18 replies to this topic

[Ren]

Jagex Financial Report: 1 April 2010 to 31 March 2011

A little Christmas present for you. Jagex's accounts have previously not been available until the following January, but this year they were filed in December (thanks to Pliigi for noticing!).

2010-11 was an interesting year for Jagex due to the change of control and ownership (see thread) and a heavy investment in various new ventures. This has meant that whilst turnover was up, their actual operating profit was down. Neither the Jagex Group nor Fen Research Ltd were mentioned in the Company Report and Financial Statement.

Jagex adjusted their 2008-09 turnover, turnover from subscription and gross profit figures in their previous report because they are now calculating them in a different way. This doesn't affect other figures such as operating profit, but does affect derived calculations such as the profit margin. Because of this the % change between the old and new figure for 2008-09 were used to adjust the relevant figures for previous years - it's not perfect, but it should be good enough for getting a sense of how the company are doing.

Donations to charity as % of turnover (adjusted):

0% (2003-04); 0.4922% (2004-05); 0.5896% (2005-06); 0.3421% (2006-07); 0.4221% (2007-08); 0.4657% (2008-09); 0.4404% (2009-10); 0.3310% (2010-11).

POLITICAL AND CHARITABLE CONTRIBUTIONS

The company made charitable donations amounting to £150,076 (2010 - £196,087) during the year Donations were made to a number of local and US based charities

Profit margin (adjusted):

34.47% (2003-04); 48.49% (2004-05); 56.60% (2005-06); 49.86% (2006-07); 41.91% (2007-08); 43.66% (2008-09); 42.21% (2009-10); 23.50% (2010-11).

Advertising as % of turnover (adjusted):

8.78% (2003-04); 8.06% (2004-05); 6.10% (2005-06); 6.46% (2006-07); 6.38% (2007-08); 5.23% (2007-08); 3.44% (2009-10); 3.27% (2010-11).

The directors are not disclosing the geographical analysis of the company’s turnover as they consider the information to be seriously prejudicial to the interests of the business

OFFICERS AND PROFESSIONAL ADVISERS

DIRECTORS
A C Crisses
J Salter
B Gardner
C Mitchell
J Quagliaroli
J Horing
M Gerhard

SECRETARY
R Hodgson

STAFF NUMBERS AND COSTS

Average number of persons employed by the company (including directors) during the year

2011:

Directors - 2
Commercial/management - 33
Development - 181
Customer relations - 123
Technical - 66

2010:

Directors - 3
Commercial/management - 33
Development - 166
Customer relations - 136
Technical - 36

Staff costs incurred during the year in respect of these employees


2011:

Wages and salaries - £12,345,392

Social security costs - £1,096,934
Other pension costs - £11,722
Share based payment - £933,420
Total - £14,392,963

2010:

Wages and salaries - £11,612,323

Social security costs - £993,311
Other pension costs - £24,155
Share based payment - £230,502
Total - £12,911,295

CHANGE OF CONTROL

In the current financial year, Insight Venture Partners, a leading private equity and venture capital firm acquired shares in Jagex from the existing sharesholders. As part of the sale the following transactions occurred:

- share options previously issued to key management personnel were exercised, being £100 nominal value of
shares,
- a share division of 10,000 for 1 and a bonus issue of 116,753,628 shares occurred,
- Jagex has acted as a guarantor for payments of deferred consideration owed, and
- Jagex agreed to pay all reasonable expenses incurred as a result of the sale of shares which totalled £2.5m in the financial year
- an acceleration of the share option charge to recognise the full fair value of the equity instruments issued in the previous year has been recognised as an expense in the current period, being £938,000 (2010 - £280,000)

CONTROLLING PARTY

The controlling party is Insight Venture Partners, as a result of controlling directly 55% of the issued share capital of the company

BUSINESS REVIEW

During the year ended 31 March 2011 the company experienced further growth with turnover increasing to £45.3m. The return of the very popular ‘Free Trade and ‘Wilderness’, continued effect of the price increases and the positive contribution from the new games such as War of Legends contributed to the rise in turnover. Profit for the financial year reduced to £6.7m following the increased investment in the new games as well as the marketing activities that were accelerated during the financial year. Although the company increased the investment in future products, it still remains very profitable.

The landscape is continuing to be very competitive but the company is positive about the future as there are new product launches in the coming financial year.

