Frontier Developments PLC (LON:FDEV) reported a decline in profits for 2018 as research and development (R&D) costs and a margin reduction bit into its earnings.
The AIM 100 video game developer reported that its pre-tax profit for the year was £2.8mln, down from £7.8mln in 2017, while revenues fell to £34.2mln from £37.4mln previously.
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The group also reported that its operating margins had shrunk to 8% from 21% the year before, which was attributed to the launch of Frontiers’ latest instalment of its Elite Dangerous franchise on PlayStation 4 as well as the release of “lower margin physical disc sales” of the game on PS4 and Xbox One consoles.
Frontier added that an increase in marketing and administrative expenses to £12.6mln from £11.9mln last year had been due mainly to the launch of Jurassic World Evolution, which was released after the end of the period in June 2018.
However, the company was upbeat in its outlook, with chief executive David Braben saying the launch of Jurassic World Evolution had led to a “record trading performance” during the initial period of the new financial year.
Braben added that the company was “comfortable” with analyst revenue projections of £75mln to £88mln for the 2019 financial year.
The company also said it was currently working on an as yet un-announced fourth intellectual property that would be targeted for release in the 2020 financial year.
In a note to clients, analysts at City broker Liberum said the results had been in line with its forecasts, adding that the strong Jurassic World Evolution sales and the “endurance” of the company’s Elite Dangerous and Planet Coaster franchises were evidence that Frontier's multi-franchise strategy was “the right path”.
Shares were up 1.8% at 1,080p.