SCI Entertainment - Final Results
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RNS Number:5965E
SCI Entertainment Group PLC
27 September 2007
SCi Entertainment Group Plc
Preliminary results for the twelve months ended 30 June 2007
SCi Entertainment Group Plc ('SCi) is one of the world's leading publishers of
computer and video games. Its brands, published under the Eidos label, include
Tomb Raider, Hitman, Championship Manager, Just Cause and Battlestations:
Midway.
12 months to 30 June 2007 12 months to 30 June 2006
(unaudited) (audited)
£m £m
Revenue 144.0 179.1
==== ====
Non GAAP measure (see note 2)
Non GAAP EBITDA * 15.0 28.8
==== ====
GAAP measure
(Loss) profit before tax (30.0) 8.1
==== ====
* Non GAAP EBITDA is stated before exceptional items £14.4m (2006: £1.8m) and
share based compensation £2.2m (2006: £4.4m) and the effect of exceptionally
high price protection charges, £14.5m (2006: £nil).
Key points
Update on potential offer: On 4 September 2007 the Board confirmed it had
received an approach regarding a possible offer for the Company. Since then it
has received further approaches and discussions are ongoing with a number of
potential acquirers.
Results for the year: Revenue for the year fell principally due to timing of
product launches and weaker retail prices on old generation platforms. Both of
these factors reflect the hardware transition in the video games market. An
exceptional provision of £13.8m has been established against the carrying value
of capitalised development costs.
Actions to build the Group: During the financial year the Group has taken steps
to build long-term value. These include:
Strategic relationship with Warner Bros.
Acquisitions to strengthen New Media Business
Significant investment in product pipeline including products for the successful
Nintendo Wii and DS platforms
Establishment of new development studio in Montreal
Changes to board. The PLC board is strengthened by the appointment of Phil
Rogers as CFO.
Bill Ennis becomes Managing Director - Publishing
Rob Murphy becomes Managing Director - Studios
Commenting on these results, Jane Cavanagh, Chief Executive of SCi said:
'Despite the challenges posed in a hardware transition year the Board has
continued to focus on the objective of building long-term value. We have made
significant investments in the year to increase and broaden our product
pipeline, improve the long-term efficiency of our development studios and grow
our New Media business. We have the strongest portfolio of products moving
forward in the history of the company'.
For further information:
SCi Entertainment Group +44 20 8636 3000
Jane Cavanagh - Chief Executive Officer
Phil Rogers - Chief Finance Officer
Rob Murphy - Managing Director - Studios
Madano Partnership +44 20 7593 4000
Matthew Moth
Mark Way
Graham Moonie
About SCi
SCi Entertainment Group is one of the world's leading publishers and developers
of entertainment software. Its publishing label Eidos has publishing operations
across Europe and the US and a number of high quality development studios
including Crystal Dynamics, Io Interactive, Beautiful Game Studios, Eidos
Studios Hungary, Eidos Studios Sweden, Pivotal Games and Eidos Montreal.
The Group has a valuable portfolio of intellectual property including: Tomb
Raider, Hitman, Deus Ex, Championship Manager, Carmageddon, the Conflict series,
Just Cause and Battlestations: Midway. Titles currently in development include:
Kane & Lynch: Dead Men, Conflict: Denied Ops and Highlander.
http://corporate.sci.co.uk/
Chairman's statement
During the financial year, the Group experienced challenging trading conditions
in a market strongly affected by the transition from old hardware platforms to
next generation platforms. However, the Group continued to make progress
through a number of strategic actions to ensure that we are well positioned for
the future and the anticipated growth and pricing model on next generation
consoles.
Results
As set out in note 2, EBITDA before exceptional items £14.4m (2006: £1.8m) and
share based compensation payment £2.2m (2006: £4.4) and before the impact of
exceptionally high price protection charges was £15.0m (2006: £28.8m). Pre-tax
loss was £30.0m (2006: Profit £8.1m). In addition, as previously indicated, we
have incurred significant charges in two important areas both strongly related
to the consequences of the hardware transition.
