SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 2000
EIDOS plc
Wimbledon Bridge House
1 Hartfield Road
Wimbledon, London
SW19 3RU United Kingdom
44 208 636 3000
(Address and telephone number of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F |X| Form 40-F |_|
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.
Yes |_| No |X|
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b):
82 -- N/A
------
<PAGE>
EIDOS plc
Form 6-K
TABLE OF CONTENTS
Page
Consolidated Financial Statements (Unaudited):
Consolidated Balance Sheets as of June 30, 2000 and March 31, 2000 2
Consolidated Statements of Operations for the three months
ended June 30, 2000 and 1999 4
Statements of Recognised Gains and Losses for the three
months ended June 30, 2000 and 1999 5
Consolidated Statements of Cash Flows for the three months
ended June 30, 2000 and 1999 6
Consolidated Statements of Changes in Shareholders' Equity
for the three months ended June 30, 2000 7
Notes to Unaudited Consolidated Financial Statements 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations for the three months ended June 30, 2000 15
Exhibits
The following documents were filed as part of this Form 6-K:
Press release dated 15 August 2000 E-1
UK press release dated 31 August 2000 -- results for the
three months ended June 30, 2000 E-2
US press release dated August 31, 2000 -- results for the
three months ended June 30, 2000 E-3
1
<PAGE>
EIDOS plc
Consolidated Balance Sheets Reconciled to US GAAP
<TABLE>
<CAPTION>
UK GAAP June 30, 2000 March 31,
(unaudited) 2000
---------------- ----------------
L000 L000
<S> <C> <C>
Fixed assets
Intangible assets (net of amortisation
of L16,570,000; March 31, 2000,
L13,923,000) 14,330 16,035
Tangible assets 5,916 6,022
Investments
Joint ventures -- share of net assets 2,468 1,840
Joint ventures -- goodwill (net of
amortisation of L4,727,000;
March 2000 L3,475,000) 10,466 12,270
Other investments 38,081 38,081
---------------- ----------------
Total investments 51,015 52,191
---------------- ----------------
Total fixed assets 71,261 74,248
---------------- ----------------
Current assets
Stocks 13,851 13,286
Debtors 34,582 77,665
Cash at bank and in hand 14,725 103,449
---------------- ----------------
Total current assets 63,158 194,400
Creditors: amount falling due within
one year (22,344) (142,176)
---------------- ----------------
Net current assets 40,814 52,224
---------------- ----------------
Total assets less current liabilities 112,075 126,472
Creditors due after more than one year (125) (53)
---------------- ----------------
Net assets 111,950 126,419
================ ================
Capital and reserves
Called up share capital 2,071 2,071
Share premium account 85,108 85,034
Other reserves 707 707
Profit and loss account 24,064 38,607
---------------- ----------------
Shareholders' funds 111,950 126,419
================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
EIDOS plc
Consolidated Balance Sheets Reconciled to US GAAP (continued)
<TABLE>
<CAPTION>
Reconciliation to US GAAP June 30, 2000 March 31,
(unaudited) 2000
---------------- ----------------
L000 L000
<S> <C> <C>
Shareholders' funds (prepared under UK
GAAP) 111,950 126,419
Goodwill 13,632 13,632
Less in process research and
development (2,368) (2,368)
Less amortisation (12,288) (12,503)
---------------- ----------------
(1,024) (1,239)
---------------- ----------------
Investment in associates -- net assets 204 204
Investment in associates -- goodwill 7,114 7,114
Less amortisation (5,815) (5,407)
---------------- ----------------
1,503 1,911
---------------- ----------------
Unrealised appreciation of other
investments 23,502 40,665
Deferred tax on unrealised appreciation (7,051) (12,200)
---------------- ----------------
16,451 28,465
---------------- ----------------
Full consolidation of joint venture
company (62) (129)
Revenue recognition (938) (938)
---------------- ----------------
Shareholders' funds in accordance with
US GAAP 127,880 154,489
================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
EIDOS plc
Unaudited Consolidated Statements of Operations Reconciled to US GAAP
<TABLE>
<CAPTION>
UK GAAP Three months ended June 30,
2000 1999
-------------- --------------
L000 L000
<S> <C> <C>
Turnover: Group and share of joint ventures' 18,869 16,810
Less: share of joint ventures (2,071) ---
-------------- --------------
Turnover -- continuing operations 16,798 16,810
Cost of goods sold (9,091) (8,345)
-------------- --------------
Gross profit 7,707 8,465
Selling and marketing (9,063) (8,867)
Research and development (11,534) (11,779)
General and administrative
Amortization of goodwill (2,647) (2,514)
Other (6,000) (6,169)
-------------- --------------
Total general and administrative (8,647) (8,683)
-------------- --------------
Operating expenses (29,244) (29,329)
-------------- --------------
Group operating loss (21,537) (20,864)
Share of operating profit of joint ventures 289 ---
Joint venture goodwill amortization (1,252) ---
-------------- --------------
Total operating loss -- continuing
operations (22,500) (20,864)
Net interest and similar charges 166 (85)
-------------- --------------
Loss on ordinary activities before tax (22,334) (20,949)
Tax on loss on ordinary activities 7,006 6,915
-------------- --------------
Net loss after tax (prepared under UK GAAP) (15,328) (14,034)
-------------- --------------
Loss per share: basic and diluted (14.8p) (16.0p)
Reconciliation to US GAAP
Net loss after tax (prepared under UK GAAP) (15,328) (14,034)
Amortisation of goodwill -- group 214 204
Amortisation of goodwill -- associates (408) (554)
Full consolidation of joint venture 67 ---
-------------- --------------
Net loss in accordance with US GAAP (15,455) (14,384)
-------------- --------------
Loss per share in accordance with US GAAP
Basic and diluted (14.9p) (16.4p)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
EIDOS plc
Unaudited Consolidated Statements of Total Recognised Gains and Losses
<TABLE>
<CAPTION>
Three months ended June 30,
UK GAAP 2000 1999
-------------- --------------
L000 L000
<S> <C> <C>
Net loss after tax (15,328) (14,034)
Translation differences on foreign currency
net investments 785 (330)
-------------- --------------
Total gains and losses in the period (14,543) (14,364)
-------------- --------------
US GAAP
Net loss (15,455) (14,384)
Other comprehensive income:
Foreign currency translation adjustments 785 (330)
Unrealised appreciation of investments (17,162) ---
Deferred tax on unrealised appreciation of
investments 5,149 ---
-------------- --------------
Total comprehensive net loss (26,683) (14,714)
-------------- --------------
Cumulative translation differences
Balance brought forward (1,233) (199)
Before tax translation differences 1,267 (524)
Tax benefit/(expense) (482) 194
-------------- --------------
After tax translation differences 785 (330)
-------------- --------------
Balance carried forward (448) (529)
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
EIDOS plc
Unaudited Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
Three months Three months
ended June 30, ended June 30,
2000 1999
L000 L000
---------------- ----------------
<S> <C> <C>
Net cash inflow/(outflow) from
operating activities 4,085 (7,035)
---------------- ----------------
Returns on investments and servicing of
finance
Interest received 428 335
Bank interest paid (1,467) (117)
Interest paid on finance leases (7) (15)
Other interest paid --- (243)
---------------- ----------------
(1,046) (40)
---------------- ----------------
Taxation
UK taxation paid (9,417) ---
Overseas tax paid (763) (938)
---------------- ----------------
(10,180) (938)
---------------- ----------------
Capital expenditure and financial
investment
Purchase of tangible fixed assets (564) (554)
Sale of tangible fixed assets 76 ---
Investment disposal costs (641) ---
---------------- ----------------
(1,129) (554)
---------------- ----------------
Acquisitions and disposals
Purchase of subsidiary undertakings --- (14,327)
---------------- ----------------
--- (14,327)
---------------- ----------------
Net cash (outflow) / inflow before
financing (8,270) (22,894)
Financing
Issue of ordinary share capital 74 1,897
Repayment of principal under finance
leases (98) (91)
---------------- ----------------
(24) 1,806
---------------- ----------------
Decrease in cash in the period (8,294) (21,088)
================ ================
</TABLE>
Notes:
1. Net cash inflow from operating activities is derived from operating loss of
L21,537,000 (1999: L20,864,000) adjusted for depreciation of L902,000 (1999:
L827,000), goodwill amortisation of L2,647,000 (1999: L2,514,000) and a
decrease in working capital of L22,073,000 (1999: L10,488,000).
