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Kuju PLC (KUJ)

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Tuesday 24 June, 2003

Kuju PLC

Final Results

Kuju PLC
24 June 2003


FOR IMMEDIATE RELEASE                                               24 June 2003


                                    KUJU PLC

                   PRELIMINARY RESULTS FOR THE TWELVE MONTHS
                              ENDED 31 MARCH 2003


Kuju plc ("Kuju" or "the Company"), a leading developer of interactive games
software for the PC, video game console and mobile phone games markets, today
announces its preliminary results for the twelve months ended 31 March 2003.


Highlights
     
•    Turnover up approximately 30% to £6.12m (2002: £4.72m).

•    Pre-tax losses on ordinary activities of £162,851 (2002: profit of
     £345,337) before exceptional items relating to bad debt provisions of 
     £434,778 resulting in a total post tax loss of £491,629.

•    During the year 3 titles were released and 2 new major titles signed
     which include Train Simulator 2 (PC title for Microsoft, to be released for
     Christmas 2003) and a major new original title with Konami, scheduled for
     release in 2005.

•    Both major projects scheduled for release for Christmas 2003 were
     publicly exhibited at the main industry show (E3) in May this year and both
     received very favourable press.

•    Development capacity expanded with the establishment of a new studio in
     Sheffield.

•    The mobile phone division has continued to develop with completion of
     21 titles for SMS, WAP, Java, and Symbian platforms and the first 
     distribution deals signed for the divisions' growing self funded portfolio 
     of Java games.

Commenting on the Preliminary results, Dominic Wheatley, Chairman of Kuju, said:

"The disappointing results were largely caused by two large doubtful debts
relating to one project.  The company is making every effort to reclaim the
amounts owed.  This has masked good progress that Kuju has made in the year
producing quality products and investing in the latest software tools and
equipment.  The new signing of a project with Konami is another important step
in ensuring the company extends its relationships with solid major publishers."


For more information:

Kuju plc                                                    Tel: 01483 414 344
Jonathan Newth, Managing Director
Ian Baverstock, Business Development Director

Buchanan Communications                                     Tel: 020 7466 5000
Bobby Morse / James Strong


CHAIRMAN'S STATEMENT

In the Interim statement I reported that the results for the second half of the
year were unlikely to be as good as those achieved in the first half. I drew
your attention to the fact that the budget for the year assumed the signature of
two new significant projects during the early part of quarters 3 and 4 of the
financial year. These were planned to coincide with existing projects being
completed and capacity becoming available. However at the time of the Interim
Report these two projects had not been signed and I stated that it was therefore
expected that this unforeseen delay and the consequential lost income would have
an adverse impact on the expected outcome for the financial year.

The problems reported to you in December continued into quarter 4 and despite
discussing a number of possible large development projects with a broad range of
publishers, the Company eventually only signed one of the two expected new
contracts by the year-end.

These delays resulted in the Group making a loss of £162,851 before doubtful
debt provisions of £434,778,  £170,000 of which was provided in the interim
accounts, and has resulted in the performance of the Group for the year to March
2003 being extremely disappointing.

90% of the bad debt provision relates to one project. Initially the publisher
who had commissioned the project experienced financial difficulties and entered
into a Company Voluntary Arrangement with its creditors so the Company provided
for the outstanding unpaid advances of £170,000 in the interim accounts and
recovered the IP to the project. The project, at that time, still to be
completed, was then re-sold to a US publisher.  One sku was delivered and
released, however, post balance sheet, we have encountered difficulty collecting
the minimum guarantee associated with publication and have initiated legal
action to recover the payment. This has necessitated a further provision of
£205,000.   The board takes a very serious view of non payment and is taking all
necessary legal action in its attempt to maximise recovery on these debts.

Progress

Despite the problems mentioned above, the Group has been making good progress
towards achieving a number of the targets it set itself at the time of
flotation:
     
•    We have made significant investment in new and replacement hardware in
     all studios for both existing and new staff.

•    We have established a new technology group. This group will reduce
     development costs and support technical innovation in our products over the
     medium term.

•    We have announced a new Warhammer 40,000 'first person shooter'
     development with THQ under licence from Games Workshop, signed a major PC 
     title with Microsoft and signed an Xbox version of Fireblade. This last 
     title has already been completed. We have commenced our first development 
     for Nintendo's GameCube platform. We have also recently started work on a 
     major new project for Konami to produce a title on both PS2 and PC.

