News
30/06/97 SCi appoints corporate development director
COMMENT: The appointment of Rob Murphy, a former partner at Arthur Anderson, as an executive director of business development is an indication that the Company is likely to make further acquisitions during the next year. Obvious targets are development companies and in particular developers that they have worked with. An increased stake in Stainless Software should not be ruled out, especially if Carmageddon is successful in the US.

15/09/97 SCi achieves highest ever pre-tax profit

COMMENT: The Company achieved £1.42m pbt on sales of £5.14m for the year ended 30/06/97. The results are attributable to the successful launch of Carmageddon two weeks earlier and to the success of Swiv3D and XS, which, whilst not selling at the same level as Carmageddon were both profitable. However, the results were also affected by changes in accounting policy which for the restated 1996 accounts has resulted in significantly lower sales and higher pre-tax losses. The 2 principal policy changes are:

• Development costs for games developed in-house are no longer to be capitalised and expensed during the life of the product (during the first 9 months of the product's sale) but are to be written off as incurred. Third party developed titles' costs are to be amortised and expensed immediately on release as opposed to over the first nine month of sales. This explains the dramatic increase in cost of sales for 1996. Surprisingly, the Company claims that the changes had minimal (£21,000) effect on the 1997 PBT. 
• Distributor's advances are to be deferred until final acceptance of the game. Hence the decrease in 1996 turnover (which has probably resulted in augmented 1997 turnover).

The policy, seen as being considerably more conservative, has the effect of accelerating the write off of development costs whilst taking a significant proportion of 1997 costs back to 1996.

07/04/98 Interim Results and £1m placing

The Company's interim results appear to show a company in decline but actually are the result of a change in publishing strategy coupled with an altered release schedule. The only worrying element of the results was a dangerously low level of cash, a problem resolved with the swift placing of £1m with institutions. The bulk of turnover came from Carmageddon titles (360,000 units have been sold to date including 100,000 in the US) whilst the cancellation and rescheduling of some titles has resulted in cost incurred with no revenue to match them (no new titles were released during the period). The Company should return to profit for the year end and have 3 titles due for release during the second half of the financial year- Frenzy (a flying game for PSX), Quad Assault (a driving game for PSX), Spellcross ( a 3D adventure game for PC). FY99 looks more promising with the release this Christmas of Carmageddon (PSX) and Carmageddon2 (PC). 4 other titles, including the N64 version of Carmageddon, are scheduled for release during FY99.
Whilst easing the immediate cash problem, the £1m of new money will also help fund the Company's increased focus on externally developed titles. Following the poor performance of its internal development teams, the Company has reduced its development personnel down to 1 team and canceled a number of projects. At the same time the Company has negotiated publishing agreements with 3 third party development companies and is in talks with another 2.

05/05/98 Budget version of Carmageddon licensed to GT Interactive
SCi have licensed the European budget rights for the original Carmageddon title to US publisher GT Interactive. Featuring under GT Interactive's successful Replay range of low priced games, the Company expects to sell around 200,000 copies. However, SCi are unlikely to see a return much above £2/unit.

03/07/98 SCi announces profits warning
As a result of the decision to postpone the launch of 3 titles originally scheduled for release before the year-end, SCi was forced to issue a warning that its 1998 year-end results would not match "market expectations". The absence of any major new title during the year, coupled with exceptional costs of £1.5m has resulted in an estimated loss before tax of £3.4m. The exceptional item is comprised of the write-off of around £1m in capitalised software development costs and the remainder of other costs resulting from the reduction of SCi's internal development resources down to one team. The news, however, was not all bleak. The change in development strategy (see 07/04/98 news), however, has partly contributed towards a claimed £1m in annualised cost-savings and with 8 titles to be released during the current year (including three new Carmageddon titles for which it has negotiated a $2m advance from US publishers Interplay), the company should return to profit for year-end 1999.

