COMPANY PRESS RELEASE: Eidos one of the world’s leading publishers and developers of entertainment software, announces results for the six months ended 30 September 2001.
Turnover decreased 42.8% from £54.3 million (pre exceptional charges) to £31.0 million. Operating losses pre goodwill and exceptional charges were reduced by 4.5% from £20.5 million to £19.6 million. The loss per share was 21.8p, or 15.4p excluding goodwill and exceptional charges, compared to 65.4p and 11.7p respectively. This is based on a weighted average number of shares in issue during the period of 125,667,301 (2000: 115,182,342). The 2000 comparatives for earnings per share have been restated for the Rights Issue that occurred during the current period, in accordance with FRS14 – Earnings per share.
In the six months to 30 September 2001 we shipped six new titles (2000: eight), in addition to French and Junior versions of Who Wants to be a Millionaire? (WWTBAM). The new titles included Commandos 2: Men of Honour on PC CD and the UK version of Who Wants to be a Millionaire? 2 on PC CD and PSOne. Although more than 500,000 units of Commandos 2: Men of Honour were shipped on launch and the title entered the retail charts in the top five in all of our major markets, total sales of this title and the various new versions of WWTBAM failed to achieve
the levels originally anticipated for them. All of our new releases in the period were on the PC CD and PSOne formats, with all of our major next generation titles for this year shipping after the period end.
The gross margin was 60.5% for the half-year compared to 55.9% for the corresponding period last year. The increase in the margin has resulted from reduced royalty costs and from the predominance of higher margin PC CD titles in the period. With the release of a significant number of next generation console titles scheduled after the period end, margins for the full year are expected to revert to a level closer to the 57.7% reported at 30 June 2001, which will nevertheless remain an
improvement over the prior year.
The period was notable for the much improved control over total operating expenses before goodwill which have fallen by 23.7% to £39.0 million, compared to £51.2 million for the same period last year (pre exceptional charges). £2.5 million of this saving has come from the disposal of certain non-core activities that occurred during the prior year. However, the bulk of the decrease has been achieved through reductions in overall costs and notably in fixed selling, marketing and general and administrative costs across all areas of our core businesses.
Selling and Marketing
Advertising costs in the six months to 30 September 2001 were £5.1 million (16.5% of turnover) compared to £9.0 million (16.6% of pre exceptional turnover) in the comparable period last year.
This includes costs of £1.4 million in respect of titles to be released in the second half of the year (2000: £0.5 million).
The fixed element of selling and marketing costs was down 53.9% to £4.1 million compared to £8.9 million in the prior year. The significant reduction in expenditure is due to permanent savings arising from reduced exhibition, salary and licence amortisation costs in our core publishing businesses.
Research and Development
Research and development represents the Company’s investment in product development of £17.8 million (2000: £17.5 million). This includes £12.2 million (2000: £12.1 million) relating to more than 30 titles to be released over the next two years.
The fixed element of research and development for the period was £2.2 million (2000: £2.7 million).
General and Administrative
General and administrative costs before goodwill amortisation, were £9.9 million, compared to £13.0 million (pre exceptional charges) in the corresponding period. The reduction in like for like expenditure reflects permanent savings in salary, financing and other costs. Total general and administrative costs for the period were £15.5 million including goodwill amortisation of £5.6 million, compared to £18.4 million in 2000 (pre exceptional charges).
Financing and Cashflow
The 1 for 3 rights issue announced on 31 May 2001 was successfully completed in July, raising £51.6m net of costs. The Group’s existing bank borrowings were repaid in full from the proceeds and at 30 September the Group had cash balances of £31.6m (2000: £5.4m). The Group retains a committed £15m banking facility which we do not anticipate drawing upon in the current year.
The net cash outflow from operating activities was £18.7 million compared to £14.2 million in the corresponding period. This is after Eidos’ investment in research and development of £20.0 million (2000: £20.2 million).