RNS Number:2626J
Empire Interactive PLC
27 March 2003
Embargoed until 0700 27 March 2003
EMPIRE INTERACTIVE PLC
("Empire" or the "Group")
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002
Year ended Year ended
31 December 2002 31 December 2001 Change
#'000 #'000
Turnover 25,054 11,086 + 126%
Operating loss (1,895) (2,500) - 24%
Loss before tax (1,816) (2,406) - 25%
Loss per share (2.72p) (3.95p) - 31%
* Strong growth, with revenue up 126% to #25.1m
* Loss before tax reduced by 25% to #1.8m
* Gross margin improved by 5% to 59%
* Extensive multi-platform games pipeline for 2003/4
* Licence wins for major Hollywood properties - Bad Boys II and
Bulletproof Monk
* Year end cash balance of #2.0m
Ian Higgins, Chief Executive of Empire, commented: "Taking the business from a
niche PC publisher to a mainstream multi-platform publisher has been a
significant undertaking for Empire, specifically on the development side of the
business. Despite some product delays, the Group has nevertheless launched some
successful new generation console games in 2002, as well as consolidating its PC
business, building a market leading budget brand and establishing further
foundations by acquiring the eJay music software business.
Further, major licensed titles acquired such as Sony Pictures' Bad Boys II and
MGM's Bulletproof Monk, and also partnerships with proven third party developers
on titles such as Warrior Kings: Battles and Vega$: Make it Big, together with
the technology and experience of our internal studios, mean that the Group is
well positioned to take advantage of the continued growth of the industry".
For further information please contact:
Empire Interactive plc (on 27 March 2003: 020 7067 0700)
Ian Higgins, Chief Executive Officer 020 8343 7337
Weber Shandwick Square Mile 020 7067 0700
Christian Taylor-Wilkinson/ Christian San Jose
About Empire
Empire is a leading publisher of interactive entertainment software that has
been established for 14 years. The company floated on the Alternative Investment
Market (AIM) of the London Stock Exchange in July 2000. Headquartered in the UK,
Empire also has offices in the US, Germany, Italy and Spain. The company
develops and publishes a varied range of titles for current and next-generation
platforms in the US, Europe and Asia. Further information about Empire and its
products can be found at: http://www.empireinteractive.com
Embargoed until 0700 27 March 2003
EMPIRE INTERACTIVE PLC
("Empire" or the "Group")
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002
Empire, a leading UK computer games developer and publisher, announces its
preliminary results for the year ended 31 December 2002.
In 2002, the Group concentrated on growing its business around multi-platform
titles with mass-market global appeal. Business risk has been further mitigated
by the ongoing publication of full-priced PC titles, the Xplosiv budget range
and the acquisition and integration of the eJay music software creation
business.
Financial Review
Turnover for the year increased 126% to #25.1m (2001: #11.1m), principally
reflecting the move to multi-platform developer and publisher, as well as the
rapid growth rate of the games sector. Gross profit increased to #14.9m (2001:
#6.0m) and gross margin improved by 5% to 59% (2001: 54%).
Operating loss narrowed by 24% to #1.9m (2001: #2.5m). This was after making a
provision of #1.2m against development costs, as stated in the Group's trading
update in January 2003. Loss before tax was also 25% lower at #1.8m (2001:
#2.4m). The basic loss per share was reduced by 31% to 2.72p per share (2001:
3.95p).
Debtors in the year increased by #2.0m to #3.7m (2001: #1.7m) reflecting higher
sales levels in the Christmas period and some titles with guarantees under
long-term distribution contracts nearing completion at year end. This represents
more than half of the cash outflow for the year.
Stock and work-in-progress ended the year 7% lower at 3.7m (2001: #4.0m)
reflecting the provision made against development costs and a modest increase in
stock despite the increased turnover.
Cash at bank at the end of the year was #2.0m (2001: #5.9m), virtually unchanged
since the #2.1m reported at 30 June 2002.
Market
The world market for video games is growing at a faster rate than ever before,
with the main consoles - Sony PlayStation 2 ("PS2"), Microsoft Xbox ("Xbox") and
Nintendo GameCube ("GameCube") - selling 30% more than the previous generation
of gaming technology at the equivalent point in time. Since 1995, the global
leisure software market has almost tripled in value (source: Screen Digest).
Sony has now sold more than 50 million PS2 consoles, giving it a 76% share of
the current 128-bit console market, ahead of Nintendo and Microsoft, which each
have a 12% share. Spending on the games sector in the UK is now double the size
of the British video rental market, with hardware sales up 44% in 2002 (source:
Screen Digest; SCEE, Microsoft, Nintendo).