22/07/98 Microsoft bundling deals signed
The Company has secured 2 bundling deals with Microsoft. The first, announced on 17/07, will see a demo of Carmageddon II included with every Sidewinder Force Feedback Steering Wheel Microsoft produces and the second sees a demo of another forthcoming game, Live Wire, included on Microsoft's Windows 98 sampler disc. Given the likely retail price of the Steering Wheel (between £150-£200), the potential revenue stream from the first deal appears limited whilst the Company will not receive any payment for the Live Wire demo. The true value lies, instead, in the exposure the demos receive.

04/12/98 FY1998 final results announced
As anticipated (see 03/07/98 news), the Company announced a significant move into the red for the year ended 30/06/98. Although the final loss before tax was not as bad as had been anticipated, the change in fortunes was still substantial compared to the previous year.
It looks like it could be a roller-coaster ride for SCi. The Company appear to be on course for a dramatic return to profitability for FY99 beginning with interim results that should be dominated by the successful launch of Carmageddon II on PC in late November. Managing around 200,000 across Europe in its first week, the sequel has achieved 50,000 units greater sales than the original Carmageddon in its first week with the prospects of PSX, N64 and Colour Gameboy versions to come. The original achieved some 600,000 unit sales (including around 400,000 full-price sales) on PC alone so the sequel and console versions should improve on that. This coupled with lower overhead and depreciation costs, a positive contribution from two titles (Spellcross and Frenzy!) released during the summer and renegotiated (and improved) distribution terms with European and US partners could see the company return impressively to the black for FY99.

02/02/99 SCi reveals strong interim turnaround

As predicted, the Company has returned to the black following the successful launch of Carmageddon II. We have indicated at the top of the page that  year-end results should show a marked improvement on FY98 and a healthy profit of at least twice the £506,000 PBT earned in the six months to 31/12/98. The three titles released during the period were all profitable although Carmageddon II (PC version) contributed the most with 200,000 sales in Europe and the guaranteed sales of 100,000 units from the USA being realised. As indicated above, the prospects for the second half of the year are excellent with the release of console versions of Carmageddon expected to result in an additional 300,000 unit sales, a figure that many in the industry might consider conservative.

22/03/99 SCi signs development deal for multi-player Carmageddon with On-Line Plc
Internet games developer On-Line Plc, also listed on AIM, is to develop a multi-player PC version of Carmageddon for use on the internet. The title, which should allow the game to be played by dozens of players at any one time, will be hosted by On-Line and is due for release in November 1999 along side the retail version of Carmageddon III for PC.

23/06/99 European console Carmaggedon rights signed to Titus
After an extended courting period, SCi have signed the rights for the European distribution of the console (PSX, N64 and C-GB) version of Carmageddon to fast-growing French publisher Titus. Although the games will not be released until FY00 (September), the deal sees the company recognising the distributor's advance in the current (FY99) year and thus the Company remains on course for a dramatic return to profit. The choice to go with Titus appears particularly prudent as the distribution will be handled by Virgin Interactive (who, having lost the Resident Evil III distribution are eager to fill their portfolio with a major title) in which Titus, via its majority shareholding in US publisher Interplay, has a 49.9% stake. Furthermore, with Interplay handling the US distribution, a global marketing program (Europe has been assigned £1.2m alone) and release schedule can be coordinated to get the most from the products' launch.

06/10/99 SCi raise £0.9m at 140p
The Company has made full use of the dramatic rise of its share price over the last few weeks to raise £0.9m of new funds to assist in the Company's continued expansion. SCi has revealed that it intends to use the proceeds to fund the acquisition of more games licenses and the move to Playstation 2 publishing.

