RNS Number:0596M
SCI Entertainment Group PLC
09 June 2003
SCi Entertainment Group Plc
Interim results for the six months ended 31 March 2003
Highlights
* Turnover increased by 22% to #7.3 million. SCi's highest ever turnover in
the first half of a financial year.
* Loss before tax of #0.8 million, significantly better than broker's
forecast.
* All major product releases on track, providing the basis for strong
growth in 2003.
* Worldwide sales of Conflict: Desert Storm reach 1.5 million units.
* Net cash balance of #2.8m, at 31 March 2003.
* Worldwide distribution strengthened by further agreements with Capcom in
Japan and Take Two in Europe.
* New product acquisition, Rolling, boosts the product pipeline for 2004.
* SCi Games Ltd board established to strengthen depth of Group management.
Jane Cavanagh, Chief Executive, said
" Continued strong sales in the first six months leave us ahead of our
original expectations. With all major releases, including The Great
Escape, Conflict: Desert Storm 2 and Futurama on track, the prospects
for meeting our expectations for the 2003 financial year are very
encouraging. These excellent results validate SCi's strategy and its
unique business model."
For further information, please contact:
SCi Entertainment Group Plc
Jane Cavanagh, Chief Executive 020 7585 3308
Rob Murphy, Finance Director 020 7585 3308
Bell Pottinger Financial
Press: Matthew Moth/Robin Tozer 020 7861 3882/3891
Investors: Neville Harris 020 7861 3894
High resolution images are available for the media to view and download free of
charge from www.vismedia.co.uk.
Chief Executive's statement
Our vision and strategy
SCi publishes computer games on all major platforms including Sony Playstation 2
and Microsoft Xbox. Over the last three years, we have transformed SCi through
investment in licences, products and people. We are now one of the UK's leading
games publishers. Our success with The Italian Job and Conflict: Desert Storm
proves that we have sufficient presence to deliver global number one hits. With
a strong management team and long-term relationships with leading developers and
distribution partners, we are well positioned for future profitable growth.
Our prime objective is to deliver shareholder value, through strong and
consistent earnings growth and by building our intellectual property portfolio.
Our strategy is to create, own and exploit valuable brands through investment in
high quality licences and products and to reduce our exposure to the commercial
risks in the games industry by our unique focus on publishing. Over the next
three years, we aim to deliver this by releasing an increasing number of high
quality titles combined with continued strong control of our cost base.
A successful strategy - results for the six months to 31 March 2003
In the last financial year, SCi reported record turnover and profits as the
success of titles such as The Italian Job and Conflict: Desert Storm
demonstrated that our strategy was working. The results for the first six months
of the 2003 financial year indicate that we are well placed to repeat this
success with both our turnover of #7.3 million and our loss before tax of #0.8
million being substantially better than budget.
As I indicated in my last statement, all our major releases in the 2003
financial year are scheduled for the second half. Accordingly, we budgeted for a
first half loss before tax of approximately #4 million. Therefore, the actual
loss of #0.8 million is significantly better than originally forecast. There are
two principal reasons for this.
Continuing sales of Conflict: Desert Storm have been stronger than originally
forecast. The product has now sold 1.5 million units across all platforms. Sales
have been particularly strong in the United States and turnover includes further
royalties from our US distributor, Take Two. It also includes guaranteed revenue
from Capcom who are to publish the title in Japan. The success of Conflict:
Desert Storm plus further contributions from The Italian Job, Gumball 3000 and
Four Four Two accounts for approximately one-third of the improvement over
budget.
The remainder of the improvement over budget arises from timing differences
which are likely to reverse in the second half of the year. Development
expenditure in the first six months was lower than budgeted. Whilst we have
continued to build our pipeline, for example through acquiring products such as
Midway and Rolling and licences such as Reservoir Dogs, we spent less than
planned. This is because of our insistence on signing only the strongest titles
at the right price. We therefore expect to spend the balance of the development
budget in the second half of the year. In addition, good progress with the
development of The Great Escape and Conflict: Desert Storm 2 has triggered
guaranteed revenue from Take Two earlier than budgeted.
Outlook for the year to 30 September 2003
The outlook for the full year remains positive. We plan to release Futurama, The
Great Escape and Conflict: Desert Storm 2 in the second half. Conflict: Desert
Storm, in particular, has quickly become established as a valuable brand, and
the release of Conflict: Desert Storm 2 is eagerly awaited. The development of
these products is on track and our expectations of initial orders are in line
with budget. Both The Great Escape and Conflict: Desert Storm 2 are being
published in the United States by Take Two. Turnover in the second half will
include minimum guarantees from these arrangements.
