TIDMFDEV
RNS Number : 1132L
Frontier Developments PLC
04 September 2019
Frontier Developments plc
Annual Results
A record year. An exciting future.
Frontier Developments plc (AIM: FDEV, 'Frontier', the 'Group' or
the 'Company'), a leading developer and publisher of videogames
based in Cambridge, UK, has published its unaudited full-year
results for the 12 months to 31 May 2019 ('financial year 2019' or
'FY19').
Overview
Frontier is a world-class videogame developer and publisher,
with a proven track record of launching multiple successful
franchises with a strong post-launch nurturing strategy which
delivers multi-year revenues. Each new release provides strong
launch sales, while a combination of regular free and chargeable
updates, together with active community support, ensures longevity
of sales performance. Frontier is currently the UK's largest
independent studio and continues to grow. In the 12 months to 31
May 2019, Frontier recruited more than 120 people, growing
headcount to over 460 staff in its Cambridge headquarters.
In financial year 2019, Frontier grew revenue by more than 160%
and operating profit by nearly 600%, representing record financial
performance. This was delivered through the success of Jurassic
World Evolution (June 2018), and the ongoing performance of
Frontier's first two self-published titles, Elite Dangerous (2014)
and Planet Coaster (2016).
Frontier's next major release is Planet Zoo, the Company's
fourth title launch since the transition to a self-publishing
business model in 2013-2014. Planet Zoo is the ultimate zoo
simulation, featuring authentic living animals, rich management,
and limitless creativity, and is coming exclusively to PC on 5
November 2019.
In addition to Frontier's core model of developing and
publishing its own games, the Company is partnering with other
high-quality developers to bring more games to market through the
Company's Frontier Publishing initiative. In June 2019 Frontier
announced the first of these deals with Haemimont Games, an
experienced and respected developer of quality strategy and
management titles.
Frontier continues to grow its franchise portfolio and its
headcount in order to deliver long-term revenue and earnings
growth, and support the ambition to be the most respected and
highest quality entertainment company in the world.
Financial summary
FY19 FY18 Change (%)
(12 months (12 months
to 31 May 2019) to 31 May 2018)
Revenue GBP89.7m GBP34.2m +162%
------------------ ------------------ -----------
Operating profit GBP19.4m GBP2.8m +593%
------------------ ------------------ -----------
Operating margin % 22% 8% +14pp
------------------ ------------------ -----------
EBITDA* GBP29.0m GBP9.4m +209%
------------------ ------------------ -----------
EPS (basic) 45.4p 9.6p +373%
------------------ ------------------ -----------
Operating cash flow** GBP15.4m (GBP2.8m) n/a
------------------ ------------------ -----------
Net cash balance GBP35.3m GBP24.1m +46%
------------------ ------------------ -----------
*Earnings before interest, tax, depreciation and
amortisation
** Operating profit excluding non-cash items, less investments
in franchises and other game related intangible assets
Operational and strategic highlights
-- Frontier achieved its biggest launch to date with Jurassic
World Evolution. Released in June 2018 alongside the launch of the
Jurassic World: Fallen Kingdom film, the game achieved 1 million
unit sales in five weeks and 2 million in seven months.
-- Frontier's strategy of supporting and nurturing its titles
through active community engagement, free updates, and chargeable
content (paid downloadable content or 'PDLC') continues to deliver,
with Jurassic World Evolution, Planet Coaster, and Elite Dangerous
all continuing to entertain existing players and attract new
ones.
-- Jurassic World Evolution has been supported since launch
through a number of free updates and by a growing range of
chargeable content, with five separate PDLC packs now available as
at 4 September 2019.
-- Planet Coaster, launched in November 2016, continues to lead
its genre. Eleven separate chargeable themed expansion packs are
now available, enabling existing players to access substantial new
features and content, and attracting new players into the Planet
Coaster world of creativity and sharing. Planet Coaster base game
unit sales passed 2 million units in January 2019.
-- Elite Dangerous, launched in December 2014, continues to
deliver exciting game experiences to active players whilst
welcoming new ones. In December 2018, Frontier delivered the fourth
chapter of the Beyond season of free updates, which added a number
of gameplay features and further narrative to the Elite Dangerous
universe. In January 2019, Elite Dangerous crossed the 3 million
base game unit threshold.
-- Planet Zoo will be Frontier's fourth major game release since
the transition to self-publishing. Coming exclusively on PC on 5
November 2019, Planet Zoo will be the ultimate zoo simulation,
featuring authentic living animals, rich management, and limitless
creativity.
-- On 6 March 2019 Frontier announced securing a major global IP
licence for a future game release in 2021.
-- On 11 June 2019 Frontier announced its first partnership
under the Frontier Publishing initiative, with experienced
developer Haemimont Games. The partnership will see Frontier and
Haemimont work together on a new project for release in two to
three years' time.
Financial highlights
-- The launch of Jurassic World Evolution, combined with the
ongoing performance of all three titles, Jurassic World Evolution,
Planet Coaster and Elite Dangerous, propelled the Company to a
record financial performance for the year ended 31 May 2019.
-- Revenue increased by over 160% to GBP89.7 million in FY19
(FY18: GBP34.2 million), which was 2.4 times the previous record of
GBP37.4 million in FY17.
-- Operating profit, as reported under IFRS, grew to GBP19.4
million, nearly 600% higher than the prior year (FY18: GBP2.8
million) and 2.5 times the previous record of GBP7.8 million in
FY17.
-- Operating profit margin increased to approximately 22% (FY18: 8%, FY17: 21%).
-- Operating cash flow** generated an inflow of GBP15.4 million
(FY18: an outflow of GBP2.8 million), reflecting the strong trading
performance.
-- Cash balances increased by GBP11.2 million during the year to
GBP35.3 million (FY18: GBP24.1 million).
Current trading and outlook
Frontier's first three self-published titles, Elite Dangerous,
Planet Coaster, and Jurassic World Evolution, continue to perform
well, in line with expectations, supported by the Company's
strategy of active community engagement, free updates, chargeable
content and price promotions.
Revenue in the current financial year, (FY20, running from 1
June 2019 to 31 May 2020), will benefit from the launch of Planet
Zoo on 5 November 2019. Whilst Frontier anticipates considerable
success with the release of Planet Zoo, it is unlikely to drive
total revenues within the financial year as high as those achieved
by Jurassic World Evolution in FY19. This is due to three main
factors:
- The fact that Planet Zoo is a single-format PC exclusive.
Jurassic World Evolution was a multi-platform release, launching
simultaneously on PC, PlayStation 4 and Xbox One, with console
representing roughly half of the total unit sales. Frontier's
strategy includes the release of certain games (especially own-IP
games) on PC first in order to maximise long term engagement,
taking into account audience considerations and hardware
capability, while retaining the opportunity to expand to console
later.
- The strength of the Jurassic World brand. Support for the
launch of Jurassic World Evolution was boosted by its release
alongside the Jurassic World: Fallen Kingdom film, and the
considerable marketing activity surrounding it.
- The timing of the release. Planet Zoo launches half-way
through FY20, so contributes half a year of revenue, whilst
Jurassic World Evolution, which launched at the beginning of FY19,
provided a full 12 months of revenue.