2. The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
EIDOS plc
Unaudited Consolidated Statement of Changes in Shareholders' Equity
For the three months ended June 30, 2000
<TABLE>
<CAPTION>
L000 (except share numbers) Ordinary shares
-----------------------------
Share
No. of premium Other Profit and
UK GAAP shares Amount account reserves loss account Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance as at April 1, 2000 103,526,440 2,071 85,034 707 38,607 126,419
Loss for the period --- --- --- --- (15,328) (15,328)
Translation adjustment --- --- --- --- 785 785
Exercise of warrants and options 41,875 --- 74 --- --- 74
------------ ------------ ------------ ------------ ------------ ------------
Balance as at June 30, 2000 103,568,315 2,071 85,108 707 24,064 111,950
------------ ------------ ------------ ------------ ------------ ------------
US GAAP
Balance at April 1, 2000 103,526,440 2,071 114,560 707 37,151 154,489
Loss for the period --- --- --- --- (15,455) (15,455)
Translation adjustment --- --- --- --- 785 785
Exercise of warrants and options 41,875 74 --- --- 74
Net unrealised appreciation of
investments --- --- --- --- (12,013) (12,013)
------------ ------------ ------------ ------------ ------------ ------------
Balance at June 30, 2000 103,568,315 2,071 114,634 707 10,468 127,880
============ ============ ============ ============ ============ ============
</TABLE>
Notes:
1. The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
EIDOS plc
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
The financial statements of Eidos plc (the Company) have been prepared in
accordance with applicable Accounting Standards in the United Kingdom.
a. Unaudited results
The interim consolidated financial statements are unaudited. In the
opinion of management, all adjustments considered necessary to present
fairly the consolidated financial position, results of operations and
cash flows for such interim periods have been made. In the opinion of
management, the unaudited interim consolidated financial statements have
been prepared on a basis consistent with Eidos' audited consolidated
financial statements at March 31, 2000.
b. Loss per share
The loss per share is calculated in accordance with Financial Reporting
Standard No.14 and based on a weighted average number of ordinary shares
in issue of for the three months ended June 30, 2000 of 103,531,137
(1999: 87,841,880). None of the potential ordinary shares is dilutive and
therefore a separate diluted loss per share is not given.
The weighted average share number and loss per share for the three months
ended June 30, 1999 has been restated to reflect the five for one share
split that took place on January 26, 2000.
The weighted average number of shares used to calculate the basic
earnings per share under US GAAP is the same as for UK GAAP.
c. Summary of differences between UK GAAP and US GAAP
A summary of the most significant differences applicable to Eidos plc and
its subsidiaries (Eidos) is set out below:
(1) Business combinations
Under US GAAP, goodwill arising on acquisitions accounted for under the
purchase method is amortized over the estimated useful life of the
goodwill, with amortized amounts being included in general and
administrative expenses. Each of the Company's acquisitions has been
accounted for using the purchase method for US GAAP purposes. Each of the
businesses acquired by the Company was involved in the development of
computer games software. The Company acquired such businesses for their
established names in the computer games software market, for the
experience of their personnel in the development of computer game
software, and for an aggregate of in excess of 25 games (together with
underlying technologies) which were under development by or on behalf of
such businesses.
8
<PAGE>
EIDOS plc
Notes to Unaudited Consolidated Financial Statements continued.../
Upon review of the acquired companies' technology, the Company determined
that a portion of such technology had neither reached technological
feasibility nor had alternative future uses and that completion of the
games under development would require substantial additional effort and
expenditure by the Company. Accordingly, for US GAAP purposes, the
Company treated an aggregate of L24.4 million as in-process research and
development, all of which was expensed in the periods in which the
related acquisitions were completed (1996: L8.2 million, 1997: L13.8
million and 1999: L2.4 million). The Company also has recorded L67.0
million of goodwill for US GAAP purposes in connection with acquisitions
(1996: L7.4 million, 1997: L11.1 million, 1998: L4.0 million, 1999: L27.8
million and 2000: L16.7 million). The Company recognizes the fast
changing industry in which it is involved and believes the remaining
goodwill has a useful life of 3 years.
Under UK GAAP, goodwill arising on consolidation of acquisitions (which
represents the excess of the fair value of the consideration paid in the
acquisition over the fair value of the identifiable net assets acquired)
prior to April 1, 1998 was written-off immediately against reserves, and
has no impact upon the Company's statement of operations until disposal.
Goodwill arising after April 1, 1998 is being capitalized and amortized
in a method similar to US GAAP; however there is no charge for in-process
research and development. The Company is therefore recording different
amounts of capitalized goodwill and amortization under UK GAAP than it is
under US GAAP. Currently the amortization charge under US GAAP exceeds
that under UK GAAP because of the amortisation of goodwill relating to
companies acquired prior to April 1, 1998. It is anticipated that in the
future the difference will decrease and eventually the UK GAAP charge
will exceed the US GAAP charge because of the in-process research and
development charges taken for US GAAP only.
Additionally UK GAAP requires that on subsequent disposal or closure of a
previously acquired business, any goodwill previously taken directly to
shareholders' equity is reflected in the income or loss on disposal.
Under US GAAP the appropriate balance to be written off on the disposal
of the business is the remaining unamortized balance of goodwill.
For acquisitions prior to April 1, 1998, the benefit of acquired tax
losses, as they are recognised in periods subsequent to the acquisition,
are credited to goodwill for US GAAP purposes and credited to income
under UK GAAP. There is no difference in treatment for acquisitions after
April 1, 1998.
Some of the investments made by Eidos during the year ended March 31,
2000 were reported differently under UK and US GAAP because of the
respective definitions of a subsidiary, joint venture, associate and
trade investment.
In summary, under UK GAAP the definitions are broadly based on control
(to a certain extent irrespective of actual percentage of shares held).
Under US GAAP they are based more on the percentage shareholding with
strong evidence required to, for example, not consolidate an entity with
a greater than 50% shareholding.
During fiscal year 2000, Eidos acquired 75% and 25% holdings in Proein SA
and Pyro Studios SL, respectively. Because of the nature of the
contractual joint control arrangements, these investments have been
accounted for as joint ventures under UK GAAP. This means they have been
accounted for using the equity method (with
9
<PAGE>
EIDOS plc
Notes to Unaudited Consolidated Financial Statements continued.../
additional disclosures required under UK GAAP). Under US GAAP, Proein has
been treated as a subsidiary and consolidated. Pyro Studios have been
accounted for using the equity method. These differing accounting
treatments do not affect the calculation of goodwill. On a line by line
basis the statement of operations and balance sheets under UK and US GAAP
differ; however, in reconciling net income and shareholders' equity from
UK to US GAAP there is only one minor difference. This is due to the
differing treatment of the provision for profit on unsold inventory.
Proein is a distributor of entertainment software in Spain; Eidos is one
of Proein's main suppliers. At each period end adjustments have to be
made for the Eidos' profit on inventory as yet unsold by Proein.
Adjustments are made for both UK and US GAAP, however, under the equity
method (UK GAAP) this adjustment is restricted to Eidos' percentage of
Proein (75%), whereas under full consolidation principles the adjustment
is for 100%.
In addition to the aforementioned acquisitions, Eidos has made a series
of investments in Top Cow Productions, Inc. in the last two years such
that the current holding is now 26%. Under UK GAAP the investment is not
treated as an associate (which would require equity accounting) because,
although Eidos has a participating interest (defined as over 20%), it
does not exercise significant influence over the operating and financial
policies of the company. Under US GAAP the investment is accounted for by
the equity method, with the resulting goodwill being amortised over three
years. Furthermore, under US GAAP, because the original investment took
place in the year ended March 31, 1999 (a step acquisition), the equity
method of accounting has been applied retrospectively and prior year US
GAAP numbers have been restated accordingly.
(2) Equity securities
Under UK GAAP, available for sale securities are stated at cost less
provision for any impairment in value. Under US GAAP, these securities
are marked to market with any unrealised gains and losses excluded from
earnings and reported in a separate component of shareholders' equity.
In prior years, Eidos had a significant investment (15%) in a technology
company listed on the Norwegian stock exchange (Opticom ASA). This
investment was not marked to market at June 30, 1999 because the Board
concluded that the price quoted on the Norwegian stock exchange was not
representative of fair value. This was because of the stage of
development of the company and the size of the holding in relation to
normal trading volumes. Accordingly the investment was carried at cost
for US accounting purposes.
During March 2000, Eidos sold a large proportion of its shareholding (at
a significant discount to then quoted market price). The remaining
holding is being marked to market under US GAAP since in the present
circumstances, the quoted price is considered to be a reasonable
reflection of the fair value.
(3) Revenue recognition
Under UK GAAP, licence income and advance royalties are recognised when
contractually due and non-refundable. Under US GAAP, SEC Staff Accounting
Bulletin No. 101 requires the deferral of non-refundable, up-front fees
unless the up-front fees are in exchange for products delivered or
services performed that represent the culmination of a separate earnings
process. During the year ended March 31, 2000, Eidos
10
<PAGE>
EIDOS plc
Notes to Unaudited Consolidated Financial Statements continued.../
received non-refundable advance royalties which met the criteria for
recognition under UK GAAP, but not under US GAAP. Accordingly, under US
GAAP these advance royalties were and continue to be deferred and will be
recognised as royalties are actually earned.
(4) Deferred taxation
Under UK GAAP deferred taxes are accounted for to the extent that it is
considered probable that a liability or asset will crystalise in the
foreseeable future.
