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Eidos plc (EID)

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Friday 27 February, 2009

Eidos plc

Interim Results

RNS Number : 9855N
Eidos plc
27 February 2009
 



                                


Eidos plc half-yearly financial report for the six months ended 31 December 2008 


Eidos plc ("Eidos" or the "Company")creator of some of the world's leading videogame properties including Tomb Raider, Hitman, Deus Ex and Championship Manager, is today announcing its Interim Results for the six months to 31 December 2008. 



Financial Highlights 


  • Revenue of £80.3m (2007: £63.4m) increased 26.7% primarily following the launch of Tomb Raider: Underworld.  


  • Adjusted EBITDA1 of £1.5m (2007: Adjusted EBITDA Loss £73.0m) reflects the completion of the first year of the Group's three-year strategic plan.  


  • Loss before tax of £9.8m (2007: £81.4m). Adjusted2 loss before tax of £1.0m (2007: £75.1m loss). 


  • Basic loss per share of 3.0p (2007: 96.2p). Adjusted3 loss per share of 0.7p (2007: 88.2p).


  • Net debt of £3.2m (2007: £5.7m).


  • Tomb Raider: Underworld sold in 2.6m units and at approximately 1.5m units sell through is outselling the two most recent iterations of the game over the same period, but lower than the initial plan set.  


  • Estimated full year revenue will be in the range of £160 - £180m.



Operational Highlights

  • First year of the Group's three-year strategic plan complete.

  • Studio-led model implemented with the Group now focused on key franchises.

  • Enhanced product assessment Green Light process implemented across the Group for all future projects.



Post period Highlights


  • On 12th February 2009 the Board recommended an offer from Square Enix to acquire the entire issued and to be issued ordinary share capital of Eidos at 32p per ordinary share.


  • Tomb Raider: Underworld now released on all planned formats worldwide, including PlayStation 2. Tomb Raider: Underworld Premium Downloadable Content released on 24th February 2009 with additional content due for release in March.


  • Reduced headcount at Crystal Dynamics and closure of Rockpool Games and Morpheme Game Studios as part of reducing costs and improving operating mechanics.


  • Further titles to be released in second half include the much anticipated Batman: Arkham Asylum, Battlestations: Pacific and Championship Manager 2009. 

___________________

1 See note 7
2 See note 7
3 See note 5


Phil Rogers, Chief Executive of Eidos said, 

"The first six months of trading this year were characterised by an incredibly competitive and increasingly challenging retail environment. The changes made at Eidos over the past year, coupled with the continued hard work and determination of our employees and external partners, means we are well placed one year into our three-year strategic plan to produce higher-quality, must-have games to entertain our consumer."


For further information: 

Eidos plc 

Phil Rogers - Chief Executive Officer

Robert Brent - Chief Financial Officer

+44 20 8636 3000

 

Madano Partnership  

 

Matthew Moth / Mark Way

 

+44 20 7593 4000

 

 

About Eidos

Eidos plc is the creator of some of the world's leading videogame properties. The Group consists 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 owns a valuable portfolio of intellectual property including: Tomb Raider, Hitman, Deus Ex, Championship Manager and Just Cause.  

www.eidos.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. Eidos does not undertake any obligation to update or revise any forward looking statements, whether as a result of new information, future developments or otherwise.

  CHIEF EXECUTIVE'S STATEMENT


Results overview



6 months to 31 December 2008

6 months to 31 December 2007

12 months to 30 June 2008


£m

£m

£m

Revenue

80.3

63.4

118.9

Gross Profit

47.6

30.9

56.1

Gross Margin

59.3%

48.7%

47.2%

Adjusted EBITDA4

1.5

(73.0)

(99.4)

Adjusted loss before tax5

(1.0)

(75.1)

(104.0)

Loss before tax

(9.8)

(81.4)

(136.0)

EPS (pence)

(3.0)p

(96.2)p

(136.3)p

Adjusted EPS6

(0.7)p

(88.2)p

(100.6)p


Revenue for the six months to 31 December 2008 increased 26.7% to £80.3m (2007:£63.4m)driven primarily by the release of Tomb Raider: Underworld. Monster Lab was the only other title released in the period (2007: 3 title releases). We also derived revenue from the continued sell through of catalogue product, license income and distribution of third party titlesOur gross profit margin improved 10.6 percentage points from 48.7% to 59.3% reflecting our focus on core franchises.


