Trading Statement

RNS Number : 7096B

Frontier Developments PLC

09 January 2015

 

9 January 2015

Frontier Developments plc

Trading Update

Frontier Developments plc (AIM: FDEV, “Frontier”, the “Group”), a leading developer of video games, announces a trading update ahead of its unaudited interim results for the six months ended 30 November 2014 and following the launch of its first major self-published title, Elite: Dangerous, after the end of the half year period .

Elite: Dangerous launch

Following the successful launch of its Elite: Dangerous game on schedule on 16^th December 2014, sales have been encouraging.

Since late 2013 the Group has been using three scenarios to model performance of the game, created based on the growth of other non-subscription online games in their first three years, a ‘base’ scenario, a ‘mid’ scenario, and a ‘bull’ scenario, details of which are set out in the table below. The Board is pleased with the progress to date. In terms of revenue Elite: Dangerous is tracking above the ‘bull’ scenario; and on units sold, between the ‘mid’ and ‘bull’ scenarios. Since our full year trading update, which was announced on 19 June 2014, the Group has received an additional c.£11.1 million in cash from over 250,000 new players. Thus in the period since the Group’s Kickstarter campaign was completed in January 2013 and up to 6^th January 2015, the total cash received is approximately £14.1 million from just over 300,000 players (units) and sales remain strong. The total addressable market for the game will grow as the Group adds new platforms, starting with the Apple Mac in approximately three months’ time.

Years ending 31 May		2015	2016	2017
Online game ‘base’ scenario	Units sold	0.25m	1.0m	2.0m
	Revenue	£2.5m	£10.0m	£20.0m
Online game ‘mid’ scenario	Units sold	0.50m	2.0m	8.0m
	Revenue	£5.0m	£20.0m	£80.0m
Online game ‘bull’ scenario	Units sold	0.75m	4.0m	30.0m
	Revenue	£7.5m	£40.0m	£300.0m

When these scenarios were prepared, the Board assumed a typical average unit price of £10. However, a higher release price of US$60/£40 per unit has been set by the Group based on the expected quality of the game, and therefore the Group is currently receiving greater revenue from fewer units sold. The Group intends to provide updates on progress in respect of sales of the game to the market on a roughly quarterly basis as appropriate going forwards. The scenarios relate to the performance of the Elite: Dangerous game, not the Group as a whole and do not constitute a profit forecast or profit estimate.

Interim six months to 30 November 2014

In the six months to the end of November 2014, the Group made good progress in executing its business transition and accompanying growth strategy, mainly through focus on the development and pre marketing of Elite: Dangerous prior to its subsequent release in December 2014.

As previously announced the Group also successfully completed and released Tales from Deep Space, a mobile title for Amazon Games Studio available on the Kindle Fire.

Sales from the pre-release versions of Elite: Dangerous in the six months ended 30 November 2014 are expected to contribute to half-year revenues for the Group of approximately £7.0 million, being an increase of 40% when compared to the prior half-year. Pre release marketing and infrastructure spend in connection with the release of Elite: Dangerous is expected to produce an operating loss of around £1.5m for the period.  EBITDA is expected to be approximately £0.7 million for the period.

The Group’s balance sheet remains strong, and at 30 November 2014, prior to the full public release of Elite: Dangerous, the Group had net cash of around £9.8 million. This places the Group in a good financial position to support its continuing investment plans going forwards.

Frontier expects to report its unaudited interim results in late February 2015.

David Braben, Chief Executive of Frontier Developments, said:

“In December the team did a great job in delivering the full public release of Elite: Dangerous and its supporting technology as planned, driving our transition to the next stage. We, as a Board, are hopeful that sales will continue to track well, leading to revenues doubling to approximately £19 million by the end of the current financial year.”

Enquiries:

Frontier Developments	[phone]
David Braben, CEO David Walsh, COO Neil Armstrong, CFO
Canaccord Genuity	[phone]
Simon Bridges/Cameron Duncan
Finncap	[phone]
Charlotte Stranner
Tulchan Communications	[phone]
James Macey White / Tom Buchanan

About Frontier Developments plc

Frontier Developments plc, listed on the AIM stock market (AIM: FDEV), is a leading independent game developer founded in 1994 by David Braben, co-author of the seminal ‘Elite’ game. Based in Cambridge, UK and Halifax, Nova Scotia, Canada, Frontier uses its proprietary ‘Cobra’ game development technology to create innovative games across videogame consoles, computers, smartphones and tablets.

The studio released Zoo Tycoon as a launch title for Microsoft’s Xbox One console in 2013 and Tales from Deep Space for Amazon in 2014. It continues to work on ScreamRide for Microsoft and other unannounced titles in addition to expansion of Elite: Dangerous.

www.frontier.co.uk

Important Note

The information contained in this announcement about the sales of Elite: Dangerous relates solely to this game and does not constitute a profit estimate or profit forecast in respect of the Group or any guidance as to the likely profits of the Group. The scenarios contained in the announcement have been prepared by the directors based on their own industry knowledge and analysis and there are a number of factors which could or may cause the actual sales of the game and revenue generated from such sales to differ materially from those expressed or implied by such scenarios.

 

END

 

 

TSTSSWFMAFISELF