teneo.com
(mailto:frontier@teneo.com)

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 Joint Corporate
Broker                    +44 (0)20 7418 8900

Paul Gillam / Tom Ballard / James Smith

 

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

Andrew Godber / Nikhil Varghese

 

Teneo
44 (0)20 7353 4200

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

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  TSTFJMBTMTJBTLJ