Team17 shares plunge as it warns on earnings
The business said it was reviewing a number of its titles, some of which had already been released.
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Your support makes all the difference.Shares in computer game maker Team17 plunged in London on Friday as it said profit will be considerably lower than many experts had forecast.
The business, perhaps best known for the Worms series, said although revenue is likely to be “modestly ahead” of what the market is currently expecting, its earnings will not be.
The business said that some of its titles are not meeting expectations. This means the split in sales between titles with its own intellectual property and those of third parties that it sells has been worse for the company than anticipated.
It must pay higher royalties for the second category, eating into any profits the business can make from them.
Team17 said it now expects that full-year adjusted earnings before interest, tax, depreciation and amortisation (Ebitda) will be £28.5 million.
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
This includes impairments of about £11.5 million 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 £48 million for the financial year.
Shares plunged by more than 40% on Friday morning shortly after markets opened.
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.”