Under US GAAP, deferred tax assets and liabilities are recorded for
temporary differences between the book and tax basis of assets and
liabilities. Deferred tax assets are reduced by a valuation allowance to
the amount which is more likely than not to be realised.
11
<PAGE>
EIDOS plc
Notes to Unaudited Consolidated Financial Statements continued.../
3. Segmental analysis
The analysis by class of business of turnover, loss before tax and assets
for Eidos on a consolidated basis is given below.
<TABLE>
<CAPTION>
Turnover Loss before taxation Gross assets
----------------------------- ----------------------------- -----------------------------
Three months ended June 30, Three months ended June 30, June 30, March 31,
----------------------------- ----------------------------- ------------ ------------
2000 1999 2000 1999 2000 2000
------------ ------------ ------------ ------------ ------------ ------------
Class of business L000 L000 L000 L000 L000 L000
<S> <C> <C> <C> <C> <C> <C>
Computer software 15,712 15,886 (22,156) (20,849) 132,138 266,319
Video editing 1,086 924 (178) (100) 2,281 2,329
------------ ------------ ------------ ------------ ------------ ------------
16,798 16,810 (22,334) (20,949) 134,419 268,648
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
The geographical analysis of turnover, loss before tax and assets for
Eidos on a consolidated basis is given below.
<TABLE>
<CAPTION>
Turnover to unaffiliated customers Inter-segment sales
---------------------------------------------------- ----------------------------------------------------
By destination By origination By destination By origination
Three months ended Three months ended Three months ended Three months ended
June 30, June 30, June 30, June 30,
------------------------ ------------------------ ------------------------ ------------------------
2000 1999 2000 1999 2000 1999 2000 1999
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Geographical segment L000 L000 L000 L000 L000 L000 L000 L000
United Kingdom 3,424 4,863 5,351 7,416 967 --- 639 3,432
Germany 2,250 2,296 2,162 2,612 (50) 1,120 --- 36
France 2,397 1,709 2,525 2,155 1,632 1,284 --- ---
Rest of Europe 825 2,292 --- --- --- --- --- ---
US 6,000 4,554 6,395 4,248 (454) 969 1,317 ---
Rest of World 1,902 1,096 365 379 90 97 229 2
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
16,798 16,810 16,798 16,810 2,185 3,470 2,185 3,470
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
12
<PAGE>
EIDOS plc
Notes to Unaudited Consolidated Financial Statements continued.../
3. Segmental analysis (continued)
Net loss before tax
<TABLE>
<CAPTION>
Three months ended
June 30,
--------------------------------
2000 1999
-------------- --------------
Geographical segment L000 L000
<S> <C> <C>
United Kingdom (13,631) (8,760)
Germany 357 (305)
France (495) (452)
US (8,517) (11,136)
Rest of World (48) (296)
-------------- --------------
(22,334) (20,949)
-------------- --------------
</TABLE>
Gross assets
<TABLE>
<CAPTION>
June 30, March 31,
-------------- --------------
2000 2000
-------------- --------------
Geographical segment L000 L000
<S> <C> <C>
United Kingdom 76,877 188,444
Germany 8,680 13,835
France 1,164 5,698
Spain (joint ventures) 4,057 4,682
US 42,982 55,240
Rest of World 659 749
-------------- --------------
134,419 268,648
-------------- --------------
</TABLE>
4. Stocks
<TABLE>
<CAPTION>
June 30, March 31,
-------------- --------------
2000 2000
-------------- --------------
<S> <C> <C>
Raw materials 652 496
Finished goods 13,199 12,790
-------------- --------------
13,851 13,286
============== ==============
</TABLE>
Stocks are stated net of provisions of L2,664,000 at June 30, 2000 and
L2,685,000 at March 31, 2000.
13
<PAGE>
EIDOS plc
Notes to Unaudited Consolidated Financial Statements continued.../
5. Borrowings
<TABLE>
<CAPTION>
June 30, 2000 March 31, 2000
-------------------------------- --------------------------------
Due within One Due after one Due within One Due after One
year year year year
-------------- -------------- -------------- --------------
L000 L000 L000 L000
<S> <C> <C> <C> <C>
Borrowings
Bank loans and overdrafts --- --- 80,616 ---
Obligations under finance leases 101 125 148 53
-------------- -------------- -------------- --------------
101 125 80,764 53
-------------- -------------- -------------- --------------
Other creditors
Trade creditors 7,225 --- 14,656 ---
Royalty creditors 3,516 --- 8,380 ---
Other tax and social security --- --- 5,960 ---
Other creditors 131 --- 287 ---
Accruals and deferred income 8,627 --- 11,949 ---
Corporation tax 2,744 --- 20,180 ---
-------------- -------------- -------------- --------------
22,243 --- 61,412 ---
-------------- -------------- -------------- --------------
22,344 125 142,176 53
============== ============== ============== ==============
</TABLE>
6. Commitments and contingencies
As at June 30, 2000 Eidos had contracts to make future payments totalling L9.1
million to various licensors and developers involved in providing games
software for Eidos' use. Eidos also has annual commitments under operating
leases of L2.6 million, L2.0 million relating to land and buildings and L0.6
million for motor vehicles and equipment. The leases for office premises are as
described in the Company's Annual Report on Form 20-F filed with the Securities
and Exchange Commission on July 5, 2000. The largest office is in Menlo Park,
California, which has an eight year lease and annual commitment of $1.3
million.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks
and uncertainties. Eidos' actual results could differ materially from the
results discussed in the forward-looking statements. Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed below and those discussed in the "Risk Factors" section of Eidos'
Annual Report on Form 20-F filed with the Securities and Exchange Commission on
July 5, 2000.
The following discussion is based on the Unaudited Consolidated Financial
Statements of Eidos, which have been prepared in accordance with UK GAAP. See
the Unaudited Consolidated Financial Statements of Eidos for information on the
differences between UK GAAP and US GAAP that affect Eidos' net income and
shareholders' equity.
OVERVIEW
Eidos has experienced, and expects to continue to experience, significant
fluctuations in operating results due to a variety of factors including, among
others: (i) the timing and success of product introductions; (ii) the market
acceptance of Eidos' products; (iii) delays in product completion; (iv) order
cancellations; (v) product returns; (vi) projected and actual changes in
platforms; (vii) changes in pricing policies by Eidos and its competitors;
(viii) development and promotional expenses relating to the introduction of new
products or new versions of existing products; (ix) changes in the value of the
pound sterling in relation to other currencies; and (x) the size and rate of
growth of the interactive software market. In response to competitive
pressures, Eidos may take certain pricing or marketing actions that could
materially adversely affect Eidos' business, results of operations and
financial condition. Products are generally shipped as orders are received;
accordingly Eidos operates with little backlog. Furthermore, the interactive
software business is highly seasonal. Net revenues are typically significantly
higher during the second half of Eidos' financial year, due primarily to the
increased demand for interactive software products during the year-end holiday
buying season. Net revenues in other periods are generally lower and vary
significantly as a result of new product introductions and other factors. As a
very significant percentage of Eidos' total sales arise in the second half,
Eidos has limited ability to compensate for shortfalls in second half sales by
changes in its operations or strategies in the first half. Eidos' expense
levels are based, in part, on its expectations regarding future sales, and, as
a result, operating results would be disproportionately and adversely affected
by a decrease in sales or a failure to meet Eidos' sales expectations.
Eidos publishes its consolidated financial statements in pounds sterling. A
significant portion of Eidos' assets and net revenues are generated in foreign
currency, primarily US dollars, Euros, French Francs and Deutschmarks. In
translating the results of its overseas operations Eidos is subject to
fluctuations in the exchange rates between pound sterling and the overseas
currency. Accordingly, depreciation in the weighted average value of the
overseas currency against the pound sterling could decrease reported revenues
and appreciation in the weighted average value of the overseas currency against
the pound sterling could increase reported revenues.
15
<PAGE>
As a result of the foregoing, results of operations can be expected to
fluctuate significantly from period to period.
RESULTS OF OPERATIONS
For the three months ended June 30, 2000 compared to three months ended June
30, 1999
Net revenue
Net revenue was unchanged at L16.8 million in the three months ended June 30,
2000. Four new titles were launched in the three months ended June 30, 2000;
Resident Evil: Code Veronica on Dreamcast, and Daikatana and Deus Ex, PC titles
from Dallas developer, Ion Storm and the Misadventures of Tron Bonne on PSX. In
addition Eidos released a PC version of World Grand Prix Racing 1999, a
Dreamcast version of Nomad Soul and Legacy of Kain: Soul Reaver on the Platinum
and Premier labels.
72% of games revenue was from sales of PC products compared to 63% for the
corresponding period of last year. Last year three titles were launched in the
first quarter, of which only one was for the PC. There were three PC releases
this year. Generally the proportion of PC sales in the first quarter is quite
high because of the volume of catalogue and budget priced sales (which are more
commonly sold on PC). This is also reflected in the average selling price,
which was L11.23 for the quarter compared to L9.84 in the same period last
year, but L13.94 in the full year.
