Frontier Developments Interim Management Report 2017

Key insights

6 takeaways

01
Frontier Developments completed its transition to a self-publishing model during the six months ending November 2016, a pivotal shift in its operational structure.See it on page 3
02
Revenue rose 66% to £18.1 million and EBITDA rose 179% to £5.8 million, a decisive turnaround from the prior year.See it on page 2
03
The company reports no debt and sufficient cash reserves to fund future development, leaving it in a robust financial position.See it on page 11
04
Growth was driven by the sustained popularity of Elite Dangerous and the successful launch of Planet Coaster.See it on page 1
05
Net book value of intangible assets increased to £19.7 million, and the company is developing a third major title based on a licensed Hollywood movie property.See it on page 15
06
Management argues self-publishing captures greater value from the company's intellectual property, and the firm manages software-development volatility through project-based impairment reviews and amortization of self-published titles upon completion.See it on page 15

Summary

Frontier Developments successfully completed a strategic transition to a self-publishing model during the six-month period ending November 2016, marking a pivotal shift in its operational structure. This evolution, underpinned by the sustained popularity of Elite Dangerous and the successful launch of Planet Coaster, generated significant financial momentum. Revenue surged by 66 percent to £18.1 million, while EBITDA experienced a substantial 179 percent increase to £5.8 million. These results represent a decisive turnaround from the previous year, leaving the company in a robust financial position characterized by an absence of debt and sufficient cash reserves to fund future development.

The company’s growth strategy centers on the long-term support of its existing franchises alongside the development of a third major title, which leverages a licensed Hollywood movie property. This expansion is supported by a disciplined approach to asset management, as evidenced by the increase in the net book value of intangible assets to £19.7 million. To mitigate the inherent volatility of software development, the firm employs rigorous accounting practices, including project-based impairment reviews and the systematic amortization of self-published titles upon their completion.

Operating primarily within the global video game industry, the company has demonstrated that its self-publishing model effectively captures greater value from its intellectual property. By maintaining a focus on high-quality, long-lifecycle titles, the organization has successfully scaled its operations while managing the financial risks associated with creative production. This period of performance establishes a stable foundation for continued investment in new content and the further expansion of the company’s portfolio of interactive entertainment.