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Kuju PLC (KUJ)

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Wednesday 28 December, 2005

Kuju PLC

Interim Results

Kuju PLC
28 December 2005


Kuju plc

Interim Results for the Six Months to 30 September 2005


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, creating and
developing new relationships with many of the larger publishers. The console
business has continued to build on this progress and the underlying business is
in a stronger position to grow.

I indicated in the Annual Statement that the loss of the "George A Romero
presents City of the Dead" title caused by HIP Interactive ceasing to trade in
July would impact negatively. The cost to the Group of the loss of this title
can now be confirmed at £308,000. The loss making division, Kuju Wireless
Publishing Ltd has now been disposed of. These two events have resulted in the
Group reporting a loss after tax for the half year of £487,763 (2004: loss
£174,102).


Progress

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

•   In collaboration with Sony Computer Entertainment Ltd, consolidated the
    good start made by the Brighton Studio with the signature and successful
    development of a major Sony funded project: EyeToyTM: Play 3.

•   Completed the development of the major first party Nintendo GameCube
    title: "Battalion Wars" at the London studio.

•   Continued to work on a major new PC title, Rail Simulator, with
    Electronic Arts, which is being funded in conjunction with Fund4Games.

•   Signed additional projects, details of which will be announced at a
    later date.

•   Continued to expand the Sheffield studio with the addition of two new
    projects.

•   Signed new development titles with Vivendi Universal Games  and Ubisoft
    Entertainment S.A. at the Surrey Studio.

•   Refocused the Mobile development studio to work for external publishers.

•   Establishing a structure where the 6 development studios operate more
    autonomously than before, giving greater flexibility in pitching for new 
    work and more accurate cost control.


Results

Turnover for the half year was £4,246,960 (2004: £3,144,169) which represents
growth of 35% over turnover in the first half of last year.

The Group made an operating loss of £519,580 (2004: loss £197,955) and a loss
after tax of £487,762 (2004: loss £174,102).

In July 2005 this year one of the Group's console game publishers, HIP
Interactive Inc., ceased operations and Ernst & Young Inc. were appointed as
interim receivers by the Canadian courts. Kuju was developing a licensed title -
"George A Romero presents City of the Dead" - for HIP.  To date the game has not
been resold. However, the group continues to seek alternative publishers to
develop the title.

The Group had cash deposits and cash investments of £73,009 (2004: £942,223) at
the half year. The Group deposits cash into a high interest yielding two-day
access AA rated treasury fund to maximise interest. The decrease in the cash
position was due in part to an increase in trade debtors reflecting delays in
cash collection, the losses on the cancelled HIP project and working capital
requirements to support growth.


Prospects

In December 2005 Kuju disposed of its wireless publishing business Kuju Wireless
Publishing Limited  to Finesse Publishing Limited ("Finesse"). The transaction
allows Kuju to focus on its profitable core console development activities. Kuju
will retain its mobile phone game development group which operates as one of
Kuju's autonomous studios.

In addition to the strength and quality of the Group's customers, a significant
indicator of the Group's future prospects is the unit sales of titles produced
by our studios. During the current year the Group released two titles which each
have the prospect of selling significant numbers of copies: Sony's EyeToyTM:
Play 3 and Nintendo's Battalion Wars.  Sales over the Christmas period will
determine precisely what impact these titles have on the second half of the
financial year and the Group's future prospects, however previews for both
titles are thus far encouraging.

Of particular significance is our development of the Rail Simulator project with
Electronic Arts. The Group commenced development of this title in September last
year through a newly formed Simulation studio.  Rail Simulator is being
co-funded by specialist third party games financier Fund4Games and the Group is
also investing in the development of this title. Through this mixture of self
and third party funding, the Group will be able to retain the IP in the
resulting product and its derivatives. In addition this funding mechanism has
allowed the Group to negotiate a higher share of product royalties than is
normal in more traditional advance/royalty funded structures.  The Group is
writing off its investment in the project as incurred and although this will
impact the bottom line during the development stages, the Directors believe that
this investment is justified by the significantly enhanced royalty share and
other benefits which may be derived from ownership of the Rail Simulator IP.

