Frontier Developments PLC (AIM:FDEV) posted a first-half loss and narrowed its revenue guidance for the full year and next year as it said the launch date for the Warhammer real-time strategy game has been pushed back.
Shares in the computer games developer fell 27% to below 1300p for the first time in almost two years.
Reporting on the six months up to 30 November 2021, Frontier said that revenue for the financial year is expected to be between £100mln-£120mln, having in November warned that lower than expected sales of Jurassic World Evolution 2 meant it was pencilling in revenues of £100mln-£130mln, rather than the £130mln-£150mln previously expected.
Frontier also cut its revenue guidance for the coming financial year to £130mln-£160mln as the Warhammer release has been pushed back into later in 2023, meaning the revenues will not flow until the group’s 2024 financial year.
The Cambridge based company posted an operating loss of £1.3mln for the first half of its 2022 financial year, due to a combination of game release related marketing costs, a higher chunk of revenue going towards intellectual property license royalties for Jurassic World Evolution 2, its flagship product last year, and some exceptional non-cash charges.
However, Frontier remained upbeat for the rest of the year and beyond, as were analysts.
The company is looking forward to it’s the release of two games before the end of its financial year in May, FAR: Changing Tides and Warhammer 40,000: Chaos Gate – Daemonhunters, while also making its debut with a new annually released Formula 1 game before the end of the calendar year.
Frontier also remains hopeful that the cinematic release of Jurassic World Dominion will have a knock-on effect on sales for Jurassic World Evolution 2, which has sold 1mln copies since its launch in November.
Brokers were remaining optimistic, with Liberum, Shore Capital and Peel Hunt all maintaining ‘buy’ ratings on the company’s shares, albeit with slightly reduced target prices in some instances.
The general belief among the brokers is that the company’s portfolio is strong and will get stronger with releases planned over the next year and beyond, as well being a beneficiary of an improving gaming market.
ShoreCap believes its current business strategy to launch and nurture its releases will prove effective for Jurassic World Evolution 2 and any future releases that perhaps don’t perform well on initial release but do so in the longer term.
The update showed that “FDEV is fairly exposed to title risk, and despite a credible reputation, it can still suffer from bugs and arguably disappointing gameplay. But despite this risk, we have also been encouraged by the group’s ability to listen to its players, react quickly and adapt to new developments,” said ShoreCap analyst Katie Cousins.
Liberum’s Ciaran Donnelly said: “We continue to see significant value in FDEV’s portfolio and FDEV is well positioned to benefit from continued growth in gaming more broadly.”