Interim Results
Bright Things plc
15 November 2005
BRIGHT THINGS PLC
('Bright Things' or the 'Company')
15 November 2005
Interim Results
Bright Things PLC, the developer of the educational games console, Bubble, and
associated software for the pre-school market, today announces interim results
for the six months ended 30 September 2005.
Highlights
• Bubble now available in stores across UK and Eire following launch in
August
• Five leading software titles now available
• Initial sales data showing encouraging take-up although majority of
sell-through not expected until 2006
• Letter of intent signed with Eidos for distribution in France and
Spain
• Positive industry and consumer feedback
• Additional content licensing agreements signed with Nickleodeon,
Nelvana and Spellbound
• Further six games due to be released in 2006, including Bob the
Builder, Postman Pat, Dora the Explorer, Angelina Ballerina, Pingu and Koala
Brothers
• PushPlay acquisition gives opportunity to develop enhanced product
range and to plan for second generation products.
Dominic Wheatley, CEO, Bright Things, said:
'With the launch of Bubble and our first suite of games, we have come a long way
since the company was founded last year. However, this is just the beginning for
Bright Things. I am pleased to announce today our agreement with Eidos for
distribution in France and Spain. These markets have great potential for us and
with our exciting pipeline of software releases, we remain confident about the
future development of our business through the rest of 2005 and beyond.'
For further information please contact:
Bright Things PLC 0870 351 7770
Dominic Wheatley, CEO
Ady Moores, CFO
Matthew Tims, Publishing Director
Giles Croot / Mark Antelme, Brunswick 020 7404 5959
About Bright Things plc
Bright Things plc is an innovative interactive entertainment company created by
former senior executives of video game publisher Eidos. Initially focused on the
pre-school market, Bright Things has created 'Bubble', an interactive DVD games
console that enables young children to learn and interact with their favourite
television characters and brands.
More information, including the Bubble TV advertisement and recent media reviews
of Bubble, is available at www.worldofbubble.com
Chairman's Statement
Introduction
The Bright Things team has made significant progress in the period to 30
September 2005. The Bubble console made its debut along with the first software
titles, representing a major milestone in our business plan. From now on the
focus is on sales and marketing, the extension of the title library and the
reduction of our cost of goods in order to achieve long term profitability.
Product summary
Bubble is an interactive games console and learning platform that integrates
wirelessly with DVD players. Using colourful lights, sounds, buttons and
interactive activity books, Bubble allows children to play and learn with real
TV characters just as they appear on TV.
Content titles include a DVD, game cartridge and interactive activity book.
These, combined with the Bubble console, provide CD-ROM like interactivity not
possible with a DVD player alone. Instead of the usual graphics associated with
games consoles, Bubble iDVDs display real TV images.
A further feature, 'Away Play', lets children play with Bubble even when they
are not in front of the TV. Pressing the flashing buttons or the touchpad allows
children to answer questions and explore games using just the booklet and
accompanying cartridge.
Bubble launched in UK and Eire
Bubble was launched in August 2005 with a choice of either a 'Balamory' or a
'Teletubbies' Interactive DVD game. In late September we introduced 'Tweenies',
followed by 'Fimbles' in October 2005. In November 2005 'Thomas & Friends' was
released and we anticipate the arrival of 'Noddy' at the end of this month.
The launch is being supported by a TV campaign across terrestrial and satellite
channels. Our PR campaign is targeted to create publicity across the mainstream
newspapers and magazines. A print advertising campaign will be seen across a
range of media to help inform parents and grandparents when making their
Christmas gift decision.
We recently received a prestigious award from the toy industry for Top Ten
Pre-school Toy of the Year.
Significant investment in research and development
We continue to invest in the development of games that we believe we need to
drive the sales of the Bubble console.
We have a further 6 games in development (Bob the Builder, Postman Pat, Dora the
Explorer, Angelina Ballerina, Pingu and Koala Brothers) due for launch in the
calendar year 2006.
Strong portfolio of protected intellectual property
The acquisition of Pushplay Interactive LLC in June 2005 combined two
complimentary interactive DVD controller patent portfolios. The Group now has
over 20 US and international patent applications. The patent portfolio
defensively tries to cover Bubble product and offensively tries to cover
alternative implementations of intelligent interactive DVD consoles. The patent
applications cover core Bubble product, peripherals and additional categories.
The Company has received its first Notice of Allowance from the United States
Patent and Trademark Office for its patent application entitled 'Remote Control
for Providing Interactive DVD Navigation Based on User Response'. The technology
is an integral part of Bright Things' interactive DVD product, Bubble, and we
believe protects the core technology of the company.
Content development and production of Interactive DVD games
Additional content licensing agreements have been signed with Nickelodeon (Dora
the Explorer), Nelvana (Babar, Franklin and The Fairly Odd Parents) and
Spellbound (Koala Brothers).