The total number of units shipped in the quarter was 1.9 million compared to
1.5 million in the corresponding period of 1999. Net revenue remained the same
however, in spite of a higher number of units shipped and higher average
initial selling price, because of the continuing weak state of the market.
Cost of sales
Cost of sales includes manufacturing, distribution costs and royalties payable.
Royalties payable comprise three elements: royalties payable to third party
software licensors, royalties payable to third party developers and royalties
payable to internal development teams.
For the three months ended June 30, 2000, cost of sales was L9.1 million. This
represented 54.1% of net revenue, compared to L8.3 million, or 49.6% of net
revenue, in the corresponding period. Gross margin for the quarter was 45.9%
compared to 50.4% in the corresponding period last year. The decrease in margin
is a direct result of the weak state of the retail market for computer games
compared to last year together with continued price pressure.
Selling and Marketing
Selling and marketing expenses comprise product marketing and advertising
expenditure as well as salaries, bonuses and commissions paid to sales and
marketing personnel. They consist of a variable element, product advertising
and commissions, and a fixed element, which includes amortisation costs of
games-related licences, payroll and associated expenses of the workforce.
Advertising costs for the three months ended June 30, 2000 were L4.5 million
(26.8% of revenue) compared to L3.9 million (23.4% of revenue) in the
corresponding period last year. This reflects
16
<PAGE>
increased expenditure on catalogue titles and the costs associated with
building brand awareness through print advertising, the internet and other
interactive media.
The fixed element of selling and marketing costs was largely unchanged at L4.6
million for the quarter (1999: L4.9 million).
Research and Development
Research and development primarily consists of software development costs.
These costs include:
* internal development costs,
* development fees paid under publishing agreements to external
developers; and
* advance royalties paid under licensing arrangements.
Research and development spend represents the Company's investment in product
development of L11.3 million for the three months ended June 30, 2000 (1999:
L10.9 million). Also included is pure research and development of L0.3 million
(1999: L0.9 million). Pure research and development costs are decreasing as
Eidos is focussing on the core games development business now. The product
development charge for the quarter includes L7.9 million (1999: L7.7 million)
invested in a pipeline of 37 titles which have yet to be released.
General and Administrative
General and administrative expenses comprise primarily personnel costs for
finance, administrative and general management as well as property, accounting
and legal expenses. It also includes goodwill amortisation charges.
General and administrative costs excluding goodwill were L6.0 million or 35.7%
of revenue (1999: L6.2 million or 36.7%) for the quarter. Total general and
administrative costs including goodwill were L8.6 million (1999: L8.7 million).
Amortisation of goodwill arising on the acquisition of Proein and Pyro (which
are accounted for as joint ventures) of L1.3 million (1999: Lnil) is shown
separately as part of the results of the joint ventures rather than as part of
Group operating results. This is in accordance with Financial Reporting
Standard No.9 ("FRS9") and represents a change in presentation from that shown
in the March 31, 2000 Annual Report on Form 20-F where the charge was included
within general and administrative expenses.
Taxation
A tax credit of L7.0 million (1999: L6.9 million) has been applied to the loss
on ordinary activities of L22.3 million (1999: L20.9 million). This reflects
the projected underlying tax rate for the year to March 31, 2001 of 38%. In
general, Eidos expects to have an effective overall rate in excess of standard
UK rates because of the high proportion of activities overseas, which have tax
rates higher than those of the UK.
17
<PAGE>
Liquidity and capital resources
At June 30, 2000 Eidos had cash and cash equivalents of L14.7 million and
Eidos' working capital was L63.2 million.
Eidos generated cash of L4.1 million from its operating activities in the three
months ended June 30, 2000. Tax and interest payments and capital expenditure
of L12.4 million represented the only significant outflows of cash in the
quarter.
At June 30, 2000 Eidos had net assets of L112.0 million compared to L126.4
million at March 31, 2000. The decrease since the year end is due to the loss
sustained in the first quarter.
Total fixed assets comprise intangible assets (goodwill) of L14.3 million
(March 31, 2000: L16.0 million), tangible fixed assets of L5.9 million (March
31, 2000: L6.0 million) and investments of L51.0 million (March 31, 2000: L52.2
million). Management continues to monitor the carrying value of all its
investments, particularly that of Express.com, which operates in a volatile
sector and continues to assess its ongoing strategy and financing structure.
Investments include L10.5 million net goodwill relating to joint ventures,
which has been disclosed in accordance with the requirements of FRS9. The March
31, 2000 comparatives have been reclassified from those included in the March
31, 2000 Annual Report to comply with the disclosure requirements of the FRS.
Year 2000
Since 1997 Eidos has undertaken a compliance project designed to assess the
potential IT problems associated with the Year 2000, including a third party
compliance programme. As a result, at the beginning of January 2000 the Group
did not experience any material disruption to its business, nor did any of its
suppliers experience any disruptions which materially affected Eidos.
The direct costs of the Group's Year 2000 compliance project have been
indistinguishable from normal costs incurred by Eidos in regular maintenance
and upgrading of all computer hardware and software. Eidos does not expect to
incur any additional material costs related to Year 2000 however the directors
remain aware that possible problems associated with the Year 2000 may still
occur and controls remain in place to continue to monitor such risks.
The Euro
The Euro was launched on January 1, 1999 and now runs in parallel with the
French Franc, German Mark and other participating currencies until the local
currencies are phased out by January 1, 2001.
The financial information systems used in the European offices are all capable
of operating in multiple currencies including the Euro. There have been
negligible external costs relating to the introduction of the Euro to date
(less than L10,000). It is anticipated that once the Euro is implemented fully
there will be some costs involved in changing to the new currency (for example,
staff training and minor software and hardware changes). These are not expected
to be material.
The Company has established a task force comprising senior representatives from
finance, operations, sales and marketing in France, Germany and the UK to
consider the wider issues
18
<PAGE>
relating to the Euro and the Company's response. It will be difficult to
establish a Europe-wide policy until the UK's position with regard to the Euro
becomes clearer.
One of the main issues for the Company is the possible erosion of margin
resulting from changes in the retail price point (as existing price points are
translated to the Euro then possibly rounded down by the retailer). At this
stage it is not possible to predict the impact of this but Eidos will seek to
maintain its margin wherever it can. In addition, price transparency may erode
margins in certain countries; however, the fact that most games are translated
to the local language should help to reduce "grey imports" and minimise this
risk.
Currently the offices in France and Germany remit Euros back to the Head Office
in the UK. These receipts are translated to Sterling and where appropriate the
currency risk is hedged in accordance with Company policies. Should the UK
convert to the Euro this currency risk will be eliminated and the US dollar
will become the only significant currency exposure.
Market Risk
A full discussion of Eidos' exposure to market risk is given in the Company's
Annual Report on Form 20-F filed with the Securities and Exchange Commission on
July 5, 2000. Since that date there have been no significant changes in
exposure.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorised.
EIDOS plc
By: /S/ Jeremy MJ Lewis September 13, 2000
__________________ _________________
Jeremy MJ Lewis
Chief Financial Officer
19
<PAGE>
For Immediate Release 15 August 2000
Eidos plc
_________
STATEMENT RE POSSIBLE OFFER
On 20 June 2000, Eidos announced that it was currently in the early stages of
discussions which may or may not lead to an offer for the whole of the issued
share capital of Eidos.
Eidos can confirm that these discussions are still continuing. A further
announcement will be made when appropriate.
Enquiries:
Eidos plc 020 8636 3000
Ian Livingstone
Mike McGarvey
Dresdner Kleinwort Benson 020 7623 8000
Michael Bedford
Morgan Stanley Dean Witter 020 7425 8000
Piers de Montfort
E1-1
<PAGE>
This press release is not intended for and may not be distributed in the United
States, or to US persons.
For Immediate Release 31 August 2000
Eidos plc
---------
2001 First Quarter Results
First quarter revenue unchanged at L16.8 million
First quarter loss before tax and goodwill also unchanged at L18.4 million
Eidos plc ("Eidos"), one of the world's leading publishers and developers of
entertainment software, announces results for the quarter ended 30 June 2000.
Mr Charles Cornwall, Chief Executive Officer, says:
"Results for the first quarter of financial year 2001 reflect a relatively
quiet period for Eidos, with only four new releases, and the continuing low
level of activity in the retail market. The industry continues to experience an
overall slowdown in anticipation of the release of Sony's PlayStation 2. Net
revenue for the quarter of L16.8 million and a loss before tax and goodwill of
L18.4 million are both broadly at a similar level as for the same period last
year. Since the beginning of the financial year all titles due for release were
released on time or ahead of schedule. In particular the Sydney Olympics titles
were released on schedule on 25 August and Deus Ex was released ahead of
schedule in the US. With our balanced portfolio of established franchises,
licensed products and exciting and original new titles, we remain confident
that Eidos can trade through the current market difficulties and take advantage
of the next generation platforms as they gain market acceptance."