Adjusted EBITDA7 was £1.5m (2007: loss of £73.0m). This excludes non-cash items such as share based compensation and changes in the fair value of derivative contracts: the latter is now unwound and will not impact the full year. The demise of Entertainment UK Ltd, a subsidiary of the Woolworths Group negatively impacted EBITDA by £0.9m. 


Adjusted loss before tax8 was £1.0m (2007: loss of £75.1m). The loss before tax was £9.8m (2007: 81.4m). Adjusted loss per share9 was 0.7p (2007: 88.2p) while basic loss per share was 3.0p (2007: 96.2p).


In our trading update in January we informed the market that we had adjusted our projections for the second half of the financial year, with our full year revenue now expected to be in the range of £160 - £180m compared to our previous guidance of £180 - £200m.



Debt position


We also informed the market in January that we retained sufficient headroom within our committed banking facility and given revised revenue and profit expectations we might need to enter into discussions with our lending bank regarding our June 2009 covenants.  


We currently anticipate operating within our existing covenants, albeit with limited headroom, and our lending bank has given written assurances that it would approach potential discussions with the Company positively.

______________

4 See note 7
5 See note 7
6 See note 5
7 See note 7
8 See note 7
9 See note 5


Dividend


There are no current plans to pay a dividend. 



Tomb Raider overview


Tomb Raider: Underworld was released on the major gaming platforms on 18 November 2008 in North America and 21 November 2008 in the rest of the world. We were pleased that in our key European territories the game charted in the Top 10 for the 6 weeks from launch to Christmas10 and performed well against both competitive products and recent iterations of the franchise. 


However, on a global basis our sell through to 31 December 2008, at approximately 1.5 million units, was below our internal forecasts, primarily due to a lower start in North America. In a difficult North American economy we have seen retailers restricting inventory levels and price discounting AAA products above our expectations. Consumer demand was focused on fewer titles (of high quality) and competition was intense, which resulted in reduced consumer interest in our game during the holiday period. 


Despite challenges in the US market and a wider global recessionTomb Raider: Underworld is currently outselling the last two iterations of the game over the same period and is expected to follow similar sales trends to Tomb Raider: Legend, which has sold through over 4.5m copies to dateTomb Raider: Underworld's sustained sales lifespan will also be supported by two additional downloadable content releases.  This is a new initiative for the Group, looking to extend the sales cycle and engage both the consumer and our retail partners in new game levels after the main release.  



         Operations overview


We have completed the first year of our three-year strategic planOur studio-led model is fully functional within our wholly-owned studios, each benefitting from an infrastructure built around our cornerstone franchises, with responsibility for brand and product marketing. Our studios are constantly improving the way they work with our territory distribution offices and partners to drive product campaigns.


We have revised our Green Light process, which monitors and assesses the progress of videogame development within the Group. Our enhanced process is now fully operational and is designed to materially improve the quality, cost and timelines of our videogame development.  

As part of our ongoing efforts to improve the mechanics of our business and actively manage our cost base we have reduced headcount at Crystal Dynamics and focused the studio solely on the Tomb Raider franchise. We have also closed Rockpool Games and Morpheme Game Studios.

______________

10UK chart data is provided by Chart track, France is provided by internal analysis. In Germany Tomb Raider: Underworld was Top 10 in the PLAYSTATION 3 charts for 6 weeks, in the All Formats charts for the first three weeks.

  Recommended cash offer


Subsequent to the year end, the Eidos Board reached agreement with Square Enix Holdings Co. Ltd ("Square Enix"), a Japanese company listed on the Tokyo Stock Exchange, on the terms of a recommended takeover offer (the "Offer") under which SQEX Ltd, a wholly-owned subsidiary of Square Enix, will acquire the entire issued and to be issued ordinary share capital of Eidos. The Offer is to be effected by means of a scheme of arrangement under the Companies Act 2006.