Looking ahead, the recent report published by Screen Digest, an independent and
highly respected industry newsletter, predicts that 2003 will be another record
year for games hardware and software sales. It is estimated that a further 32
million PS2, Xbox and GameCube consoles will be sold across the world, with
software sales increasing to $18.5bn from $16.9bn in 2002.
Empire is well positioned to take further advantage of this continued growth,
due to its globally recognisable titles, its mature distribution network and
multi-platform capability.
Operational Review
2002 saw the Group complete its transition to multi-platform publisher,
highlighted by significantly higher revenues, which reflects the multiple
revenue streams now available to the Group instead of our historical single
revenue source from PC sales.
Despite the obvious disappointment due to the slippage of Starsky & Hutch and
Ghost Master into 2003, the Group made positive moves in the period and ended
the year with increased experience and strength in development as well as depth
across its portfolio of titles. We have put great emphasis on new title
development and have overhauled our processes, including the appointment of two
additional senior development executives.
Crucially, since January 2001, all of our new titles under development are
either second or third iteration projects based on tried and tested technology.
This should increase the gaming quality of our titles, as well as reducing both
the risk and time of development, allowing us to bring new games to market in a
more timely fashion.
The Group has successfully reduced its business risk by creating a portfolio of
games across different platforms, different genres and different price points.
We have focused our development on popular licensed titles, including recent
agreements to develop games for the forthcoming blockbuster movies, Bad Boys II
from Sony Pictures and Bulletproof Monk from MGM, which we expect to release
within the next 12 months.
During the reporting period, Empire published the following full-price titles as
detailed below:
Title Developer Platform
Virtua Tennis In-house PC
Crazy Taxi In-house PC
Sheep External Nintendo Game Boy Advance ("GBA")
Endgame In-house PS2
Antz Extreme Racing External PS2, Xbox, GBA, PC
Total Immersion Racing In-house PS2, Xbox, PC
Big Mutha Truckers External PS2, Xbox in Europe
International Cricket Captain In-house PSOne, PC
Endgame has now sold over 125,000 units and Total Immersion Racing has sold more
than 340,000 units.
Our music creation software brand, eJay, acquired in March 2002 has subsequently
released several new titles throughout the year, including Dance 5, Clubworld,
and HIP HOP 4. The acquisition is now fully integrated and contributed 8% of
European revenues in 2002.
Xplosiv, the Group's budget range of games, continued to dominate its market,
with chart topping games such as Sonic 3D, Quake II, Civilisation - Call to
Power, Age of Empires and Tony Hawks Skateboarding 2. The division continued to
show excellent growth, with sales of over 1.5 million units in 2002 representing
20% of the total European business and over 50% growth on 2001. Sonic 3D
maintained the number 1 spot in the UK's budget chart for most of the year,
including the Christmas number 1 and became the ninth best selling PC title in
2002, selling almost 200,000 copies.
Pipeline for 2003
The Board is happy with the development progress of two of the Group's key
titles, Starsky & Hutch and Ghost Master and is confident that the delays
associated with the development of the two titles have now been overcome. As
stated in our trading update in January 2003, these titles are on track for
release this year.
The Group is releasing Bubble Bobble on the GBA and Warrior Kings: Battles on
the PC in March 2003 in Europe, with the US launches scheduled for later in the
first half of this year.
Bad Boys II, for which the Group signed the global publishing rights in February
2003, is based on the sequel to Sony Pictures' hit movie Bad Boys, starring Will
Smith and Martin Lawrence as renegade cops on the streets of Miami. The game is
being developed by Blitz Games, which has vast experience in developing
multi-platform licenced titles, such as Universal's The Mummy Returns, Warner
Bros' Taz and Disney's Lilo & Stitch. Bad Boys II is being developed for the
PS2, Xbox, GameCube and PC to coincide with the Christmas 2003 DVD launch of the
film.
Bulletproof Monk, a game based on the forthcoming John Woo Hollywood martial
arts film starring Chow Yun-Fat (Crouching Tiger, Hidden Dragon) and Seann
William Scott (American Pie), is being developed for the PS2, Xbox and GameCube.
The developers, Mucky Foot, have an excellent track record developing titles
such as Blade II for Activision and have the established tools and practices for
creating multi-format, combat-based console titles. The game engine used in the
development of Bulletproof Monk is an evolution of that used in Blade II,
significantly reducing development associated risks.
VEGA$: Make It Big, our tycoon genre title, is being developed by Deep Red, a PC
3D game genre specialist, who are utilising a full 3D engine advanced from their
last title, Monopoly Tycoon. This is allowing Deep Red to focus resource on the
creation of art assets and gameplay and shorten the development timeline.
VEGA$: Make It Big is being developed for the PC and will be released in the
second half of the current financial year.
