Quick Insights on Two FTSE Stocks Trending on the LSE – Frontier Developments & Tribal Group

Summary

  • Frontier Developments announced the release of three games for FY2021. The Company launched Elite Dangerous Odyssey game in August 2020.
  • Frontier Developments expects FY2021 revenue in the range of £83 million to £95 million.
  • Tribal Group reported revenue of £38.2 million in H1 FY2020. SIS division and Education Services added £29.0 million and £9.2 million, respectively for the total revenue.
  • The Company witnessed surge in demand for cloud services in the education sector.

Frontier Developments PLC (LON: FDEV) is a gaming stock & Tribal Group (LON: TRB) is a technology stock. Based on 1-year performance, shares of FDEV were up by close to 126.55 percent, whereas shares of TRB were down by close to 5.80 percent (as on 28 August 2020 after the market close). FDEV and TRB had a market capitalization of close to 883.30 million and 133.70 million, respectively.

Frontier Developments PLC (LON: FDEV) - Strong product pipeline for FY2020

Frontier Developments is a UK based company that develops video games. The Company has launched games such as Elite Dangerous, Planet Coaster and Planet Zoo. The Company is headquartered in Cambridge, and it is listed on the FTSE AIM UK FTSE index.

FY2021 trading update as reported on 28 August 2020

On 27 August 2020, the Company revealed the launch of three games at Gamescom. Jurassic World Evolution complete edition would be launched on 3 November 2020. The game is available for Nintendo Switch™, and it is open for pre-order. The Company announced the name of two games that would be launched under Frontier Foundry, a third-party games label launched by Frontier. Lemnis Gate, a combat strategy shooter game and Struggling, a co-op platform based on physics were launched under the label. In early 2021 Lemnis Gate would be available on Steam now for PC, Playstation(PS), and Xbox One. Struggling would be available on Steam and Nintendo Switch. In addition to the three new games, Frontier has an existing pipeline for games. In Q1 FY21, it launched the Elite Dangerous Odyssey that is a paid update of Elite Dangerous. The new update would include planets with light atmospheres. The Company is launching Planet Coaster on PS 4, PS 5, Xbox One and Xbox Series X by the end of the year. Planet Coaster is a roller coaster park management game. Planet Zoo Australia pack was launched in August 2020 which has an extension of zoo option in the game. The zoo game has five new animals and diverse environment. The Arctic pack and South America pack launched in December 2019 and April 2020, respectively were a huge success.

FY2020 trading update as reported on 8 June 2020

In FY20, the Company expects revenue of £76 million and the operating profit is £16 million. The operating margin would be close to 21 percent. In H1 FY20, the Company generated revenue of £32.0 million and operating profit was £4.5 million.

Share Price Performance Analysis

1-Year Chart as on August-28-2020, after the market close (Source: Refinitiv, Thomson Reuters)

Frontier Developments PLC's shares last traded at GBX 2,270.00 (as on 28 August 2020, after the market close). FDEV's 52-week High and Low were GBX 2,300.00 and GBX 895.00, respectively. Frontier Developments had a market capitalization of around £883.3 million.

Business Outlook

Frontier Developments had a resilient performance in Q1 FY20 and expected the business activity in the remaining year to be healthy. The Company highlights that it had a strong product pipeline and it had a successful launch of games last year. The new games would also be launched by Frontier Foundry that is for a third-party label. The Company expects to post revenue in the range of £83 million to £95 million for FY2021. The revenue forecast includes earnings from future game, content and platform releases.

Tribal Group PLC (LON: TRB) - It would resume annual dividend for FY2020

Tribal Group PLC is a UK based company that provides software and services to the education sector. The Company operates in more than 55 countries and has a workforce of around 850 people. Tribal Group is listed on the FTSE AIM All-Share index.

H1 FY2020 results (ended 30 June 2020) as reported on 13 August 2020

(Source: Company website)

In H1 FY20, the Company reported revenue of £38.2 million, which declined by 3.9 percent year on year on constant currency from £39.7 million in H1 FY19. Student Information System (SIS) division generated revenue of £29.0 million, which was up by 1.3 percent year on year, whereas Education Services division reported revenue of £9.2 million, which fell by 17.2 percent year on year. Tribal Group reported an adjusted operating profit of £8.1 million in H1 FY20, which fell by 2.4 percent year on year from £8.3 million in H1 FY19.

The Company reported statutory profit after tax of £3.8 million in H1 FY20, which increased by 4.3 percent year on year from £3.6 million in H1 FY19. The adjusted operating cash flow was £4.3 million in H1 FY20. Annual recurring revenue (ARR) increased by 3.3 percent to £43.2 million in H1 FY20 from £41.8 million in H1 FY19.

Under ARR, support & maintenance and license reported revenue of £36.8 million and cloud services reported revenue of £6.4 million in H1 FY20. As on 30 June 2020, Tribal Group had net cash of £6.7 million, and it stated that it would resume the annual dividend payment for FY20. SIS division benefitted from the new customer wins and yearly renewal of support & maintenance and cloud services contracts. The sale of the Edge module also supported the SIS revenue. The business of Education Services was impacted as schools were closed. In H1 FY20, many contracts were moved to remote delivery.

New contract win with the University of Sydney

On 13 August 2020, the Company reported that it won a new five-year contract with the University of Sydney. Tribal would provide cloud service, and the deal is valued at £5.5 million. The contract has an extension option of two years at annual recurring revenue of close to £0.5 million.

Share Price Performance Analysis

1-Year Chart as on August-28-2020, after the market close (Source: Refinitiv, Thomson Reuters)

Tribal Group PLC's shares last traded at GBX 65.00 (as on 28 August 2020, after the market close). TRB’s 52-week High and Low were GBX 75.75 and GBX 40.00, respectively. Tribal Group had a market capitalization of around £133.70 million.

Business Outlook

Tribal Group expects the full-year revenue and adjusted EBITDA to be ahead of market expectation. The Company highlighted that it is witnessing increasing demand for cloud service in the education sector. The Company has seen educational organizations shifting to cloud services with increased usage of Dynamics CRM and student engagement solution, and thus it is hopeful over the future pipeline. The higher education segment is uncertain about the future enrollment of the students in 2020-2021, following which the sales cycle has lengthened.

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