RNS Number : 3941D
SCI Entertainment Group PLC
15 September 2008
15 September 2008
SCi Entertainment Group Plc
Preliminary Announcement of Results for the 12 months to 30 June 2008
SCi Entertainment Group Plc ("SCi" or "the Company"), the holding Company of Eidos Interactive, creator of some of the world's leading
videogame properties including Tomb Raider, Hitman, Deus Ex, Championship Manager, Kane & Lynch and Just Cause, announces its unaudited
preliminary results for the 12 months to 30 June 2008.
Company highlights
The 2008 financial results reflect a year of decisive action and business transformation with a revitalised focus on cornerstone
franchises to capitalise on the substantial market opportunity.
� Leaner operating structure in place with a 25% lower headcount level to deliver the targeted reduction in operating costs of �14
million in the new financial year
� Shifting the business structure to a studio-led model to form focused teams around our key franchises to produce high quality
games and high-impact, focused and coordinated marketing campaigns
� Executive Board restructured with the appointment of Phil Rogers as Chief Executive Officer and recently Robert Brent as Chief
Financial Officer
� Strengthened Board with the appointment of two new Non-executive Directors, Kevin Tsujihara and Aaron Brown, from Warner Bros.
and Thorson Investments respectively
� �60 million (before expenses) raised by way of a successful Placing and Open Offer to provide working capital and �25 million
new debt facility secured
Key financials
� Revenue declined to �118.9 million* (2007: �128.8 million*) reflecting major transition and change during the year
� Focus on publishing own products resulted in gross profit increasing to �56.1 million against �54.3 million last year and an
improvement in gross profit margin from 42.2% to 47.2%
� Adjusted EBITDA loss** of �99.1 million (2007: loss �13.3 million) within market expectations, as a result of necessary
transformation of the business and a loss before tax of �136.0 million (2007: loss �30 million)
* excludes �14.8 million (2007: �15.2 million) of revenue for Proein SL which has been classified as discontinued
** see note 7
Commenting on today's results, Phil Rogers, CEO, stated:
"The 2008 results reflect a year in which we took decisive action to transform our business. We have emerged as a stronger business and
over the next year we will see the results of our restructured and revitalised operation. We are focused on delivering higher quality games
with our priorities clearly set on maximising the returns from our cornerstone franchises.
"We remain totally focused on and excited by the worldwide release of Tomb Raider: Underworld in November. Tomb Raider: Underworld has
benefited from additional development time and a carefully choreographed build up to launch. In 2009 we will continue to see the benefits of
our new structure to the releases of our games, which include Just Cause 2, Battlestations Pacific, Championship Manager 09 and
Batman:Arkham Asylum.
"Our commitment to improving quality across the business and securing strategic partnerships will be the key to unlock our full
potential."
For further information:
SCi Entertainment Group Plc
Phil Rogers - Chief Executive Officer
Robert Brent - Chief Financial Officer
Chris Glover - Group Communications Director
+44 20 8636 3000
Madano Partnership
Matthew Moth / Dominic Barretto
+44 20 7593 4000
www.madano.co.uk
About SCi
SCi Entertainment Group is the holding Company of Eidos Interactive, creator of some of the world's leading videogame properties.
Consisting of several development studios including Crystal Dynamics, Io Interactive, Beautiful Game Studios, Eidos Game Studios and Eidos
Montreal as well as sales and distribution offices in Europe and the US. The Group has a valuable portfolio of intellectual property
including: Tomb Raider, Hitman, Deus Ex, Championship Manager, Carmageddon and Just Cause.
www.sci.co.uk
Forward looking statements
Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are
subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future events or
results referred to in these forward looking statements. The Company does not undertake any obligation to update or revise any forward
looking statements, whether as a result of new information, future developments or otherwise.
Chairman's Statement
"Focus and clear strategy will stand the Group on solid ground to achieve long-term returns for shareholders."
The past year has been dominated by acquisition talks, restructuring and transition for the Group. Our business has undergone
fundamental change to ensure it is best placed to take advantage of the growing interactive videogames market and deliver long-term returns
for shareholders.
