REG - Frontier Developmnts - Trading Update - Record annual revenue, 26% growth

Frontier DevelopmentsAnnouncement

14/06/2022 07:00

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RNS Number : 7168O  Frontier Developments PLC  14 June 2022

14 June 2022

Frontier Developments plc

Trading Update

Strong second half and record annual revenue (26% growth)

Frontier Developments plc (AIM: FDEV, "Frontier" or the "Company"), a leading
developer and publisher of videogames based in Cambridge, UK, provides an
update on trading for financial year FY22, the 12 months ended 31 May 2022.

Headlines

·    Record revenue (unaudited) of £114 million in FY22, an increase of
26% on the previous year

·    Jurassic World Evolution 2 base game unit sales exceeded 1.3 million
units

·    Warhammer 40,000: Chaos Gate - Daemonhunters performing ahead of
expectations

·    FY22 cash profit (adjusted EBITDA*) in line with expectations
(subject to audit)

·    Accounting profit (IFRS operating profit) reduced by a one-off
amortisation charge

·    FY23 releases to include Jurassic World Evolution 2: Dominion Biosyn
Expansion and F1® Manager 2022 in June and August 2022 respectively, plus
three new Foundry titles

* Earnings before interest, tax, depreciation, 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

FY22 revenue

Building on the growth achieved in the first half of the financial year and a
monthly sales record in December 2021, a strong trading performance in the
period 1 January to 31 May 2022 helped to deliver record annual revenue of
approximately £114 million in FY22. This unaudited result is 26% above the
previous record of £90.7 million, achieved in FY21.

Jurassic World Evolution 2

FY22 benefitted from the release of another successful new Frontier title,
Jurassic World Evolution 2, which has continued to attract an expanding player
base since its launch in November 2021. By 31 May 2022 Jurassic World
Evolution 2 had achieved over 1.3 million base game units sold across all
platforms and formats, excluding base game digital downloads through
Microsoft's Game Pass subscription service, through which the base game became
available on 17 May 2022.

The development and release of paid-downloadable content ('PDLC') and free
content has, as usual, been an important element of our strategy in continuing
to engage and entertain existing Jurassic World Evolution 2 players whilst
attracting new ones. We have seen strong uptake of the three separate PDLC
packs available as at 31 May 2022.

Releasing today, a compelling new PDLC launches, alongside Universal Pictures
and Amblin Entertainment's Jurassic World Dominion.  The Jurassic World
Evolution 2: Dominion Biosyn Expansion launches on all existing platforms,
inviting park managers to immerse themselves in the game's biggest DLC to
date, inspired by the epic events of Jurassic World Dominion.

Watch the (https://youtu.be/9DVcfrNPFR8) Jurassic World Evolution 2: Dominion
Biosyn Expansion (https://youtu.be/9DVcfrNPFR8) announcement trailer here
(https://youtu.be/9DVcfrNPFR8)

This major new expansion for Jurassic World Evolution 2 is set to deliver a
strong start for FY23, and additional PDLC will be released during FY23.

Our existing game portfolio

Our portfolio of internally developed titles which released before FY22 -
Elite Dangerous, Planet Coaster, Jurassic World Evolution and Planet Zoo -
continue to reach new audiences, and each delivered material revenues in FY22.
Most notably, Planet Zoo performed especially well, supported by 4 new PDLC
packs releasing in FY22, alongside free content.

As previously reported, following the launch of the major Odyssey expansion
over a year ago, in May 2021, Elite Dangerous revenue in FY22 fell below our
original expectations. We are focussing on supporting and growing our player
community, and will build on the narrative aspects of Elite Dangerous during
FY23.

Frontier Foundry

Alongside our internally developed titles, Frontier Foundry, our games label
for publishing carefully selected partner developments, made good progress in
FY22, with three new game releases.

Our most recent Frontier Foundry title, Warhammer 40,000: Chaos Gate -
Daemonhunters, received a very positive reception at its launch on 5 May 2022.
After one month of sales it has already become our most successful Frontier
Foundry title to date, with performance above expectations.

We have three more Frontier Foundry titles planned for release in FY23,
including Deliver Us Mars which has now been confirmed for release in
September 2022. We continue to expect Frontier Foundry to become a material
part of our business.

FY22 profitability

Adjusted EBITDA, which we referred to as 'operating cash flow' in previous
years, is a measure of cash operating profit, being earnings before interest,
tax, depreciation, 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.

Subject to audit, adjusted EBITDA in FY22 is anticipated to be in line with
expectations at approximately £7-8 million versus £12 million reported for
FY21. The year on year reduction reflects greater investment in significant
game developments for release in future years, including F1® Manager 2022 for
this summer (in FY23), and our Warhammer Age of Sigmar real-time strategy game
for FY24.

Due to the lower than expected engagement with Elite Dangerous: Odyssey on PC,
and the decision to cancel the console development of this major expansion,
the Board has prudently decided to fully amortise the Elite Dangerous: Odyssey
capitalised intangible asset as at 31 May 2022. The resulting additional
amortisation charge in FY22 is expected to be approximately £7 million.