Our continued ability to deliver products substantially on schedule illustrates
the benefit of outsourcing games development and also a reflection of the
quality of our development partners and our internal systems and team.
Working capital
At 31 March 2003 the Group had net cash balances of #2.8 million, having
generated cash of a similar amount in the preceding six months.
The Group expects to remain cash positive for most of the financial year.
However, from August we expect to make substantial marketing and manufacturing
payments for the release of The Great Escape and Conflict: Desert Storm 2.
Therefore, similar to last year it is likely that we will use our overdraft
facilities at the end of the financial year prior to collecting cash from
customers in the first quarter of the 2004 financial year.
SCi Games board
The establishment of a strong management team is a key part of our strategy. We
recently established an SCi Games board which includes Darren Barnett as
Development Director, Dave Clark as Marketing Director and Patrick O'Luanaigh as
Creative Director. This team has considerable experience in the games industry
and is responsible, along with Bill Ennis, Rob Murphy and myself for the
operational management of the Group. This board is supported by senior
management expertise in the areas of Licensing, Legal, Operations, Quality
Assurance and Public Relations together with an outstanding team of strong
producers and creative designers who closely manage the development of our
products.
Future outlook
Much of our pipeline for the 2004 financial year is already in place. The
release schedule will include Rolling, Richard Burns Rally, Tidejackers, Midway
and Conflict: Missing Presumed Dead. Our latest acquisition, Rolling, a
roller-blading game endorsed by many of the world's leading skaters, was
purchased at an advanced stage of completion from the receivers of Rage plc.
We are already making plans for the 2005 financial year and beyond. Our pipeline
includes further products in the Conflict series and a new version in the hugely
successful Carmageddon series, as well as games based on existing licenses such
as Reservoir Dogs.
The global market for computer games, already comparable in size to the film and
music industries, continues to grow and to prove resilient to more general
cycles in economic activity. With strong management, strengthening cash flows, a
high quality product pipeline and recognisable brands, we are positioned to
deliver increasing profitability and growth and achieve our objective of
creating substantially higher value for our shareholders.
Jane Cavanagh
Chief Executive
9 June 2003
Independent review report to SCi Entertainment Group Plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 March 2003 on pages 6 to 10. We have read the other
information contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the financial
information.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone other than the company
for our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with Listing Rules of
the Financial Services Authority which require that the accounting policies and
presentation applied to the interim figures should be consistent with those
applied in preparing the preceding annual accounts except where any changes, and
the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 March 2003.
BDO Stoy Hayward
Chartered Accountants
8 Baker Street
London
W1U 3LL
9 June 2003
Consolidated profit and loss account
For the six months ended 31 March 2003
Unaudited Unaudited Audited
6 months to months to year to
31 March 31 March 30 September
2003 2002 2002
#000s #000s #000s
Turnover 7,281 5,957 17,712
Cost of sales (2,070) (1,831) (6,351)
__________ __________ _________
Gross profit 5,211 4,126 11,361
---------- ---------- ----------
Development costs (3,911) (1,739) (4,285)
Other administrative costs (1,845) (1,489) (4,178)
Depreciation and amortisation (304) (330) (617)
---------- ---------- ----------
Administrative expenses (6,060) (3,558) (9,080)
__________ __________ _________
Operating (loss) profit (849) 568 2,281
Interest receivable (payable) 4 (42) (74)
(payable)
__________ __________ _________
(Loss) profit on ordinary
activities before taxation (845) 526 2,207
Tax on loss on ordinary
activities - - -
__________ __________ _________
(Loss) profit for
ordinary activities after
taxation (845) 526 2,207
============ ============ ===========
(Loss) earnings per share
- basic (2.97)p 2.69p 10.11p
- diluted (2.97)p 2.61p 9.74p
============ ============ ===========
The above results arise from continuing activities.