19/11/99 SCi announces record prelims
SCi revealed record PBT of £1.7m on sales of £8m in the year to June 1999. The Company also revealed that it was in the final stages of a £20m fund-raising to further capitalise on the strong interest in games shares and SCi's rapidly risen share price.
The Company released 4 new titles during FY99 although only one, Carmageddon 2, contributed strongly to the results. As indicated in previous news, the Company signed, during the second half of the year, a distribution deal with Titus to release the console versions of Carmageddon outside of the UK. The Company has chosen to recognise the advanced sales royalties in FY99 (even though the products were released during FY00).
The line-up for FY00 comprises a title based on the newly signed license Mille Miglia (a classic car race held yearly in Italy) and Carmageddon 3 (PC and PSX). Although SCi will need to sell in excess of 300,000-350,000 units of the console versions of Carmageddon in order to generate any revenue for FY00, the strength of the titles and sales so far this year suggest that this is not only very possible but also likely. SCi appears on course for further growth during FY00 and it is likely the final figures will be augmented by additional product acquisitions over the next 6 months. In addition, the Company will have reduced its overdraft position (which was serviced during FY99 with a £230k charge) and although admin expenses will likely rise marginally, this will have been offset by the one-off cost of the closure of Stainless Software recognised during FY99.
To achieve the reduction in negative interest, the Company plans to pay back the approximate £3m overdraft from the proceeds of its £20m fund-raising. The Company will use the remainder to continue its policy of relying on third party developers by buying up titles at a late stage of development, funding the development of new titles from scratch and acquiring licenses and bringing in third party developers to create games around them. With the market about to transition to next-generation console platforms from Sega, Sony, Nintendo and Microsoft, with the developer skills necessary to create top games for these titles likely to become increasingly scarce commodities and with average development costs expected to rise over 30% during the next two years as a result, SCi, and other publishers, are going to need considerable reserves - and publishing prowess - in order to compete.

13/12/99 SCi buys Thunderbirds games rights
SCi has announced that it has added to its portfolio of games licences having reached an agreement with Carlton International to take the worldwide computer and video game rights to the 60's TV series Thunderbirds. SCi intends to develop Thunderbirds games for Playstation 2, PC and for online use and plans to capitalise on the planned re-release of the series (which has been digitally remastered) in 2000.

14/02/00 SCi reveals interim results and internet investment

News
18/01/01&26/01/01 SCi makes profits warning, announces prelims
Less than a month after it had issued a positive trading statement (see 2000 news), SCi has been forced to announce a profits warning. This bizarre situation has arisen in spite of a good trading period around Christmas with SCi's Thunderbirds Game Boy product selling ahead of expectations and the revelation that the Company has signed a $4.3m deal with US publisher SVG/Crave.
One cause of the profits warning was the recognition, a week before the results were due, that one of its larger European publisher partners was not in a position to fulfill
a sales guarantee agreed for a range of SCi's products a few years ago. The Company has therefore written £600,000 from its debtor column.
In the (currently popular) tradition of getting bad news out of the way at one point not progressively over time, SCi has also chosen to write down its investment in internet music company music3w.com (formerly Ontourworld) resulting in a further £700,000 being passed through the P& this year.
However, the Company has not stopped there and has also made a further two adjustments which have negatively affected the Company's FY00 performance. The first arose from a request by the Company's auditors to postpone until FY01 and FY02 the recognition of £1.2m in revenues relating to the contracted  exploitation of Actualize IPR (game engines, porting rights) by a third party publisher  The second, of £1.8m, relates to a retrospective modification to the valuation of Actualize which would have otherwise resulted in marginally improved bottom line for FY00.
Ultimately the exercise serves to benefit future financial periods and the Company is confident of a return to profitability in its next financial year.

29/06/01 SCi reveals interim results

Sci's negative results reflect two key factors:
1) A further change in accounting policy (to complement the changes made in 1997) that sees all third party development costs as well as all generic technology (e.g. game engines) development costs written off as incurred rather than amortised on the balance sheet and written off at a later time or over a protracted period. This brings the accounting policy in line with industry standard accounting practices but also serves the useful purpose of getting rid of a significant proportion of the costs associated with next year's releases, costs which would have deflated next year's financial performance.
2) The Company's only significant release was Thunderbirds on Game Boy Color which, despite only being released in the UK, contributed around £1m to the £1.6m total interim turnover with over 70,000 unit sales. The remaining turnover comprised back catalogue sales, in particular from the Rally series.
SCi is a company that has historically demonstrated highly lumpy growth characteristics that reflect the small size of the comhttp://www.adslguide.org.uk/pany and the resulting uneven flow of product into the market. FY2001 and FY2002 will prove the same with only a limited number of titles due for release before the end of FY01 (Sept) but some 6 major titles (11SKUs) due for FY02. The recent accounting policy changes will exacerbate the difference by allowing the company to realise the cost of the FY02 titles during the current "depressed" year and thus lining the Company up for an extremely strong FY02. This is proving a common theme amongst games publisher with Eidos, Rage and Empire also using this and last year (which happen to coincide with industry transition years) to get as much "bad news" out of the way as possible.
Thus, SCi will post large losses this year but will swing back strongly in FY02 (first indications of this will be during calendar Q1-02) when it should post record revenues and profits.

