Virtuality Group Plc’s full-year profits forecast failed to become a reality, as the virtual reality pioneer turned in full- year losses, despite a profitable second half. In fact, the Leicester, UK-based company was in profit by the second quarter, but analysts’ forecasts of profits of at least #150,000 for the year proved to be way off the mark as the company recorded net and pre-tax losses of #565,000, down from #1.4m losses the previous year. Nevertheless, the market liked what it saw and pushed the shares up nine pence to 255 pence. No doubt news from Japan of the completion of development of a motorcycle simulator using Virtuality’s head-mounted display technology helped boost the shares. Following a change in Japanese law, driving schools will have to include a simulation course as part of its tuition, and Virtuality has developed the simulator in conjunction with Kawasaki Heavy Industries Ltd, which is now in the process of rolling out the product. Riders have to cope with dangerous weather and road conditions and predestrians crossing in front of them unexpectedly. The headset ensures the riders have to move their heads left and right, rather than staring at a screen straight ahead. The main reason for not achieving profitability was that the low-cost consumer virtual reailty headset failed to reach the home market during the year, hitting the second half performance. However a major Japanese group in the consumer electronics market has licensed the technology, with details to follow, promised chairman Dennis Ohryn in his statement. An announcement is expected in the next few weeks. Former managing director Jon Waldern has moved to Palo Alto, California to become chief technology officer and Ohryn has taken on Waldern’s responsibilities. All the group’s research and development will be done in California and the company is recruiting locally. Sales of Location-Based Entertainment systems, by which the company means arcade games, increased such that the installed based rose to 1,250 in 41 countries, from 800 in 27 countries the year before. But the market recently hit a blip, according to Waldern, which also dented the group’s performance. Virtuality’s model is to produce games for the arcade and then convert them to games consoles and personal computers. Waldern said all the company’s games are now available for personal computers, running under Microsoft Corp’s Windows. Development expenditure during the year was #1.96m, up from #1.56m last time, as work continued on low cost virtual reality peripherals and new UltraScalar technologies. The Elysium Ultrascalar will enable three- dimensional video to be merged with three-dimensional graphics in real time, according to Ohryn. Ohryn believes there is little doubt that virtual reality will be part of mainstream computing in years to come, and three-dimensional worlds will become the norm, helped by the predicted widespread adoption of Virtual Reality Modeling Language 2.0 on the Internet. There are approximately five such ‘standards’ jostling for position at the moment, but Silicon Graphics Inc and Netscape Communications Corp and 54 others are winning friends with their Moving Worlds version (CI No 2,851). Virtuality also works in the advertising and promotions markets, where the company has increased profits in the year. The company had three competitors back in 1993, and now has 24, according to Waldern. And Virtuality is still claiming around 80% of the entire market. The company was reluctant to make predictions for the current half year as far as profitability goes, and the lumpy nature of contracts such as the one with Kawasaki makes forecasting a dangerous game. But a few more contracts like that would make profits a formality. The consumer headset deal relies on the Japanese partner hitting the right price point with the product and overcoming consumer skepticism. There will not be a dividend.
