SCi scores interim profit
Article Date: Jun 21 2002Computer games publisher SCi Entertainment cheered followers with a move into profit and a 275 per cent turnover hike at the half year stage today, but the shares came under pressure on news of a discounted fundraising. James Crux reports.
In the first half to March, fully listed SCi Entertainment's (SEG) pre-tax profits were an encouraging £500,000, a dramatic improvement from losses of £6.2 million last year. And turnover rocketed from £1.6 million to £6 million. Two major games were released in the first half, The Italian Job on the Sony Playstation and Rally Championship Xtreme on the PC. Launched in October, The Italian Job immediately spent four weeks at number one in the UK Playstation charts and so far, its sales have topped expectations by 25 per cent. Meanwhile, November saw the PC launch of Rally Championship Xtreme, which made a 'substantial contribution' to profits.
Half one also benefited from sales of three further games based on the TV show Thunderbirds, and in March the group licensed Conflict: Desert Storm, an action stealth game based on the shadowy events of the Gulf War, on all formats to Take-Two for the North American market. Whilst an initial signing fee was recognised in the half, investors can expect the remainder of the advance to swell the coffers in the second. The game will be released worldwide in September. A bullish chief executive Jane Cavanagh says 'we are already looking ahead to the 2004 financial year and beyond. Our pipeline includes more games in the Conflict series as well as games based on licences already signed such as Where Eagles Dare, The Guns of Navarone and Ice Station Zebra.'
Leisure-listed SCi also intends to raise £3.1 million net through a placing and open offer of 6.64 million new shares at 52.75p, underwritten by house broker KBC Peel Hunt. About £2.41 million will be used to buy new licences and develop new games based on these, with the rest to be targeted at some remaining short-term borrowings. Cavanagh explained, 'the group needs to continually invest in a strong pipeline of new titles, and given the long lead times for game development, this need is best met by equity'. As of 31 March, the company had net cash of £250,000.
In early play today, the shares shed 7p to only 50p on news of the discounted placing and offer, valuing the business at £10.47 million. With KBC Peel Hunt forecasting a £1.9 million pre-tax profit for the year, giving earnings of 7p, the shares sit on a forward rating of just 7.1 times earnings.
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