Rage shares tumble on profits warning

Shares in Rage Software yesterday lost 17 per cent of its value after the computer games company issued a surprise profits warning. The group, which is transforming itself from a games developer into a publisher in an effort to boost margins, said profits for the year ended 30 June and the next financial year were "unlikely to meet current market expectations" following the cancellation of a major contract. The shares closed down 4.75p at 22.75p.

Shares in Rage Software yesterday lost 17 per cent of its value after the computer games company issued a surprise profits warning. The group, which is transforming itself from a games developer into a publisher in an effort to boost margins, said profits for the year ended 30 June and the next financial year were "unlikely to meet current market expectations" following the cancellation of a major contract. The shares closed down 4.75p at 22.75p.

On Thursday, they had risen as high as 30.5p on speculation that it was about to make a positive announcement. Rage said the contract, to develop an exclusive title for a gaming platform, had been budgeted to contribute about £0.7m in the current financial year, with another £1m accounted for in the following year.

Alex Davies, an analyst at Teather & Greenwood, said: "This obviously does hurt Rage in the short-term. But in the longer-term, it doesn't detract from their core business." Before adjusting for the contract loss, Teather & Greenwood was forecasting zero profits for 2000, rising to profits of £1m in 2001.

The Liverpool-based Rage made a loss of £763,000 in the first half after one-off costs relating to its reinvention as a publisher. The group has lost more than half its market value this year as customers delay buying games until the launch of new consoles.

Despite the slump in the share price, Mr Davies said it was unlikely that Rage would become a bid target. He said: "I could see synergies for a bid ... But I don't think Rage will be the first to go."

Eidos, the company which is best-know for creating the Tomb Raider series featuring cyber celebrity Lara Croft, said earlier this month that it was still in potential takeover talks almost two months after they were first announced. Rage is due to publish full-year results on or before 25 September.