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Kuju PLC (KUJ)


Wednesday 24 December, 2003

Kuju PLC

Interim Results

Kuju PLC
24 December 2003

24 December 2003

                                        Kuju PLC

                              INTERIM RESULTS ANNOUNCEMENT

                                   Chairman's statement

In the announcement of the Annual Results and at the AGM held at the end of
July, I outlined a strategy for the Group to move towards a model where as much
work as possible will be outsourced or fulfilled by contract staff. I am pleased
to report excellent progress in implementing this strategy and key details are
set out below. In line with market expectations the Group made a significant
loss at the half year of £1,505,482 (2002: profit: £53,184) however the Group
anticipates that this strategy will result in an improvement in trading for the
second half of the year


The Group is successfully implementing the following key elements of its
business plan:

•         We have restructured the business into 4 main business units (Action,
Racing, Wireless and New Projects (Sheffield))

•         We have closed down our simulation division and withdrawn from its
loss making contract.

•         We have reduced the permanent headcount by 30% down to 93 now.

•         We have released our Warhammer 40,000 'first person shooter' title "
FireWarrior", developed for THQ under licence from Games Workshop, for PS2 and
PC which has become a top ten title in Europe.

•         We have signed a number of smaller contracts for developments and

•         The Wireless division is continuing to develop in line with
expectations.  Publishing  revenues are growing and we continue to sign
distribution agreements for our Java catalogue.


The Group Turnover was £1,859,975 (2002: £3,186,612) representing a fall of 40%
when compared to the same period last year.  This was principally due to the
continuing delay in signing new projects and the withdrawal from our Microsoft
simulation contract.

The Group produced a pre tax loss of £1,505,482 (2002: £66,480 profit).  This
was principally attributable to the performance of the simulation division, the
delays in signing new projects, adverse currency movements in respect of
contracts denominated in US dollars and the costs of restructuring.

The Group had cash deposits and cash investments of £433,779 (2002: £1,858,571).
The Group deposits cash into a high interest yielding two-day access AA rated
treasury fund to maximise interest.


Since the half year we have signed two of the main projects delayed from earlier
in the year.  The Directors believe that a significant portion of the
restructuring costs have now been incurred and that the Profit and Loss results
for the second half of the year will show an improvement. However any
improvement in the Group's financial performance and its working capital
requirements are largely dependent on successfully completing the projects it
already has under development and the signature of one more significant project
during quarter 4 of the financial year. The Group is in advanced negotiation on
a number of possible large development projects with one currently in a
publisher funded pre-production. At the date of this announcement the
significant project is yet to be signed.

It should also be noted that most of the contracts entered into by the Group
allow publishers to cancel without cause and with low early termination
payments.  In the current games development environment, such cancellations are
not uncommon. Kuju is currently in discussions with a publisher about early
termination of one of its contracts. Any such action would have an adverse
effect on the working capital position of the business.

Our Wireless division is continuing to develop as expected and is showing an
increasing swing towards publishing and distribution revenues from Java games.
Kuju is encouraged by the revenues to date from Java games and expects a
self-sustaining business model for the publishing of wireless games to appear
during the rest of this financial year.


The games development market has undergone a difficult twelve months and the
Group has restructured itself to lower the cost base going forward to ensure
that the impact on profitability of short term fluctuations in capacity will be
minimised in the future.

We continue to pitch to the high quality publishers for the best game licences
and ideas to maximise our chances of achieving royalties.

Dominic Wheatley


Unaudited consolidated profit and loss account

                                                                 Six months       Six months       Year to
                                                                 to 30 Sept       to 30 Sept      31 March
                                                                       2003             2002          2003
                                                    Notes                 £                £             £

Turnover                                                       1,859,975    3,186,612        6,120,829

Cost of Sales                                                  2,888,816    2,524,915        5,402,006
                                                                ________    ________         ________
Gross (loss)/profit                                           (1,028,841)   661,697          718,823

Administrative expenses                           4              486,986    612,543          1,361,106
                                                                ________    ________         ________

Operating (loss)/profit                                       (1,515,827)   49,154           (642,283)

