Square Enix financials give cause for concern

Square Enix, the Japanese gaming giant behind the popular Final Fantasy series of games, has released its latest financial report - and it makes uncomfortable reading for anyone who has invested in the company.

In the financial year ending in March 2011, the company has seen its net sales drop by a drastic 34.8 per cent and its operating income drop a staggering 74.1 per cent. Worse still, the company's recurring income is down 80.6 per cent compared to the previous financial year.

The figures make sobering reading for the company's investors - and leaves the industry wondering just how the company has turned a nine billion yen net income in the previous financial year into a staggering 12 billion yen net loss.

"Our group experienced significantly lower sales and profit during the fiscal year mainly due to weak performance of console game titles released during the year," Square Enix president Yoichi Wada claimed, "as well as the impact of a continued delay in billing for a key on-line title [Final Fantasy XIV Online], which was newly launched during the year."

Wada's comments point to problems with the launch of the company's MMO, which saw Square Enix waiving subscription fees in order to get its customers back on-side.

"Further," Wada added, "under a rapidly-changing operating environment and more prudent estimates of future cash flows, the company wrote down goodwill (approximately 8.8 billion yen). Project development cancellation and related losses (approximately 4.5 billion yen) as well as losses caused by natural disaster (approximately 0.6 billion yen) were also factors in the recording of total extraordinary losses of 16.0 billion yen."

The short-term future doesn't exactly look rosy for the gaming giant, either: major titles Final Fantasy Versus XIII, Final Fantasy XIV's PS3 version, and the European release of Final Fantasy Type-0 have all disappeared from the company's launch schedule, meaning they are unlikely to appear until 2012 at the earliest - assuming they're not part of the 'project development cancellations' of which Wada has warned investors.

With the company's Deus Ex: Human Revolution shaping up to be one of the most anticipated titles of 2011, following on as it does from the critically aclaimed Deus Ex and disappointing sequel Invisible War, 2011 could be the year that Square Enix gets back on track - but there's a long time between the company's financial report and the game's release in August.