At the start of the 2008 calendar year, the Group underwent a number of significant changes. In early January after the termination of
acquisition talks we reset our financial outlook for 2008 and later that month Jane Cavanagh, Bill Ennis and Rob Murphy all stepped down
from their respective positions as directors of the Company. Phil Rogers became Chief Executive Officer and led a full business review with
the support of the Board which resulted in the Group being significantly restructured and refocused.
During the second half of the financial year, we raised �60 million (before expenses) by way of a successful Placing and Open Offer of
new shares to provide working capital and arranged a new debt facility of �25 million.
Results for the year
Our revenue declined to �118.9 million (2007: �128.8 million) in the financial year reflecting its transitional nature (we have also
excluded Proein SL from our results for both years as its sale is in the final stages of completion and it has therefore been treated as a
discontinued operation). Nonetheless, both gross profit and gross profit margin improved as a result of the greater weighting to published
titles, the former increasing to �56.1 million (2007: �54.3 million) and latter improving five percentage points to 47.2%.
Adjusted EBITDA loss was �99.1 million (2007: loss �13.3 million) highlighting the scale of transformation that the Group has undergone.
The restructuring resulted in an additional charge in the year of �65.9 million against capitalised development costs. As of 30 June 2008 we
have �49.7 million carried on our balance sheet reflecting the investments we have made in major titles in development including Tomb
Raider: Underworld, Hitman 5, Batman: Arkham Asylum, Shellshock 2, Just Cause 2 and new intellectual properties.
Our decision to restructure various components of the business and reduce operating costs has also resulted in a �16.3 million
impairment to the value of intangible assets and exceptional restructuring costs of �6.2 million. As a result our business structure has
become more focussed and efficient with a leaner operating structure now in place to deliver the targeted reduction in operating costs of
�14 million in the new financial year.
The past financial year has been difficult but the action we have taken was necessary and has produced a business that is now well
placed to capitalise on the opportunities that the videogames industry presents.
Strengthening of the Board
In addition to Phil Rogers, the Board has been strengthened with the appointment of two new Non-executive Directors, Kevin Tsujihara and
Aaron Brown, representing investors Warner Bros. and Thorson Investments respectively. Since the end of the financial year we have also
appointed a new Chief Financial Officer, Robert Brent.
Business structure
The Group's business structure has been changed to a studio-led model focused on maximising returns from our cornerstone franchises such
as Tomb Raider, Hitman and Deus Ex. We have adopted a flexible and efficient approach to distribution and have entered into a strategic
agreement with Warner Bros. Home Entertainment for the sales, marketing and distribution of our products in the important North American
market, strengthening our relationship with Warner Bros., one of the world's leading media companies.
Working in partnership is a key theme for the future of the Group. By identifying and working with the right partners we are looking to
achieve greater scale and build flexibility into the business.
Summary
Our industry is growing through a broadening demographic appeal of games, increasing spend among gamers, longer product cycles and new
online opportunities.
We have provided the right resource and environment for our studios to do what they do best: create great intellectual property and
commercially successful games, while the appropriate balance of direct and third party distribution channels will build flexibility and
scale into our business.
Our cornerstone franchises have the potential to deliver substantial returns on investment and remain key to the business. We must
continue to be creative and innovative to ensure these and our future games are relevant and appealing to our consumer.
The Board believes the Group is now well positioned to deliver returns for our shareholders by leveraging our new business approach,
revitalised focus and cornerstone franchises to capitalise on the substantial market opportunity.
Tim Ryan
Chairman Chief Executive's Statement
"Our commitment to improving quality across the business and securing strategic partnerships will be the key to unlock our full
potential."
Our 2008 financial results reflect a year in which we took decisive action and transformed our business.
Business Review
On 29 February 2008 we announced a restructuring plan and concluded that our focus should be on cornerstone franchises in order to
optimise returns on these titles. The key aspects of the new business plan are as follows:
Fundamental change in business structure
The Group's business structure has changed from a centrally controlled development and publishing model to one that is studio-led,
focused on building appropriate studio infrastructure around the Group's cornerstone franchises, such as Tomb Raider, Hitman, Championship
Manager and Deus Ex. The Group's studios are now responsible for the development of games from initial design through production and
branding to product marketing, working in conjunction with sales, channel marketing and distribution expertise.
We have a dedicated team responsible for our other titles and third party products, including casual games. Titles currently in
production include: Just Cause 2, Battlestations Pacific, Pony Friends 2 and Batman: Arkham Asylum.
