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Warthog PLC (WHOG)


Tuesday 17 December, 2002

Warthog PLC

Interim Results

Warthog PLC
17 December 2002

For immediate release
17th December 2002

                                 PRESS RELEASE

                                  WARTHOG PLC

                           ('Warthog' or 'the Group')


                            ENDED 30 SEPTEMBER 2002


  • Turnover increased by 13% from £4.8 million (for 1st half of FY2002) to
    £5.4 million (including the acquisition of 42-Bit AB).

  • Profit before tax increased significantly from £36,000 (for 1st half of
    FY2002) to £134,000.  As in previous years, the majority of annual profits
    are expected to fall within the 2nd half of the financial year.

  • Earnings per share increased from 0.03p (for 1st half of FY2002) to 0.18p

  • 4 console/PC games completed and further 22 under contract and in
    development with leading publishers.

  • 1 TV series and 6 mobile games completed.

  • Warthog's original game 'Mace Griffin Bounty Hunter' is to be published
    jointly by Vivendi Universal Games and Electronic Arts.

  • Acquired the Manchester-based game studio Zed Two Ltd.  An all share
    acquisition with a maximum consideration of £1.5m payable over 3 years.

  • Publishers' rescheduling of some premium titles, as well as an
    unfavourable US exchange rate has led to a prudent reduction in full year
    earnings forecasts.  Expected royalties will fall in next year's financial

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

'Warthog is becoming established as one of the leading games software developers
in Europe. These results demonstrate a good financial performance despite
challenging market conditions.  Our enhanced positioning within the industry is
giving us greater access to the leading publishers internationally and we are
confident of our ability to secure premium games contracts now and in the future
which will continue to drive earnings growth.'


Ashley Hall
CEO Warthog plc                                       0161 608 1200

Andrew Gething
Warthog plc                                           0161 608 1200

David Simonson/ Clare Maciocia
Merlin Financial                                      0207 606 1244

Warthog PLC, the interactive entertainment software group, today announced its
Interim Results for the six months ended 30 September 2002.

Chairman's & CEO's Statement

It gives me pleasure to report on an encouraging half-year for the group, once
again increasing turnover and profit and securing high profile licences with
top-tier publishers.  Our strategy is one of profitable growth and to maximise
our position within our expanding market, and I am pleased to report that we
have managed to maintain this growth and increase profitability during the
period. However, we are now predicting a number of delays in current contracts
and, as a result, our full year forecasts are likely to be behind current market

Our turnover has increased by 13% from £4.8 million (for the 1st half of FY2002)
to £5.4 million and  profit before tax increased by 272% from £36,000 (for the
1st half of FY2002) to £134,000. This is after amortisation of £68,000.   We
completed the acquisition of our Swedish office, 42-Bit AB, in April 2002.  The
above half-year figures include the contribution from this office.

We completed four console games in this half-year period and are working on a
further twenty two console and PC games.  We also  completed six mobile games
and had our first involvement with a television series.

In general, our industry is less exposed to the depressed economic climate than
many reliant on consumer spending.  Nevertheless, funding difficulties have
inhibited some publishers from placing as many projects as they would have
wished and the integration of timelines with other media has also led to delays
in contracts. Accordingly, we have experienced a number of delays, but I believe
that we are less exposed to these factors than are many smaller developers and
remain confident for the future.

Despite the delays we are making good progress in delivering on our strategy:
increasing turnover and profitability, engaging with top-line publishers, and
securing contracts with desirable and recognised brands.  We continue to invest
in our games engine technology, our organisational capability and in the
wireless and hand held markets.  As a result we are recognised as being well
positioned within the European/USA development community.

As reported in previous years our annual budgets anticipate the majority of
profits falling within the second half of the year. In line with our strategy
stated at the time of our flotation, the Directors do not propose the payment of
a dividend.

Our team

Games are becoming more complex, of a higher quality and are required within
ever decreasing timescales. Whilst we are constantly improving our technology
and productivity tools, the burden of these demands falls on our staff.  They
are constantly responding to these demands  and it is they who must take the
credit for the games that we deliver. The Board and management are unanimous in
our praise and appreciation for their tireless work and creativity.