•    The Wireless division enjoyed continued growth in the early part of
     the year and has completed a considerable number of games on various 
     platforms including Java, SMS, WAP and Symbian.

•    We have examined a number of potential acquisition targets and will
     continue carefully to consider opportunities as they arise.

Results The Group Turnover at £6,120,829 (2002: £4,723,049) reflects an annual
increase of 29.6%. However this was all achieved during the first six months and
the turnover for the second half at £2,934,217 (2002: £2,981,531) was comparable
to the prior year second half.

The Group had a pre tax annual loss on ordinary activities of £162,851 (2002 -
profit £345,337) before a doubtful debt provision of £434,778 (2002 - £Nil).
The Group had a post tax loss of £491,629 (2002 - profit £254,337).

The Group had cash deposits and cash investments of £801,998 (2002 - £700) at
the year end.  The Group deposits cash into a high interest yielding two-day
access AA rated treasury fund to maximise interest.

The operating loss was created by significant delays in signing two new major
projects to replace existing contracts as they were completed. The Group only
secured one of these two projects and that was in quarter 4. This combination of
four months lost income and the carrying costs for retaining staff expertise
eroded profitability in the second half.

The Board has reviewed this situation and has put in place a restructuring of
the cost base with a view to minimising the prospect of this situation being
repeated in future. It is intended to move more towards the film industry model
with as much work as possible being outsourced or fulfilled by contract staff.
In this way the type of additional costs carried in the year recently completed
would be minimised in the future.

In addition the Board has undertaken a review of all other overheads and is now
implementing a cost reduction programme.

Prospects

In my half year statement I reported that our financial performance was
dependant on securing new contracts in the second half of the year and that the
market was uncertain.  Prospects for the coming year are more encouraging.
However, whilst we believe that the market is picking up it remains difficult.
As I have previously reported the nature of the industry is one of peaks and
troughs and in recent weeks the industry seems to be displaying more optimism
reflected in current discussions with a number of publishers for potential new
projects.

Whilst continuing to develop existing relationships the company has worked hard
to create new relationships with some of the larger publishers.  Indeed, our
recent contract with Konami, one of the most respected Japanese publishers,
reflects this.

The company recently attended The E3 Exhibition in Los Angeles and had several
product ideas favourably received. We also had two current projects showing to
the public:
     
•    Train Simulator 2    (a PC title for Microsoft with an intended 
                          Christmas release)

•    Firewarrior          (a Games Workshop licensed title being developed for 
                          THQ expected to be released in the autumn)

In the Wireless division the flow of Java funded work is continuing in line with
the business plan. Following positive responses at E3 and at meetings prior to
the show there are prospects for further funded development from a range of new
customers. The Group has recently signed new distribution deals for self funded
work and there are strong prospects from further customers

Summary

The Group has begun adapting its organisational structure to minimise the impact
on profitability of any future delays in securing new funded development work
whilst continuing to pitch for the best game licences and ideas in order to
maximise our chances of achieving additional royalties.

As I have previously indicated the publishing community are increasingly looking
to partner with only the best game creators.  I am hopeful that our product
releases this year will serve to strengthen our reputation as creative but
dependable and open the doors of opportunity in this vibrant industry.

Finally, I would like to take this opportunity to thank our dedicated staff for
all their hard work during the year.

Dominic Wheatley
Chairman


CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 31 MARCH 2003
                                                                       Note                 2003                    2002
                                                                                               £                       £

Turnover                                                                               6,120,829               4,723,049

Cost of sales                                                                        (5,402,006)             (3,677,183)

Gross profit                                                                             718,823               1,045,866

Administrative expenses - other                                                        (926,328)               (692,004)
                        - exceptional                                     3            (434,778)                       -

Total administrative expenses                                                        (1,361,106)               (692,004)

Operating (loss)/profit                                                                (642,283)                 353,862

Interest receivable                                                                       49,885                   2,364
Interest payable and similar charges                                                     (5,231)                (10,889)

(Loss)/profit on ordinary activities before taxation                                   (597,629)                 345,337

Taxation on (loss)/profit from ordinary activities                        4              106,000                (91,000)

(Loss)/profit on ordinary activities after taxation                                    (491,629)                 254,337

(Loss)/earnings per share


Basic                                                                     5               (6.1)p                    4.2p
Diluted                                                                   5               (6.1)p                    4.2p


All amounts relate to continuing activities.

