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Team17 off to a winning start

The video games developer posted record results in its first outing as a public company
March 20, 2019

Team17 (TM17) revealed a revenue surge in its maiden full-year figures as a publicly-listed entity. The Yorkshire-based video games developer moved onto London's junior market in May 2018, raising £108m in the process. The launch of 12 new games in 2018, combined with 42 per cent growth in back catalogue sales, boosted adjusted cash profit by 18 per cent to £15.3m. A similar number of new titles is expected in 2019 and three new games have already been introduced.

IC TIP: Buy at 243p

Although it's a little early to gauge profitability trends, investors will doubtless note the nine percentage point contraction in the gross margin. That resulted from an unfavourable sales mix, as lower-margin third-party IP titles comprised 74 per cent of total revenue compared with 50 per cent in 2017.

The company did not release any new own-IP titles in 2018. Management says that this weighting was a conscious decision, drawing upon the commercially successful and critically-acclaimed Overcooked 2. Although a third-party IP, it was developed within Team17’s internal studio, reflecting a wider strategy to simultaneously be a creative partner, developer and publisher.

Analysts at Liberum have revised their 2019 forecasts upwards, anticipating adjusted pre-tax profits of £14.6m and EPS of 9.4p, rising to £16m and 10.3p in 2020.

TEAM17 (TM17)   
ORD PRICE:243pMARKET VALUE:£318m
TOUCH:235-250p12-MONTH HIGH:293pLOW: 181p
DIVIDEND YIELD:nilPE RATIO:40
NET ASSET VALUE:48p*NET CASH:£23.5m
Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2015 (pre-admission)10.43.8na
2016 (pre-admission)13.52.8na
2017 (pre-admission)29.65.44.3nil
201843.28.76.1nil
% change+46+62+42-
Ex-div:-   
Payment:-   

†Dividends amounting to £2.74m and £2.15m were paid to shareholders for the Dec 2015 and 2016 year-ends respectively

*Includes intangible assets of £21.1m, or 16p a share