Highlights of the Chairman's Statement
* Net revenue and loss before tax and goodwill consistent with same period
last year
* Four new titles launched in the quarter
* Deus Ex reached No.1 in certain US retail charts, Resident Evil: Code
Veronica also performed well in European retail charts
* Deus Ex released in Europe in August reaching No. 1 in certain UK retail
charts
* Sydney Olympics titles released on 25 August
* Publishing arrangements for Resident Evil and Chicken Run titles extended
to include PC and Dreamcast versions respectively
* Tomb Raider movie, starring Angelina Jolie, started shooting in London in
July
Results Highlights (for the quarter to 30 June 2000)
<TABLE>
<CAPTION>
<S> <C> <C>
* Turnover: L16.8m (1999: L16.8m)
* EBITDA: (L17.7m) (1999:(L17.5m))
* Loss before tax and goodwill: (L18.4m) (1999:(L18.4m))
* Loss before tax: (L22.3m) (1999:(L20.9m))
* Loss per share: (14.8p) (1999: (16.0p))
* Loss per share before goodwill: (11.0p) (1999: (13.1p))
</TABLE>
Note 1: Eidos prepares financial statements in accordance with applicable UK
accounting standards (UK GAAP). The reconciliation to US GAAP is
available from Eidos on request.
E2-1
<PAGE>
Regarding prospects and current trading Mr Ian Livingstone, Chairman, says:
In the first quarter we released four new titles, including Deus Ex and
Daikatana, from Dallas developer, Ion Storm. The combined performance of these
two titles has been encouraging given the state of the market and considering
they are PC-only titles. The release of Deus Ex was scheduled for August but it
was released early in the US. It has been particularly well received and
reached number one in certain US retail charts. Following its subsequent
release in Europe it also reached number one in certain UK charts. The other
key release in the quarter was the Dreamcast version of the successful Resident
Evil series, Resident Evil: Code Veronica. This was released in Europe only and
has continued to perform well in retail charts since its release in May.
Although the quiet trading conditions experienced in the first quarter appear
likely to continue in the summer months, the second quarter has already seen
the successful European release of Deus Ex, and the world-wide release of the
Sydney Olympics titles. The Olympics titles are being released on three formats
being PC, PSX and Dreamcast. Future releases for the second quarter are "Who
wants to be a Millionaire?" on PSX, PC and Dreamcast, Powerstone 2 on Dreamcast
and Resident Evil: Nemesis on PC.
Looking further ahead, we believe the release schedule for the rest of the
financial year is our strongest to date. The schedule includes new products
such as Chicken Run, Hitman, Startopia, Project IGI, 102 Dalmatians and
Anachronox, another title from Ion Storm. In addition, there will be the new
instalments in the Tomb Raider and Championship Manager franchises, together
with sequels to Fear Effect, Commandos and Gangsters. Scheduled PlayStation 2
releases are to include TimeSplitters, Soul Reaver 2, Herdy Gerdy and Eden.
Visitors to Pinewood Studios, near London, will have noticed that Paramount
Pictures' eagerly anticipated screen version of Tomb Raider, starring Academy
Award(r) winner Angelina Jolie, has begun shooting. The movie is currently
scheduled for release next summer.
On 20 June Eidos released an announcement saying it was in preliminary
discussions which might or might not lead to an offer for the business. These
discussions were at a very early stage at the time of the announcement and have
continued subsequently. It is as yet too early to determine the outcome of the
negotiations. A further announcement will be made as soon as is appropriate.
Contact:
Charles Cornwall, CEO: 020 8636 3000
Jeremy Lewis, CFO: 020 8636 3000
Ryan Barr/Brad Edwards, Brainerd Communicators: 001 212 986 6667
Simon Ellis/Paul Vann, Binns & Co: 020 7786 9600
Issued by Binns & Co: 020 7786 9600
E2-2
<PAGE>
CHAIRMAN'S STATEMENT
Results and Trading Review
Eidos reports a loss before tax of L22.3 million for the three months ended 30
June 2000 compared to L20.9 million in the corresponding period last year.
Turnover remained unchanged at L16.8 million. The loss per share was 14.8p
compared to 16.0p in the same period last year based on a weighted average
number of shares outstanding in the period of 103,531,137 (1999: 87,841,880).
Net cash inflow from operating activities was L4.1 million compared to an
outflow of L7.0 million in the corresponding period last year following
favourable working capital movements. The total cash outflow for the period of
L8.3 million includes L10.2 million tax (most of which was due on the sale of
Opticom shares in March 2000).
Four new titles were launched in the three months ended 30 June 2000 being
Resident Evil: Code Veronica on Dreamcast, Daikatana and Deus Ex, key PC titles
from Ion Storm and The Misadventures of Tron Bonne on PSX. In addition Eidos
released a PC version of World Grand Prix Racing 1999, a Dreamcast version of
Nomad Soul and Legacy of Kain: Soul Reaver on the Platinum and Premier labels.
Gross margin for the quarter was 45.9% compared to 50.4% in the corresponding
period last year. The decrease in margin is a direct result of the continuing
weak state of the retail market for computer games compared to last year with
continued price pressure affecting gross margins.
Selling and Marketing
Advertising costs for the three months ended 30 June 2000 were L4.5 million
(26.8% of revenue) compared to L3.9 million (23.4% of revenue) in the
corresponding period last year. This reflects increased expenditure on
catalogue titles and the costs associated with building brand awareness through
print advertising, the internet and other interactive media.
The fixed element of selling and marketing costs was largely unchanged at L4.6
million for the quarter (1999: L4.9 million).
Research and Development
Research and development spend includes the investment in product development
of L11.2 million for the three months ended 30 June 2000 (1999: L10.9 million)
representing the Group's continued commitment to developing new franchises.
Also included is pure research and development of L0.3 million (1999: L0.9
million) which is decreasing as Eidos is now focussing on games development.
The product development charge for the quarter includes L7.9 million invested
in a pipeline of 37 titles which have yet to be released.
General and Administrative
General and administrative costs excluding goodwill were L6.0 million or 35.7%
of revenue (1999: L6.2 million or 36.7%) for the quarter. Total general and
administrative costs including goodwill were L8.6 million (1999: L8.7 million).
Amortisation of goodwill arising on the acquisition of Proein and Pyro (which
are accounted for as joint ventures) of L1.3 million (1999: Lnil) is shown
separately as part of the results of the joint ventures rather than as part of
Group operating results. This is in accordance with Financial Reporting
Standard No.9 ("FRS9") and represents a change in presentation from that shown
in the 31 March 2000 Annual Report, where the charge was included within
general and administrative expenses.
E2-3
<PAGE>
Taxation
A tax credit of L7.0 million (1999: L6.9 million) has been applied to the loss
on ordinary activities of L22.3 million (1999: L20.9 million). This reflects
the projected underlying tax rate for the year to 31 March 2001 of 38%. In
general, Eidos expects to have an effective overall rate in excess of standard
UK rates because of the high proportion of activities overseas, which have tax
rates higher than those of the UK.
Balance Sheet
At 30 June 2000 Eidos had net assets of L112.0 million compared to L126.4
million at 31 March 2000 and L64.4 million at 30 June 1999. The decrease since
the year end is due to the loss sustained in the first quarter. The increase
since 30 June 1999 is mainly due to the conversion of the remainder of the
US$50 million convertible bond (L20.7 million) and the retained profits for the
last financial year (L25.2 million).
Total fixed assets comprise intangible assets (goodwill) of L14.3 million (31
March 2000: L16.0 million, 30 June 1999: L24.0 million), tangible fixed assets
of L5.9 million (31 March 2000: L6.0 million, 30 June 1999: L5.3 million) and
investments of L51.0 million (31 March 2000: L52.2 million, 30 June 1999: L12.2
million). Management continues to monitor the carrying values of all its
investments, particularly that of Express.com, which operates in a volatile
sector and which continues to assess its ongoing strategy and financing
structure.
Investments include L10.5 million net goodwill relating to joint ventures,
which has been disclosed in accordance with the requirements of FRS9. The 31
March 2000 comparatives have been reclassified from those included in the 31
March 2000 Annual Report to comply with the disclosure requirements of the FRS.
The joint ventures were acquired after 30 June 1999 and consequently no
adjustment is required to the balance sheet at that date.
Current Trading and Future Prospects
In the first quarter we released four new titles, including Deus Ex and
Daikatana, from Dallas developer, Ion Storm. The combined performance of these
two titles has been encouraging given the state of the market and considering
they are PC-only titles. The release of Deus Ex was scheduled for August but it
was released early in the US. It has been particularly well received and
reached number one in certain US retail charts. Following its subsequent
release in Europe it also reached number one in certain UK charts. The other
key release in the quarter was the Dreamcast version of the successful Resident
Evil series, Resident Evil: Code Veronica. This was released in Europe only and
has continued to perform well in retail charts since its release in May.
