Round-up – Codemasters H1 2021 revenues, Audioboom in Canada and renewable energy yieldcos

A few regulatory filings for companies that I’m invested in piqued my interest today.


Codemasters filed a half year trading update, noting a “strong” performance and revenue of £80.5m versus £39.8m for the same period last year. The stock has recorded a jump in price following news of the update, registering 394p per share in trading early on Wednesday.

Unfortunately, it appears that my thesis about the potential sale of games recently released by Slightly Mad Studios, acquired by Codemasters, was incorrect. I had suggested that sales of Fast & Furious Crossroads and Project CARS 3 would be lacklustre given the poor reviews. The movie franchise game was released on 7 August and the latest in the racing simulation game series hit the shelves on 28 August, so given these release dates sales would have been visible in Codemasters’ earnings for the six months ended 30 September 2020.

The RNS from Codemasters does say that its F1 2020 title did over-perform compared to the previous year, citing the quality of the game, as well as growth of the sport, especially in the US. As with the video game sector more generally, I’m sure that the Covid-19 pandemic also provided an uplift to sales, with gamers spending more money as they’re subjected to lockdown measures. Deloitte detailed the impact to the video game industry in analysis published in July, outlining how during the crisis a third of consumers have, for the first time, engaged with some form of video gaming.

Estimating revenue from Slighty Mad Studios

Despite over-performance by F1 2020, Codemasters said the titles from Slightly Mad Studios garnered revenues “in line” with expectations. Here, it might be useful reminding ourselves of the financials revealed by Codemasters in their acquisition of Slightly Mad Studios in November 2019, according to the regulatory filing at the time. The first game in the Project CARS series recorded revenue of £30.2m (£18.3m in FY15 and £11.9m in FY16), while Project CARS 2 took revenue of £22.1m (£14.8m in FY17 and £7.3m in FY18). If we predict that Project CARS 3 experiences a similar decline in revenue (approximately 27% between the first and second iteration of the game) then it will hit £16.1m in revenues.

Fast & Furious Crossroads was expected to deliver “similar gross revenue potential as an annual instalment of the F1 Franchise”, according to Codemasters. It’s hard to determine exactly how much the F1 games bring to revenues, since earnings are not broken down according to game. If we look at Codemasters FY20, the company took revenues of £76m with two main titles being launched, F1 2019 and GRID, plus a special edition of DiRT Rally 2.0. The GRID game didn’t appear particularly successful and the Game of the Year Edition of DiRT Rally 2.0 is essentially a re-packaging of the DiRT Rally 2.0 game, plus all the extra paid for content. So, even being very conservative, I think we could guess that F1 2019 accounted for at least half that year’s revenues, therefore £38m. I imagine it was even more than this, but for this ‘back of a fag packet’ calculation let’s underestimate. This gives us a guesstimate for Fast & Crossroads of £38m, which coincidentally tallies with H1 2020 results when just one game was released (F1 2019) and revenues were £39.8m. We’re in the ballpark.

If we put those two very rough approximations (£16.1m and £38m) together that gives us a contribution of £54.1m from Slightly Mad Studios. Yet both those rough estimates account for whole accounting periods, in fact, two years of revenue in the case of Project CARS, and we’re actually talking about just over a month for the racing simulation game and almost two months for the movie franchise game. Plus, Codemasters said that F1 2020 over-performed, and it was released on 10 July 2020, giving it much more time to contribute to earnings.

Given the latest figures for revenues of £80.5m and historical performance of the F1 franchise, I don’t think Slightly Mad Studios can have contributed anything like £54.1m. If we take a conservative estimate of F1 game revenues for Codemasters increasing by 20% because of over-performance, based on H1 2020 results when just F1 2019 was released, then we arrive at £47.7m before any contribution from Slightly Mad Studios. My original thesis was that poor reviews led to poor sales, especially in the case of Fast & Furious Crossroads. So my thinking is Slightly Mad Studios didn’t hit £54.1m in revenue from these two games, and perhaps they’re more around the £32.8m mark, or even less? Begging the question, what are Codemasters’ expectations?

Effect on payment for Slighty Mad Studios

This is interesting given the earn-out consideration from the acquisition of Slightly Mad Studios. Ian Bell and his fellow Slightly Mad Studios shareholders can expect up to $161m in earn-out consideration, depending on adjusted EBITDA, in a mixture of cash and the issue of shares. By determining how well the new titles from Slighty Mad Studios sell, we might get a handle on how much cash Codemasters will have to pay out and how much dilution in shares we should expect.

