November 16, 2018 / 7:06 AM / a year ago

Angry Birds maker Rovio's shares jump after strong quarter

HELSINKI (Reuters) - Rovio Entertainment, the maker of the Angry Birds mobile game, boosted its shares on Friday with an increase in third-quarter profits, but also said it needed new games to drive growth.

A Rovio sign and a figure of an Angry Birds character are seen in front of Rovio's headquarters in Espoo, Finland March 2, 2018. REUTERS/Jussi Rosendahl/File Photo

Rovio, which listed in Helsinki in September 2017, has been hit by its high dependency on the Angry Birds brand, first launched 2009, and tough competition.

The group’s shares had dropped 50 percent in February after Rovio said sales could fall this year after 55 percent growth in 2017.

“It is clear that we need new games in order to accelerate growth,” Rovio’s Chief Executive Kati Levoranta said in a statement, adding that the company planned to launch at least two new games next year and had another ten projects in the pipeline.

She said the company’s plan to launch another new Angry Birds themed game in China this year had been set back by the Chinese authorities’ crackdown on new online video games. She did not give details on how important the Chinese market was for the company.

Rovio expanded into film with an Angry Birds movie in 2016, which earned about $350 million at the box office and expects a movie sequel to boost business next year, partly through brand-licensing revenues.

“[We] also signed an agreement for a long-form animated series for TV,” Levoranta said during a webcast. She said the series would be rolled out after the movie in 2020.

The company has also stepped up investments in its 80-percent owned spin-off company Hatch, which is building a Netflix-style streaming service for mobile games.

The company said Hatch had now left beta phase and was recently publicly released in the Nordic countries, Britain and Ireland.

OP Bank analyst Hannu Rauhala said the news about Hatch entering commercial production was a positive sign.

“Now there are hopes that at some point it will start creating revenue, reducing its current negative impact on profit,” said Rauhala, who has a “buy” rating on the stock.

“The result was good but it should be remembered that in the game industry the variation between quarters can be significant,” Rauhala said.

Rovio’s shares were up more than 11 percent by 1320 GMT.

The Finnish company reported third-quarter adjusted operating profit of 10.4 million euros ($11.80 million), up from 4.0 million euros a year ago.

The rise in quarterly profit was mainly due to reduced marketing costs and growth from Rovio’s most popular game, Angry Birds 2, which increased its gross bookings 68 percent to 30.8 million euros year-on-year.

But looking ahead, Rovio said tough competition and high marketing costs would put pressure on its full-year outlook.

The group said it expected 2018 sales to be between 280 and 290 million euros, compared with a previous range of 260 and 300 million euros. Last year, the company had revenues of 297 million euros.

The company’s sees its full-year core operating profit margin at 10-11 percent, up from a previous view of 9-11 percent.

($1 = 0.8816 euros)

Reporting by Jussi Rosendahl and Anne Kauranen, editing by Terje Solsvik and Jane Merriman

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