- 2007 Half-Year Results
Gameloft's financial statements for the first half-year ending 30 June 2007 break down as follows:
In EURM S1 2007 IFRS S1 2006 IFRS
Sales 45.9 30.5
Other Income 0.2 0.2
Cost of goods sold 3.8 2.1
R&D 25.1 19.8
Sales & Marketing 10.5 8.0
Administration 3.7 2.6
Other expenses 0.7 0.1
Current operating income(i) 2.3 (1.8)
Stock-based compensation (1.5) (1.7)
Other operational revenues and expenses 0.0 19.7
Operating income 0.8 16.2
Financial result (0.1) (1.0)
Tax expense (0.6) (0.5)
Group Share of Net Income 0.0 14.7
(i)before stock-based compensation
Total sales increased by 50% during the first six months of 2007. The growth of our game download sales, Gameloft's core business, reached 58% over the same period. This strong increase in sales is linked to our investments in R&D which allow us to release a growing number of games every year for a growing number of telephone models.
Gameloft recorded a very sharp improvement in current operating income during the first six months of 2007. The operating margin stands at 5.1%, gaining 11 margin points compared to the first half of 2006. This significant increase in the margin, despite a 42% increase in the average headcount over the period, highlights the substantial leverage that exists with the growth in sales. The margin should therefore continue to improve over the second half of the year and we are in a position to confirm our operating margin goal (excluding employee stock based compensation) in excess of 10% over the full year 2007.
The half-year impact from expensing stock options is EUR1.5M. It is expected to reach around EUR3.0M for the full year 2007. This charge will have no impact on the company's equity and cash level.
Our financial result was EUR-0.1M, up significantly compared to the first six months of 2006. The company benefited from lower exchange rate losses on the US dollar and from interests on our available funds.
The net income stands just over the breakeven point, down however compared to the first half of 2006. This is due to the sale in June 2006 of our web site jeuxvideo.com which generated a capital gain of EUR20.4M in our 2006 accounts.
Healthy financial position
Gameloft's financial position improved significantly during the year's first six months. The company's equity stands at EUR48.6M at 30 June 2007, net cash was EUR20.4M and financial indebtedness remained at zero. Operating cash flow reached 4.7Meuros during the period, a strong increase over the previous year. We can therefore renew with confidence our full year target of generating an operating cash flow close to breakeven or positive during fiscal 2007. Gameloft therefore has the financial resources necessary for its international growth strategy.
Outlook for 2007 and 2008
Investments in R&D over several years now have ideally positioned Gameloft in the mobile gaming industry. The company currently has:
- the industry's largest development capacity, well beyond that of its competitors;
- a growing number of outlets for its products as demonstrated by the release of Gameloft games for Apple's Ipod, XBox Live, Nintendo DS and PCs.
- a unique know-how demonstrated by the numerous awards that our mobile games have won worldwide;
- a catalogue of more than 150 games which generates recurrent revenue and which covers over 1000 mobile handset models;
- a large portfolio of IPs strengthened by the recent acquisition of the mobile rights to Beowulf, Heroes, Shrek The Third, 1 Vs 100, etc.
The company is therefore in a position today to confirm all of the financial objectives that were set in the beginning of the year: sales between EUR95M and EUR100M in 2007 and exceeding EUR130M in 2008 combined with an operating margin (excluding employee stock based compensation) in excess of 10% in 2007 and around 15% in 2008.
In the long term, the Company is therefore more than ever in a position to become a leader in a market of 4 billion potential consumers in 20101, a position for which it has invested heavily with success since 2002.
Sales for the third quarter of 2007 will be published on 26 October 2007.
(1) Source: Strategy Analytics
P&L (in thousands of euros) H1 2007 IFRS H1 2006 IFRS
Sales 45 858 30 529
Other revenue from the activity 211 200
Cost of goods sold 3 782 2 070
R&D 25 093 19 770
Sales and Marketing 10 490 8 015
Administration 3 652 2 608
Other expenses 716 61
Current operating income (before 2 336 -1 795
stock-based compensation)
Stock-based compensation -1 535 -1 690
Other operating revenue and expenses -44 19 684
Operating income 757 16 198
Cost of net financial indebtedness 251 -63
Interest income 469 216
Interest expense -811 -1 127
Financial result -91 -974
Tax expense -633 -477
Net income 34 14 747
. Group's share 34 14 710
. minority interests 0 37
BALANCE SHEET (in thousands of euros) 30/06/2007 IFRS 31/12/2006 IFRS
ASSETS
Net intangible fixed assets 3 469 2 816
Net tangible fixed assets 4 623 3 551
Non-current financial assets 2 105 962
Assets from deferred assets 516 821
Total non-current assets 10 712 8 151
Inventory 87 111
Client receivables 27 679 26 283
Investment securities 13 698 7 119
Liquid assets 6 737 11 573
Other current assets 4 509 5 154
Total current assets 52 708 50 240
TOTAL 63 420 58 390
LIABILITIES
Capital 3 612 3 538
Issue premium 61 300 58 592
Reserves -16 360 -34 223
Result 34 16 258
Shareholders' equity 48 585 44 165
Minority interests 0 0
Non-current liabilities 880 1 036
Current liabilities 13 955 13 190
TOTAL 63 420 58 390
Cash Flow Statement
(in thousands euros) 30.06.07 30.06.06
Operating transactions
Net income 34 14 710
Depreciation of tangible and
intangible fixed assets 2 637 783
Variation of provisions 63 -7
Result from stocks options
and assimilated 1 535 1 690
Variation of deferred taxes 5 -2
Capital gains or losses on
sales of assets -2 -20 352
Gross cash flow 4 271 -3 177
Change in the working
capital requirement 464 -426
Operating cash flow 4 735 -3 603
Total flows linked to
investments -5 907 19 282
Total flows from
financing transactions 2 709 -3 108
Impact of conversion
differentials 201 -346
Change in cash flow 1 738 12 224
Cash at the beginning
of the year 18 660 8 840
Cash at the end of
the semester 20 398 21 065
Contact: Anne-Laure Descleves
Tel: + 33-(0)-1-58-16-20-82
anne-laure.descleves@gameloft.com
