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					SCi Entertainment Group Plc
Annual report and accounts 2005




Leading brands, leading roles
Highlights
Acquisition of Eidos plc                 Change in year-end to           Strong start to the 2006
effective from 16 May 2005               30 June following the           financial year. Championship
makes SCi the largest UK                 acquisition results in a        Manager Solo is the UK’s
computer and video games                 pre-tax loss of £14.0 million   number one selling mobile
publisher and a leading                  after exceptional charges,      phone game; Total Overdose
player in the global video               which is 7% better than the     entered the UK Top Ten and
games industry.                          market expectation of a loss    is performing strongly in other
                                         of £15.1 million.               European countries; Conflict:
Integration of SCi and Eidos
                                                                         Global Storm shipped on time
proceeding well and SCi’s                Strong balance sheet and
                                                                         on 30 September 2005.
management team                          no gearing. Positive cash of
strengthened by the                      £44 million at 30 June          New Completion Bond
appointment of Scott                     2005, which is 10% better       agreement signed with Film
Dodkins (European                        than market expectations.       Finances Inc to further
Managing Director), Bill                                                 manage and reduce
                                         The Group has traded well
Gardner (Managing Director                                               development risk.
                                         since the acquisition of
– US Publishing) and Ian
                                         Eidos. Strong performances
Livingstone (Product
                                         from Championship Manager
Acquisition Director).
                                         and the distribution of LEGO
Management and staff                     Star Wars mean that Eidos
restructuring completed on               made an operating profit of
schedule.                                £1.6 million in the seven
                                         week period from acquisition
Review of development
                                         to 30 June 2005.
proceeding well. As planned,
key franchises scheduled for
release in the second half of                                            Contents
                                                                         Profile 1
the 2006 financial year in                                                Organisation and structure 2
order to maximise quality                                                Chief executive’s statement 4
                                                                         Operating and financial review 16
and potential revenues.                                                  Directors, officers and advisers 25
                                                                         Directors’ report 26
The Board remains confident                                               Consolidated profit and
of achieving planned annual                                              loss account 28
                                                                         Consolidated statement of total
cost savings of £14 million                                              recognised gains and losses 29
in the first full year of                                                 Balance sheets 30
                                                                         Consolidated cash flow statement 31
operation.                                                               Notes to the accounts 33
                                                                         Report of the independent auditors 53
SCi is confident of returning                                             Corporate governance 55
Eidos to profitability during                                             Corporate responsibility statement 58
                                                                         Directors’ remuneration report 59
the twelve months to                                                     Shareholder information 64
30 June 2006.                                                            Five year record inside back cover




SCi Entertainment Annual Report & Accounts 2005
Profile
SCi is now a major force in the global interactive entertainment industry.
We own some of the strongest brands in the games industry – including
Tomb Raider, Hitman, the Conflict series and Championship Manager –
and some of the most talented development studios in the world –
Io Interactive, Crystal Dynamics, Pivotal Games, Beautiful Game Studios and
Core Design. We expect the 2006 financial year to demonstrate the strength
and breadth of the new Group’s brands and return Eidos to profitability.
The launch of new hardware platforms plus the continued expansion of
mobile and on-line games should continue to drive growth in the overall
market and therefore the opportunities available to the enlarged Group.
39%




of gamers are female
25%




of gamers are over 40
85%




of games sold have age ratings of <18
40%




of all Europeans play computer games
60%




of all Americans play computer games
Source: ISFE (Interactive Software Federation of Europe)




SCi Entertainment Annual Report & Accounts 2005            1
Organisation and structure



Publishing                                          Development                     Distribution

Eidos Interactive (UK)                              Beautiful Game Studios (UK)     Eidos France

Eidos Inc (US)                                      Core Design (UK)                Eidos Germany
                                                    Crystal Dynamics (US)           Proein (Spain) 75%*

                                                    Io Interactive (Denmark)

                                                    Pivotal Games (UK)
                                                    Pyro Studios (Spain) 27%*

                                                    Rocksteady Studios (UK) 25.1%


* Group interest following 100% acquisition of Eidos plc.




Our brands include:                                 Licensed products include:
Battlestations: Midway                              Constantine

Carmageddon                                         Futurama

Championship Manager                                The Great Escape

Commandos                                           Highlander

Conflict series                                     The Italian Job

Deus Ex                                             Reservoir Dogs

Galleon                                             Rogue Trooper

Gangsters                                           Thunderbirds

Hitman                                              Where Eagles Dare

Imperial Glory

Just Cause

Legacy of Kain

Rally series

Thief

Tomb Raider

Total Overdose

Urban Chaos




SCi Entertainment Annual Report & Accounts 2005             2
 PLC Board
 Jane Cavanagh
 Chief Executive

 Bill Ennis
 Commercial Director
 Rob Murphy
 Finance Director

 Tim Ryan                                         Product Acquisitions     Ian Livingstone
 Non-executive Director                                                    Product Acquisition Director

 Nigel Wayne                                      Development              Darren Barnett Development Director
 Non-executive Director                                                    Patrick O’Luanaigh Design Director

                                                  European Publishing      Scott Dodkins
 Anthony Price                                                             Managing Director, Europe
 Company Secretary
                                                  US Publishing            Bill Gardner
                                                                           Managing Director – US Publishing

                                                  New Media & IT           Simon Protheroe
                                                                           New Media & IT Director




                                                  Development Studios
                                                  Beautiful Game Studios   David Rutter


                                                  Core Design              Gavin Rummery


                                                  Crystal Dynamics         Sean Vesce


                                                  Io Interactive           Janos Flösser


                                                  Pivotal Games            Jim Bambra




SCi Entertainment Annual Report & Accounts 2005     3
Chief executive’s statement



SCi’s objective is to increase                the combined Group will be fully
shareholder value. We aim to do this by       realised in the 12 months to 30 June
continuing to build a strong portfolio        2006.
of high quality game franchises and
intellectual property combined with an        Operating results to 30 June 2005
effective global distribution network.        The offer to acquire Eidos was declared
We believe that this, supported by            unconditional on 16 May 2005. Given
sound financial management, will               the relative size of SCi and Eidos, the
continue to deliver profitable growth.         Board concluded that there were strong
Over recent years SCi has successfully        practical reasons for changing the SCi
achieved this objective, principally          financial year to 30 June to coincide
through organic growth, whilst                with the Eidos financial year. In
consistently delivering increases in          addition, this change has enabled
turnover and profits.                          management, staff and shareholders to
    In May 2005, SCi successfully             focus quickly on the first full 12 months
completed its share offer for Eidos plc,      of the combined Group.
making the combined Group the UK’s                The results to 30 June 2005
largest video games publisher and a           therefore incorporate nine months
leading player in the global video            results for the existing SCi Group, plus
games industry. Following the                 the results of Eidos for a seven week      Following the
acquisition, SCi now owns some of the         period from acquisition on 16 May          acquisition, SCi
strongest brands in the games industry        2005 to 30 June 2005. During this          now owns some
(including Tomb Raider, which has now         period, turnover was £15.4 million and     of the strongest
sold in excess of 28 million units across     the Group recorded a pre-tax loss after    brands in the
the franchise, Hitman, the Conflict            exceptional charges for the period of      games industry.
series and Championship Manager) and          £14.0 million, which is approximately
some of the most talented development         7% better than market expectations.
studios in the world. The Group’s                 During the nine month period SCi’s
development studios are Beautiful             major product release, as planned, was
Game Studios, Core Design, Crystal            Constantine. This was launched, on
Dynamics, Io Interactive and Pivotal          time, in January 2005 to coincide with
Games. In addition, the Group has part        the Warner Bros film starring Keanu
ownership of Rocksteady and Pyro              Reeves.
Studios. The application of SCi’s                 At the start of October 2004, we
strategy and financial model is                expected the majority of SCi’s turnover
returning Eidos to profitability. The          and profits to arise in the second half
integration of Eidos and SCi is now at        of the old financial year ending in
an advanced stage and the Board is            September 2005. In line with the
confident that its stated objectives for       successful approach adopted in




SCi Entertainment Annual Report & Accounts 2005   4
By the end of 2005, the network games market
will constitute 15% of total games software
sales in the Western World. Network games
include mobile, iDTV, massively multi-player
on-line games, casual
games and games
on demand.
Source: ELSPA/Screen Digest




                                                      OPINION
                                                      “Hitman: Blood Money
                                                      takes the series into
                                                      amazingly inventive new
                                                      places it’s never been
                                                      before.”
                                                               Official Xbox Magazine
                                                               on Hitman: Blood Money




                                                       In Hitman: Blood Money take control of the world’s deadliest
                                                       Hitman to carry out hits in a seemingly limitless number of
                                                       ingenious but ruthless ways. Using new gaming technology
                                                       and functionality it delivers an experience that is the closest
                                                       gamers will ever have come to the real world of the assassin.



SCi Entertainment Annual Report & Accounts 2005   5
Computer and video games now generate
more revenue than either the cinema box
office or video rentals in Europe.
Source: ISFE (Interactive Software Federation of Europe)




           Championship Manager allows you to manage
           your club to glory, dealing with everything from
           tactics and training to transfers – everything
           you would expect a real-life football manager
           to do without owning a sheepskin coat.




 OPINION
  “...looking slicker than
  many of the established
  titles of the genre.”
                      XBM Magazine
         on Commandos Strike Force




                                                              With Commandos Strike Force engage the individual
                                                              skills of your three Strike Force operatives to fight in
                                                              the world’s most fearsome war – bringing a reign of
                                                              terror to the enemy using any means necessary.
Chief executive’s statement continued



previous years, we planned our major          known franchises. With cumulative sales
product launches for September 2005.          of over 4 million units since its first
The Board is of the opinion that, had         launch, Championship Manager is
the financial year end been unaltered,         established as the leading football
the September product releases would          management simulation. Sales of the
have enabled the Group to achieve its         recently launched Championship
original profit targets.                       Manager 5 made a strong contribution
    Following the acquisition of Eidos,       to results for the period, particularly on
the enlarged Group performed well in          console formats where the game has
the seven weeks to 30 June 2005. Sales        enjoyed considerable chart success. The
of LEGO Star Wars, Championship               development of the brand has been
Manager and Imperial Glory meant that         supported by a subscription based on-
the post acquisition operating profit          line version of Championship Manager.
(before exceptional restructuring costs)      A new version of Championship
of Eidos was £1.3 million. The                Manager for the Sony PSP format has
profitability of these products illustrate     been launched in December 2005.
the potential of the new Group.                   The results for the period to 30 June
    By 30 June 2005, LEGO Star Wars           2005 reflect the Group’s new policy in
had sold over 1.5 million units and           respect of development costs. Whereas
reached the number one chart position         previously all development expenditure
in many countries, including the UK.          was written off as incurred, the Group
This product is being distributed by          now capitalises development costs once
Eidos, rather than published, under an        it has established that development of a
agreement signed prior to the acquisition     game is technically and commercially
whereby Eidos earns a distribution fee for    feasible. Once a game has been released
each unit sold, but does not assume the       the cost of its development is expensed      With cumulative
normal development, inventory and             over the period in which the principle       sales of over
credit risks of a publisher. Accordingly,     revenues from the game are expected to       4 million units since
the contribution per unit is significantly     arise. The new policy will enable a like     its first launch,
lower than on published products.             for like comparison to be made between       Championship
Nevertheless, LEGO Star Wars will make        the results of the Group and its             Manager is
a good contribution to profits in the 2006     principal global competitors and is also     established as the
financial year. The Board is reviewing         consistent with the requirements of the      leading football
further distribution opportunities to         International Financial Reporting            management
maximise the profitability potential of        Standards which will apply to the Group      simulation.
the Eidos distribution network around         from the 2006 financial year onwards.
the world.                                        The results for the period include
    Championship Manager has always           exceptional development provisions of
been one of Eidos’ strongest and best         £1.9 million against the cost of games in




SCi Entertainment Annual Report & Accounts 2005   7
Chief executive’s statement continued



development plus fundamental                  will be released under the Eidos brand
restructuring costs of £4.7 million. These    because of the strength of its consumer
costs relate to the fundamental               recognition. All UK publishing staff
reorganisation of the enlarged Group,         from both Groups are in the process of
including provisions for changing the         moving to one location at the former
Group’s North American business model.        Eidos headquarters in Wimbledon.
                                              Following appropriate employee
Integration of Eidos                          consultation periods we have achieved
The acquisition of Eidos plc was              a significant reduction in UK
effective from 16 May 2005 when our           headcount and related costs. We are
recommended offer was declared                achieving further savings through the
unconditional in all respects. The offer      rationalisation of suppliers.
valued Eidos at approximately                 > Reduction in international
£74 million. In addition, SCi raised          distribution overheads. We have
£60.1 million (before expenses)               decided to close the former Eidos
through a Placing and Open Offer in           distribution offices in Japan and
order to provide working capital              Australia. In addition, we have lowered
facilities to the enlarged Group.             the fixed cost base of the Eidos
    Following the acquisition, the Board      distribution offices in France and
has implemented a plan to integrate the       Germany by the introduction of
combined Group and restore Eidos to           performance based incentive schemes.
profitability. As previously stated in the     > Overall cost reduction. Through
Offer Document for Eidos, the Board           the combined effect of the above
believes that the acquisition will be         measures the Board is confident that it
earnings enhancing in the first full year      will achieve its stated target of annual
of trading. The principle achievements        cost savings of £14 million in the first
in the first three months following            full year of trading.
acquisition have been:                        > Strengthened management
> Reduction in annual cost of                 team. Group management has been            Group management
Eidos plc. This has been achieved by          strengthened by a number of selective      has been
rationalisation of the Eidos plc board        senior appointments. Scott Dodkins         strengthened by a
and senior management, delisting of           (formerly of Activision) has been          number of selective
Eidos plc, termination of the Eidos           appointed as European Managing             senior appointments.
NASDAQ quote and ADR facility and             Director, Bill Gardner (formerly of
the elimination of duplicated plc             Capcom) has been appointed as
related costs.                                Managing Director of our US
> Integration of Eidos and SCi UK             Publishing operations and Ian
publishing operations. The Board has          Livingstone has been appointed as
decided that all future Group products        Product Acquisition Director.




SCi Entertainment Annual Report & Accounts 2005   8
 Conflict: Global Storm brings the series into the
 21st century. Using a 100% rebuilt engine, it
 boasts radically enhanced graphics and AI
 and is fully playable co-operatively on-line, a
 clear generation above previous instalments.




                                                        OPINION
                                                        “The graphics are mint.
                                                        Details are sharp,
                                                        animation superb and
                                                        rag-doll physics actually
                                                        look human.”
                                                        Official PlayStation 2 Magazine
                                                             on Conflict: Global Storm




SCi Entertainment Annual Report & Accounts 2005     9
£320 million was invested in the UK game
development industry in 2004.
Source: ELSPA/Screen Digest




 OPINION
  “We’ve lost count of how
  many people have told us
  how fun it is.”
                         NGC Magazine
                    on LEGO Star Wars



                In LEGO Star Wars: The Video Game the
                world’s most successful film series meets the
                world’s favourite toy in this epic video game.




