A drive to focus on racing games has helped computer games giant Codemasters cut its annual losses from almost £30 million to £3.1 million.

Accounts filed on Companies House by Codemasters Group Holdings showed that while the firm remained in the red on a pre-tax basis, it made huge inroads into the £29.8 million loss posted in 2010.

The Warwickshire company, which recently revealed plans to create more than 100 jobs in Birmingham and the wider region, has achieved better control of its costs by focusing on racing games, including its BAFTA-winning Formula 1 title.

The firm, which sold 2.5 million copies of F1 2010 worldwide last year, and renewed the contract for the game until the 2015 season, turned an operating loss of more than £21 million last year into an operating profit of £2.3 million after a cut in expenses.

The improvement in fortunes came despite sales falling by more than three per cent per cent, to £119.2 million as the firm focused on higher margin operations.

Chief executive Rod Cousens said, in his review, that there were positive early signs for this year with 1.8 million copies of F1 2011 being sold in the first four months.

He said: “The group’s strategy is to focus on racing, where we continue to demonstrate our ability to produce high quality titles that deliver maximum entertainment for players.

“This concentration on proven franchises brings a greater degree of predictability to revenue streams and we will continue to extend our brands into new areas and onto more platforms as we deliver content on HD console, PC, smart phones, tablets and internet browsers. We want to generate more from less, increasing our revenue stream on fewer, high-quality titles. This can be achieved through digital content delivery, generating an increased share of revenue through full game downloads, free to play microtransaction deliver models, increased downloadable content and advertising income.

“Multiple revenue streams across multiple platforms will lead to improved margins.”

The company, which also makes the DiRT off road racing games, was boosted by a massive fall in expenses.

Total administrative expenses dropped from £84.5 million in 2010 to £50.2 million last year – a fall of more than 40 per cent, after research expenses and development costs were reined in.

The company, which announced last week it was recruiting more than 100 extra workers in the Midlands, saw its total workforce increase from 778 to 814 last year.

That came despite a fall in management and administrative staff, from 142 in 2010 to 105 last year, as more focus was placed on development employees. Mr Cousens added: “We want to create worlds that our customers can play any time, anywhere, on any device. Our marketing efforts are focused on adding new players, re-engaging with existing players and increasing monetisation.

“The future pipeline will be driven by increased investment in digital. We anticipate strong, profitable, predictable revenues in our publishing business based around proven franchises. We believe we can enjoy the benefits of traditional publishing alongside a marked ramp-up in digital revenues, which we expect will grow in significance in our fiscal year 2014.”

The fall in sales in the 2011 financial year came as the firm’s principal market continued to emerge as Europe. There was a 14.6 per cent fall in UK revenue, to £35.2 million, while sales to Europe rose 15.5 per cent, to £50.3 million. US sales dipped 14.1 per cent, to £19.3 million but sales to the rest of the world increased by 9.7 per cent, to £10.1 million.