Under the terms of the Offer, Eidos shareholders will be entitled to receive 32 pence in cash for each Eidos share. The Offer values the entire existing issued share capital of Eidos at approximately £84.3 million.


Eidos has a strong portfolio of established franchises, with highly talented employees. Square Enix recognizes this and sees Eidos as both complementary to their business as well as a valuable brand within videogames.


It is expected that the scheme document containing further details of the Offer will be posted in early March, that the Offer will be put to Eidos shareholders for their approval at a Court Meeting and at an Extraordinary General Meeting in March 2009 and that, subject to the Offer becoming unconditional, the scheme will become effective before the end of April 2009.



Board changes and name change 


During this reporting period Robert Brent joined the Company as Chief Financial Officer and two Non-executive Directors, Aaron Brown and Kevin Tsujihara, stood down from the Board.

On 3 December 2008, the company changed its name to Eidos plc and the trading (ticker) symbol changed to EID.



Outlook and risks


The Company is cautious about the near-term impact of the difficult global economic environment on sales volumes and price discounting. The cost of games development is also increasing and with it risk, particularly in respect of the success and timing of product releases and the achievability of forecast sales and margins. Therefore we believe that scale is required to develop, market and sell AAA games and operationally we need stability to provide the appropriate platform for our studios. 


Strategically we shall continue to focus on our cornerstone franchises, concentrating effort and resource on those high quality titles that will deliver long-term value, whilst tactically exploring and investing in new franchise opportunities that we believe hold the best chance of becoming our cornerstone franchises of tomorrow.


In January we revised our sales assumptions for Tomb Raider: Underworld and other products to be released and we continue to estimate that our full year revenue will be in the range of £160 - £180m. Looking to the second half of this financial year, we are encouraged by the positive reaction to the forthcoming Batman: Arkham Asylum videogame. We continue to work closely with DC Comics and Warner Bros. and benefit from cross-promotional opportunities such as the inclusion of the first video trailer for Batman: Arkham Asylum on all DVDs (excluding Blu-ray) of the movie The Dark Knight


In addition, we will be releasing Battlestations: Pacific, the follow-up to the highly acclaimed Battlestations: Midway and a brand new iteration of Championship Manager in Championship Manager 2009




Statement of Directors' responsibilities

The Directors' confirm to the best of their knowledge: 

  • The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; 

  • The half-yearly management report includes a fair review of the information required by DTR 4.2.7R being an indication of important events that have occurred during the first 26 weeks of the financial year and their impact on the condensed set of financial statements and a description of the principle risks and uncertainties for the remaining 26 weeks of the year; and 

  • The half-yearly management report includes a fair review of the information required by DTR 4.2.8R being disclosure of related party transactions and changes therein since the last annual report.


On behalf of the Board

Phil Rogers (Chief Executive) 

Robert Brent (Chief Financial Officer) 

Tim Ryan (Chairman) 


  Independent Review Report to Eidos Plc 

Introduction

We have been engaged by Eidos to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2008 which comprises the Consolidated Income Statement, the Consolidated Balance Sheet, the Consolidated Cashflow Statement, the Consolidated Statement of Changes in Equity and related explanatory notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of and has been approved by the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting'', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist Eidos in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 December 2008 is not prepared, in all material respects, in accordance with International Accounting Standard 34, as adopted by the European Union, and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Emphasis of matter - going concern

Without qualifying our conclusion, we draw attention to the disclosures in note 2 of the condensed set of financial statements concerning the group's ability to continue as a going concern. These include the following material uncertainties:

  • the ongoing availability of the credit facility given the potential covenant breaches; and

  • the ability to obtain additional funding from alternative sources should it be required; and

  • the achievability of forecasts and key assumptions within the forecasts.

These events and conditions, along with other matters as disclosed in note 2, indicate the existence of material uncertainties which may cast significant doubt over the Group's ability to continue as a going concern. The condensed set of financial statements does not include the adjustments that would result if the Group were unable to continue as a going concern.