20/08/01 SCi secures "agreement" with Microsoft
SCi revealed an "agreement" with Microsoft for its Conflict: Desert Storm Xbox title. Contrary to some press speculation, this is neither a marketing, distribution or publishing deal. In fact, this "agreement" only amounts to a simple product approval (which all console titles by all publishers have to go through) and SCi will gain no commercial advantage from it other than having the product ready for release when Xbox launches in Europe in Spring 2002.

13/09/01 SCi arranges banking facility and equity line of credit, gives trading update
SCi revealed that it has secured a £2m banking facility and in order to achieve this has also had to put in place a £5m equity line of credit (ELOC) along similar lines to that used by Rage Software. The ELOC, which, like Rage, is with GEM Global Yield Fund, is drawn down at SCi's discretion and is issued at a 10% discount to the Company's share price. As with all ELOC deals the principal concern is one of dilution as based on the current share price the current SCi shareholder base would be diluted by around 30%. However, the Company is confident that it will not need the ELOC facility and would use the banking facility first. Although SCi may well dip into the banking facility during the course of its FY02, its use would be short-term only and linked to individual product pre-orders (and thus theoretically re-payment would be secure). Given the Company's strong release schedule during FY02, the Company's working capital requirement will be extensive as much of the cost of launching a product comes before the title goes on sale (e.g. product manufacturing @ £6-£7 per console unit, marketing, PR and other promotional costs etc.).
The Company also gave a trading update revealing that the FY02 year would begin strongly with pre-orders for The Italian Job (PSX) and Rally Championship Xtreme (PC) topping 200,000 and 300,000 respectively.

19/09/01 Bad debt being pursued
SCi revealed that despite having secured a court ruling in its favour against troubled French publisher Titus (with whom it had a dispute over £600,000 in contractually owed royalties), the Company had still not received payment and was to take further steps to ensure payment.

14/12/01 FY01 results and FY02 preview
Despite losses of £10.5m on turnover of just £2m, SCi's FY01 figures were in line with expectation as the Company continued its investment in its FY02 and FY03 release schedule. With its new policy of writing off development investment as incurred, SCi revealed that it had spent £10.7m on development costs during FY00 and FY01. Since the Company launched no major new titles during FY01 (although it did release a number of filler products), the figures should have come as no surprise and, interestingly, the situation mirrors that of SCi's 98/99 financial years when the Company's release schedule was focused around the FY99 year and resulted in a profit warning for FY98. FY99 saw record turnover and profitability and the Company is on course for similar record-breaking during the current financial year. Sell-through of both The Italian Job (PSX) and Rally Championship Xtreme (PC) has now matched pre-orders and re-orders have begun to be received on both. The Company also revealed that the £600,000 in bad debt written off at the beginning of 2001 (due to the protracted dispute with the troubled French publisher Titus), will now be honoured and repaid in installments. As and when this is received, the Company will recognise this through its P&L and will thus improve FY2002's bottom line further.
Finally, the Company announced that it had taken on 2 new non-executive directors, Tim Ryan and Nigel Wayne, to further strengthen the SCi board. 

