REG - Frontier Developmnts - FY24 Interim Results
17/01/2024 07:00
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RNS Number : 9066Z Frontier Developments PLC 17 January 2024
17 January 2024
Frontier Developments plc
FY24 Interim Results
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 unaudited interim results for the 6 months to 30
November 2023 ('H1 FY24').
H1 FY24 Financial Headlines
H1 FY24 H1 FY23
(6 months to 30 November 2023) (6 months to 30 November 2022)
Revenue £47.7m £57.1m
Adjusted EBITDA loss* (£4.9m) (£0.6m)
Operating (loss)/profit before restructuring (£30.8m) £6.9m
Cash balance at period end £17.1m £42.6m
*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 restructuring costs, share-based payment charges and
other non-cash items.
· Good back-catalogue performance, with games which released before the
start of the period delivering 72% of total revenue in H1 FY24
· Within the back-catalogue, creative management simulation ('CMS') games
achieved £26.3 million of revenue (55% of total revenue), representing a
sustain rate of 81% versus the comparative period (H1 FY23: £32.6 million)
· The revenue contribution from new games launching during the period was
lower than expected
· Adjusted EBITDA loss of £4.9 million (H1 FY23: loss of £0.6 million)
reflected the lower level of total revenue and a 3% increase in cash operating
costs, partially offset by a higher gross profit margin
· The Organisational Review announced in October is on-track, including
the planned 20% reduction in annual operating costs to support a return to
profitability in FY25
· Non-cash amortisation and impairment charges resulted in an operating
loss before restructuring of £30.8 million in H1 FY24 (H1 FY23: profit of
£6.9 million)
· Cash balance of £17.1 million at 30 November 2023 (31 May 2023: £28.3
million)
Operational & Strategic Update
As explained in the Business Update in November, Frontier's move to diversify
its game portfolio, including through third-party publishing and entering new
genres, has not delivered the anticipated success. As a result, the Company
has refocussed on CMS games which have delivered more predictable and
recurring returns through Frontier's expertise and leadership in that genre.
Frontier has confirmed three future CMS games with one releasing in each of
the next three financial years - FY25, FY26 and FY27. Whilst developing those
three future CMS games the Company will continue to support and nurture its
existing portfolio.
Alongside the strategic refocus to CMS games, in the last three months the
Company has undertaken an Organisational Review to reshape Frontier to deliver
on the updated strategic plan more efficiently, return the Company to profit,
and create a sustainable foundation for the future. The cost reduction
elements of the review are now largely complete, and the targeted savings of
20% of annual operating costs will be fully in place from the start of FY25.
Current Trading and Outlook
Total sales during the important trading period of late November to early
January were in-line with the revised expectations set in November, with
strong sales performances across Frontier's CMS portfolio offsetting lower
sales from some other games.
Frontier has two successful PC games coming to consoles before the end of this
financial year. The first of these was confirmed on 16 January, with Warhammer
40,000: Chaos Gate - Daemonhunters announced for release on PlayStation®5,
Xbox Series X|S, PlayStation®4 and Xbox One on 20 February 2024. The second
PC game coming to consoles will be announced in the next few weeks.
The Board continues to expect FY24 revenue to be within the guidance range of
£80-95 million, and the guidance on Adjusted EBITDA is also unchanged from
the Business Update provided in November.
Jonny Watts, Frontier's CEO, said
"2023 was a challenging year for Frontier and for many companies across the
games industry. The last few months have been a tough period of change for
everyone at Frontier, and of course it's been particularly difficult for those
people in teams who have suffered redundancies. I'd like to thank everyone for
their hard work and patience while we make the necessary changes.
We are confident that our renewed focus on our world-class CMS games is
getting us back on track, and it's pleasing to see the strong ongoing
performance of our established portfolio of games, led by Jurassic World
Evolution 2 and Planet Zoo. I'd like to thank our players across our whole
portfolio for their ongoing engagement and support.
We have two exciting console releases coming in the next few months, including
Warhammer 40,000: Chaos Gate- Daemonhunters, and we are making great progress
on our new own-IP CMS game for release in FY25.
I look forward to providing further updates during 2024."
There will be a call for analysts and institutional investors at 9:30a.m.
today. To register please contact Frontier@teneo.com.