The directors expect the general level of activity to continue for the foreseeable future

Included within administrative expenses are costs of £2.9m (2010 nil) borne by Jagex Limited on behalf of
the shareholders relating to the sale of their shares during the year

KEY PERFORMANCE INDICATORS

The company has several key performance measures used internally to monitor and challenge performance and to assist investment decisions The most important indicators are:

- Revenue
- Operating profit
- Headcount

Performance in the current and prior years is summansed as follows:

Revenue: 45,345 (2011); 44,520 (2010); +2% change
Operating profit: 10,658 (2011) 18,794 (2010); -43% change
Headcount: 405 (2011); 374 (2010); +8.3% change

RESULTS AND DIVIDENDS

The profit for the year, after taxation, amounted to £6,730,298 (2010 - £13,772,776)

The directors paid dividends in the year of £nil (2010 - £22,833,585)

FUTURE DEVELOPMENTS

The company hopes to continue to grow its player base by launching internally developed new games in various languages as well as activity as a publisher for third party developed games.

The company intends to release at least one of the projects currently in rapid development

EMPLOYEE INVOLVEMENT

The company places considerable value on the involvement of its employees and has continued to keep them informed on matters affecting them as employees and on the various factors affecting the performance of the company. This is achieved through formal and informal meetings, as well as circulating data regarding subscriber growth.

Click here to view Jagex's entire financial filing.

Past Reports:

• 2009 to 2010 Financial Report
• 2008 to 2009 Financial Report
• 2007 to 2008 Financial Report

Related Topics:

• The Jagex Group
• Fen Research Limited
• 4 People join Jagex's Board of Directors
• Jagex Wins Patent Infringement Lawsuit

Footnotes

Contributors: , Pliigi.
Disclaimer: Views expressed by members of staff do not necessarily represent the view of Stellar Dawn Central.

[Kaur]

Some really interesting stuff here, thanks for posting!

[Eggs]

Operating profit -43%. Not good.

[Kaur]

Operating profit -43%. Not good.

Might want to look more into it before judging how good or bad it is?

Profit for the financial year reduced to £6.7m following the increased investment in the new games as well as the marketing activities that were accelerated during the financial year. Although the company increased the investment in future products, it still remains very profitable.
[-]
The landscape is continuing to be very competitive but the company is positive about the future as there are new product launches in the coming financial year.

[Eggs]

That's what they say... we saw a drop of 8,136,220 pounds of operating profit but only a growth of 733,065 pounds of wage costs.

EDIT: Acquisition costs probably account for around 3 million pounds. Revenue however, is still flat.

[Ren]

I expect that many of Jagex's additional costs are one-off. The administrative costs went up by £5.9m (from £6,091,645 in 2010 to £11,953,091 in 2011).

Some of the expenses incurred by Jagex in 2010-11:
1. Part of the supposed "seven figures" defending the Paltalk case (source).
2. The annual cost of the "litigation cases including intellectual property infringement".
3. The change of control/ownership (inc. £2.9m in administrative costs for sale of shares). "Jagex agreed to pay all reasonable expenses incurred as a result of the sale of shares which totalled £2.5m in the financial year
- an acceleration of the share option charge to recognise the full fair value of the equity instruments issued in the previous year has been recognised as an expense in the current period, being £938,000 (2010 - £280,000)"
4. The acquisition of Planetarion in July 2010.
5. The acquisition of the technology behind Undercroft in August 2010 (source).
6. RuneFest 2010 (where they refunded the tickets and gave away a lot of free stuff).
7. Developing RuneScape, Stellar Dawn, FourthScape, etc. Wage, salary and social security costs went up by around £0.9m.
8. "marketing activities that were accelerated during the financial year".

[Jiblix]

Interesting

[Eggs]

Ren, administrative costs aren't included in your summary.

[Ren]

Ren, administrative costs aren't included in your summary.

Good point - I'll consider including admin costs in the future. Comparing the admin costs is difficult because last year they changed the method of calculating "certain commission and transaction costs incurred in sales transactions and the allocation of certain costs between costs of sale and administrative expenses based upon the actIvitIes of the business" as "previously the company deducted certain commission and transaction costs in arriving reported revenue". This change nearly doubled their reported admin expenses, making it hard to compare pre and post 2009 administrative costs. In the charts I've adjusted the turnover and gross profits for years prior to 2009 to reflect the change in accounting practice by applying the % difference between the original and re-stated 2009 figures to pre-2009 figures.

