Eidos plc Announces Financial Results for the Second Quarter and Half Year Ended September 30, 1998
Second Quarter Revenues Increase 76% to 21.8m Pounds Net Loss Reduces to 8.8m Pounds(from 19.1m pounds)
LONDON, Nov. 24 /PRNewswire/ -- Eidos plc (Nasdaq: EIDSY - news), one of Europe's largest publishers and developers of entertainment software, announced today results for the three and six months ended September 30, 1998. Revenues for the quarter were 21.8 million pounds, up from 12.4 million pounds for the corresponding period last year. On a US GAAP basis the Company's loss before tax for the quarter ended September 30, 1998 was 13.0 million pounds (1997: loss of 25.5 million pounds), giving a net loss of 8.8 million pounds and a loss per share of 51.3 pence, compared to a net loss of 19.1 million pounds and a loss per share of 112.9 pence in the corresponding period last year.
Revenues for the half year were 47.6 million pounds, compared to 21.8 million pounds for the corresponding period last year. On a US GAAP basis the Company's loss before tax for the half year was 16.9 million pounds (1997: loss of 32.3 million pounds), giving a net loss of 11.8 million pounds and a loss per share of 69.1 pence, compared to a net loss of 26.0 million pounds and a loss per share of 153.3 pence in the corresponding period last year.
Commenting on Eidos' current trading and future prospects, Ian Livingstone, Chairman, stated, ''Our strategy of releasing high quality games continues to drive our growth. New releases have met with favourable market reaction and previous releases continue to perform well.
The current quarter sees the release of Ninja, Tomb Raider 3, Michael Owen's World League Soccer and The Unholy War in Europe, as well as Links 99, Gangsters and Thief: The Dark Project. All were well received at the two major trade shows held in the first half, E3 last May in Atlanta and ECTS in London in September.
On November 20, Tomb Raider 3 was released world-wide. We are very encouraged by the considerable interest shown by the market in this title and we continue to be confident about its success. Tomb Raider and the character Lara Croft have now become strong franchises. Earlier titles in the series continue to perform well as part of our full-price, Platinum, Classic and Premier ranges. In addition, a Lara Croft merchandising programme was introduced in the current quarter, with a select range of clothing and accessories.
On October 1, we secured the rights to the UEFA Champions League licence for PC and Playstation with the first product due to ship in April 1999.
On November 5, Eidos completed its acquisition of Crystal Dynamics, Inc, an independent development company based in Palo Alto, California. We are delighted with the Crystal Dynamics acquisition which we believe will significantly enhance our product portfolio and US development capability. We look forward to forthcoming releases including Gex III: Deep Cover Gecko, Legacy of Kain: Soul Reaver and Akuji: The Heartless.
The material revenue growth in the period reflects the greater degree of balance of our product portfolio and our ability to launch products successfully in the traditionally quieter summer months. Moreover, our release schedule for the third and fourth quarters is significantly stronger than it has been in the past.''
Charles Cornwall, Chief Executive Officer, added, ''Our performance has remained strong in the second quarter due to both a quality catalogue and continuing sales from our first quarter releases. Eidos released seven titles in the first half, three of which achieved sales in excess of 350,000 units each. As a result, turnover in the first half has more than doubled to 47.6m (million) pounds compared to 21.8m pounds in the same period last year.''
US GAAP US GAAP
Three Months Ended Six Months Ended
September 30 September 30
1998 1997 1998 1997
Net Sales (000 pounds) 21,785 12,433 47,586 21,817
Net Loss After Tax
(000 pounds) (8,778) (19,128) (11,822) (25,952)
Loss Per Share (pence) (51.3) (112.9) (69.1) (153.3)
Weighted Average
Shares Outstanding 17,110,873 16,940,776 17,110,856 16,934,004
•For translation purposes, use a convenience exchange rate of $1.70=1.00 pound, being closing rate as of September 30, 1998. * •Recent developments •First half turnover up 118% to 47.6m pounds from 21.8m pounds •Seven titles released in the first half (1997: ten) •Continuing success of Commandos: Behind Enemy Lines •First half net loss after tax reduced to 11.8m pounds from 26.0m pounds •Ninja, Tomb Raider 3, Michael Owen's World League Soccer and The Unholy
War released in current quarter so far
•New CFO appointed •New non-executives appointed •Completion of the Crystal Dynamics acquisition on November 5, 1998
New Appointments
The Board has appointed Victor Steel and Allen Thomas as independent non-executive directors following the resignations of Sophie Wilson, Geoff Brown and Robert Keith.