BDO Stoy Hayward LLP

Chartered Accountants and Registered Auditors

London

27th February 2009


  Consolidated Income Statement for the simonths ended 31 December 2008


Notes


6 months to 31 December 2008

6 months to 31 December 2007

(Restated 
- see note 1)

12 months to 30 June 2008

(Restated 
- see note 1)




Unaudited

Unaudited

Audited




£m

£m

£m







Revenue

3


80.3

63.4

118.9

Cost of sales



(32.7)

(32.5)

(62.8)




----------

----------

----------

Gross Profit



47.6

30.9

56.1

Development costs



(21.7)

(79.6)

(104.3)

Advertising



(9.4)

(10.1)

(17.6)

Administrative costs - exceptional



-

-

(6.2)

  • other



(25.6)

(22.6)

(63.2)

Administrative expenses



(56.7)

(112.3)

(191.3)




----------

----------

----------

Loss from operations



(9.1)

(81.4)

(135.2)

Finance income



0.2

0.3

0.5

Finance costs



(0.9)

(0.3)

(1.3)




----------

----------

----------

Loss before taxation

3


(9.8)

(81.4)

(136.0)

Tax credit / (charge)

4


2.0

(2.0)

(2.0)




----------

----------

----------

Loss from continuing operations



(7.8)

(83.4)

(138.0)

Post tax loss on discontinued operations



-

-

(5.0)




-------

---------

----------

Loss for the period



(7.8)

(83.4)

(143.0)




=====

=====

=====

Loss per share



Pence

Pence

Pence

Basic

5


(3.0)

(96.2)

(136.3)

Diluted

5


(3.0)

(96.2)

(136.3)







Continuing operations






Basic

5


(3.0)

(96.2)

(131.6)

Diluted

5


(3.0)

(96.2)

(131.6)




=====

=====

=====


  Consolidated Balance Sheet at 31 December 2008


Notes

31 December 2008

31 December 2007

30 June   2008



Unaudited

Unaudited
(R
estated 
- see note 1)

Audited
(R
estated 
- see note 1)



£m

£m

£m

Non current assets





Property plant and equipment


7.8

7.9

7.4

Goodwill


2.0

2.7

2.0

Other intangible assets 

8

69.3

97.3

75.4

Capitalised development costs

9

58.7

37.9

49.7

Investment in associates


0.2

0.2

0.2

Deferred tax assets


-

0.3

-



-----

-----

-------



138.0

146.3

134.7

Current assets





Inventory


7.6

6.6

3.5

Trade and other receivables

10

73.6

55.6

30.9

Cash and cash equivalents


19.8

12.0

25.9

Assets classified as held for sale


-

-

5.5



-------

-------

-------



101.0

74.2

65.8



-------

-------

-------

Total assets


239.0

220.5

200.5



====

====

====

Non-current liabilities





Deferred consideration


-

1.4

1.4

Deferred tax liabilities


9.9

14.1

12.2



-------

-------

-------



9.9

15.5

13.6

Current liabilities





Bank overdraft


23.0

17.7

-

Trade and other payables

10

38.7

32.9

29.8

Tax liabilities


6.1

2.7

5.5

Accruals and deferred income


21.7

11.8

10.9

Provisions

11

21.0

17.1

17.8

Liabilities held for sale


-

-

2.6



-------

-------

-------



110.5

82.2

66.6



-------

-------

-------

Total liabilities


120.4

97.7

80.2






Equity 





Share capital

12

13.2

4.3

12.9

Share premium

12

170.7

121.5

169.2

Merger reserve

12

81.3

81.3

81.3

Capital reserve 

12

6.3

6.3

6.3

Foreign currency translation reserve

12

5.0

0.8

1.2

Share based compensation

12

0.5

6.1

6.5

Employee benefit trust share reserve 

12

(0.9)

(0.9)

(0.9)

Retained loss 

12

(157.5)

(96.6)

(156.2)



-------

-------

-------

Equity attributable to equity holders of the parent Company 

12

118.6

122.8

120.3



-------

-------

-------

Total liabilities and equity


239.0

220.5

200.5



====

====

====

  Consolidated Cash Flow Statement for the six months ended 31 December 2008



6 months to 31 December 2008

6 months to 31 December 2007
    (Restated 
- see note 1)

12 months to 30 June 2008

(Restated 
- see note 1)



Unaudited

Unaudited

Audited



£m

£m

£m

Operating activities





Loss from continuing operations


(9.8)