Net Interest                                                       10,345   17,326           44,654
                                                                ________    ________         ________
(Loss)/profit on ordinary activities before
taxation                                                      (1,505,482)   66,480           (597,629)

Tax on (loss)/profit on ordinary activities       5                -        13,296           (106,000)
                                                                ________    ________         ________

(Loss)/profit for the period                                  (1,505,482)   53,184           (491,629)

Dividend                                                           -        -                -
                                                                ________    ________         ________

(Loss)/profit transferred to reserves                         (1,505,482)   53,184           (491,629)

                                                                ________    ________         ________

(Loss)/earnings per share                         6          (17.9)p        0.7p             (6.1)p

Unaudited consolidated balance sheet

                                                             30 Sept     30 Sept          31 March
                                                                2003        2002             2003
                                                                  £           £               £

Assets employed

Fixed assets
Tangible assets                                               296,847       377,598         365,354

Current assets
Stocks                                                        -             -               71,710
Debtors                                                       620,619       1,327,619       1,962,183
Investments                                                   214,331       1,481,000       755,161
Cash                                                          219,448       377,571         46,837
                                                              ________      ________        ________

                                                              1,054,398     3,186,190       2,835,891

Creditors: amounts falling due within one year                (441,737)     (570,949)       (786,254)
                                                              ________      ________        ________

Net current assets                                            612,661       2,615,241       2,049,637
                                                              ________      ________        ________

Total assets less current liabilities                         909,508       2,992,839       2,414,991

Provisions for liabilities and charges                        (9,000)       (9,000)         (9,000)
                                                              ________      ________        ________

                                                              900,508       2,983,839       2,405,991

                                                              ________      ________        ________

Financed by
Called-up share capital                                       5,031,250     5,031,250       5,031,250
Share premium                                                 397,149       385,683         397,149
Merger Reserve                                                (3,413,855)   (3,369,355)     (3,413,855)
Other Reserves                                                2,912         2,912           2,912
Profit and loss account                                       (1,116,948)   933,349         388,535
                                                              ________      ________        ________

Shareholders' funds - equity                                  900,508       2,983,839       2,405,991
                                                              ________      ________        ________

Unaudited consolidated cash flow statement
                                                              Six months    Six months       Year to
                                                              to 30 Sept    to 30 Sept      31 March
                                                                    2003          2002          2003
                                                                       £           £               £
Net cash (outflow)/inflow from operating
activities                                                     (323,769)     168,320       (752,249)

Returns on investments and servicing of finance
Interest received                                              10,345        17,326        49,885
Interest paid                                                  -             -             (5,231)
                                                               ________      ________      ________
Net cash inflow from returns on
investments and servicing of finance                           10,345        17,326        44,654

Taxation                                                       130,826       -             (108,259)

Capital expenditure and financial investment
Purchase of tangible fixed assets                              (76,883)      (264,471)     (395,246)
                                                               ________      ________      ________
Net cash outflow from capital
expenditure and financial investment                           (76,883)      (264,471)     (395,246)

Acquisitions and disposals
Cash acquired on reverse acquisition                           -             250,000       250,000
Cost of reverse acquisition                                    -             -             (44,500)
                                                               _________     _________     _________

Net cash inflow from acquisitions and disposals                -             250,000       205,500

Equity dividends paid                                          -             -             -
                                                               ________      ________      ________
Net cash (outflow)/inflow before management of
liquid resources and financing
                                                               (259,481)     171,175       (1,005,600)

Management of liquid resources
Decrease/(increase) in short term deposits                     540,830       (1,481,000)   (755,161)
                                                               _________     _________     _________
Cash inflow/(outflow) from management of liquid
                                                               540,830       (1,481,000)   (755,161)

Issue of shares                                                -             1,791,935     1,803,399
Repayment from borrowings                                      -             -             (99,473)
                                                               ________      ________      ________

Net cash inflow from financing                                 -             1,791,935     1,703,926

                                                               ________      ________      ________

Increase/(Decrease) in cash in the period                      281,349       482,110       (56,835)
                                                               ________      ________      ________