Product improvement initiatives
The decision to shift the Group's business structure to a studio-led model has enabled it to form focused teams around its key products
with the aim of not only producing high quality games, but high-impact, focused and coordinated marketing campaigns. The marketing of our
core products is beginning further out from the product launch date in order to generate the right level of consumer awareness, build
anticipation, establish and work with relevant online communities and deliver a strategic marketing campaign which can gather momentum
towards the product launch.
Over the past six months the Group has cancelled a number of projects that the Board considered either loss-making, unlikely to generate
acceptable returns on investment or not of appropriate quality. We have also introduced a new, tougher 'green-light' process to monitor
product quality of all future projects.
Cost reduction plan
Leaner operating structure now in place with a 25% lower headcount level to deliver the targeted reduction in operating costs of �14
million in the new financial year.
We raised �60 million (before expenses) by way of a successful Placing and Open Offer of new shares to provide working capital and we
have made fundamental and beneficial changes to our business in order to take advantage of the continued growth in the games industry.
A 'New' Company
We are more than six months into the new structure and revitalised business. Progress is in-line with expectations and we are benefiting
from transitioning key publishing roles into our major studios, with a highly coordinated and executed development, marketing and sales
campaign for Tomb Raider: Underworld well under way.
We have identified the areas we need to focus on in order to achieve both our short and long-term goals. Our North American partnership
with Warner Bros. is key to maximising our presence in this crucial market. This agreement became effective on 23 May 2008 and we are
working with Warner Bros. in a number of ways, including the delivery of high-impact channel marketing and PR campaigns to benefit our
forthcoming product releases in North America including Tomb Raider: Underworld, and Warner Bros.' own intellectual property, Batman, in our
recently unveiled game Batman: Arkham Asylum. We have also entered into a strategic mobile relationship with Electronic Arts for the
exclusive multi-regional distribution and licensing rights to certain Eidos titles across mobile devices.
In Europe, our sales and distribution business continues to deliver but with greater focus and momentum. We have agreed the sale of our
Spanish distribution business, Proein SL, to Koch Media and will now focus on maximising returns in the UK, France and Germany through our
offices in those territories, whilst working with distribution partners in other European and export territories.
Results overview
Our revenue for the year declined to �118.9 million (2007: �128.8 million) reflecting the transitional nature of our financial year.
These figures exclude the revenues of �14.8 million (2007: �15.2 million) from Proein SL since it has been treated as a discontinued
operation.
Published products contributed 60.0% (2007: 52.3%) of our total revenue with 10 titles released in the year and 7.1 million units sold
(2007: 7.6 million units) with Kane & Lynch (1.4 million units), Tomb Raider: Anniversary (1.0 million units) and Conflict Denied Ops (0.5
million units) our largest unit selling titles.
Our distribution revenue declined to �42.2 million (35.5% of revenue) from �53.7 million (41.7% of revenue) in 2007 as a result of the
reduction in the number of global and local distribution titles released. The majority of our distribution revenue was derived from sales of
Age of Conan, which sold in excess of one million units since release in the final quarter of the year to 30 June 2008. The remainder of our
revenue in both years was licensing and other income.
Both gross profit and gross margin improved as a result of the change in mix from lower margin distribution products to higher margin
published products, which also showed improved margin due to higher achieved premium price points and our biggest release occurring in the
holiday season. Gross profit increased to �56.1 million (2007: �54.3 million) and our margin improved five percentage points to 47.2%.
Development costs including royalty payments charged to the income statement for the year totalled �104.3 million (2007: �32.8 million)
of which �38.4 million relates to product releases. The remaining �65.9 million are adjustments to the net realisable value of ongoing and
discontinued projects.
The Group spent �17.6 million (2007: �12.8 million) on product advertising in the financial year, representing 14.8% of revenue (2007:
10.0%). The increase is primarily due to additional investment to launch a new intellectual property in the holiday season.
Our administrative costs excluding exceptional charges were �62.9 million (2007: �39.5 million) of which �31.7 million (2007: �15.3
million) is amortisation, depreciation and impairment charges and �0.1 million (2007: �2.2 million) share based payment compensation.