(81.4)

(136.0)

Loss from discontinued operations


-

-

(5.6)

Share based compensation 


0.5

(0.5)

0.1

Depreciation on property, plant and equipment and software amortisation charged to the income statement


1.8

2.1

3.6

Amortisation of brands and technology


4.5

5.8

11.6

Impairment of brands and technology


1.6

-

16.3

Impairment of goodwill


-

-

0.2

Financing income


(0.2)

(0.3)

(0.5)

Foreign exchange


(0.5)

-

0.3

Finance costs


0.9

0.3

1.3

Loss on measurement of discontinued operations to fair value less costs to sell


-

-

3.5



-------

-------

--------



(1.2)

(74.0)

(105.2)

(Increase) / decrease in trade and other receivables


(34.8)

(14.3)

7.9

(Increase) /decrease in inventories


(4.1)

0.6

2.2

Release of capitalised development costs


25.7

79.6

101.9

(Decrease) /increase in trade and other payables, accruals, deferred income and provisions


21.3

10.8

10.4



-------

-------

--------

Cash generated from operations


6.9

2.7

17.2











Income taxes repaid 


0.2

0.2

0.2




-------

-------

--------

Cash flows from operating activities



7.1

2.9

17.4

Investing activities





Payment for subsidiary undertaking


(1.7)

(2.2)

(1.0)

Sale of subsidiaries


2.9

-

-

Purchase of property, plant and equipment and intangible software


(2.0)

(3.7)

(5.4)

Sale of fixed assets


-

-

0.2

Interest received


0.2

0.3

0.5

Expenditure on capitalised development costs


(34.7)

(35.7)

(69.8)

Sale of associated undertakings


-

0.4

0.4



-------

-------

--------

Net cash used in investing activities


(35.3)

(40.9)

(75.1)






Financing activities





Proceeds from issue of share capital


-

1.2

60.2

Share issue expenses


-

-

(3.8)

Interest paid


(0.9)

(0.3)

(1.6)



-------

-------

--------

Net cash generated by financing activities


(0.9)

0.9

54.8






Net decrease in net cash and cash equivalents


(29.1)

(37.1)

(2.9)

Cash and cash equivalents at beginning of period


25.9

31.4

31.4



-----

-------

--------

Cash and cash equivalents at end of period


(3.2)

(5.7)

28.5

Less cash classified as held for sale


-

-

(2.6)



-------

-------

--------

Reported cash and cash equivalents at end of period


(3.2)

(5.7)

25.9



====

====

====


  Notes:

1. Basis of preparation

This Interim Report has been prepared in accordance with the Disclosure and Transparency Rules of the UK Financial Services Authority and International Financial Reporting Standards (IFRS), as adopted by the European Union (EU). The accounting policies applied are consistent with those described in the Annual Report and Financial Statements 2008. The Interim Report has been prepared in accordance with IAS 34 'Interim Financial Reporting' and should be read in conjunction with the Annual Report and Financial Statements 2008.


The results for the half-year are unaudited. The financial information in this interim announcement does not constitute statutory accounts within the meaning of Section s434 of the Companies Act 2006.

 
The comparative financial information for the year ended 30 June 2008 does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. The statutory accounts of Eidos 
plc for the year ended 30th June 2008 have been reported on by the Company's auditors and have been delivered to the Registrar of Companies. The report of the auditors was unqualified, 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 Section 237(2) or 272(3) of the Companies Act 1985.

 
The income statement comparatives for the 6 months to 31 December 2007 have been restated to disclose separately the results of discontinued operations as required by IFRS5. The income statement and cashflow comparatives for the 12 months to 30 June 2008 have been restated to reclass foreign exchange expense of £0.3 million from within finance costs to administrative costs. The balance sheets as at 30 June 2008 and 31 December 2007 have been restated to reclass taxation and social security liabilities of £1.4 million and £2.9 million respectively from Tax Liabilities to Trade and Other Payables.


Copies of this Interim Report are available from the Company's registered office at Wimbledon Bridge House, 1 Hartfield Road, Wimbledon, SW19 3RU.



2. Going concern

In determining the appropriate basis of preparation of the interim financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future. 

