Frontier Developments Share Discussion Threads

[yankhanson] 30/11/2023 16:08

Fellow shareholders, let's all extend sympathy to our friend mortality, considering that his new ownership of 0.2% of the company has triggered early-onset dyscalculia (regarding FDEV's nonsensical recovery financials) and amnesia (regarding FDEV's many unmet past forecasts). This known medical condition arising from owning too many FDEV shares is of course the reason the CEO and CFO (remuneration since 2021: ~£11,420,000) are buying none at all despite the current "bargain" price. Likewise the new Chair of Board. They've seen with their own eyes what a 32% shareholding did to the brain of the President, David Braben.

Stay happy!

[t_baggins] 30/11/2023 14:43

With all due respect he seems to be very attached to Asos oh and Sfor amongst many others underwhelming shares..

What a stupid thing to say, if you hold "no opinion", then for what reason would you buy the shares in the company ?

Even if you're indifferent to the company or its shares, and heaven only knows why you would buy a share you think that of; that is still an opinion. You're still of the opinion that the company /shares are indifferent.

Further, a quick look at your posts and i am not seeing where you are "making any money " there is overwhelming indication that you are losing money like on here, SFOR and ASOS but not much illustrating making any?

Indeed, the only share i can see you are negative on was Zoo, back last month and that seems to have gone up 30% since your post to Tom warning him of buying in?

If one make constant supercilious and narcissistic chest banging claims on these threads, please expect scrutiny of substance, or in this case lack off.


mortal1ty28 Nov '23 - 12:29 - 7104 of 7109
0 3 1
Nice. See the difference between me and Yank is I don't hold a personal opinion on any company. I am just here to make money.


It helps being a former professional fund manager for 15 years, investing in UK small and mid-caps. You learn to be detached.

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really?

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mortal1ty15 Jun '23 - 06:04 - 26653 of 32024
0 2 0
Back to profitability. Screw you bears. Back to 5 quid.

[yankhanson] 30/11/2023 14:42

There are now so many elephants in this room that the walls are bulging. Another is the financial turn-around plan, reverting to management simulation games leveraging "Frontier's expertise and leadership in that genre"... conveniently forgetting that each one of Frontier's last three management games devastated the share price.

Motley Fool "The Frontier Developments (LSE: FDEV) share price crashed this morning, when the gaming company warned that sales of Jurassic World Evolution 2 have been “lower than expected” since its 9 November release."

Frontier stock has now lost 50% of its value since January. "


> Realms of Ruin has a current 24 DAU peak of just 179

Realms of Ruin has a current 24-hour Daily Active Users peak of just 179.

> with a rating of 68%

Down to 66% here.

[74tom] 30/11/2023 13:13

The elephant in the room is that directors haven't bought a single share since January... The CEO is on a salary of £400k PA and owns a grand total of 40k shares, having added just 10k since he took the job last year. If this is a bargain then why hasn't a PDMR upped their holdings?! It tells you everything I'm afraid.

To call Realms of Ruin a flop is a massive understatement, it's an utter disaster. The Frontier Foundry Warhammer game, Chaos Gate - Daemonhunters, has made ~$10.3m on steam & sold >300k units, average DAU's are still ~500 some 18 months after release and have never fallen below 400.

Realms of Ruin has a current 24 DAU peak of just 179 and it has trended down every day since release. It's steam revenue is just $1.5m on 30k units sold...

Who is going to buy a game costing $59.99 with a rating of 68%? Hardly anyone it turns out

[mortal1ty] 29/11/2023 07:43

Another 5% day today.

Up or down I can't tell you. Probably both at one point.

[cirlbunting1] 28/11/2023 13:12

Yh added at 152. Avg 210. That was my 3rd tranche.

[mortal1ty] 28/11/2023 12:57

Okay, up to 20%. Still the direction is positive. They can flex the exact amount depending on how trading is.

This is the same incompetent management team that successfully released Planet Coaster? Planet Zoo? JWE? and JWE2? The market's view on management competence can change quite quickly. Usually depends on how successful the last title was.