The amortisation charge of acquired brands, technology and software was �11.7 million (2007: �11.4 million) with an additional
impairment charge of �16.3 million (2007: �nil), which reflects the result of the strategic review and the decisions to restructure various
components of the business, in particular the acquisitions made last year.
Our loss before tax was �136.0 million (2007: loss �30.0 million) giving a basic loss per share of 136.3p (2007: loss 35.3p).
Market overview
The market is substantial and continues to grow, with new opportunities for publishers to develop revenue streams and grow margins.
The current videogame cycle is expected to be the biggest and longest in the industry's history. Screen Digest reports software revenues
will be 23% higher than the previous cycle which ran from 2000 and was dominated by Sony's PlayStation 2. In 2007 the value of the global
software market reached a new record of �14.7 billion of sales and is forecast to grow by 12.5% in 2008. Western Europe and North America
remain our key markets, with a combined software value of over �13.2 billion.
As a business, we are well placed to maximise the opportunities presented by the continued global growth in the market, which we believe
is primarily driven by higher retail prices and an increased number of platforms, along with higher tie ratios (the number of games sold per
console owner). In addition there is a broadening demographic appeal for games today and new revenue opportunities presented by online
gaming, such as premium downloadable content, in-game advertising and micro transactions.
In the hardware market the Nintendo Wii is the current leader in terms of number of consoles sold to consumers, however no hardware
manufacturer can yet assume ascendancy. As a publisher this presents a number of exciting opportunities. Nintendo has undoubtedly broadened
the demographic appeal of videogames, while the Sony PLAYSTATION 3 and Microsoft Xbox 360 continue to appeal to the core gamer.
We believe the online gaming market will benefit from increased broadband speed and penetration, presenting new revenue opportunities
for our core games. We also believe that online gameplay features will help maintain premium price points for our products by extending
their appeal and we intend to grow our presence in this online environment to exploit the strength of our games.
Priorities and Outlook
We have emerged from the past months of change as a stronger business and over the next year we will begin to see the results of our
restructured and revitalised operation. The Group is focused on delivering higher quality games with our priorities set clearly on
maximising the returns from our cornerstone franchises.
We remain totally focused on, and we are excited about, the worldwide release of Tomb Raider: Underworld on 18 November in North America
and 21 November in Europe. Tomb Raider: Underworld has benefited from additional development time and a carefully choreographed build up to
launch with increased tactical online presence, delivery of high quality marketing assets and the unveiling of a new 'live' Lara Croft - all
helping to build 'buzz' prior to launch.
Our first Tomb Raider: Underworld trailer was launched exclusively on MTV in July in the US and Europe. Closer to home, the London
unveiling of our new live Lara Croft secured national news coverage with the BBC and ITV in August and has continued to drive excitement and
buzz for this key title across all key territories over the past month.
We will continue to drive innovation and encourage creativity throughout the business as we look to strategically grow our portfolio of
videogame franchises. Products for our new financial year include: Just Cause 2, Battlestations Pacific, Monster Lab, Championship Manager
09, Batman: Arkham Asylum and Tomb Raider: Underworld.
A consistent identity
We are focusing our efforts on our cornerstone franchises, which are predominantly associated with the Eidos brand. The Eidos name is
widely recognised in the games marketplace and is our trading name. The Board feels that it would be beneficial to align the name of the
listed Company to the strong product brand that Eidos represents in order to benefit from a single identity and clearer outward and internal
communication. Therefore it is the Board's recommendation to change the name of the Company to Eidos plc.
A resolution to approve the change of name will be proposed at the Annual General Meeting, which will be held on 2 December 2008.
Our staff remain absolutely fundamental to the success of the business. This has been a most challenging year and I would like to thank
our employees for their contribution and continued commitment over the past 12 months.