21/02/02 AGM and trading update
SCi has used its AGM to issue a positive trading update. The Company has reported that sales of The Italian Job are some 25% ahead of expectation and its strong performance has led to the signing of a distribution deal with US publisher Take 2 for the North American market. Under the terms of the deal, SCi will receive a sales guarantee and although North American sales are not expected to be significant, the deal helps underpin both the longevity of the title's sales and SCi's financial performance in the second half of the year. The Company also confirmed that Rally Championship Xtreme is to be published on Gamecube rather than Xbox and will follow the eagerly anticipated PS2 version during 1H03.
SCi has continued its successful policy of acquiring and attaching licenses to its titles with the signing of cartoon brand Futurama and football magazine FourFourTwo. Whilst the latter will neatly fit onto the Company's existing football management game in development (to be released in 2H02), the former represents a longer term opportunity. Futurama creator Matt Groenig's The Simpsons has spawned over a dozen games titles, some of which have sold in significant volumes and although Futurama is not as popular as The Simpsons, SCi's exclusive multi-year, multi-platform license should reap profitable dividends over time. Futurama which is being developed by Swedish games developer UDS will be released during FY03 on PS2, Xbox and Gamecube.
Finally, SCi confirmed that it was receiving payments from French publisher Titus, following its successful litigation last year and that it had entered into a marketing agreement with graphics chip leader Nvidia to promote Conflict: Desert Storm.

08/04/02 SCi secures lucrative US distribution deal for Conflict: Desert Storm
As expected, SCi has finally concluded a US distribution deal for its highly anticipated action strategy title, Conflict: Desert Storm. The deal comes on the back of a similar tie-up with the US publisher for the PSX and PC versions of The Italian Job. Take 2 has proven one of the most successful publishers in North America over the last 12 months with hit console and PC releases Max Payne and Grand Theft Auto 3 and Conflict: Desert Storm complements its portfolio well. Although details of the deal were not revealed, it is understood that a number of publishers were vying for the North American distribution rights and SCi will likely have secured favourable advance payment and per-unit contribution terms as a result.

16/04/02 & 30/04/02 £1m New funding secured
SCi confirmed that its current trading was in line with forecasts and that it had secured a £500,000 loan from its equity line of credit provider, GEM Global Yield Limited. The loan is a short-term replacement for the ELOC as the draw-down of the ELOC is restricted by the volume of recent trading in SCi. This explains the £100k ELOC draw-down announced at the same time, the proceeds of which will have been used to pay back part of the loan. Two weeks later, SCi revealed that it had placed £500,000 with private investors thus bringing the new funds secured to £1m. On both occasions it stated that the reasons for the fund-raising was to fund the acquisition of "new licenses and intellectual property" - i.e. brand rights and games in development.
Investors biggest concern with SCi has been its ability to meet the working capital requirement for launching its summer products. Management, however, are confident that this will be met by a combination of distributor advances (such as that from their recently announced North American distribution deal for "Conflict: Desert Storm") and existing bank facilities.

01/05/02 SCi secures Alistair McLean titles
SCi has acquired the exclusive worldwide games rights to three Alistair McLean novels, "Where Eagles Dare", "The Guns of Navarone" and "Ice Station Zebra". This continues SCi's policy of creating games based on popular brands and licenses. This strategy has proven very successful with "The Italian Job" reaching No.1 in the UK PlayStation charts. The first products from this new deal are expected to be released during FY04.

03/05/02 and 24/05/02 SCi continues to pay back loan through the ELOC
SCi has continued to pay back the £500k loan secured from ELOC provider GEM by drawing down on its equity line of credit. The £100k raised on 03/05 and £250k raised on 24/05( combined with the £100k drawn down on the 16th April) leaves around £50k which will be either be paid back through further ELOC issues or from cash generated from summer trading.

30/05/02 Rally Championship Japanese PS2 deal signed
SCi has secured a Japanese distribution deal for the PS2 version of Rally Championship. The Japanese version, which is being handled by Success Corporation, does not yet have a release date but is expected to contribute during SCi's FY02. The deal comprises an advance and guaranteed sales although SCi will receive a considerably smaller per unit contribution compared to European territory contributions. We believe that this deal represents a useful rather than significant contribution to SCI's FY02 results.