Although the quiet trading conditions experienced in the first quarter appear
likely to continue in the summer months, the second quarter has already seen
the successful European release of Deus Ex, and the world-wide release of the
Sydney Olympics titles. The Olympics titles are being been released on three
formats being PC, PSX and Dreamcast. Future releases for the second quarter are
"Who wants to be a Millionaire?" on PSX, PC and Dreamcast, Powerstone 2 on
Dreamcast and Resident Evil: Nemesis on PC.
Looking further ahead, we believe the release schedule for the rest of the
financial year is our strongest to date. The schedule includes new products
such as Chicken Run, Hitman, Startopia, Project IGI, 102 Dalmatians and
Anachronox, another title from Ion Storm. In addition, there will be the new
instalments in the Tomb Raider and Championship Manager franchises, together
with
E2-4
<PAGE>
sequels to Fear Effect, Commandos and Gangsters. Scheduled PlayStation 2
releases are to include TimeSplitters, Soul Reaver 2, Herdy Gerdy and Eden.
Visitors to Pinewood Studios, near London, will have noticed that Paramount
Pictures' eagerly anticipated screen version of Tomb Raider, starring Academy
Award(r) winner Angelina Jolie, has begun shooting. The movie is currently
scheduled for release next summer.
On 20 June Eidos released an announcement saying it was in preliminary
discussions which might or might not lead to an offer for the business. These
discussions were at a very early stage at the time of the announcement and have
continued subsequently. It is as yet too early to determine the outcome of the
negotiations. A further announcement will be made as soon as is appropriate.
Ian Livingstone
Chairman
31 August 2000
E2-5
<PAGE>
EIDOS plc
Unaudited Consolidated Profit and Loss Account
<TABLE>
<CAPTION>
Three months Three months
ended 30 June ended 30 June
2000 1999
L000 L000
<S> <C> <C>
Turnover: Group and share of joint ventures' 18,869 16,810
Less: share of joint ventures' turnover (2,071) ---
-------------- --------------
Turnover -- continuing operations 16,798 16,810
Cost of goods sold (9,091) (8,345)
-------------- --------------
Gross profit 7,707 8,465
Selling and marketing (9,063) (8,867)
Research and development (11,534) (11,779)
General and administrative
Amortisation of goodwill (2,647) (2,514)
Other (6,000) (6,169)
-------------- --------------
Total general and administrative (8,647) (8,683)
-------------- --------------
Operating expenses (29,244) (29,329)
-------------- --------------
Group operating loss (21,537) (20,864)
Share of operating profit of joint ventures 289 ---
Joint venture goodwill amortisation (1,252) ---
-------------- --------------
Total operating loss -- continuing
operations (22,500) (20,864)
Net interest and similar charges 166 (85)
-------------- --------------
Loss on ordinary activities before tax (22,334) (20,949)
Tax on loss on ordinary activities 7,006 6,915
-------------- --------------
Net loss after tax (15,328) (14,034)
-------------- --------------
Loss per share (14.8p) (16.0p)
Loss per share before goodwill (11.0p) (13.1p)
</TABLE>
Notes:
1. The earnings per share is based on a weighted average number of ordinary
shares in issue of 103,531,137 (1999: 87,841,880) for the quarter ended 30
June 2000.
E2-6
<PAGE>
EIDOS plc
Unaudited Consolidated Balance Sheet
<TABLE>
<CAPTION>
30 June 30 June
2000 1999
L000 L000
<S> <C> <C>
Fixed assets
Intangible assets 14,330 23,999
Tangible assets 5,916 5,331
Investments
Joint ventures -- share of net assets 2,468 ---
Joint ventures -- goodwill 10,466 ---
Other investments 38,081 12,164
-------------- --------------
Total investments 51,015 12,164
-------------- --------------
Total fixed assets 71,261 41,494
-------------- --------------
Current assets
Stocks 13,851 6,618
Debtors 34,582 33,369
Cash at bank and in hand 14,725 27,195
-------------- --------------
Total current assets 63,158 67,182
Creditors: amounts falling due within one
year (22,344) (23,480)
-------------- --------------
Net current assets 40,814 43,702
-------------- --------------
Total assets less current liabilities 112,075 85,196
Creditors due after more than one year (125) (20,815)
-------------- --------------
Net assets 111,950 64,381
============== ==============
Capital and reserves
Called up share capital 2,071 1,856
Share premium account 85,108 62,251
Other reserves 707 707
Profit and loss account 24,064 (433)
-------------- --------------
Shareholders' funds 111,950 64,381
============== ==============
</TABLE>
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 investment in joint ventures comprises L3.9 million share of gross assets
less L1.4 million share of gross liabilities.
E2-7
<PAGE>
EIDOS plc
Unaudited Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
Three months Three months
ended 30 June ended 30 June
2000 1999
L000 L000
<S> <C> <C>
Net cash inflow/(outflow) from operating
activities 4,085 (7,035)
-------------- --------------
Returns on investments and servicing of
finance
Interest received 428 335
Bank interest paid (1,467) (117)
Interest paid on finance leases (7) (15)
Other interest paid --- (243)
-------------- --------------
(1,046) (40)
-------------- --------------
Taxation
UK taxation paid (9,417) ---
Overseas tax paid (763) (938)
-------------- --------------
(10,180) (938)
-------------- --------------
Capital expenditure and financial investment
Purchase of tangible fixed assets (564) (554)
Sale of tangible fixed assets 76 ---
Investment disposal costs (641) ---
-------------- --------------
(1,129) (554)
-------------- --------------
Acquisitions and disposals
Purchase of subsidiary undertakings --- (14,327)
-------------- --------------
--- (14,327)
-------------- --------------
Net cash outflow before financing (8,270) (22,894)
Financing
Issue of ordinary share capital 74 1,897
Repayment of principal under finance leases (98) (91)
-------------- --------------
(24) 1,806
-------------- --------------
Decrease in cash in the period (8,294) (21,088)
============== ==============
</TABLE>
Notes:
1. Net cash inflow from operating activities is derived from operating loss of
L21,537,000 (1999: L20,864,000) adjusted for depreciation of L902,000 (1999:
L827,000), goodwill amortisation and write-offs of L2,647,000 (1999:
L2,514,000) and a decrease in working capital of L22,073,000 (1999:
L10,488,000).
E2-8
<PAGE>
FOR IMMEDIATE RELEASE
EIDOS PLC ANNOUNCES FINANCIAL RESULTS FOR THE THREE MONTHS
ENDED JUNE 30, 2000
First quarter revenue unchanged at L16.8 million ($25.4 million)
First quarter loss before tax and goodwill also unchanged at L18.4 million
($27.8 million)
LONDON, August 31, 2000 -- Eidos plc (NASDAQ: EIDSY), one of the world's
leading publishers and developers of entertainment software, announced today
results for the quarter ended June 30, 2000. Revenue was L16.8 million ($25.4
million) for the quarter, unchanged from the same period last year. On a US
GAAP basis the Group's loss before tax for the quarter ended June 30, 2000 was
L22.4 million ($33.8 million) compared to L21.3 million in the corresponding
period last year. This resulted in a loss per share of 14.9p (22.5c) for the
quarter compared to a loss of 16.4p in the corresponding period last year.
Commenting on Eidos' current trading and prospects, Ian Livingstone, Chairman,
stated,
"In the first quarter we released four new titles, including Deus Ex and
Daikatana, from Dallas developer, Ion Storm. The combined performance of these
two titles has been encouraging given the state of the market and considering
they are PC-only titles. The release of Deus Ex was scheduled for August but it
was released early in the US. It has been particularly well received and
reached number one in certain US retail charts. Following its subsequent
release in Europe it also reached number one in certain UK charts. The other
key release in the quarter was the Dreamcast version of the successful Resident
Evil series, Resident Evil: Code Veronica. This was released in Europe only and
has continued to perform well in retail charts since its release in May.
Although the quiet trading conditions experienced in the first quarter appear
likely to continue in the summer months, the second quarter has already seen
the successful European release of Deus Ex, and the world-wide release of the
Sydney Olympics titles. The Olympics titles are being released on three formats
being PC, PSX and Dreamcast. Future releases for the second quarter are "Who
wants to be a Millionaire?" on PSX, PC and Dreamcast, Powerstone 2 on Dreamcast
and Resident Evil: Nemesis on PC.
Looking further ahead, we believe the release schedule for the rest of the
financial year is our strongest to date. The schedule includes new products
such as Chicken Run, Hitman, Startopia, Project IGI, 102 Dalmatians and
Anachronox, another title from Ion Storm. In addition, there will be the new
instalments in the Tomb Raider and Championship Manager franchises, together
with sequels to Fear Effect, Commandos and Gangsters. Scheduled PlayStation 2
releases are to include TimeSplitters, Soul Reaver 2, Herdy Gerdy and Eden.
Visitors to Pinewood Studios, near London, will have noticed that Paramount
Pictures' eagerly anticipated screen version of Tomb Raider, starring Academy
Award(r) winner Angelina Jolie, has begun shooting. The movie is currently
scheduled for release next summer.
