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Warthog PLC (WHOG)


Thursday 13 December, 2001

Warthog PLC

Interim Results

Warthog PLC
13 December 2001

For immediate release

13th December 2001

                                PRESS RELEASE

                                 WARTHOG PLC

                          ('Warthog' or 'the Group')


                           ENDED 30 SEPTEMBER 2001


  * Turnover increased by 140% from £2.0 million (for 2n half of FY2001) to
    £4.8 million (post acquisition of Infogrames' Manchester development team
    and Loons)
  * Profit before tax for the period ahead of budget at £36,000 (2nd half of
    FY2001: £164,000). Majority of annual profits due to fall within the 2nd
    half of the year due to release schedule of games.
  * 4 games completed and further 19 under contract in development with
    leading publishers including THQ and Infogrames
  * The Group has completed its first two mobile games and have a further
    two in development, under contract. Positioned well for anticipated growth
    in mobile industry
  * Warthog announces today that Crave Entertainment Inc has extended its
    contract to include Playstation 2 and GameCube versions of Bounty Hunter.
  * The Group also announces that it has entered into the Quiz game genre
    with Quiz Game based on the leading Italian TV programme Quiz Show, for
    Digital Bros.
  * The Group has grown substantially to a total workforce of 171 at this
    half year stage, including the entire fifteen-man development team from
    Infogrames' Manchester studio.
  * Group well positioned to take advantage of next cycle of anticipated
    growth in video games industry with launches of Next Generation consoles

Commenting on the results, Ashley Hall, CEO of Warthog said:

'We are extremely pleased with our substantial growth in the last six months
and are continuing our strategy of reinvesting our profits to generate future
growth in the business. Warthog is well placed to exploit the upturn in the
video games industry, having already signed agreements to develop games on all
four of the next generation games consoles. We have also successfully
established ourselves as one of the leaders in mobile development within
Europe, with contracts with market leaders, Digital Bridges and THQ. We remain
confident that we will continue to achieve further successes in the industry
and out-perform our competitors. '


Ashley Hall                                             0161 608 1200

CEO Warthog Plc
Andrew Gething                                          0161 608 1200

Warthog plc

David Simonson/ Clare Maciocia                          0207 606 1244

Merlin Financial Communications

Chairman's Statement

It gives me great pleasure to report to you on a highly successful period of
growth for our company. Turnover was £4.8million for the half year (after the
'Loons' acquisition described below), representing an increase of 140% from
the 2nd half of last year (£2.0 million). In this half-year we have completed
four games and have a further nineteen under contract in development. In
addition we have completed our first two mobile games and have a further two
in development, under contract. We have an extensive and balanced portfolio of
games, which we expect to serve us well over the coming year.

Profits for the period were slightly ahead of our target at £36,000 compared
to £164,000 for the second half of last year. We achieved a better than
expected financial performance from core activities, due to developing games
within budget. Our planning for the full-year anticipates the majority of
annual profits falling within the second half of the year due to the release
schedule of our games. However, we now expect the publisher to defer the
launch of Rally Championship on the PlayStation 2 (PS2), to the first quarter
of our next financial year, which will to reduce expected profit levels for
the full year.

In an exciting period for our industry we are continuing our strategy of
reinvesting our profits to generate future growth in the business. Investment
is focused in three areas: the self-funding of two versions of our 'Rally
Championship' game; a step increase in the creation and prototyping of new
games; and investment in the mobile gaming sector. As per our strategy stated
at the time of our flotation on AIM, the Directors do not propose the payment
of a dividend.

Our team

Our people are our strength; they are the stars that create the magic; they
are responsible for our reputation and deserve great credit for our success.
During this period the team has grown from 78 to 122 full time employees,
supplemented by a further 49 full-time contractors, totalling 171 people at
the half year stage. They continue to create award winning games of the
highest quality, as well as responding well to the organisational changes
required due to our continuing expansion. Our staff retention rate continues
to be amongst the best in the industry

Changes in the strategy of some of our competitors have created the
opportunity for us to recruit further experienced personnel from well known
studios, including a fifteen-person development team from Infogrames'
Manchester Studio. This has enabled us to expand organically without the
growing pains experienced by some of our competitors. Our Vice Presidents of
Design, Art & Technology are collectively responsible for driving our quality
and have an overseeing brief across all development. In addition we appointed
a VP of Production, responsible for development standards across all of our
games. He has already started to use his extensive prior experience as studio
manager for Gremlin and Infogrames to improve our development processes.