As previously announced the Group incurred exceptionally high price protection
charges of £14.5m. These charges, recorded as a deduction from revenue, arose
from lower retail prices, particularly on PlayStation 2 products.
The Group has carefully assessed its level of capitalised development costs. We
have previously indicated that we would establish a provision of approximately
£4m against our expenditure on PlayStation 3 products.
The Board continues to believe in the long-term commercial success of
PlayStation 3 but believes this may take more time than originally forecast by
Sony. The Board is of the opinion that the key driver to the acceleration of
the installed base of PlayStation 3 will be a further hardware price cut.
Therefore until such time that such a price move is announced by Sony, the Board
believes that it is prudent to increase our provision to £13.8m against the
carrying value of certain capitalised development costs. This is recorded as an
exceptional charge.
Update on potential offer
On 4 September 2007 we announced that we had received an approach regarding a
possible offer for the Company. Since that time, we have received further
approaches and discussions are ongoing with a number of potential acquirers.
There remains no certainty that any offer for the Company will be made or as to
the terms of any such offer were one to be made. A further announcement will be
made in due course.
Board changes
As the Group continues to grow we have recognised the need to expand the senior
management team. Accordingly I am delighted that Phil Rogers, who joined the
Group in February 2007 as Corporate Development Director, has been promoted to
the PLC Board as Chief Financial Officer replacing Rob Murphy. Phil was
previously Vice President Corporate Development at Electronic Arts and is a
Chartered Accountant. In relation to this promotion there are no matters to
disclose in accordance with Listing Rule 9.6.13R.
Bill Ennis, formerly Commercial Director, becomes Managing Director - Publishing
and Rob Murphy, formerly CFO, becomes Managing Director - Studios. These
changes have immediate effect.
Strategic actions
Despite challenging trading conditions, the Group continued to make strong
strategic progress during the financial year:
We completed a series of agreements with Warner Bros. Entertainment, one of the
world's leading media companies. Under these arrangements, Warner Bros. has made
a significant investment of £44m in the ordinary share capital of the Group and
we have entered into a series of licensing arrangements with Warner Bros. to
create and publish games based on a series of their properties - including
Batman, Looney Tunes and the Hanna Barbera catalogue. These titles are now in
production. The first of these titles will be released in 2008.
We have grown our New Media division through the strategic acquisitions of
Rockpool Games, Bluefish Media and Morpheme. These acquisitions increase our
scale in online and mobile gaming and distribution.
We have invested £68.5m in new products and technologies to increase our product
pipeline and improve the long-term efficiency of our studios. Importantly we
have increased our focus on the highly successful Nintendo Wii and DS platforms
with 10 titles to be released by Christmas 2007 and currently over 20 products
for these platforms scheduled for the 2008 calendar year.
We opened a new development studio in Montreal, demonstrating our commitment to
expand our development resources in cost effective locations. Montreal is
already benefiting from our strategy of technology sharing. During the past
three months we have also established an operating base in China to further our
strategy of utilising cost effective outsourcing.
During the year our recently established studio in Budapest enjoyed number one
chart success with its first release Battlestations: Midway.
A recent report from PWC's Global Entertainment Outlook predicts the global
video games market to grow from $26bn in 2005 to $45bn in 2010. We believe that
through our investments and strategy we are well positioned to take full
advantage of this growth.
Tim Ryan
27 September 2007
Chief Executive's statement
Our results for the year reflect the trading conditions experienced as a result
of the transition from old platforms to next-generation platforms.
Exceptionally high price protection charges and the changes to our release
schedule resulted in revenues and EBITDA being below our original expectations.
From an overall market perspective, the past twelve months have confirmed the
changing ways in which people purchase and play games, the platforms on which
they play them and a significant expansion of the age range and interest of game
players.
It was a year which confirmed that the transition which is currently being
experienced by the video games industry is much more than simply a console
upgrade; it is an opportunity to introduce new games and gaming genres, develop
games for previously untapped audiences, deliver games in new and innovative
ways to the end consumer and expand business with better potential margins.
To address this market backdrop over the past twelve months the company has made
good progress in making sure we are well positioned to exploit the opportunities
of being a global publisher of interactive entertainment software.