    

The Group has funded its working capital using a bank credit facility of £25 million which expires in April 2010. At 31 December 2008, the Group was in full compliance with the financial covenants contained in the facility agreement. In January 2009, it was announced in the trading update that the Group had passed its peak net debt position and that there was sufficient headroom within the committed banking facility but that given revised profit expectations, the Company might need to enter into discussions with its lending bank regarding the June 2009 covenants. 


Management currently anticipates being able to operate within existing covenants, albeit with limited headroom. The lending bank has given written assurances that it would approach potential discussions with the Company positively. Based on the discussions, and the written expressed intentions of the bank, the Directors have concluded that it is reasonable to assume their continued support however, without a formal commitment, this cannot be guaranteed.


Management has prepared detailed cash flow projections for the remainder of this financial year and for the following two financial years. These projections indicate that the Group should be able to remain within its agreed facility for the foreseeable future following the issuance of these interim financial statements. However, the Directors consider that risks exist particularly in respect of the success and timing of product releases and the achievability of forecast sales and margins, and acknowledge that this could result in the need for additional short term funding. The Directors believe there are a number of options available to them to meet any additional funding requirement, including strategic partnerships and the possible sale of assets.


Subsequent to the year end, the Eidos Directors reached agreement with the Directors of Square Enix Holdings Co. Ltd ('Square Enix') on the terms of a recommended offer under which SQEX Ltd, a wholly-owned subsidiary of Square Enix, will acquire the entire issued and to be issued ordinary share capital of Eidos. The offer is to be effected by means of a scheme of arrangement under the Companies Act 2006. 


Under the terms of the offer, Eidos Shareholders will be entitled to receive 32 pence in cash for each Eidos Share. The Offer values the entire existing issued share capital of Eidos at approximately £84.3 million. 


Having reviewed the cash flow projections and key assumptions, together with assessing the position of the bank, the possible options for additional funding and the recommended offer from Square Enix, the Directors have a reasonable expectation that the Group will be able to meet its liabilities as they fall due for the foreseeable future. It is on this basis that the Directors consider it appropriate to prepare the Group's interim financial statements on a going concern basis. 


However for the reasons described above, the Directors recognise that there are material uncertainties that may cast significant doubt on the Group's ability to continue as a going concern, and therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. These material uncertainties comprise:

  • the ongoing availability of the credit facility given the potential covenant breaches; and

  • the ability to obtain additional funding from alternative sources should it be required; and 

  • the achievability of forecasts and key assumptions within the forecasts.







  3. Segmental Analysis


6 months to 31 December 2008

Unaudited

6 months to 31 December 2007

(Restated) 
U
naudited

12 months to 30 June 2008

(Restated) 
A
udited


£m

£m

£m





Revenue by destination




United Kingdom

17.4

13.9

21.8

Europe

40.1

23.6

48.2

United States of America

18.2

21.7

40.2

Rest of World

4.6

4.2

8.7


------

------

--------

Total Revenue

80.3

63.4

118.9


===

===

====

Loss before tax by destination




United Kingdom *

(7.6)

(77.0)

(129.4)

Europe

(0.9)

(2.5)

(3.8)

United States of America

(1.2)

(1.8)

(2.6)

Rest of World

(0.1)

(0.1)

(0.2)


------

------

--------

Loss before tax

(9.8)

(81.4)

(136.0)


===

===

====

* Central costs have been included within the United Kingdom results. 




4. Taxation



6 months to 31 December 2008

6 months to 31 December 2007

12 months to 30 June 2008


Unaudited

Unaudited

Audited


£m

£m

£m





Current tax




UK corporation tax 

-

(1.0)

(0.3)

Overseas taxation

(0.6)

(0.2)

(2.6)


-----

-----

-----


(0.6)

(1.2)

(2.9)

Deferred Tax




Origination and reversal of temporary differences

2.6

(0.8)

0.9


------

------

--------

Taxation credit / (charge) 

2.0

(2.0)

(2.0)


===

===

====


At 31 December 2008 the Group had substantial tax losses carried forward subject to the agreement of the tax authorities in various jurisdictions.


