Riverdeep announces €39m in annual losses

RIVERDEEP, the Irish educational software firm, has announced annual losses of $35.2 million (€38.92 million).

Losses at the firm, in which IBM took a 14 per cent stake worth $85 million earlier this week, have increased 322 per cent from $7.1 million in the year ended June, 1999. However, the company has been expanding and has spent around $35 million on acquisitions in the last year.

The results, in line with analysts' expectations, had little effect on Riverdeep's share price. It closed unchanged at €3.50.

According to Mr John Coolican, head of technology research at Merrion Capital: "At its present level Riverdeep is trading at nine times projected sales for 2001. Many of its peers are trading at three to four times sales. The stock is at a premium, and the question is how much of that premium does it deserve."

The value of Riverdeep contracts increased over the quarter by 33 per cent to $5.2 million compared with $3.9 million in the last quarter.

In a conference call to analysts, Riverdeep chief executive, Mr Barry O'Callaghan, said the company had set itself an aggressive target of 30 per cent quarter on quarter contract value growth.

This may not affect Riverdeep's revenue figures for another couple of quarters, because new contract wins are spread over four quarters.

Sales at Riverdeep rose sharply over the period, from $360,000 in June 1999 to $8.3 million in the year to June 2000.

The average revenue per new subscriber increased to $9.32, a 47 per cent increase over the previous quarter. By comparison with its last quarter, Riverdeep did not reveal the number of subscriptions at higher value levels for this quarter.

While the figure indicates Riverdeep is reaching a higher price point per subscriber, industry sources estimate it should be hitting at least $10 at this stage if it is to achieve its target of an average of $20 per subscriber.

Revenues for the quarter increased to $1.7 million compared with $238,000 in the same quarter a year ago.

On Tuesday Riverdeep acquired the educational assets of Edmark Corporation from IBM in a stock-for-assets deal valued at $85 million.

The value of Riverdeep founder and chairman, Mr Pat McDonagh's 38 per cent stake in the company is now estimated at around $258 million, while Mr O'Callaghan's 6 per cent holding is worth about $40 million.