On October 16, 1998 the Board appointed Jeremy Lewis as the new CFO, following the resignation of Jonathan Lees.
Acquisitions/Investments
Eidos holds approximately 15% of the share capital of Opticom ASA, a Norwegian listed company and a leader in the research and development of polymer based optical storage and processing technologies. In common with other technology stocks, the Opticom share price has experienced large fluctuations in the last six months. These fluctuations caused the market price of Eidos' investment at September 30, 1998 to fall below cost.
Eidos has reduced the carrying value by 5.3m pounds down to the market price at September 30, 1998. Under US GAAP the charge has been taken directly to equity. Since that date the share price has recovered substantially and as at November 23, 1998 the market value was only 1.6m pounds less than cost. We are encouraged with the technical progress that has been made by Opticom and remain optimistic about its long term prospects and our joint venture with it, Eidopt AS.
UK GAAP Financial Summary
Eidos reports a loss after tax of 13.8m pounds for the six months ended September 30, 1998 compared to a loss of 12.0m pounds for the corresponding period last year. This loss is after the non-operating charge of 5.3m pounds to reflect the fall in the market price of Opticom as at September 30, in which we have an investment. Turnover increased 118% from 21.8m pounds to 47.6m pounds. The loss per share was 80.6p or 49.9p excluding exceptional items, compared to 70.8p.
The operating loss of 13.6m pounds(1997: 18.1m pounds) is after charging incremental advertising costs for future releases of 1.9m pounds and acquisition investigation costs of 1.6m pounds.
The net cash outflow from operating activities was 6.6m pounds compared to 13.1m pounds in the corresponding period of 1997. This is after Eidos' investment in product development and pure research and development of 16.1m pounds (1997: 16.0m pounds).
There were seven (1997: ten) new games released in the six months ended September 30 1998. These included Deathtrap Dungeon on PSX and PC in Europe, the world-wide releases of Final Fantasy VII and Commandos: Behind Enemy Lines for PC, World League Soccer on PSX and PC for Europe only and our first release from Crystal Dynamics, The Unholy War on PSX in the US. The first three titles have achieved sales in excess of 350,000 units in the period.
Gross margin was 52.7% for the half year compared to 58.2% for the corresponding period last year. Cost of sales includes royalties paid to developers in excess of development advances paid. Royalty costs this year were 6.1m pounds compared to 1.8m pounds in the corresponding period of 1997 reflecting the success of the titles released this year. In addition, the release of the original Tomb Raider in the Platinum and Premier ranges resulted in a higher proportion of catalogue sales in 1998 compared to 1997, thus reducing gross margin.
Selling and Marketing
Advertising costs in the half year were 6.4m pounds (13.4% of revenue) compared to 2.4m pounds (11.1% of revenue) in the corresponding period of 1997. In accordance with Eidos' accounting policy advertising costs are expensed as incurred. The total includes incremental costs of 1.9m pounds on titles to be released after September 30. The increase also reflects the growing use of TV advertising to promote Eidos' valuable franchises.
The fixed element of selling and marketing costs was 6.1m pounds compared to 4.2m pounds in the prior year. Costs have continued to rise in line with the general expansion of Eidos. The world-wide departmental headcount has increased from 110 to 160 partly as result of a move to a direct sales force in both France and Germany.
Research and Development
Research and development represents the Company's investment in product development of 15.0m pounds (1997: 15.3m pounds) and pure research and development of 1.1m pounds (1997: 0.7m pounds). Product development includes 12.3m pounds (1997: 11.4m pounds) invested in a pipeline of over 40 titles to be released over the next two years.
General and Administrative
General and administrative costs for the period were 10.1m pounds or 21.3% of revenue compared to 8.2m pounds or 37.6% of revenue in 1997. The current charge includes 1.2m pounds attributable to the non-games segments of Eidos (1997: 1.4m pounds) and 1.6m pounds attributable to costs investigating potential acquisitions during the summer.