  5. Loss per share



6 months to 31 December 2008



6 months to 31 December 2007



12 months to 30 June 2008




Continuing

Discon-

tinued

Total

Continuing

Discon-

tinued

Total

Continuing

Discon- 

tinued

Total











Loss for the period

Basic


£m

£m

£m

£m

£m

£m

£m

£m

£m

Basic and diluted

(7.8)

-

(7.8)

(83.4)


(83.4)

(138.0)

(5.0)

(143.0)











Adjusted loss for the period

Basic


£m

£m

£m

£m

£m

£m

£m

£m

£m

Basic and diluted

(1.8)

-

(1.8)

(76.5)

-

(76.5)

(103.3)

(2.2)

(105.5)











Weighted average number of shares

m

m

m

m

m

m

m

m

m

Basic and diluted

261.9

261.9

261.9

86.7

86.7

86.7

104.9

104.9

104.9





















Loss for the period per share

p

p

p

p

p

p

p

p

p

Basic and diluted

(3.0)

-

(3.0)

(96.2)

-

(96.2)

(131.6)

(4.7)

(136.3)











Adjusted loss for the period per share

p

p

p

p

p

p

p

p

p

Basic and diluted

(0.7)

-

(0.7)

(88.2)

-

(88.2)

(98.5)

(2.1)

(100.6)












The number of potentially issuable shares that has not been included in the diluted EPS calculation because they are anti dilutive is 12,696,960 (2007: 5,139,974) The weighted average number of shares has not been diluted for loss making periods.

6. Dividends

No dividend has been declared for the six months ended 31 December 2008 (2007: £Nil).  

7.  Non-GAAP measures of performance


6 months to 31 December 2008

6 months to 31 December 2007 (restated)

12 months to 30 June 2008 (restated) 


£m

£m

£m

Loss from operations

(9.1)

(81.4)

(135.2)

Depreciation, amortisation and impairment charged to income statement 

7.9

7.9

31.7

Operating loss on discontinued operations

-

-

(2.2)

Changes in fair value of derivative contracts

2.2

-

-

Exceptional charges

-

-

6.2

Share based compensation

0.5

0.5

0.1


-----

-----

-----

Adjusted EBITDA Profit/(Loss)

1.5

(73.0)

(99.4)





Depreciation charged to the income statement 

(1.8)

(2.1)

(3.8)

Net financing cost

(0.7)

-

(0.8)


-----

-----

-----

Adjusted Loss before tax

(1.0)

(75.1)

(104.0)



Tax charge

(0.8)

(1.4)

(1.5)



-----

-----

-----

Adjusted loss for the period

(1.8)

(76.5)

(105.5)


====

===

===


8. Other Intangible Assets


6 months to 31 December 2008

Unaudited

6 months to 31 December 2007

Unaudited

12 months to 30 June 2008

Audited


£m

£m

£m









At start of period

75.4

102.7

102.7

Additions

0.5

0.4

0.7

Amortisation 

(5.0)

(5.8)

(11.7)

Impairment

(1.6)

-

(16.3)


------

------

--------

At end of period

69.3

97.3

75.4


===

===

====


Included in the impairment charge is an amount of £1.6 million relating to the brand of an underperforming title. The recoverability of Other Intangible Assets was measured by reference to value in use, using cash flow projections based on contribution forecasts. Growth rate assumptions were set at 3% and a discount factor of 17% applied, being management's best estimate of the risks attached to the underlying cash flows. The discount factor would need to increase to 22% to result in an additional impairment greater than £1 million.




9. Capitalised Development Costs


6 months to 31 December 2008

Unaudited

6 months to 31 December 2007

Unaudited

12 months to 30 June 2008

Audited


£m

£m

£m









At start of period

49.7

81.8

81.8

Capitalised in the period

34.7

35.7

69.8

Charged in the period to the income statement

(25.7)

(79.6)

(101.9)