This non-cash accounting adjustment has no impact on cash flow, cash balances,
or adjusted EBITDA, but will reduce operating profit as reported under IFRS
for FY22. Subject to audit, operating profit as reported under IFRS is
expected to be approximately £1-2 million after deduction of the one-off £7
million Elite Dangerous: Odyssey amortisation charge.

Financial resources

Frontier continues to benefit from a strong balance sheet, with total cash
balances at 31 May 2022 (unaudited) of £39 million (31 May 2021: £42
million). The small reduction in cash during the financial year reflected a
greater investment in significant game developments for release in future
years, and the £5 million purchase of shares by the Employee Benefit Trust
undertaken in April 2022 to satisfy future share option exercises by
employees.

F1® Manager 2022

On 7 June 2022 we announced, to a very positive response, our officially
licensed Formula 1® management simulation, F1® Manager 2022, launching on 30
August 2022 across PC, PlayStation® 5, Xbox Series X|S, PlayStation® 4 and
Xbox One. Pre-order sales are now live, with early access from 25 August for
those who pre-order. F1® Manager 2022 is the first of our annual Formula 1®
titles as part of our exclusive licence for Formula 1® management games.

Stepping into the role of Team Principal, one of the highest-pressure roles in
motorsport, players will lead their chosen team to glory in the 2022 FIA
Formula One World Championship™ and beyond. F1® Manager 2022 offers fans an
unrivalled F1® experience, capturing in unprecedented detail the world of
F1® and the high-octane excitement of running a team. From the paddock to the
podium, players will need to manage decisions on and off the track to ensure
their success, all while balancing the books and satisfying both the board and
the all-important team sponsors.

Watch the (https://youtu.be/JYmb3yPex8w) F1® Manager 2022
(https://youtu.be/JYmb3yPex8w) announcement trailer here
(https://youtu.be/JYmb3yPex8w)

Our people

Our talented people have delivered record revenue for FY22 and are working
hard on nurturing our existing games whilst developing new titles.  We
welcomed a record number of people to Frontier during FY22, with 272 new
starters, helping grow our diverse and multi-disciplinary team to 790 people
as at 31 May 2022.

Frontier has a long track record of creating innovative, high quality games
while recognising that a commitment to productivity and efficiency underpins
our long term success. We are expanding our team to bring more games and
content to new and existing players through our portfolio of genre-leading
titles. We are also investing in the development of our team, mindful of the
stresses and strains that come with rapid growth.

Outlook

Over the medium term, the Board expects Frontier to continue to grow revenue
by around 20% on average per annum, with any annual growth rate variability
largely driven by the number and scale of new releases in each year.

We begin FY23 in excellent shape.  Our portfolio continues to thrive, with
Elite Dangerous, Jurassic World Evolution 2 and Planet Zoo, all set to benefit
from new DLC during FY23. Our major new game release in FY23 is F1 Manager
2022.

This new financial year for Frontier Foundry is also off to a good start
following the successful release of Warhammer 40,000: Chaos Gate -
Daemonhunters in May 2022.  We have three new Frontier Foundry game releases
planned for FY23 including Deliver Us Mars.

The Board is comfortable with current analyst expectations for FY23 based on
the expected performance of our existing games and the anticipated success
with our planned new releases.

With F1® Manager 2022 scheduled for release on 30 August 2022 (25 August for
those who pre-order), we expect to provide a trading update on FY23 in
mid-September 2022, alongside the publication of our full audited FY22
financial results.

David Braben, CEO and Founder, commented:

"We've had another year of solid growth. Following its launch in November
2021, our player base for Jurassic World Evolution 2 has continued to expand,
as expected. We are now very well set up for the future, with the Dominion
expansion and bundles launching today for Jurassic World Evolution 2, and F1
Manager 2022 due later this summer.  The team has done a great job this year,
overcoming many challenges and working tirelessly to support our games and our
players. Our games label, Frontier Foundry, has performed well too, with
Warhammer 40,000: Chaos Gate - Daemonhunters launching right at the end of the
financial year and looking good for FY23 too, with further exciting Foundry
releases to come."

 

Conference call for analysts:

Frontier will host a conference call with analysts at 09.30am today. To
participate please contact Tulchan Communications
via frontier@tulchangroup.com (mailto:frontier@tulchangroup.com) for details.

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as amended by The Market Abuse (Amendment) (EU Exit)
Regulations 2019. The person responsible for making this announcement on
behalf of the Company is Alex Bevis.

 

Enquiries:

Frontier Developments   +44 (0)1223 394 300

David Braben, CEO

Alex Bevis, CFO

 

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

Neil Patel / Cameron Duncan

 

Jefferies - Joint Broker   +44 (0)20 7029 8000

Max Jones / William Brown

 

Tulchan Communications   +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. Based in
Cambridge, 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/)

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