Team17 Group says 'certain titles' within the games label are not meeting internal expectations
The business, perhaps best known for the Worms series, said its full year revenue is likely to be “modestly ahead” of what the market is currently expecting and it has “an exciting schedule of high-quality new releases planned across the group in 2024”.
Wakefield-based Team17 said it now expects that full-year adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) will be £28.5m. This includes impairments of about £11.5m as the business said it would review some of its titles.
Team17 said it was “reviewing a number of titles, both under development and already launched, to assess the revenue potential in the current market environment, which is expected to result in impairments”.
Analysts at Shorecap had previously expected Ebitda to be around £48m for the financial year.
Shorecap analyst Katie Cousins said: “The shares are likely to be weak today, however, we continue to see long-term value at Team17, and believe the group has historically traded strongly and delivered on its strategy.
“We value the diversified model, which is profitable and supported by cash, as well as the strong brand awareness with consumers. Therefore, and although it will likely be reduced with our downgrades, we still expect to see value beyond our fair value vs the current share price.”
In a statement, Team17 said: “While the important trading periods of Black Friday and Christmas are not yet complete, management believes the group remains well positioned with strong traction across its new release and back catalogue titles, and currently expects FY23 (full year 2023) revenues to be modestly ahead of current market expectations.
It added: “Despite this overall robust revenue performance, certain titles within the games label are not meeting internal expectations, resulting in a less favourable mix between higher margin own-IP titles and third-party titles (with higher royalty payments) than anticipated.
"In addition, the group was too slow to address some project overspends and has faced some delays in implementing key cost initiatives at Team17 games label. These are now at advanced stages and will continue to bring benefits into next year.
It added: “Management continues to be pleased with the performance of astragon and StoryToys. However, since the H1 (half year) results, and in the light of the post Covid-19 dynamics, management has re-evaluated the cost structure within Team17 Games label to align with its core competencies as an indie game developer and publisher.
"In addition, it is also reviewing a number of titles, both under development and already launched, to assess the revenue potential in the current market environment, which is expected to result in impairments recognised in FY23 (full year 2023).”
Team17 said back catalogue investments will continue to support revenue growth.
It added: “Management will provide greater clarity on FY24 (full year 2024) at the full year results, but currently expects to see an improved underlying trading performance compared to FY23.”