We have increased our focus on Nintendo Wii and DS platforms. We recently
announced plans to release thirty new titles for these platforms by the end of
the calendar year 2008. An example of our success on these platforms is Pony
Friends, which was launched in May and illustrates our ability to create new
franchises for Nintendo's younger and broader audience. This product has
shipped in excess of our original expectations and marks the beginning of
another new franchise for the Group.
We have today confirmed the release date of Kane and Lynch: Dead Men which will
be in store from 20th November in the US and 23rd November in Europe. With the
movie rights already optioned by Lionsgate Films, this is a hugely anticipated
title which we believe will prove to be a multi-million unit franchise from our
acclaimed studio Io Interactive, creators of Hitman.
Also eagerly anticipated are the Nintendo Wii and Xbox 360 versions of Tomb
Raider Anniversary which are due for a pre-Christmas launch.
Our commitment to invest in technology, expand our studios and New Media group
and broaden our product portfolio - through both expanding our wholly owned
original intellectual properties and building strategic partnerships with
companies such as Warner Bros. - demonstrates our commitment to long-term growth
and building shareholder value.
Results to 30 June 2007 - Overview
Total revenues for the year were £144.0m, down 20% compared to prior year.
However, these revenues are stated after £14.5m of exceptionally large price
protection charges and therefore on an adjusted basis, revenues were £158.5m, a
decrease of 12% compared to 2006.
Group revenues for the period arose from the following sources:
12 months to 30 June 12 months to 30 June
2007 2006
£m £m
Published products 75.2 145.3
Distribution 60.1 28.6
Licensing and New Media 8.7 5.2
144.0 179.1
These revenues arose from the following unit sales:
Unit sales (m)
Published products 8.3 9.4
Distribution 6.4 2.5
14.7 11.9
Just Cause, Tomb Raider Anniversary and Battlestations: Midway were the largest
contributors to the results of our Publishing division.
Tomb Raider Anniversary celebrated ten years of our world-leading franchise with
a number one hit and one million units shipping on launch.
We successfully launched new titles, Just Cause and Battlestations: Midway, and
both became number one hits. Over one million units of Just Cause were shipped
during the year. We launched Battlestations: Midway, a title developed by our
Budapest studio, in February. Importantly, both titles are wholly owned
properties, both properties have sequels in development and we believe both
titles have the potential to be long-term franchises.
The largest contributor to distribution revenues was continued sales of Lego
Star Wars. In addition, sales of Justice League Heroes, distributed by the
Group on behalf of Warner Bros, were strong.
SCi made a gross profit of £57.0m for the financial year which was 40% of
revenue. This compares to a gross profit of £103.8m or 58% of revenue, in the
prior year. The reduction in gross profit was due to a much higher proportion
of distribution revenue, on which the Group earns lower margins, plus pricing
pressure reflected in an exceptionally high charge for price protection.
Total development costs charged to the income statement for the year were £32.8m
(2006 £28.1m). This represents 44% of revenue from published products, compared
to 19% in the previous year. Total charges include an exceptional provision of
£13.8m against capitalised development costs. This includes provision against
our investment in certain PlayStation 3 products and technologies.
The charge for other administrative overhead costs of £41.3m (2006 £47.8m)
includes £15.3m (2006 £14.8m) of depreciation and amortisation charges and £2.2m
(2006 £4.4m) of share based compensation. Therefore the underlying level of
cash based overheads was £23.8m (2006 £28.6m). The underlying level of overhead
expenditure has remained relatively constant. However, the Group has classified
approximately £6m of costs including the cost of Quality Assurance as
development rather than administration.
After allowing for all exceptional costs plus non-cash amortisation charges loss
before tax was £30.0m (2006: profit before tax £8.1m).
Our achievements
We remain focused on delivering solid, long-term, shareholder value through
growing our player base, improving our customer offerings, investing in
intellectual properties and broadening our product base. We believe financial
year 2007 can be summarised as a year in which we made good progress against
these objectives and is a year in which we made important strategic investments.
