FinancialNacon
First Half 2023/24 Interim Financial Report: Six Months Ended 30 September 2023
1 Nov 202328 pages~54 min full read
NACON reported a 8.7% year-on-year decline in non-IFRS revenue to €70.8 million for the six months ended September 30, 2023, driven by a 12.7% drop in accessory sales and a 9.0% decrease in new software releases.
Despite lower top-line revenue, EBITDA increased by 20.1% to €29.3 million, supported by a strategic expansion of the gross margin to 64.2%.
Net income fell to €3.2 million from €8.4 million in the prior year, primarily due to higher depreciation and financing costs resulting from an intensive investment cycle.
The company holds €187.8 million in net game development costs and €138.3 million in goodwill, and has updated its game amortization accounting to a five-year diminishing balance method.
Operating cash flow improved to €26.3 million, aided by a €3 million partial disposal of future revenue rights for the title 'Gollum'.
Management anticipates a stronger second half for the 2023/24 fiscal year, supported by a release schedule featuring 'RoboCop: Rogue City' and new premium gaming accessories.
The group maintains a strong international presence with 86.9% of total revenue derived from export sales and has secured €15 million in additional liquidity through recent financing.
NACON experienced a transitional first half for the 2023/24 fiscal year, characterized by a strategic shift toward higher-margin digital sales despite a contraction in top-line results. Non-IFRS revenue for the six months ended September 30, 2023, reached €70.8 million, representing an 8.7% year-on-year decline. This downturn was primarily driven by a 12.7% drop in gaming accessory sales and a 9.0% decrease in new software releases. However, the company successfully expanded its gross margin to 64.2%, fueling a 20.1% increase in EBITDA to €29.3 million. Net income fell significantly to €3.2 million from €8.4 million in the prior year, largely due to increased depreciation and financing costs associated with a heavy investment cycle.
The financial structure reflects a high level of ongoing investment in the software pipeline, with €187.8 million currently held in net game development costs and €138.3 million in goodwill across acquired studios. To better align with the extended lifespans of digital titles, the accounting methodology for game amortization was updated to a five-year diminishing balance method. Cash flow from operating activities improved to €26.3 million, supported by a €3 million partial disposal of future revenue rights for the title Gollum. While net cash positions decreased to €18.3 million, the group secured additional liquidity through a €5 million loan from BPI France and subsequent post-balance sheet financing totaling €10 million.
Operating as a single "NACON - Gaming" segment, the group maintains a robust international footprint, with export sales accounting for 86.9% of total revenue. Management remains optimistic for the full fiscal year, anticipating strong growth in both sales and operating income. This outlook is underpinned by a dense release schedule featuring high-profile titles such as RoboCop: Rogue City and the introduction of new premium gaming accessories. Despite the temporary dip in net earnings and the settlement of various intellectual property disputes, the group’s focus on back-catalogue performance and strategic studio acquisitions positions it for a stronger second-half performance.
