PRESS RELEASE: NACON : UPDATE ON THE ONGOING ...

Nacon SAS (0A9N, AIM) has announced a significant restructuring effort as four of its subsidiaries, including notable video game studios Spiders, Kylotonn, and Cyanide, along with motion capture company Nacon Tech, have filed for insolvency. This development follows a court order from the Lille Métropole Commercial Court on March 2, 2026, which mandated the opening of judicial reorganisation proceedings aimed at restructuring the company's debt and ensuring its long-term sustainability. The company reported an IFRS revenue of €167.9 million and a modest operating profit of €1.1 million for the fiscal year 2024/2025, indicating that while revenue generation remains robust, profitability is under pressure, likely exacerbated by the current operational challenges.

The judicial reorganisation proceedings, as outlined in French law, provide a framework for Nacon to freeze its liabilities while it seeks to negotiate with creditors and develop a viable continuation plan. This process can last up to 18 months, during which the company will work closely with judicial administrators to devise a restructuring strategy that aims to stabilize operations and protect its workforce of over 1,000 employees. The announcement comes at a critical juncture for Nacon, which has been striving to consolidate its position in the competitive video game market, leveraging its 30 years of industry experience and a distribution network spanning 100 countries.

From a financial perspective, the current situation raises significant concerns regarding Nacon's capital structure and funding sufficiency. The company's reported operating profit of €1.1 million against a backdrop of substantial revenue suggests that operational efficiencies may be lacking, and the insolvency filings could further strain its financial resources. While the judicial reorganisation may provide temporary relief from creditors, it does not inherently resolve the underlying issues that led to this predicament. Investors will need to closely monitor the company's cash burn rate and any potential capital raises that may be necessary to fund ongoing operations during this restructuring phase.

In terms of valuation, Nacon's current predicament poses a challenge when comparing it to peers in the gaming sector. However, given the absence of specific market capitalisation figures in the announcement, a precise valuation comparison is difficult. Nonetheless, it is essential to consider that companies in similar circumstances often trade at depressed multiples during restructuring phases. For instance, peers such as Focus Home Interactive (Euronext: ALFOC), known for its strong portfolio of games and stable revenue streams, may provide a benchmark for evaluating Nacon's relative valuation. Another comparable entity is Ubisoft Entertainment SA (Euronext: UBI), which, despite facing its own challenges, maintains a larger market presence and diversified portfolio that could mitigate risks associated with single-title dependencies.

The execution track record of Nacon will also be scrutinised as the company navigates these turbulent waters. Historically, the company has made strides in consolidating its various studios and enhancing its product offerings. However, the current insolvency filings raise questions about management's ability to meet previously set milestones and targets. Investors will be particularly concerned about any patterns of repeated announcements without tangible progress, especially given the competitive nature of the gaming industry where innovation and timely releases are critical for success.

One concrete risk highlighted by this announcement is the potential for further operational disruptions during the restructuring process. The insolvency filings could lead to talent attrition, particularly among key developers and creative staff, which may hinder Nacon's ability to deliver on upcoming projects. Additionally, the uncertainty surrounding the judicial reorganisation could impact relationships with distributors and partners, further complicating the company's recovery efforts.

Looking ahead, the next measurable catalyst for Nacon will likely be the development of a comprehensive restructuring plan, which the company aims to propose during the observation period of the judicial proceedings. This plan will be crucial in determining the future trajectory of the company and is expected to be disclosed within the next few months. Investors will be keen to see how effectively Nacon can negotiate with creditors and what measures it will implement to restore operational stability.

In conclusion, the announcement regarding Nacon's judicial reorganisation proceedings represents a significant turning point for the company, reflecting both the challenges it faces and the potential pathways to recovery. While the restructuring process may provide a framework for stabilisation, it also underscores the urgent need for operational improvements and strategic realignment. Given the circumstances, this announcement can be classified as significant, as it materially impacts the company's valuation, risk profile, and execution outlook in a highly competitive market. Investors will need to remain vigilant as developments unfold, particularly regarding the effectiveness of the restructuring efforts and the company's ability to emerge from this period of uncertainty.

Key insights

• ●Nacon's subsidiaries filed for insolvency, raising operational concerns.
• ●Judicial proceedings may last up to 18 months, impacting stability.
• ●Next catalyst is the proposed restructuring plan in coming months.

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