Taking into account the ongoing performance of Elite Dangerous,
Planet Coaster, and Jurassic World Evolution, including the
expansion content for each of those games, and the planned launch
of Planet Zoo on 5 November 2019, the Board is comfortable with the
current range of analyst revenue projections of GBP65 million to
GBP73 million for financial year 2020 (the 12 months to 31 May
2020).
The Board expect revenue from the Frontier Publishing initiative
to grow over time, although does not expect it to be material in
FY20.
David Braben, Chief Executive, said:
"I am delighted to report a record level of financial
performance, which reflects the skill and hard work of our talented
team and the support of our players around the world. We continue
to nurture and enhance all three of our existing titles (Elite
Dangerous, Planet Coaster and Jurassic World Evolution), and I look
forward to the release of our fourth highly anticipated game,
Planet Zoo, later this year.
Earlier in 2019 we celebrated our 25(th) anniversary as a
company, and while I am very proud of all of our achievements to
date, it feels like we are at the start of our journey. The
opportunities we have now are better than ever. I am more excited
about our future, our next 25 years, as a result, as we continue to
expand our horizons and grow our portfolio, our team, and our
partnerships."
This announcement contains inside information as defined in
Article 7 of the Market Abuse Regulation (EU) 596/2014. The person
responsible for making this announcement on behalf of the Company
is Alex Bevis.
Enquiries:
Frontier Developments +44 (0)1223 394 300
David Braben, CEO
Alex Bevis, CFO
Liberum - Nomad and Joint Broker +44 (0)20 3100 2000
Neil Patel / Cameron Duncan
Jefferies - Joint Broker +44 (0)20 7029 8000
Max Jones / William Brown
Tulchan Communications +44 (0)20 7353 4200
Matt Low / Deborah Roney / James Macey White
About Frontier Developments plc
Frontier is a leading independent creator of self-published
videogame franchises founded in 1994 by David Braben, co-author of
the iconic Elite game. Based in Cambridge, Frontier uses its
proprietary 'COBRA' game development technology to create
innovative games, currently focusing on videogame consoles and
personal computers.
Frontier's LEI number: 213800B9LGPWUAZ9GX18.
www.frontier.co.uk
About Planet Zoo
Simulation Runs Wild in Planet Zoo. From the developers of
Jurassic World Evolution (2018), Planet Coaster (2016) and Zoo
Tycoon (2013) comes the ultimate zoo sim, featuring authentic
living animals who think, feel and explore the world players create
around them. Planet Zoo allows players to experience a
globe-trotting campaign or let their imagination run wild in the
freedom of Sandbox mode, create unique habitats and vast
landscapes, make big decisions and meaningful choices, and nurture
their animals as they construct and manage a truly modern zoo where
animal welfare and conservation comes first.
www.planetzoogame.com
About Jurassic World Evolution
Jurassic World Evolution - available for Windows PC, Microsoft
Xbox One and Sony PlayStation 4 - evolves players' relationships
with the Jurassic World film franchise, placing them in control of
operations on the legendary island of Isla Nublar and the
surrounding islands of the Muertes Archipelago. Players create and
manage their own Jurassic World as they bioengineer new dinosaur
breeds, and construct attractions, containment and research
facilities. Every choice leads to a different path and spectacular
challenges arise when 'life finds a way.'
www.jurassicworldevolution.com
About Planet Coaster
Planet Coaster - available for Windows PC - builds on Frontier's
genre-defining expertise with coaster park games such as
RollerCoaster Tycoon 3 and Thrillville. It further raises the bar
for this popular genre, allowing players to create the theme park
of their dreams as they surprise, delight and thrill incredulous
crowds, and share their success with the world via the Steam
Workshop community.
www.planetcoaster.com
About Elite Dangerous
Elite Dangerous - available for Windows PC, Microsoft Xbox One
and Sony PlayStation 4 - is the definitive massively multiplayer
space epic, bringing gaming's original open world adventure to the
modern generation with a connected galaxy, evolving narrative and
the entirety of the Milky Way recreated at its full galactic
proportions.
www.elitedangerous.com
Chairman's Statement
OVERVIEW
The hard work of our amazing team has delivered a set of record
financial results; of which we are all extremely proud. This has
not happened by accident. Over the last 25 years our talented
personnel, led by David Braben and Jonny Watts, have established a
culture and reputation for high quality, as well as for creating
enduring and authentic game experiences. It's this sharp focus on
quality that led us to achieve our best year yet in FY19 through
the success of our biggest launch to date, Jurassic World
Evolution, and the ongoing popularity of Elite Dangerous and Planet
Coaster.
In 2013 we made the brave decision to transition to a
self-publishing business model because of the opportunities we saw
from the growth of digitalisation. This included an expectation
that the development and ownership of game content would increase
in importance and prominence over time. David, Jonny, and their
teams grabbed the opportunity, and we now have three strong game
franchises in the market and more in the pipeline. I am personally
delighted that our decision to change our business model has proven
correct, and that we continue to deliver for all of our
stakeholders, including our communities of players, our staff, and
our investors.
Our reputation for quality and our increased profile have helped
us strengthen our existing partnerships and build new
relationships. We already have one future title which will be based
on a major global IP, and discussions are ongoing with a number of
IP owners. In June 2019 we announced our first partnership under
the Frontier Publishing initiative, with experienced developer
Haemimont Games. Frontier Publishing partnerships are an excellent
way for us to build our portfolio by leveraging our publishing
capability, our channel relationships, and our financial resources
to help talented external development teams bring their games to
market.
BOARD
I believe that our Board of Directors is a team of highly
experienced, capable, and motivated individuals. Whilst we are all
well-aligned in terms of our strategy and direction, there is
regular debate and challenge at Board meetings, which is
facilitated by each of our different areas of expertise, business
experiences and individual perspectives. At the AGM in October 2018
our former Chief Operating Officer, David Walsh, transitioned to a
Non-Executive Director role in order to focus his attention on a
start-up opportunity outside of the games industry. I would like to
thank David for his 17 years of excellent service to Frontier in an
executive role, and I am pleased to report that he is proving to be
a very capable Non-Executive Director.
OUTLOOK
We are proud of our strong growth and record financial
performance for last year, but we have much more to come in the
future. It's thanks to our fantastic people that we are in such a
strong position. I'd like to take this opportunity to thank them
for all of their hard work.
Chief Executive's Statement
The five years since we transitioned to a self-publishing model
have been really exciting. We continue to successfully execute the
strategy we set out at IPO, building a great portfolio of our own
games in the process. FY19 has been our best yet, and I am very
pleased to report a record level of financial performance, which
reflects the skill and hard work of our talented people and the
support of our players around the world. We continue to nurture and
enhance all three of our existing titles (Elite Dangerous, Planet
Coaster and Jurassic World Evolution), and I look forward to the
release of our fourth, Planet Zoo, later this year. Our roadmap for
future releases both as a developer and publisher is looking
particularly strong, including our announcement in March 2019 that
one future launch, in 2021, will benefit from a major global IP
licence. More IP licences are anticipated.
Over the last 12 to 18 months we have been exploring the
potential to use our publishing capability, industry experience,
commercial partnerships and financial resources to supplement our
own development roadmap. The three areas we have been reviewing
are:
-- Third party publishing (controlling the promotion and
distribution of other developers' games);
-- Commissioning (outsourcing the majority of development of
Frontier games to other developers); and
-- Acquisitions (to enhance our franchise portfolio or capabilities).