20/06/02 Interim results and new fund raising

SCi's interim figures brought few surprises although the accompanying announcement that the Company was conducting a further fund raising exercise was unexpected. Despite being propped up by a £600,000 write-back of the Titus litigation provision (see 2001 news), the results display substantial improvements over the previous three interims and reflect the improvement in the fundamental trading position of the Company compared to previous years. The Italian Job, which (even in late July, over 8 months after its release) still features in the UK PSX top 10 , was the principal factor behind this turn-around. The second half of the year continues to look strong with a number of key releases due, including Rally Championship and Conflict: Desert Storm. The PS2 version of Rally Championship, as disclosed in the Warthog analysis, has not fared well in the UK, failing to make the PS2 top 20, although it is thought to have fared better on the continent. Early retail and distribution indications for Conflict: Desert Storm are very favourable and, as a result, the Company appears highly likely to exceed the £1.6m PBT market forecast. It is, of course, early days yet and sales of the product, which is on course for release before the Company's year-end, will undoubtedly be spread between FY02 and FY03.
Having previously asserted that it had sufficient cash to see it through this year, the fund raising of £3.5m (£3.1m net) comes as something of a surprise. Citing working capital requirement for publishing console titles and the need to invest in product for FY04 and beyond, the Company does leave itself open to criticism about its ability to manage its cash resources, especially given the amounts raised by the Company over the last 5 years.
The Company wisely ensured that the fund raising was fully underwritten. The fact that the share price remained below the offer price during the offer period has resulted in virtually no take-up from the Company's substantial retail investor base. Instead the Company now has some much-needed institutional investors and one can expect the Company to up its institutional campaign as its financial year draws to a close.

22/07/02 New Conflict games revealed
Although SCi already has a long-term publishing agreement with UK developers Pivotal, it has secured their services for two specific games, Conflict: Desert Sabre and Conflict: Missing Presumed Dead. Both are sequels to the eagerly anticipated Conflict: Desert Storm multi-platform action strategy game (also developed by Pivotal) with the first sequel due before the end of SCi's FY03. Although it was unlikely that SCi would stop with C:DS or would work with another developer, this development represents good news as it confirms major releases in both FY03 and FY04. Given retail anticipation of the title in the US and in Europe, the Conflict series now looks set to become SCi's biggest franchise.

27/08/02 Richard Burns licence won
SCi continues its licence acquisition spree with the signing of a long-term agreement with current World Rally Champion Richard Burns. Burns' name and rally expertise will be applied to the Warthog-developed/SCi published Rally Championship products, the 7th iteration of which is due before the end of SCi's FY03. Given the importance of the Colin McRae license to the eponymous rally title from Codemasters, this latest  acquisition is an excellent move by SCi and should add to the appeal of SCi's multi-platform rally products over the next few years.

03/10/02 Two more products for Take 2
SCi has further cemented its relationship with US publisher Take 2 with the signing of two new North American publishing and distribution deals. The first is for the sequel to Conflict: Desert Storm, called Conflict: Desert Sabre and is indicative of the success anticipated by Take 2 of the original which it launched at the end of last month. Conflict: Desert Sabre is due to be launched in September 2003. The second is for a multi-platform game based around SCi's The Great Escape licence which is also due in the second half of SCi's FY03. In both instances, SCi will have received guarantees and advances from Take2 which not only provide useful cash resources early but help underpin FY03 forecasts.

04/012/02 Record prelims announced
The success of The Italian Job (around 0.5m units sold to date) and Conflict: Desert Storm (over 0.5m units booked during the period) have driven SCi to report record sales and profitability for the year to Sept 30th 2002. Following a spartan year in which no major products were released, SCi released 6 titles in FY02, the first  to arrive as a result of the £20m fund-raising at the end of 1999. The Company's cash position at the year-end remained precarious although at the time of reporting was substantially improved following the receipt of amounts due from retail and distribution partners.
Although SCi warned that first half sales and profits would be depressed due to the skewing of the FY03 release schedule towards the second half of the year, the Company will still benefit from continuing sales of C:DS, the release of the GameCube version of Rally Championship Xtreme and other back-catalogue product sales. In fact, with the Company reporting total shipments of 1m units in its first 12 weeks on sale (which it is confident will result in sell-though of 1m units), 1H03 sales could feasibly be higher than 1H02 sales. This combined with a strong second half release schedule underpinned by US publishing guarantees (see previous news) has given the SCi management confidence that growth will continue into 2003 and 2004.

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