Sales at Irish games software company Havok rose by 39 per cent to more than $7.1 million in 2005, helped by the development of Sony's PlayStation 3, the Nintendo Wii and the growth of online games in Asia.
However, profits at the company fell to $19,076 from $157,813 in the previous year.
Chief executive Dave O'Meara attributed the fall in net profit to investment in new products. Around 40 per cent of cash is being invested in new products not on the market, he said.
The company added a new product Havok Animation in 2005 and last year started work on two additional products - Havok Behavior and Havok FX.
"We are not driven by growing profits in the short-term at the expense of investing in new products," Mr O'Meara said.
"We invested in developing new products to be in a position to take advantage of the opportunities we knew were going to be there because of the new generation platforms like PS3 and [ Microsoft's] Xbox360."
Havok provides the software to enhance the animation of video games. Its products are used by over 70 of the world's leading game developers in more than 150 titles.
Its products have been used to produce special effects in movies such as The Matrix and Charlie and the Chocolate Factory.
The company has substantial cash reserves, rising from $7.5 million at the end of 2004 to $13.2 million at the end of 2005.
Of the $10 million that appears under amounts falling due from creditors within a year, over $9 million relates to deferred revenue, according to the company.
Customers pay upfront for a licence for a number of years and under US accounting rules which Havok uses, the full licence amount cannot be counted as revenue in the year it is received. The revenue must be deferred and is released to the profit and loss account over the period of the contract, usually one to three years, Havok said.
Mr O'Meara said this cash will be used to expand the company. "This is our war chest to develop new products, make acquisitions and open new offices," he said.
Under the FRS 25 accounting standard which reclassifies some forms of equity as long-term debt, the $15.5 million in redeemable preference shares in Havok, held largely by institutional shareholders, has been classified as long-term debt and appears under creditors in 2005.
In the previous year's accounts the shares were presented under called-up share capital, share premium and other reserve.
"These preference shares can, in theory, be redeemed on or after September 1st this year. However, Havok's institutional shareholders have given a written commitment that they will not redeem until an IPO or other exit."