Manufacturing process established
Bubble is manufactured by our contracted manufacturer in China. We have made
significant investment in manufacturing technologies for the platform including:
• Tooling costs;
• Quality Assurance process and systems on all software and hardware
integrated into a manufacturing line, and
• Digital monitoring and control of factory outputs.
Having created Bubble both in terms of hardware electronics and the firmware to
run the electronics, we are now progressing with the cost reduction phase of the
business plan, which includes making significant engineering investments
(including an ASIC chip set) that substantially reduce the cost of goods. We
expect to make significant progress on this in time for volume production for
our main selling season in the calendar year 2006.
Distribution outside UK
The original business plan called for a 'soft' launch in the UK to establish the
Bubble platform and allow time to adjust the product and the marketing. We have
already learnt a great deal which will benefit us for next year, in particular
the importance of presenting the consumer with an attractive range of game
titles. North America remains an important opportunity and the product
development process and refinement of the software have to be executed with that
market in mind. Having made preliminary presentations to several major US
retailers and having received a favourable reaction, we are in the process of
finalising our strategy there. Bright Things has an office and an experienced
team in the US.
Bright Things today announces that a letter of intent has been signed with
Eidos, one of the leading distributors of entertainment software, for the
distribution rights for Bubble and associated software in both France and Spain.
Prospects
We continue to make progress in launching this platform into the UK marketplace.
As with any new product and brand introduction, it takes time getting the
product offering across to the consumer. Comparative data, supplied by NPD, for
product introductions into the pre-school category show that year 2 and year 3
sales usually increase substantially.
As previously stated, margins on the first 100,000 Bubbles are necessarily
tight, but are expected to improve next year with the introduction of the ASIC
chip and with the reduction of the cost of goods. A broader catalogue of games
will also promote greater sales.
From the data available we are seeing sales of our hardware and software
increasing each week, which is encouraging.
By Easter we expect to have 'Bob the Builder', 'Pingu', 'Postman Pat' and
'Angelina Ballerina', taking our total number of games to ten. In the late
summer we hope to introduce 'Dora the Explorer' and 'The Koala Brothers'.
We believe that Bubble is a product that can sell throughout the year especially
if aided by the introduction of key titles. To build the sales levels we need
improved packaging, a bigger library of games, in-store demonstrations and wider
distribution. We have started discussions with key retailers to broaden the
number of stores taking Bubble next year and execute major promotions.
Our distributor, Bandai, has ordered 112,000 units of the hardware, of which
86,000 have now shipped from the factory in China, the balance arriving in the
first quarter 2006. Given present data we believe this stock will take Bandai
through the next year. As ever, a note of caution must be sounded in this
competitive market as the drivers for success can be as varied as a 'must have'
new game or a major promotion. We will be attempting to create these drivers in
the course of 2006 and have already started work on this. As we move the
company's focus from R & D to sales and marketing we expect to continue to build
our business during the course of next year.
We are all extremely proud of the product we have produced and firmly believe
that we have a strong consumer product offering in the pre-school market place.
Crucially, early consumer feedback has been positive and press reviews have been
favourable.
Ian Livingstone
Chairman
15 November 2005
Acquisition of PushPlay Interactive LLC
Bright Things completed the acquisition of PushPlay Interactive LLC ('PPI') on
28th June 2005. PPI is a limited liability company incorporated in the US. The
consideration payable on this acquisition totalled £1,112,000 and this was
settled by the issue of 415,800 10p ordinary shares at £1.375 per share;
US$500,000 of cash, and warrants to subscribe for 540,541 10p ordinary shares at
£1.50 per share and 250,000 10p ordinary shares at £2.50 per share. The warrants
have been fair valued at £267,000 using the Black-Scholes valuation method. Post
acquisition, the PPI team have been integrated into other group companies. The
results of PPI from 28th June 2005 are included in the consolidated financial
statements.
Bright Things, Inc.
Bright Things, Inc. was incorporated on 6 April 2005 in the state of California,
USA. The results of Bright Things, Inc. are included in these consolidated
accounts.