 Rogue Trooper – As the last survivor of the
 deadly Genetic Infantrymen, use a combination
 of stealth and all-out action techniques in                     OPINION
 your ultimate mission of revenge.
                                                                 “You’re going to have to
                                                                 think and shoot, and that
                                                                 we like.”
                                                                       Official Xbox Magazine
                                                                             on Rogue Trooper
Chief executive’s statement continued



> Review of development process.              future from substantially increased        The Board has
We have completed our review of all           margins on all products being              extended its strong
Eidos development studios and titles in       published directly in North America.       financial
development. Our first priority has            > Improved financial management.            management to the
been to ensure that all titles are given      The Board has extended its strong          Eidos Group.
sufficient resources to be completed to        financial management to the Eidos
a high standard. In particular our plans      Group. In particular, new forecasting
allow for sufficient time to be spent on       and approval systems have already been
key franchises such as Tomb Raider,           introduced, resulting in tighter control
Hitman and Commandos. In line with            of the cost base.
our plans, the next versions of these
franchises will now be released in            2006 financial year and future
spring 2006. The next phase of our            product portfolio
development review is to introduce            The Group has made a very positive
new incentive schemes into studios            start to the 2006 financial year. On
owned by Eidos, structured on                 16 September we launched Total
successful project management to              Overdose. This new product received
encourage on time delivery and                very strong reviews and immediately
supported by the appropriate financial         entered the Top Ten of the UK All
framework to ensure that each                 Format Charts and reached similar
development studio is profitable.              chart positions in several European
> Restructure of US publishing                countries.
operation, improved margins. The                  On 30 September 2005 the latest
Board has determined that there are           product in the highly successful
now considerable financial advantages          Conflict series was launched. Conflict:
to the Group publishing directly in           Global Storm is the fourth product in
North America rather than licensing           the series. With a fully revised engine,
our products to other publishers.             the game’s initial reviews suggest that
Accordingly, we decided to retain and         this franchise should once again
restructure the existing Eidos                perform strongly. The quality and on
publishing operation based in San             time delivery of Conflict: Global Storm
Francisco. Under the new leadership of        further illustrates the success of our
Bill Gardner, the US office has been           acquisition, in September 2003, of
refocused on rebuilding the Eidos             Pivotal Games.
presence in North America. After SCi              The first half of the financial year
completes its existing contractual            will also see revenue from the
licence obligations on a small number         continued distribution income from
of titles previously signed to other US       sales of LEGO Star Wars. The Platinum
publishers, the Group will benefit in          version of LEGO Star Wars was




SCi Entertainment Annual Report & Accounts 2005   11
Chief executive’s statement continued



launched in October 2005 along with a         until at least one year after the release
new version for the Nintendo                  of the new hardware.
GameCube. In addition, Championship               We will also develop products to sell
Manager on PSP was launched in                into the large installed base for
December 2005.                                PlayStation 2, which is currently
    Our release schedule for the              estimated at over 100 million. We
remainder of the financial year is very        expect the average age of PlayStation 2
strong. We are continuing to build our        buyers to fall and accordingly our
product line-up for 2007 and already          games for this platform may have a
have several products in development for      younger target audience.
2008 which have yet to be announced.
    Our current portfolio of products,        New media
in development or recently released,          Following the acquisition of Eidos, the
includes the titles in the table opposite.    Group now has a dedicated New Media
    We are finalising our release              division, which focuses on building new
schedules for the 2006 and 2007               revenue streams by bringing the Group’s
financial years based on these products        intellectual property to developing
in development.                               markets including mobile gaming, on-
    The growth in the global games            line distribution, interactive TV and on-
market continues to be boosted by the         line gambling. The New Media team is
introduction of new hardware platforms.       building upon its early success as part of
Sony launched the PSP in Europe in            Eidos and is benefiting from the addition     The Group has a
September 2005. Microsoft has recently        of the SCi catalogue to its portfolio.       number of mobile
launched the Xbox 360 and Sony is                  The Group has a number of mobile        titles at various
expected to launch PlayStation 3 in late      titles at various stages of development,     stages of
2006. We are planning our release             including mobile versions of Tomb            development,
schedule to maximise the potential            Raider and Hitman. The titles in             including mobile
opportunities to be derived once the          development also include other               versions of Tomb
installed base of a new hardware              products, such as a poker game, which        Raider and Hitman.
platform has achieved critical mass.          are designed to appeal to the wider,
    For these reasons our first next           more casual, audience which
generation titles will be based around        constitutes the bulk of the market in a
existing franchises with a substantial        number of territories. In addition, the
fan base. This will include                   Company continues to work with
Championship Manager on Sony PSP              Synergenix, who will release a number
and Tomb Raider: Legend on Sony PSP           of titles from the SCi portfolio in
and Microsoft Xbox 360. However, we           forthcoming months, following on
do not plan to launch next generation         from Total Overdose which was
versions of the majority of our titles        launched in September 2005.




SCi Entertainment Annual Report & Accounts 2005   12
Figures for 2004 show that the video games
industry employs over 22,000 people – in
development, distribution, retail, printing
and other support areas – making it by
far the largest software employment
field in Europe.
Source: ELSPA/Screen Digest




Products in development or recently released include:   Platforms
LEGO Star Wars (released April 2005)                    PS2, Xbox, PC, GBA

Championship Manager 5 (released May 2005)              PS2, Xbox

Imperial Glory (released May 2005)                      PC

Total Overdose (released September 2005)                PS2, Xbox, PC

Conflict: Global Storm (released September 2005)         PS2, Xbox, PC

LEGO Star Wars (released October 2005)                  GC and Platinum

Championship Manager (released December 2005)           PSP

Commandos Strike Force                                  PS2, Xbox, PC

Hitman: Blood Money                                     PS2, Xbox, PC

Rogue Trooper                                           PS2, Xbox, PC

Tomb Raider: Legend                                     PS2, Xbox, PC, Xbox 360, PSP

Championship Manager 05/06                              PS2, Xbox, PC

Battlestations: Midway                                  PS2, Xbox, PC

Just Cause                                              PS2, Xbox, PC

Reservoir Dogs                                          PS2, Xbox, PC

Urban Chaos                                             PS2, Xbox

Tomb Raider 10th Anniversary Edition                    PSP

Championship Manager 06/07                              PS2, Xbox, PC

Highlander                                              PS2, Xbox 360, PC

Conflict: Global Storm 2                                 PS2, Xbox 360, PC

Total Overdose 2                                        PS2, Xbox 360, PC




SCi Entertainment Annual Report & Accounts 2005    13
Tomb Raider and Lara Croft have a 94%
awareness amongst gamers.
Source: MAGDID & Assoc: Brand Awareness Study




Tomb Raider
has generated
$1.5 billion total
brand revenue
from games,
merchandising
and feature films.




 OPINION
  “A PlayStation 2 title
  that is destined to
  become the largest and
  most significant of the
  year.”
                      PSW Magazine
 on Lara Croft: Tomb Raider Legend




             Originally launched in 1996, Tomb Raider is one of the
             best selling video game franchises of all time with over
             28 million copies sold. The game’s protagonist, Lara Croft,
             has transcended video games like no other character,
             becoming a 20th century cultural phenomenon.




SCi Entertainment Annual Report & Accounts 2005        14
Chief executive’s statement continued



    The first mobile title to be launched      Overall
since the acquisition of Eidos was            The new Group is in a strong financial       The new Group is in
Championship Manager 5 Solo, which            position, with an impressive product        a strong financial
was released in the UK in August 2005,        portfolio, an international distribution    position, with an
at the start of the football season. The      network, talented development               impressive product
game received exceptional review scores       resources and experienced employees.        portfolio, an
and is selling very well, reaching a          The Board therefore believes that the       international
number one position with most of the          Group has a very positive future ahead      distribution
mobile operators through which it is          of it.                                      network, talented
available.                                        Finally, I would like to thank all      development
                                              staff throughout the Group for their        resources and
Further revenue streams                       support, effort and enthusiasm over the     experienced
The strength of the Group’s franchises        last year and, in particular, through the   employees.
combined with the continuing growth           recent acquisition and integration
of the video games industry are               process.
increasingly presenting opportunities
to generate additional revenue through
licences and partnerships with other
entertainment media such as film and
on-line gambling.                             Jane Cavanagh
                                              Chief executive




SCi Entertainment Annual Report & Accounts 2005   15
Operating and financial review



Results from operations                       Eidos in April 2005 before its
The Group made an operating loss of           acquisition by SCi, had sold
£14.7 million (2004: restated profit of        approximately 1.5 million units by
£7.3 million) after charging                  June 2005.
depreciation and amortisation of
£2.7 million (2004: £1.2 million) and         Gross profit
exceptional costs of £6.6 million (2004:      Gross profit represents
£nil).                                        turnover less the direct
                                              costs of selling a game.
Product releases                              Direct selling costs
We launched one new title in the              principally comprise the
financial period. In addition we earned        cost of manufacturing a
revenue from three titles initially           finished product plus
launched by Eidos shortly before              marketing costs. They also
acquisition by SCi.                           include royalties due to
                          PS2 Xbox PC   GBA   third parties in respect of products
New product release                           distributed by the Group. Marketing
Constantine                                costs were £0.8 million compared to
                                              £1.0 million in 2004. The decrease
Other products                                reflects a smaller number of new
LEGO Star Wars                            releases. Gross margin for the financial
Imperial Glory                               year decreased to 29% from 65% in the
Championship Manager 5                     previous year. This reflects: (a) a
                                              significant fall in licence income
Turnover                                      compared to the previous period when
Turnover for the period was                   a substantial portion of the Group’s
£17.5 million compared to £31.0 million       income arose from products licensed to
in 2004. The decrease arises from the         North American publishers (such
reduction in the financial year to nine        income has no corresponding
months following the Group’s decision         manufacturing or marketing costs as
to change its financial year-end to June.      these are paid by the licensee); and
In previous years the Group has earned        (b) the lower margins earned on the
a high proportion of its turnover from        distribution of LEGO Star Wars.
products released in September. This              There was little change during the
income was excluded from the nine             year in margins earned from new
month period.                                 products. We have experienced little
    The largest contribution to turnover      change in the retail prices of premium
was from distribution of LEGO Star            products.
Wars. This product, first released by




SCi Entertainment Annual Report & Accounts 2005   16
The value of the US PC and video game
software market in 2004 reached
approximately $7.4 billion, a 7% increase
over 2003.
Source: International Development Group estimate




 OPINION
  “...the spectacularly
  grand scale of Midway’s
  warfare has made us ‘fall
  in love’ with World War II
  all over again.”
                        Xbox World
         on Battlestations: Midway




                                                        Battlestations: Midway is an innovative WWII tactical
                                                        shooter on an unprecedented scale, bringing a new
                                                        dimension to the war gaming genre. With a mix of
                                                        action and strategy, relive the epic aerial and naval
                                                        battles of the Pacific War in direct command of
                                                        multiple warships, aircraft and submarines.




SCi Entertainment Annual Report & Accounts 2005    17
Regular players of video games are
mainly 20-to-30 years of age, playing
six hours a week.
Source: ISFE (Interactive Software Federation of Europe)
       joint and kicking up one hell of a Mexican storm.
       ‘El Gringo Loco’, an ex-con, bad-ass fresh out of the
       underworld. Go undercover with Ramiro Cruz
       rampage through Mexico’s gun-toting, drug-pushing
       Total Overdose is a super-cool, tequila-fuelled




 OPINION
  “Total Overdose manages
  to mix guns and an
  extreme-sports scoring
  system to create an
  excitingly twisted action
  game.”
  Official PlayStation 2 Magazine
               on Total Overdose




SCi Entertainment Annual Report & Accounts 2005                18
Operating and financial review continued



Development costs                             Other administrative costs
Development costs charged to the profit        Other administrative costs comprise all
and loss account represent: (a) the           the costs of running the Group’s
amortisation of development costs in          corporate, publishing and distribution
relation to products released during the      functions. These include staff and
period; (b) development costs incurred        associated costs employed in sales,
in the period on future products where        distribution, marketing, PR, design,
the technical or commercial viability         project management, production, IT,
cannot yet be assessed with reasonable        localisation, quality assurance,
certainty; (c) exceptional charges to         customer service, new product
write down previously capitalised             acquisition, new media, finance, HR,
development costs on projects to net          legal and licensing. Total administrative
realisable value taking into account cost     costs of £4.1 million, compared to
of completion; and (d) development            £4.7 million, reflect a nine month
royalties arising from further sales of       period compared to 12 months in 2004,
games already released.                       partially offset by the inclusion of Eidos
     Under the Group’s new accounting         administrative costs for the seven weeks
policy, once a product is considered to       following acquisition.
be technically and commercially                   Following the acquisition of Eidos,
feasible, development costs are               the Group’s underlying level of              The Group
capitalised and treated as work in            administrative costs has increased           continues to invest
progress. Once the product is released        significantly. At 30 June 2005 the            significantly in
its cost is amortised over the period         Group had 274 administrative staff,          future products.
which the Group expects to earn               compared to 66 at 30 September 2004.
revenues from the product.                    The Group has implemented plans to
     Development costs increased to           reduce combined administrative costs,
£7.6 million from a restated £7.0 million     particularly through the elimination of
in 2004. The costs included a                 duplicate plc costs, the rationalisation
£1.9 million exceptional charge to write      of UK publishing and the closure of
down the carrying value of a future           Eidos’ former distribution offices in
product where, due to unsatisfactory          Japan and Australia.
performance by a third-party
developer, the Group has revised its
expectations of net realisable value.
     The Group continues to invest
significantly in future products. At
30 June 2005 the Group has work in
progress of £16.8 million (2004
restated: £4.2 million).




SCi Entertainment Annual Report & Accounts 2005   19
Operating and financial review continued



Depreciation and amortisation                     After assessing the prospects for the
The charge for depreciation and               2006 financial year, the Group has
amortisation increased to £2.7 million        recognised a deferred tax asset of
in the financial year from £1.2 million        £7 million as a prudent estimate of the
in 2004.                                      losses that may be utilised in that
    The charge for goodwill increased         period. The increase in deferred tax
to £2.1 million from £0.9 million in          asset has been included in the profit
2004 due to the additional goodwill           and loss account as a tax credit.
charge arising on the acquisition of
Eidos.                                        Earnings per share
    The acquisition of Eidos also caused      Basic loss per share was 25.58p (2004:
depreciation to increase to £0.6 million      restated earnings of 22.45p). The loss
from £0.3 million in 2004.                    per share reflects the effects of
                                              shortening the financial year and the
Goodwill                                      exceptional costs arising during the
Goodwill relates to the acquisitions of       year, offset by the deferred tax credit
Eidos, Pivotal and Actualize, and is          referred to under Taxation above.
being amortised over periods between
seven and ten years. The net book value       Working capital
of goodwill at 30 June 2005 was               At 30 June 2005 the Group had net           At 30 June 2005
£88.7 million (2004: £5.1 million).           cash of £44.1 million and no debt.          the Group had net
There is no contingent consideration          During the year the Group raised            cash of
relating to the acquisitions of Eidos,        £60.1 million (before expenses)             £44.1 million and
Pivotal or Actualize.                         through a Placing and Open Offer. This      no debt.
                                              was to repay borrowings of Eidos and
Taxation                                      provide working capital facilities to the
No tax charge arises on the loss for the      enlarged Group, particularly allowing
financial period. At 30 June 2005 the          for increased development time to
principal operating companies in the          complete products in development to a
Group had substantial tax losses              high standard.
available to carry forward to set against         At 30 June 2005 the Group had net
future taxable profits, subject to             current assets of £62.7 million,
agreement with appropriate tax                including trade debtors of
authorities.                                  £23.4 million.




SCi Entertainment Annual Report & Accounts 2005   20
In Europe as a whole, games software
sales grew to their highest ever level in
2004 – 5.6 billion euros.
Source: ELSPA/Screen Digest




       In Urban Chaos you are the last line in urban defence
       and it’s time to take your city back – experience a year
       in the unpredictable life of a T-Zero Officer in a city on
       the brink of collapse, working with the Emergency
       Services to restore order through superior firepower.




