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03 Feb 2021 | 08:08

Frontier posts decent first half as game sales surge in lockdowns

(Sharecast News) - Video game developer and publisher Frontier Developments reported revenue of £36.9m in its first half on Wednesday, rising from £32m year-on-year. The AIM-traded firm said its operating profit for the six months ended 30 November was £6.9m, up from £4.5m year-on-year, while its operating margin improved to 19% from 14%.

EBITDA for the period came in at £15.5m, compared to £10.9m a year earlier, and basic earnings per share were 15p, up from 9.4p.

Frontier reported operating cash flow of £3.1m, rising from £1.9m in the prior year, while its net cash balance at period end was £34.9m, down from £45.8m at the start of the year, but up from the £28.9m it reported at the interim in the 2020 financial year.

The company put its revenue growth down to the ongoing performance of all of its existing titles, combined with initial contributions from new platform launches, as its gross profit margin grew to 71% from 67% year-on-year.

That was due to lower average distribution costs, including lower digital store commission rates on some services, and a greater proportion of revenue from own-intellectual property (IP) titles over licenced IP titles.

On the operational front, Frontier said player numbers for all of its titles were continuing to expand "strongly", through active player-community management, additional free and chargeable content, price promotions and expansions onto new platforms and channels.

Frontier Foundry, its own games label for third-party publishing, also continued to grow with a number of titles in discussion, as well as titles already signed.

Its first partner title, the "experimental and unique" Struggling, was released in August, with Frontier Foundry set to become a "material" part of the business in the future.

Looking at its current trading, the company said all of its titles were performing well, with revenue growth in the second half expected to build on the strong performance in the first half.

It said that would come down to the ongoing sales performance of a larger portfolio, with Jurassic World Evolution: Complete Edition on the Nintendo Switch platform and Planet Coaster: Console Edition on PlayStation and Xbox having released in November, as well as chargeable content packs in the second half of 2021 for Planet Zoo, such as the Aquatic Pack released in December.

Revenue in December, which was typically the largest month of the year for video game sales, was stronger than expected, with base game units and paid downloadable content selling well across all four of the firm's major franchises.

It said the expected success of Elite Dangerous: Odyssey, a major new era for the Elite Dangerous franchise, was planned for release on PC before the end of the financial year.

For the 2022 financial year, Frontier said it expected "significant" growth from the continued strong performance of its existing portfolio, alongside contributions from new games, including two multi‐platform releases incorporating major global IP licences and a number of Frontier Foundry titles.

"Covid has caused a great deal of hardship for many people, but we have been fortunate to benefit from a higher level of demand and engagement for our immersive games during the various lockdowns around the world," said chief executive officer David Braben.

"I am delighted with the growth achieved in our player communities and in our team during 2020. It's pleasing to see strong engagement across all of our titles during these challenging times for so many people and I am proud of our great team for the adaptability they have shown during remote working.

"Our next major event is Elite Dangerous: Odyssey, which is coming together really well, and represents one part of our exciting line-up for 2021 and beyond. We're in great shape for the future."

At 0948 GMT, shares in Frontier Developments were down 0.92% at 3,240p.
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