Our office in Sweden has integrated well and has expanded to 30 people (from 24
on acquisition), and we are building the capability to run a second full
development team there.  At the half-year stage we have now a total workforce of
206, comprised of 183 employees and 23 subcontractors.

Our technology

We continue to invest in our technology and our main game engine, TUSK, is now
being deployed simultaneously across six projects.  We receive good plaudits for
its technical capabilities and we continue to invest in R & D to enhance its
functionality and scope.  We consider our proprietary technology to have great
value to the company and it has been the deciding factor in our selection for
several major projects.   We are increasingly standardising our own software '
tooling' and processes across projects as well as investing in proprietary asset
management software.

The games market

The games industry is progressing much in-line with predictions, growing at a
steady rate on the back of the Sony PlayStation 2 (PS2), Microsoft Xbox and
Nintendo Game Cube hardware.  The entry into the market by the supermarket
retailers as well as mass market advertising continues to grow the market and I
am confident that the industry will have an extremely successful Christmas.

The games market is becoming aligned with other mass market entertainment
products and consequently the release dates of some games are being scheduled
for simultaneous release with films and TV.  In many cases this leads to longer
tendering periods as more stages are involved; changes can occur during
production; and changes in release dates are required to align with other media
formats.  Whilst Warthog has suffered from the impact of these delays, we
welcome the alignment with mass media as this should result in increased games

Within the publishing community there has been a move towards reducing risk by
commissioning the larger developers, which have the capacity and advanced
technology to develop their titles.  Warthog will benefit from this trend in the
longer term in several ways: firstly our customers are favouring larger
developers including ourselves to work with, and secondly there are
opportunities to make acquisitions, sometimes of whole businesses, or else
teams and projects from the less fortunate developers overlooked by the
increasingly risk averse publishing community.

The emerging mobile and TV markets

The mobile entertainment market has taken longer to develop than we anticipated.
However, the arrival of phones equipped with large colour displays and Java
technology combined with mass advertising of mobile gaming products, further
encourages us that this is a credible market.  We have matched our investment
with the relatively slow emergence of this market, and we remain confident that
we are well placed to capture opportunities as the  market accelerates.

Games completed

The PS2 version of 'Rally Championship', with SCi, has been successfully
published, including being bundled with the PS2 in some stores in the UK, and we
are optimistic for its publication in the USA and Japan.  The Game Cube version
will be in the shops soon, following on from the PC version released previously.
The PC and PS2 versions have sold reasonably well and we await the sales on
the Game Cube version.

We delivered the first of the two Nintendo Game Boy Advance (GBA) games '
Animaniacs - Pinky and the Brain the Masterplan' based on the Warner Bros.
children's cartoon series, which is Warthog's first 2D platform game on GBA.

Last year we acquired the Manchester Studio development team from Infogrames,
together with a part built game 'Loons: The Fight for Fame', based on the Warner
Bros. Looney Tunes characters.  This acquisition has proved very successful,
with the new team delivering an excellent Xbox exclusive game.

'Robot Wars Extreme', for the BBC, uses cutting-edge, real-time 3D model
rendering and demonstrates advances in artificial intelligence for the hand-held
system.  The game was released in November 2002 and received an 'Excellent'
rating from EAGB Advance.

We contributed to our first TV show 'The Machine'.  This is the first
deliverable from our relationship with Multi Media Arts, and although
financially modest in impact we are pleased to have entered this market and look
forward to further developments in this field.

We delivered six mobile phone games including  'Moto GP' and 'Streetfighter'
across multiple platforms which included technical firsts with Java and I-mode.
At the beginning of this financial year we completed 'Quiz Show' on PlayStation
for Digital Bros.

Games in Production

'Animaniacs - Hollywood Hijinx' is being developed simultaneously for PS2, Game
Cube, Xbox and PC using the TUSK engine.  Animaniacs has pioneered a development
process for lip-synching that uses combined hand and automated animation to
deliver astonishing realism.   'Animaniacs - Lights Camera Action' on GBA is
being developed in our Swedish office and pioneered the development of a 21/2D
isometric engine.