In June 2019 we announced our first deal under our Frontier
Publishing initiative (third party publishing) with experienced
developer Haemimont Games. I anticipate further deals in the future
for Frontier Publishing, and we also continue to explore
commissioning and acquisition opportunities.
Earlier in 2019 we celebrated our 25 year anniversary as a
company, and while I am very proud of all of our achievements to
date, it feels like we are at the start of our journey. The
opportunities we have now are better than ever. I am excited about
our future, our next 25 years, as we continue to expand our
horizons and grow our portfolio, our team and our partnerships.
THE GAMES MARKET
The games market, along with film, TV, and music, is part of the
wider $300 billion entertainment industry. Games forms the largest
sector, worth in excess of $130 billion, and it is still growing
rapidly unlike its other counterparts, such as TV, that have
typically experienced declines over several years.
With audiences craving greater levels of interactivity within
their entertainment experiences, the lines between these sectors
continue to blur. Frontier is well placed to both drive and support
future changes in the wider industry, including the potential
addition of whole new forms of entertainment, leveraging our strong
relationships with leading entertainment companies.
The games market is typically seen as three different sectors,
PC, console and mobile/tablet, each with distinct characteristics,
though increasingly it is play styles that matter. Rich, engaging
experiences where the expectation might be to play for an hour or
so in a session, for example, are currently confined to PC and
console. In the future we might see these coming to other platforms
too like mobile and tablet, via the new streaming services. Our
main development focus is therefore on those rich, engaging
experiences currently most suited to PC and console, as the
audiences on these platforms greatly value games exhibiting
Frontier's key development strengths of compelling gameplay and
high production quality. Currently, the mobile sector is
overcrowded and has a very low barrier to entry, typically with
games with a 5-10 minute play expected play session, making
audiences less predictable and much less influenced by quality.
'Discoverability' (the ability to find a title) is also better on
PC and console, with excellent support from reviewers, content
creators and social media.
The entire games market is moving rapidly towards digital
download as the primary delivery model. Mobile and PC are now
almost 100% digital, and the console audience is quickly catching
up, as focus shifts to the new generation of hardware and older
business models are replaced. We have also seen a number of
interesting developments and announcements for streaming game
content. While technical considerations mean that streaming games
from the cloud to consumer devices may take several years to become
mainstream, we believe the prospect of streaming is already
shifting the balance of power from distribution stores in favour of
game developers, as evidenced by a leading distribution store
adjusting its distribution fees from 30% to 20%-25%.
Our industry has always thrived on disruption, in terms of
individual games, game genres, charging models, technology and
routes to market, and it has been interesting to observe the impact
of some of those disrupting factors in the last 12 months,
particularly in terms of new digital distribution channels and
streaming services. We believe that many of these changes benefit
those companies who both create and own their own content, which is
a further validation of our transition to a self-published
development model. Our particular focus on 'games as a service'-
supporting our titles and their communities with regular updates -
is working very well, producing three successful titles so far,
with early indications that the fourth is being well received, but
we will continue to monitor and consider different delivery model
options as the industry continues to evolve.
Strategy
We believe that publishing our own franchises, and selectively
those of other high-quality development studios, is the best way to
maximise the benefit of our core skills, our assets and our COBRA
technology platform. The Company's focus is on developing and
delivering top-quality, self-published PC and console titles for
digital distribution.
We will continue to follow our repeatable model to support our
great franchises over many years with new releases and updates, and
to create further franchises in popular game genres where we can
use our key expertise, knowledge and/or valuable external IP to
deliver highly differentiated, best-in-class player experiences,
and to further build our revenue pipeline over the long term.
Our strategic objective is to create long-term sustainable
growth through successfully publishing a growing number of
franchises. Our strategic focus is on two key areas:
-- developing our business to achieve repeatable success; and
-- creating and managing franchises.
We are scaling up for the future so we can release games more
frequently, and we already have future franchises in different
phases of development. The increase in the number of releases
supporting our existing games helps smooth revenue, but major
releases of new franchises are still a significant factor in the
revenue stream. As we scale the number of franchises over future
years, and as the frequency of these releases approaches one per
year, this will have a smoothing effect on growth, but in the
meantime revenue is sensitive to the specific schedule of such
releases and may therefore exhibit 'stepped' behaviour across
financial years, as those new franchises are released.
We are growing our portfolio, and consequently we are increasing
our development team to enable us to support additional titles
while generating new content for our existing titles. We expect to
grow our resources and capability over time to enable us to achieve
one major launch every 12 months, but this will not require us to
increase our workforce linearly because supporting an existing
franchise typically requires fewer staff than creating a new
one.
As stated in the Group's previous Annual Reports and other
communications, in addition to the current core model of using
internal resources, supplemented by outsourced services, the Group
will continue to explore other opportunities to accelerate its
scale-up.
The Board expects the third party publishing initiative
announced in June 2019 to grow as more third party games are signed
and added to the publishing roster, though it is not expected that
these games will contribute material revenue in the current
financial year (FY20).
We will also continue to explore opportunities for commissioning
(outsourcing the majority of development of Frontier games to other
developers), and enhancing the Group's franchise portfolio or
capabilities via acquisitions. The Group has considered a number of
possible acquisitions, but so far none have met our valuation,
product alignment, and culture fit thresholds.
Strategic Report
Developing our business to achieve repeatable success
We invest our development resources in games with strong
franchise potential, primarily on PC and console. In order to
maximise the return on our core skills and assets we target game
genres where we have established expertise and/or intellectual
property within our teams. Audiences on the chosen platforms tend
to value games that exhibit Frontier's key development
strengths.
We have a proven and successful model for repeatable success,
looking at under-served areas of the market in which we can excel.
To accelerate our progress and increase the frequency of launches
we are continuing to scale up our organisation, not just in terms
of staff numbers, but also in terms of leadership skills, training,
organisational structure, process and external partnerships.
We also invest in the necessary facilities to support our
world-class team. In April 2018 we moved all of our staff into a
brand new office space on the Cambridge Science Park, with a great
many custom features. It is our belief that having all our people
in Cambridge working together in a single building helps maximise
our operational effectiveness and efficiency, and the improved work
environment helps with recruitment and overall productivity.
We use online channels to create and engage with player
communities during game development, a practice which provides a
valuable source of both feedback, and these player communities
provide excellent advocacy for each franchise prior to launch.
Our development process uses our proprietary COBRA development
tools and technology to facilitate innovative features and the
creation of top-quality games with strong differentiation for the
PC and console audiences. Our control of this technology also
removes the risks related to ongoing access to third party licensed
technology alternatives, as has happened in the past where
successful tool providers are acquired by a major rival player. In
addition, the direct engagement with those involved in the engine
development, and the ability to control the delivery dates and new
feature roadmap of that technology can be invaluable, for example
giving first-mover advantage with new technologies such as VR.
With each of our franchises, we plan for the long term, and how
best to support and sustain the audience for each one. A dedicated
team monitors progress based on sentiment towards the games,
success of each of the distribution channels and platforms, and the
up-take of additional content both free and paid, allowing us to
reach the widest possible audience over time. Free content is a
valuable tool to help retain and restore existing audiences and
support sentiment, while paid content both helps monetise the game
and brings new players as new content triggers online coverage on
platforms like YouTube or Twitch, increasing sales of the
corresponding base game and for other paid expansion content.