Phil Rogers
Chief Executive
Unaudited Consolidated income statement for the 12 months to 30 June 2008
Notes Unaudited Audited
12 months to 30 June 2008 12 months to
30 June 2007
Restated
�m �m
Revenue 2 118.9 128.8
Cost of sales (62.8) (74.5)
----- -----
Gross profit 56.1 54.3
Development costs (104.3) (32.8)
Advertising (17.6) (12.8)
Administrative costs 4 (6.2) (0.6)
-exceptional
-other (62.9) (39.5)
Administrative expenses (191.0) (85.7)
------- -------
Loss from operations (134.9) (31.4)
Finance income 0.5 1.2
Finance costs (1.6) (0.5)
Profit on disposal of - 0.6
associate
Share of (loss) / profit in - 0.1
associate
------ -----
Loss before taxation (136.0) (30.0)
Tax (charge) / credit 5 (2.0) 1.7
----- -----
Loss from continuing (138.0) (28.3)
operations
Post tax (loss) / profit on 8 (5.0) 0.2
discontinued operations
----- -----
Loss for the year (143.0) (28.1)
==== ====
2008 2007
Loss per share Pence Pence
Basic 6 (136.3) (35.3)
Diluted 6 (136.3) (35.3)
Continuing operations
Basic 6 (131.6) (35.5)
Diluted 6 (131.6) (35.5)
Unaudited Consolidated balance sheet at 30 June 2008
Notes Unaudited Audited
30 June 2008 30 June
2007
�m �m
Restated
Non current assets
Property plant and equipment 7.4 6.5
Goodwill 2.0 2.7
Other intangible assets 9 75.4 102.7
Capitalised development costs 10 49.7 81.8
Investment in associates 0.2 0.6
Deferred tax assets 11 - 0.1
134.7 194.4
Current assets
Inventory 3.5 7.2
Trade and other receivables 30.9 41.3
Cash and cash equivalents 25.9 31.4
Assets classified as held for sale 8 5.5 -
65.8 79.9
Total assets 200.5 274.3
Non current liabilities
Deferred consideration 1.4 4.1
Deferred tax liabilities 11 12.2 13.2
13.6 17.3
Current liabilities
Trade and other payables 28.4 30.0
Tax liabilities 6.9 4.1
Accruals and deferred income 10.9 10.1
Provisions 17.8 10.2
Liabilities classified as held for sale 8 2.6 -
66.6 54.4
Total liabilities 80.2 71.7
Equity
Share capital 12 12.9 4.3
Share premium 169.2 120.3
Merger reserve 81.3 81.3
Capital reserve 6.3 6.3
Foreign currency translation reserve 1.2 (0.6)
Share based compensation 6.5 5.1
Employee benefit trust share reserve (0.9) (0.9)
Retained profits (156.2) (13.2)
Equity attributable to equity holders of the
parent company 120.3 202.6
Total liabilities and equities 200.5 274.3
Unaudited Consolidated cash flow statement for the 12 months to 30 June 2008
Notes Unaudited Audited
12 months to30 June 12 months to30 June
2008 2007
�m �m
Operating activities Restated
Loss from continuing (136.0) (30.0)
operations
Loss from discontinued 8 (5.6) -
operations
Share based compensation 0.1 2.2
Depreciation on plant, 3.6 1.6
property and equipment and
amortisation of software
Amortisation of brands and 11.6 11.0
technology
Impairment of brands and 16.3 -
technology
Impairment of goodwill 0.2 2.7
Financing income (0.5) (1.2)
Financing costs 1.6 0.5
Net loss / (profit) made by - (0.1)
associates
Profit on disposal of an - (0.6)
associate
Loss on measurement of 8 3.5 -
discontinued operations to
fair value less costs to sell
--- ---
(105.2) (13.9)
Decrease in trade and other 7.9 14.4
receivables
Decrease / (increase) in 2.2 (2.6)
inventories
Release of capitalised 101.9 32.8
development costs
Increase / (decrease) in trade 10.4 (4.9)
and other payables, accruals,
deferred income and provisions
---- ----
Cash generated from operations 17.2 25.8
Income taxes repaid / (paid) 0.2 (2.1)
==== ===
Cash flows from operating 17.4 23.7
activities
Investing activities
Payment for subsidiary (1.0) (3.9)
undertakings
Cash acquired with - 0.9
subsidiaries
Acquisition expenses - (0.2)
Purchase of property, plant (5.4) (5.5)
and equipment and intangible
software
Saleof fixed assets 0.2 -
Interest received 0.5 1.2
Expenditure on capitalised (69.8) (68.5)
development costs
Saleof associated undertakings 0.4 0.8
==== ===
Net cash used in investing (75.1) (75.2)
activities
Financing activities
Proceeds from issue of share 60.2 47.1
capital
Share issue expenses (3.8) (0.9)
Interest paid (1.6) (0.5)
=== ===
Net cash generated by 54.8 45.7
financing activities
Net (decrease) in cash and (2.9) (5.8)
cash equivalents
Cash and cash equivalents at 31.4 37.2
beginning of period
---- ----
Cash and cash equivalents at 28.5 31.4
end of period
Less cash classified as held 8 (2.6) -
for sale
---- ----
Reported cash and cash 25.9 31.4
equivalents at end of period
==== ====
Notes to the unaudited financial information:
1. Basis of preparation
The unaudited financial information set out above does not constitute the Company*s statutory accounts within the meaning of section 240 of
the Companies Act 1985. The 2008 figures are based on unaudited accounts for the year ended 30 June 2008. The statutory accounts will be
finalised on the basis of the financial information presented by the directors in the preliminary announcement and will be delivered to the
Registrar of Companies following the Company*s Annual General Meeting. The auditors do not expect to issue a qualified report or for the
audit report to contain any matters to which they draw attention to without qualifying their report or to contain a statement under the
Companies Act 1985, s237(2) or (3).
