By Jesus Calero and Elviira Luoma
(Reuters) – Swedish games developer Embracer topped second-quarter operating profit expectations on Thursday, aided by its restructuring efforts, sending its shares up more than 11%.
The group, which owns the rights to the Tomb Raider and Lord of the Rings games, reported a 14% drop in adjusted operating profit to 1.8 billion Swedish crowns ($170.2 million) in the quarter through September, but beat analysts’ forecast of 1.62 billion crowns.
The decline was mainly due to a lower contribution from PC and console games, it said.
The Entertainment & Services unit’s sales grew 13% organically, boosted by licensing revenues from the Lord of the Rings: Tales of Middle-earth trading card game.
Embracer has been hit by development delays, lower demand and mixed responses to its new titles. It announced major restructuring plans in June, after a $2 billion partnership deal with an undisclosed company fell through in May.
“The share price development in Embracer over the past year is an exciting cocktail (of) less than optimal performance, less than optimal communication, bad underlying markets and some bad luck,” said Hans-Marius Ludvigsen, a portfolio manager at DNB Asset Management that holds a 3.61% stake in Embracer. He added the gaming group was on the right path now.
Embracer’s shares have lost nearly a half of their value since it warned on profit in May.
It said the restructuring resulted in a reduction of around 900 staff, or 5% of its workforce, and a discontinuation of several studios that would be carried out through closures and divestments.
“Our restructuring program is making good progress, with opex savings ahead of plan and capex savings expected to contribute notably in the second half of the year,” CEO Lars Wingefors said in a statement.
Contacted by Reuters, Wingefors declined to comment on an earlier report that the company was mulling a potential sale of U.S.-based game studio Gearbox Entertainment.
Embracer has so far written down 15 mainly unannounced projects across its subsidiaries.
($1 = 10.5733 Swedish crowns)
(Reporting by Jesus Calero and Elviira Luoma in Gdansk; editing by Milla Nissi, Sharon Singleton and David Evans)