Our success with Pony Friends on Nintendo's handheld DS device illustrates our
ability to create new franchises for a younger and broader audience. Following
the release in May in Europe and June in North America, Pony Friends had shipped
0.3 million units by the financial year-end, ahead of original expectations, and
has continued to sell extremely well post year end establishing another wholly
owned original intellectual property.
Nintendo's Wii and DS platforms have revolutionised gaming with their innovative
and simple approach to entertaining. Designed for a pick-up-and-play gamer the
success of these platforms has opened up our market to new audiences. The
creation in 2007 of our dedicated Casual Games division enables us to focus on
driving growth from this consumer trend. A version of Pony Friends for the
Nintendo Wii is planned and the Group has 10 further titles for the Nintendo
platforms scheduled for release by Christmas 2007 and currently over 20 products
for Nintendo DS and Wii for the 2008 calendar year.
Our New Media group's acquisitions this year of Rockpool Games, Bluefish Media
and Morpheme demonstrates our belief that online connectivity and mobile games
represents a significant opportunity to grow our revenue streams over the next
cycle.
We believe that the growth and success of broadband and mobile infrastructures
will present many opportunities including extending the life span of our
products, enabling us to offer new content and sell to consumers through online
micro-transactions and extending and continuing our game-play across different
devices.
Battlestations: Midway and Just Cause utilised the online capability of
Microsoft's Xbox Live Marketplace to good effect in 2007; Battlestations: Midway
generated over 1 million downloads of additional online content from the demo,
wallpapers and videos and the Just Cause single player game-demo generated over
800,000 downloads itself.
We have invested across our core business in 2007.
We have continued to expand our internal development capabilities with the
opening of a studio in Montreal and invested further in technology to keep us at
the cutting edge of next-generation game development. Today our development
processes are benefiting from a backbone of shared technologies, engines and
game assets which we will look to further enhance over the coming year.
Over the year our in house development resource is over 600 employees and we
expect to continue to build our studios in terms of size and skills, especially
in locations that allow us to keep development costs low.
We have invested significantly in the 2008 and future pipeline of products and
we are looking forward with much anticipation to the sequels to Just Cause and
Battlestations: Midway, which are already in development - and new versions of
world-leading franchises Tomb Raider and Hitman. We will also be launching
brand new IP into the market in the shape of Kane and Lynch: Dead Men, which is
generating a considerable amount of press interest prior to November launch.
Our distribution business provides a low-risk, profitable source of revenue that
makes most effective use of our global sales and distribution infrastructure.
Over the year we secured agreements with numerous companies to distribute strong
third-party product including Justice League Heroes from Warner Bros., Bionicle
Heroes from Travellers Tales and through Proein, our 100% owned Spanish
subsidiary, Final Fantasy XII from Square Enix.
We created some winning partnerships with world leading media groups. In early
2007, production began on the new Hitman film from 20th Century Fox, starring
Timothy Olyphant and Dougray Scott, this was shot on location in Europe and is
currently scheduled for a worldwide theatrical release this Autumn.
Our Priorities and Outlook
The investment in our business over the past twelve months gives us a strong
product pipeline for financial year 2008 and well into 2010. Our publishing
business is planning 13 core game new releases on over 34 SKU in the next 12
months compared to 10 core game new releases in FY07. We are also scheduled to
more than double the number of games launched by our New Media and Casual Games
groups.
Over the next year we believe we will see further expansion of our target
audiences and really see the power of next-generation platforms. Therefore our
future priorities are set clearly on establishing our new games firmly in the
market place and appealing to this expanding demographic across a broader
platform base. We will also continue to build on our existing franchises of 13
intellectual properties which have sold over 1 million units each, including the
Tomb Raider franchise which has now sold over 32 million units and whose story
line and game innovation continues to evolve.
Our staff are fundamental to the success of the business and I would like to
take this opportunity to thank all our employees for their contributions and
commitment over the past twelve months.