You mentioned large shareholders selling, not me. I am simply saying I don't care.

I don't need the board to be replaced as long as they have learnt their lessons.

[yankhanson] 28/11/2023 12:43

"Management are taking 20% of opex out"

Oh? Says who? Not the company RNS. It said only "up to 20%".

" "Management not addressing root cause" - They have also re-focussed back on the category they know best."

Root cause is not game category. It is incompetent management. All of whom are still in their jobs.

" "Invesco and Swedbank dumping shares" - That is up to them. These guys aren't geniuses. If they were they wouldn't have lost so much money."

Um, they lost money ONLY because FDEV's incompetent management tanked the company value. If you're saying they were wrong to buy FDEV, are you also saying they are wrong to now sell?

"As a 0.2% shareholder, please pass me all complaints, and I will take them up with the board."

Only one complaint. Board has not been replaced.

[sbb1x] 28/11/2023 12:23

Breakout above 160

[mortal1ty] 28/11/2023 12:17

As a 0.2% shareholder, please pass me all complaints, and I will take them up with the board.

[mortal1ty] 28/11/2023 12:16

Not entirely true

1)"Management not addressing root cause" - Management are taking 20% of opex out, including firing staff. You yourself complained (maybe 6 months ago) that staff were not being made redundant, and this was a black mark on management. Well they are firing staff now.

2)"Management not addressing root cause" - They have also re-focussed back on the category they know best. Their last statement was an admission of previous errors in strategy.

3)"Invesco and Swedbank dumping shares" - That is up to them. These guys aren't geniuses. If they were they wouldn't have lost so much money. The fact the shares are up today, 1 day after the warning, tells you there is demand down here. Usually shares continue to drift after profit warnings (especially in small-cap).

In fact yesterday was the biggest volume day all year. Overhangs are being cleared. New investors looking to the future, and deeply distressed value in the business.

[yankhanson] 28/11/2023 12:01

Great question john09. There will be one catalyst over the next 6 months. The January trading update. This will be another devastating profit warning, inc. a large increase in expected losses for this FY. For the reason, start with 74tom's excellent explanation above.

Until then, the share price will continue to fall, recognising that we've seen no evidence of management addressing any of the root causes of this year's 83% loss of company value, that we've seen the Realms of Ruin catastrophe deliver confirmation (if any were needed) of the utter incompetence of David Braben's management team, and that the major investors Invesco and Swedbank Robur are continuing to dump FDEV shares onto the open market and indeed following yesterday's new of the fourth major flop in a row delivering the largest project loss in the FDEV PLC's history, have dramatically increased the dump rate. See the robosell at 16h35.

[mortal1ty] 28/11/2023 11:32

Their pipeline is always 2-3 years ahead. They will have been working on the title out in FY25 for sometime already.

Also yes I expect their next title will be Planet Coaster 2. It came out in 2016, so tech has moved on quite a bit.

Leveraging of the existing game to some extent will make it easier.

[john09] 28/11/2023 11:14

There’s no way they’ll get a new game out from May. They might get one out for christmas again say November ie 12 months,. But given War Hammer took 3 years what confidence do you have they cab whack one out in a year unless its some kind of tweak on an existing format

[mortal1ty] 28/11/2023 11:11

The market is forward looking right. So over the next 6 months, the market will be looking what is 6 months out from there.

So to your question, over the next 6 months, I believe investors will start considering what is on the horizon over 6-12 months from now.

We know they have a game release in FY25 (May24 onwards). So that should fall firmly in that 6-12 month window. That game should be a decent content management sim, maybe a Planet Coaster 2 etc.

A low risk game like that will give investors confidence that they aren't facing an immediate flop. It might even push sales back up towards £100m.

Either way, this business should stabilize and start growing again. That pushes the business from 0.5x EV/Sales (distressed) to 1.0x EV/Sales (cheap). That should be enough for a bounce to £3 ish.

[john09] 28/11/2023 10:25

What are the catalysts in the next 6 months?

[mortal1ty] 28/11/2023 10:18

Its down 5p John lol. If it gets to £1 come to me then. I might start to feel some pain down there.