The 2007 comparatives are derived from the statutory accounts for the year ended 30 June 2007 which have been delivered to the Registrar of
Companies and received an unqualified audit report, did not include references to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and did not contain a statement under the Companies Act 1985, s237(2) or (3). The income statement
comparatives have been restated to separately disclose the results of discontinued operations as required by IFRS 5 and the balance sheet
comparatives have been restated to reclassify �2.1 million of the deferred consideration as a current liability.
The draft unaudited Group consolidated financial statements on which this preliminary announcement is based have been prepared in accordance
with the Companies Act 1985 as applicable to companies reporting under IFRS and IFRIC interpretations issued and effective and endorsed by
the European Union as at the time of preparing these financial statements. The accounting policies used in the preparation of this financial
information are consistent with those set out in the statutory financial statements for the period ended 30 June 2007.
The Annual Report and Accounts for the year ended 30 June 2008 will be posted to the shareholders in October 2008. Additional copies will be
available via SCi*s website www.sci.co.uk, or from the Company Secretary at the Company*s registered office, Wimbledon Bridge House, 1
Hartfield Road, Wimbledon, London, SW19 3RU.
2. Segmental Analysis of Revenue
12 months to 30 June 12 months to 30 June 2007
2008
Revenue by destination Restated
�m �m
United Kingdom 21.8 28.2
Europe 48.2 41.1
United States of America 40.2 49.1
Rest of World 8.7 10.4
------ -------
Total revenue 118.9 128.8
==== ====
12 months to 30 June 12 months to 30 June 2007
2008
Revenue by business segment Restated
�m �m
Publishing 71.4 67.3
Distribution 42.2 53.7
Licensing 5.3 7.8
------ ------
Total revenue 118.9 128.8
=== ===
3. Staff costs and numbers
The average monthly number of employees (including executive directors) was:
12 months to 30 June 2008 12 months to 30 June 2007
Number Number
Sales, marketing and 200 222
administration
Development 880 645
---- -----
1,080 867
=== ===
At 30 June 2008 the Group had 163 (2007: 228) employees in sales, marketing and administration and 649 (2007: 743) in development
(excluding 138 employees in respect of operations that have been classified as either discontinued or where a provision has been made for
their redundancy).
Aggregate remuneration (including directors) comprised:
12 months to 30 June 2008 12 months to 30 June 2007
�m �m
Wages and salaries 40.2 32.4
Social security costs 3.5 3.2
Share based compensation 1.4 2.4
Cash settled equity incentive (1.3) (0.4)
schemes
Other pension costs 1.8 1.2
Redundancy 4.1 -
----- -----
49.7 38.8
=== ===
4. Exceptional charges
12 months to 30 June 2008 12 months to 30 June 2007
�m �m
Exceptional administrative
costs
Restructuring costs (6.2) -
Settlement of a trade dispute - (0.6)
----- -----
(6.2) (0.6)
=== ===
The Group initiated a strategic review in January 2008 and in February 2008 it announced its plans to restructure at an estimated cost
of �7 million. At the year end the Group has incurred restructuring costs of �6.2 million. The key components of the restructuring cost are
redundancy costs associated with reducing headcount, relocation of the quality assurance function to Montreal and professional, consulting
and legal fees.