                                                                    OPINION
                                                                    “It’s a first-person
                                                                    shooter and then some,
                                                                    ...and all manner of
                                                                    explosions and
                                                                    disturbances keep you
                                                                    constantly on edge.”
                                                                                    Xbox World
                                                                                on Urban Chaos




SCi Entertainment Annual Report & Accounts 2005       21
There is massive growth in new, non-retail,
distribution channels for games – the
network games market – which is growing
at over seven times the pace of the
traditional, retail based, games market.
Source: ELSPA/Screen Digest




 OPINION
  “Global Storm does it
  with the swagger and
  confidence of a title that
  knows it’s back at the
  top of its game. Terrific
  stuff.”
                    Xbox World 360
         on Conflict: Global Storm




SCi Entertainment Annual Report & Accounts 2005   22
Operating and financial review continued



Completion bonding                            Financial instruments
We continue to seek new ways of               During the period, the Group’s
managing and reducing development             financial instruments, other than
risk. In this respect we have entered         derivatives, comprised cash, overdrafts
into an agreement with Film Finances          and various items such as trade debtors
Inc to provide Completion Bonds on            and creditors that arise directly from
two titles currently in development.          operations. The main purpose of these
    The purpose of a Completion Bond          financial instruments is to finance the
is to maximise the financial assurance         Group’s operations. The Group also
that a product will be developed on           enters into derivative transactions in
time, on budget and in accordance with        the form of foreign currency contracts
agreed specifications. In the event of         in order to manage the currency risk
delay or failure, the cost of the project     arising from the Group’s operations.
will be guaranteed by the Bond rather         The Group’s policy is, and was
than borne by the Group. This                 throughout the period under review,
arrangement has been common in the            not to trade in financial instruments.
film industry for many years. Film             The main risks arising from the
Finances Inc, based in Los Angeles, is        Group’s financial instruments are
the leading provider of Completion            liquidity risk and foreign currency risk.
Bonds to the film industry and we are          The Board reviews and agrees policies
pleased to be amongst the first                for managing each of these risks on a
companies in the games industry to            regular basis.
apply this model. We anticipate further
use of the Completion Bonding model           Liquidity risk
in the future.                                The Group has substantial cash
                                              reserves. The Group currently has no
Pensions                                      borrowing facility, but will assess its
The Group offers all employees the            need to put in place appropriate short-
opportunity to participate in an              term working capital facilities in
appropriate Company pension scheme.           periods where there is a number of
As these are defined contribution              product launches.
schemes there are no circumstances in
which the Group will face a future
pension liability.




SCi Entertainment Annual Report & Accounts 2005   23
Operating and financial review continued



Foreign currency risk                            International Financial Reporting
The Group receives significant portions           Standards
of its revenues in either euros or US            We are obliged to publish our next full
dollars. The Group also has significant           set of results, for the period to 30 June
costs in each of these currencies                2006, under International Financial
relating to overseas offices, the                 Reporting Standards (“IFRS”). The
manufacture of finalised products and             Group is currently identifying the
the development of new games. The                accounting policies which will differ
Group seeks to balance the flows of               between IFRS and UK Generally
currency across countries to minimise            Accepted Accounting Principles. The
any imbalance of foreign currency                results for the period to 30 June 2005
receipts and payments.                           will be restated as a comparative.




                                                 Rob Murphy
                                                 Finance director




   Forge the destiny of the world amid the turbulent
   times of the early 19th century. In Imperial Glory you
   lead one of the Great Empires in titanic conflicts, or
   achieve economic dominance backed by shrewd
   diplomats and a resolute military. Choose to rule as
   absolute despot or constitutional monarch.




SCi Entertainment Annual Report & Accounts 2005     24
Directors, officers and advisers



Jane Cavanagh                                 Tim Ryan                                  Company secretary
Chief executive                               non-executive director                    Anthony Price
Jane Cavanagh founded SCi in 1988.            Tim Ryan was appointed to the Board
Before founding SCi, Jane worked in           on 19 October 2001. Tim has               Registered office
marketing for BT. She is one of the           considerable experience of corporate      Wimbledon Bridge House
most experienced executives in the            communications. His former positions      1 Hartfield Road
games industry. As founder, Jane              include head of corporate and investor    Wimbledon
owned 100 per cent of SCi until its           relations at SkyePharma Plc, one of the   London
flotation in 1996.                             world’s leading drug delivery             SW19 3RU
                                              companies, and director of corporate
Bill Ennis                                    communications at NTL. He is now          Registered in England
Commercial director                           chief executive of Bell Pottinger         No. 03121578
Bill Ennis was appointed to the Board         Corporate and Financial.
on 1 May 1995, having previously                                                        Broker
worked for DEC. He has considerable           Nigel Wayne                               KBC Peel Hunt Limited
experience in the industry and is a           non-executive director                    111 Old Broad Street
former director of the Entertainment          Nigel Wayne was appointed to the          London EC2N 1PH
Leisure Software Publishers Association       Board on 20 July 2001 and was
(ELSPA).                                      appointed senior independent director     Solicitors
                                              in 2004. He is a Chartered Accountant     Harbottle & Lewis LLP
Rob Murphy                                    with considerable experience of           Hanover House
Finance director                              advising and funding growing              14 Hanover Square
Rob Murphy was appointed to the               companies in the technology and           London W1S 1HP
Board on 1 July 1997. Before joining          media sectors. A former finance
the Company he was a partner in the           director of SCi, he has considerable      Auditors
audit and business advisory division of       experience within the computer games      BDO Stoy Hayward LLP
Arthur Andersen in London. He is a            industry.                                 8 Baker Street
qualified Chartered Accountant.                                                          London W1U 3LL

                                                                                        Registrars
                                                                                        Capita IRG Plc
                                                                                        The Registry
                                                                                        34 Beckenham Road
                                                                                        Beckenham
                                                                                        Kent BR3 4TU

                                                                                        Bankers
                                                                                        Barclays Bank PLC
                                                                                        27 Soho Square
                                                                                        London W1D 3QR




SCi Entertainment Annual Report & Accounts 2005   25
Directors’ report



The directors present their annual report on the affairs   Directors
of the Group, together with the accounts and               The names and brief biographical details of the
independent auditors’ report, for the nine months          current directors, all of whom served throughout the
ended 30 June 2005.                                        period under review, are set out on page 25.
                                                               Jane Cavanagh and Rob Murphy retire by rotation
Principal activities                                       at the forthcoming Annual General Meeting and,
The principal activities of the Group are the              being eligible, offer themselves for re-election.
development and publishing of interactive                      Details of directors’ shareholdings and options are
entertainment software. A review of the Group’s            set out in the directors’ remuneration report on pages
performance during the nine months to 30 June 2005,        59 to 63.
including financial performance, likely future
developments and prospects, is set out in the chief        Directors’ responsibilities
executive’s statement on pages 4 to 15 and the             Company law requires the directors to prepare
operating and financial review on pages 16 to 24.           accounts for each financial year which give a true and
Principal subsidiaries and joint ventures are listed in    fair view of the state of affairs of the Company and
note 12 to the accounts on page 45.                        Group and of the profit or loss of the Group for that
                                                           period. In preparing those financial statements, the
Results and dividend                                       directors are required to: select suitable accounting
The results for the nine month period to 30 June 2005      policies and apply them consistently; make
are shown in the consolidated profit and loss account       judgements and estimates that are reasonable and
on page 28. No dividend has been paid or declared for      prudent; state whether applicable accounting
the period (2004: £nil).                                   standards have been followed, subject to any material
                                                           departures disclosed and explained in the financial
Post balance sheet events                                  statements; and prepare the accounts on a going
The Board of SCi announced on 5 July 2005 that the         concern basis unless it is inappropriate to presume
Company had received valid acceptances of the offer        that the Group will continue in business.
for Eidos plc in respect of a total of 128,542,895 Eidos       The directors are also responsible for keeping
shares, representing approximately 90.52 per cent of       proper accounting records which disclose with
the issued ordinary share capital of Eidos.                reasonable accuracy at any time the financial position
    Since valid acceptances had been received in respect   of the Company and Group and enable them to
of more than nine-tenths in value of the Eidos shares      ensure that the financial statements comply with the
to which the offer related, SCi was entitled to exercise   Companies Act 1985.
its rights pursuant to Sections 428-430F of the                They are also responsible for safeguarding the
Companies Act 1985 (the “Act”) to acquire                  assets of the Company and Group and hence for
compulsorily all of the outstanding Eidos shares in        taking reasonable steps for the prevention and
respect of which valid acceptances had not been            detection of fraud and other irregularities.
received. Accordingly, compulsory acquisition notices          Financial statements are published on the Group’s
pursuant to Section 429 of the Act in exercise of such     website in accordance with legislation in the United
rights were dispatched to the holders of Eidos shares      Kingdom governing the preparation and
who had not yet accepted the offer. The transfer of        dissemination of financial statements, which may vary
the compulsorily acquired Eidos shares took place on       from legislation in other jurisdictions. The
17 August 2005.                                            maintenance and integrity of the Group’s website is
                                                           the responsibility of the directors. The directors’
Share Capital                                              responsibility also extends to the ongoing integrity of
Details of changes in the share capital of the Company     the financial statements contained therein.
are set out in note 19 to the accounts.                        This annual report is available on the Company’s
                                                           website at www.sci.co.uk.




SCi Entertainment Annual Report & Accounts 2005   26
Directors’ report continued



Charitable donations
During the nine month period to 30 June 2005 SCi
made no charitable donations (2004: £2,750).

Supplier payment policy
The Group’s policy is to settle terms of payment with
suppliers when agreeing the terms of each transaction,
ensure that suppliers are made aware of the terms of
payment and abide by the terms of payment. Trade
creditors of the Group at the period end represented
63 days purchases (2004: 39 days). The Company had
trade creditors of £0.3 million at the period-end
(2004: nil).

Substantial shareholdings
On 5 December 2005 the Company had been notified,
in accordance with Sections 198 to 208 of the
Companies Act 1985, of the following interests in the
ordinary share capital of the Company.
                                     Number              %

Credit Agricole Cheuvreux
International Limited           13,409,679         18.46
Artemis Investment
Management Ltd                    6,657,770            9.17
Cantor Fitzgerald Europe          5,339,925            7.35
Jane Cavanagh                     4,819,630            6.64
Schroders Investment
Management                        3,912,128            5.39

Auditors
BDO Stoy Hayward LLP have expressed their
willingness to continue in office and a resolution to
re-appoint them will be proposed at the Annual
General Meeting.

By order of the Board,

Anthony Price
Company secretary
5 December 2005




SCi Entertainment Annual Report & Accounts 2005   27
Consolidated profit and loss account
for the nine months ended 30 June 2005



                                                                                                                12 months to
                                                                Continuing operations           Nine months    30 September
                                                                                                  to 30 June           2004
                                                       Notes                    Acquisitions           2005        (restated)
                                                                     £m                  £m             £m               £m

Turnover: Group and share of joint venture                2          3.7                13.8         17.5              31.0
Less: share of joint venture turnover                                  –                (2.1)        (2.1)                –
Turnover                                                             3.7                11.7         15.4              31.0
Cost of sales                                                       (2.9)               (8.1)       (11.0)            (10.8)
Gross profit                                                          0.8                 3.6           4.4             20.2

 Development costs – Exceptional                          6         (1.9)                  –          (1.9)                –
                      Other                                         (5.0)               (0.7)         (5.7)             (7.0)
 Other administrative costs                                         (3.6)               (0.5)         (4.1)             (4.7)
 Depreciation and amortisation                                      (1.6)               (1.1)         (2.7)             (1.2)
 Exceptional restructuring costs                          6         (2.4)               (2.3)         (4.7)                –
Total administrative expenses                                     (14.5)                (4.6)       (19.1)            (12.9)
Operating (loss) profit                                            (13.7)                (1.0)       (14.7)               7.3
Share of associated undertaking operating profit                     0.1                    –          0.1                  –
Share of joint venture operating profit                                –                  0.4          0.4                  –
(Loss) profit on ordinary activities before interest               (13.7)                (0.5)       (14.2)               7.3
Net interest receivable                                   3                                           0.2                  –
(Loss) profit on ordinary activities
before taxation                                           4                                         (14.0)               7.3
Tax on profit on ordinary activities:
Group and share of joint venture                          7                                            5.2              (0.9)
(Loss) profit on ordinary activities after taxation                                                    (8.8)              6.4
Minority interest                                                                                     (0.6)                –
(Loss) profit for the period                                                                           (9.4)              6.4



                                                                                                      Pence            Pence
(Loss) earnings per share
Basic                                                     8                                       (25.58)             22.45
Diluted                                                   8                                       (25.58)             20.71
There is no difference between the loss on ordinary activities before taxation and the loss for the period stated
above, and their historical cost equivalents.

The notes on pages 33 to 52 form part of the statutory financial statements.




SCi Entertainment Annual Report & Accounts 2005   28
Consolidated statement of total recognised gains and losses
for the nine months ended 30 June 2005



                                                                                   12 months to
                                                                   Nine months    30 September
                                                                     to 30 June           2004
                                                                          2005        (restated)
                                                                           £m               £m

(Loss) profit for the period
Group                                                                    (9.0)              6.4
Joint ventures                                                            0.2                 –
Attributable to minority interest                                        (0.6)                –
Total recognised gains and losses for the financial period                (9.4)              6.4
Prior year adjustment – development costs                                (4.2)                –
Total gains and losses recognised since last financial statements         (5.2)                –




SCi Entertainment Annual Report & Accounts 2005   29
Balance sheets
at 30 June 2005



                                                                    Group                        Company
                                                                            30 September
                                                               30 June              2004     30 June   30 September
                                                       Notes     2005        (as restated)     2005            2004
                                                                   £m                 £m         £m             £m

Fixed assets
Goodwill                                                  9     88.7                  5.1        –               –
Tangible assets                                          10      4.7                  0.5        –               –
Investments                                              12      2.9                    –      9.6             7.8
                                                                96.3                  5.6      9.6             7.8
Current assets
Work in progress                                         13     16.8                 4.2         –               –
Stocks                                                   14      2.1                 0.3         –               –
 Debtors – due within one year                                  33.7                14.8      19.3             5.0
         – due after one year                                    0.2                   –         –               –
Debtors                                                  15     33.9                14.8      19.3             5.0
Cash at bank and in hand                                        44.1                 3.5      35.1               –
                                                                96.9                22.8      54.4             5.0
Creditors: amounts falling due within one year           16    (34.2)               (5.2)     (0.9)              –
Net current assets                                              62.7                17.6      53.5             5.0

Total assets less current liabilities                          159.0                23.2      63.1            12.8
Creditors: amounts falling due
after more than one year                                 17     (0.2)                   –         –              –
Provisions for liabilities and charges                   18    (15.3)                   –         –              –
Net assets                                                     143.5                23.2      63.1            12.8



Capital and reserves
Called-up equity share capital                           19      3.5                 1.4       3.5             1.4
Share premium account                                    20     57.4                   –      57.4               –
Merger reserve                                           20     69.9                 0.5         –               –
Capital reserve                                          20      6.3                 6.3       6.3             6.3
Employee Benefit Trust share reserve                      20     (0.9)                  –         –               –
Profit and loss account                                   20      5.6                15.0      (4.1)            5.1
Equity shareholders’ funds                               21    141.8                23.2      63.1            12.8
Minority interest – equity                                       1.7                   –         –               –
                                                               143.5                23.2      63.1            12.8

The accounts on pages 28 to 52 were approved by the Board of directors on 5 December 2005
and signed on its behalf by:

Jane Cavanagh                                 Rob Murphy
Director                                      Director


SCi Entertainment Annual Report & Accounts 2005   30
Consolidated cash flow statement
for the nine months ended 30 June 2005



                                                       Nine months     12 months to
                                                         to 30 June   30 September
                                                              2005            2004
                                                               £m               £m

Net cash (outflow) inflow from operating activities         (10.3)              4.4

Returns on investments and servicing of finance
Net interest received                                         0.2                –
                                                           (10.1)                –
Capital expenditure and financial investment
Purchase of tangible fixed assets                             (0.3)            (0.4)

Acquisitions
Acquisition expenses                                         (0.6)               –
Net cash acquired with subsidiary undertakings               (6.8)               –
                                                             (7.4)               –
Net cash (outflow) inflow before financing                   (17.8)              4.0

Financing
(Decrease) in short-term borrowings                            –              (2.3)
Issue of ordinary share capital                             58.4                 –
                                                            58.4              (2.3)
Increase in cash in the year                                40.6               1.7




SCi Entertainment Annual Report & Accounts 2005   31
Reconciliation of operating (loss) profit to cash (outflow) inflow from operating activities
for the nine months ended 30 June 2005



                                                                                                         12 months to
                                                                                         Nine months    30 September
                                                                                           to 30 June            2004
                                                                                                2005      (as restated)
                                                                                                 £m                £m

Operating (loss) profit                                                                       (14.7)               6.2
Depreciation                                                                                   0.6                0.3
Goodwill amortisation                                                                          2.1                0.9
(Increase) in work-in-progress                                                               (10.4)                 –
Decrease (increase) in stocks                                                                  0.5               (0.1)
Decrease in debtors                                                                            1.2                0.9
(Decrease) in creditors                                                                       (4.0)              (1.8)
EBT charge                                                                                     1.4                  –
Increase in provisions                                                                        13.0                  –
Net cash (outflow) inflow from operating activities                                           (10.3)               4.4




Reconciliation of net cash flow to movement in net funds
for the nine months ended 30 June 2005




                                                                                                                   £m

Increase in cash in the year                                                                                   40.6
Finance leases acquired with subsidiary undertakings                                                           (0.5)
Opening net funds                                                                                               3.5
Closing net funds                                                                                              43.6




Analysis of net funds
at 30 June 2005



                                                          30 September                      Non-cash          30 June
                                                                  2004       Cash flow      movement             2005
                                                                   £m             £m             £m                £m

Cash                                                              3.5           40.6               –           44.1
Finance leases                                                      –              –            (0.5)          (0.5)
Total                                                             3.5           40.6            (0.5)          43.6
Included within the cash flow statement is cash outflow from operating activities arising in the acquired entity of
£7.4 million. All other balances relate to existing activities.