All recognised gains and losses are included in the profit and loss account.


CONSOLIDATED BALANCE SHEET
AT 31 MARCH 2003


                                         Note             2003             2003             2002            2002
                                                             £                £                £               £
Fixed assets

Intangible assets                                                             -                            8,671
Tangible assets                                                         365,354                          228,222
Investments                                                                   -                            1,000

                                                                        365,354                          237,893
Current assets

Stocks                                                  71,710                             7,000
Debtors                                              1,962,183                         1,353,363
Investments                                            755,161                                 -
Cash at bank and in hand                                46,837                               700

                                                     2,835,891                         1,361,063
Creditors: amounts falling due

within one year                                        786,254                           701,235

Net current assets                                                    2,049,637                          659,828

Total assets less current                                             2,414,991                          897,721
liabilities

Provision for liabilities and                                           (9,000)                          (9,000)
charges

                                                                      2,405,991                          888,721

Capital and reserves

Called up share capital                                               5,031,250                              101
Share premium account                                                   397,149                            5,544
Other reserve                                                             2,912                            2,912
Merger reserve                                                      (3,413,855)                                -
Profit and loss account                                                 388,535                          880,164

Shareholders' funds - equity                6                         2,405,991                          888,721



CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 MARCH 2003

                                                                 2003             2003           2002            2002
                                                                    £                £              £               £


Net cash (outflow)/inflow from operating activities                          (752,249)                         90,931


Returns on investments and servicing of finance
Interest received                                              49,885                           2,364
Interest paid                                                 (5,231)                        (10,889)

Net cash inflow/(outflow) from returns on                                       44,654                        (8,525)
investments and servicing of finance

Taxation                                                                     (108,259)                       (81,921)


Capital expenditure and financial investment
Purchase of tangible fixed assets                           (395,246)                       (205,785)

Net cash outflow from capital expenditure and                                (395,246)                      (205,785)
financial investment

Acquisitions and disposals

Cash acquired on reverse acquisition                          250,000                               -
Costs of reverse acquisition                                 (44,500)                               -

Net cash flow from acquisitions and disposals                                  205,500                              -

Equity dividends paid                                                                -                       (30,000)


Cash outflow before use of liquid resources and                            (1,005,600)                      (235,300)
financing

Management of liquid resources

Purchase of current asset investments                       (755,161)                               -

Cash outflow from management of liquid resources                             (755,161)                              -

Financing

Issue of shares                                             1,803,399                           5,545
(Repayment)/receipts from borrowings                         (99,473)                          35,387

                                                                             1,703,926                         40,932

Decrease in cash                                                              (56,835)                      (194,368)



NOTES TO THE PRELIMINARY ANNOUNCEMENT
FOR THE YEAR ENDED 31 MARCH 2003

     
1    Basis of Accounting

     The financial information included in this document has been prepared on a
     consistent basis and using the same accounting policies as the audited 
     financial statements for the year ended 31 March 2002, except for the 
     application of Reverse Acquisition Accounting as explained in note 2.

2    Basis of consolidation - Reverse Acquisition Accounting
     
     On 21 May 2002 the company became the legal parent company of Kuju 
     Entertainment Limited in a share-for-share transaction. Due to the relative 
     size of the companies, Kuju Entertainment Limited shareholders became the 
     majority holders of the enlarged share capital. Further, the company's 
     continuing operations and executive management were those of Kuju 
     Entertainment Limited. Accordingly, the substance of the combination was 
     that Kuju Entertainment Limited acquired Kuju PLC in a reverse acquisition.

     Under the requirements of the Companies Act 1985 it would normally be 
     necessary for the company's consolidated accounts to follow the legal form 
     of the business combination. In that case, the pre-combination results 
     would be those of Kuju PLC and Kuju Entertainment Limited would be included 
     only in relation to its performance from 21 May 2002. However, this would 
     portray the combination as the acquisition of Kuju Entertainment Limited by 
     Kuju PLC and would, in the opinion of the directors, fail to give a true 
     and fair view of the substance of the business combination. Accordingly, 
     the directors have adopted reverse acquisition accounting as the basis of 
     consolidation in order to give a true and fair view.

     In invoking the true and fair override the directors note that reverse
     acquisition accounting is endorsed under International Accounting  Standard 
     22 and that the Urgent Issues Task Force (UITF) of the UK's Accounting 
     Standards Board has considered the subject and concluded that there are 
     instances where it is right and proper to invoke the true and fair override 
     in such a way (UITF Information Sheet 17).