The exceptional costs in the prior period of �0.6 million were incurred on the settlement of a trade dispute.
During the current year, the analysis on the income statement of exceptional items has changed. The directors believe this to be a more
appropriate presentation and accordingly the comparative figures have also been changed. This had no affect on the loss or assets reported.
5. Tax on loss on ordinary activities
12 months to 30 June 2008 12 months to 30 June 2007
�m �m
Current tax
UK corporation tax at 28% 0.3 0.2
Overseas taxation 2.6 0.2
----- -----
2.9 0.4
Deferred tax
Origination and reversal of (0.9) (2.1)
temporary differences
---- -----
Taxation charge / (credit) 2.0 (1.7)
=== ===
6. Loss per share
Loss per share has been calculated using the following:
12 months to 30 June 2008 12 months to 30 June 2007
Continuing Discontinued Total Continuing Discontinued Total
Loss for year Restated Restated
�m �m �m �m �m �m
Basic (138.0) (5.0) (143.0) (28.3) 0.2 (28.1)
Diluted (138.0) (5.0) (143.0) (28.3) 0.2 (28.1)
Weighted average number of
shares
m m m m m m
Basic 104.9 104.9 104.9 79.7 79.7 79.7
Diluted 104.9 104.9 104.9 79.7 79.7 79.7
There is no potential dilution of the loss per ordinary share at 30 June 2008 or 30 June 2007.
7. Non-GAAP measures of performance
Adjusted EBITDA Loss
12 months to 30 June 12 months to 30 June 2007
2008
�m �m
Loss from operations (134.9) (31.4)
Depreciation, amortisation and 31.7 15.3
impairment charged to income
statement
Operating loss on discontinued (2.2) -
operations
Exceptional charges (see note 6.2 0.6
4)
Share based compensation 0.1 2.2
-------- --------
Adjusted EBITDA Loss (99.1) (13.3)
==== ====
In calculating its Adjusted EBITDA the Group includes the results of discontinued operations and adds back exceptional items and share
based compensation.
8. Discontinued operations
With effect from 1 July 2008 the Group is selling its Spanish distribution company Proein SL for a consideration of EUR3.8million (�2.9
million). As the company was available for immediate sale and its sale was highly probable at the balance sheet date its assets and
liabilities have been classified as held for sale. An impairment loss of �3.5 million on the measurement of the disposal group to fair value
less costs to sell has been recognised and is included in discontinued operations. The results of the division have been classified as a
discontinued operation as it is considered to be a separate major geographical area of operations. The division is included within the
European geographical segment.
The results of discontinued operations and the assets and liabilities classified as held for sale are as follows:
Results of discontinued 12 months to 30 June 2008 12 months to 30 June 2007
operations
�m �m
Revenue 14.8 15.2
Operating expenses (17.0) (15.2)
--- ---
Operating Loss (2.2) -
Finance expense 0.1 -
Loss on measurement to fair (3.5) -
value
--- ---
Loss before tax (5.6) -
Tax credit 0.6 0.2
---- ----
Loss after tax (5.0) 0.2
=== ===
Pence Pence
Basic loss per share (4.8) 0.2
Diluted loss per share (4.8) 0.2
Assets and liabilities 30 June 2008
classified as held for sale
�m
Goodwill 0.5
Property, plant and equipment 0.4
Inventory 1.6
Trade and other receivables 3.9
Cash and cash equivalents 2.6
Loss on measurement to fair (3.5)
value less costs to sell
-----
Assets classified as held for 5.5
sale
===
Trade and other payables (1.2)
Provisions (1.4)
-----
Liabilities classified as held (2.6)
for sale
===
The cash outflow relating to discontinued operations during the year is �0.1 million.
