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Kuju PLC (KUJ)

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Wednesday 22 December, 2004

Kuju PLC

Interim Results

Kuju PLC
22 December 2004

                                    Kuju plc

            Interim Results for the Six Months to 30 September 2004



Chairman's Statement

In the Annual statement I reported that the Group had made considerable progress
in the second half of last year, stabilising the business and creating and
developing new relationships with many of the larger publishers. The Group has
performed in line with market expectations resulting in a loss for the half year
of £174,102 (2003: loss £1,505,482).


Progress

The Group has continued to make progress in a number of areas so far this
financial year. We have:

  • Completed our Activision project which was the multi-player game in the
    recently released Call of Duty: Finest Hour;
  • Completed a funded prototype in Brighton for Sony Computer Entertainment
    Europe which was released as part of Eye Toy: Play 2;
  • Signed a follow on project with a major publisher for the Brighton studio;
  • Signed a new development agreement for the Action division in our Surrey
    studio based on a licensed property with Hip Interactive Inc.;
  • Completed in our Sheffield studio the Club Football and LMA Manager
    conversion projects for Codemasters both of which have now been released;
  • Completed the wireless version of Crash Twinsanity for Vodafone's recent
    consumer 3G launch;
  • Commenced work on a PlayStation Portable prototype;
  • Commenced early research and development for next generation console
    technology; and
  • Completed the restructuring of our Wireless division moving the rapidly
    growing publishing arm into a separate company, still wholly owned by the
    group.

We are continuing to invest modestly in the Wireless Publishing division as its
revenues continue to improve and the market continues to grow. There has
recently been significant corporate activity in the Wireless games sector and
market valuations appear to be rising. We are currently in the process of
strategically reviewing the optimal way to exploit this asset which is not shown
on the consolidated balance sheet.



Results

Turnover for the half year was £3,144,169 (2003: £1,859,975) which represents
growth of 4.6% over turnover in the second half of last year and growth of 69%
over the same period last year.

The Group made an operating loss of £197,955 (2003: loss £1,515,827) and a loss
after tax of £174,102 (2003: loss £1,505,482).

The loss for the six month period is as a result of delays in the signing of
certain new projects. These projects have been signed since the half year and we
currently believe that the full year results will be in line with market
expectations.

The Group had cash deposits and cash investments of £942,223 (2003: £433,779) at
the half year.  The Group deposits cash into a high interest yielding two-day
access AA rated treasury fund to maximise interest.



Prospects

We believe that interest in the Group's console business is continuing to
improve and we are seeing a rise in active project enquiries; these include the
first approaches for Next Generation titles and several expressions of interest
in titles for Sony's new PlayStation Portable. In particular, we believe that
the critical and commercial success of Call of Duty: Finest Hour will enhance
the company's reputation in the critical North American market.

However our view of the market remains cautious. The low value of the US Dollar
is adversely affecting competitiveness when dealing with the many US publishers
and signatures on deals still take time.

The Wireless Publishing business is operating in a rapidly evolving market.
Sales of individual titles continue to rise with the business having actively
secured third party intellectual properties to enhance this trend in the coming
months. Competition for access to the main operator portals has, however, become
stronger and the cost of these third party properties is also rising rapidly.



Summary

In the Annual Report and Accounts I re-iterated my belief that the best value
for shareholders in the medium term would be obtained by demonstrating our
technological and production competencies in the new console platforms emerging
in that time frame. Kuju is now seeing the start of this move to the next
generation of platforms and has begun the necessary research and development to
prepare for the new technology.

It is also my belief that this new generation of consoles will accelerate the
ongoing consolidation in the independent games development market. To date,
consolidation has tended mainly to have been through the exit from the market of
major competitors.

We are also seeing a rapidly evolving market for our Wireless Publishing
business. In light of recent corporate activity, we now believe that it is the
right time to re-evaluate this division and its future direction.

We look forward to enhancing our competitive position as we continue to seek to
win contracts for the current and next generation of platforms.