We also monitor the geographical performance of our titles,
understanding and monitoring under and over performance versus
expectations in each territory, and will continue to look for
opportunities to tailor our price to a level more appropriate to
each local economy.
Creating and managing franchises
In order to maximise the return on our core skills and assets we
target game genres where we believe we can deliver both
high-quality, differentiated offerings using established expertise
and intellectual property, and have a strong chance of successful
market entry as we believe that sector is under-served by the
existing offerings, based on past experience or knowledge of that
sector.
We use this proven, rigorous and repeatable model to invest our
resources with the intention of creating world-class games with
strong franchise potential and plans for strong post-launch product
support to help realise this potential. With Elite Dangerous we
knew there had been significant success in the past, not least
because of our own games in that area in previous decades, and also
that there were no games like it at the time. We verified that
there was a significant appetite for such a game with Kickstarter
crowdfunding at the end of 2012 and early 2013, and the game itself
has now vindicated that decision with continued success in its
fifth year since full release.
With Planet Coaster, we were releasing a title in competition
with an established and well-loved franchise, RollerCoaster Tycoon
3. Frontier developed RollerCoaster Tycoon 3 for Atari in 2004 when
we were a work-for-hire business and it was a very successful game
for over a decade. This led us to believe the sector was
under-served and given our experience developing RollerCoaster
Tycoon 3 we were confident we could create its natural successor as
the genre-defining title. Despite the release of another game in
the sector the day prior to Planet Coaster's launch, we have
achieved that aim and Planet Coaster now dominates the sector and
continues to be successful in its third year since release.
Jurassic World Evolution followed in June 2018 (working with the
team at Universal Games and Digital Platforms), and now Planet Zoo
has been announced, for release on 5(th) November 2019. With Planet
Zoo, we are following the same model. The last successful game in
this sector was Zoo Tycoon with Microsoft in 2013, developed by
Frontier for Microsoft, and again we are confident we have
developed a game that will be the dominate its sector for years to
come. Early indications are encouraging. The responses to our
Planet Zoo announcements, videos and hands-on demonstrations so far
have been overwhelmingly positive.
Future Plans
We will continue to grow the capacity and capability of our
organisation in both commercial and development areas in order to
further the successful evolution of our franchises.
As part of this process, we will explore additional potential
partnerships and licensing opportunities. We will also continue to
review potential acquisition targets that could augment our
capacity or add new capabilities as well as IP that may help us
achieve our goals.
We will endeavour to enhance and expand our franchises and grow
their audiences using appropriate additional products, platforms,
media, marketing, distribution channels and charging models through
investing in the necessary people, organisation, resources and
infrastructure.
We are building a broad portfolio of franchises, each different
to the last and each with the capabilities to expand over time and
we are scaling up for the future so we can release games more
frequently. All upcoming franchises will be selected using the same
approach set out above, and we already have several in different
phases of development.
Subject to Frontier's disclosure obligations as an AIM company,
it is the Board's intention to make announcements about upcoming
projects at the optimum time for the success of that particular
franchise, which may be some time after the start of a particular
project.
Our future franchise portfolio is likely to contain some with
Frontier owned IP (like Elite Dangerous, Planet Coaster and Planet
Zoo) and some with third party licensed IP (like Jurassic World
Evolution). Games based on owned IP provide Frontier with the
benefit of having complete creative freedom, whilst games based on
licensed IP have the potential to more easily reach very large
audiences, such as with Jurassic World Evolution. We will review
the value of licensing proven third party major global IP versus
developing our own IP for each potential future franchise on a
case-by-case basis. We will also consider the long term benefits of
relationships with these IP partners and how it can help with
future opportunities as the wider entertainment sector continues to
change, presenting ever more new opportunities for new types of
entertainment.
ELITE DANGEROUS
Elite Dangerous is now in its sixth financial year since release
in December 2014. Since launch we have continued to release
expansions to the original Elite Dangerous game, simultaneously on
PC, PlayStation 4 and Xbox One as those platforms have been added.
Simultaneous releases on all supported platforms are planned to
continue going forward. These updates add to the quality of the
game, renew the interest of existing players and also generate
additional awareness across traditional media and social media
platforms, resulting in new sales. The attach rate of Elite
Dangerous: Horizons to the base game continues to grow steadily,
helped by the regular updates.
Having the base game and Horizons expansions in the market
covers mid-price entry to the franchise with an upgrade path, and
we bundle the two together and add some digital items to create a
Deluxe edition for a premium price point entry. We believe each
product offers great value individually and a compelling premium
package together.
The Horizons season of chargeable expansions launched in
December 2015 with Planetary Landings and concluded in September
2017 with The Return, with each release in the season providing new
headline gameplay features plus a large number of quality of life
enhancements and other tweaks, fixes and improvements.
The Beyond season of free updates was announced in October 2017
at the Frontier Expo 17 fan convention, and released in four
chapters during the period February 2018 to December 2018. Each
Beyond update was free for all players, regardless of whether they
had the Horizons season pass, providing enhancements to the overall
player experience, bringing foundational changes to the core
systems of Elite Dangerous and delivering new in-game content for
Commanders to experience as they explore the massively multiplayer
galaxy.
Elite Dangerous is Frontier's biggest selling game franchise to
date. The franchise continues to perform strongly as we continue to
focus on enhancements within the strategy of further improving
perceived quality and sentiment, adding significant long-term new
features and supporting the unique evolving player-driven story,
which all players experience together. We will continue to support
existing players and further expand the player base over the next
financial year through the addition of new content.
PLANET COASTER
Planet Coaster was successfully launched in November 2016 after
a short Beta period, achieving the global #1 position on the Steam
distribution channel and continuing to sell strongly through the
subsequent holiday period. In accordance with our strategy, we
began to release free updates, each of which adds headline features
but also expands and improves different creative and management
aspects of the game. 15 free updates have now been released for
Planet Coaster, starting with the Winter Update one month after
launch in December 2016 and continuing at regular intervals, with
the latest released in June 2019. In addition to the free content
updates, we released the Thememaker's Toolkit in winter 2018.
Thememaker's Toolkit is a free feature that allows players to
unleash their creativity and enhance their parks by importing
bespoke 3D models of their own design into the game.
In addition to the free updates, players are able to introduce
further content into their parks through the purchase of paid
downloadable content (PDLC) packs. The first of these released in
July 2017 with three packs involving Universal IP - Back to the
Future, The Munsters, and Knight Rider. In total Planet Coaster has
11 separate PDLC packs available to date. The most recent, the
Ghostbusters pack using Sony Pictures IP, released in June 2019.
The Ghostbusters pack took the game on a new direction, introducing
a narrative scenario that directly tied into the original film, in
which Dan Aykroyd and William Atherton reprised their iconic roles.
It also presented players with new gameplay elements that have
injected an abundance of new creative options for their
enjoyment.
The combination of free updates and PDLC packs is an important
part of Frontier's strategy for Planet Coaster, as they keep the
game fresh for existing players and help attract new players into
the game.