Our technology

We are proud of our technology and we continue to increase the resources that
we focus in this area. Our technology represents a major differentiator for
the company and we now have advanced game engines which can be reused, and
dedicated competencies for each of the next generation consoles, PS2, Xbox,
GameCube (GC), and Game Boy Advance (GBA).

Specifically, new advanced 'rendering' capabilities (special visual effects)
allow us to exploit the increased power available from the new hardware
platforms, whilst character and real-time animation techniques are delivering
ever more realistic character movements. In addition, a new lip synchronising
process enables us to create realistic speech, thus overcoming a common
bug-bear of previous computer games.

The games market

The global games software market is forecast to show 15%-25% compound annual
growth from 2002-5 to reach $28bn, (source: Screendigest). The Next Generation
hardware platforms of GBA and GC from Nintendo and Xbox from Microsoft have
arrived. Xbox and GC were released in November in North America and the Xbox
is expected to be released in Europe on 14th March 2002. Meanwhile PS2 has
reportedly now sold over 20 million units worldwide, selling at almost double
the rate of the original Playstation when it first came to market. These
successful launches have confirmed the anticipated increase in market growth
for the games software market.

The emerging mobile games market

The mobile gaming market is starting to take shape with mobile operators
across Europe now reporting successful pilots and revenue generating games. I
am pleased to report we have successfully established ourselves as one of the
leaders in mobile development within Europe as confirmed by contracts from
market leaders, Digital Bridges and THQ. Our first game, 'Pirate Adventure',
is now live in North America and Europe where it is being promoted by Europe's
largest mobile portal, Genie.

Games completed

'Rally Championship Xtreme' was released in November 2001, with reported
advanced orders of over 300,000 units, and immediately received its first
'Award for Excellence' from the notoriously critical PCZone magazine. This is
our first driving game, successfully establishing Warthog's presence in the
popular driving game genre. We are self-funding the development of two further
versions of the game in return for a higher royalty percentage with the aim of
increasing our profitability.

In the children's cartoon genre we completed three Tiny Toons games 'Buster
saves the day' on Game Boy Color (GBC), 'Plucky's big adventure' on Play
Station One (PS1) and 'Wacky Stackers' our first GBA game, for publisher
SWING!. In the past year it has become clear that the Quiz genre appeals to a
wider audience than traditional gamers and hence we have entered this market
with 'Quiz Game' based on the leading Italian TV programme 'Quiz Show' under
contract for Digital Bros.

Games in Production

A further 2 versions of Rally Championship are in development on PS2 and GC.
Our publisher SCi has rescheduled the release of the PS2 version to maximise
the marketing phase and it is now scheduled for release in the first quarter
of our next financial year. This game is substantially complete and has
already received approval from Sony for its Alpha version.

Our success with 'Tiny Toons' resulted in us being awarded a further contract
with SWING! for 'Animaniacs'. Amblin Entertainment and Steven Spielberg
created this award winning children's cartoon series, in collaboration with
Warner Bros. This is Warthog's first GC contract and our first multi-player
single-cartridge, four-player GBA game. After the success of 'Tom & Jerry' for
publisher New Kid Co, they awarded us a contract for 'E.T. The
Extra-Terrestrial' for PS2. In March next year, Universal Pictures and Amblin
Entertainment will re-release the film 'E.T. The Extra-Terrestrial' in a new

Warthog acquired a full development team and their part-completed game 'Loons'
from major publisher Infogrames. As part of this deal we will complete the
game, a Warner Bros title, based on the 'Looney Tunes' characters, on a Next
Generation platform, for publication later in 2002. Our 'Bounty Hunter' game
is already receiving critical acclaim and the publisher, Crave, has extended
the contract to include versions for PS2 and GC platforms. 'Bounty Hunter' is
a first in the games industry as it combines walking and flying-around game
experiences in a single, seamless game environment.