Consolidated balance sheet
31 March 2003
Unaudited Unaudited Audited
31 March 31 March 30 September
2003 2002 2002
#000s #000s #000s
Fixed assets
Goodwill 3,070 3,528 3,304
Tangible assets 266 291 255
Investments 500 500 500
__________ __________ __________
3,836 4,319 4,059
Current assets
Stocks - finished goods for
resale 309 18 377
Debtors - due within one
year 3,896 2,597 8,387
Cash at bank and in hand 2,789 716 311
__________ __________ __________
6,994 3,331 9,075
Creditors: Amounts falling
due within one year (2,176) (3,938) (3,635)
__________ __________ __________
Net current assets
(liabilities) 4,818 (607) 5,440
__________ __________ __________
Net assets 8,654 3,712 9,499
============ ============ ============
Capital and reserves
Called-up equity share capital 1,423 979 1,423
Share premium account 28,337 24,675 28,337
Merger reserve 464 464 464
Profit and loss account (21,570) (22,406) (20,725)
__________ __________ __________
Equity shareholders' funds 8,654 3,712 9,499
============ ============ ============
Consolidated cash flow statement
For the six months ended 31 March 2003
Unaudited Unaudited Audited
31 March 31 March 30 September
2003 2002 2002
Note #000s #000s #000s
Net cash inflow
(outflow) from
operating activites 6 2,938 (402) (3,509)
Returns on
investments and
servicing of
finance
Net interest
received (paid) 14 (26) (40)
Interest element of
finance lease rentals (10) (16) (34)
__________ __________ __________
4 (42) (74)
Capital expenditure
and financial
investment
Purchase of tangible
fixed assets (82) (49) (79)
__________ __________ __________
Net cash outflow 2,860 (493) (3,662)
before financing 2,860 (493) (3,662)
Financing
Increase (decrease)
in short term
borrowings - 826 (332)
Issue of ordinary
share capital - - 4,106
Capital element of (32) (60) (128)
finance lease rentals (32) (60) (128)
__________ __________ __________
(32) 766 3,646
__________ __________ __________
Increase (decrease)
in cash in the year 7 2,828 273 (16)
============ ============ ============
The accompanying notes are an integral part of this consolidated cash flow
statement.
Notes to the accounts
1. The interim financial information set out herein relating to the results of
SCi Entertainment Group Plc ("the Company") and subsidiary undertakings
("the Group") for the period ended 31 March 2003 does not constitute
statutory accounts within the meaning of section 240 of the Companies Act
1985. The Group's auditors have audited the statutory accounts for the year
ended 30 September 2002 and have issued an unqualified report thereon and
did not contain a statement under section 237(2) - (3) of the Companies Act
1985 and these accounts have been delivered to the Registrar of Companies.
The Directors approved the interim financial information on 9 June 2003. A
copy of this report will be sent to shareholders and further copies are
available from the Company's registered office, 11 Ivory House, Plantation
Wharf, London SW11 3TN and the Company's website at www.sci.co.uk.
2. The interim financial information has been prepared on a going concern
basis, which assumes that the Group will continue in operational existence
for the foreseeable future.
3. There have been no changes from the accounting policies set out in the last
published accounts.
4. The calculation of loss per share is based upon the consolidated loss after
taxation of #845,000 (31 March 2002 - profit #526,000, 30 September 2002 -
profit #2,207,000) divided by the weighted average number of ordinary shares
in issue in the six month period to 31 March 2003 of 28,466,487 (six months
to 31 March 2002 19,578,504 shares, 12 months to 30 September 2002
21,824,640 shares).
5. The Directors of the Company do not propose the payment of a dividend.
6. Reconciliation of operating profit to net cash outflow from operating
activities.
Unaudited Unaudited Audited
6 months to 6 months to year to
31 March 31 March 30 September
2003 2002 2002
#000s #000s #000s
Operating profit (loss) (849) 568 2,281
Depreciation charges 70 86 149
Goodwill amortisation 234 244 468
Profit on sale of - - 3
tangible fixed assets
Decrease in stocks 68 1,226 867
Decrease (increase) in 4,491 242 (5,548)
debtors
Decrease in creditors (1,076) (2,768) (1,729)
__________ __________ __________
2,938 (402) (3,509)
============ ============ ============
7. Analysis of net (debt) funds
1 October Cashflow 31 March
2002 2003
#000s #000s #000s
Cash at bank and in hand 311 2,478 2,789
Overdrafts (350) 350 -
__________ __________ __________
(39) 2,828 2,789
Finance leases (122) 32 (90)
__________ __________ __________
Net funds (debt) (161) 2,860 2,699
============ ============ =============
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