SCi Entertainment Annual Report & Accounts 2005   32
     Notes to the accounts
     for the nine months ended 30 June 2005



1.   Accounting policies                                         it actually exercises significant influence. Joint
     The principal accounting policies of the Group are          ventures are undertakings, which are jointly controlled
     summarised below.                                           with other entities or individuals. The Group’s share of
                                                                 profits less losses from associated and joint venture
     Basis of accounting                                         undertakings is included in the consolidated profit
     The financial statements have been prepared under the        and loss account on the equity accounting basis and
     historical cost convention and in accordance with           its interest in their net assets included in investments
     applicable accounting standards. The Group has made         in the balance sheet.
     one change to accounting policies. Costs of developing
     new products are now capitalised and amortised over         Accounting periods
     the period in which the Group expects to derive revenue     The accounting reference date of the Group is 30 June.
     from the product. Previously, development costs were        The previous accounting reference date of the Group
     written off as incurred. In the opinion of the directors    was 30 September.
     this change facilitates a clear comparison between the
     results of the Group and those of its competitors.          Fixed assets
        The change in accounting policy has resulted in a        Fixed assets are stated at cost, net of depreciation and
     prior year adjustment to profit of £4.2 million. This        provision for impairment. Depreciation is provided on
     has had the effect of increasing shareholders’ funds at     all fixed assets, at rates calculated to write off the cost
     30 September 2004 from £19.0 million to £23.2 million.      less estimated residual value, of each asset on a
     The effect on the profit and loss account for the 12         straight-line basis over its expected useful life, as follows:
     months to 30 September 2004 was to increase the
                                                                 • Leasehold improvements: over the life of the lease
     profit for the period by £2.8 million and to increase
                                                                 • Equipment and vehicles: 3 to 5 years
     shareholders’ funds at 1 October 2003 by £1.4 million.
                                                                 Fixed asset investments
     Basis of consolidation
                                                                 Fixed asset investments are shown at cost less
     The Group accounts consolidate the accounts of
                                                                 provisions for any impairment.
     SCi Entertainment Group Plc and its subsidiary
                                                                    Investments are stated at cost plus direct
     undertakings drawn up to 30 June 2005. As
                                                                 acquisition costs. Where consideration is represented
     provided by Section 230 of the Companies Act 1985,
                                                                 by new share issues, under Sections 131 and 132 of the
     no profit and loss account is presented in respect of
                                                                 Companies Act 1985, the Company has elected to
     SCi Entertainment Group Plc.
                                                                 show the associated cost of investment as being the
         The results of subsidiaries acquired are consolidated
                                                                 nominal value of the shares issued.
     for the period from the date on which control passed.
     Acquisitions are accounted for under the acquisition
                                                                 Work in progress
     method with goodwill, representing any excess of the
                                                                 The cost of developing new products is capitalised as
     fair value of the consideration given over the fair value
                                                                 work in progress once the Group has determined that:
     of the identifiable assets and liabilities acquired.
                                                                 • the product is technically and commercially
                                                                    feasible;
     Goodwill
                                                                 • the project is clearly defined and related
     Goodwill is capitalised and amortised in the profit and
                                                                    expenditure is separately identifiable;
     loss account on a straight line basis over a period of
                                                                 • current and future costs are expected to be
     between seven to ten years, based on the expected
                                                                    exceeded by future sales; and
     useful economic life in accordance with FRS 10.
                                                                 • adequate resources exist for the product to be
     Provision is made for any impairment.
                                                                    completed.
                                                                    Work in progress is charged to the profit and loss
     Associated and joint venture undertakings
                                                                 account, following the release of the product, over the
     Associated undertakings are undertakings in which
                                                                 period in which the Group is expected to derive
     the Group holds a long-term interest and over which
                                                                 revenues from the product.


     SCi Entertainment Annual Report & Accounts 2005   33
     Notes to the accounts continued
     for the nine months ended 30 June 2005



1.   Accounting policies continued                                recognised in the profit and loss account, or as
     Stocks                                                       adjustments to the carrying value of fixed assets, only
     Stocks comprise finished goods for resale, and are            when the hedged transaction has itself been reflected
     stated at the lower of cost and net realisable value.        in the Group’s accounts. If an instrument ceases to be
     Cost is calculated as cost of materials. Net realisable      accounted for as a hedge, for example because the
     value is based on estimated selling price, less further      underlying hedged position is eliminated, the
     disposal costs.                                              instrument is marked to market and any resulting
                                                                  profit or loss recognised at that time.
     Taxation                                                        In relation to the disclosures made in note 24:
     Corporation tax payable is provided on taxable profits        • Short-term debtors and creditors are not treated as
     at prevailing rates.                                            financial assets or financial liabilities, except for the
                                                                     foreign currency disclosures contained within
     Deferred taxation                                               note 24.
     Deferred tax assets and liabilities arise from timing        • The Group does not hold or issue derivative
     differences between the recognition of gains and losses         financial instruments for non-trading or
     in the financial statements and their recognition in the         speculative purposes.
     tax computation.                                             • Forward exchange contracts are used to fix the
         In accordance with FRS 19, deferred tax is provided         exchange rate of committed foreign currency
     in respect of all timing differences that have originated,      transactions. Gains and losses arising on such hedges
     but not reversed, at the balance sheet date that may give       are not recognised until the transaction occurs.
     rise to an obligation to pay more or less tax in the
     future. The recognition of deferred tax assets is limited    Leases
     to the extent that the group anticipates making              Assets held under finance leases, which confer rights
     sufficient taxable profits in the future to absorb the       and obligations similar to those attached to owned
     reversal of the underlying timing differences.               assets, are capitalised as tangible fixed assets and are
         Deferred tax balances are not discounted.                depreciated over the shorter of the lease terms and
                                                                  their useful lives. The capital elements of future lease
     Foreign currency                                             obligations are recorded as liabilities, while the interest
     Transactions in foreign currencies are recorded at the       elements are charged to the profit and loss account
     rate of exchange at the date of the transaction or a         over the period of the leases to produce a constant rate
     forward contract rate where applicable. Monetary             of charge on the balance of capital repayments
     assets and liabilities denominated in foreign currencies     outstanding. Rentals under operating leases are
     at the balance sheet date are reported at the rates of       charged on a straight-line basis over the lease term,
     exchange prevailing at that date. Any gain or loss           even if the payments are not made on such a basis.
     arising from a change in exchange rates subsequent to
     the date of the transaction is included as an exchange       Employee Benefit Trust share reserve
     gain or loss in the profit and loss account.                  The cost of the Company’s shares held by the EBT is
                                                                  deducted from shareholders’ funds in the Company
     Financial instruments                                        and Group balance sheet. Any cash received by the
     For a forward foreign exchange contract to be treated        EBT on disposal of the shares it holds is also
     as a hedge, the instrument must be related to actual         recognised directly in shareholders’ funds. Other assets
     foreign currency assets or liabilities or to a probable      and liabilities of the EBT (including borrowings) are
     commitment. It must involve the same currency or             recognised as assets and liabilities of the Company.
     similar currencies as the hedged item and must also             Any shares held by the EBT are treated as cancelled
     reduce the risk of foreign currency exchange                 for the purpose of calculating earnings per share.
     movements on the Group’s operations. Gains and
     losses arising on these contracts are deferred and




     SCi Entertainment Annual Report & Accounts 2005   34
     Notes to the accounts continued
     for the nine months ended 30 June 2005



1.   Accounting policies continued                              Pensions
     Turnover                                                   For defined contribution schemes, the amount
     Turnover comprises: (a) sales of games to retailers and    charged to the profit and loss account in respect of
     external distributors at invoiced and accrued amounts      pension costs is the contributions payable in the year.
     less value added tax; (b) royalty payments received or     Differences between contributions payable in the year
     accrued from external distributors under licence of the    and contributions actually paid are shown as either
     right to distribute games in certain territories. Where    accruals or prepayments in the balance sheet.
     advance payments against royalties are received under
     licence, such advances are recognised at the point at      Share based employee remuneration
     which they become non-returnable; and (c) royalty          When shares and share options are awarded to
     payments received or accrued from third parties under      employees a charge is made to the profit and loss
     licence of the right to exploit the Group’s intellectual   account based on the difference between the market
     property on other media. Turnover from sales of            value of the Company’s shares at the date of grant and
     games is recognised at the point at which the game is      the option exercise price in accordance with UITF
     delivered. The Group makes provision against any           Abstract 17 (revised 2003) “Employee Share Schemes”.
     subsequent returns.                                        The credit entry for this charge is taken to the profit
                                                                and loss reserve and reported in the reconciliation of
     Long-term incentive plan for executive directors           movements in shareholders’ funds.
     Future payments under the Group’s long-term
     incentive plan are estimated and charged to the profit
     and loss account over the period to which they relate.


                                                                                              Nine months
2.   Segmental analysis                                                                         to 30 June   30 September
     Turnover by destination                                                                         2005            2004
                                                                                                      £m               £m

     United Kingdom                                                                                  3.3             12.8
     Europe                                                                                          5.0              8.4
     United States of America                                                                        7.2              7.7
     Rest of World                                                                                   2.0              2.0
                                                                                                   17.5              31.0
     Turnover from joint ventures, as shown in the consolidated profit and loss account, originates in Spain and relates
     to entertainment software. In addition, turnover in the United Kingdom includes £131,000 (2004: nil) of sales to
     joint ventures in Spain.

                                                                                              Nine months    30 September
                                                                                                to 30 June           2004
     (Loss) profit before interest and taxation                    Exceptional        Other           2005     (as restated)
                                                                         £m            £m             £m               £m
     Geographical segment
     United Kingdom                                                     (4.0)        (8.8)        (12.8)               7.3
     Europe                                                             (0.3)         0.3             –                  –
     United States of America                                           (2.1)         1.0          (1.1)                 –
     Rest of World                                                      (0.2)        (0.1)         (0.3)                 –
                                                                        (6.6)        (7.6)        (14.2)               7.3




     SCi Entertainment Annual Report & Accounts 2005   35
     Notes to the accounts continued
     for the nine months ended 30 June 2005



2.   Segmental analysis continued                                                                Nine months    30 September
                                                                                                   to 30 June           2004
     Net assets                                                                                         2005     (as restated)
                                                                                                         £m               £m
     Geographical segment
     United Kingdom                                                                                 178.1               23.2
     Europe                                                                                           4.5                  –
     United States of America                                                                       (38.4)                 –
     Rest of World                                                                                   (0.7)                 –
                                                                                                    143.5               23.2
     Turnover, operating profit and net assets are all attributable to the principal activity of the Group which the
     directors consider to be a single class of business.


                                                                                                 Nine months
                                                                                                   to 30 June   30 September
3.   Net interest receivable                                                                            2005            2004
                                                                                                         £m               £m

     Other interest receivable                                                                          0.3               0.1
     Bank loans and overdrafts                                                                         (0.1)             (0.1)
                                                                                                        0.2                 –



4.   (Loss) profit on ordinary activities before taxation                                         Nine months    30 September
                                                                                                   to 30 June           2004
     (Loss) profit on ordinary activities before taxation is stated after charging (crediting):          2005     (as restated)
                                                                                                         £m               £m

     Depreciation and amounts written off tangible fixed assets:
     – owned fixed assets                                                                                0.2               0.2
     – leased fixed assets                                                                               0.4                 –
     Goodwill amortisation                                                                              2.1               0.9
     Operating lease rentals                                                                            0.7               0.1
     (Profit) on foreign exchange                                                                       (0.9)                –
     Auditors’ remuneration for audit services                                                          0.3                 –
     Of the Group audit fee the amount attributable to the audit of the parent company was £25,000 (12 months to
     30 September 2004: £3,500). Amounts payable to BDO Stoy Hayward LLP in respect of non-audit services,
     including taxation, were £140,000 (12 months to 30 September 2004: £15,000).




     SCi Entertainment Annual Report & Accounts 2005   36
     Notes to the accounts continued
     for the nine months ended 30 June 2005




                                                                                                   Nine months
5.   Staff costs                                                                                     to 30 June   30 September
     The average monthly number of employees (including executive directors) was:                         2005            2004
                                                                                                       Number          Number

     Sales, marketing and administration                                                                  95               66
     Development                                                                                         145               73
                                                                                                         240              139
     The total number of employees at 30 June 2005 includes 152 SCi Entertainment Group employees and 651 Eidos
     employees, the latter having been included for the period after acquisition on a time-apportioned basis and
     increasing the total by 88.
        Of the SCi Entertainment Group employees, 66 were engaged in sales, marketing and administration and 86
     were engaged in development. Of the Eidos employees, 212 (29 on a time-apportioned basis) were engaged in
     sales, marketing and administration, 439 (59 on a time-apportioned basis) were engaged in development.

                                                                                                   Nine months
                                                                                                     to 30 June   30 September
     Aggregate remuneration comprised:                                                                    2005            2004
                                                                                                           £m              £m

     Wages and salaries                                                                                   8.8             5.3
     Social security costs                                                                                0.8             0.6
     Other pension costs                                                                                  0.2             1.6
                                                                                                          9.8             6.0
     Details of emoluments paid to directors are contained in the directors’ remuneration report on pages 59 to 63.


                                                                    Continuing operations          Nine months
                                                                                                     to 30 June   30 September
6.   Exceptional charges                                                             Acquisition          2005            2004

                                                                         £m                 £m             £m              £m

     Restructuring costs of integrating Eidos and SCi                    0.3                2.3          (2.6)              –
     Provisions in relation to US publishing                             2.1                  –          (2.1)              –
     Write down of work in progress                                      1.9                  –          (1.9)              –
                                                                         4.3                2.3          (6.6)              –
     Restructuring costs of £2.6 million arise from the Company’s acquisition of Eidos plc. The costs relate primarily to
     redundancy costs arising from the integration of the Group’s publishing activities.
        Following the acquisition of Eidos plc, the Group has changed its method of publishing in the United States.
     Previously the Group sub-licensed products to other publishers in the United States, and will now publish directly.
        The Group has made a provision of £2.1 million for the costs of withdrawing from existing US publishing
     arrangements.
        Following a Group-wide review of its product profile, the Group has decided to make an exceptional provision
     of £1.9 million against products in development.