Our children's game  'E.T. Return to the Green Planet', on the PS2 draws its
inspiration from the book  'The Storybook of the Green Planet' in which players
explore E.T.'s adventures on his home planet.

Our original title 'Mace Griffin Bounty HunterTM' continues to impress and is
now to be published by two of the world's largest game publishers; Vivendi
Universal Games for the PS2, Game Cube and Xbox versions and Electronic Arts for
PC.  This follows the acquisition, by Vivendi Universal Games, of the worldwide
console rights from Crave Entertainment.  'Mace Griffin Bounty HunterTM '
immerses players in a universe of huge corporations and futuristic gunslingers,
as the lead character, Mace Griffin, seamlessly moves between first-person
action and space flight combat, while unravelling a dangerous mystery.  Mace
Griffin himself has been redesigned to suit film and TV formats, and as a result
the game's release date, is now due in Q1/2003, rather than Q4/2002, as
previously anticipated.  Our confidence in this title continues to grow, and
with the marketing now in place for the game, we are optimistic for its success.

'Wolverine's Revenge', our X-men title, is being developed for Activision.  The
game will be released at the same time as the new X-men film, which is of mixed
benefit to Warthog as the release date for the film has now been put back to the
second quarter of 2003  instead of Q1/2003, as previously expected.  Its
development is progressing extremely well and we anticipate a high level of

Our title for  leading US publisher, THQ, 'BattleBot's' is approaching
completion and will be released in Q1 2003 on PS2 and Game Cube. This 1 to 4
player game pitches player-built robots fighting against each other in
gladiatorial battles which  take place in peril-laden arenas.  It features the
ability for users to build their own robots and then  pitch them in battles in
twelve urban locations  across the USA.  Up to four players can recreate the fun
of the TV series.

Our second rally game for SCi is to be endorsed by the World Rally Champion,
Richard Burns.   The development of this game, in our Swedish office, is
progressing well and is in part self-funded by Warthog with a  particularly
attractive royalty structure.  It is due to be released towards the end of 2003.

'X10' is a first-person-shooter game for the  Xbox, Game Cube and PS2.  Warthog
has signed the publishing rights of 'X10', which is our own intellectual
property, to be published by Conspiracy Entertainment. In 'X10' the player takes
the role of a soldier, who  must explore the world of 'X10' and tackle its
dangerous environment  of political intrigue, military threats and deadly

Financial Review

Earnings per share is six times greater than last year at 0.18p and profit
before tax almost four times that reported in the same period last year.
Turnover is up 13% on gross margins of 19%, against 11% last year. This includes
a significant amount of costs carried without contract at the half-year stage,
the benefit from which will flow into the second half. Signing new games and
prototypes, which are anticipated in the second half of the year, will have a
significant positive impact on margins as well as turnover.

Our intangible assets have increased by £0.6 million on last year following the
acquisition of our Swedish subsidiary in the period. This figure includes the
reasonably expected deferred element of the consideration and is being written
off over a prudent 5-year timespan.

Current assets are £1.3 million up on the same period last year. As anticipated,
work in progress has fallen £0.3 million as we have invoiced out our PS2 Rally
game.  However, it has pushed up our debtor figure, which is £1.4 million in
excess of the comparable figure last September. Contract work not yet billed has
remained relatively stable, rising by only £0.1 million. Other assets and
prepayments represent the other £0.1 million increase over last year.

Creditors have fallen £1.3 million on the same period last year, although
excluding the Infogrames transaction, they have increased £0.6 million. £0.4
million (78%) of the increase has principally come from unbilled sub-contractor
work, which tracks our invoicing to publishers, and development team bonuses,
which are paid only on the completion of the game. Corporation tax and social
security taxes are also up, accounting for the remaining £0.2 million (22%).
Trade creditors are almost unchanged at £0.4 million.

Our cash position was £1.2 million at the end of September. Cash outflow has
slowed from £2 million in the first six months of last year to £1.6 million in
the first six months of this year. Cash continues to be spent on capital
expenditure, self funded developments and contract work committed in advance of
billing. We expect the latter two elements to reverse in the second half of the
year as the current batch of developments come to conclusion.


