Shares in fantasy games developer and publisher Frontier Developments (FDEV:AIM) gained 2.2% to £24.37 as it reported annual revenue and profit slightly ahead of expectations and set out its long-term vision.
The firm reported full-year revenues of £76.1 million for the year ended 31 May 2020 and operating profit of £16.6 million.
STRONG EVOLUTION
Revenues were down on the £89.7 million reported in 2019 because of the timing of game releases, with Planet Zoo released halfway through the fiscal 2020 year in November 2019.
However the wholly owned title is Frontier’s biggest selling game on PC during an equivalent period, contributing over £30 million.
Elite Dangerous, Planet Coaster and Jurassic World Evolution continued to contribute sustained revenues including paid-downloadable content (PDLC).
Gross profit of £51.6 million represented a 7% increased margin due to a higher proportion of own intellectual property (IP) sales compared with licensed sales.
In addition digital sales now represent 97% of the business compared with 85% in the prior year, and attract a higher margin than physical disc sales.
The gaming industry has been a beneficiary of the pandemic related lockdown with furloughed staff stuck in their homes spending more time gaming.
NEW FRONTIERS
The company confirmed the guidance for 2021 revenues to be £90 million and £95 million, supported by the previously announced release schedule.
Underlining the increasing strength of Frontier’s reputation with global brand owners, in March it signed a deal with Formula 1 gaining exclusive rights to an annual PC and console management game, with the first game expected for the 2022 season. This is the company’s first foray into the annual sports genre.
In May the company revealed a license with Games Workshop (GAW) for exclusive rights to a real-time strategy game for the hugely popular Warhammer Age of Sigmar. This will bring the game to a wider audience on console as well as PC.
A games label for third-party developers was launched intended to leverage Frontier’s publishing capability and industry experience by partnering with high-quality developers. Six games have been signed including five during the current year.
Lemis Gate is scheduled for release in the current financial year, three titles in the following year and one for 2023. The ambition is to release five-to-six games every year from 2023.
The company said, ‘Our future looks bright with multiple major releases confirmed for FY21 and an exciting roadmap for FY22 and beyond, adding great relationships with Formula 1 and with Games Workshop to an already rich portfolio.’
Broker Liberum has taken a stab at what the business could look like if everything goes to plan over the next five years. It reckons the business could generate £220 million of revenues in 2025 and £50 million of profits, assuming a 25% operating margin.
