UK games publisher Eidos saw fiscal 2003's £17.4m profit shrink to a £2m loss during fiscal 2004, which ended on 30 June.

However, the company was confident that takeover talks with unnamed third parties "are progressing well", despite the "disappointing: dip into the red.

The loss comes in spite of a 3.8 percentage point rise in gross margins to 62.8 per cent. But that simply wasn't sufficient to counter an 11.6 per cent decline in turnover. Preliminary figures for FY 2004 saw sales total £133.9m, down on the previous year's figure, $151.5m.

Even ignoring exceptional items, the most recently complete fiscal year showed a loss: £2m in the red, compared to FY 2003's operating profit of £13.9m. On a per share basis, 2004's loss amounted to 2.1p, compared to 13.8p for 2003.

Eidos' bosses blamed the loss on the failure of a number of releases to "live up to management's sales targets", specifically Hitman: Contracts, Commandos 3, Whiplash, and Legacy of Kain: Defiance, and the decision to delay the release of ShellShock: Nam '67 until FY 2005, all as a result of "unexpected softness" in the market.

As evidence that they were not culpable, Eidos chiefs pointed to the raised gross margin - a result of better "cost and development control", they said.

"This year's results should not be viewed in isolation as they do not adequately reflect the significant achievements and improvements of the past 36 months in terms of increased gross margins, balance sheet strength, cash generation and the on-time release of games," said CEO Michael McGarvey in a statement.

Eidos now has to hope that the market picks up and its upcoming releases - a new Tomb Raider, another Hitman instalment and ShellShock - perform ahead of expectations.

Then there's the takeover, talks centring on which are taking place with a number of companies. As yet, however, no formal offer has been made for the company. ®

Related stories

Eidos confirms takeover talks
Eidos issues profit warning
Eidos snaps up IO Interactive
Eidos profits defy Legacy of Kain
Vodafone tops games content for Live! with Lara Croft exclusive