(BFM Bourse) – The BigBen Interactive subsidiary specializing in gaming peripherals and video game publishing reported a better than expected half-year gross margin. The current year will, however, be an exercise in transition. For the following year, Nacon should, on the other hand, benefit from solid editorial activity as well as a large back catalogue. As for BigBen, the half-year results are not as flamboyant as they were penalized by the slower integration of Metronic.
Last October, Nacon was heavily penalized on the stock market (-11.56%) in the wake of a severe warning on its results for its 2022/2023 financial year ended at the end of March. The gaming accessories seller was forced to lower its annual forecast due to a postponement of the release of several games including the highly anticipated “The Lord of the Rings: Gollum” adapted from the famous novel The Lord of the Rings.
Sales of accessories were also disappointing over the period covering the months of April to September. “This activity remains marked by a very high base effect, particularly in the USA and by a sharp drop in the global helmet market”, Nacon indicated at the time. . “This warning came to significantly undermine the confidence that investors could have in the file” recalled Berenberg in a note in response to Nacon’s underperformance.
No bad surprise, good surprise
In this context, the half-year results and the outlook for the video game specialist were eagerly awaited by operators. Nacon thus announced Monday evening after the stock market, a gross margin of 47.6 million euros, or 61.4% of turnover after 52.1% in the same period of the previous year. The lower relative weight of accessories, which currently account for 37% of total turnover (compared to 60% last year), explains this increase in the gross margin rate.
Current operating income for the 1st half increased by 31.4% to 11.1 million euros, or 14.3% of sales. The net result, meanwhile, more than doubled to 8.4 million euros after 3.8 million euros in the 1st half of 2021/2022.
The half-yearly publication of Nacon was appreciated by investors, the title rose by more than 7.5% to 2.36 euros, around 3:30 p.m. “Nacon goes up on the stock market because the publication reveals a rising gross margin, driven by a product mix increasingly oriented towards games and with a lower weight of accessories”, explains Louis-Marie de Sade, analyst at EuroLand Corporate. “Investors also appreciate the good visibility on the top line for the months and years to come. The game lags were announced at the last publication so there are no big disappointments on this publication” he continues.
For Invest Securities, on the other hand, these half-year results are far from flamboyant. They are even judged “without great surprise” by the design office, especially since Nacon is once again adjusting the formulation of its 2022/2023 objectives which have included “very modest objectives” since the end of October. By way of outlook, Nacon now anticipates revenue and current operating income for 2022/2023 “slightly up on the previous financial year” despite the later release of several major games, a shrinking accessories business and tensions in the supply of new consoles.
The design office therefore insinuates that Nacon has issued “a small warning on results” which does not say its name. The group created by BigBen Interactive was previously aiming for growth in its turnover as well as an increase in its current operating profit over the financial year.
On the side of editorial news, management announced a shift of four games (blood-bowl, Chief Life, clash and Transportation Fever 2) whose releases were scheduled for the third quarter of 2022/2023. They should finally be released around the fourth quarter of 2022/2023 (from January to March 2023). Note that the highly anticipated The Lord of the Rings: Gollum, whose release was scheduled for September 2022 and then postponed to “2023”, is now scheduled for the first half of 2023/2024. For its part, the release of the game Drive Unlimited Solar Crown Review has been postponed to a date that has not been confirmed but “management places it in September 2023”, specifies the EuroLand Corporate analyst.
Strong editorial activity planned
These same reports, however, lead Nacon to be positive for the 2023/2024 financial year. “Releases in the 2022/2023 financial year will feed the 2023/2024 back catalog and will mechanically have an acceleration effect on growth” explains the group.
An enthusiasm that is also shared by EuroLand Corporate: “The 13 games that will be released in 2022/2023 will contribute to feeding the back catalog. Between 18 and 20 games are planned for the following year, i.e. 2023/2024. The combination of the two should give Nacon a very good year 2023/2024” specifies Louis-Marie de Sade.
On the side of Invest Securities, the story is diametrically opposed. “The management is trying to reaffirm its confidence in the future and in the ‘promising 2023/24 financial year’, but it seems difficult to give them credit in view of the current momentum”, is keen to temper Invest Securities.
Like Dontnod or Focus Home Interactive, Nacon is positioned on “AA” video game publishing, i.e. productions with a capped budget and with a lower level of technical ambition but placed on promising niches – as opposed to Ubisoft, which produces so-called “AAA” games, also called “blockbusters”.
The daughter does better than the mother
Like its subsidiary, the parent company BigBen communicated the half-year results of its shifted 2022/2023 fiscal year on Monday evening. The main black point of this publication is to be found on the side of the current operating result. It stands at 0.7 million euros, against 1.4 million euros last year. Management attributes this poor performance to Metronic, the European leader in image processing specializing in the connected world of audio-video, acquired in October 2021.
“Excluding the impact of Metronic, current operating income would have been up over the half-year,” explains BigBen, who points out that “actions are currently being taken to improve Metronic’s profitability”. “The great synergies that were expected from this integration have not yet materialized,” says Louis-Marie de Sade.
“Given the growth that should be sustained for Nacon Gaming and Bigben Audio-Video/Telco activity that should remain well oriented in 2023-2024, the group anticipates strong growth from next financial year and reaffirms its confidence in its medium-term outlook” concludes BigBen. “Unlike Nacon, which adjusted its wording on its objectives, BigBen reiterates its 2022/2023 objectives, still aiming for an increase in turnover and current operating income”, indicates Invest Securities.
The market is focusing on the sharp decline in current operating income due to the longer-than-expected integration of Metronic. The title BigBen yields 5.5% to evolve on its annual lows at 6.90 euros, around 3:30 p.m.
Sabrina Sadgui – ©2022 BFM Bourse
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