     SCi Entertainment Annual Report & Accounts 2005   37
     Notes to the accounts continued
     for the nine months ended 30 June 2005



                                                                                                    Nine months    30 September
                                                                                                      to 30 June           2004
7.   Tax on (loss) profit on ordinary activities                                                            2005     (as restated)
                                                                                                            £m               £m

     UK corporation tax
     Adjustment to the tax charge in respect of previous year                                             (0.1)                –
     Share of tax in joint ventures                                                                       (0.1)                –
                                                                                                          (0.2)                –
     Deferred tax
     Origination and reversal of timing differences                                                        5.4              (0.9)
     Tax credit (charge) on (loss) profit on ordinary activities                                            5.2              (0.9)

     Reconciliation of current year tax charge
     Tax reconciliation
     (Loss) profit on ordinary activities                                                                (14.0)               7.3


     Tax credit (charge) on profit on ordinary activities at the
     UK corporation tax rate (30%)                                                                         4.2              (2.2)
     Effects of:
     – expenditure qualifying for an enhanced deduction                                                      –               0.5
     – short-term timing differences                                                                       0.3              (0.2)
     – adjustment to the tax charge in respect of previous year                                           (0.1)                –
     – share of tax in joint ventures                                                                     (0.1)                –
     – adjustment to the tax charge in respect of change in accounting policy                                –               0.3
     – tax losses carried forward/utilised                                                                (4.2)              1.2
     – group accounting policy alignment                                                                  (0.5)             (0.1)
     Current tax on (loss) profit on ordinary activities                                                   (0.2)                –

     Deferred tax
     At 30 June 2005, the Group had substantial tax losses carried forward subject to the agreement of the tax
     authorities in various jurisdictions. After assessing the prospects for the 2006 financial year the Board has decided
     to recognise a deferred tax asset of £7 million (at 30 September 2004: £1.4 million) as a prudent estimate of the
     losses that may be utilised in that period. The deferred tax asset in note 15 is stated net of a deferred tax liability of
     £1.1 million arising in Denmark as a result of short-term timing differences.

                                                                                                        30 June    30 September
     Movement in deferred tax asset                                                                       2005             2004
                                                                                                            £m               £m

     Brought forward                                                                                       1.4               0.9
     Acquisition of Eidos plc                                                                             (0.9)                –
     Profit and loss account                                                                                5.4               0.5
                                                                                                           5.9               1.4




     SCi Entertainment Annual Report & Accounts 2005   38
     Notes to the accounts continued
     for the nine months ended 30 June 2005



                                                                      Nine months to
8.   (Loss) earnings per share                                        30 June 2005                  30 September 2004
                                                                                    Weighted                        Weighted
     Earnings per share has been calculated using                             average number         Earnings average number
     the following:                                                    Loss         of shares   (as restated)       of shares
                                                                        £m                 m            £m                 m

     Basic                                                            (8.8)            34.4            6.4              28.5
     Diluted                                                          (8.8)            34.4            6.4              29.5
     The difference between the weighted average number of shares in issue on a basic and diluted basis at
     30 September 2004 reflects those shares which would be issued at 120.5p under the SCi Share Option Scheme.
        The calculation of loss per ordinary share is based on the loss for the period of £8.8 million (30 September
     2004: £6.4 million profit) and on 34.4 million ordinary shares (30 September 2004: 28.5 million), being the
     weighted average number of ordinary shares in issue and ranking for dividend during the year. There is no
     potential dilution of the loss per ordinary share for 30 June 2005.


9.   Goodwill                                                                                                          Group
                                                                                                                          £m

     Cost
     1 October 2004                                                                                                      7.7
     Additions
     – Arising on acquisition of Eidos                                                                                  85.7
     30 June 2005                                                                                                     93.4

     Amortisation
     1 October 2004                                                                                                      2.6
     Charge for the period                                                                                               2.1
     30 June 2005                                                                                                       4.7

     Net book value
     30 June 2005                                                                                                     88.7
     30 September 2004                                                                                                   5.1




     SCi Entertainment Annual Report & Accounts 2005   39
    Notes to the accounts continued
    for the nine months ended 30 June 2005



                                                                                                Equipment,
                                                                                                   vehicles
                                                                                  Leasehold     and fixtures
10. Fixed assets                                                               improvements     and fittings         Total
                                                                                        £m             £m            £m

    Cost
    1 October 2004                                                                     0.2            1.5            1.7
    Additions                                                                            –            0.3            0.3
    Acquisition of subsidiary                                                          3.2           11.8           15.0
    30 June 2005                                                                      3.4           13.6           17.0

    Depreciation
    1 October 2004                                                                     0.1             1.1           1.2
    Charge for the period                                                                –             0.6           0.6
    Acquisition of subsidiary                                                          2.4             8.1          10.5
    30 June 2005                                                                      2.5             9.8          12.3

    Net book value
    30 June 2005                                                                      0.8             3.8           4.7
    30 September 2004                                                                  0.1             0.4           0.5
    The net book value of tangible fixed assets at 30 June 2005 includes the amount of £502,000 (at 30 September
    2004: £42,000) in respect of assets held under finance leases. The depreciation charge for the period in respect of
    such assets was £363,000 (12 months ended 30 September 2004: £14,000).




    SCi Entertainment Annual Report & Accounts 2005   40
     Notes to the accounts continued
     for the nine months ended 30 June 2005



11. Acquisition of Eidos
    On 16 May 2005 the Group declared unconditional in all respects its offer for Eidos plc for a total maximum
    consideration of £75.2 million, comprising the issue of up to 23.6 million shares. At the effective date of
    acquisition SCi had received acceptances from Eidos shareholders comprising 78.02% of the issued share capital of
    Eidos. At 30 June 2005 SCi had received further acceptances from Eidos shareholders such that SCi held 90.02% of
    the shares in Eidos, acquired for a fair value consideration of £71.1 million (20.8 million SCi shares).
       The fair value of consideration represents shares with an average market value on the date of issue of
    £71.1 million.
       This acquisition has been accounted for using the acquisition method of accounting. After the alignment of
    accounting policies and other adjustments to the valuation of assets and liabilities to reflect their fair value, the
    provisional fair value of liabilities acquired is £14.6 million. Goodwill of £85.7 million has therefore arisen.
       In July and August the Group completed the acquisition of all the share capital of Eidos. Details are given in
    note 27.

     Fair value adjustments
     In calculating the goodwill arising on acquisition, the fair value of net assets of Eidos plc have been assessed and
     provisional adjustments from book value have been made where necessary. These adjustments are summarised in the
     table below.
                                                                                         Fair value adjustments
                                                                    Book value    Accounting policy       Revaluation     Fair value
                                                                 on acquisition         alignment         adjustment           Total
                                                                           £m                  £m                  £m           £m

     Tangible assets                                                      4.5                    –                (0.5)      4.0
     Other investments                                                    0.3                    –                   –       0.3
     Joint venture – net assets                                           4.5                    –                (2.4)      2.1
     Work in progress                                                       –                  2.2                   –       2.2
     Stocks                                                               2.3                    –                   –       2.3
     Debtors                                                             15.8                    –                   –      15.8
     Creditors: amounts falling due within one year                     (30.3)                   –                (0.3)    (30.6)
     Finance leases and other creditors                                  (0.5)                   –                   –      (0.5)
     Provisions for liabilities and charges                                 –                    –                (2.3)     (2.3)
     Net liabilities (non cash)                                          (3.4)                 2.2                (5.5)      (6.7)
     Bank loans and overdraft                                            (6.8)                   –                   –       (6.8)
     Net liabilities                                                    (10.2)                 2.2                (5.5)    (13.5)
     Minority interest                                                                                                      (1.1)
     Net liabilities acquired                                                                                              (14.6)
     Purchase price
     Fair value of consideration                                                                                             71.1
     Goodwill created                                                                                                        85.7




     SCi Entertainment Annual Report & Accounts 2005   41
     Notes to the accounts continued
     for the nine months ended 30 June 2005



11. Acquisition of Eidos continued
    The reasons for the fair value adjustments above are as follows:
    • The write down in tangible assets reflects a provision against the carrying value of fixtures and fittings on a
      property that is the subject of an onerous lease.
    • The write down of joint venture net assets reflects the revaluation to net asset value.
    • The increase in creditors reflects accruals for expenditure incurred before the acquisition.
    • The provisions for liabilities adjustment was to recognise an onerous lease provision in existence at the date of
      acquisition and a reserve for potential litigation liabilities.
    • Work in progress has been capitalised in line with the accounting policy of SCi.

     Pre-acquisition results of Eidos plc
     In the 45 week period from 1 July 2004 to 16 May 2005 the results for Eidos plc were:
                                                                                                  45 weeks    12 months to
                                                                                                 to 16 May        30 June
                                                                                                      2005           2004
                                                                                                       £m              £m


     Turnover                                                                                       62.1            133.9
     Cost of sales                                                                                 (50.3)           (49.9)
                                                                                                    11.8             84.0
     Development costs                                                                             (26.6)           (39.2)
     Administrative expenses                                                                       (41.5)           (48.9)
     Amortisation of goodwill                                                                       (4.6)            (1.6)
     Operating loss                                                                                (60.9)            (5.6)
     Income from joint venture                                                                       2.3              2.1
     Interest receivable                                                                             0.2              1.6
     Loss before tax                                                                               (58.4)            (1.9)
     Tax                                                                                             0.5             (1.0)
     Loss after tax transferred to reserves for the period                                         (57.9)            (2.9)


     Consolidated statement of total recognised gains and losses
     Profit/(loss) for the period
     Group                                                                                         (60.2)            (4.4)
     Joint ventures                                                                                  2.3              1.5
                                                                                                   (57.9)            (2.9)
     Currency translation differences on foreign currency net investment
     Group                                                                                           (0.1)           (1.4)
     Joint ventures                                                                                  (0.2)           (0.1)
                                                                                                     (0.3)           (1.5)
     Total gains and losses recognised                                                             (58.2)            (4.4)

     Cashflows
     The only cashflows arising on the acquisition of Eidos plc were the overdraft of £6.8 million and incidental
     acquisition expenses of £0.6 million.


     SCi Entertainment Annual Report & Accounts 2005   42
    Notes to the accounts continued
    for the nine months ended 30 June 2005



12. Fixed asset investments
    The Group had the following fixed asset investments:
                                                          Joint    Associated                          30 June    30 September
                                                      ventures    undertaking       Investments          2005             2004
                                                            £m           £m                 £m             £m              £m

    Cost
    At 1 October 2004                                        –             –                  –             –               –
    Acquisition of Eidos                                   2.1             –                0.3           2.4               –
    At 30 June 2005                                        2.1             –                0.3           2.4               –

    Share of retained profits
    At 1 October 2004                                        –             –                  –             –               –
    Profit for the period                                   0.4           0.1                  –           0.5               –
    At 30 June 2005                                        0.4           0.1                  –           0.5               –

    Net book value
    At 30 June 2005                                        2.5          0.1                0.3            2.9               –
    At 1 October 2004                                        –             –                  –              –              –

    Joint ventures
    The Group’s share of the results of joint ventures includes the following:
                                                                                                   Nine months
                                                                                                     to 30 June   30 September
                                                                    Proein SL    Pyro Studios SL          2005            2004
                                                                         £m                 £m             £m              £m

    Turnover                                                             2.0                0.1           2.1               –

    Profit before tax                                                     0.4                  –           0.4               –
    Taxation                                                               –                  –             –               –
    Profit after tax                                                      0.4                  –           0.4               –




    SCi Entertainment Annual Report & Accounts 2005   43
    Notes to the accounts continued
    for the nine months ended 30 June 2005



12. Fixed asset investments continued
    Joint ventures continued
    The Group has the following aggregate interests in joint ventures:
                                                                                                   30 June    30 September
                                                                   Proein SL     Pyro Studios SL     2005             2004
                                                                          £m                £m         £m              £m

    Share of assets
    – Share of fixed assets                                               0.2                0.1      0.3                –
    – Share of current assets                                            5.6                0.7      6.3                –
                                                                         5.8                0.8      6.6                –
    Share of liabilities
    – Due within one year                                                (1.0)             (0.1)    (1.1)               –
    – Due after more than one year                                       (0.3)             (0.3)    (0.6)               –
    Share of net assets                                                   4.5               0.4      4.9                –
    Provision against carrying value of investment                       (2.2)             (0.2)    (2.4)               –
                                                                         2.3                0.2      2.5                –
    The joint ventures are Proein SL, a games publisher, and Pyro Studios SL, a games developer, both of which are
    located in Spain. The Group’s interests are 67.5% and 24% respectively. The interests in Proein SL and Pyro
    Studios SL arise as a result of the acquisition of Eidos plc.
       The associated undertaking is Rocksteady Studios Ltd, a games developer located in England, in which the
    Group’s interest is 25.1%.

    The Company has the following investments:                                                          Company
                                                                                                   30 June    30 September
    All amounts are shown at cost                                                                    2005             2004
                                                                                                       £m              £m

    Subsidiary undertakings:
    – shares                                                                                         6.1              4.3
    – loans                                                                                          3.5              3.5
                                                                                                     9.6              7.8




    SCi Entertainment Annual Report & Accounts 2005   44
    Notes to the accounts continued
    for the nine months ended 30 June 2005



12. Fixed asset investments continued
    At 30 June 2005, the parent company has investments in the following principal undertakings, each of which has
    an accounting reference date of 30 June.
                                                                                                       Country of
                                                                                                       registration and
                                   Principal activity                          Holding %   Class       operation

    Subsidiary undertakings
    SCi Games Ltd                  Development and publishing of                   100* Ordinary       England
                                   interactive entertainment software
    Pivotal Games Ltd              Development of interactive                      100* Ordinary       England
                                   entertainment software
    Eidos plc                      Development and publishing of                     90* Ordinary      England
                                   interactive entertainment software
    Core Design Ltd                Development of interactive                        90    Ordinary    England
                                   entertainment software
    Eidos Interactive Inc          Publisher of interactive                          90    Ordinary    USA
                                   entertainment software
    Eidos Sarl                     Distributor of interactive                        90    Ordinary    France
                                   entertainment software
    Eidos GmbH                     Distributor of interactive                        90    Ordinary    Germany
                                   entertainment software
    Crystal Dynamics Inc           Development of interactive                        90    Ordinary    USA
                                   entertainment software
    Io Interactive A/S             Development of interactive                        90    Ordinary    Denmark
                                   entertainment software
    Joint ventures
    Pyro Studios SL                Development of interactive                        24    Common      Spain
                                   entertainment software                                  shares
    Proein SL                      Distributor of interactive                     67.5     Common      Spain
                                   entertainment software                                  shares
    Associated undertaking
    Rocksteady Studios Ltd         Development of interactive                     25.1     Ordinary    England
                                   entertainment software
    * Held directly by SCi Entertainment Group Plc




    SCi Entertainment Annual Report & Accounts 2005     45
    Notes to the accounts continued
    for the nine months ended 30 June 2005



                                                                                                          30 September
                                                                                               30 June            2004
13. Work in progress                                                                             2005         (restated)
                                                                                                   £m               £m

    At 1 October 2004                                                                            4.2                1.4
    Addition                                                                                    15.8                9.8
    On acquisition                                                                               2.2                  –
    Released in the period                                                                      (5.4)              (7.0)
    At 30 June 2005                                                                             16.8                4.2


                                                                        Group                       Company
                                                                  30 June     30 September     30 June    30 September
14. Stocks                                                          2005              2004       2005             2004
                                                                      £m               £m          £m               £m

    Finished goods                                                  2.1               0.3           –                 –


                                                                        Group                       Company
                                                                  30 June     30 September     30 June    30 September
15. Debtors                                                         2005              2004       2005             2004
                                                                      £m               £m          £m               £m

    Trade debtors                                                  23.4              11.9          –                  –
    Deferred tax asset                                              5.9               1.4          –                  –
    Prepayments and accrued income                                  2.0               1.6          –                  –
    Other debtors                                                   2.4                 –          –                  –
    Amounts due from subsidiary undertaking                           –                 –       19.3                5.0
    Amount due from associated undertaking                          0.2                 –          –                  –
                                                                   33.9              14.9       19.3                5.0
    The amount due from associated undertaking is a loan to Rocksteady Studios Ltd, and is repayable after more
    than one year.