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
Neil Patel / Paul Gillam / Richard Chambers / Kate Bannatyne
Liberum - Joint Corporate Broker +44 (0)20 3100 2000
Max Jones / Matt Hogg / Nikhil Varghese
Teneo +44 (0)20 7353 4200
Matt Low / Arthur Rogers
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.
Frontier's LEI number: 213800B9LGPWUAZ9GX18.
www.frontier.co.uk (http://www.frontier.co.uk/)
Interim Results Statement
REVENUE AND GROSS PROFIT
Revenue in H1 FY24 of £47.7 million was 17% lower than the comparative period
(H1 FY23: £57.1 million).
The back-catalogue of games which released before the start of the financial
year performed well in H1 FY24, generating 72% of total revenue. The largest
contribution came from Frontier's established portfolio of CMS games -
RollerCoaster Tycoon 3, Planet Coaster, Planet Zoo, Jurassic World Evolution
and Jurassic World Evolution 2 - which together recorded £26.3 million of
revenue in H1 FY24 (55% of total revenue), representing a sustain rate of 81%
versus the comparative period (H1 FY23: £32.6 million).
The ongoing revenue contribution from those genre-leading CMS games shows the
strength of Frontier's select, develop, launch and nurture strategy. As
expected, the strongest performers in the period were Jurassic World Evolution
2 and Planet Zoo, which were both supported with free updates and multiple
PDLC packs. Across the whole portfolio, PDLC accounted for 29% of total
revenue in H1 FY24 (H1 FY23: 30%).
Revenue from new game releases in the period was lower than expected. Revenue
from F1® Manager reduced 34% from H1 FY23 to H1 FY24 through lower sales of
F1® Manager 2023 compared with F1® Manager 2022. Launch sales of Warhammer
Age of Sigmar: Realms of Ruin ('Realms of Ruin'), which released in November
2023, were lower than expected.
Although revenue reduced by £9.4 million (17%) against the comparative
period, gross profit only decreased by £3.1 million (9%) to £33.0 million
(H1 FY23: £36.1 million) through the positive impact of subscription fees and
product mix, which boosted the gross profit margin percentage to 69% (H1 FY23:
63%). Frontier's gross margin percentage tends to vary between periods based
on the revenue mix of own-IP games, licenced-IP games and subscription deals.
COSTS
In October 2023 Frontier announced an Organisational Review to reshape the
Company to deliver more efficiently on its updated strategy. The cost-saving
element of the Organisational Review is on-track to deliver against the
targeted 20% reduction in annual operating expenditure. The timing of the cost
reductions meant limited financial benefits in H1 FY24, with the impact of
reductions starting in November and building during December and January.
Costs will continue to reduce during H2 FY24 and it's expected that all cost
reductions will be in place for the start of the next financial year on 1 June
2024. The Company recorded a £2.5 million provision for restructuring costs
in H1 FY24.
Gross research and development expenses (before capitalisation and
amortisation under IAS 38) in H1 FY24 reduced slightly to £25.5 million (H1
FY23: £25.9 million), with a rise in people costs being more than offset by a
significant reduction in outsourced development costs and funding for Foundry
games. Of the total gross spend 59% (£15.1 million) was capitalised (H1 FY23:
71%, £18.4 million) with the development costs for F1® Manager 2023 and F1®
Manager 2024 being expensed as incurred instead of being capitalised,
following the lower than expected financial performance of F1® Manager 2022
in 2023.
R&D amortisation and impairment charges related to previously capitalised
game developments and Frontier's game technology increased to £37.6 million
(H1 FY23: £8.6 million). The total charge in the period included a non-cash
accounting full impairment for Realms of Ruin of £16.9 million following the
lower than expected sale performance of the game at launch in November 2023.
Amortisation charges accounted for the remaining £20.7 million of the total
(H1 FY23: £8.6 million), with the increase over the comparative period the
result of the updated approach to amortisation profiles as highlighted in the
2023 Annual Report and Accounts. Intangible assets are now amortised more
rapidly in the first 12 months following their release, through the adoption
of a steeper amortisation charge profile than the previous default method of
straight-line amortisation. The impairment charge and the updated approach to
amortisation has not impacted Adjusted EBITDA, which is a measure of cash
profitability, but has resulted in a short-term adverse impact on the reported
IFRS operating result.
