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SCi Entertainment, the UK’s largest computer games publisher, said the cost of preparing for the launch of new games, such as the latest Lara Croft Tomb Raider, had pushed it into the red in the first half of the year.
However, the company said it expected to make a profit for the full year, following a series of high-profile games releases in the next few months, starting with the launch of the latest Lara Croft game next Friday.
The company is spending £5m on a TV and outdoor poster campaign for the launch and is expecting to sell in excess of 2.5m copies of the game.
SCi, bought larger rival Eidos last May giving it a portfolio of high-profile titles such as Tomb Raider, Hitman and Championship Manager. However, many of these titles had suffered from delays and rushed development under the Eidos management, and SCi has budgeted more than £60m to bring the games back up to a high standard.
As a result of the development costs, and the costs of restructuring the Eidos business, SCi reported pre-tax losses of £20.1m for the six months to the end of December compared with a profit of £3.9m a year earlier.
Revenues more than doubled from £17.9m to £50.1m reflecting the addition of the Eidos portfolio and the unexpected success of Lego Star Wars, which the company distributes. SCi is believed to be one of three potential bidders for smaller UK rival Empire Interactive.
Losses per share were 17p (earnings of 12.9p). No dividend was proposed. Shares in SCi fell ½p to 504p.
FT Comment: A lot rides on the success of Tomb Raider. SCi shares shot up in October as take-over talks were announced but have not fallen dramatically since they were terminated, suggesting investors have high hopes for Lara. SCi is accounting conservatively, saying it can make a profit if the game sells just 2.5m, the same amount as the previous, poorly received Eidos title. However, with the shares trading at nearly 18 earnings forecasts, investors are clearly expecting more. In what will be a tough transitional year, this optimism appears risky.