Frontier Developments PLC (AIM:FDEV) shares fell 5% to 553p after it provided an update on trading that confirmed sales for the year to 31 May 2023 were in line with expectations but that profits will be hit by a write-down of its Foundry third-party assets.
The computer games developer said it is ceasing all activity related to publishing new third-party titles and will instead "re-focus" on its own titles, following a review it started at the time of January's profit warning.
It said the financial performance across the Foundry portfolio has been "disappointing" and the business has not delivered on expectations of a positive return on investment within the first year of each title.
Reported operating profit for the year is now expected to swing to a loss of around £11mln, due to a circa £13mln writedown of existing Foundry titles.
Underlying operating profits are expected to be around £2mln and cash profitability (EBITDA) around a loss of £5mln, in line with guidance from January.
Revenue came in at roughly £104mln, down 9% year on year, in line with its £100-114mln guidance range and ahead of the FactSet analyst consensus of £102mln.
Its existing portfolio of games generated 72% of revenue, mostly from Jurassic World Evolution 2, with F1 Manager 2022 the biggest revenue generator among new releases, selling over 800,000 units.
Two key releases in the new financial year are Warhammer Age of Sigmar, "coming soon" in partnership with Games Workshop Group PLC (LSE:GAW), and F1 Manager 2023 (releasing in summer 2023 on PC, PlayStation, Xbox).