As a result of the lower level of development cost capitalisation, the
increased amortisation charges and the impairment charge for Realms of Ruin,
net research and development expenses as recorded in the consolidated income
statement increased to £48.1 million (H1 FY23: £16.1 million), being gross
spend of £25.5 million, less capitalised costs of £15.1 million, plus
amortisation and impairment charges of £37.6 million.
Sales and marketing expenses in the period increased to £8.4 million (H1
FY23: £6.9 million) through two Frontier game launches in the period (F1®
Manager 2023 and Realms of Ruin) versus one launch in H1 FY23 (F1® Manager
2022).
Administrative expenses of £7.4 million were higher than the comparative
period (H1 FY23: £6.3 million), largely due to foreign exchange differences,
with a foreign exchange gain of £1.0 million having been recorded in H1 FY23.
A restructuring charge of £2.5 million was recorded in the period following
the announcement of the Organisational Review in October 2023. The charge
included a full provision for all costs expected to be incurred through the
review, which will conclude by the end of FY24.
FINANCIAL PERFORMANCE
Although gross profit in H1 FY24 only reduced by £3.1 million against the
comparative period, operating performance as reported under IFRS fell by
£37.7 million from an operating profit of £6.9 million in H1 FY23 to an
operating loss before restructuring of £30.8 million in H1 FY24. This was
primarily due to three factors; the Realms of Ruin impairment charge; a higher
level of amortisation from the adoption of steeper amortisation charge
profiles; and a lower level of development cost capitalisation.
In comparison to the IFRS result, performance as measured by Adjusted EBITDA,
a measure of cash profitability, only reduced by £4.3 million to a loss of
£4.9 million (H1 FY23: loss of £0.6 million), with gross profit reducing
£3.1 million and cash operating costs increasing by £1.2 million. 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
restructuring costs, share-based payment charges and other non-cash items.
Consistent with H1 FY23, a nil corporation tax amount was posted in H1 FY24. A
net credit is expected to be posted in the full year FY24 results for the
anticipated Video Games Tax Relief cash claim for qualifying development
activity in the financial year. The Group will provide additional corporation
tax disclosures in the FY24 financial statements.
A loss after tax of £33.1 million was recorded in the period (H1 FY23: profit
of £6.7 million). Basic loss per share was 85.7 pence (H1 FY23: earnings per
share of 17.2 pence).
BALANCE SHEET AND CASH FLOW
The Group continues to be well capitalised, with a cash balance of £17.1
million at 30 November 2023 (31 May 2023: £28.3 million). Microsoft Game
Pass subscription fees for F1® Manager 2023 and Jurassic World Evolution 2
were received in December 2023, with cash at 31 December 2023 growing to
£19.9 million. Cash from the sales recorded in December will be received from
platform and channel partners in January and February.
CONSOLIDATED INCOME STATEMENT
FOR THE PERIOD ENDED 30 NOVEMBER 2023
Notes 6 months to 6 months to 30 November 2022 12 months to 31 May 2023
£'000
£'000
30 November 2023
£'000
Revenue 5 47,677 57,118 104,575
Cost of sales (14,714) (20,984) (37,230)
Gross profit 32,963 36,134 67,345
Research and development expenses 8 (48,060) (16,052) (67,857)
Sales and marketing expenses (8,350) (6,893) (12,012)
Administrative expenses (7,369) (6,333) (14,056)
Operating (loss)/profit before restructuring (30,816) 6,856 (26,580)
Restructuring costs (2,500) - -
Operating (loss)/profit (33,316) 6,856 (26,580)
Net finance income/(costs) 217 (137) 71
(Loss)/profit before tax (33,099) 6,719 (26,509)
Income tax - - 5,604
(Loss)/profit for the period attributable to shareholders (33,099) 6,719 (20,905)
Earnings per share
Basic (loss)/earnings per share 6 (85.7p) 17.2p (53.6p)
Diluted (loss)/earnings per share 6 (85.7p) 16.5p (53.6p)
All the activities of the Group are classified as continuing.
The accompanying accounting policies and notes form part of this financial
information.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 NOVEMBER 2023
All the activities of the Group are classified as continuing.