One of the few disadvantages of working with top publishers and household brands
is that the timings for publicity are, quite correctly, tightly controlled, and
hence we are unable to announce significant contracts as often or early as we
would like to our investors.  As per our strategy we are engaging with top-line
publishers and securing contracts with desirable and recognised brands.
Accordingly, I am very excited about the projects we now have under development.

The funding difficulties of a number of smaller publishers  have led to some
delays in our existing contracts and in signing new contracts.  All the
royalties forecast for this financial year are now due to fall in the next
financial year due to the release dates of some high profile projects being
rescheduled.  This, together with an adverse US$ exchange rate, means that
Warthog will report full year earnings below market expectations.  However, our
present games line up, and the increasing trend of working with top tier
publishers on premium licences, provides us with an encouraging outlook for the

Warthog is well established as one of the leading development companies in
Europe and we are confident of our ability to secure premium contracts and
deliver great games and hence deliver increasing profitability for our

Iain Macdonald & Ashley Hall
Chairman                        CEO



                                         Six months   Six months         Year 
                                              ended        ended        ended 
                            Notes        09/30/2002   09/30/2001   03/31/2002 
                                                  £            £            £ 

  TURNOVER                      2         5,402,913    4,770,285    8,858,117 
  Cost of Sales                           4,367,792    4,222,973    7,266,913 
  Gross profit                            1,035,121      547,312    1,591,204 
  Other operating expenses                  841,115      544,498    1,142,358 
  Goodwill                                   64,350            0            0 

  OPERATING PROFIT                          129,657        2,814      448,846 
  Investment income                          24,557       55,482       77,536 
                                            154,214       58,296      526,382 
  Interest payable                           19,820       22,480       38,591 
  PROFIT ON ORDINARY                        134,394       35,816      487,791 
  ACTIVITIES BEFORE TAXATION                                                                    
  Taxation                      3            48,900       21,382      182,437 

  RETAINED PROFIT                            85,494       14,434      305,354 
  FOR THE PERIOD                                                              

  Earnings per                  4             0.18p        0.03p        0.72p 
  ordinary share  - basic                                                                     
  Earnings per                                0.16p        0.03p        0.64p 
  ordinary share  - diluted                                                                   

  WARTHOG PLC                                                                 
  CONSOLIDATED BALANCE SHEET                                                                       
  30TH SEPTEMBER 2002                                                         

                              Notes    09/30/2002    09/30/2001    03/31/2002 
                                                £             £             £ 
  FIXED ASSETS                                                                
  Intangible fixed assets                 579,195             0             0 
  Tangible assets                       2,249,583     1,632,241     1,988,025 
                                        2,828,778     1,632,241     1,988,025 
  CURRENT ASSETS                                                              
  Stock                                   829,312     1,097,907     1,470,342 
  Debtors                               5,956,954     4,317,763     3,649,522 
  Cash at bank and in hand              1,228,655     1,489,283     2,828,801 
                                        8,014,921     6,904,953     7,948,665 

  CREDITORS: Amounts                    1,489,860     2,803,141     1,306,618 
  falling due within one                                                      

  NET CURRENT ASSETS                    6,525,061     4,101,812     6,642,047 

  TOTAL ASSETS LESS                     9,353,839     5,734,053     8,630,072 
  CURRENT LIABILITIES                                                         

  CREDITORS: Amounts falling due        1,129,738       544,034     1,137,992 
  after more than one year                                                    

  PROVISIONS FOR                           25,011             0        25,011 
  LIABILITIES AND CHARGES                                                     
                                        8,199,090     5,190,019     7,467,069 

  CAPITAL AND RESERVES                                                        
  Called up share capital                 471,881       417,891       461,497 
  Contingent share capital        5       286,885             0             0 
  Share premium account                 6,592,405     4,300,623     6,243,147 
  Merger reserve                           52,463        52,463        52,463 
  Profit and loss account                 795,456       419,042       709,962 

