Everplay (AIM:EVPL), the independent video games developer and publisher, saw its shares fall 13% to 225p on Tuesday despite reporting record profits and an upbeat outlook for 2026, in a move analysts suggested was an overreaction to headline revenue figures that had already been well-flagged.
Peel Hunt, which rates the stock a 'buy' with a target price of 480p, noted that flat revenues were anticipated, reflecting the company's deliberate decision to exit the low-margin physical distribution business operated through its astragon division.
The broker also pointed out that the shares trade on just 10 times its 2026 earnings estimate, and upgraded its 2026 EBITDA forecast by 3% following the results.
Stripping out the physical distribution exit, group revenue grew 5% to £166.0 million (2024: £166.6 million).
Peel noted that while revenue fell 10% in the first half of 2025, it accelerated 9% in the second half, suggesting underlying momentum was building through the year.
Gross profit rose 10% to £76.3 million, and the gross profit margin expanded by 4.4 percentage points to 46.0%, illustrating the benefit of shedding lower-quality revenues. Peel Hunt attributed the improvement to the absence of material title impairments, a favourable sales mix, and continued cost discipline.
Adjusted EBITDA grew 11% to £48.5 million, bang in line with Peel Hunt's estimates, while profit before tax jumped 44% to £36.6 million, with adjusted profit before tax coming in slightly ahead of the broker's forecasts.
The group ended the year with cash of £51.9 million, below Peel Hunt's £63 million estimate, a shortfall the broker attributed to working capital timing, higher tax rates, which it said could reverse, and capital expenditure on upcoming first-party titles.
The broker said the cash position nonetheless left room for further acquisitions.
New release revenues were a particular bright spot, rising 80% year on year, driven by six new games from the Team17 label, including Date Everything!, which attracted more than 750,000 players since launch.
StoryToys, the group's children's edutainment division, delivered an outstanding year with revenues up 25% to £30.4 million, boosted by the LEGO Bluey app, which passed one million downloads in its first month and reached number one in the kids iPad chart in 117 countries.
The group enters 2026 with a pipeline of at least 15 new games and apps, including Hell Let Loose: Vietnam, which has already accumulated more than half a million wishlist entries on gaming platform Steam, along with new titles arising from partnerships with Netflix, Apple Arcade, Amazon and Nintendo Switch 2.
Chief executive Mikkel Weider, who joined in January, said he was confident the group was on track for a strong year, with the board declaring a final dividend of 1.9 pence per share, bringing the full-year total to 2.9 pence, up 7% on 2024 and a 4% beat to Peel's estimate.