Playing the market

City Interactive (CI), a Polish producer and distributor of computer games, has debuted on the Warsaw Stock Exchange. The company offered 2.5 million new C-series shares and over 82,000 existing shares of the same series. On debut day the price of shares increased by 3.33 percent, reaching zł.9.30.

Making the most of its IPO

In its issue prospectus, CI said it wanted to raise some zł.28.6 million from the market, of which around zł.8 million was to be spent on acquisitions. The firm acquired only zł.22 million from its debut, however, leaving it with little to spend on takeovers.

Nevertheless, the company hasn't ruled out making acquisitions and has said it could finance such a move through a loan. "Our bookbuilding process took place in the most difficult time on the market [during the November market correction]. Due to that we raised less than we had expected. We are observing the market. If something interesting occurs, we will finance the transaction from a loan," said Marek Tymiński, president of CI.

Adrian Kyrcz, an analyst from IDM SA, said the company will have trouble taking a loan since it has very few fixed assets. "On the other hand, they are now a listed company so they have become more trustworthy for banks," said Kyrcz.

Tymiński said that the firm is now more concentrated on setting up its own subsidiaries abroad, widening its distribution network. CI will use these subsidiaries to enter new markets further afield. "Within the next couple of weeks we will announce new subsidiaries in the UK, Germany and Latin America," said Tymiński.

Expanding its reach

The company creates and publishes a wide range of computer games, including its own titles as well as licensed games. New licenses will cost the firm some zł.5 million. CI's portfolio includes a few dozen games which have been sold in more than 40 countries.

Now the company intends to spend some zł.11.6 million on expanding its game development department, increasing employment at home and abroad as well as purchasing new technologies.

According to Tymiński, all this will help CI strengthen its position in the value segment, which means games targeted to mass consumers, for whom price is as important as quality.

"Right now we have a leading position in that segment on the Polish market and a significant position in Europe. We have the potential to become the leading computer-game producer in that segment in Central and Eastern Europe and an important player on the global market," said Tymiński.

IDM SA's Kyrcz said that the plans look promising. "Now we have to wait for a year or so to see how the company spends the acquired funds," he added.

CI and its markets

The company is optimistic when it looks at the global computer-game market, which  is worth some $37 (zł.90.5) billion and is expected to reach $46 (zł.112) billion by the end of 2010. CI estimates the value of the Polish market at around zł.600 million.

In H1 2007 CI's net profit amounted to zł.1.4 million, compared to zł.980,000 in H1 2006. Revenues in that period grew by almost 45 percent and reached zł.6.11 million. Last year the company earned zł.1.75 million in net profit and had revenues of zł.8.98 million.

"We believe our financial results will grow by some 25 percent next year, or even more," said Tymiński.

City Interactive

Strengths:

- Leading position on the domestic market

and strong in Europe

- Fast growth

Weaknesses:

- Competition from international players

- Less raised from the bourse than expected