During the six month period to December 31, 2003, and as planned, the Company released 23 SKUs (10 products), including Backyard Wrestling: Don't Try This at Home, Commandos 3: Destination Berlin, Legacy of Kain: Defiance, Championship Manager: Season 03/04 and Deus Ex: Invisible War. Sales performed broadly in line with management's expectations, with the exception of Commandos 3 and Legacy of Kain, which did not achieve expected levels. This, combined with US hardware sales falling short of market forecasts, and the adverse impact caused by the weakening of the US dollar, will result in revenue for the period being modestly below market expectations.
The Company was successful in increasing gross margins during the period, which reflects the success of its strategy to develop products internally. The Company continues to make operational improvements in the business and has also increased its R&D expenditure to reflect the continued investment in the forward product pipeline.
Consequently, operating profit for the first six months of the year will be well ahead of the comparable period last year, albeit below some market forecasts. The Company will report a positive operating cash inflow in the period and a continuing strong cash balance.
During the second half of this financial year, the Company expects to release a further 23 SKUs (6 products), including Thief: Deadly Shadows, ShellShock: Nam '67 (previously named Tour of Duty) and the next sequel in the highly successful Hitman franchise, Hitman: Contracts. The first sequel, Hitman: Silent Assassin, has now shipped in excess of three million units.
Based on trading performance to date and the strength of the forthcoming release schedule in the second half, the Board remains confident in meeting current market expectations for the full year to June 30, 2004.
The Company will report its interim results on March 4, 2004.