I am delighted to announce our first contract with THQ Inc, one of the world's
largest publishers of games. They have commissioned Warthog to develop two
versions of the game, 'Battlebots' for PS2 and GC. 'Battlebots' pitches player
built robots against one another in peril-laden arenas, and is watched by 3.5
million viewers each week in the USA.

Warthog's 'X-men' title for Activision is progressing well and is due for
release towards the end of next year on PS2. Finally, we continue to invest in
the creation of new game prototypes, which we promote to publishers. This
investment is already bearing fruit and I hope to announce new projects, some
based on Warthog's Intellectual Property, in the new year.

Financial Review

Our figures for this period are significantly affected by the acquisition of
the Infogrames' Manchester development studio and part completed game 'Loons'.
This enhanced turnover by £1.9 million but had no attributable profit at the
half-year stage. Removing this effect, a turnover of £2.9 million is still
strong, at 43% up over the last six months of the previous year. Due to our
investments in this period our gross margins are 3% down on the same period
last year at 19%, although we expect these to improve in the second half of
the current year.

Despite our rapid growth, I am pleased that we have kept overheads in check,
bringing them to less than 19% of turnover (excluding 'Loony Tunes' results),
5% less than last years post flotation ratios. Our cash position remains
strong at £1.5 million. Our cash has been spent in three main areas; our trade
debt has increased in line with our increased trading activity; our investment
in contracted and self-funded game development has increased; and the cost of
the building work to our premises has yet to be offset by the planned increase
in our mortgage facility.


Although market conditions are somewhat subdued in many industries, we
consider (and most indicators agree) that our market will continue to expand
strongly over the foreseeable future. Progress in Warthog has been remarkable,
and is due to the industry leading combination of excellence in design and
development and outstanding management, which is strong at every level from
the boardroom to the project team. Growing a company at the rate we have is
never easy and I am delighted with our executives' controlled performance. We
have positioned ourselves as one of the leading games developers in Europe,
and progress in this direction continues.

Despite our size we are determined to maintain a creative and vibrant
development studio, and so ensure that we will continue to develop innovative
and compelling titles for our customers. The more and better games Warthog
produces, the higher our reputation rises and the more we become the developer
of choice for publishers. This virtuous circle thrives on Warthog being
successful financially as well as in games development. These phenomena are
expected to enable Warthog to create significant shareholder value over the
coming years, as we emerge as one of this dynamic industry's clear leaders in
games development.

We are now focusing our efforts on increasing our earnings and with a
portfolio approach we hope to deliver this without abandoning the prudent
approach to growth that has served us so well to-date. Our early successes in
the mobile arena look very promising and we believe we are well set to exploit
this market as it emerges. We have and will continue to assess acquisition
opportunities as part of our growth strategy.

Although the company will not receive royalty incomes from Rally Championship
this financial year, the outlook for royalties is very positive for the next
financial year, although they will always be hard to predict. We remain
consistently positive about the future of our company and of our abilities to
out-perform our competitors. We are equally confident that Warthog will in the
future be able to return healthy profits whilst continuing on its ambitious
growth path.

Iain Macdonald


PERIOD TO 30TH SEPTEMBER 2001                   Six months Six months      Year
                                                     ended      ended     ended
                                          Notes   30/09/01   31/03/01  31/03/01
                                                         £          £         £

TURNOVER                                      2  4,770,285  2,003,218 3,782,386
Cost of Sales                                    4,222,973  1,562,902 2,880,929
Gross profit                                       547,312    440,316   901,457
Other operating expenses                           544,498    339,458   606,896
OPERATING PROFIT                                     2,814    100,858   294,561
Profit on sale of fixed asset investments                0     33,800    33,800
Investment income                                   55,482     31,725    34,135
                                                    58,296    166,383   362,496
Interest payable                                    22,480     23,371    48,346
Amounts written off investments                          0    -20,500         0
Taxation                                      3     21,382     58,891   102,172
RETAINED PROFIT FOR THE YEAR                        14,434    104,621   211,978
Earnings per ordinary share - basic           4      0.03p                0.66p
Earnings per ordinary share - diluted                0.03p                0.65p