Dominic Wheatley

Chairman

22nd December 2004




Unaudited consolidated profit and loss account
                                                                Six months       Six months        Year to
                                                                to 30 Sept       to 30 Sept       31 March
                                                                      2004             2003           2004
                                                    Notes                £                £              £

Turnover                                                     3,144,169     1,859,975        4,867,081

Cost of Sales                                                2,800,951     2,888,816        5,397,188
                                                             ________      ________         ________
Gross profit/(loss)                                          343,218       (1,028,841)      (530,107)

Administrative expenses                                      541,173       486,986          (926,075)
                                                             ________      ________         ________

Operating loss                                               (197,955)     (1,515,827)      (1,456,182)

Net Interest                                                 23,853        10,345           11,405
                                                             ________      ________         ________

Loss on ordinary activities before taxation                  (174,102)     (1,505,482)      (1,444,777)

Tax on loss on ordinary activities                4          -             -                34,316
                                                             ________      ________         ________

Loss for the period                                          (174,102)     (1,505,482)      (1,410,461)

Dividend                                                     -             -                -
                                                             ________      ________         ________


Loss transferred to reserves                                 (174,102)     (1,505,482)      (1,410,461)

                                                             ________      ________         ________


Loss per share                                    5          (1.1)p        (17.9)p          (16.8)p





Unaudited consolidated balance sheet
                                                                    30 Sept         30 Sept        31 March
                                                                       2004            2003            2004
                                                                          £               £               £

Assets employed

Fixed assets
Tangible assets                                               378,863       296,847         210,721

Current assets
Debtors                                                       1,202,070     620,619         916,521
Investments                                                   832,489       214,331         14,983
Cash                                                          109,734       219,448         1,299,882
                                                              ________      ________        ________

                                                              2,144,293     1,054,398       2,231,386

Creditors: amounts falling due within one year                (939,169)     (441,737)       (1,446,577)
                                                              ________      ________        ________

Net current assets                                            1,205,124     612,661         784,809
                                                              ________      ________        ________

Total assets less current liabilities                         1,583,987     909,508         995,530

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

                                                              1,583,987     900,508         995,530

                                                              ________      ________        ________

Financed by
Called-up share capital                                       5,394,885     5,031,250       5,031,250
Share premium                                                 796,073       397,149         397,149
Other Reserves                                                2,912         2,912           2,912
Merger Reserve                                                (3,413,855)   (3,413,855)     (3,413,855)
Profit and loss account                                       (1,196,028)   (1,116,948)     (1,021,926)
                                                              ________      ________        ________

Shareholders' funds - equity                                  1,583,987     900,508         995,530
                                                              ________      ________        ________




Unaudited consolidated cash flow statement
                                                                  Six months    Six months       Year to
                                                                  to 30 Sept    to 30 Sept      31 March
                                                                        2004          2003          2004
                                                                           £             £             £
Net cash (outflow)/inflow from operating
activities                                                     (575,423)     (323,769)     328,394

Returns on investments and servicing of finance
     Interest received                                         23,853        10,345        12,339
     Interest paid                                             -             -             (934)
                                                               ________      ________      ________
Net cash inflow from returns on
investments and servicing of finance                           23,853        10,345        11,405

Taxation                                                       -             130,826       133,575

Capital expenditure and financial investment
     Purchase of tangible fixed assets                         (309,631)     (76,883)      (125,769)
                                                               ________      ________      ________
Net cash (outflow)/inflow before management of
liquid resources and financing                                 (861,201)     (259,481)     347,605
                                                               

Management of liquid resources
     (Increase)/decrease in short term deposits                (817,506)     540,830       740,178

Financing
     Issue of shares                                           488,559       -             -
     Receipt of funds in respect of post         
     year end share placing                                    -             -             274,000
                                                               ________      ________      ________

Net cash inflow from financing                                 488,559       -             274,000

                                                               ________      ________      ________


(Decrease)/increase in cash in the period                      (1,190,148)   281,349       1,361,783