It goes without saying that we’re ignoring many other variables here in judging revenues, such as recurring sales from bonus content or old games not released within the accounting period. Maybe I’m also slightly mad that I misjudged my sale of Codemasters shares at the end of September, although I still feel as if I’m on the right track and the contribution from Slightly Mad Studios is less than expected and instead we’re looking at a strong performance from Codemasters without its recent addition, as the RNS hints at with the reference to F1’s strong sales.

Audioboom ad sales in Canada and new podcasts

Podcast company Audioboom said on Wednesday that it had inked a deal with Rogers Media in Canada to sell advertising inventory, according to a regulatory filing. I’ve previously written about Audioboom, the ongoing sale process, and the fact that it’s shares are majority owned by a close and interconnected group of people.

I’m not really too sure about the significance of this “strategic partnership” with Rogers Media, which owns a vast array of media properties across Canada, including 54 radio stations. It seems this deal enables the Canadian media company to sell ad content for inclusion on Audioboom podcasts. However, I’m hesitant to get too excited, given that we’ve often seen news of Audioboom’s strategic partnerships with various other outfits, including Voxnest, Spotify, Starburns Audio, The Podcast Exchange, Cumulus Media and Westwood One.

Rogers Media itself bought Vancouver-based podcast production company Pacific Content in May 2019. It also launched its own podcast network called Frequency in 2018, as part of an effort to take advantage of audio content.

The other part of the Audioboom RNS made announcements about new podcasts as part of the Audioboom Originals Network. Baby Mamas No Drama reached Number 1 in the Apple Podcast chart, according to Audioboom. Since its launch on 29 September, it has attracted lots of positive feedback on iTunes with more than 1,400 ratings. It’s hosts Vee Rivera and Kail Lowry, from US reality show Teen Mom 2, have strong social media followings, with Rivera attracting 317,000 followers on Instagram, and Lowry boasting 3.9m people following her on Instagram and 1.3m on Twitter.

The second podcast is linked to the US reality show Dance Moms, centred around a dance school company, founded by Abby Lee Miller, a so-called reality television personality. Miller has 683,000 followers on Twitter, so you’d expect this podcast to have a popular following too.

The third podcast announced by Audioboom is hosted by Annie Apple, described as a “NFL mom” to Eli Apple, a football player with the Carolina Panthers. She isn’t quite as popular on Twitter with 27,000 followers, but appears to have worked as a contributor for sports network ESPN. She doesn’t seem to have the same visibility online as the hosts in the two other podcasts announced by Audioboom.

Those first two podcasts, although certainly not to my taste, seem to be targeted to leverage personalities who have a loyal fan base. A small, but important development for Audioboom’s continued development of quality content that can attract advertising.

Trimming renewable holdings and director buys

My final topic concerns renewable energy yieldcos, which I have written about several times, most recently describing how I had topped up my holding in the Foresight Solar Fund. Well, Newton Investment Management Limited, owned by BNY Mellon, announced on Wednesday that it had reduced its holding in the UK solar energy producer from 8.35% to 4.92%.

Furthermore, 11% of the share capital in US Solar Fund, a yieldco focused on the US market, was sold by Walsh & Company Investments, a fund manager that manages the UK-listed company. The shares were sold at $0.90 each, a discount to the current price of the stock, and the RNS doesn’t appear to reveal who bought them, only that Jefferies International handled the sale. Perhaps we’ll find out whether a significant chunk was bought by a particular party in a subsequent regulatory filing. Walsh & Company Investments have retained 5.1m shares, which are subject to a lock-up agreement until April 2022, representing 2.5% of the share capital (based upon 200,092,323 shares in issue, as outlined by interim results).

I can’t decide yet whether I’m concerned about this changes in holdings to Foresight Solar Fund and US Solar Fund, although they are slightly different in nature, given that yieldco fund managers usually receive shares as part of their fees. The final renewable energy firm to mention isn’t technically a yieldco, although it acts in a slightly similar way, and the news here is rather more positive. Encavis, a renewable energy firm listed in Frankfurt, said on Wednesday that Christoph Husmann, the company’s chief financial officer, bought shares worth more than €98,000, a sign that he’s confident in the company’s outlook.

Main photo: Screenshot of Mitsubishi EVO IX at Cadwell Park in Project CARS 3 by Slightly Mad Studios.


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