On June 20, Eidos released an announcement saying it was in preliminary
discussions which might or might not lead to an offer for the business. These
discussions were at a very early stage at the
E3-1
<PAGE>
time of the announcement and have continued subsequently. It is as yet too
early to determine the outcome of the negotiations. A further announcement will
be made as soon as is appropriate."
Charles Cornwall, Chief Executive Officer, added, "Results for the first
quarter of financial year 2001 reflect a relatively quiet period for Eidos,
with only four new releases, and the continuing low level of activity in the
retail market. The industry continues to experience an overall slowdown in
anticipation of the release of Sony's PlayStation 2. Net revenue for the
quarter of L16.8 million and a loss before tax and goodwill of L18.4 million
are both broadly at a similar level as for the same period last year. Since the
beginning of the financial year all titles due for release were released on
time or ahead of schedule. In particular the Sydney Olympics titles were
released on schedule on August 25, and Deus Ex was released ahead of schedule
in the US. With our balanced portfolio of established franchises, licensed
products and exciting and original new titles, we remain confident that Eidos
can trade through the current market difficulties and take advantage of the
next generation platforms as they gain market acceptance."
<TABLE>
<CAPTION>
US GAAP
Quarter Ended June 30
--------------------------------------------------------
2000 1999
$000* L000 L000
<S> <C> <C> <C>
Net Sales 28,758 19,045 16,810
EBITDA (26,464) (17,526) (17,470)
Loss before tax (33,776) (22,368) (21,299)
Net loss (23,337) (15,455) (14,384)
Loss per share (22.5c) (14.9p) (16.4p)
Loss per share before goodwill (16.6c) (11.0p) (13.1p)
Weighted average shares 103,531,137 103,531,137 87,841,880
</TABLE>
* The Company's financial statements are expressed in Pounds Sterling.
References to `Pounds Sterling' or `L' are to the currency of the United
Kingdom and references to `$', `US dollars' or `US$' are to United States
currency. Solely for convenience this press release contains translations of
certain Pounds Sterling amounts into US dollars at specified rates. These
translations should not be construed as representations that the Pounds
Sterling amounts actually represent such US dollar amounts or could be
converted into US dollars at the rate indicated or any other rate. Unless
otherwise indicated, the translations of Pounds Sterling amounts into US
dollars have been made at the rate of $1.51 to L1.00, the exchange rate
published by Datastream for June 30, 2000.
Recent developments
* Net revenue and loss before tax and goodwill consistent with same period
last year
* Four new titles launched in the quarter
* Deus Ex reached No.1 in certain US retail charts, Resident Evil: Code
Veronica also performed well in European retail charts
* Deus Ex released in Europe in August reaching No. 1 in certain UK retail
charts
* Sydney Olympics titles released on August 25
* Publishing arrangements for Resident Evil and Chicken Run titles extended
to include PC and Dreamcast versions respectively
* Tomb Raider movie, starring Angelina Jolie, started shooting in London in
July
E3-2
<PAGE>
UK GAAP Financial Summary
Eidos reports a loss before tax of L22.3 million for the three months ended
June 30, 2000 compared to L20.9 million in the corresponding period last year.
Turnover remained unchanged at L16.8 million. The loss per share was 14.8p
compared to 16.0p in the same period last year based on a weighted average
number of shares outstanding in the period of 103,531,137 (1999: 87,841,880).
Net cash inflow from operating activities was L4.1 million compared to an
outflow of L7.0 million in the corresponding period last year following
favourable working capital movements. The total cash outflow for the period of
L8.3 million includes L10.2 million tax (most of which was due on the sale of
Opticom shares in March 2000).
Four new titles were launched in the three months ended June 30, 2000 including
Resident Evil: Code Veronica on Dreamcast, Daikatana and Deus Ex, key PC titles
from Ion Storm and The Misadventures of Tron Bonne on PSX. In addition Eidos
released a PC version of World Grand Prix Racing 1999, a Dreamcast version of
Nomad Soul and Legacy of Kain: Soul Reaver on the Platinum and Premier labels.
Gross margin for the quarter was 45.9% compared to 50.4% in the corresponding
period last year. The decrease in margin is a direct result of the continuing
weak state of the retail market for computer games compared to last year with
continued price pressure affecting gross margins.
Selling and Marketing
Advertising costs for the three months ended June 30, 2000 were L4.5 million
(26.8% of revenue) compared to L3.9 million (23.4% of revenue) in the
corresponding period last year. This reflects increased expenditure on
catalogue titles and the costs associated with building brand awareness through
print advertising, the internet and other interactive media.
The fixed element of selling and marketing costs was largely unchanged at L4.6
million for the quarter (1999: L4.9 million).
Research and Development
Research and development spend includes the investment in product development
of L11.3 million for the three months ended June 30, 2000 (1999: L10.9 million)
representing the Group's continued commitment to developing new franchises.
Also included is pure research and development of L0.3 million (1999: L0.9
million) which is decreasing as Eidos is now focussing on games development.
The product development charge for the quarter includes L7.9 million invested
in a pipeline of 37 titles which have yet to be released.
General and Administrative
General and administrative costs excluding goodwill were L6.0 million or 35.7%
of revenue (1999: L6.2 million or 36.7%) for the quarter. Total general and
administrative costs including goodwill were L8.6 million (1999: L8.7 million).
Amortisation of goodwill arising on the acquisition of Proein and Pyro (which
are accounted for as joint ventures) of L1.3 million (1999: Lnil) is shown
separately as part of the results of the joint ventures rather than as part of
Group operating results. This is in accordance with Financial Reporting
Standard No.9 ("FRS9") and represents a change in presentation from that shown
in the March 31, 2000 Annual Report, where the charge was included within
general and administrative expenses.
E3-3
<PAGE>
Taxation
A tax credit of L7.0 million (1999: L6.9 million) has been applied to the loss
on ordinary activities of L22.3 million (1999: L20.9 million). This reflects
the projected underlying tax rate for the year to March 31, 2001 of 38%. In
general, Eidos expects to have an effective overall rate in excess of standard
UK rates because of the high proportion of activities overseas, which have tax
rates higher than those of the UK.
Balance Sheet
At June 30, 2000 Eidos had net assets of L112.0 million compared to L126.4
million at March 31, 2000 and L64.4 million at June 30, 1999. The decrease
since the year end is due to the loss sustained in the first quarter. The
increase since June 30, 1999 is mainly due to the conversion of the remainder
of the US$50 million convertible bond (L20.7 million) and the retained profits
for the last financial year (L25.2 million).
Total fixed assets comprise intangible assets (goodwill) of L14.3 million
(March 31, 2000: L16.0 million, June 30, 1999: L24.0 million), tangible fixed
assets of L5.9 million (March 31, 2000: L6.0 million, June 30, 1999: L5.3
million) and investments of L51.0 million (March 31, 2000: L52.2 million, June
30, 1999: L12.2 million). Management continues to monitor the carrying value of
all its investments, particularly that of Express.com, which operates in a
volatile sector and which continues to assess its ongoing strategy and
financing structure.
Investments include L10.5 million net goodwill relating to joint ventures,
which has been disclosed in accordance with the requirements of FRS9. The March
31, 2000 comparatives have been reclassified from those included in the March
31, 2000 Annual Report to comply with the disclosure requirements of the FRS.
The joint ventures were acquired after June 30, 1999 and consequently no
adjustment is required to the balance sheet at that date.
Eidos plc is one of the world's leading publishers and developers of
entertainment software. The Company develops and publishes a diverse mix of
titles for the Sony PlayStation, Sega Dreamcast, Nintendo Game Boy Color and
multimedia PC markets in the US, the UK, Europe and Asia. 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, and 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, product 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, 2000.
