Embracer Group, the Sweden-based firm that holds the rights to the Lord of the Rings franchise, has posted second quarter entertainment net sales down 10% in a “slow” period that should quicken up next month.
The company’s Entertainment & Services net sales for the July-September period was SEK 1.25B ($113.16M), down on the same period last year.
Overall, the company posted net sales down 21% of SEK8.55B, with the PC/Console Games, Mobile Games and Tabletop Games units also seeing decreases. Adjusted EBIT fell 33% from SEK1.81B last year to SEK1.21B this time round.
Embracer, which purchased the rights to Middle-Earth Enterprises from The Saul Zaentz Comapany in August 2022, said its entertainment division “had another slow quarter, largely as expected” as few films to other titles released. However, it noted “increasingly anticipation” around the release of anime film The Lord of the Rings: The War of the Rohirrim on December 13, which should lead to a stronger Q3 and help to drive “notable earnings growth year-on-year.”
The company is currently in the process of spinning off its assets into three companies, which will out The Lord of the Rings, The Hobbit and other IP into its own bucket. Embracer has also shed a large number of staff and lowered costs, as it seeks steadier footing.
“Over the past 15 months, we have created a stronger foundation for long-term value creation, lowering our net debt and our capex,” said Lars Wingefors, Embracer co-founder and CEO. “We have many high-performing and efficient companies, several with industry leading margins.
“However, we acknowledge that parts of our PC/Console and Entertainment & Services segments are still underperforming due to delays and low ROI for primarily small and mid-sized releases. Combined with fixed operating costs this creates unacceptable margins which we are firmly addressing ahead of the spin-offs.”
Embracer also announced this morning that it is selling its mobile games biz Easybrain to Miniclip for $1.2B in cash. This will allow Embracer to wipe out a huge chunk of its net debt, which will fall from SEK13.2B to about SEK500M on a pro forma basis.
