As a teenager, Debbie Bestwick took a part-time job as a shop assistant in a video game store to help her single mother meet the rent bill.
The gaming bug bit: she quit school and, a few decades on, she is chief executive of indie video game developer Team17, which found fame with cult classic Worms. That game’s missile-wielding grubs helped spur the company to a string of successes, including a float four years ago.
Team17 became a stock market darling when gamers indulged themselves during lockdowns. Since then, though, the Aim-listed stock has struggled: the shares are down 57 per cent over the past 12 months at 345p.
There is a reason for the decline other than gamers having less time on their hands. In this financial year, the slated games for release have been cut from 12 to 8, with titles such as The Unliving being delayed. Meanwhile, the games that Wakefield-based Team17 is still launching this year, including the highly anticipated Marauders, face a congested release window and a lot of competition. The conventional wisdom also runs that looming recession will hit spending on fripperies such as video games.
Yet the flipside is that gaming firms may benefit from the cost of living crisis — it’s a cheap night in. Compound annual growth in the global gaming industry is forecast to be 9 per cent from 2019 to 2024, when revenues are expected to hit $219 billion, according to the games analyst Newzoo.
Team17’s share price battering also belies its own recent performance: revenues for the six months to July surged by a third to a record £53 million — even though only one new game was released in the period.
Although pre-tax profit slipped by £3 million to £11 million, that was due to higher costs from acquisitions, and those are paying off. The children’s educational app-maker StoryToys, which Team17 bought last year, almost doubled subscriber numbers to 250,000 in the first half of this year. And the recent acquisition of Germany’s Astragon — which makes farming, police, fire-fighting and other simulator games — means Team17 now earns 38 per cent of its revenues from its own intellectual property. That should trigger higher profits from content.
Berenberg bank analyst Benjamin May also flags Team17’s “very positive pipeline”, adding that the shares, now changing hands at about 16 times earnings for 2023, are “highly attractive”.
The purple-haired Bestwick looks to be steering towards another purple patch at Team17. Buy.