  SHAREHOLDERS FUNDS              6     8,199,090     5,190,019     7,467,069 

  WARTHOG PLC                                                                 
  CONSOLIDATED CASH FLOW STATEMENT                                                                   
  PERIOD TO 30TH SEPTEMBER 2002                                                                        

                              Notes    Six months    Six months          Year 
                                            ended         ended         ended 
                                       09/30/2002    09/30/2001    03/31/2002 
                                                £             £             £ 

  Cash flow from operating        8    -1,192,614    -1,525,208    -2,145,012 

  Returns on investments                    4,737        33,002        38,945 
  and servicing of finance                                                    

  Taxation                                -26,637        -4,212      -105,862 

  Capital expenditure and                -489,068      -565,670    -1,096,774 
  servicing of finance                                                        

  CASH OUTFLOW BEFORE                  -1,703,582    -2,062,088    -3,308,703 

  Financing                                 39086        -9,038     2,577,095 

  DECREASE IN CASH IN THE              -1,664,496    -2,071,126      -731,608 


1 The interim report was approved by the directors on 28 November 2002. 

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 2002. 

2 Turnover and profit before taxation were all derived from the Group's
principal activity. 
Turnover and operating profit is split between continuing operations and
acquistions as follows:- 

                                       Six months    Six months          Year 
                                            ended         ended         ended 
                                       09/30/2002    09/30/2001    03/31/2002 
       Turnover                                 £             £             £ 

       Continuing operations            5,117,271     4,770,285     8,858,117 
       Acquisitions                       285,642             0             0 

                                        5,402,913     4,770,285     8,858,117 

       Operating profit                                                       
       Continuing operations              112,451         2,814       448,846 
       Acquisitions                        17,206             0             0 

                                          129,657         2,814       448,846 

3   The taxation charge for the period is analysed as follows:-                                                         

                                       Six months    Six months          Year 
                                            ended         ended         ended 
                                       09/30/2002    09/30/2001    03/31/2002 
                                                £             £             £ 

       UK Corporation Tax charge           48,900        21,382       157,426 
       for the period                                                         
       Deferred tax                             0             0        25,011 
                                           48,900        21,382       182,437 

4  Earnings per share for the half year ended 30th September 2002 have been
calculated using the number of shares in issue throughout the period of
47,208,842 (31/03/2002 - 46,149,573) 

The diluted earnings per share includes share options granted at less than
fair value. The weighted average number of shares used is 52,500,078
(31/03/2002 - 47,200,209) 

5  On 5 April 2002 the group acquired 42-Bit AB, a company registered in Sweden,
for an initial consideration of £413,115 satisfied by the issue of 1,059,269
ordinary shares of 1p each. Further shares to the value of £286,885 will to
be issued by April 2004 dependent on the retention of employees. 

6  The movement in shareholders' funds is analysed as follows: 

                                       Six months    Six months          Year 
                                            ended         ended         ended 
                                       09/30/2002    09/30/2001    03/31/2002 
                                                £             £             £ 

       Opening shareholders' funds      7,467,069     5,184,623     5,184,623 
       Retained profit for the             85,494        14,434       305,354 
       financial period                                                       

       Proceeds from issue of                   0           850     1,977,092 

       Merger difference on               359,642             0             0 

       Contingent shares                  286,885             0             0 
       Share premium                            0        -9,888             0 

                                        8,199,090     5,190,019     7,467,069 

7    The results for the year ended 31st March 2002 are abridged from the   
     2002 annual report and accounts which received an unqualified          
     auditors' report and which have been filed with the Registrar of       

8   Reconciliation of operating profit to net cash flow from operating activities 

                                        Six months   Six months          Year 
                                            ended         ended         ended 
                                       09/30/2002    09/30/2001    03/31/2002 
                                                £             £             £ 

  Operating profit                        129,657         2,814       448,846 
  Depreciation                            214,389       143,070       318,390 
  Increase in debtors                  -2,280,362    -3,380,760    -2,716,268 
  Increase /(decrease) in work in         641,030      -464,094      -836,529 
  Increase in creditors                   102,672     2,173,762       640,549 

  Cash flow from operating             -1,192,614    -1,525,208    -2,145,012 

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

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