G5 Entertainment: Solid report, but EBIT hurt by one-off - ABG

Sales in line, adj. EBIT +18% vs. consensus
One-time impairment of 73m hurt net profit
Buybacks to continue


Q3 details

Sales SEK 360m (3% vs ABGSCe 350m and 2% vs cons 354m), adj. EBIT 50m (27% vs ABGSCe 39m and 18% vs cons 42m), Net profit -26m (-174% vs ABGSCe 35m). Organic growth was -10% vs. ABGSCe -9%. This growth is relatively in line with the underlying market in Q3. Adjusted EBIT margin of 14% was better than ABGSCe 11%, primarily driven by lower-than-expected marketing expenses (UA). Going forward, G5 expect UA/sales to be back at the previously guided range of 17-22%. Sherlock grew 13% q-o-q, organically, which slightly better than expected. It also repurchased 28m in shares in Q3 and expect to continue, which is positive. EBIT was negatively impacted by a SEK 73m impairment of capitalised development. The reason being that G5 will stop capitalising game projects that are in early stage until they are scaled up globally. Because of this, G5 is writing-off the capitalised value of that portfolio of games. This is a more conservative approach in our view. Importantly, the projects that are written off are not cancelled, G5 will continue to do work on them but start capitalise the development at a later stage. Because of this, it provides a guidance of 13-15% EBIT margin in Q4.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/g5-entertainment/Equity-research/2022/11/g5-entertainment---solid-report-but-ebit-hurt-by-one-off/