                                                               ________      ________      ________




Notes to the unaudited consolidated cash flow statement
                                                                    Six months    Six months     Year to
                                                                    to 30 Sept    to 30 Sept    31 March
                                                                          2004          2003        2004
                                                                             £             £           £
           Reconciliation of operating loss to net
           cash (outflow)/inflow from operating
           activities
           Operating loss                                       (197,955)      (1,515,827)   (1,456,182)
           Depreciation of fixed assets                         141,489        145,390       280,402
           Decrease in stocks                                   -              71,710        71,710
           (Increase)/decrease in debtors                       (285,549)      1,233,305     937,403
           (Decrease)/increase in creditors                     (233,408)      (258,347)     495,061
                                                                ________       ________      ________

           Net cash (outflow)/inflow from operating
           activities                                           (575,423)      (323,769)     328,394
                                                                ________       ________      ________



           Reconciliation of net cash flow to movement 
           in net funds

           (Decrease)/increase in cash in the period            (1,190,148)   281,349        1,361,783
           Cash flow from movement in liquid resources          817,506       (540,830)      (740,178)
                                                                ________      ________       ________

           Changes in net funds resulting from
           cash flows                                           (372,642)     (259,481)      621,605

           Net funds at the beginning of the period             1,314,865     693,260        693,260
                                                                ________      ________       ________

           Net funds at the end of the period                   942,223       433,779        1,314,865
                                                                ________      ________       ________




KUJU PLC


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 2004.

The results for the 6 months ended 30 September 2004 and the comparatives for
the 6 months ended 30 September 2003 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).

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 30 September 2004.



2       Basis of consolidation - Reverse Acquisition Accounting (Continued)


                                 Reverse Acquisition     Normal acquisition          Impact of reverse
30 September  2004         Accounting (as disclosed)             accounting     acquisition accounting

Share Capital                              5,394,855              5,394,855                          -
Share Premium                                796,073                796,073                          -
Merger Reserve                           (3,413,855)              2,025,000                (5,438,855)
Opening P&L and other                    (1,019,014)            (3,593,820)                  2,574,806
Reserves
P&L Account                                (174,102)              (625,230)                    451,128
Goodwill                                           -              2,412,921                (2,412,921)


                                 Reverse Acquisition     Normal acquisition          Impact of reverse
30 September 2003          Accounting (as disclosed)             accounting     acquisition 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 P&L and other                        391,447            (1,288,890)                  1,680,367
Reserves
P&L Account                              (1,505,482)            (1,961,060)                    455,578
Goodwill                                           -              3,302,911                (3,302,911)


                                 Reverse Acquisition     Normal acquisition          Impact of reverse
31 March 2004              Accounting (as disclosed)             accounting     acquisition 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 P&L and other
Reserves                                     391,447            (1,288,890)                  1,680,337
P&L Account                              (1,410,461)            (2,304,930)                  (894,469)
Goodwill                                           -              2,864,049                  2,864,049


3       Annual Financial Statements

The audited financial statements of Kuju PLC for the year ended 31 March 2004
have been filed with the Registrar of Companies and included an unqualified
audit report.

4       Taxation

The taxation charge for the six months ended 30 September 2004 has been
calculated by applying the estimated effective tax rate for the year ending 31
March 2004.

5       Earnings/(loss) per ordinary share

The calculation of the loss per share for the six months ended 30 September 2004
is based upon the loss after tax of £174,102 (September 2003 loss £1,505,482,
March 2004 loss £1,410,461) and the weighted average number of ordinary 5p
shares in issue of 15,419,694 (September 2003 8,385,417 ordinary 60p, March 2004
8,385,417 ordinary 5p). The calculation of the weighted average number of shares
for 2003 assumes that the reverse acquisition occurred on the first day of the
period.

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


6       Interim report

Copies of the interim report for the six months ended 30 September 2004 will be
sent to shareholders shortly. Further copies will be available from the
Registered Office.

7       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.


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