Video game publisher Frontier Developments (FDEV:AIM) reported interim revenues for the period ended 30 November of £32m as indicated in the 15 January trading update. The shares fell 9.5% to £13.07 as analysts cut their full-year revenue expectations by around 5% due to currency headwinds.
MOMENTUM BUILDING
Revenues aren’t comparable with the prior half year (£64.7m) due to the timing of the release of Jurassic World Evolution in June 2019, while the latest release, Planet Zoo was only released on 5 November 2019.
The company confirmed strong demand for Planet Zoo saying, ‘to date Planet Zoo has sold the most units on PC of any of Frontier's games during an equivalent time period, crossing 500,000 units in early December’. The game achieved the global number one and two bestseller spots on games platform Steam.
All four games performed well over the key holiday trading period including Elite Dangerous which is a 2014 vintage.
ALL TO PLAY FOR
While investors will need to wait for the full year results to gauge the full success or otherwise of the current sales momentum, the company stuck to its prior revenue guidance of £65m to £73m with consensus being roughly in the middle before today’s update.
The appreciation of sterling against the dollar in the fourth quarter offset the ‘strong performance of all four titles’ implying that the range would have been raised without the impact. The company hedges half of it’s predominately dollar-based revenues.
Market expectations for full-year operating profits are expected to be between £10m and £12m. The shares trade at a premium valuation of roughly 41 times two-year forward earnings expectations.