The accompanying accounting policies and notes form part of this financial
information.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 NOVEMBER 2023
6 months to 6 months to 12 months to
30 November 2023 30 November 2022 31 May 2023
£'000 £'000 £'000
(Loss)/profit for the period (33,099) 6,719 (20,905)
Other comprehensive income
Items that will be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (146) 23 (578)
Total comprehensive (loss)/income for the period attributable to the equity (33,245) 6,742 (21,483)
holders of the parent
The accompanying accounting policies and notes form part of this financial
information.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 NOVEMBER 2023
(REGISTERED COMPANY NO: 02892559)
30 November 2023 30 November 2022 31 May 2023
£'000
£'000
£'000
Notes
Non-current assets
Goodwill 7,027 10,385 7,160
Other intangible assets 7 33,746 79,012 56,987
Property, plant and equipment 5,415 6,171 5,696
Right-of-use assets 17,506 18,673 17,860
Deferred tax assets - 1,349 -
Total non-current assets 63,694 115,590 87,703
Current assets
Trade and other receivables 19,132 11,191 15,558
Current tax assets 5,805 4,094 9,438
Cash and cash equivalents 17,134 42,639 28,311
Total current assets 42,071 57,924 53,307
Total assets 105,765 173,514 141,010
Current liabilities
Trade and other payables (13,929) (18,430) (16,521)
Provisions (1,758) - -
Lease liabilities (1,597) (1,483) (1,505)
Deferred income (2,457) (2,769) (4,355)
Total current liabilities (19,741) (22,682) (22,381)
Net current assets 22,330 35,242 30,926
Non-current liabilities
Provisions (78) (63) (71)
Lease liabilities (17,416) (18,525) (17,773)
Other payables (3,836) (5,547) (4,235)
Deferred income - - (163)
Deferred tax liabilities (411) - (419)
Total non-current liabilities (21,741) (24,135) (22,661)
Total liabilities (41,482) (46,817) (45,042)
Net assets 64,283 126,697 95,968
Equity
Share capital 197 197 197
Share premium account 36,547 36,468 36,547
Equity reserve (13,953) (11,998) (14,553)
Foreign exchange reserve (742) 5 (596)
Retained earnings 42,234 102,025 74,373
Total equity 64,283 126,697 95,968
The accompanying accounting policies and notes form part of this financial
information.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 NOVEMBER 2023
Share capital £'000 Share premium account £'000 Equity reserve £'000 Foreign exchange reserve £'000 Retained earnings £'000 Total equity £'000
At 31 May 2022 197 36,468 (12,769) (18) 94,492 118,370
Profit for the period - - - - 6,719 6,719
Other comprehensive income:
Exchange differences on translation of foreign operations - - - 23 - 23
Total comprehensive income for the period - - - 23 6,719 6,742
Share-based payment charges - - 1,305 - - 1,305
Share-based payment transfer relating to option exercises and lapses - - (814) - 814 -
Employee Benefit Trust net cash inflows from option exercises - - 280 - - 280
Transactions with owners - - 771 - 814 1,585
At 30 November 2022 197 36,468 (11,998) 5 102,025 126,697
Loss for the period - - - - (27,624) (27,624)
Other comprehensive income:
Exchange differences on translation of foreign operations - - - (601) - (601)
Total comprehensive income for the period - - - (601) (27,624) (28,225)
Issue of share capital net of expenses - 79 - - - 79
Share-based payment charges - - 2,035 - - 2,035
Share-based payment transfer relating to option exercises and lapses - - (1,543) - 1,543 -
Employee Benefit Trust cash outflows from share purchases - - (3,000) - - (3,000)
Employee Benefit Trust net cash inflows from option exercises - - (47) - - (47)
Deferred tax movements posted directly to reserves - - - - (1,571) (1,571)
Transactions with owners - 79 (2,555) - (28) (2,504)
At 31 May 2023 197 36,547 (14,553) (596) 74,373 95,968
Loss for the period - - - - (33,099) (33,099)
Other comprehensive income:
Exchange differences on translation of foreign operations - - - (146) - (146)
Total comprehensive income for the period - - - (146) (33,099) (33,245)
Share-based payment charges - - 1,559 - - 1,559
Share-based payment transfer relating to option exercises and lapses - - (960) - 960 -
Employee Benefit Trust net cash inflows from option exercises - - 1 - - 1
Transactions with owners - - 600 - 960 1,560
At 30 November 2023 197 36,547 (13,953) (742) 42,234 64,283
The accompanying accounting policies and notes form part of this financial
information.
CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE PERIOD ENDED 30 NOVEMBER 2023
6 months to 6 months to 12 months to
30 November 2023 30 November 2022 31 May 2023
£'000
£'000
£'000
(Loss)/profit before taxation (33,099) 6,719 (26,509)
Adjustments for:
Depreciation and amortisation 24,467 12,289 41,438
Impairment of other intangible assets 16,930 - 18,117
Movement in unrealised exchange losses on forward contracts (114) (817) (239)
Share-based payment expenses 1,559 1,305 3,340
Interest received (504) (166) (677)
Payment of interest element of lease liabilities 287 303 607
Research and Development Expenditure Credits (236) - (481)
Working capital changes:
Change in trade and other receivables (3,460) 15,451 11,084
Change in trade and other payables (6,150) (6,228) (3,114)
Change in provisions 1,765 7 15
Cash generated from operations 1,445 28,863 43,581
Taxes received 3,919 4,021 4,294
Net cash flows from operating activities 5,364 32,884 47,875
Investing activities
Purchase of property, plant and equipment (787) (645) (1,335)
Expenditure on other intangible assets (15,227) (18,895) (42,046)
Acquisition of subsidiaries (net of cash acquired) - (8,847) (9,606)
Interest received 504 166 677
Net cash flows used in investing activities (15,510) (28,221) (52,310)
Financing activities
Proceeds from issue of share capital - - 79
Employee Benefit Trust cash outflows from share purchases - - (3,000)
Employee Benefit Trust cash inflows from option exercises 1 280 233
Repayment of loans - - (1,260)
Payment of principal element of lease liabilities (747) (731) (1,461)
Payment of interest element of lease liabilities (287) (303) (607)
Net cash flows used in financing activities (1,033) (754) (6,016)
Net change in cash and cash equivalents from continuing operations (11,179) 3,909 (10,451)
Cash and cash equivalents at beginning of period 28,311 38,699 38,699
Exchange differences on cash and cash equivalents 2 31 63
Cash and cash equivalents at end of period 17,134 42,639 28,311
The accompanying accounting policies and notes form part of this financial
information.
NOTES TO THE FINANCIAL INFORMATION
1. CORPORATE
INFORMATION
Frontier Developments plc (the 'Group' or the 'Company') 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 and headquartered in the UK, with
subsidiaries based in Canada and the US.
2. BASIS OF PREPARATION AND STATEMENT OF COMPLIANCE
Basis of preparation
The consolidated interim financial statements have been prepared in accordance
with International Accounting Standard 34 'Interim Financial Reporting' (IAS
34), as issued by the International Accounting Standards Board (IASB) and as
adopted by the UK, and the disclosure requirements of the Listing Rules.
The consolidated interim financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act 2006 and have
not been audited or reviewed by the Company's auditors.
The consolidated interim financial statements should be read in conjunction
with the financial statements for the year ended 31 May 2023.
Statutory accounts for the year ended 31 May 2023 were approved by the Board
of Directors on 12 September 2023 and delivered to the Registrar of Companies.
The Auditor's Report was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under section 498 of the Companies
Act 2006.
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 (£'000) except when otherwise indicated.
Going concern basis
The Group's 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 a
period of not less than 12 months from the date of the consolidated interim
financial statements. The Group and Company therefore continue to adopt the
going concern basis in preparing their financial statements.
3. ACCOUNTING POLICIES
The consolidated interim financial statements have been prepared in accordance
with the accounting policies adopted in the Group's most recent annual
financial statements for the year ended 31 May 2023.
4. ACCOUNTING ESTIMATES AND KEY JUDGEMENTS
When preparing the consolidated interim financial statements, management
undertakes a number of judgements, estimates and assumptions about recognition
and measurements of assets, liabilities, income and expenses. The actual
results may differ from these estimates.
