CentreGold Plc’s optimism at the full-year stage last October (CI No 2,531) was betting without the problem of it being left with a pile of 16-bit Sega and Nintendo cartridge games that nobody wants – or at least nobody wants to pay for – prior to the release of 32- and 64-bit games consoles. The Birmingham-based entertainment software house’s shares slipped to a new low of 49 pence, but this was after a frank warning issued in February that resulted in them plunging 37 pence to 60p (CI No 2,609). CentreGold turned in interim pre-tax losses of ú3.9m after a stock write-down of ú3.0m, against profits last time of ú2.6m. Sales also fell by 22% to ú41.0m due to the slump in demand. The biggest fall came in the publishing sector where the cartridge g lut was exacerbated by manufacturers announcing the next generation CD-ROM games consoles – not due for release until later this year – causing customers to keep their hands in their pockets until then, despite the likely high cost of the new systems and games. Publishing sales fell 39% to ú16.0m. CentreGold must have empathised with the turkeys at Christmas as the effect of the flood of games on to the market only became apparent to the company in late November, when the company had to hastily repackage and cut prices on some of its titles at the most important time of year. After the stock write-down, the group has reduced its inventory further by around 51% since the end of January, and does not anticipate any further reductions. In the US, US Gold Inc made an operating loss of ú1.8m in the half due to the same squeeze on margins resulting from retail price cuts. Core Design Ltd, bought in October for ú5.3m (CI No 2,531), contributed ú18,000 in pre-tax profits in the three months to January. The distribution side of the business fared a little better, because it was able to develop sales of multimedia products to help offset the slump in demand for games cartridges. Distribution turnover slipped by 5% to ú25.0m. Through careful selection of titles, the directors are confident that following the drastic write-down the company can still make significant sales to the large installed base. A small office has been opened in Tokyo on the back of Sega Enterprises Ltd’s launch of the Saturn and Sony Corp’s Playstation games machines to generate income from sub-licensing. Offices have also been opened in France and Germany during the half. The leading-edge development group Silicon Dreams, together with Core Design will be responsible for more than half of the development of new titles due for release before Christmas. These include seven titles for the Playstation, five for 3DO Co multiplayer, six for the Sega Saturn and 10 compact disk games for personal computers – a market that has been performing well for CentreGold thus far. The first offering from Silicon Dreams will be the Fever Pitch football game due out in June. The board describes current trading as satisfactory and expresses confidence in a significant improvement in operating profits in the second half. It will need to generate some cash as well, as balances were down to ú15,000 at half-time. No dividend is proposed.