Jagex's reported administrative expenses under the old system are as follows:
2004: £169,719
2005: £339,909
2006: £898,281
2007: £2,047,483
2008: £3,053,119
2009: £3,244,703

And their stated administrative expenses under the new system are as follows:
2009 (as restated): £6,172,995
2010: £6,091,645
2011: £11,953,091

[Eggs]

Thanks a lot Ren!

Wow, their administrative costs nearly doubled from 2010 to 2011, under the new system!

[Omali]

Jagex has two, potentially three projects being worked on currently that are 100% money sinks. Stellar Dawn, Transformers, and we don't know how far into planning their next Fantasy themed MMO (source).

Forgot to make my point. Having these three projects going will be a major drag on Jagex's profits, and we already know that they lost millions when MechScape was cancelled.

[Aenaid]

Profit and turnover levels still seem healthy, though it does seem to be fizzling out. The need for a Stellar Dawn surge seems pressing to help the company keep moving forward. I suspect Andrew Gower got out now as he felt the RuneScape project had reached its peak.

[Omali]

Profit and turnover levels still seem healthy, though it does seem to be fizzling out. The need for a Stellar Dawn surge seems pressing to help the company keep moving forward. I suspect Andrew Gower got out now as he felt the RuneScape project had reached its peak.

If anything, Andrew was probably sick of the corporate environment. People like him, who start projects that become overwhelmingly successful, tend to get sick of their own creation when it becomes less of a hobby and more of a job.

I used to work at a small chain store, and eventually it went publicly traded. Most of us at the store quit because we couldn't stand the corporate atmosphere that evolved.

[Zoala]

Profit and turnover levels still seem healthy, though it does seem to be fizzling out. The need for a Stellar Dawn surge seems pressing to help the company keep moving forward. I suspect Andrew Gower got out now as he felt the RuneScape project had reached its peak.

If anything, Andrew was probably sick of the corporate environment. People like him, who start projects that become overwhelmingly successful, tend to get sick of their own creation when it becomes less of a hobby and more of a job.

I used to work at a small chain store, and eventually it went publicly traded. Most of us at the store quit because we couldn't stand the corporate atmosphere that evolved.

Of course, Andrew did not expect Runescape to be successful and only made it more or less for fun.....

[Chris]

Do we know whether they paid upfront for their new building lease or are they paying it in increments?

[Ren]

Do we know whether they paid upfront for their new building lease or are they paying it in increments?

I assumed that they would pay monthly, quarterly or annually rather than in one lump sum because the articles probably would have mentioned a large upfront payment. I believe they got the new building in July 2011 so it'd be just outside the period covered in the 2010/11 accounts.

[Pliigi]

Do we know whether they paid upfront for their new building lease or are they paying it in increments?

According to Savills Estate Agents, who represented the property owners in the letting, Jagex agreed to a 15-year lease of the 43,774 square foot property at £22.50 per square foot. If that's accurate, which I see no reason to doubt, Jagex will pay £984,915 ($1,541,391) per year for the property, for a total of £14,773,725 ($23,120,840).

[Chris]

Do we know whether they paid upfront for their new building lease or are they paying it in increments?

According to Savills Estate Agents, who represented the property owners in the letting, Jagex agreed to a 15-year lease of the 43,774 square foot property at £22.50 per square foot. If that's accurate, which I see no reason to doubt, Jagex will pay £984,915 ($1,541,391) per year for the property, for a total of £14,773,725 ($23,120,840).

That seems familiar, I remember looking up various links as you writing the topic yourself. £22.50 psf is fairly reasonable considering where they are and what they're getting.

[Honour]

Operating profit -43%. Not good.

Might want to look more into it before judging how good or bad it is?

Profit for the financial year reduced to £6.7m following the increased investment in the new games as well as the marketing activities that were accelerated during the financial year. Although the company increased the investment in future products, it still remains very profitable.
[-]
The landscape is continuing to be very competitive but the company is positive about the future as there are new product launches in the coming financial year.

When did investments start being calculated into the operating profit?

EDIT: nvm didn't realise the investments were for their own games

Edited by Honour, 04 January 2012 - 01:51 PM.