                                                                        Group                       Company
                                                                  30 June     30 September     30 June    30 September
16. Creditors: amounts falling due within one year                  2005              2004       2005             2004
                                                                      £m               £m          £m               £m

    Obligations under finance leases                                 0.3                 –          –                  –
    Trade creditors                                                 6.2               2.4        0.3                  –
    Royalty creditors                                              10.1                 –          –                  –
    Taxation and social security                                    2.7               0.5          –                  –
    Accruals and deferred income                                   12.8               2.3        0.6                  –
    Corporation tax                                                 2.1                 –          –                  –
                                                                   34.2               5.2        0.9                  –




    SCi Entertainment Annual Report & Accounts 2005   46
    Notes to the accounts continued
    for the nine months ended 30 June 2005



                                                                         Group                          Company
17. Creditors: amounts falling due after                           30 June     30 September        30 June    30 September
    more than one year                                               2005              2004          2005             2004
                                                                       £m               £m             £m              £m

    Obligations under finance leases                                   0.2                 –              –              –


                                                                         Group                          Company
                                                                   30 June     30 September        30 June    30 September
18. Provisions for liabilities and charges                           2005              2004          2005             2004
                                                                       £m               £m             £m              £m

    Provision for onerous contract                                   0.8                  –              –              –
    Restructuring provision                                          1.0                  –              –              –
    Returns provision                                               13.3                  –              –              –
    Provision against legal proceedings                              0.2                  –              –              –
                                                                    15.3                  –              –              –
    The provision for onerous contract and the provision against legal proceedings have been established on acquisition
    of Eidos and hence have been taken to goodwill via fair value adjustments rather than being charged to the profit
    and loss account in the period.
       The provision against return of goods sold of £13.3 million relates to sales made during the nine month period
    and hence has been charged to the profit and loss account during this period. The brought forward provision
    (included within accruals) of £0.5 million was fully utilised during the year.


                                                                                                   30 June    30 September
19. Called-up share capital                                                                          2005             2004
                                                                                                       £m              £m

    Authorised
    97,000,000 (2004: 49,000,000) ordinary shares of 5p each                                          4.9             2.5
    Allotted, called-up and fully-paid
    69,438,360 ordinary shares of 5p each (2004: 28,562,187 ordinary shares of 5p each)               3.5             1.4

                                                                                                   Number
    The movement in share capital was as follows:                                             of shares (m)            £m


    1 October 2004                                                                                   28.5             1.4
    Placing and open offer                                                                           20.0             1.0
    Issue of shares to acquire Eidos                                                                 20.8             1.1
    Issue of new shares under SCi Share Option Scheme                                                 0.1               –
    30 June 2005                                                                                    69.4             3.5
    On 13 May 2005 the shareholders approved the issue of 21.3 million shares in order to acquire Eidos plc (see
    note 11).
       On 13 May 2005 the shareholders approved a Placing and Open Offer of 20.0 million shares to raise
    £60.1 million before expenses (£58.3 million net of expenses). The proceeds of the share issue were to provide
    working capital to the newly enlarged Group following the acquisition of Eidos plc.
       A total of 103,500 shares were issued during the year under the SCi Share Option Scheme for a total
    consideration of £45,875.

    SCi Entertainment Annual Report & Accounts 2005   47
    Notes to the accounts continued
    for the nine months ended 30 June 2005



19. Called-up share capital continued
    SCi Share Option Scheme
    The Company operates an unapproved Share Option Scheme. At 30 June 2005, options were outstanding over
    3,478,674 shares, including options held by directors. The options are exercisable if certain performance criteria
    are met, as set by the remuneration committee, which currently relate to share price performance compared with a
    published media sector average.
    Number of shares over
     which options granted   Exercise price   Exercise period
                                    Pence

                175,000             39.0      11 December 2001 to 11 December 2005
                 43,000             56.5      8 March 2002 to 8 March 2006
                 28,000             43.5      2 July 2004 to 2 July 2008
                 17,500             47.5      18 July 2004 to 18 July 2008
                240,000             81.0      20 August 2004 to 20 August 2008
                 20,000             85.0      1 October 2004 to 1 October 2008
                287,000             57.0      13 September 2005 to 13 September 2009
                332,000             72.0      16 June 2006 to 16 June 2010
                500,000            103.5      23 October 2006 to 23 October 2010
                190,174            125.5      31 March 2007 to 31 March 2011
                723,000            100.5      27 August 2007 to 27 August 2011
                 97,000            230.0      17 December 2007 to 17 December 2011
                  8,000            273.5      2 February 2008 to 2 February 2012
                  8,000            361.5      28 April 2008 to 28 April 2012
                810,000            333.5      30 June 2008 to 30 June 2012
              3,478,674
    The market price of the ordinary shares at 30 June 2005 was 337.5p and the range during the period was 120.5p
    to 443.5p. All share options granted during the year were issued at market value.


                                                                                                                                Employee
                                                       Share premium                                            Profit and    Benefit Trust
20. Reserves                                                  account     Merger reserve   Capital reserve   loss account   share reserve
                                                                     £m              £m               £m             £m              £m

    Group
    1 October 2004 – as previously stated                            –              0.5               6.3          10.8                –
    Prior year adjustment                                            –                –                 –           4.2                –
    1 October 2004 – as restated                                     –             0.5                6.3          15.0                –
    Loss for the period                                              –               –                  –          (9.4)               –
    Arising on acquisition                                           –               –                  –             –             (0.9)
    New shares issued                                            126.8               –                  –             –                –
    Transfer to merger reserve                                   (69.4)           69.4                  –             –                –
    30 June 2005                                                 57.4            69.9                6.3            5.6            (0.9)




    SCi Entertainment Annual Report & Accounts 2005             48
    Notes to the accounts continued
    for the nine months ended 30 June 2005



                                                                                Share premium                          Profit and
20. Reserves continued                                                                 account   Capital reserve    loss account
                                                                                           £m               £m              £m
    Company
    1 October 2004                                                                         –                6.3             5.1
    Loss for the period                                                                    –                  –            (9.2)
    New shares issued                                                                   57.4                  –               –
    30 June 2005                                                                       57.4                6.3            (4.1)
    The Company has taken advantage of the exemption given in Section 132 of the Companies Act 1985 not to
    recognise the premium on the issue of shares as they were issued in order to acquire at least 90% of its new
    subsidiary undertaking, Eidos plc. As a result, the associated £69.4 million of fair value of shares issued in excess of
    the nominal value has been transferred to the merger reserve.
       The remaining £57.4 million within share premium represents the fair value of shares issued under open offer
    (£61.1 million) less their nominal value (£1 million – see note 19) less associated issue costs (£1.7 million).


                                                                                                       30 June     30 September
21. Reconciliation of movements in shareholders’ funds                                                   2005              2004
                                                                                                            £m              £m

    Group
    Opening shareholders’ funds – as previously stated                                                   19.0             13.9
    Prior year adjustment                                                                                 4.2              1.4
    Opening shareholders’ funds – as restated                                                            23.2             15.3
    (Loss) profit for the financial period                                                                 (9.4)             5.1
    Shares available for distribution arising on acquisition of Eidos                                    (0.9)               –
    New shares issued – arising on acquisition                                                           70.5                –
                       – arising on open offer                                                           58.4                –
    Closing shareholders’ funds                                                                        141.8              20.4


    Company
    1 October 2004                                                                                       12.8               7.7
    (Loss) profit for the financial period                                                                 (4.7)              5.1
    New shares issued                                                                                    59.5                 –
    Closing shareholders’ funds                                                                          67.6             12.8




    SCi Entertainment Annual Report & Accounts 2005   49
    Notes to the accounts continued
    for the nine months ended 30 June 2005



22. Financial commitments
    There were no capital commitments contracted at the balance sheet date. Annual commitments under
    non-cancellable operating leases are as follows:                   2005                      2004
                                                                    Land and                       Land and
                                                                    buildings          Other       buildings          Other
                                                                          £m             £m              £m              £m
    Group
    Expiry date: – within one year                                       0.1           0.1                –               –
                 – between one and two years                             1.4           0.1                –               –
                 – between two and five years                             0.3             –              0.1               –
                 – more than five years                                   0.2             –                –               –
                                                                         2.0           0.2              0.1               –
    Leases of land and buildings are typically subject to rent reviews at specified intervals and provide for the lessee to
    pay all insurance, maintenance and repair costs. Other operating leases relate to cars and office equipment.


23. Profit attributable to SCi Entertainment Group Plc
    The loss for the nine months to 30 June 2005 dealt with in the accounts of the parent company,
    SCi Entertainment Group Plc, was £9.2 million (12 months to 30 September 2004: profit of £5.1 million).


24. Derivatives and other financial instruments
    The operating and financial review provides an explanation of the role that financial instruments have had during
    the period in creating or changing the risks the Group faces in its activities. It summarises the Group objectives
    and policies in relation to financial instruments. The disclosures contained within this note deal with financial
    assets and liabilities, excluding short-term debtors and creditors, other than for the purpose of the foreign
    currency disclosures described under short-term debtors and creditors below.

    Interest rate and currency profile
    The interest rate and currency profile of the Group’s financial assets and liabilities, excluding short-term debtors
    and creditors, was as follows:
                                                       Sterling      US dollar          Euro           Other           Total
                                                           £m             £m             £m              £m             £m

    30 June 2005
    Cash – floating rate                                36.9              3.7           3.1             0.4           44.1

    30 September 2004
    Cash – floating rate                                    2.1            1.1           0.3               –            3.5
    Cash balances earned interest at the following rates: Sterling 1.2% – 1.75%; US dollar 0.125% – 0.875%;
    Euro 0.1% – 0.5%.
    Balances placed on deposit earned interest at the following rates: Sterling 4.45% – 4.83%;
    US dollar 2.11% – 3.15%; Euro 1.5% – 2.01%.




    SCi Entertainment Annual Report & Accounts 2005   50
    Notes to the accounts continued
    for the nine months ended 30 June 2005



24. Derivatives and other financial instruments continued
    Short-term debtors and creditors
    At 30 June 2005 the Group had short-term debtors denominated                                      30 June       30 September
    in the following foreign currencies:                                                                2005                2004
                                                                                                           £m                  £m

    US dollars                                                                                         11.9                   3.6
    Euros                                                                                               4.5                   2.7
    Danish krone                                                                                        0.7                     –
    Japanese yen                                                                                        0.2                     –
    Australian dollars                                                                                  0.5                     –

    At 30 June 2005 the Group had short-term creditors denominated
    in the following foreign currencies:
    US dollars                                                                                           1.8                  0.3
    Euros                                                                                                1.0                  0.1
    Danish krone                                                                                         2.5                    –
    Japanese yen                                                                                         0.2                    –
    All other short-term debtors and creditors were denominated in sterling.

    Maturity of financial assets
    Financial assets comprise balances on deposit, which may be withdrawn on demand.

    Currency Exposures
    The Group’s objective in managing the currency exposures is to minimise gains and losses arising in its overseas
    subsidiaries. The Company provides working capital to its overseas subsidiaries in their functional currencies and
    hedges its exposure in accordance with the policy described in the operating and financial review. The table below
    shows the Group’s currency exposures, i.e. those transactional exposures that give rise to the net currency gains
    and losses recognised in the profit and loss account. These exposures were as follows:
                                                                                 Net foreign currency monetary assets (liabilities)
                                                                                 US dollar                Euro                Total
                                                                                       £m                  £m                  £m

    Functional currency of Group operation
    30 June 2005
    Sterling                                                                        (3.8)                0.2                (3.6)


    30 September 2004
    Sterling                                                                          3.3                 2.6                 5.9

    Borrowing facilities and maturity of financial liabilities
    The Group had an agreed and unused overdraft facility of up to £1.5 million, which lapsed during the period. The
    Group currently has no borrowing facility, but will assess its need to put in place appropriate short-term working
    capital facilities in periods where there is a number of product launches.




    SCi Entertainment Annual Report & Accounts 2005   51
     Notes to the accounts continued
     for the nine months ended 30 June 2005



24. Derivatives and other financial instruments continued
    Interest rates
    During the period sterling, dollar and euro deposits earned interest at rates between 1.5% and 4.83% (2004: 2.1% and
    4.1%).

     Foreign currency risk
     The Group receives significant portions of its revenues in either euros or US dollars. The Group’s policy is to
     eliminate significant currency exposures through natural hedges by transacting for sales and purchases in the same
     currency and by forward contracts. At 30 June 2005 the Group had sold forward US dollars of $9.5 million (at
     30 September 2004: $4.5 million). These contracts mature between 31 October and 22 December 2005, and at
     30 June 2005 were showing a loss of £0.3 million.

     Fair values
     Other than stated above the directors consider the fair value of the financial assets and liabilities at 30 June 2005
     and at 30 September 2004 are not materially different from their book values.


25. Related party transaction
    a) Transactions with associated undertakings
    During the period the Group paid £1.6 million to its associated undertakings as royalties and advances on games
    being developed for the Group.
    In the period to 30 June 2005 the Group paid £1.1 million to Rocksteady Studios Ltd, an associated undertaking in
    which the Group has an interest of 25.1%, as advances for the development of games for the Group. At 30 June
    2005, the Group was owed £0.2 million by Rocksteady Studios Ltd (see note 15).
    In the period after acquisition of Eidos, the Group sold games to the joint venture Proein SL totalling £0.1 million.
    In the same period, the Group paid £0.5 million to the joint venture Pyro Studios SL as royalties and advances for
    the development of games for the Group. At 30 June 2005, the Group was owed £0.1 million by Proein SL and
    £0.1 million by Pyro Studios SL.

     b) Transactions with subsidiary undertakings
     The Group has taken advantage of the exemption in FRS 8 in respect of subsidiaries, which are consolidated in
     these accounts.
     All inter-company transactions are calculated on an arm’s length basis.

     c) Other related party transactions
     Tim Ryan is a director of Bell Pottinger Financial Ltd. During the period Bell Pottinger acted as the Group’s financial
     PR company. Tim Ryan was not involved in the process of selecting Bell Pottinger in this role and plays no part in the
     arrangement of fees with Bell Pottinger. During the period the Group incurred fees of £75,772 from Bell Pottinger,
     such fees being determined on an arms-length basis. At 30 June 2005 the Group owed £63,450 to Bell Pottinger.


26. Contingent liabilities
    The Company and its subsidiaries are defendants in a number of legal proceedings incidental to its operations.
    Other than already provided for in the financial statements, the Company does not expect the outcome of such
    proceedings, either individually or in aggregate, to have a material effect upon the results of the Company’s
    operations or its financial position.


27. Post balance sheet event
    The Group completed the acquisition of the remaining issued share capital of Eidos plc during July and August
    2005, for a fair value consideration of £11.7 million, represented by the issue of 2.9 million shares.