JURASSIC WORLD EVOLUTION
Jurassic World Evolution, our first self-published licensed
title, launched on 12 June 2018. It was our first self-published
title (although not our first game) to debut simultaneously on PC,
PlayStation 4 and Xbox One, and the first to benefit from a major
marketing event by launching alongside the latest film in the
franchise, Jurassic World: Fallen Kingdom at the start of the
biggest games industry show of the year - the Electronic
Entertainment Expo (E3) in Los Angeles.
The opportunity was identified and approved through our thorough
project assessment process. It leveraged our management and builder
game expertise, plus our unrivalled expertise in implementing
believable in-game animals from games such as Dog's Life,
Kinectimals and Zoo Tycoon. In this case, we determined that being
able to use the Jurassic World IP would significantly benefit
awareness with the most recent movie in the franchise released in
June 2018, around the 25(th) anniversary of the original movie.
Jurassic World Evolution evolves the players' relationship with
the Jurassic World film franchise, placing them in control of
operations on the legendary island of Isla Nublar and the
surrounding islands of the Muertes Archipelago. Players create and
manage their own Jurassic World as they bioengineer new dinosaur
breeds and construct attractions, containment, and research
facilities. Every choice leads to a different path and spectacular
challenges arise when 'life finds a way.'
Jurassic World Evolution was announced in August 2017, with
pre-order announced on 28 March 2018 for a digital launch on 12
June 2018 on all three platforms. In addition, physical discs went
on sale for PlayStation 4 and Xbox One on 3 July 2018 for those who
still prefer physical media. Player engagement has been very
positive, and the game achieved 1 million units in five weeks and
passed the 2 million unit marker within seven months.
Jurassic World Evolution's first PDLC pack was available at
launch and as a 'deluxe' bundle during pre-order. Consistent with
our strategy for our first two titles, we have released a number of
free updates since launch and we have also provided players the
opportunity to engage with paid-for content. To date, we have
released five separate PDLC packs in total. As with Planet Coaster,
the combination of free updates and PDLC packs is an important part
of our strategy.
PLANET ZOO
In April 2019 Frontier announced its next major release would be
Planet Zoo, launching exclusively for PC on 5 November 2019.
Frontier aims to make Planet Zoo the ultimate zoo simulation,
featuring authentic living animals, rich management, and limitless
creativity. In Planet Zoo players can build and manage a truly
modern zoo where animal welfare and conservation comes first.
Planet Zoo will present the most authentic animals in videogame
history. From playful lion cubs to mighty elephants, every animal
in Planet Zoo is an individual who thinks, feels and explores the
world players build around them. Planet Zoo's animals care about
their surroundings and each other, with complex environmental and
social needs. Players will nurture their animals throughout their
lives, study and manage every species to see them thrive, and help
them raise young to pass their genes onto future generations.
Players can manage their zoo in an expressive world that reacts
to every choice they make, as they choose to focus on the big
picture or go hands-on and look after the smallest details. Players
can thrill visitors with prestigious animals and famous exhibits,
develop their zoo and research new technologies, and release
animals back into the wild to repopulate the planet.
And in Planet Zoo players can unleash their creativity with the
next evolution of Planet Coaster's best-in-class creation
mechanics. With powerful creative tools players can create stunning
scenery and habitats, dig lakes and rivers, raise hills and
mountains, and carve tunnels and caves as they build their own zoo.
Players will see their animals and visitors respond to their
creative vision, and can share their designs with friends in Planet
Zoo's online community.
FRONTIER PUBLISHING
We are actively pursuing opportunities to use our publishing
capability, industry experience, commercial partnerships and
financial resources to supplement our own development roadmap by
partnering with other high-quality developers to bring more games
to market.
In June 2019 we announced our first deal under this Frontier
Publishing initiative with experienced developer Haemimont Games.
Haemimont Games ("Haemimont"), founded in 1997 in Bulgaria, boasts
a passionate team of over 60 highly skilled people and a wealth of
experience in developing quality strategy and management games,
including Victor Vran, Surviving Mars, and titles in the Tropico
series. The partnership will see Frontier and Haemimont work
together on a new project for release in two to three years' time,
with Frontier providing the development funding as well as
marketing and distribution.
This deal is strategic and a strong start to growing Frontier's
publishing business with third party titles. The Board expects the
publishing business to become a material contributor to the Company
in years to come, as more partnerships are agreed.
Our Frontier Publishing initiative helps us expand our game
portfolio further, through external development partnerships that
supplement our own internal development roadmap. We are in
discussions with other developers and hope to be able to announce
additional publishing partnerships in the future.
Financial Review
OVERVIEW
The launch of Jurassic World Evolution in June 2018, combined
with the ongoing performance of all three titles, Jurassic World
Evolution, Planet Coaster and Elite Dangerous, propelled the
Company to a record financial performance for the year ended 31 May
2019. Revenue increased by over 160% to GBP89.7 million (FY18:
GBP34.2 million) and operating profit grew by nearly 600% to
GBP19.4 million (FY18: GBP2.8 million). Cash balances increased by
GBP11.2 million during the year to GBP35.3 million (FY18: GBP24.1
million) reflecting the strong trading performance.
TRADING
Jurassic World Evolution accounted for a large proportion of the
total annual revenue of GBP89.7 million in the period (FY18:
GBP34.2 million) through its strong launch in the first month of
the financial year on PC, PlayStation 4 and Xbox One. Elite
Dangerous and Planet Coaster continue to deliver sustained revenue
from both sales of the base game and PDLC, and sales of Jurassic
World Evolution in the second half of the financial year, i.e.
beyond its initial launch period, were encouraging in terms of both
base game sales and PDLC. The ongoing performance of all three
titles reflects Frontier's approach to supporting and nurturing
each of its franchises.
Self-publishing revenue accounted for 99.8% of sales in the year
(FY18: 95%) with the significant majority being digital sales.
Physical sales represented around 15% of total company revenue in
FY19 (FY18: 7%), with disc sales of Jurassic World Evolution on
PlayStation 4 and Xbox One accounting for around one third of the
base game unit sales of Jurassic World Evolution on console during
the period.
Gross profit was GBP54.6 million in the year (FY18: GBP24.1
million) with gross margin at 61% (FY18: 70.5%). The significant
growth in gross profit resulted from the increase in revenue
achieved from the launch of Jurassic World Evolution. The reduction
in gross margin percentage to 61% reflects the royalties payable to
Universal Games and Digital Platforms on sales of Jurassic World
Evolution and physical disc sales of Jurassic World Evolution which
are lower margin than digital sales.
Gross research and development expenses in the period grew by
33% to GBP21.2 million (FY18: GBP15.9 million). The continued
growth reflects further investment to support Frontier's franchise
portfolio strategy, through increases in internal staff combined
with greater levels of outsourced activity. As at 31 May 2019,
Frontier had grown its total headcount to 466 staff compared to 377
at 31 May 2018.