30TH SEPTEMBER 2001                                     Six months         Year
                                                             ended        ended
                                                 Notes    30/09/01     31/03/01
                                                                 £            £
Tangible assets                                          1,632,241    1,209,641
Investments                                                      0            0
                                                         1,632,241    1,209,641
Stock                                                    1,097,907      633,813
Debtors                                                  4,317,763      937,003
Cash at bank and in hand                                 1,489,283    3,560,409
                                                         6,904,953    5,131,225
CREDITORS: Amounts falling due within one year           2,803,141      606,209
NET CURRENT ASSETS/(LIABILITIES)                         4,101,812    4,525,016

TOTAL ASSETS LESS CURRENT LIABILITIES                    5,734,053    5,734,657
CREDITORS: Amounts falling due after more than one         544,034      550,034
                                                         5,190,019    5,184,623
Called up share capital                                    417,891      417,891
Share premium account                                    4,300,623    4,309,661
Merger reserve                                              52,463       52,463
Profit and loss account                                    419,042      404,608
SHAREFOLDERS FUNDS                                   5   5,190,019    5,184,623

CONSOLIDATED CASH FLOW STATEMENT               Six months Six months       Year
PERIOD TO 30TH SEPTEMBER 2001                       ended      ended      ended
                                                 30/09/01   31/03/01   31/03/01
                                                        £          £          £
Cash flow from operating activities            -1,525,208   -875,369   -821,265
Returns on investments and servicing of            33,002      8,354    -14,211
Taxation                                           -4,212    -49,765    -49,765
Capital expenditure and servicing of finance     -565,670   -221,999   -307,954
CASH OUTFLOW BEFORE FINANCING                  -2,062,088 -1,138,779 -1,193,195
Financing                                          -9,038  4,689,093  4,722,646
INCREASE/(DECREASE) IN CASH IN THE PERIOD      -2,071,126  3,550,314  3,529,451


1 The interim report was approved by the directors on 10th December 2001.

  This interim report, which is the responsibility of the directors, has not
  been audited but has been reviewed by our auditors Baker Tilly to the extent
  described in the review report.

  The interim report has been prepared using the accounting policies set out in
  the Company's statutory accounts for the year ended 31st March 2001.

2 Turnover and profit before taxation were all derived from the Group's
  principal activity.

3 The taxation charge for the period is analysed as
                                                        Six       Six      Year
                                                     months    months
                                                      ended     ended     ended
                                                   30/09/01  31/03/01  31/03/01
                                                          £         £         £

  UK Corporation Tax charge for the period           21,382    58,891   102,172

4 Earnings per share for the half year ended 30th September 2001 have been
  calculated using the number of shares in issue throughout the period of 
  41,873,973 (31/03/2001 - 31,913,249)

  The diluted earnings per share includes share options granted at less than
  fair value. The weighted average number of shares used is 46,455,776 
  (31/03/ 2001)

5 The movement in shareholders' funds is analysed as
                                                        Six       Six      Year
                                                     months    months
                                                      ended     ended     ended
                                                   30/09/01  31/03/01  31/03/01
                                                          £         £         £

  Opening shareholders' funds                     5,184,623   338,158   235,442
  Retained profit for the financial period           14,434   104,621   211,978
  Proceeds from issue of shares                         850 4,948,017 4,987,156
  Merger difference on consolidation                         -249,953  -249,953
  Bonus issue                                                  43,780
  Share premium                                      -9,888
                                                  5,190,019 5,184,623 5,184,623

6 The results for the year ended 31st March 2001 are abridged from the 2001
  annual report and accounts which received an unqualified auditors' report and 
  which have been filed with the Registrar of Companies

7 Reconciliation of operating profit to net cash flow
  from operating activities
                                                 Six months       Six      Year
                                                      ended     ended     ended
                                                   30/09/01  31/03/01  31/03/01
                                                          £         £         £

  Operating profit                                    2,814   100,858   294,561
  Depreciation                                      143,070    93,722   191,939
  Increase in debtors                            -3,380,760  -259,514  -550,797
  Increase in work in progress                     -464,094  -633,813  -633,813
  Increase in creditors                           2,173,762  -176,622  -123,155
  Cash flow from operating activities            -1,525,208  -875,369  -821,265


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