Contact:
Charles Cornwall, CEO: 011 44 20 8636 3000
Jeremy Lewis, CFO: 011 44 20 8636 3000
Ryan Barr/Brad Edwards, Brainerd Communicators: 212 986 6667
Simon Ellis/Paul Vann, Binns & Co: 011 44 20 7786 9600
E3-4
<PAGE>
EIDOS plc
Unaudited Consolidated Statements of Operations reconciled to US GAAP for the
quarter ended June 30, 2000
<TABLE>
<CAPTION>
UK GAAP Three months
Three months ended June 30, ended June 30,
2000 2000 1999
$000 L000 L000
<S> <C> <C> <C>
Turnover: Group and share of joint ventures' 28,492 18,869 16,810
Less: share of joint ventures' turnover (3,127) (2,071) ---
-------------- -------------- --------------
Turnover -- continuing operations 25,365 16,798 16,810
Cost of goods sold (13,727) (9,091) (8,345)
-------------- -------------- --------------
Gross profit 11,638 7,707 8,465
Selling and marketing (13,685) (9,063) (8,867)
Research and development (17,416) (11,534) (11,779)
General and administrative
Amortization of goodwill (3,997) (2,647) (2,514)
Other (9,060) (6,000) (6,169)
-------------- -------------- --------------
Total general and administrative (13,057) (8,647) (8,683)
-------------- -------------- --------------
Operating expenses (44,158) (29,244) (29,329)
-------------- -------------- --------------
Group operating loss (32,520) (21,537) (20,864)
Share of operating profit of joint ventures 436 289 ---
Joint venture goodwill amortization (1,891) (1,252) ---
-------------- -------------- --------------
Total operating loss -- continuing operations (33,975) (22,500) (20,864)
Net interest and similar charges 251 166 (85)
-------------- -------------- --------------
Loss on ordinary activities before tax (33,724) (22,334) (20,949)
Tax on loss on ordinary activities 10,579 7,006 6,915
-------------- -------------- --------------
Net loss after tax (prepared under UK GAAP) (23,145) (15,328) (14,034)
-------------- -------------- --------------
Loss per share (22.3c) (14.8p) (16.0p)
Loss per share before goodwill (16.6c) (11.0p) (13.1p)
Reconciliation to US GAAP
Net loss after tax (prepared under UK GAAP) (23,145) (15,328) (14,034)
Amortisation of goodwill -- group 323 214 204
Amortisation of goodwill -- associates (616) (408) (554)
Full consolidation of joint venture 101 67 ---
-------------- -------------- --------------
Net loss in accordance with US GAAP (23,337) (15,455) (14,384)
-------------- -------------- --------------
Loss per share in accordance with US GAAP
Loss per share (22.5c) (14.9p) (16.4p)
Loss per share before goodwill (16.6c) (11.0p) (13.1p)
</TABLE>
Notes:
1. The Company's financial statements are expressed in Pounds Sterling.
References to `Pounds Sterling' or `L' are to the currency of the United
Kingdom and references to `$', `US dollars' or `US$' are to United States
currency. Solely for convenience this press release contains translations of
certain Pounds Sterling amounts into US dollars at specified rates. These
translations should not be construed as representations that the Pounds
Sterling amounts actually represent such US dollar amounts or could be
converted into US dollars at the rate indicated or any other rate. Unless
otherwise indicated, the translations of Pounds Sterling amounts into US
dollars have been made at the rate of $1.51 to L1.00, the exchange rate
published by Datastream for June 30, 2000.
E3-5
<PAGE>
EIDOS plc
Consolidated Balance Sheets Reconciled to US GAAP
<TABLE>
<CAPTION>
UK GAAP June 30, 2000 March 31, 2000
(unaudited)
$000 L000 L000
<S> <C> <C> <C>
Fixed assets
Intangible assets 21,638 14,330 16,035
Tangible assets 8,933 5,916 6,022
Investments
Joint ventures -- share of net assets 3,727 2,468 1,840
Joint ventures -- goodwill 15,804 10,466 12,270
Other investments 57,502 38,081 38,081
-------------- -------------- --------------
Total investments 77,033 51,015 52,191
-------------- -------------- --------------
Total fixed assets 107,604 71,261 74,248
-------------- -------------- --------------
Current assets
Stocks 20,915 13,851 13,286
Debtors 52,219 34,582 77,665
Cash at bank and in hand 22,235 14,725 103,449
-------------- -------------- --------------
Total current assets 95,369 63,158 194,400
Creditors: amounts falling due within one year (33,739) (22,344) (142,176)
-------------- -------------- --------------
Net current assets 61,630 40,814 52,224
-------------- -------------- --------------
Total assets less current liabilities 169,234 112,075 126,472
Creditors due after more than one year (189) (125) (53)
-------------- -------------- --------------
Net assets 169,045 111,950 126,419
============== ============== ==============
Capital and reserves
Called up share capital 3,127 2,071 2,071
Share premium account 128,513 85,108 85,034
Other reserves 1,068 707 707
Profit and loss account 36,337 24,064 38,607
-------------- -------------- --------------
Shareholders' funds 169,045 111,950 126,419
============== ============== ==============
</TABLE>
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 investment in joint ventures comprises L3.9 million share of gross assets
less L1.4 million share of gross liabilities.
3. Goodwill relating to joint ventures and associates as at March 31, 2000 has
been reclassified in accordance with FRS9.
E3-6
<PAGE>
EIDOS plc
Consolidated Balance Sheets Reconciled to US GAAP
<TABLE>
<CAPTION>
Reconciliation to US GAAP June 30, 2000 March 31, 2000
(unaudited)
$000 L000 L000
<S> <C> <C> <C>
Shareholders' funds (prepared under UK GAAP) 169,045 111,950 126,419
Goodwill 20,584 13,632 13,632
Less in process research and development (3,575) (2,368) (2,368)
Less amortisation (18,555) (12,288) (12,503)
-------------- -------------- --------------
(1,546) (1,024) (1,239)
-------------- -------------- --------------
Investment in associates -- net assets 308 204 204
Investment in associates -- goodwill 10,742 7,114 7,114
Less amortisation (8,781) (5,815) (5,407)
-------------- -------------- --------------
2,269 1,503 1,911
-------------- -------------- --------------
Unrealised appreciation of other investments 35,488 23,502 40,665
Deferred tax on unrealised appreciation (10,647) (7,051) (12,200)
Full consolidation of joint venture company (94) (62) (129)
Revenue recognition (1,416) (938) (938)
-------------- -------------- --------------
Shareholders' funds in accordance with US GAAP 193,099 127,880 154,489
============== ============== ==============
</TABLE>
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 investment in joint ventures comprises L3.9 million share of gross assets
less L1.4 million share of gross liabilities.
3. Goodwill relating to joint ventures and associates as at March 31, 2000 has
been reclassified in accordance with FRS9.
E3-7
<PAGE>
EIDOS plc
Unaudited Consolidated Statements of Cash Flow
<TABLE>
<CAPTION>
Three months
Three months ended June 30, ended June 30,
2000 2000 1999
$000 L000 L000
<S> <C> <C> <C>
Net cash inflow/(outflow) from operating activities 6,168 4,085 (7,035)
-------------- -------------- --------------
Returns on investments and servicing of finance
Interest received 646 428 335
Bank interest paid (2,215) (1,467) (117)
Interest paid on finance leases (10) (7) (15)
Other interest paid --- --- (243)
-------------- -------------- --------------
(1,579) (1,046) (40)
-------------- -------------- --------------
Taxation
UK taxation paid (14,220) (9,417) ---
Overseas tax paid (1,152) (763) (938)
-------------- -------------- --------------
(15,372) (10,180) (938)
-------------- -------------- --------------
Capital expenditure and financial investment
Purchase of tangible fixed assets (852) (564) (554)
Sale of tangible fixed assets 115 76 ---
Investment disposal costs (968) (641) ---
-------------- -------------- --------------
(1,705) (1,129) (554)
-------------- -------------- --------------
Acquisitions and disposals
Purchase of subsidiary undertakings --- --- (14,327)
-------------- -------------- --------------
--- --- (14,327)
-------------- -------------- --------------
Net cash outflow before financing (12,488) (8,270) (22,894)
Financing
Issue of ordinary share capital 112 74 1,897
Repayment of principal under finance leases (148) (98) (91)
-------------- -------------- --------------
(36) (24) 1,806
-------------- -------------- --------------
Decrease in cash in the period (12,524) (8,294) (21,088)
============== ============== ==============
</TABLE>
Notes:
1. Net cash inflow from operating activities is derived from operating loss of
L21,537,000 (1999: L20,864,000) adjusted for depreciation of L902,000 (1999:
L827,000), goodwill amortisation and write-offs of L2,647,000 (1999:
L2,514,000) and a decrease in working capital of L22,073,000 (1999:
L10,488,000).
E3-8
<PAGE>
Eidos plc Statistical Information for the Period Ended June 30, 2000
Geographical Revenue Mix
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended June 30, 2000 Quarter ended June 30, 1999
L000s % of Total L000s % of Total
<S> <C> <C> <C> <C>
North America 6,000 35.7% 4,554 27.1%
UK/Europe 8,896 53.0% 11,160 66.4%
Rest of World 1,902 11.3% 1,096 6.5%
-------------- -------------- -------------- --------------
Total net revenue 16,798 100.0% 16,810 100.0%
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
Percentage
Decrease
Quarter
<S> <C>
North America 31.8%
UK/Europe (20.3%)
Rest of World 73.5%
--------------
Total net revenue (0.1%)
--------------
</TABLE>
Platform Revenue Mix (Games Revenue only)
(Unaudited)
<TABLE>
<CAPTION>
Quarter ended June 30, 2000 Quarter ended June 30, 1999
L000s % of Total L000s % of Total
<S> <C> <C> <C> <C>
Console 4,445 28.4% 5,897 37.2%
PC 11,206 71.6% 9,954 62.8%
-------------- -------------- -------------- --------------
Total net revenue 15,651 100.0% 15,851 100.0%
-------------- -------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
Percentage
Decrease
Quarter
<S> <C>
Console (24.6%)
PC 12.6%
--------------
Total net revenue (1.3%)
--------------
</TABLE>
E3-9