In general we believe that market conditions and opportunities for the Group's
PC & console studios are continuing to improve however our view of the market
remains cautious and completing deals can still take time.


Summary

It is my belief that the 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 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
23rd December 2005






Unaudited consolidated profit and loss account


                                    Six months       Six months         Year to
                                    to 30 Sept       to 30 Sept        31 March
                                          2005             2004            2005
                           Notes             £                £               £

Turnover                             4,246,960        3,144,169       7,693,461

Cost of Sales                        4,163,641        2,800,951       6,663,672
                                     _________        _________       _________

Gross profit                            83,319          343,218       1,029,789


Administrative expenses                602,899          541,173       1,175,921
                                     _________        _________       _________

Operating loss                        (519,580)        (197,955)       (146,132)


Net Interest                             1,707           23,853          43,509


                                     _________        _________       _________

Loss on ordinary 
activities before taxation            (517,873)        (174,102)       (102,623)

Tax on loss on ordinary 
activities                   4          30,110                -               -
                                     _________        _________       _________

Loss for the period                   (487,762)        (174,102)       (102,623)

Dividend                                     -                -               -
                                     _________        _________       _________

Loss transferred to reserves          (487,762)        (174,102)       (102,623)

                                      ========          =======        ========


Loss per share              5            (0.3)p           (1.1)p         (0.01)p



Unaudited consolidated balance sheet

                                    Six months       Six months         Year to
                                    to 30 Sept       to 30 Sept        31 March
                                          2005             2004            2005
                                             £                £               £
Assets employed


Fixed assets


Tangible assets                        391,867          378,863         422,186


Current assets


Stocks                                 13,497                            71,714
Debtors                             2,306,477         1,202,070       1,953,535
Investments                            34,538           832,489          11,191
Cash                                   38,471           109,734         263,387
                                     ________          ________        ________

                                    2,392,983         2,144,293       2,299,827

Creditors: amounts falling 
due within one year                (1,617,124)         (939,169)     (1,066,546)
                                     ________          ________        ________

Net current assets                    775,589         1,205,124       1,233,281
                                     ________          ________        ________
Total assets less current 
liabilities                         1,167,726         1,583,987       1,655,467
                                     ========          ========        ========

Financed by


Called-up share                     5,394,885        5,394,885        5,394,885
Share premium                         796,073          796,073          796,072
Other Reserves                          2,912            2,912            2,912
Merger Reserve                     (3,413,855)      (3,413,855)      (3,413,855)
Profit and loss account            (1,612,289)      (1,196,028)      (1,124,549)
                                   __________       __________       __________

Shareholders' funds - equity        1,167,726        1,583,987        1,655,467
                                   ==========       ==========        =========


Unaudited consolidated cash flow 
statement

                                   Six months      Six months           Year to
                                   to 30 Sept      to 30 Sept          31 March
                                         2005            2004              2005
                                            £               £                 £

Net cash (outflow)/inflow from operating
activities                             10,668        (575,423)       (1,175,691)

Returns on investments and servicing 
of finance

Interest received                       3,305          23,853            44,188


Interest paid                          (1,598)              -              (679)
                                   __________       __________       __________

Net cash inflow from returns on

investments and servicing of finance   (1,707)         23,853            43,509


Taxation                               30,110                                 -


Capital expenditure and financial 
investment


Purchase of tangible fixed assets    (132,627)       (309,631)         (508,090)
                                   __________       __________       __________

Net cash (outflow)/inflow before 
management of liquid resources       
and financing                         (90,142)       (862,201)       (1,640,272)


Management of liquid resources
(lncrease)/decrease in short term 
deposits                               11,191         (817506)           (3,792)