Capitalisation of development costs on franchise assets and
other game related intangibles accounted for GBP14.8 million in the
period (FY18: GBP13.4 million). As a consequence the percentage of
gross research and development costs which were capitalised reduced
to 70% compared to 85% for the last financial year. This reduction
resulted mainly from the interaction of two factors. Firstly, the
Company refined the application of its capitalisation accounting
policy with effect from 1 June 2018, such that only development
activity associated with new chargeable products would be
capitalised (subject to the usual criteria set out under accounting
standard IAS 38). Secondly, during the first six months of the
financial year a substantial number of Frontier's development team
were engaged on the Beyond series of free updates for Elite
Dangerous (which concluded in December 2018) and a number of free
updates for Jurassic World Evolution and Planet Coaster. Whilst
costs for those activities were not capitalised during the period
as they were developments of existing released products rather than
new products, Frontier believes that investment in free updates is
an important part of its strategy in supporting and nurturing games
after launch. A higher percentage of costs were capitalised in the
second half of the financial year and to date in the current
financial year as a greater proportion of staff have been working
on development activity associated with new chargeable products,
including paid downloadable content (PDLC) for existing game
franchises.
Amortisation charges for franchise assets and other game related
intangibles grew to GBP8.5 million for the period (FY18: GBP6.1
million) following the launch of Jurassic World Evolution in June
2018.
Net research and development expenses recorded in the income
statement in the period were GBP14.9 million (FY18: GBP8.5
million), being gross spend, less capitalised costs, plus
amortisation charges. The increase is therefore due to the
combination of factors described above (a higher level of gross
spend, a lower proportion of those costs being capitalised and an
increase in amortisation charges).
Sales, marketing and administrative expenses grew to GBP20.4
million (FY18: GBP12.8 million). This substantial increase resulted
mainly from three factors: i) higher marketing costs to support the
launch of Jurassic World Evolution in June 2018; ii) higher bonus
costs, as the bonus scheme is based on profit, which was
significant in the period; iii) higher facilities costs following
the move into new premises in April 2018.
Operating profit of GBP19.4 million was recorded in the year
(FY18: GBP2.8 million) representing an operating margin of
approximately 22% (FY18: 8%). The substantial increase in both
profit and profit margin reflected the strong sales performance in
the period. EBITDA (earnings before interest, tax, depreciation and
amortisation) also increased substantially to GBP29.0 million
(FY18: GBP9.4 million).
Total corporation tax charges in the income statement for the
period totalled GBP2.2 million (FY18: a credit of GBP0.7 million),
which would imply an effective tax rate of 11% on the GBP19.7
million of pre-tax profits recorded. However, the Company estimates
that the taxable profits generated in the period were actually
almost completely offset by brought forward tax losses combined
with tax deductions related to staff share option gains recorded up
to 31 May 2019. The reason that a tax charge of GBP2.2 million was
recorded in the income statement is largely due to a GBP2.0 million
tax accounting charge adjustment related to staff share options. In
accordance with accounting standard IAS 12, the benefit of tax
deductible share option gains in excess of the cumulative IFRS 2
accounting charges related to those gains must be credited directly
to reserves rather than being taken through the income statement,
which generated this GBP2.0 million credit directly to reserves
instead of to the income statement. The Group has recognised a
deferred tax asset of GBP0.6 million as at 31 May 2019 which mainly
relates to carried forward tax losses, and the Group has also
recorded a current tax liability as at 31 May 2019 of GBP1.0
million based on a provisional estimate of corporation tax due for
FY19.
Profit after tax for FY19 was GBP17.4 million (FY18: GBP3.6
million) and basic earnings per share was 45.4p (FY18: 9.6p).
BALANCE SHEET AND CASHFLOW
The Company runs a robust balance sheet, and this was further
boosted by the record financial performance achieved in the year
with operating cash flow (operating profit excluding non-cash
items, less investments in franchises and other game related
intangible assets) of GBP15.4 million (FY18: an outflow of GBP2.8
million), resulting in a cash position at 31 May 2019 of GBP35.3
million (31 May 2018: GBP24.1 million).
Tangible assets increased to GBP6.4 million (FY18: GBP5.0
million) mainly as a result of the second phase of the fit-out of
the new leased office facility, which the Company occupied in April
2018.
Intangible assets increased by GBP6.3 million to GBP36.5 million
at 31 May 2019 (FY18: GBP30.2 million) as investments in game
franchise assets, particularly Jurassic World Evolution, exceeded
amortisation charges related to those assets.
Trade and other receivables totalled GBP5.2 million at the end
of the period (FY18: GBP6.7 million). The higher balance at 31 May
2018 mainly resulted from pre-order sales of Jurassic World
Evolution, and this was the principle reason for a high level of
deferred income at the end of the prior period, with a deferred
income balance of GBP1.5 million at 31 May 2019 compared to GBP4.3
million at 31 May 2018.
Trade and other payables totalled GBP10.0 million (FY18: GBP6.9
million) with the largest factor for the increase being the profit
related bonus accrual. The Company ran a two-year bonus plan for
all staff for the combined period of FY18 and FY19, and most of the
bonus charge was accrued in FY19 since that financial year
generated the majority of operating profit (FY19: GBP19.4 million,
FY18: GBP2.8 million).
Cash balances increased GBP11.2 million during the year to
GBP35.3 million (FY18: GBP24.1 million) with operating cash flow
(operating profit excluding non-cash items, less investments in
franchises and other game related intangible assets) providing an
inflow of GBP15.4 million in the period (FY18: an operating cash
outflow of GBP2.8 million).
In September 2018 the Frontier Developments plc Employee Benefit
Trust (the "EBT") used GBP5.0 million of Company cash to acquire
466,173 Ordinary Shares of 0.5p each in the Company ("Ordinary
Shares") at an average price of GBP10.70 per Ordinary Share. These
Ordinary Shares are held in the EBT and are intended to be used to
satisfy the exercise of share options by employees. The EBT is a
discretionary trust for the benefit of the Company's employees,
including the Directors of the Company.
As at 31 May 2019 there were 38,741,068 Ordinary Shares in issue
including 502,668 Ordinary Shares in total held by the EBT.
