Embracer Shares Surge as Restructuring Efforts Pay Off


Stockholm – Embracer shares take the lead in the Stoxx Europe 600 index following positive developments in the company’s restructuring efforts and improved cash flow. This news brings relief to investors who have witnessed a significant decline in share value over the past six months.

As of 1126 GMT, shares are trading 13% higher at SEK23.89.

Embracer, the renowned gaming group responsible for popular franchises such as Tomb Raider and Lord of the Rings, previously announced that a $2 billion strategic partnership deal had fallen through at the last minute. Additionally, the company faced delays in releasing several games, resulting in a potential revenue loss of more than $95 million by one year and a reduction in earnings guidance.

These unforeseen circumstances caused shares to plummet by 45% in a single day, prompting Embracer to launch a comprehensive restructuring plan aimed at increasing cash flow and reducing debt. The company set out to achieve a net debt target of under SEK10 billion by fiscal year-end, which was later revised to SEK8 billion. Furthermore, it pledged to cut overhead costs by at least 10%.

In its recent earnings report, Embracer stated that the restructuring efforts are progressing well. Operating expenditure savings are ahead of the initial plan, and capital expenditure savings are expected to make a notable contribution in the second half of the year.

According to Citi analysts Thomas A Singlehurst and Praveen Shetty, “On the restructuring side, the company appears to be on track. Perhaps the most encouraging development is that the group has delivered positive free cash flow of around SEK0.4 billion versus expectations of an outflow of SEK0.5 billion-SEK1.0 billion.”

Furthermore, Embracer reported fiscal second-quarter revenue that exceeded the company’s compiled consensus by 7.5%. Adjusted earnings before interest and tax also surpassed expectations by 12%. Although organic growth declined by 2%, it outperformed the consensus estimate of an 8% fall. The company maintains its full-year guidance.

“In the context of the very weak share price performance since the 1Q, we think Embracer’s 2Q results are solid enough to drive some relief for sentiment,” stated Citi.

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