     SCi Entertainment Annual Report & Accounts 2005   52
Report of the independent auditors
to the shareholders of SCi Entertainment Group Plc



We have audited the financial statements of SCi               We read other information contained in the annual
Entertainment Group Plc for the nine months ended         report and consider whether it is consistent with the
30 June 2005 on pages 28 to 52. These financial            audited financial statements. This other information
statements have been prepared under the accounting        comprises only the chief executive’s statement, the
policies set out on pages 33 to 35. We have also          operating and financial review, the corporate
audited the information in the Directors’                 governance statement, the unaudited part of the
remuneration report that is described as having been      directors’ remuneration report and the directors’
audited.                                                  report. We consider the implications for our report if
                                                          we become aware of any apparent misstatements or
Respective responsibilities of directors                  material inconsistencies with the financial statements.
and auditors                                              Our responsibilities do not extend to any other
The directors’ responsibilities for preparing the         information.
Directors’ remuneration report, annual report and the        Our report has been prepared pursuant to the
financial statements in accordance with applicable law     requirements of the Companies Act 1985 and for no
and United Kingdom Accounting Standards are set           other purpose. No person is entitled to rely on this
out in the statement of Directors’ responsibilities.      report unless such a person is a person entitled to rely
   Our responsibility is to audit the financial            upon this report by virtue of, and for the purpose of,
statements and the part of the Directors’                 the Companies Act 1985 or has been expressly
remuneration report to be audited in accordance with      authorised to do so by our prior written consent. Save
relevant legal and regulatory requirements, United        as above, we do not accept responsibility for this
Kingdom Auditing Standards and the Listing Rules of       report to any other person or for any other purpose
the Financial Services Authority.                         and we hereby expressly disclaim any and all such
   We report to you our opinion as to whether the         liability.
financial statements give a true and fair view and
whether the financial statements and the part of the       Basis of audit opinion
Directors’ remuneration report to be audited have         We conducted our audit in accordance with United
been properly prepared in accordance with the             Kingdom Auditing Standards issued by the Auditing
Companies Act 1985. We also report to you if, in our      Practices Board. An audit includes examination, on a
opinion, the Directors’ report is not consistent with     test basis, of evidence relevant to the amounts and
the financial statements, if the Group has not kept        disclosures in the financial statements and the part of
proper accounting records, if we have not received all    the Directors’ remuneration report to be audited. It
the information and explanations we require for our       also includes an assessment of the significant estimates
audit, or if information specified by law or the Listing   and judgements made by the directors in the
Rules regarding directors’ remuneration and               preparation of the financial statements, and of
transactions with the company and other members of        whether the accounting policies are appropriate to the
the Group is not disclosed.                               Group’s circumstances, consistently applied and
   We review whether the corporate governance             adequately disclosed.
statement reflects the Group’s compliance with the
nine provisions of the 2003 FRC Combined Code
specified for our review by the Listing Rules of the
Financial Services Authority, and we report if it does
not. We are not required to consider whether the
Board’s statements on internal control cover all risks
and controls, or form an opinion on the effectiveness
of the Group’s corporate governance procedures or its
risk and control procedures.




SCi Entertainment Annual Report & Accounts 2005      53
Report of the independent auditors continued



   We planned and performed our audit so as to            Opinion
obtain all the information and explanations which we      In our opinion:
considered necessary in order to provide us with          • the financial statements give a true and fair view of
sufficient evidence to give reasonable assurance that         the state of affairs of the Group and the Company
the financial statements and the part of the directors’       as at 30 June 2005 and of the loss of the Group for
remuneration report to be audited are free from              the nine month period then ended; and
material misstatement, whether caused by fraud or         • the financial statements and the part of the
other irregularity or error. In forming our opinion we       Directors’ remuneration report to be audited have
also evaluated the overall adequacy of the presentation      been properly prepared in accordance with the
of information in the financial statements and the part       Companies Act 1985.
of the Directors’ remuneration report to be audited.
                                                          BDO Stoy Hayward LLP
                                                          Chartered Accountants and Registered Auditors
                                                          London
                                                          20 December 2005




SCi Entertainment Annual Report & Accounts 2005   54
Corporate governance



The Board is committed to establishing and                   The audit, remuneration and the nomination
maintaining high standards of corporate governance;       committees each comprise the two non-executive
the process by which the Group is directed and            directors and the chief executive. Each committee is
managed, risks are identified and controlled and           chaired by Nigel Wayne who has also been nominated
effective accountability assured. The following           by the Board as the Group’s senior independent
statement is intended to describe how the Group has       director.
applied the principles of the revised Combined Code          Directors have access to the advice and services of
on Corporate Governance (the “Code”), which applied       the company secretary and may take, at the
to the Group for the period under review. It also         Company’s expense, independent professional advice.
explains the reasons for any areas of non-compliance         During the nine month period ending 30 June 2005
with Section 1 of the Code.                               there were six Board meetings, two meetings of the
                                                          audit committee, two meetings of the remuneration
The Board                                                 committee and no meetings of the nomination
The Board comprises two non-executive directors and       committee. All meetings were fully attended with the
three executive directors. The non-executive directors    exception of three Board meetings relating to the
are considered to be independent. All directors are       approval of pre-circulated documents, which were not
required to stand for re-election at least every three    attended by Nigel Wayne and Tim Ryan.
years.
    All the members of the Board are equally              The audit committee
responsible for the management and proper                 The audit committee meets at least twice a year to
stewardship of the Group. The non-executive directors     review the financial results, the findings of the external
are independent of management and, other than             independent auditors and the Group’s internal control
described in the directors’ remuneration report and       systems. It also considers the Group’s financial
note 25 to the accounts, free from any business or        accounting procedures and policies as well as the cost-
other relationship with the Company or Group. The         effectiveness, independence and objectivity of the
non-executive directors are able to bring independent     external auditors by monitoring the level and
judgement to issues brought before the Board.             appropriateness of any non-audit work provided by
    During the period under review, the directors         them.
considered that two non-executive directors were             The members of the audit committee are
sufficient to maintain an appropriately balanced           Jane Cavanagh, Nigel Wayne and Tim Ryan.
board, given the size of the Company.
    The Board meets regularly throughout the year and     The remuneration committee
more frequently where business needs require. The         The committee is responsible for the remuneration of
Board has a schedule of matters reserved to it for        the executive directors. It advises the Board on the
decision and the requirement for Board approval on        broad framework for executive remuneration and
these matters is communicated widely throughout the       determines, on behalf of the Board, the individual
senior management of the Group. This includes             remuneration packages. The policies adopted together
matters such as business acquisitions, appointments to    with details of the directors’ remuneration and service
subsidiary company boards, material capital               contracts terms are set out in the directors’
commitments and commencing or settling major              remuneration report on pages 59 to 63. The
litigation. Prior to each meeting directors are sent an   committee meets on an ad hoc basis as necessary.
agenda together with additional information,                  No director is involved in deciding his or her own
including financial reports, required for the meeting.     remuneration, whether determined by the committee
The Board has delegated responsibility in a number of     or, in the case of the non-executives, by the Board.
areas to three sub-committees.                                The members of the remuneration committee are
                                                          Jane Cavanagh, Nigel Wayne and Tim Ryan.




SCi Entertainment Annual Report & Accounts 2005   55
Corporate governance continued



The nomination committee                                     Directors on the Combined Code (the Turnbull
The nomination committee is responsible for                  Report) published in September 1999. This process,
reviewing the composition and structure of the Board         which is tied closely to operations, is regularly
and for recommending Board appointments and                  reviewed by the Board. The key procedures that the
interviewing potential candidates. The committee             directors have established to ensure risk management
meets on an ad hoc basis as required.                        and internal controls are effective are as follows:
   The members of the nomination committee are
Jane Cavanagh, Nigel Wayne and Tim Ryan.                     Risk identification
                                                             The Group has identified its major risks and has
Operational management                                       policies in place to avoid and mitigate those risks. All
The executive directors are supported by a team of           senior members of staff participate in this process and
senior managers who are responsible for assisting in         the results are reported to the Board.
the development and achievement of the Group’s
corporate strategy, business plans and budgets and for       Operational risks
reviewing operational and financial performance. The          Operational management are responsible for the
team, together with the executive directors are              identification and evaluation of significant risks
responsible for agreeing and monitoring policies and         applicable to their area of business and, in conjunction
other matters not reserved for the Board.                    with the Board, for designing and operating suitable
                                                             internal controls. The senior management team, which
Relations with shareholders                                  includes the executive directors who report directly to
The executive directors meet regularly with                  the Board, are responsible for monitoring and
institutional shareholders, fund managers and analysts       controlling all operational risks.
and are available to answer questions from private              The Board regularly reviews risk summaries so that
shareholders. Communication with all shareholders is         prompt action can be taken in an appropriate manner.
facilitated by the issue of full year and interim reports,   In addition, the internal control process is supported
which, together with other corporate information and         by:
press releases, are available on the Company’s website:      (a) a comprehensive financial control and rolling
www.sci.co.uk.                                                    forecast system;
    The Annual General Meeting provides a forum for          (b) a flat management structure which facilitates
all shareholders to raise issues with the directors. The          open and timely communication;
notice convening the meeting is normally issued at           (c) sophisticated project management systems to
least 20 working days in advance and separate                     coordinate and control key development and
resolutions are proposed on each substantially                    publishing activities;
separate issue.                                              (d) an experienced legal function that supports the
                                                                  Group’s business needs; and
Risk management and internal controls                        (e) a programme of commercial insurance covering
The directors are responsible for the Group’s system of           key risks including intellectual property matters,
internal control and for reviewing its effectiveness.             product liability and business interruption.
However, such a system can only provide reasonable,             The Board has considered the need for an internal
but not absolute, assurance against material                 audit facility and has determined that the scale and
misstatement or loss. As part of the Board’s ongoing         nature of the Group does not justify a dedicated
review and involvement with joint ventures, they also        function at the present time. However, given the recent
give consideration to the adequacy of their internal         changes to the Group, the internal control systems will
controls and risk management.                                be further reviewed during the current financial year.
   The Board confirms that there is an ongoing
process for identifying, evaluating and managing the
significant risks faced by the Group, in compliance
with the guidance Internal Control: Guidance for



SCi Entertainment Annual Report & Accounts 2005   56
Corporate governance continued



Compliance status                                          • Check that all partners engaged in the audit process
During the period under review the Company                   are rotated at least every five years.
complied with the provisions of the Code except as         • Assess the likely impact on the auditors’
follows:                                                     independence and objectivity before awarding
(a) there is currently no formal procedure for               them any contract for additional services. It is
     training newly appointed directors;                     company policy to require the auditors to tender
(b) non-executive directors have previously been             for all non-audit assignments where the fee is in
     awarded share options;                                  excess of £100,000.
(c) non-executive directors are not appointed for          • Have as a standing agenda item auditor
     fixed terms but, as with executive directors, retire     independence issues at each audit committee
     by rotation approximately every three years;            meeting.
(d) the chief executive’s service contract contains a
     three-year notice period;                             Going concern
(e) the chief executive is a member of the                 The directors confirm that, after making enquiries,
     remuneration and audit committees and hence           they have a reasonable expectation that the Group has
     these do not consist of at least three independent    adequate resources to continue in operational
     non-executive directors;                              existence for the foreseeable future. For this reason,
(f) the Company does not currently have a chairman         they continue to adopt the going concern basis in
     and the position is maintained by Jane Cavanagh       preparing the accounts.
     as both CEO and chairman;
(g) the Board has yet to implement a self-evaluation
     process.
    The reason for non-compliance with item (b) is
given in the directors’ remuneration report. For the
period under review, the directors considered the
Code provisions relating to the other exceptions listed
above to be inappropriate for the nature and size of
the Company. The Board intends to review these
issues in the light of the increased size and complexity
of the Group following the acquisition of Eidos plc.
    Details of directors’ remuneration and related
matters are set out in the directors’ remuneration
report on pages 59 to 63.

External audit matters
Independence
The audit committee has sole responsibility for
assessing the independence of the external auditors,
BDO Stoy Hayward LLP. Each year the committee
undertakes to:
• Seek reassurance that the external auditors and
   their staff have no family, financial, employment,
   investment or business relationship with the
   company. To this end the committee requires the
   external auditor and their associates to confirm this
   in writing, and detail the procedures which the
   auditor has carried out in order to make this
   confirmation.



SCi Entertainment Annual Report & Accounts 2005   57
Corporate responsibility statement



SCi has a strong commitment to its customers,             Disabled employees
shareholders, employees and, in a wider context,          Applications for employment by disabled persons are
society at large. The following policies represent the    always fully considered, bearing in mind the aptitudes
basis of the Group’s approach to corporate                of the applicant concerned. In the event of members
responsibility.                                           of staff becoming disabled every effort is made to
                                                          ensure that their employment with the Group
Employment policy and employee involvement                continues and that appropriate training is arranged. It
The Group’s employees are integral to the success of      is the policy of the Group that the training, career
the business and, as a result, the Group pursues          development and promotion of disabled persons
employment practices which are designed to attract,       should, as far as possible, be identical with that of
retain and develop this talent to ensure the Group        other employees.
retains its strong market position with motivated and
satisfied employees.                                       Environmental policy
   The Board and senior managers take responsibility      SCi seeks to ensure that its operations and products
for employment matters and have established suitable      cause the minimum detrimental impact to the
policies and guidelines. Wherever possible, the Group     environment. The Group’s objective is to comply with
seeks to benchmark itself against industry best           environmental legislation in all countries in which it
practice.                                                 operates and to promote effective resource
   It is the Group’s policy to give all staff an          management, energy efficiency waste minimisation
opportunity to share in the future success of the         and recycling initiatives. Due to the nature of its
business. Historically this has been achieved through     business, the Group does not have a high
the SCi Share Option Plan, which is due to expire in      environmental impact.
2006. The Board is currently considering an
appropriate structure for future equity incentive         Community
arrangements for the enlarged Group and will put          The Group aims to partner with local communities in
forward proposals to shareholders in due course.          which it operates by supporting local initiatives and
   Employees receive regular updates on corporate         charitable events. SCi encourages its employees to
performance and developments through various              participate as volunteers in such activities and
formal and informal channels of communication,            supports these initiatives through donations, employee
including the Group’s website and internal intranet.      time and/or other contributions. During the nine
The Group assists its employees in achieving an           months to 30 June 2005, SCi made no charitable
appropriate work/life balance, by measures including      donations (2004: £2,750).
policies on parental, maternity and paternity leave and
flexible working where appropriate. Workplace
discrimination or harassment is not tolerated and the
Group is committed to providing equal opportunities
to all employees.




