The shares shot ahead after Frontier said H2 had gone with a bang and it would therefore report record full year revenues of £114m, 26% above the previous record of £90.7m achieved in FY21. Adjusted ebitda is expected to be £7-£8m down from £12m. It would have been even better but for there being an undershoot on Elite Dangerous and the officially licensed Formula 1 management simulation, F1 Manager, which is falling into FY23 (25 August launch and could be 30% of this year’s sales).
The year, however, benefited from the major release of Jurassic World Evolution 2, which exceeded 1.3 million base game units sold and should benefit from a new movie. The latter has led to release of a movie tie-in expansion pack/paid-downloadable content (PDLC) including four new species of prehistoric animals and has had strong uptake. Alongside the internally developed titles, Frontier Foundry, its games label for publishing partner developments, had three new game releases including Warhammer 40,000, Chaos Gate and Daemonhunters, which exceeded expectations.
EBITDA is anticipated to be in line with expectations at approximately £7-8m versus £12m reported for FY21. The year-on-year reduction reflects greater investment in significant game developments for release in future years, including Formula 1 in August and its Warhammer Age of Sigmar real-time strategy game for FY24. However, due to the lower than expected engagement with Elite Dangerous: Odyssey on PC, the console launch has seen the game shelved and the results will also exclude £7m accelerated amortisation to write this down. FDEV’s outlook points to continued medium-term revenue growth of c.20%. Buy.
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