CONSOLIDATED INCOME STATEMENT
FOR THE YEARED 31 MAY 2019
31 May 2019 31 May 2018
Notes GBP'000 GBP'000
------------------------------------------------ ------ ------------ ------------
Revenue 3 89,669 34,192
Cost of sales (35,021) (10,092)
------------------------------------------------ ------ ------------ ------------
Gross profit 54,648 24,100
Research and development expenses (14,891) (8,500)
Sales and marketing expenses (7,852) (6,076)
Administrative expenses (12,536) (6,724)
------------------------------------------------ ------ ------------ ------------
Operating profit 19,369 2,800
Finance income 289 81
------------------------------------------------ ------ ------------ ------------
Profit before tax 19,658 2,881
Income tax (2,248) 713
------------------------------------------------ ------ ------------ ------------
Profit for the period attributable to
shareholders 17,410 3,594
------------------------------------------------ ------ ------------ ------------
Earnings per share
Basic earnings per share 4 45.4 9.6
Diluted earnings per share 4 43.2 9.1
------------------------------------------------ ------ ------------ ------------
All the activities of the Group are classified
as continuing.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MAY 2019
31 May 2019 31 May 2018
GBP'000 GBP'000
------------------------------------------------ ------ ------------ ------------
Profit for the period 17,410 3,594
Other comprehensive income:
Items that will be reclassified subsequently
to profit or loss
Exchange differences on translation of
foreign operations (4) 2
------------------------------------------------ ------ ------------ ------------
Total comprehensive income for the period
attributable to the equity holders of
the parent 17,406 3,596
------------------------------------------------ ------ ------------ ------------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MAY 2019
(REGISTERED COMPANY NO: 02892559)
Restated* Restated*
31 May 2019 31 May 2018 31 May 2017
Notes GBP'000 GBP'000 GBP'000
----------------------------------- ------ ------------ ------------- -------------
Non-current assets
Intangible assets 5 36,450 30,186 22,860
Property, plant and equipment 6 6,352 4,966 696
Deferred tax asset 605 - -
43,407 35,152 23,556
----------------------------------- ------ ------------ ------------- -------------
Current assets
Trade and other receivables 5,178 6,720 2,941
Current tax asset 141 536 510
Cash and cash equivalents 35,332 24,124 12,579
----------------------------------- ------ ------------ ------------- -------------
40,651 31,380 16,030
----------------------------------- ------ ------------ ------------- -------------
Total assets 84,058 66,532 39,586
----------------------------------- ------ ------------ ------------- -------------
Current liabilities
Trade and other payables (9,026) (6,909) (4,894)
Deferred income (1,036) (3,634) (459)
Current tax liabilities (966) - (747)
Provisions - (11) (275)
----------------------------------- ------ ------------ ------------- -------------
(11,028) (10,554) (6,375)
----------------------------------- ------ ------------ ------------- -------------
Net current assets 29,623 20,826 9,655
----------------------------------- ------ ------------ ------------- -------------
Non-current liabilities
Provisions (13) - -
Deferred income (465) (690) (927)
Other payables (939) - (989)
----------------------------------- ------ ------------ ------------- -------------
(1,417) (690) (1,916)
----------------------------------- ------ ------------ ------------- -------------
Total liabilities (12,445) (11,244) (8,291)
----------------------------------- ------ ------------ ------------- -------------
Net assets 71,613 55,288 31,295
----------------------------------- ------ ------------ ------------- -------------
Equity
Share capital 194 193 171
Share premium account 34,390 34,132 14,601
Equity reserve (3,073) 780 972
Foreign exchange reserve (16) (12) (4)
Retained earnings 40,118 20,195 15,555
----------------------------------- ------ ------------ ------------- -------------
Total equity 71,613 55,288 31,295
----------------------------------- ------ ------------ ------------- -------------
* Restated for a licence related accounting adjustment as per
note 5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MAY 2019
Share Foreign
Share premium Equity exchange Retained Total
capital account reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 May 2017 171 14,601 972 (4) 15,555 31,295
------------------------------------- --------- --------- --------- ---------- ---------- ---------
Profit for the year - - - - 3,594 3,594
Other comprehensive income:
Exchange differences on translation
of foreign operations - - - (8) - (8)
Exchange differences on translation
of net investment - - - - 10 10
--------- --------- --------- ---------- ---------
Total comprehensive income for
the year - - - (8) 3,604 3,596
------------------------------------- --------- --------- --------- ---------- ---------- ---------
Issue of share capital net of
expenses 22 19,531 - - - 19,553
Share-based payment charges - - 992 - - 992
Share-based payment transfer
relating to option exercises
and lapses - - (1,036) - 1,036 -
EBT share inflows from issues
and/or purchases - - (263) - - (263)
EBT share outflows from option
exercises - - 115 - - 115
------------------------------------- --------- --------- --------- ---------- ---------- ---------
Transactions with owners 22 19,531 (192) - 1,036 20,397
------------------------------------- --------- --------- --------- ---------- ---------- ---------
At 31 May 2018 193 34,132 780 (12) 20,195 55,288
------------------------------------- --------- --------- --------- ---------- ---------- ---------
Profit for the year - - - - 17,410 17,410
Other comprehensive income:
Exchange differences on translation
of foreign operations - - - (4) - (4)
Exchange differences on translation
of net investment - - - - - -
------------------------------------- --------- --------- --------- ---------- ---------- ---------
Total comprehensive income for
the year - - - (4) 17,410 17,406
------------------------------------- --------- --------- --------- ---------- ---------- ---------
Issue of share capital net of
expenses 1 258 - - - 259
Share-based payment charges - - 1,564 - - 1,564
Share-based payment transfer
relating to option exercises
and lapses - - (535) - 535 -
EBT share inflows from issues
and/or purchases - - (5,000) - - (5,000)
EBT share outflows from option
exercises - - 118 - - 118
Tax credits on share options
taken directly to reserves - - - - 1,978 1,978
------------------------------------- --------- --------- --------- ---------- ---------- ---------
Transactions with owners 1 258 (3,853) - 2,513 (1,081)
------------------------------------- --------- --------- --------- ---------- ---------- ---------
At 31 May 2019 194 34,390 (3,073) (16) 40,118 71,613
------------------------------------- --------- --------- --------- ---------- ---------- ---------
CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE YEARED 31 MAY 2019
31 May 2019 31 May 2018
GBP'000 GBP'000
---------------------------------------------------------- ------------ ------------
Cash generated from operations 32,312 10,252
Taxes received/(paid) 480 (41)
Cashflow from operating activities 32,792 10,211
---------------------------------------------------------- ------------ ------------
Investing activities
Purchase of property, plant and equipment (2,269) (4,660)
Expenditure on intangible assets (14,981) (13,503)
Interest received 289 81
Cashflow from investing activities (16,961) (18,082)
---------------------------------------------------------- ------------ ------------
Financing activities
Proceeds from issue of share capital 259 19,553
Employee Benefit Trust net investment (4,882) (148)
Cashflow from financing activities (4,623) 19,405
---------------------------------------------------------- ------------ ------------
Net change in cash and cash equivalents from
continuing operations 11,208 11,534
Cash and cash equivalents at beginning of period 24,124 12,579
Exchange differences on cash and cash equivalents - 11
Cash and cash equivalents at end of period 35,332 24,124
---------------------------------------------------------- ------------ ------------
The accompanying accounting policies and notes form part
of this financial information.
Reconciliation of operating profit to cash generated
from operations
31 May 2019 31 May 2018
GBP'000 GBP'000
---------------------------------------------------------- ------------ ------------
Operating profit 19,369 2,800
Depreciation and amortisation 9,600 6,567
---------------------------------------------------------- ------------ ------------
EBITDA 28,969 9,367
---------------------------------------------------------- ------------ ------------
Movement in unrealised exchange (gains)/losses
on forward contracts (340) 287
Share-based payment expenses 1,564 992
---------------------------------------------------------- ------------ ------------
Operating cash flows before movements in working
capital 30,193 10,646
---------------------------------------------------------- ------------ ------------
Net changes in working capital:
Change in trade and other receivables 1,542 (4,069)
Change in trade and other payables 575 3,939
Change in provisions 2 (264)
---------------------------------------------------------- ------------ ------------
Cash generated from operations 32,312 10,252
---------------------------------------------------------- ------------ ------------
NOTES TO THE FINANCIAL INFORMATION
1. CORPORATE INFORMATION
Frontier Developments plc (the 'Group') develops video games for
the interactive entertainment sector. The Company is a public
limited company and is incorporated and domiciled in the United
Kingdom.
The address of its registered office is 26 Science Park, Milton
Road, Cambridge CB4 0FP.
The Group's operations are based in the UK and its North
American subsidiary, Frontier Developments Inc., in the US.
2. BASIS OF PREPARATION AND STATEMENT OF COMPLIANCE
The basis of preparation and going concern policies applied in
the preparation of these financial statements are set out below.
