King shares dive on revenue warning

Shares in Candy Crush maker King Digital fell as much as 12 per cent in after-hours trading, despite the company's latest sales figures beating Wall Street expectations, after it warned that revenues for the current quarter would be "seasonally softer" and hit by currency fluctuations.

Revenues for the first quarter fell from $606.7m to $569.5m but were above analysts' estimates. Pre-tax profits rose 31 per cent to $210.9m, boosted by foreign exchange gains, with earnings of $0.52.

But King said gross bookings - players' spending before taking account of costs such as app store fees - for the second quarter would be $490m to $520m, below what investors were hoping for.

Due to its "game release schedule, the impact of foreign currency changes to date and recent trends", King said, "we expect the midyear period to be seasonally softer, returning to growth trends in the latter part of the year."

While increasing foreign exchange costs mark the biggest shift in its outlook, King is caught up in an accelerating overall decline in people playing games on Facebook's desktop site as the social network's traffic moves to mobile. Some 81 per cent of King's gross revenue now comes from smartphones and tablets.

King is growing its user base but the number of people spending money on its games is falling fast. Monthly active users were up 14 per cent year on year to 550m, with 158m playing every day. Average spend per paying user was up 31 per cent to $23.64.

However, the number of people paying for in-game upgrades was 28 per cent lower than the same period a year ago, with monthly unique payers down 8.5m. King said this was due to a change in the way players pay for in-game items.

King chief executive Riccardo Zacconi said the results showed the "continued strength of our franchises".

The London-based company is working to reduce its dependence on Candy Crush Saga, which is by far its biggest hit. It now accounts for 38 per cent of players' gross spending on its games, down from 67 per cent a year ago.

The back half of this year will see King launch a handful of new mobile games including a move beyond its mainstay of "casual" titles. One new genre will be a so-called "resource management" game, popularised by Zynga's FarmVille on the PC and a lucrative niche on mobile led by Supercell's Clash of Clans .

Mr Zacconi said that players tend to spend more money on those kinds of titles but he hoped King's take on the genre would have a "wide appeal" to its network of existing players.

"We currently have more games in production than ever before," he said.

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