     As a consequence of applying reverse acquisition accounting, the current 
     year results comprise the results of Kuju Entertainment Limited for the 
     twelve months to 31 March 2003 plus those of Kuju PLC from 21 May 2002 (the 
     date of acquisition) to 31 March 2003.  The comparatives for the twelve 
     months to 31 March 2002, are those of Kuju Entertainment Limited.

     There are a number of effects on the consolidated Financial Statements of
     adopting reverse acquisition accounting.  The principal effect of 
     consolidating using reverse acquisition accounting is that no goodwill 
     arose on consolidation. No goodwill arose as the fair value of Kuju PLC was 
     equal to the book value of £250,000, at the time of acquisition.  A merger 
     reserve is created which reflects the difference between the book value of 
     the shares issued by Kuju PLC as consideration for the acquisition of Kuju 
     Entertainment Ltd and the share capital in Kuju Entertainment Ltd.  Under 
     normal acquisition accounting the goodwill arising on the investment by 
     Kuju PLC in Kuju Entertainment Limited would be shown on the consolidated 
     balance sheet and amortised in accordance with FRS 10. The directors 
     believe that by adopting reverse acquisition accounting the consolidated 
     profit and loss account more fairly reflects the actual trading results of 
     the group.  The following table indicates the principal effects on the 
     composition of the reserves as at 31 March 2003.

                                            Reverse acquisition            Normal                 Impact of
                                                     accounting       acquisition       reverse acquisition
                                                 (as disclosed)        accounting                accounting
                                                              £                 £                         £

Share capital                                         5,031,250         5,031,250                         -
Share premium                                           397,149           397,149                         -
Merger reserve                                      (3,413,855)         2,025,000               (5,438,855)
Opening profit and loss reserves                        880,164                 -                   880,164
Loss for the year                                     (491,629)       (1,288,890)                   797,261
Other reserve                                             2,912                 -                     2,912
Goodwill                                                      -         3,758,518                 3,758,518

3    Administrative Expenses

     Exceptional administrative expenses of £434,778 (2002 - £Nil) relate to bad 
     debt provisions.

4    Taxation on (loss)/profit from ordinary activities
     
                                                                                 2003                   2002
                                                                                    £                      £
Current tax
UK corporation tax on (loss)/profits of the year                                    -                106,000
Adjustment in respect of previous period                                    (106,000)                      -

Deferred tax
Origination and reversal of timing differences                                      -               (18,000)
Effect of reduced tax rate on opening liability                                     -                  3,000

Movement in deferred tax provision                                                  -               (15,000)

Taxation on (loss)/profit on ordinary activities                            (106,000)                 91,000
     
5    (Loss)/Earnings per ordinary share

     The calculation of the (loss)/earnings per share for the year ended 31
     March 2003 is based upon the loss after tax of £491,629 and the weighted 
     average number of ordinary 60p shares in issue of 8,092,448. The 
     calculation of the weighted average number of shares assumes that the 
     reverse acquisition occurred on the first day of the period.

     The comparatives for earnings per share have been based on the profit after 
     tax for the year, and the number of shares of Kuju PLC in issue immediately 
     prior to the placing, i.e. 6,041,667 shares.
     
6    Reconciliation of movements in shareholders' funds

                                                                                    2003                  2002
Group                                                                                  £                     £

(Loss)/profit for the year                                                     (491,629)               254,337
Grant of share options                                                                 -                12,228
Issue of shares                                                                1,803,399                 5,545
Cost of reverse acquisition                                                     (44,500)                     -
Assets acquired on reverse acquisition                                           250,000                     -

Net addition to shareholders' funds                                            1,517,270               272,110
Opening shareholders' funds                                                      888,721               616,611

Closing shareholders' funds                                                    2,405,991               888,721

7    Financial Statements
     
     The announcement set out above does not constitute a full financial 
     statement of the group's affairs for the period ended 31 March 2003. The 
     auditors have reported on the full accounts for the period and have 
     accompanied them with an unqualified report. The accounts have yet to be 
     delivered to the Registrar of Companies. The annual report and accounts 
     will be posted to shareholders on 27 June 2003, and the Annual General 
     Meeting of the Company will be held on 30 July 2003.


                      This information is provided by RNS
            The company news service from the London Stock Exchange

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