Riverdeep enters troubled waters as losses treble

RIVERDEEP, the electronic learning company founded by former school teacher Pat McDonagh, saw its losses treble in 2004.

The company, which was delisted from the stock market in 2003 by Mr McDonagh and Riverdeep's chief executive Barry O'Callaghan, made a pre-tax loss of $114.9 million (€95m) in 2004, according to accounts just lodged at the Companies Registration Office. The company, which supplies CDs and internet-based education products to schools around the world, made a loss of $31m in 2003. There was some good news for the company, however, as sales for the year picked up from $151.9m to $153.3m.

According to the accounts, Riverdeep had built up retained losses of $148 million by the end of 2004 and as a result of the continued decline in losses, the equity shareholders' fund of $96m in 2003 moved into a $3.9m deficit.

The company's long-term debts increased from $268m to $394m. The debt pile was built up from the management buy-out.

The company said that in 2004 it signed a deal with American firm Encore, which would be its sole US distributor. The move meant Riverdeep would exit the retail side of the market and it undertook a wide-ranging restructuring of the company.

"By undertaking this initiative, management approved a cost programme that would reduce overheads and have an immediate effect on working capital reduction," the company said.

The company cut nearly 170 jobs as a result of the Encore deal and saved almost $8m in salary costs. Its directors, listed as Mr McDonagh, Mr O'Callaghan, Anthony Mulderry, Patrick Tierney and Simon Calver, saw their pay fall from $3.1m in 2003 to $1.54m in 2004.

Riverdeep, which floated on the Irish Stock Exchange and the US Nasdaq market at the height of the technology bubble in February 2000, was taken private by Mr McDonagh and Mr O'Callaghan for €376m or €1.51 a share. The shares had floated at €3.48 and rose to €9.20 on their first day of trading.