Frontier Developments (FDEV) defended its operating margin despite a period of lower revenue for the games developer. Frontier, which focuses on quality PC and console games, rather than mobile platforms, attributed the minor revenue decline to the timing of gaming releases over the past two years, along with the PC-only launch of Planet Zoo, which represented its fourth title.
Demand for its four titles helped drive up net cash, excluding lease liabilities, by almost a third to £45.8m, while trade receivables more than doubled to £12.3m owing to a boom in gaming demand during lockdown. Frontier’s gross research and development expenditure rose by a fifth to £24.6m to help support the growth of its franchise portfolio, with part of this budget going towards greater use of outsourcing. The operating margin held firm at 22 per cent, and Frontier anticipates record revenues of £90m-95m in 2021. It is raising scheduled annual game releases in 2022, from one title to two.
Peel Hunt forecasts full-year 2021 adjusted pre-tax profits and earnings per share of £17.9m and 38.6p respectively, rising to £28.9m and 61.8p in 2022.
| FRONTIER DEVELOPMENTS (FDEV) | ||||
| ORD PRICE: | 2,350p | MARKET VALUE: | £ 914m | |
| TOUCH: | 2,340-2,350p | 12-MONTH HIGH: | 2,494p | LOW: 952p |
| DIVIDEND YIELD: | NIL | PE RATIO: | 57 | |
| NET ASSET VALUE: | 249p* | NET CASH: | £22.2m | |
| Year to 31 May | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 21.4 | 1.3 | 4.2 | nil |
| 2017 | 37.4 | 7.8 | 22.7 | nil |
| 2018 | 34.2 | 2.9 | 9.6 | nil |
| 2019 (restated) | 89.7 | 19.7 | 46.9 | nil |
| 2020 | 76.1 | 16.2 | 41.3 | nil |
| % change | -15 | -17 | -12 | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes intangible assets of £53m, or 136p a share | ||||