I remember when I first bought this at £10, and then it fell to £8. Then it rose all the way to £27. Didn't feel too good then either, but turned out ok.

[john09] 28/11/2023 10:08

How’s that falling knife feel in the hands mortality?

[mortal1ty] 28/11/2023 09:33

I think that £93m opex number includes number of non-cash charges.

I was working it out a different way, if they make -£9m EBITDA at £95m sales, then at £80m that is a £10m hit to gross profit (which should be covered by their cost cutting). This sort of ties in with their guidance for next year.

To be honest the P&L is a bit all over the place, but in FY23, they made £44m in CFO, and if you strip out acquisition costs, they spent about £41m on CFI (that includes capitalised costs).

So at £104m it was roughly cash positive. Take out £20m sales, that is £12m in gross profit. They should be able to find that in their overheads.

[74tom] 27/11/2023 21:51

Good reasoning in the main, however a big question mark on the breakeven numbers;

"Cash is £20m at 31st October. They burnt through £8m in 5 months that means. 20% of cost out of opex should save c. £20m a year. I believe that effectively should see this business to cash flow neutral on a £85m run-rate"

Gross margin has been ~64% for the last 2 years, so on £85m run rate would deliver £54.5m gross profit.

Opex last year was £93m, so a 20% cut only reduces it to £74.5m.

You've then got capitalised development spend to factor in, which presumably will be material if they are developing 3 new games.

So I don't see how they can be anywhere near cash flow neutral on £85m revenue unless they cut FY23 opex by 40-50%?

Amazing looking at FY20, £76m revenue and an operating profit of £16.6m on opex of just £35m... horrific to add £58m to their annualised cost base and end up in a far worse position.

[mortal1ty] 27/11/2023 16:17

Hi 74tom.

1) Management only need to issue profit warnings if the business is trading materially below 'market expectations'. I suspect market expectations will drop quite a bit today (maybe £85m sales, and -£15m EBITDA). So a profit warning will have to be driven by sales below £80m (and the knock on impact to profit). Management walked away from their -£9m EBITDA guide today.

2) I think pretty much every warning so far has to some extent been driven by a disappointing large release including Odyssey, F1 Manager 22, F1 Manager 23, and now Warhammer. Furthermore, these warnings were supported by disappointing publishing releases. Looking forward, there are no major releases for a while, which gives me some reassurance that there isn't a large £20-£30m in revenue for some major title (like Yank pointed out there was for Warhammer).

3) Cash is £20m at 31st October. They burnt through £8m in 5 months that means. 20% of cost out of opex should save c. £20m a year. I believe that effectively should see this business to cash flow neutral on a £85m run-rate. Cash should end up at year-end maybe towards £14-£15m based on current cash burn vs. opex cuts.

4) Even when the business was doing well this business had massive discounts on games. The idea was to boost DLC's if I remember correctly.

So short-term I don't see too much more bad news, especially given lack of major releases. Mid-term I hope to see some announcements on CMS titles. I will take a view then whether these games might be flops or not. In the mean-time these shares can rise 40% on no news (£1.90 to £2.80 was an example).

Finally on valuation. At £80m sales, with £20m cash, and a £60m market-cap, the business is trading at 0.5x EV/Sales. I struggle to find many businesses on this valuation, which aren't like extremely low margin, commoditised businesses.

According to my screen the valuation is in the bottom 15% in the UK. Hence I believe the valuation has troughed. This is why the shares only dropped 20% today (the same as the sales downgrade), the market already believes the valuation multiple (at 0.5x sales) is low enough.

I owned this from £10->£27, so for me its largely moving back to where I left off.

[lyndley] 27/11/2023 16:08

It's come down from £34 per share in 2021 and now at £1.50. I just don't get it, I mean the company has had a few issues, but many of the games have sold reasonably well, this is just nuts tho.

[sbb1x] 27/11/2023 15:09

Nice buy 89,000 shares.

[john09] 27/11/2023 15:05

Never catch a falling knife and it’s been falling since 260p in the most very recent drop