Jane Cavanagh
27 September 2007
Consolidated income statement for the twelve months ended 30 June 2007
Notes 12 months to 30 June 12 months to 30 June
2007 2006
Unaudited Audited
£m £m
Revenue 144.0 179.1
Cost of sales (87.0) (75.3)
---------- ----------
Gross Profit 57.0 103.8
Development costs - exceptional (13.8) (1.1)
other (19.0) (27.0)
Advertising (13.7) (19.4)
Other Administrative costs - (0.6) (0.7)
exceptional
other (41.3) (47.8)
Administrative expenses (88.4) (96.0)
---------- ----------
(Loss) profit from operations (31.4) 7.8
Finance income 1.2 0.7
Finance costs (0.5) (0.3)
Profit on disposal of associate 0.6 -
Share of profit (loss) of associates 0.1 (0.1)
---------- ----------
(Loss) profit before taxation (30.0) 8.1
Tax credit 3 1.9 5.4
---------- ----------
(Loss) profit for the year (28.1) 13.5
===== =====
Attributable to:
Equity holders of the parent (28.1) 13.4
Minority Interest - 0.1
---------- ----------
(28.1) 13.5
===== =====
(Loss) earnings per share Pence Pence
Basic 4 (35.3) 18.5
Diluted 4 (35.3) 17.7
===== =====
Consolidated balance sheet at 30 June 2007
Notes 30 June 2007 30 June 2006
Unaudited Audited
£m £m
Non current assets
Property plant and equipment 6.5 3.2
Goodwill 2.7 4.7
Intangible assets 7 102.7 105.7
Capitalised development costs 8 81.8 46.1
Investment in associates 0.6 0.4
Deferred tax assets 0.1 2.1
------- -------
194.4 162.2
Current assets
Inventory 7.2 5.2
Trade and other receivables 41.3 57.5
Cash and cash equivalents 31.4 37.2
79.9 99.9
Assets classified as held for sale - 0.2
------- -------
Total assets 274.3 262.3
==== ====
Non current liabilities
Deferred consideration 6.2
Deferred tax liabilities 13.2 15.4
------- -------
19.4 15.4
Current liabilities
Trade and other payables 30.0 29.8
Tax liabilities 4.1 7.3
Accruals and deferred income 10.1 8.0
Provisions 8.1 15.0
------- -------
52.3 60.1
------- -------
Total liabilities 71.7 75.5
Equity
Share capital 4.3 3.8
Share premium 120.3 74.6
Merger reserve 81.3 81.3
Capital reserve 6.3 6.3
Foreign currency translation (0.6) 0.5
reserve
Share based compensation 5.1 4.7
Employee benefit trust share (0.9) (0.9)
reserve
Retained profits (13.2) 14.9
Equity attributable to equity 202.6 185.2
holders of the parent company
Minority interests - 1.6
Total equity 202.6 186.8
------- -------
Total liabilities and equities 274.3 262.3
==== ====
Consolidated Cash Flow Statement for the twelve months ended 30 June 2007
12 months to 30 June 12 months to 30
2007 June 2006
Unaudited Audited
£m £m
Operating activities
(Loss) profit before taxation (30.0) 8.1
Share based compensation payment 2.2 4.4
Depreciation on property, plant and equipment and software 1.6 1.8
amortisation charged to the income statement
Amortisation of brands and technology 11.0 10.6
Goodwill impairment 2.7 2.4
Net financing income (0.7) (0.4)
(Profit) loss made by associates (0.1) 0.1
Profit on disposal of associate (0.6) -
-------- -------
(13.9) 27.0
Decrease / (increase) in trade and other receivables 14.4 (26.6)
(Increase) / in inventories (2.6) (1.4)
(Decrease) / increase in trade and other payables, accruals, (4.9) 6.3
deferred income and provisions
Release of capitalised development costs 32.8 28.1
-------- -------
Cash generated from operations 25.8 33.4
Income taxes paid (1.7) (0.5)
-------- -------
Cash flows from operating activities 24.2 32.9
Investing activities
Payment for subsidiary undertaking 3.9 -
Cash acquired with subsidiaries (0.9) -
Acquisition expenses (0.2) -