Empire's currently announced, full-price game portfolio for 2003/4 is as
follows:
Title Platform
Bubble Bobble GBA
Warrior Kings: Battles PC
Big Mutha Truckers PS2, Xbox - in US
GameCube, PC - all territories
Starsky & Hutch PS2, Xbox, GameCube, PC, GBA
Ghost Master PC, PS2, Xbox
VEGA$: Make it Big PC
Bad Boys II PS2, Xbox, PC, GameCube
Bulletproof Monk PS2, Xbox, GameCube, GBA
eJay is expected to release five new titles during the course of 2003 and the
Group is also planning further growth for the Xplosiv brand. As well as new
titles for Xplosiv on the PC, the Group is currently finalising its launch plans
on PS2 during 2003.
Finally, the Group expects to be able to announce shortly licensing contracts
for its titles in Japan.
Outlook
The Group enters 2003 with cautious optimism. We are determined to take
advantage of the expected growth in console sales over the next two to three
years and have been investing in globally recognised titles.
We believe that we have a balanced portfolio of titles for 2003 and 2004 that
are being developed by experienced teams who, in many cases, are using
previously developed core software engines. This should substantially reduce
both risk and development lead times. It is upon this balanced portfolio that we
believe the business will move forward.
Ian Higgins, Chief Executive of Empire, commented: "Taking the business from a
niche PC publisher to a mainstream multi-platform publisher has been a
significant undertaking for Empire, specifically on the development side of the
business. Despite some product delays, the Group has nevertheless launched some
successful new generation console games in 2002, as well as consolidating its PC
business, building a market leading budget brand and establishing further
foundations by acquiring the eJay music software business.
Further, major licensed titles acquired such as Sony Pictures' Bad Boys II and
MGM's Bulletproof Monk, and also partnerships with proven third party developers
on titles such as Warrior Kings: Battles and Vega$: Make it Big, together with
the technology and experience of our internal studios, mean that the Group is
well positioned to take advantage of the continued growth of the industry".
-Ends-
For further information and graphics, please contact:
Empire Interactive plc (on 27 March 2003: 020 7067 0700)
Ian Higgins, Chief Executive Officer 020 8343 7337
Weber Shandwick Square Mile 020 7067 0700
Christian Taylor-Wilkinson/ Christian San Jose
About Empire
Empire is a leading publisher of interactive entertainment software that has
been established for 14 years. The company floated on the Alternative Investment
Market (AIM) of the London Stock Exchange in July 2000. Headquartered in the UK,
Empire also has offices in the US, Germany, Italy and Spain. The company
develops and publishes a varied range of titles for current and next-generation
platforms in the US, Europe and Asia. Further information about Empire and its
products can be found at: http://www.empireinteractive.com
Empire Interactive plc
Consolidated Summarised Profit and Loss Account
For the year ended 31 December 2002
2002 2001
Unaudited Audited
Note #'000 #'000
Turnover 2 25,054 11,086
Cost of sales (10,197) (5,068)
__________ __________
Gross profit 14,857 6,018
Sales and marketing expenses (5,420) (3,069)
Development expenses (10,698) (4,855)
Administrative expenses (634) (594)
__________ __________
Operating loss (1,895) (2,500)
Net interest receivable 79 94
__________ __________
Loss on ordinary activities before taxation (1,816) (2,406)
Tax on loss on ordinary activities (29) (33)
__________ __________
Loss for the year (1,845) (2,439)
__________ __________
Basic and diluted loss per share 3 (2.72)p (3.95)p
__________ __________
All the activities of the Group are classed as continuing.
Empire Interactive plc
Consolidated Summarised Balance Sheet
At 31 December 2002
2002 2001
Unaudited Audited
#'000 #'000
Fixed assets
Intangible assets 251 410
Tangible assets 719 803
__________ __________
970 1,213
__________ __________
Current assets
Stock and work-in-progress 3,696 3,993
Debtors 3,716 1,685
Cash at bank and in hand 1,984 5,861
__________ __________
9,396 11,539
__________ __________
Creditors: amounts falling due within one year (5,235) (5,760)
__________ __________
Net current assets 4,161 5,779
__________ __________
Total assets less current liabilities 5,131 6,992
Creditors: amounts falling after more than one year (17) (56)
__________ __________
5,114 6,936
__________ __________
Capital and reserves
Called-up share capital 68 68
Share premium account 10,102 10,040
Shares to be issued, including premium 97 212
Profit and loss account (5,153) (3,384)
__________ __________
Shareholders' funds 5,114 6,936
__________ __________
Empire Interactive plc
Consolidated Summarised Cash Flow Statement
For the year ended 31 December 2002
2002 2001
Unaudited Audited
Note #'000 #'000
Net cash (outflow)/inflow from operating activities 4 (3,675) 360
Returns on investments and servicing of finance 80 94
Taxation (30) (36)
Purchase of tangible fixed assets (262) (206)
Sale of tangible fixed assets 53 39
__________ __________
Cash (outflow)/inflow before financing (3,834) 251
Management of liquid resources
Change in short term deposits 4,323 (3,612)
Financing
Issue of shares, net of expenses - 3,704
Capital element of finance lease rentals (43) (77)
__________ __________
Net cash (outflow)/inflow from financing (43) 3,627
__________ __________
Increase in cash 5 446 266
__________ __________
Empire Interactive plc
Consolidated Statement of Total Recognised Gains and Losses
For the year ended 31 December 2002
2002 2001
Unaudited Audited
#'000 #'000
Loss for the financial year (1,845) (2,439)
Currency translation differences on opening net assets 76 (23)
__________ __________
Total gains and losses recognised since last financial statement (1,769) (2,462)
__________ __________
Empire Interactive plc
Notes to the Preliminary Announcement
For the year ended 31 December 2002
1. Basis of Preparation
The financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost convention.