Taxation
A tax credit of 5.1m pounds has been applied to the loss on ordinary activities of 18.9m pounds. This reflects the projected underlying tax rate for the year to March 31, 1999, adjusted to exclude exceptional items.
Eidos plc is one of Europe's largest publishers and developers of entertainment software. The Company develops and publishes a diverse mix of titles for the Sony PlayStation and multimedia PC markets in the US, the UK and Europe. The Company's shares are traded on the Nasdaq Stock Market under the symbol EIDSY.
Certain statements contained in this press release may be deemed forward-looking that involve a number of risks and uncertainties. The Company's actual results may differ materially from the expectations expressed in such forward looking statements. Among the factors that could cause actual results to differ materially are world-wide business and industry conditions, including consumer buying and retailer ordering patterns, products delays, changes in research and development spending, company consumer relations, in particular, levels of sales to mass merchants, retail acceptance of the company's published and third-party titles, competitive conditions and other risks detailed, from time to time, in the company's SEC filings, including, but not limited to, the Company's form 20-F for the period ended March 31, 1998.
EIDOS plc
Consolidated Statements of Operations Reconciled to US GAAP for
the three and six months ended September 30, 1998 (Unaudited)
Three months ended Six months ended
September 30 September 30
UK GAAP 1998 1997 1998 1997
000 pounds 000 pounds 000 pounds 000 pounds
Turnover ..
continuing operations 21,785 12,433 47,586 21,817
Cost of goods sold (11,325) (5,474) (22,503) (9,128)
Gross profit 10,460 6,959 25,083 12,689
Selling and marketing (6,593) (3,821) (12,451) (6,589)
Research and
development (9,064) (8,555) (16,129) (15,972)
General and
administrative (6,122) (4,075) (10,123) (8,194)
Operating expenses (21,779) (16,451) (38,703) (30,755)
Loss on ordinary
activities before
interest (11,319) (9,492) (13,620) (18,066)
Amounts written
off investments (5,250) -- (5,250) --
Net interest and
similar charges (77) (232) (58) (265)
Loss on ordinary
activities
before tax (16,646) (9,724) (18,928) (18,331)
Taxation 4,265 4,102 5,132 6,341
Net loss after tax
(prepared under
UK GAAP) (12,381) (5,622) (13,796) (11,990)
Loss per share (1) (72.4p) (33.2p) (80.6p) (70.8p)
Reconciliation to US GAAP
Net loss after tax
(prepared under
UK GAAP) (12,381) (5,622) (13,796) (11,990)
Amortisation
of goodwill (1,647) (2,373) (3,276) (3,837)
Amounts written
off investments 5,250 -- 5,250 --
Computer games
software -- (11,133) -- (10,125)
Net loss in accordance
with US GAAP (8,778) (19,128) (11,822) (25,952)
Loss per share in
accordance with
US GAAP
Basic and diluted (51.3p) (112.9p) (69.1p) (153.3p)
Notes:
1. Under UK GAAP the loss per share for the three months ended September
30, 1998 before exceptional items is 41.7p (six months ended September
30, 1998 49.9p)
EIDOS plc
Consolidated Balance Sheets Reconciled to US GAAP (Unaudited)
UK GAAP September September March 31,
30, 1998 30, 1997 1998
(restated) (restated)
000 pounds 000 pounds 000 pounds
Fixed assets
Tangible assets 6,467 7,297 6,734
Investments 6,909 11,195 11,582
Total fixed assets 13,376 18,492 18,316
Current assets
Stocks 4,404 1,351 5,118
Debtors: amounts falling
due within one year 33,617 25,132 30,770
Cash at bank and in hand 26,115 17,615 42,513
Total current assets 64,136 44,098 78,401
Creditors: amount falling
due within one year (21,144) (14,107) (26,327)
Net current assets 42,992 29,991 52,074
Total assets less
current liabilities 56,368 48,483 70,390
Creditors due after
more than one year:
US $50 million
convertible bonds (28,582) (29,762) (28,995)
Other creditors (310) (696) (459)
(28,892) (30,458) (29,454)
Net assets 27,476 18,025 40,936
Capital and reserves
Called up share capital 1,711 1,694 1,711
Share premium account 49,352 49,049 49,349
Capital reserves 167 167 167
Profit and Loss account (23,754) (32,885) (10,291)
Shareholders' funds 27,476 18,025 40,936
September September March 31,
30, 1997 30, 1998 1998
Reconciliation to US GAAP 000 pounds 000 pounds 000 pounds
Shareholders' funds
(prepared under UK GAAP) 27,476 18,025 40,936
Goodwill 19,436 21,298 19,605
Less amortisation (15,664) (9,965) (12,388)
Deferred tax 2,003 -- 2,003
Shareholders' funds in
accordance with US GAAP 33,251 29,358 50,156
Notes:
1. Eidos plc is registered in England and Wales (number 2501949) and its
registered office is Wimbledon Bridge House, 1 Hartfield Road,
Wimbledon, London SW19 3RU.
