- Full year earnings beat
- New £10 million buyback
- Brokers upgrade outlook
A stronger-than-expected full-year trading update and new share buyback equivalent to 10% of its market capitalisation sent shares in video games developer Frontier Developments (FDEV:AIM) as much as 18% higher.
Wednesday’s (11 June) share price jump adds to a roughly 4% gain seen on Monday after the company revealed the October release date for the third instalment of the critically acclaimed JWE (Jurassic World Evolution) game following the Jurassic World: Rebirth movie set for release in early July.
Analysts at Panmure Liberum believe there are several factors which make the release date ‘excellent’ in terms of timing. Pre-orders have begun and should see a benefit from the marketing of the film Jurassic World: Rebirth which releases on 2 July.
Secondly, the release date occurs in the seasonally-strong fourth quarter, and finally, competitor Take Two Interactive’s (TTWO:NASDAQ) release of Grand Theft Auto VI has been delayed until 2026.
EARNINGS BEAT AND UPGRADES
Revenue for the year to 31 May increased to £90.6 million from £89.3 million, while adjusted EBITDA (earnings before interest, tax, depreciation, and amortisation) is expected to be between £8 million and £9 million, significantly ahead of consensus forecasts.
This includes a £3.5 million gain on the sale of publishing rights for Foundry game Stranded: Alien Dawn which was flagged in a May trading update.
Cash grew by £13 million to £42.5 million, prompting the company to announce a £10 million share buyback programme, equivalent to 10% of its market capitalisation.
Analysts at Peel Hunt commented: ‘Thanks to strong performance from its back catalogue, Frontier has beaten our initial FY25E revenue expectations by 7% to end at £90.6m.
‘Frontier’s operating leverage, cash generation, and sale of publishing rights sees EBITDA up 9x YoY, a £12m beat versus our initial estimates.’
Looking ahead, the team at Panmure Liberum expect JWE III to contribute roughly £40 million in revenue which they believe is conservative in relation to the sales generated by JWE I (£68 million) and JWE II (£51.8 million).
The broker has increased its 2026 EPS (earnings per share) estimate by 9% to reflect the planned share buyback and 2027 EPS by 7.5% to 28.6p.
