Perfect World, a leading mobile game company in China, announced a significant decrease in its net profits in 2021. Affected by the news, the company’s stock price fell to 14.63 yuan ($2.31), with a total market value of 28.382 billion yuan.
On January 21, Perfect World released its 2021 predicted performance report, showing expected annual net profit between 350 million and 390 million yuan, down 77.40%-74.81% year-on-year. It is also estimated that the non-net profit will be deducted by between 100 million and 120 million yuan, down 90.42%-88.50% compared to last year.
In its attempt to explain the declining performance, Perfect World pointed out in the announcement that its net profit mainly consisted of its game business, film and drama business and headquarters expenditure. Among them, the game business is at a critical stage of upgrading products and strategies, and the performance during the transition period is under staged pressure. It is estimated that the profit will be between 670 million and 690 million yuan, down 70.68%-69.81% year-on-year. The film and drama business is expected to incur a loss of between 170 million and 190 million yuan, due to the loss of fair value changes caused by the company’s investment to Universal Pictures.
Perfect World further pointed out that for overseas business, the company duly adjusted the game layout and closed some projects that did not meet expectations in the second quarter of 2021, resulting in a one-time loss of about 270 million yuan. At the end of the reporting period, the company signed an agreement with relevant parties on the sale of studios in the U.S. and local distribution teams in Europe and America. The transactions are expected to be completed in 2022. For its domestic business, the company increased investment in the R&D, which had a certain impact on the 2021 annual performance.
In addition, Perfect World said that the performance of some games declined, causing income flow to decrease compared with that of last year, which was influenced by the pandemic. The performance of the new exploration game was not as good as expected, which also affected the results shown in the report.
According to its official website, Perfect World is a cultural and entertainment industry group, focusing on the R&D, distribution and operation of online games, and also investing in films and drama series business.