The principal accounting policies of the Group have remained unchanged from the
previous year, other than a change to comply with FRS 19 on deferred tax which
currently does not materially affect the Group. Certain of the Group's
accounting policies are set out below:
Turnover
Turnover is the total amount receivable by the Group for goods supplied and
services provided, net of provisions for discounts and returns. In the case of
long-term contracts, turnover and profit are recognised on delivery, unless the
outcome can be assessed with reasonable certainty, in which case turnover and
profit are recognised on the basis of the proportion of attributable development
costs incurred to the anticipated total of such costs. All amounts are stated
net of VAT.
The excess of advances received under long-term contracts over amounts that have
been recognised in the profit and loss account is disclosed separately as
payments on account within creditors.
Development Expenditure
Expenditure incurred in respect of research and development is written off to
the profit and loss account in the year incurred except for those development
costs which are included within work-in-progress where there is reasonable
likelihood that they will be recovered within 12 months of the balance sheet
date. Where some of a product's revenues have been recognised under a long-term
contract, work-in-progress only includes development costs on the basis of the
proportion that estimated future revenues bear to anticipated total revenues.
Expenditure on fixed assets for development purposes is shown in the balance
sheet in tangible fixed assets under development equipment. These assets
comprise computers and associated hardware used in the development of products.
2. Turnover
Turnover by geographical destination was as follows:
2002 2001
#'000 #'000
North America 9,853 5,374
United Kingdom 3,726 2,938
Rest of Europe 10,936 2,286
Rest of World 539 488
__________ __________
25,054 11,086
__________ __________
3. Earnings Per Share
The calculation of the basic earnings per share is based on the loss
attributable to ordinary shareholders of #1,845,000 (2001: #2,439,000) divided
by the weighted average number of shares in issue during the year.
The weighted average number of shares used in the calculations are set out
below:
2002 2001
Number of Number of
shares shares
__________ __________
67,721,028 61,793,923
__________ __________
In accordance with FRS 14, the diluted loss per share is equivalent to the basic
earnings per share as any conversion of options would decrease the net loss per
share.
4. Reconciliation of Operating Loss to Net Cash Flow From Operating Activities
2002 2001
#'000 #'000
Operating loss (1,895) (2,500)
Depreciation 299 341
Amortisation of goodwill 106 106
(Profit)/loss on disposal of tangible fixed assets (8) 4
Decrease/(increase) in stock and work in progress 297 (3,085)
(Increase)/decrease in debtors (2,031) 1,615
(Decrease)/increase in creditors and payments on account (520) 3,903
Currency translation difference 77 (24)
__________ __________
Net cash (outflow)/inflow from operating activities (3,675) 360
__________ __________
5. Reconciliation of Net Cash Flow To Movement in Net Funds
2002 2001
#'000 #'000
Increase in cash in the year 446 266
(Decrease)/increase in short-term deposits (4,323) 3,612
__________ __________
(3,877) 3,878
Net cash outflow/(inflow) from finance leases 43 (5)
__________ __________
Movement of net funds in the year (3,834) 3,873
Net funds at 1 January 2002 5,762 1,889
__________ __________
Net funds at 31 December 2002 1,928 5,762
__________ __________
6. Publication of non-statutory accounts
The financial statements set out in this preliminary announcement do not
constitute statutory accounts as defined in section 240 of the Companies Act
1985.
The summarised balance sheet at 31 December 2002 and the summarised profit and
loss account, summarised cash flow statement and associated notes for the year
then ended have been extracted from the Group's unaudited financial statements.
Those financial statements have not yet been delivered to the Registrar, nor
have the auditors reported on them.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UNORROAROUUR
