Radica Shows Full-Year Profit Drop

Officials from Hong-Kong based peripheral, electronic game, and 'TV game' manufacturer Radica Games have announced the company’s financial results for the fourth quarter and year ended December 31st, 2004. For the full year, the company reported a net profit of $3.5 million or $0.18 per diluted share, compared to $12.5 million or $0.66 per diluted share for 2003. Pre-tax profits for the full year were $4.3 million, compared to $9.6 million in 2003. Net loss for the quarter was $1.6 million or $0.09 per diluted share, compared to a net profit of $7.3 million or $0.38 per diluted share at the same time in 2003. The company also made a pre-tax loss of $2.0 million for the quarter, compared to a profit of $4.1 million in 2003. The company’s previously popular Play TV Legends series of TV console games, including licensed Tetris and Sega Genesis/Mega Drive titles, proved to have a lower margin than before due to increased airfreight, outsourcing and marketing costs. It's also possible, although unremarked upon by the company, that increasing competition in the 'TV Game' arena, with companies such as JAKKS Pacific and Atari also releasing licensed all-in-one game-inclusive joysticks and joypads, may have contributed to demand issues. In addition, the disappointing results partly reflect the impact of a pre-tax non-cash charge of $3.5 million for impairment of goodwill for the Gamester business acquired in 1999, as well as $0.6m in charges against an underperforming license guarantee and inventory reserves for certain discontinued product lines. According to CEO Pat Feely, though: "Fourth quarter results excluding the impairment charge were consistent with the profit expectations we announced in December. While profits were offset by the goodwill impairment charge, sales exceeded expectations due to strong late demand and improvements in availability for 20Q and Gamester Race Pac. We are encouraged that the strong demand on these items seems to be carrying over into Q1."