SCi Entertainment Annual Report & Accounts 2005   58
Directors’ remuneration report
to the shareholders of SCi Entertainment Group Plc



This report has been prepared in accordance with the         incentive plan. The committee sets performance
Code and the Remuneration Regulations 2002. This             criteria based on the financial targets set during the
report will be put to an advisory vote of the Company’s      Group’s budgeting process, taking into account the
shareholders at the Annual General Meeting.                  strategic aims of the Group as well as the interests of
                                                             shareholders. The targets for each performance criteria
The constitution and responsibility of the                   are designed to be challenging. The committee
remuneration committee                                       determines whether these criteria have been met based
The committee is comprised of the chief executive and        on relevant financial information.
the non-executive directors. Nigel Wayne is chairman            The above policy is expected to continue to be
of the remuneration committee. The committee has             applied in respect of the forthcoming and subsequent
access to professional advice as and when it considers       years.
it necessary.
    The remuneration committee’s principal functions are     Remuneration policy for non-executive directors
to advise the Board on the broad framework for executive     The Company’s policy on non-executive director
remuneration and to determine the remuneration               remuneration is to pay fees based upon the experience
packages of the executive directors. It reviews the          and expertise of the directors. The level of non-
performance of the executive directors and sets the scale    executive fees reflects the amount of time that the
and structure of their remuneration and the basis of their   non-executives are required to spend on Company
service agreements with due regard to the interests of       duties during the year. The non-executive directors
shareholders. No executive director may participate in       receive no other benefits, with the exception of the
decisions regarding their own remuneration. The              share options referred to on page 63.
committee is also responsible for overseeing the operation
of the SCi Share Option Scheme.                              Remuneration packages
                                                             Basic salary and benefits in kind
Remuneration policy for executive directors                  Basic salary and benefits have been reviewed in the light
In determining remuneration packages the                     of the increased responsibilities of the directors
remuneration committee has regard to the importance          following the acquisition of Eidos. It is intended that
of retaining and motivating executive directors as well      basic salary and benefits will now be reviewed every
as linking reward to the Group’s performance. Within         three years. Interim reviews may take place at the
this context, the committee’s policy on executive            discretion of the remuneration committee to take
director remuneration is to:                                 account of exceptional or unusual changes in the
• pay a competitive base salary designed to attract          Group’s circumstances. At each review the committee
    and retain executive directors relevant to each          considers the individual’s performance and
    director’s role, experience and the external market;     responsibilities as well as market trends. Particular
• provide incentive arrangements which are subject           regard is paid to salary levels in companies of a
    to challenging performance targets (based on             comparable size, sector and performance. Accordingly,
    profitable growth and share price performance),           the committee reviewed the remuneration of the
    reflect the Group’s objectives and recognise the          executive directors following the Group’s acquisition of
    importance of providing sustained motivation of          Eidos and decided to increase the basic salaries of each
    management to focus on longer-term, as well as           of them to: Jane Cavanagh – £275,000; Bill Ennis –
    annual, performance, and;                                £195,000; Rob Murphy – £195,000. The next review
• align the interest of the executive directors with         shall take place in July 2008. The basic salary of each
    those of shareholders.                                   executive director will also be increased annually by
    In order to achieve these objectives the committee’s     the greater of 5% or the increase in the Average
approach is that a significant proportion of the overall      Earnings Index over the previous twelve months.
remuneration package should be linked to the                 Benefits include car allowances and private medical
performance of the Group, through participation in           insurance. The value of benefits is not pensionable.
annual bonus schemes, share options and a long-term



SCi Entertainment Annual Report & Accounts 2005      59
Directors’ remuneration report continued



Annual performance related bonus                              The 2008 LTIP
The annual bonus scheme applies to all executive              At the Annual General Meeting shareholders will be
directors and is determined by the remuneration               asked to approve a new LTIP (the “2008 LTIP”) which
committee. It is based on exceeding the Group’s target        will apply to all executive directors and will cover
profits, with such targets set early in the financial year      performance in the three year period to 30 September
for which the bonus is payable.                               2008, (the “2008 LTIP”). Upon approval of the 2008
   During the period under review the maximum                 LTIP the remuneration committee recommend
amount of the annual bonus under the scheme was               payments of £75,000 to Jane Cavanagh and £50,000
45% of basic salary per director. Following the change        each to Bill Ennis and Rob Murphy as compensation
in year-end the remuneration committee decided to             for early termination of the 2007 LTIP.
award a prorated bonus for the nine month period to
each executive director. From 1 July 2005 the                 Long-term service scheme
maximum amount of the annual bonus under the                  Bill Ennis and Rob Murphy were awarded fixed grants
scheme is 67% of basic salary per director. The annual        of share options as a reward for long service. Bill Ennis
bonus is not pensionable.                                     has received his maximum entitlement of 410,000
                                                              shares under this scheme. Rob Murphy had received
Long-term incentive plans                                     85,000 shares under the scheme, at 30 June 2005, and
The 2007 LTIP                                                 is eligible for further annual awards.
During the period under review shareholders
approved the terms of a long-term incentive plan              Pensions
(“LTIP”) which applies to all executive directors and         Pension contributions are made on behalf of executive
covers performance in the three year period to                directors based on 15% of basic salary.
30 September 2007, (the “2007 LTIP”). The 2007 LTIP
is based on performance in the three years to                 Share options
30 September 2007 and covers performance against              Share option awards may be made to directors under
three performance measures. The performance                   the SCi 1996 Share Option Plan. Options under this
measures were chosen by the committee in 2004 to be           plan, which are issued at the market price at the date
appropriate indicators of corporate performance over          of grant, may be exercised at any time between the
the period of the 2007 LTIP that link to long-term            third and seventh anniversaries of their date of grant
shareholder reward. The targets related to the                to the extent that they have vested, provided that
performance measures are designed to be challenging.          performance conditions to which they are subject have
    Under the 2007 LTIP an award of up to a maximum of        been fulfilled. Currently, the performance conditions
125% of total basic salaries for the period 30 September      require the Company’s share price to have
2007 may be made to each executive director. Awards           outperformed the FTSE Media & Entertainment Index
under the LTIP are not pensionable. The determination of      over the period from the date of grant to exercise.
the value to be awarded depended on the Group                     The committee has chosen share price performance
achieving over the period of the 2007 LTIP (a) a target for   as the performance condition for share options as it
total pre-tax profits in the three years to 30 September       believes it is the most appropriate measure of long-
2007 of £6 million (after providing for all bonus             term shareholder return. The requirement to exceed
payments); (b) annual profit growth in each of the three       the performance of the FTSE Media & Entertainment
financial years ending 30 September 2007; and (c) a share      Index is considered to be challenging. The committee
price performance which outperforms the FTSE Media &          will regularly review the performance conditions for
Entertainment Index between 1 October 2004 and                future option grants.
30 September 2007. In order to achieve the maximum                The SCi 1996 Share Option Plan is due to expire in
payout all three criteria would have to be met.               2006 and the Board is currently considering an
    Following the acquisition of Eidos, the                   appropriate structure for future equity incentive
remuneration committee has determined that the 2007           arrangements for the enlarged Group and will put
LTIP should be replaced by a new three year scheme            forward proposals to shareholders in due course.
which better reflects the targets for the enlarged group.


SCi Entertainment Annual Report & Accounts 2005   60
Directors’ remuneration report continued



Service contracts
Details of the service contracts of directors are as follows:
                      Commencement date          Expiry date


Jane Cavanagh         18 January 1996            terminable on three years’ rolling notice
Bill Ennis            29 July 1996               terminable on twelve months’ rolling notice
Rob Murphy            27 June 1997               terminable on six months’ rolling notice
Tim Ryan              27 September 2001          terminable on one month’s rolling notice
Nigel Wayne           13 July 2001               terminable on one month’s rolling notice
There are no provisions in any of the above service contracts for compensation to be payable in the event of early
termination other than for payment in lieu of notice.

Performance graph
The following graph shows the Company’s total                   shareholder return relative to the FTSE Media &
shareholder return since 1 October 2000 relative to the         Entertainment Index which contains similar businesses
FTSE Media & Entertainment Index. The committee                 is more appropriate than a general FTSE index.
considers that a comparison of the Group’s total

FTSE Index (pence)

150

                                          SCi Entertainment Group total return
                                          FTSE Media & Entertainment sector total return
125




100




  75




  50




  25




   0
       2000          2001                 2002                  2003                   2004         2005




SCi Entertainment Annual Report & Accounts 2005     61
Directors’ remuneration report continued



The following disclosures on directors’ remuneration have been audited, as required by Part 3 of Schedule 7A of
the Companies Act 1985.

Individual directors’ remuneration
The remuneration of each director for the nine months ended 30 June 2005 was as follows:
                       Basic salary/                       Taxable   Total         Total     Pension*     Pension*
                               Fees         Bonus          benefits   2005         2004          2005         2004
                             £000s          £000s           £000s    £000s       £000s         £000s        £000s

Executive
Jane Cavanagh                  157             60               8    225           512           24               30
Bill Ennis                     100             40               6    146           433           15               19
Rob Murphy                     100             40               6    146           433           15               19

Non-executive
Tim Ryan                          9             –               –       9           12             –              –
Nigel Wayne                       9             –               –       9           12             –              –
                               375           140               20    535           621           54               68
* Pension represents contributions to money purchase schemes.

Directors’ shareholdings
The directors who held office at 30 June 2005 had the following interests in the shares of the Company:
                            30 June    30 September
                              2005             2004
                            Number          Number
Executive
Jane Cavanagh        4,819,630          4,819,630
Bill Ennis             462,450            462,450
Rob Murphy              71,500             71,500

Non-executive
Tim Ryan                 38,600            38,600
Nigel Wayne              10,000            10,000
                     5,402,180          5,402,180
There have been no changes in the above shareholdings between 30 June 2005 and the date of these financial
statements.




SCi Entertainment Annual Report & Accounts 2005       62
Directors’ remuneration report continued



Options
The interests of the directors in share options of the Company at 30 June 2005 were:
                30 September                                                Exercise
                       2004       Granted    Exercised       30 June 2005      price   Exercisable
                     Number       Number          Number          Number     Pence

Jane Cavanagh       75,000            –                  –     75,000 39.0 11 December 2001 to 11 December 2005
                    80,000            –                  –     80,000 81.0 20 August 2004 to 20 August 2008
                    80,000            –                  –     80,000 72.0 16 June 2006 to 16 June 2010
                    43,865            –                  –     43,865 125.5 31 March 2007 to 31 March 2011
                         –      270,000                  –    270,000 333.5 30 June 2008 to 30 June 2012

Bill Ennis          50,000            –                  –     50,000 39.0 11 December 2001 to 11 December 2005
                    80,000            –                  –     80,000 81.0 20 August 2004 to 20 August 2008
                   170,000            –                  –    170,000 72.0 16 June 2006 to 16 June 2010
                   410,000            –                  –    410,000 100.5 27 August 2007 to 27 August 2011
                         –      270,000                  –    270,000 333.5 30 June 2008 to 30 June 2012

Rob Murphy          50,000            –                  –     50,000 39.0 11 December 2001 to 11 December 2005
                    41,000            –                  –     41,000 56.5 8 March 2002 to 8 March 2006
                    80,000            –                  –     80,000 81.0 20 August 2004 to 20 August 2008
                    84,809            –                  –     84,809 125.5 31 March 2007 to 31 March 2011
                    85,000            –                  –     85,000 100.5 27 August 2007 to 27 August 2011
                         –      270,000                  –    270,000 333.5 30 June 2008 to 30 June 2012

Tim Ryan            20,000             –                 –     20,000         85.0     1 October 2004 to 1 October 2008

Nigel Wayne         20,000             –      (2,500)          17,500         47.5     18 July 2004 to 18 July 2008
                 1,369,674      810,000       (2,500) 2,177,174
As indicated on page 57 the Combined Code recommends that non-executive directors should not be eligible for
the award of share options. The Board believes that it is appropriate for non-executive directors to be incentivised
in the same manner as other directors.
   All options granted to directors in the period were granted on 30 June 2005 and at market value.
   On 14 January 2005 Nigel Wayne exercised 2,500 options at a price of 263.5p, making a gain of £5,400.
   Under the rules of a long-term service scheme Rob Murphy is entitled to a maximum award of 325,000 options
to be awarded in increasing annual increments. 75,000 of these options were awarded on 19 October 2005.

Share price
The market price of the ordinary shares at 30 June 2005 was 337.5p and the range during the period was 120.5p to
443.5p.

On behalf of the Board,

Nigel Wayne
Chairman – Remuneration committee
5 December 2005


SCi Entertainment Annual Report & Accounts 2005     63
Shareholder information



Shareholder analysis
As at 5 December 2005, the number of registered shareholders was 3,974 and the number of ordinary shares in issue was
72,579,456.
                                                               Number of         Percentage of       Number of        Percentage of
                                                             shareholders   total shareholders   shares (million)      total shares

Range of holdings:
1 to 1,500                                                       3,437                86.5                 0.9               1.2
1,501 to 5,000                                                     270                 6.8                 0.7               1.0
5,001 to 10,000                                                     57                 1.4                 0.4               0.6
10,001 to 50,000                                                    92                 2.3                 2.1               2.9
50,001 to 100,000                                                   29                 0.7                 2.0               2.7
100,001 to 250,000                                                  37                 0.9                 5.9               8.2
250,001 to 500,000                                                  21                 0.6                 7.8              10.7
500,001 to 1,000,000                                                18                 0.5                13.0              17.9
1,000,000 to highest                                                13                 0.3                39.8              54.8
Total                                                           3,974               100.0                72.6             100.0
Held by:
Individuals                                                      3,236                81.4                 7.4              10.2
Institutions and companies                                         738                18.6                65.2              89.8
Total                                                           3,974               100.0                72.6             100.0


Company registrars                                                   ShareGIFT
Enquiries concerning shareholdings, change of address or             Shareholders who hold only a small number of shares,
other particulars, should be directed in the first instance to        where dealing costs make it uneconomic to sell them, may
the Company’s registrars, Capita Registrars. Capita also             wish to consider donating them to charity through
provide a range of on-line shareholder information services          ShareGIFT, a registered charity administered by The Orr
at www.capitaregistrars.com where shareholders can check             Mackintosh Foundation. Further information is available at
their holdings and find practical help on transferring shares         www.sharegift.org or telephone +44 (0)20 7337 0501.
and updating personal details.
                                                                     Annual General Meeting
Share dealing service                                                The Company’s Annual General Meeting will be held at the
An internet and telephone share dealing service has been             offices of Peel Hunt, 111 Old Broad Street, London EC2N 1PH
established by Capita Registrars, enabling shareholders to           on 7 February 2006. A circular to shareholders, which
buy or sell SCi ordinary shares on the London Stock                  includes the notice convening the meeting, accompanies this
Exchange. Shareholders who are interested in using these             document.
services should visit www.capitadeal.com or telephone
+44 (0)870 458 4577.                                                 Financial calendar 2006
                                                                     March 2006           Announcement of half year results
Share price information                                                                   to 31 December 2005
The latest SCi share price can be obtained via the Company’s         September 2006       Announcement of full year results
website at www.sci.co.uk. It can also be obtained in the UK                               to 30 June 2006
on Ceefax and Teletext. SCi’s stock exchange code is SEG.
                                                                     Investor relations
Unsolicited mail                                                     Should you have any queries, please contact Anthony Price
The Company is obliged by law to make its share register             on +44 (0)20 8636 3434. Alternatively, you can e-mail your
available upon request to the public and to other                    enquiry to anthonypr@eidos.co.uk.
organisations which may use it as a mailing list resulting in
shareholders receiving unsolicited mail. Shareholders
wishing to limit the receipt of such mail should write to the
Mailing Preference Service, Freepost 29, LON 20 771,
London W1E 0ZT or telephone +44 (0)845 703 4599 for an
application form.




SCi Entertainment Annual Report & Accounts 2005      64
Five year record



                                                                             12 months to      12 months to
                                                           Nine months to   30 September      30 September       12 months to    12 months to
                                                                 30 June             2004              2004     30 September    30 September
                                                                    2005      (as restated)     (as restated)           2002            2001
                                                                      £m               £m                £m               £m              £m

Summary of results
Turnover                                                          17.5               31.0              28.5             17.7            2.0
Gross profit                                                        4.4               20.2              17.2             11.4            0.1
Operating (loss) profit                                           (14.2)               4.5               3.6              2.3          (10.7)
(Loss) profit before tax                                          (14.0)               4.5               3.6              2.2          (10.5)

Net assets employed
Fixed assets                                                      96.3                5.6               6.4              4.1             5.4
Net current assets (liabilities)                                  62.7               17.6              10.3              5.4            (2.2)
Total assets less current liabilities                            159.0               23.2              16.7              9.5             3.2
Long-term liabilities and provisions for
liabilities and charges                                          (15.3)                  –             (0.6)               –               –
Net assets                                                       143.5               23.2              16.1              9.5             3.2



                                                                   Pence            Pence             Pence            Pence           Pence

Earnings per share                                              (25.58)            17.89             15.36            10.11          (53.50)
The results for 2001 and 2002 have not been restated for the change in accounting policy as the directors do not
consider the effect of these changes to be material.




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SCi Entertainment Group Plc
Wimbledon Bridge House
1 Hartfield Road
Wimbledon
London
SW19 3RU

Tel:     +44 (0)20 8636 3000
Fax:     +44 (0)20 8636 3001
Web:     www.sci.co.uk
Email:   info@sci.co.uk

				
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