Purchase of property, plant and intangible software (5.5) (2.2)
Interest received 1.2 0.7
Expenditure on capitalised development costs (68.5) (57.4)
Sale of investments in associated undertakings 0.8 -
-------- -------
Net cash used in investing activities (75.2) (58.9)
Financing activities
Proceeds from issue of share capital 47.1 17.6
Share issue expenses (0.9) (0.2)
Interest paid (0.5) (0.3)
-------- -------
Net cash generated by financing activities 45.7 17.1
Net (decrease) in net cash and cash equivalents (5.8) (8.9)
Cash and cash equivalents at beginning of period 37.2 46.1
Cash and cash equivalents at end of period 31.4 37.2
Consolidated statement of changes in equity for the twelve months ended 30 June
2007
Share Share Merger Capital Foreign Share based Employee Retained Total
capital premium reserve reserve Currency compensation benefit Profit
translation trust share
reserve reserve
£m £m £m £m £m £m £m £m £m
1 July 2005 3.5 57.4 69.9 6.3 - 0.3 (0.9) 1.5 138.0
Profit for the - - - - - - - 13.4 13.4
period
New shares 0.2 17.4 - - - - - - 17.6
issued
Share issue - (0.2) - - - - - - (0.2)
costs
Issue of share 0.1 - 11.4 - - - - - 11.5
for remaining
10% of Eidos
Share based - - - - - 4.4 - - 4.4
compensation
Foreign exchange - - - - 0.5 - - - 0.5
Total charged to 0.3 17.2 11.4 - 0.5 4.4 - - 33.8
equity
Total income and 0.3 17.2 11.4 - 0.5 4.4 - 13.4 47.2
expense for the
period
------ ------ ------ ------ ------ ------ ------ ------ ------
30 June 2006 3.8 74.6 81.3 6.3 0.5 4.7 (0.9) 14.9 185.2
=== === === === === === === === ===
Loss for the - - - - - - - (28.1) (28.1)
period
New shares 0.5 46.6 - - - - - - 47.1
issued
Share issue - (0.9) - - - - - - (0.9)
costs
Share based - - - - - 2.4 - - 2.4
compensation
Share based (2.0) (2.0)
compensation
transferred to
liabilities *
Foreign exchange - - - - (1.1) - - - (1.1)
Total charged to 0.5 45.7 - - (1.1) 0.4 - - 45.5
equity
Total income and 0.5 45.7 - - (1.1) 0.4 - (28.1) 17.4
expense for the
period
- - - - - - - - -
30 June 2007 4.3 120.3 81.3 6.3 (0.6) 5.1 (0.9) (13.2) 202.6
=== ==== === === ==== == ==== ===== =====
* Transfer to liabilities of amounts in respect of cash settled overseas staff
equity schemes previously classified within reserves
Notes:
1. Basis of preparation
The accounting reference date of the Group is 30 June. The current year's
results are for the period to 6 July 2007. The comparative year's results are
for the year to 30 June 2006. The unaudited financial information set out above
relating to the results of SCi Entertainment Group plc (the 'Company') and
subsidiary undertakings (the 'Group') for the years ended 30 June 2007 and 30
June 2006 does not constitute statutory accounts within the meaning of section
240 of the Companies Act 1985.
The financial statements have been prepared in accordance with the accounting
policies and presentation required by International Financial Reporting
Standards, incorporating International Accounting Standards ('IAS') and
Interpretations (collectively 'IFRS')as endorsed by the EU.
A copy of the statutory accounts for the year ended 30 June 2006 has been
delivered to the Registrar of Companies. The comparative numbers for the year
ended 30 June 2006 have been extracted from these accounts. The auditors' report
on those accounts was unqualified, did not include references to any matters to
which the auditors drew attention by way of emphasis without qualifying their
report(s) and did not contain a statement under section 237(2)-(3) of the
Companies Act 1985.
