Frontier Developments PLC (LON:FDEV) surged in early trading Wednesday after the video game developer's record performance for the half year, driven by its biggest game launch to date.
The AIM 100 firm reported underlying earnings (EBITDA) for the six months to 30 November of £21.7mln, up from £6mln a year ago, while revenues jumped to £64.7mln from £19mln and operating margins expanded to 27% from 16%.
READ: Frontier Developments revenues boosted by launch of Jurassic World Evolution video game
The company said the significant uptick in performance was mostly attributable to Jurassic World Evolution, its biggest game launch to date, which had sold 1mln base game units in the first 5 weeks of release and 2mln in seven months.
This was coupled with the ongoing performance of the firm’s Planet Coaster and Elite Dangerous franchises which had sold 2mln and 3mln units since release in November 2016 and December 2014 respectively.
Frontier’s operating cash flow also rose to £16.5mln form £1mln in the period, leaving it with a net cash balance of £39.5mln compared to £29.1mln a year ago.
Looking forward, the company said it had seen a “good trading performance” during the competitive holiday period and that it was “comfortable” with analyst revenue projections for the full year of between £79mln and £88mln.
The firm added that its fourth game franchise, based on its own unannounced IP, was on track with a release planned for later in the 2019 calendar year.
David Braben, chief executive of Frontier, said it was “particularly pleasing” that the Jurassic World launch had been the firms biggest to date, adding that the company had “a lot of exciting opportunities ahead of us driven by our resources, capability and experience, our strong partnerships, and the widening opportunities for games companies within the ever-changing entertainment industry”.
Broker predicts “long-run annual release model” to smooth portfolio
In a note to clients, analysts at broker Peel Hunt said the results were in line with their own estimates, adding that they believed Frontier was “positioned well, with a strong franchise portfolio, £39.5m net cash and upcoming franchises in the works”.
“With the group releasing new content for Planet Coaster, Elite Dangerous and Jurassic World Evolution, we highlight that the tail of content and revenue contribution from each franchise should not be underestimated (25% for established franchises). As Frontier rolls out new content, for example, its September 2018 free content release for JWE, player engagement remains strong and game sales are expected to continue to be resilient through the forecast period.”
Analysts also retained their ’Buy’ rating and 1,400p price target on the stock saying they expected the company to support its strong base with more releases which would lead to “a long-run annual release model, thus smoothing out a currently lumpy portfolio”.
Shares were up 7% at 952p.