These policies have been consistently applied to all the periods
presented, unless otherwise stated.
Basis of preparation
The financial information of Frontier Developments plc, for both
the Group and Company, has been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU) and the Companies Act
2006 applicable to companies reporting under IFRS.
The financial information has been prepared under the historical
cost convention, except for financial instruments held at fair
value. The financial information is presented in Sterling, the
presentation and functional currency for the Group and Company. All
values are rounded to the nearest thousand pounds (GBP'000) except
when otherwise indicated.
Going concern basis
The Group's forecasts and projections, taking account of current
cash resources and reasonably possible changes in trading
performance, support the conclusion that there is a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future, a period of not
less than 12 months from the date of approval of these financial
statements. The Group therefore continues to adopt the going
concern basis in preparing its financial statements.
3. SEGMENT INFORMATION
The Group identifies operating segments based on internal
management reporting that is regularly reviewed by the chief
operating decision maker and reported to the Board. The chief
operating decision maker is the Chief Executive Officer.
Management information is reported as one operating segment,
being revenue from self-published franchises and other revenue
streams such as royalties and licensing.
The Group does not provide any information on the geographical
location of sales as the majority of revenue is through third party
distribution platforms which are responsible for the sales data of
consumers.
All of the Group's non-current assets are held within the
UK.
All material revenue is categorised as either self-publishing
revenue or other revenue.
In both the period ended 31 May 2019 and the period ended 31 May
2018, 'Other Revenue' mainly related to royalty income.
12 months 12 months
to 31 May to 31 May
2019 2018
GBP'000 GBP'000
------------------------- ----------- -----------
Self-publishing revenue 89,476 32,644
Other revenue 193 1,548
------------------------- ----------- -----------
89,669 34,192
------------------------- ----------- -----------
4. EARNINGS PER SHARE
The calculation of the basic earnings per share is based on the
profits attributable to the shareholders of Frontier Developments
plc divided by the weighted average number of shares in issue
during the year.
31 May 2019 31 May 2018
-------------------------------------------------- ------------- ------------
Profit attributable to shareholders (GBP'000) 17,410 3,594
Weighted average number of shares 38,337,119 37,519,639
-------------------------------------------------- ------------- ------------
Basic earnings per share (pence) 45.4 9.6
-------------------------------------------------- ------------- ------------
The calculation of the diluted earnings per share is based on the profits
attributable to the shareholders of Frontier Developments plc divided
by the weighted average number of shares in issue during the year as
adjusted for the dilutive effect of share options.
31 May 2019 31 May 2018
-------------------------------------------------- ------------- ------------
Profit attributable to shareholders (GBP'000) 17,410 3,594
Diluted weighted average number of shares 40,254,488 39,485,283
-------------------------------------------------- ------------- ------------
Diluted earnings per share (pence) 43.2 9.1
-------------------------------------------------- ------------- ------------
The reconciliation of the average number of Ordinary Shares used for
basic and diluted earnings per share is as follows:
31 May 2019 31 May 2018
-------------------------------------------------- ------------- ------------
Weighted average number of shares 38,337,119 37,519,639
Dilutive effect of share options 1,917,369 1,965,644
-------------------------------------------------- ------------- ------------
Diluted average number of shares 40,254,488 39,485,283
-------------------------------------------------- ------------- ------------
5. INTANGIBLE ASSETS
The Group and Company intangible assets comprise capitalised
development tools and self-published software from internal
development activities and acquired software licences.
Development Self-published
tools and software Third-party
licences and licences software Total
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------------ --------------- ------------ ---------
Cost
At 31 May 2017* 4,537 31,665 344 36,546
Additions 930 12,489 84 13,503
Disposals - - - -
-------------------------------- ------------ --------------- ------------ ---------
At 31 May 2018* 5,467 44,154 428 50,049
-------------------------------- ------------ --------------- ------------ ---------
Additions 1,295 13,518 168 14,981
Disposals - - - -
-------------------------------- ------------ --------------- ------------ ---------
At 31 May 2019 6,762 57,672 596 65,030
-------------------------------- ------------ --------------- ------------ ---------
Amortisation and impairment
At 31 May 2017 3,479 10,029 178 13,686
Amortisation charges 949 5,101 127 6,177
Disposals - - - -
-------------------------------- ------------ --------------- ------------ ---------
At 31 May 2018 4,428 15,130 305 19,863
-------------------------------- ------------ --------------- ------------ ---------
Amortisation charges 365 8,174 178 8,717
Disposals - - - -
-------------------------------- ------------ --------------- ------------ ---------
At 31 May 2019 4,793 23,304 483 28,580
-------------------------------- ------------ --------------- ------------ ---------
Net book value at 31 May 2019 1,969 34,368 113 36,450
-------------------------------- ------------ --------------- ------------ ---------
Net book value at 31 May 2018* 1,039 29,024 123 30,186
-------------------------------- ------------ --------------- ------------ ---------
* Restated for license commitment previously not recorded which
increased intangible assets and trade and other payables at 31 May
2017 and 31 May 2018 by GBP989,000.
The majority of amortisation charges for intangible assets are
expensed within research and development expenses.
6. PROPERTY, PLANT AND EQUIPMENT
Group and Company
Assets in
Fixtures Computer Leasehold the course
and fittings equipment improvements of construction
GBP'000 GBP'000 GBP'000 GBP'000 Total GBP'000
------------------------ -------------- ----------- -------------- ----------------- --------------
Cost
------------------------ -------------- ----------- -------------- ----------------- --------------
At 31 May 2017 115 898 - 394 1,407
Additions - 317 - 4,343 4,660
Transfer 459 307 3,971 (4,737) -
Disposals - - - - -
----------------------- --------------- ----------- -------------- ----------------- --------------
At 31 May 2018 574 1,522 3,971 - 6,067
Additions 276 616 1,377 - 2,269
Transfer - - - - -
Disposals - - - - -
------------------------ -------------- ----------- -------------- ----------------- --------------
At 31 May 2019 850 2,138 5,348 - 8,336
------------------------ -------------- ----------- -------------- ----------------- --------------
Depreciation
------------------------ -------------- ----------- -------------- ----------------- --------------
At 31 May 2017 106 605 - - 711
Charge for the period 19 309 62 - 390
Transfer - - - - -
Disposals - - - - -
------------------------ -------------- ----------- -------------- ----------------- --------------
At 31 May 2018 125 914 62 - 1,101
Charge for the period 121 478 284 - 883
Transfer - - - - -
Disposals - - - - -
------------------------ -------------- ----------- -------------- ----------------- --------------
At 31 May 2019 246 1,392 346 - 1,984
------------------------ -------------- ----------- -------------- ----------------- --------------
Net book value at 31
May 2019 604 746 5,002 - 6,352
------------------------ -------------- ----------- -------------- ----------------- --------------
Net book value at 31
May 2018 449 608 3,909 - 4,966
------------------------ -------------- ----------- -------------- ----------------- --------------
Assets in the course of construction related to the fit-out of a
new leased building in the Science Park in Cambridge which was
occupied from April 2018. During the period to 31 May 2019 further
fit-out costs were incurred as previously unused office space was
occupied by the Group.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UOABRKBAKRAR
(END) Dow Jones Newswires
September 04, 2019 02:00 ET (06:00 GMT)
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