New titles drove an increased gross margin
Sales were GBP 15m in Q3, in line with pre-announced numbers, and a 20% decrease y-o-y. The lower sales were primarily due to weaker sales from the existing game portfolio (in part because of a softer market), while we are still waiting for the Scopley games to ramp-up. The gross margin rose from 16% to 17% y-o-y (+0.7pp vs. ABGSCe) mainly from a higher gross margin on new game releases. The reported EBIT was GBP -0.4m in Q3 compared to ABGSCe GBP 0.4m, mainly as a result of the lower sales (pre-announced) while both opex and D&A were lower than we expected. The company reiterated its 2023 guidance from 3 November of 0-10% sales growth. We therefore leave Q4e sales relatively unchanged at GBP 25m, for a y-o-y growth of 17% in Q4e and 6% on 2023e (mid-point of guidance). That said, we are a bit more cautious on '24e-'25e as a result of the higher-than-expected drop-off in sales from the backlog titles in Q3, so we cut '24e-'25e sales by 11-9%.
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