Internationally known video game label Team 17 shares dropped on Friday, as the company stated in the trading update that some of its games are not meeting the sales target.
The gaming company’s shares were down by 41.08% at the time of writing on Friday.
Team17 is known for games such as “Worms,” “Miami Chase,” and “Yooka-Laylee.”
The label has not specified which games are underperforming.
The company’s trading update explains that:
“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 Team 17 Games Label. These are now in advanced stages and will continue to bring benefits into next year.”
It is further stated that Team17 management is happy with the performance of two games in particular, Astragon and StoryToys.
However, following the H1 results and considering the changes in the post-Covid-19 landscape, the management is reassessing the cost structure of Team17 Games Label.
Additionally, it is evaluating various titles, the update states, both in development and already launched.
This assessment is anticipated to lead to impairments recognised in FY23.
Furthermore, Team17 now anticipates achieving a full-year adjusted EBITDA of at least £28.5m, including potential non-cash impairments on titles of up to £11.5m.
“It may not be game over for Team 17, but the game developer’s profit warning will definitely give any investors pause. While revenue will be modestly higher than expectations, earnings are expected to be lower than anticipated and fall materially from 2022 levels” , said AJ Bell Investment Director Russ Mould.
“Failing to control overspending will not do anything for the firm’s credibility in the market, and the decision to review games in development shows how this market has gotten tougher now that people aren’t stuck indoors, with gaming representing one of the few possible escapes from the drudgery of lockdown.”