Financing


Issue of shares                             -         488,559           526,000


Fee on share issue                          -                           (37,440)
                                   __________       __________       __________

Net cash inflow from financing              -         488,559           488,559
                                   __________       __________       __________

Decrease)/increase in cash 
in the period                         (78,951)     (1,190,148)       (1,147,920)
                                    =========       =========         =========




Notes to the unaudited consolidated cash flow statemen

                                   Six months     Six months            Year to
                                   to 30 Sept     to 30 Sept           31 March
                                         2005           2004               2005
                                            £              £                  £

Reconciliation of operating loss to net cash
(outflow)/inflow from operating activities


Operating loss                       (519,580)      (197,955)         (146,132)
Depreciation of fixed assets          162,970        141,489           296,625
(Increase) / Decrease in stocks        58,217              -           (71,714)
(Increase) / Decrease in debtors     (352,942)     (285,549)        (1,037,014)
(Decrease) / Increase in creditors    662,003      (233,408)          (217,456)
                                   __________       __________       __________

Net cash (outflow)/inflow from 
operating activities                   10,668      (575,423)        (1,175,691)
                                   __________       __________       __________


Reconciliation of net cash flow 
to movement in net funds


(Decrease) / Increase in cash 
in the period                         (78,953)   (1,190,148)        (1,147,920)


Cash flow from movement in liquid 
resources                             (11,191)      817,506             (3,792)
                                   __________       __________       __________

Changes in net funds resulting 
from cash flows                       (90,144)     (372,642)        (1,151,712)

Net funds at the beginning of 
the period                            163,153     1,314,865          1,314,865
                                   __________       __________       __________

Net funds at the end of the period     73,009       942,223             163,153
                                    =========       =========         =========


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 2005.



The results for the 6 months ended 30 September 2005 and the comparatives for
the 6 months ended 30 September 2004 are both unaudited.



2 Basis of consolidation - Reverse Acquisition Accounting



0n 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 2005.


Kuju PLC

2 Basis of consolidation - Reverse Acquisition Accounting (Continued)




                             Reverse Acquisition          Normal Acquisition Impact of Reverse Acquisition
                       Accounting (as disclosed)                  Accounting                    Accounting
30 September 2005
                                              £                           £                             £
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 Reserves       (1,121,637)                 (4,598,698)                     3,477,061
P&L Account                            (487,740)                   (938,868)                       451,128
Goodwill                                                          1,510,667                    (1,510,667)



                            Reverse Acquisition          Normal Acquisition Impact of Reverse Acquisition
                       Accounting (as disclosed)                  Accounting                    Accounting
30 September 2004
                                              £                           £                             £
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 Reserves       (1,019,014)                 (3,593,820)                     2,574,806
P&L Account                            (174,012)                   (625,230)                       451,128
Goodwill                                      -                   2,412,921                   (2,412,921)


                            Reverse Acquisition          Normal Acquisition Impact of Reverse Acquisition
                      Accounting (as disclosed)                  Accounting                    Accounting
30 March 2005
                                             £                           £                             £
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 Reserves      (1,019,014)                 (3,593,820)                    2,574,806
P&L Account                           (102,623)                 (1,004,879)                      902,256
Goodwill                                     -                   1,961,793                    (1,961,793)




Kuju PLC




3 Annual Financial Statements


The audited financial statements of Kuju PLC for the year ended 31 March 2005
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 2005 has been
calculated by applying the estimated effective tax rate for the year ending 31
March 2005.



5 Earnings/(Ioss) per ordinary share


The calculation of the loss per share for the six months ended 30 September 2005
is based upon the loss after tax of £487,762 (September 2004: loss £174,102,
March 2005: loss £102,623) and the weighted average number of ordinary 5p shares
in issue of 15,419,694 (September 2004: 15,419,694 ordinary 5p, March 2005:
15,419,694 ordinary 5p.


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 2005 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.




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

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