Notes to the unaudited consolidated cash flow statement

                                                                Six months   Six months     Year to
                                                                to 30 Sept   to 30 Sept    31 March
                                                                      2003         2002        2003
                                                                        £            £           £
           Reconciliation of operating profit to net
           cash (outflow)/inflow from operating
           Operating (loss)/profit                              (1,515,827)    49,154       (642,283)
           Depreciation of fixed assets                         145,390        123,765      266,785
           Decrease/(increase) in stocks                        71,710         7,000        (64,710)
           Decrease/(increase) in debtors                       1,233,305      25,744       (499,561)
           (Decrease)/increase in creditors                     (258,347)      (37,343)     187,520
                                                                ________       ________     ________

           Net cash flow from operating activities              (323,769)      168,320      (752,249)
                                                                ________       ________     ________

Reconciliation of net cash flow to movement in net

Increase/(decrease) in cash in the period                       281,349       482,110       (56,835)
Cash flow from loan financing in the year                       -             -             99,473
Cash flow from (decrease)/increase in liquid
                                                                (540,830)     1,481,000     755,161
                                                                ________      ________      ________

Changes in net funds resulting from cash flows                  (259,481)     1,963,110     797,799

Net funds/(debt) at the beginning of the period                 693,260       (104,539)     (104,539)
                                                                ________      ________      ________

Net funds at the end of the period                              433,779       1,858,571     693,260
                                                                ________      ________      ________


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 2003.

The results for the 6 months ended 30 September 2003 and the comparatives for
the 6 months ended
30 September 2002 are both unaudited.

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 results for the
six months ended 30  September 2002 (unaudited) comprise the results of Kuju
Entertainment Limited for the entire six months ended 30 September 2002 plus
those of Kuju PLC from 21 May 2002 (the date of acquisition) to 30 September
2002.  The results for the six months ended 30 September 2003 (unaudited)
comprise results of Kuju Entertainment and Kuju Plc for the entire period.

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 Ltd 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 30 September 2003.

                                 Reverse Acquisition     Normal acquisition          Impact of reverse
                                          Accounting             accounting     acquisition accounting
30 September  2003                     (as disclosed)
                                                   £                      £                          £

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 P&L and other                        391,446            (1,288,890)                  1,680,366
P&L Account                              (1,505,482)            (1,961,060)                    455,578

                                 Reverse Acquisition     Normal acquisition          Impact of reverse
                                          Accounting             accounting     acquisition accounting
30 September 2002                      (as disclosed)
                                                   £                      £                          £

Share Capital                              5,031,250              5,031,250                          -
Share Premium                                385,683                385,683                          -
Merger Reserve                           (3,369,355)              2,025,000                (5,394,355)
Opening P&L and other                        880,164                      -                    880,164
P&L Account                                   53,184              (296,321)                    349,505

3       Annual Financial Statements

The audited financial statements of Kuju PLC for the year ended 31 March 2003
have been filed with the Registrar of Companies and included an unqualified
audit report.

4         Administrative expenses

Administrative expenses are determined after charging a doubtful debt provision
of £2,932 (September 2002 £170,000, March 2003 £434,778).

5       Taxation

The taxation charge for the six months ended 30 September 2003 has been
calculated by applying the estimated effective tax rate for the year ending 31
March 2003.

6         Earnings/(loss) per ordinary share

The calculation of the (loss)/profit per share for the six months ended 30
September 2003 is based upon the (loss)/profit after tax of £(1,505,482)
(September 2002 profit £53,184, March 2003 loss £491,629) and the weighted
average number of ordinary 5p (previously 60p) shares in issue  of 8,385,417
(September 2002 7,779,480, March 2003 8,092,448). The calculation of the
weighted average number of shares assumes that the reverse acquisition occurred
on the first day of the comparative period.

Share options in existence at the period end do not dilute the earnings per
share due to the loss for the period.

7       Interim report

Copies of the interim report for the six months ended 30 September 2003 will be
sent to shareholders on
30 December 2003. Further copies will be available from the Registered Office.

8       Financial Information

The unaudited Profit and Loss Accounts, Balance Sheets and Cash Flow Statements
included within this Interim Statement do not constitute statutory accounts
within the meaning of Section 240 of the Companies Act 1985 and have not been
delivered to the Registrar of Companies.

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

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