2006 financial year and future product portfolio
Bright Things launched the following products in the six month period to 30
September 2005:
Bubble DVD games console bundled with Teletubbies Interactive DVD game (released
August 2005)
Bubble DVD games console bundled with Balamory Interactive DVD game (released
August 2005)
Teletubbies Interactive DVD game (released August 2005)
Balamory Interactive DVD game (released August 2005)
Tweenies Interactive DVD game (released September 2005)
Our release schedule for the remainder of the financial year to 31 March 2006 is
strong. We are continuing to build our product line-up for financial year to 31
March 2007. Our portfolio of Interactive DVD games currently in development
includes the following titles:
Fimbles Interactive DVD game (released October 2005)
Thomas & Friends Interactive DVD game (released November 2005)
Noddy Interactive DVD game
Bob the Builder Interactive DVD game
Postman Pat Interactive DVD game
Angelina Ballerina Interactive DVD game
Pingu Interactive DVD game
Dora the Explorer Interactive DVD game
Koala Brothers Interactive DVD game
Further revenue streams
The strength of the Group's Patent and Intellectual Property portfolio combined
with the continuing growth of the Interactive DVD industry are increasingly
presenting opportunities to generate revenue from the use of our technology in
products outside of our initial target market of the pre-school sector.
Development model
We continue to retain the core management and technical skills in house and
subcontract game development to external studios with appropriate expertise in
DVD authoring and DVD game development.
Manufacturing capabilities
Bubble is manufactured by our contracted manufacturer with the factory located
in Zhongshan, China. We currently have capacity to produce 90,000 bubble units
per month. This is based on one production line and is scaleable accordingly.
Significant investment has been made in tooling costs and quality assurance
processes.
We are progressing with the cost reduction phase of the business plan which
includes making significant engineering investments (including an ASIC chip set)
that will substantially reduce the cost of goods of the console on an ongoing
basis. We expect to make significant progress on this in time for volume
production for the peak selling season in the calendar year 2006.
Turnover
Turnover for the period consist of product sales to our distributor (Bandai) and
royalties receivable on goods sold into the channel by Bandai. These total
£674,000 for the period.
Cost of sales
Costs of manufacturing and shipping products totalled £685,000. Of this,
£571,000 relates to direct costs of manufacturing the products, £64,000 relates
to freight and distribution of the products and £50,000 relates to royalties
payable to rights holders.
Gross loss
The overall gross loss for the period to 30 September 2005 is £11,000. This is
primarily due to the higher Cost of Goods associated with the first bubble units
and Interactive DVD games being produced. Further we air freighted the first
batch of 5,000 Bubble consoles into the UK to meet retailer deadlines, these
units would normally be shipped by sea at lower cost.
Administrative expenses
Administrative expenses for the six months ended 30 September 2005 are the main
component of the loss on ordinary activities during the period. Comparative
figures are shown for the nine months ended 30 September 2004 which are
comparable to the current six month period as the results for January to March
2004 were insignificant. Administrative expenses are in line with expectation
and are analysed into two categories:
Research & development expenditure and impairment of licences - £1,461,000 (2004
- £994,000)
Research and development expenditure incurred on hardware and software has been
written off to the profit and loss account. We continue to second staff from BBC
Worldwide and have taken on additional internal head count in the period to
support the internal management and technical support of software development
projects. Hardware development is managed out of our US office employing the
services of specialised engineering firms primarily based in California, US.
We continue to write off all licensing costs on the basis of an ongoing lack of
certainty over there recoverability, given that the platform is not yet
established.
General & administrative expenditure - £1,185,000 (2004 - £616,000)
The main component of general and administrative expenditure relates to human
resource costs, totalling £504,000 for the period. Headcount has risen to 21 at
30 September 2005 (2004 - 6). With an average of 14 heads for the six months
ended 30 September 2005 (2004 - 6). Additional staff were recruited into both
the UK and US offices during the period as the Group expanded operationally.
Office and administration costs totalled £178,000 (2004 - £109,000) for the
period, the largest component of which was office rent of £98,000 (2004 -
£47,000).
Travel and subsistence costs increased in the period to £124,000 (2004 -
£47,000). This increase is primarily due to the increase in staff and the travel
between the UK & US to oversee software development projects and between US &
China to oversee the manufacturing process.
Marketing costs totalled £118,000 (2004 - £52,000) in the period. These costs
primarily relate to retained agencies and consultants. Our distributor Bandai
have the financial responsibility in regard to the product marketing and public
relations campaign.
Legal and professional fees relating to the portfolio of patent applications
were £78,000 (2004 - £7,000) for the period. The main reason for the increase
being the post acquisition amalgamation of the PushPlay portfolio of patents.
Earnings per share
Basic loss per share of 12.7p (2004 loss of 12.1p) has increased due to the
scaling up of the companies research and development activities and production
activities.
Net assets
Net assets have decreased to £5,099,000 as at 30 September 2005 from £6,810,000
at 31 March 2005. This is due to the operating loss for the period.
Cash at bank at 30 September 2005 is £3,960,000. This comprises £2,578,000 in a
Special Interest Bearing Account (SIBA) and £129,000 on Money Market Call
Deposit. A further £500,000 is held in a blocked account by our bankers (RBS) in
support of our financial market trading position (these funds accrue interest at
SIBA rates). The remainder of the funds are held in current accounts. In April
2005 the company entered into forward currency option agreements to purchase US
dollars. This has substantially reduced the exposure to US Dollar/Sterling
currency fluctuations in the period to June 2006.