The judgements, estimates and assumptions applied in the interim financial
statements, including the key sources of estimation uncertainty, were the same
as those applied in the Group's last annual financial statements for the year
ended 31 May 2023.
5. 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.
The majority 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 is received upfront
by the
distributors.
Other revenue mainly related to royalty income in all periods.
6 months to 30 November 2023 6 months to 30 November 2022 12 months to 31 May 2023
£'000
£'000
£'000
Publishing revenue 46,654 56,971 104,084
Other revenue 1,023 147 491
Total revenue 47,677 57,118 104,575
Cost of sales (14,714) (20,984) (37,230)
Gross profit 32,963 36,134 67,345
Research and development expenses (48,060) (16,052) (67,857)
Sales and marketing expenses (8,350) (6,893) (12,012)
Administrative expenses (7,369) (6,333) (14,056)
Operating (loss)/profit before restructuring (30,816) 6,856 (26,580)
Restructuring costs (2,500) - -
Operating (loss)/profit (33,316) 6,856 (26,580)
Net finance income/(costs) 217 (137) 71
(Loss)/profit before tax (33,099) 6,719 (26,509)
Income tax - - 5,604
(Loss)/profit for the period attributable to shareholders (33,099) 6,719 (20,905)
6. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on the profit/(loss)
attributable to the shareholders of Frontier Developments plc divided by the
weighted average number of shares in issue during the period.
6 months to 30 November 2023 6 months to 30 November 2022 12 months to 31 May 2023
(Loss)/profit attributable to shareholders (£'000) (33,099) 6,719 (20,905)
Weighted average number of shares 38,601,286 39,018,948 39,025,746
Basic (loss)/earnings per share (p) (85.7) 17.2 (53.6)
The calculation of the diluted earnings per share is based on the
profit/(loss) attributable to the shareholders of Frontier Developments plc
divided by the weighted average number of shares in issue during the period as
adjusted for the dilutive effect of share options.
6 months to 30 November 2023 6 months to 30 November 2022 12 months to 31 May 2023
(Loss)/profit attributable to shareholders (£'000) (33,099) 6,719 (20,905)
Diluted weighted average number of shares 38,601,286 40,598,671 39,025,746
Diluted (loss)/earnings per share (p) (85.7) 16.5 (53.6)
The reconciliation of the average number of Ordinary Shares used for basic and
diluted earnings per share is as follows:
6 months to 30 November 2023 6 months to 30 November 2022 12 months to
31 May 2023
Weighted average number of shares 38,601,286 39,018,948 39,025,746
Dilutive effect of share options - 1,579,723 -
Diluted average number of shares 38,601,286 40,598,671 39,025,746
The dilutive effect of share options is nil for the 6 months to 30 November
2023 because a loss was recorded for the period.
7. OTHER INTANGIBLE ASSETS
Game technology £'000 Game developments £'000 Third-party software £'000
IP licences Total
£'000 £'000
Cost
At 31 May 2022 19,733 129,393 2,390 11,185 162,701
Additions 1,643 16,786 106 - 18,535
Acquisition of a subsidiary - - 62 - 62
At 30 November 2022 21,376 146,179 2,558 11,185 181,298
Additions 1,806 17,396 323 - 19,525
Acquisition of a subsidiary - 3,910 (4) - 3,906
Exchange rate movement - (300) - - (300)
At 31 May 2023 23,182 167,185 2,877 11,185 204,429
Additions 2,218 12,835 174 1,047 16,274
Exchange rate movement - (86) - - (86)
At 30 November 2023 25,400 179,934 3,051 12,232 220,617
Amortisation and impairment
At 31 May 2022 9,173 77,970 1,651 3,074 91,868
Amortisation charges 1,512 7,293 210 1,341 10,356
Acquisition of a subsidiary - - 62 - 62
At 30 November 2022 10,685 85,263 1,923 4,415 102,286
Amortisation charges 2,357 24,605 211 - 27,173
Acquisition of a subsidiary - - (4) - (4)
Impairment charges 3,919 12,474 - 1,724 18,117
Exchange rate movement - (130) - - (130)
At 31 May 2023 16,961 122,212 2,130 6,139 147,442
Amortisation charges 1,542 19,124 211 1,686 22,563
Impairment charges - 15,502 - 1,428 16,930
Exchange rate movement - (64) - - (64)
At 30 November 2023 18,503 156,774 2,341 9,253 186,871
Net book value
Net book value at 30 November 2023 6,897 23,160 710 2,979 33,746
Net book value at 31 May 2023 6,221 44,973 747 5,046 56,987
Net book value at 30 November 2022 10,691 60,916 635 6,770 79,012
Net book value at 31 May 2022 10,560 51,423 739 8,111 70,833
8. KEY PERFORMANCE INDICATORS - NON-STATUTORY MEASURES
In addition to measures of financial performance derived from IFRS reported
results - revenue, operating profit, operating profit margin percentage,
earnings per share and net cash balance - Frontier publishes, and provides
commentary on, financial performance measurements derived from non-statutory
calculations. Frontier believes these supplementary measures, when read in
conjunction with the measures derived directly from statutory financial
reporting, provide a better understanding of Frontier's overall financial
performance.