2. The balance sheets at March 31, 1998 and September 30, 1997 have been
restated to reflect the reclassification of the goodwill reserve
required by Financial Reporting Standard No. 10.
EIDOS plc
Unaudited Consolidated Statements of Cash Flow
Six months ended Six months ended
September 30, September 30,
1998 1997
000 pounds 000 pounds
Net cash outflow from
operating activities (6,554) (13,066)
Returns on investments and
servicing of finance
Interest received 1,304 751
Expenses paid in
connection with bond issue -- (1,102)
Bond interest paid (951) (587)
Other interest paid (208) --
Interest paid on
finance leases (82) (85)
63 (1,023)
Taxation
Overseas tax paid (6,316) (771)
Capital expenditure and
financial investment
Purchase of tangible
fixed assets (1,387) (3,995)
Sale of tangible
fixed assets 70 3
Purchase of other
investments (1,498) (11,183)
(2,815) (15,175)
Acquisitions and disposals
Purchase of associated
undertakings -- (166)
Net cash outflow
before financing (15,622) (30,201)
Financing
Issue of ordinary share capital 3 --
Expenses paid in
connection with share issue -- (65)
Proceeds from bond issue -- 30,864
Repayment of principal
under finance leases (420) (508)
(417) 30,291
(Decrease) / increase
in cash in the period (16,039) 90
Eidos plc Statistical Information for the Period Ended September 30, 1998
Geographical Revenue Mix
(unaudited)
Quarter
September 30, 1998 September 30, 1997
000s pounds % of Total 000s pounds of Total
North America 6,553 30.1% 3,705 29.8%
UK/Europe 14,443 66.3% 7,838 63.0%
Rest of World 789 3.6% 890 7.2%
Total net revenues 21,785 100.0% 12,433 100.0%
Half Year
September 30, 1998 September 30, 1997
000s pounds % of Total 000s pounds % of Total
North America 16,756 35.2% 6,088 27.9%
UK/Europe 28,397 59.7% 14,447 66.2%
Rest of World 2,433 5.1% 1,282 5.9%
Total net revenues 47,586 100.0% 21,817 100.0%
Percentage Increase Percentage Increase
Quarter Half Year
North America 76.9% 175.2%
UK/Europe 84.2% 96.5%
Rest of World (11.4)% 89.8%
Total net revenue 75.2% 118.1%
Platform Revenue Mix (Games Revenue only)
(Unaudited)
Quarter
September 30, 1998 September 30, 1997
000s pounds % of Total 000s pounds % of Total
Console 6,209 29.6% 3,913 33.9%
PC 14,757 70.4% 7,630 66.1%
Total net revenues 20,966 100.0 11,543 100.0%
Half Year
September 30, 1998 September 30, 1997
000s pounds % of Total 000s pounds % of Total
Console 17,374 38.0% 7,303 36.6%
PC 28,348 62.0% 12,651 63.4%
Total net revenues 45,722 100.0% 19,954 100.0%
Percentage Increase Percentage Increase
Quarter Half Year
Console 58.7% 137.9%
PC 93.4% 124.1%
Total net revenues 81.6% 129.1%
SOURCE: Eidos plc |