9. Other intangible assets
Brands Technology Software Total intangible assets
�m �m �m �m
Cost
1 July 2006 69.2 47.7 1.5 118.4
Additions - 8.2 0.2 8.4
------ ----- ------ -------
30 June 2007 69.2 55.9 1.7 126.8
Additions - 0.3 0.4 0.7
------- ---- ----- ------
30 June 2008 69.2 56.2 2.1 127.5
Amortisation
1 July 2006 5.1 6.7 0.9 12.7
Charge for the period 4.6 6.4 0.4 11.4
------ ---- ----- -----
30 June 2007 9.7 13.1 1.3 24.1
Charge for the period 4.6 7.0 0.1 11.7
Impairment 3.7 12.6 - 16.3
----- ---- ---- ----
30 June 2008 18.0 32.7 1.4 52.1
Net book value
30 June 2008 51.2 23.5 0.7 75.4
30 June 2007 59.5 42.8 0.4 102.7
30 June 2006 64.1 41.0 0.6 105.7
Impairment of other intangible assets
Included in the impairment charge is an amount of �7.1 million in respect of the technology acquired with the Rockpool group of
companies and Bluefish Media GmbH. A full impairment charge against these assets was made as these activities will no longer form a
significant focus of the group and are unlikely to deliver any future economic benefits. A further impairment charge of �5.1 million was
made against the brands and technology of titles no longer developed and an impairment charge of �4.1 million against the brands and
technology of an under performing title.
The recoverable amount of these assets was measured by reference to value in use using cashflow projections based on contribution
forecasts. Growth rate assumptions were set at nil and a discount factor of 15% applied, being management's best estimate of the risk
attached to the underlying cashflows. The discount factor would need to increase by 5% and the contribution forecasts by a factor of 25% to
result in an additional impairment of greater than �1 million.
10. Capitalised development costs
Engines and technology Games Total
�m �m �m
30 June 2006 2.7 43.4 46.1
Capitalised in the year 22.7 45.8 68.5
Charged in the year - (32.8) (32.8)
----- ------ ------
30 June 2007 25.4 56.4 81.8
Capitalised in the year 4.9 64.9 69.8
Charged in the year (27.4) (74.5) (101.9)
----- ------ ------
30 June 2008 2.9 46.8 49.7
==== ==== =====
11. Deferred tax assets and liabilities
At 30 June 2008 the Group had substantial tax losses carried forward subject to the agreement of the tax authorities in various
territories.
Movement in deferred tax 30 June 2006 Movement in the 30 June 2007 Movement in the 30 June 2008
balance period period
�m �m �m �m �m
Tax losses 14.3 (1.0) 13.3 (1.6) 11.7
Brands and technology (31.3) 3.6 (27.7) 6.1 (21.6)
Short term temporary 3.7 (2.4) 1.3 (3.6) (2.3)
differences
Recognised deferred tax assets (13.3) 0.2 (13.1) 0.9 (12.2)
(liabilities)
Presented as:
Deferred tax asset 2.1 (2.0) 0.1 (0.1) -
Deferred tax liability (15.4) 2.2 (13.2) 1.0 (12.2)
Total (13.3) 0.2 (13.1) 0.9 (12.2)
Movement in unrecognised 30 June 2006 Movement in the 30 June 2007 Movement in the 30 June 2008
deferred tax balance period period
�m �m �m �m �m
Tax losses 6.4 1.8 8.2 31.4 39.6
Other short term temporary - 8.0 8.0 6.2 14.2
differences
Unrecognised deferred tax 6.4 9.8 16.2 37.6 53.8
assets
12. Called up share capital
30 June 2008 30 June 2007
�m �m
Authorised
400,000,000 (2007: 97,000,000) ordinary shares of 20.0 4.9
5p each
Allotted, called-up and fully-paid
258,480,671 ordinary shares of 5p 12.9 4.3
(2007: 86,470,185 ordinary shares of 5p each)
The movement in share capital was as follows:
30 June 2008 30 June 2008 30 June 2007 30 June 2007
Number of shares (m) �m Number of shares (m) �m
Restated Restated
At beginning of the year 86.5 4.3 76.2 3.8
Share subscription by Warner 8.9 0.4
Bros.
Issue of shares under placing 171.6 8.6 - -
and open offer
Issue of shares under earn out 0.3 - 0.1 -
agreements
Issue of new shares under SCi 0.1 - 0.8 0.1
1996 Share Option Plan
Issue of new shares to KBC - - 0.5 -
Peel Hunt
---- ----- ----- -----
At end of the year 258.5 12.9 86.5 4.3
==== === === ===
During the year 171,605,424 shares were issued under a placing and open offer, 295,762 shares were issued under earn out agreements and
109,300 shares were issued under the SCi 1996 Share Option Plan.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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