------

------

--------

At end of period

58.7

37.9

49.7


===

===

====


10. Working Capital


31 December 2008

Unaudited

31 December 2007

Unaudited

30 June 2008

Audited


£m

£m

£m

Trade debtors

66.9

47.4

25.4

Prepayments and other income

4.3

3.1

3.4

Other debtors

2.4

5.1

2.1


-----

------

------

Total trade and other receivables

73.6

55.6

30.9


=====

=====

=====



31 December 2008

Unaudited

31 December 2007

(Restated)
Unaudited

30 June 2008

(Restated)
Audited


£m

£m

£m

Trade creditors

22.1

17.3

12.1

Royalty creditors

5.2

10.0

12.9

Other creditors

5.8

2.7

3.4

Sales and payroll taxes

5.6

2.9

1.4


------

-------

------

Total trade and other payables

38.7

32.9

29.8


====

=====

=====


11. Current provisions


Returns Provision

Restructuring provision

Deferred consideration

Total


£m

£m

£m

£m

31 December 2007

14.4

-

2.7

17.1

Charged to the income statement in the period

12.9

1.8

-

14.7

Utilised in the period

(12.5)

-

-

(12.5)

Transferred to liabilities classified as held for sale

(1.5)

-

-

(1.5)


-----

-------

------

-------

30 June 2008

13.3

1.8

2.7

17.8

Charged to the income statement in the period

14.6

-

-

14.6

Utilised in the period

(7.9)

(1.8)

-

(9.7)

Settled by cash and shares

-

-

(3.1)

(3.1)

Transfer from non-current provisions

-

-

1.4

1.4


------

------

--------

---------

31 December 2008

20.0

-

1.0

21.0


=====

=====

=====

=====



12. Consolidated statement of changes in equity for the six months ended 31 December 2008


Share capital

Share premium

Merger reserve

Capital reserve

Foreign Currency translation reserve

Share based compens-
ation 

Employee benefit trust share reserve

Retained Profit

Total


£m

£m

£m

£m

£m

£m

£m

£m

£m

30 June 2007 - Audited

4.3

120.3

81.3

6.3

(0.6)

5.1

(0.9)

(13.2)

202.6











Loss for the period

-

-

-

-

-

-

-

(83.4)

(83.4)

Foreign exchange

-

-

-

-

1.4

-

-

-

1.4


------

------

------

------

------

------

------

------

------

Total recognised income and expense for the period

-

-

-

-

1.4

-

-

(83.4)

(82.0)











New shares issued

-

1.2

-

-

-

-

-

-

1.2

Share based compensation

-

-

-

-

-

1.0

-

-

1.0


------

------

------

------

------

------

------

------

------

31 December 2007- Unaudited

4.3

121.5

81.3

6.3

0.8

6.1

(0.9)

(96.6)

122.8


====

====

====

====

====

===

====

=====

=====

Loss for the period

-

-

-

-

-

-

-

(59.6)

(59.6)

Foreign exchange

-

-

-

-

0.4

-

-

-

0.4


------

------

------

------

------

------

------

------

------

Total recognised income and expense for the period

-

-

-

-

0.4

-

-

(59.6)

(59.2)











New shares issued

8.6

51.5

-

-

-

-

-

-

60.1

Share issue costs

-

(3.8)

-

-

-

-

-

-

(3.8)

Share based compensation

-

-

-

-

-

0.4

-

-

0.4


------

------

------

------

------

------

------

------

------

30 June 2008 - Audited

12.9

169.2

81.3

6.3

1.2

6.5

(0.9)

(156.2)

120.3


====

====

====

====

====

===

====

=====

=====

Loss for the period

-

-

-

-

-

-

-

(7.8)

(7.8)

Foreign exchange

-

-

-

-

3.8

-

-

-

3.8


------

------

------

------

------

------

------

------

------

Total recognised income and expense for the period

-

-

-

-

3.8

-

-

(7.8)

(4.0)











New shares issued

0.3

1.5

-

-

-

-

-

-

1.8

Share based compensation

-

-

-

-

-

0.5

-

-

0.5

Transfer for expired options

-

-

-

-

-

(6.5)


6.5

-


------

------

------

------

------

------

------

------

------

31 December 2008- Unaudited

13.2

170.7

81.3

6.3

5.0

0.5

(0.9)

(157.5)

118.6


====

====

====

====

====

===

====

=====

=====




This information is provided by RNS
The company news service from the London Stock Exchange
 
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