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Summary
- The demand for gaming solutions is expected to remain strong in the near term as people have now become more habitual to self-entertainment options.
- Gaming is now being considered at par with film, television, and other home entertainment options.
The pandemic-induced lockdowns weighed down heavily on the entertainment zones. People could not step out of their homes and thus resorted to home entertainment solutions. Thus, the pandemic became a catalyst for the companies that provide gaming solutions. The unavailability of conventional entertainment options during the lockdown fuelled the growth in the gaming industry.
The demand for gaming solutions is expected to remain strong in the near term as people have now become more habitual to self-entertainment options. The gaming companies are investing in the development of studios to gain market share in international markets. Gaming is now being considered at par with film, television, and other home entertainment options.
According to TIGA, a trade association representing the video games industry, the video games industry in the UK is set to grow and is expected to create a lot of employment opportunities in the next few years.
(Image Source: © Kalkine Group 2020)
The gaming sector expects support from the government in the form of a hike in the Video Games Tax Relief from 25 per cent to 32 per cent. The favourable tax environment shall promote further investment in the sector that shall help in developing studios. However, the sector might face a shortage of skilled resources.
Let us put our lens through some thriving listed businesses in this sector that have produced handsome returns for the investors.
- 888 Holdings Plc (LON:888)
FTSE 250-listed online gaming solutions provider 888 Holdings continued to deliver a strong performance for FY2020.
In December 2020, the company created all-time high monthly records in terms of both revenue and active customer numbers, as per its recent post close trading update. As a result, the group expects to beat the revenue and adjusted EBITDA forecasts. During 2020, the gaming company launched several new products which led to increased customer acquisitions.
Although the gaming company has carried its momentum in 2021, the company board still follows a prudent approach as it expects possible headwinds including macro-economic and regulatory uncertainties in certain jurisdictions over the approaching months.
During the first half of 2020, the company witnessed a growth of 37 per cent in revenue primarily driven by strong growth in Poker and Casino division. In addition, the gaming company has announced a dividend per share of 3.2 cents along with an additional dividend per share of 2.8 cents.
The Group is confident of deriving growth for the company by leveraging upon its product offering, and diversified portfolio across global markets. Shares of 888 Holdings delivered a triple-digit price return of 124 per cent in the last 52-week period.
The shares of 888 Holdings were marginally down by 0.99 per cent to GBX 300.50 at GMT 12:23 PM +1 on 29 January. The gaming company has a market cap of more than a billion.
- Frontier Developments Plc (LON:FDEV)
UK-based software technology company Frontier Developments Plc is a video game developer. The company is listed on the FTSE AIM UK 50 Index. During the H1 FY21, trading was in-line with expectations. The company recorded strong performances across titles including major new platform launches for Planet Coaster and Jurassic World Evolution. The company expects its total revenue to be approximately £37 million during the first half of 2021, which represents a growth rate of 16 per cent year-on-year.
December witnessed increased sales for videogames with download option. In the year-to-date scale, trading was ahead of the Board's original expectations. The company continued to trade ahead of expectations for FY 2021 across its base games and other product categories. The company anticipates its revenue to be in the range of £90-£95 million for FY2021.
Market experts predict a higher revenue target of £133-£153 million for the fiscal year 2022. The company has an exciting line-up of new games, including two multi-platform releases which can help the company in delivering a strong performance in 2022.
Shares of Frontier Developments delivered a triple-digit price return of 129 per cent in the last 52-week period. The company’s shares were marginally down by 1.55 per cent to GBX 3,180 at GMT 12:22 PM +1 on 29 January 2021 before the market close.
- Codemasters Group Holdings Plc (LON:CDM)
The award-winning British video game developer recorded revenues more than £80 million as it released three games during the first half of FY21. The company successfully launched three titles F1® 2020, Fast & Furious Crossroads, and Project CARS 3 during the first half of FY21.
The company successfully launched DiRT 5 in November 2020. The company is expected to launch three more titles during the first half of FY22.
Shares of UK-based video game developer and publisher, Codemasters Group Holdings has delivered triple-digit returns of more than 102 per cent in the last 52-week period. The company shares were marginally up by 0.17 per cent to GBX 601 at GMT 12:19 PM +1 on 29 January 2021 before the market close.