The Annual report and accounts for the year ended 30 June 2007 will be posted to
the shareholders in October 2007. 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. Non GAAP measures of performance
EBITDA before exceptional items and share based compensation
12 months to 12 months to
30 June 2007 30 June 2006
£m £m
(Loss) profit from operations (31.4) 7.8
Depreciation and amortisation 15.3 14.8
Exceptional items (see note 5) 14.4 1.8
Share based compensation payment 2.2 4.4
---- ---
EBITDA before exceptional items and share based 0.5 28.8
compensation payment *
==== ====
Exceptional items charged to revenue 14.5 -
EBITDA before all exceptional items and share 15.0 -
based exceptional items
* EBITDA before exceptional items and share based compensation payment is based
on Revenue of £144.0m. This revenue is after deduction of exceptionally high
price protection charges of £14.5 million (2006 - £Nil) arising from the
hardware transition. Further details of this charge are set out in Note 5.
This charge is recorded as a deduction in arriving at revenue. Had this charge
not been incurred then EBITDA before exceptional items and share based
compensation payment would have been £15.0 million (2006 - £28.8m).
3. Taxation
12 months to 30 June 2007 12 months to 30 June 2006
£m £m
Current tax
UK corporation tax at 28% (0.2) (0.2)
Overseas taxation - (2.6)
----- -----
(0.2) (2.8)
Deferred Tax
Origination and reversal of temporary 2.1 8.2
differences
-------- ---
Taxation credit 1.9 5.4
===== ===
At 30 June 2007 the Group had substantial tax losses carried forward subject to
the agreement of the tax authorities in various jurisdictions.
4. (Loss) earnings per share
12 months to 30 12 months to 30
June 2007 June 2006
Loss Weighted average Earnings Weighted average
number of shares number of shares
£m Million £m Million
Basic (28.1) 79.7 13.5 72.9
==== ==== ==== ====
Diluted (28.1) 79.7 13.5 76.4
==== ==== ==== ====
The weighted average number of shares has not been diluted for loss making
periods.
The number of potentially dilutive options as at 30 June 2007 is 5,522,274
(2006: 6,667,924).
5. Exceptional items
Development costs
The Group has established a provision of £13.8 million against the carrying
value of capitalised development costs. This reflects the net realisable value
of the Group's investment in certain products and capitalised technologies. In
setting the provision the Group has been particularly aware of the potential
impact of slower than anticipated growth of the PlayStation 3 platform on sales
forecasts.
Administrative costs
During the year the Group incurred £0.6m in relation to the settlement of a
trade dispute.
Exceptionally large price protection charges.
The Group's revenue is stated after deduction of price protection charges.
Price protection charges are incurred by the Group when it mutually agrees with
retailers to issue credit notes for products previously sold to retailers but
not yet sold to the end customer. The Group's experience over a long period is
that price protection charges average approximately 10% of gross sales to
retailers. In the year to 30 June 2007 the Group experienced severe price
pressure on platforms with declining popularity, particularly the Sony
PlayStation 2. As a result the Group incurred excess price protection charges
of £14.5m, resulting in a total charge of approximately 20% of gross sales to
retailers. The Group regards this excess as exceptionally high.
6. Dividends
No dividend has been declared for the twelve months ended 30 June 2007 (2006
£Nil).
7. Intangible assets
Brands Technology Software Total intangible
assets
£m £m £m £m
Cost
1 July 2005 69.2 47.7 0.9 117.8
Additions - - 0.6 0.6
------- ---- ----- ------
30 June 2006 69.2 47.7 1.5 118.4
Additions - acquired with - 8.4 - 8.4
subs
------ ----- ------ -------
30 June 2007 69.2 56.1 1.5 126.8
Amortisation
1 July 2005 0.5 0.7 - 1.2
Charge for the period 4.6 6.0 0.9 11.5
------ ---- ----- -----
30 June 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
Net book value
30 June 2007 59.5 43.1 0.2 102.7
30 June 2006 64.1 41.0 0.6 105.7
30 June 2005 68.7 47.0 0.9 116.6
8. Capitalised development costs
Engines and Games Total
technology
£m £m £m
30 June 2005 - 16.8 16.8
Capitalised in the year 2.7 54.7 57.4
Charged in the year - (28.1) (28.1)
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
This information is provided by RNS
The company news service from the London Stock Exchange
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