SCi Entertainment is to cut a quarter of its workforce and hold an emergency rights issue to raise up to £55m as it struggles in the face of mounting losses.
The computer games maker, which produces the popular Tomb Raider series as well as a string of other hit titles, revealed yesterday that it lost £81.4m in the second half of last year, compared with a £17.9m loss in the same period a year earlier.
SCi's problems have been escalating since a profits warning last summer, with the company hit by a failure to get new games out on time. It held talks with a number of potential suitors last autumn but announced earlier this year that these takeover discussions had collapsed.
Phil Rogers, who was appointed chief executive in January, vowed yesterday to implement a radical new business strategy focused on a handful of SCi's most successful games series.
The company has scrapped 14 projects it considers unlikely to produce a decent return and is intending to shed 260 jobs. It plans to cut costs by £14m a year by the end of June. "SCi is in need of immediate change," Mr Rogers said. "To get [back] on track, we have to act rapidly and effect change quickly."
SCi expects its new strategy to require new capital of between £45m and £55m and thinks its best hope of raising the money is from a rights issue, although it has also held discussions with commercial partners about injections of funds and is talking to banks about extending its overdraft facilities.
The company also made it clear it would welcome new discussions with potential bidders, saying: "At this time, the board is not encouraging offers for the company but, in a consolidating industry, any sensible offer for the company or proposal for crystallising value for some of the group's intellectual property will be considered."
Simon Davies, an analyst at ABN Amro, said there was doubt in the market about the viability of a rights issue. "Breathing space is getting particularly limited," he added. "The preference is for an equity issue but, with no evidence of support for this plan, in these markets it is a concern."
Shares in SCi fell 26 per cent to 39p. The company is worth £34m, less than a tenth of its value before last July's profits warning.Reuse content