EBITDA
EBITDA, being earnings before tax, interest, depreciation, and amortisation,
is commonly used by investors when assessing the financial performance of
companies. It attempts to arrive at a 'cash profit' figure by adjusting
operating profit for non-cash depreciation and amortisation charges. In
Frontier's case, EBITDA does not provide a clear picture of the Group's cash
profitability, as it adds back amortisation charges relating to game
developments, but without deducting the investment costs for those
developments, resulting in a profit measure which does not take into account
any of the costs associated with developing games. Since EBITDA is a commonly
used financial performance measure, it has been included below for the benefit
of readers of the accounts who may value that measure of performance.
6 months to 6 months to 12 months to
30 November 2023 30 November 2022 31 May 2023
£'000
£'000
£'000
Operating (loss)/profit before restructuring (30,816) 6,856 (26,580)
Depreciation and amortisation 24,467 12,291 41,438
Impairment of other intangible assets 16,930 - 18,117
EBITDA 10,581 19,147 32,975
Adjusted EBITDA
Frontier also discloses an Adjusted EBITDA measure which, in the Group's view,
provides a better representation of 'cash profit' than EBITDA. Adjusted EBITDA
for Frontier is defined as 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 effectively provides the cash profit figure that
would have been achieved if Frontier expensed all game development investment
as it was incurred, rather than capitalising those costs and amortising them
over several years.
6 months to 6 months to 12 months to 31 May 2023
£'000
30 November 2023 30 November 2022
£'000
£'000
Operating (loss)/profit before restructuring (30,816) 6,856 (26,580)
Add back non-cash intangible asset amortisation charges for game developments 20,666 8,589 34,490
and Frontier's game technology
Add back non-cash intangible asset impairment charges 16,930 - 18,117
Deduct capitalised investment costs in game developments and Frontier's game (15,054) (18,429) (37,632)
technology
Add back non-cash depreciation charges 1,904 1,934 3,909
Add back non-cash movements in unrealised exchange (gains)/losses on forward (114) (817) (239)
contracts
Add back non-cash share-based payment expenses 1,559 1,305 3,340
Adjusted EBITDA loss (4,925) (562) (4,595)
Research and development (R&D) expenses
Research and development (R&D) expenses recorded in Frontier's
consolidated income statement are arrived at after capitalising game
development costs and after recording amortisation charges for games which
have been released. Similar to the principles of the Adjusted EBITDA measure
showing financial performance as if all game development investments were
expensed as incurred, Frontier provides commentary on the difference between
gross R&D expenses (before capitalisation/amortisation) and net R&D
expenses (after capitalisation/ amortisation). The net R&D expenses figure
aligns with the R&D expenses recorded in the consolidated income
statement, whereas the gross R&D expenses figure provides a better
representation of 'cash spend' on R&D activities.
6 months to 6 months to 12 months to
30 November 2023 30 November 2022 31 May 2023
£'000
£'000
£'000
Gross R&D expenses 25,518 25,892 52,882
Capitalised investment costs in game developments and Frontier's game (15,054) (18,429) (37,632)
technology
Amortisation charges for game developments and Frontier's game technology 20,666 8,589 34,490
Impairments of other intangible assets 16,930 - 18,117
Net R&D expenses 48,060 16,052 67,857
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