Sweden's Embracer Goes on Buying Spree to Head Off Flagging Gaming Demand

By Scott Kanowsky 

Investing.com -- Embracer Group AB (ST:EMBRACb) has embarked on a series of acquisitions, with the Swedish gaming firm looking to bolster its offerings in the face of an industry-wide post-pandemic swoon in player demand.

The company has agreed to buy U.S.-based video game distributor Limited Run Games, karaoke machine maker Singtrix, tech-driven studio Tuxedo Labs, and game developer Tripwire Interactive. It will also acquire the intellectual property rights to The Lord of the Rings and The Hobbit literary works by author J.R.R. Tolkien.

In a statement, Embracer said the deals will add an estimated SEK 550M to 750M in pro forma adjusted pre-tax earnings during this fiscal year.

On Thursday, Embracer also reported a 3% increase in adjusted income before interest and tax in its first quarter to SEK 1.32B. Analysts at DNB said the figure missed its estimates, potentially due to a decline in three-month profit at Embracer's mobile games unit, which fell by 3% to SEK 277M.

However, net sales rose by 107% to SEK 7.12B, meeting expectations.

Meanwhile, the group reiterated its full year guidance for adjusted earnings before tax, with the number seen at between SEK 9.20B - 11.3B.

Analysts at Citi said Embracer would be relying on a ramp-up in launches in the second half of the year to reach that target, as the group seeks to reinvigorate demand, which has been largely flagging across the gaming sector after the lifting of Covid-19 restrictions caused more players to ditch their controllers for other sources of entertainment.

Stockholm-listed shares in Embracer dropped by more than 1.5% in mid-afternoon trading, and have fallen by more than a fifth over the past one-year period.