Adrian Moores
Finance Director
15 November 2005
Consolidated profit and loss account for the period ended 30 September 2005
Note Period from
6 months ended 9 months ended 1 January 2004
30 September 30 September to 31 March
2005 2004 2005
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Turnover 674 - -
Cost of sales (685) - -
_______ _______ _______
Gross loss (11) - -
------------ ------------ ----------
Research and
development
costs (1,461) (994) (2,266)
Other
administrative
expenses (1,185) (616) (1,310)
------------ ------------ ----------
Administrative
expenses (2,646) (1,610) (3,576)
_______ _______ _______
Operating loss (2,657) (1,610) (3,576)
Interest
receivable 128 42 74
_______ _______ _______
Loss on
ordinary
activities
before (2,529) (1,568) (3,502)
and after taxation
Deficit brought forward 6 (3,642) (140) (140)
_______ _______ _______
Deficit carried forward 6 (6,171) (1,708) (3,642)
_______ _______ _______
=== === ===
Basic and diluted loss
per share 2 (12.7)p (12.1)p (25.1)p
========== =========== ==========
_______ _______ _______
All amounts relate to continuing activities.
All recognised gains and losses are included in the profit and loss account.
Consolidated balance sheet at 30 September 2005
Note 30 September 30 September 31 March
2005 2004 2005
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Fixed assets
Intangible assets 4 1,079 8 7
Tangible assets 100 65 71
_______ _______ _______
1,179 73 78
_______ _______ _______
Current assets
Stock 543 - -
Debtors 679 289 182
Cash at bank and in hand 3,960 2,596 6,991
_______ _______ _______
5,182 2,885 7,173
Creditors: amounts falling due (1,262) (267) (441)
within one year
_______ _______ _______
Net current assets 3,920 2,618 6,732
_______ _______ _______
Total assets less current liabilities 5,099 2,691 6,810
_______ _______ _______
Capital & Reserves
Called up share capital 5 2,010 1,533 1,968
Share premium 6 9,851 3,724 9,342
Merger reserve 6 (858) (858) (858)
Other reserves 6 267 - -
Profit and loss account 6 (6,171) (1,708) (3,642)
_______ _______ _______
Equity shareholders'funds 7 5,099 2,691 6,810
_______ _______ _______
Consolidated cash flow statement for the period ended 30 September 2005
Note Period from
6 months ended 9 months ended 1 January 2004
30 September 30 September to 31 March
2005 2004 2005
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net cash
outflow from
operating 8 (2,820) (964) (2,578)
activities _______ _______ _______
Returns on investments and
servicing of finance
Interest
received 128 7 74
_______ _______ _______
Net cash
inflow from
returns on 128 7 74
investments and servicing of
finance
Capital expenditure and
financial
investment
Purchase of
tangible fixed
assets (45) (71) (90)
Purchase of
intangible
fixed assets - (336) (428)
_______ _______ _______
Cash outflow
from capital
expenditure
and financial
investment (45) (407) (518)
Acquisitions
Purchase of
subsidiary
undertaking (273) - -
Cash acquired
with
subsidiary
undertaking 10 - -
Acquisition
expenses (31) - -
_______ _______ _______
Cash Outflow
from
acquisitions (294) - -
Cash outflow
before
management of (3,031) (1,364) (3,022)
liquid resources and financing
Management of liquid resources
Decrease/(incr
ease) in fixed
term deposits 9 6,250 - (6,250)
Increase in
blocked
deposits 9 (500) - -
_______ _______ _______
Decrease/(Increase) of
liquid
resources 5,750 - (6,250)
Financing
Net proceeds
from issue of - 3,957 9,694
new share capital
Exercise of
share options - - 316
_______ _______ _______
Increase in
cash 9 2,719 2,593 738
_______ _______ _______
Notes forming part of the interim financial statements for the period ended 30
September 2005
Copies of the interim report and accounts will be available for members of the
public at the Company's registered office, 7 Pilgrim Street, London, EC4V 6LB.
Loss per share
Basic loss per share is calculated as follows (the effect of all potential
ordinary shares is antidilutive):
6 months ended 9 months ended Period from
1 January 2004
to 31 March
30 September 30 September 2005
2005 2004 (audited)
(unaudited) (unaudited)
Loss after
taxation for
the period £2,529,000 £1,568,000 £3,502,000
Weighted
average number
of shares 19,900,130 12,980,535 13,963,607
_______ _______ _______
Basic and
diluted loss
per share 12.7p 12.1p 25.1p
_______ _______ _______
This information is provided by RNS
The company news service from the London Stock Exchange
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