Creative Labs' profits fall 70% after €4.7m pay-offs

REDUNDANCY COSTS totalling €4.7 million at Dublin-based digital entertainment firm Creative Labs resulted in the company’s operating profits dropping by 70 per cent to the end of June 2008.

The company, which has its European headquarters at the Ballycoolin Industrial Estate in Blanchardstown, Dublin, announced last May that it was cutting its workforce by 50. This followed job cuts of 230 in December 2006.

The company’s operating profits dropped to €1.3 million in 2008 from €4.5 million the previous year, following the redundancy charge, according to accounts just filed.

The company’s turnover dropped by 12 per cent to €369 million due primarily from the firm’s decision to exist the high definition display market, the directors say in the accounts.

They anticipate that the company’s revenues for this year will further decrease due to “adverse macro-economic conditions” which it expects to continue through the second quarter of this year and “because there may be a de-emphasis of some underperforming product lines”.

The accounts show that there was a slight increase in the company’s pretax profit for 2008, going from €1.4 million to €1.5 million.

Operating costs in 2008 were €362 million compared to €419 million in 2007. No dividend was paid last year.

The company’s principal activity is the distribution of multimedia and other products of the Creative Technology Group to the European market and the technical support of these products with European end users.

The €4.7 million spend in redundancy costs last year followed €3.3 million spent on redundancy the previous year. The directors say that the restructuring, designed to reduce cost and increase efficiency, was in process at the end of its financial year last June. Employee numbers dropped to 165 last year from 197 in 2007.

Staff costs, including the redundancy pay-offs, fell 17 per cent from €23.2 million to €19.2 million.

More than 500 people worked at Creative Labs site in Ballycoolin at the peak of its production. The company had accumulated losses of €1.3 million at June 2008. The firm, which produces its flagship product Zen, was founded in 1981 and is based in Singapore.