Tavistock Regulatory News (TAVI)

29 Jun 2005 07:01

Bright Things plc29 June 2005 BRIGHT THINGS PLC ("Bright Things" or the "Company") 29 June 2005 Preliminary Results Bright Things PLC, the developer of an educational games console, Bubble, andassociated software for the pre-school market today announced Preliminaryresults:Business Highlights: •Development of games console, "Bubble" nearing completion - expected to be available in stores in the UK and Eire in the autumn •Content agreements signed with rights holders to create titles based on characters including Noddy, Balamory, Postman Pat, Bob the Builder and the Teletubbies •Six games expected to be available at launch date with a further six currently under development •UK and Eire distribution agreement in place with Bandai •Progress being made with distribution in Continental Europe and the US •Expenditure in line with expectations •Share placing in March 2005 raised £6 million to secure future development costs •Acquisition of PushPlay strengthens Bright Things' position with regards to patent applications and IP rights Dominic Wheatley, CEO, Bright Things, said: "This has been an incredibly busy year for Bright Things. We have created theproducts in line with the timeframe and investment cost expected. The initialresponse within the industry to Bubble and associated software based uponcharacters including Bob the Builder, Teletubbies, Noddy and Postman Pat, hasbeen extremely positive. We are pleased to have the distribution agreement withBandai in place for the UK and Eire and are progressing opportunities fordistribution in Europe and the US. "In the coming months we look forward to the retail launch of Bubble in the UKand Eire. In addition, our recent acquisition of PushPlay gives Bright Thingsthe opportunity to develop an enhanced product range and to plan for secondgeneration products." For further information please contact: Bright Things PLC 0870 351 7770Dominic Wheatley, CEOAdy Moores, CFOMatthew Tims, Publishing Director Giles Croot / Mark Antelme, Brunswick 020 7404 5959 Chairman's statement When I wrote to you at the time of our half year report in December 2004, I setout the progress we had made on a number of fronts. This included theconsiderable effort put into the creation of both the hardware unit (the gamesconsole) and the interactive software to accompany it. Today I am pleased toprovide further details of your company's development. The HardwareWe now have a name for the product - Bubble. After a successful pilot build of150 Bubbles at the factory in China in May, we are now in main production. Thepilot build has enabled us to refine the product and I am pleased to report thatthe firmware is working well and will shortly be finalised. Meanwhile workcontinues towards our goal of shrinking the electronics to ever smaller andcheaper components. A key element of the quality control work undertaken was on DVD compatability.We have now tested Bubble's compatability on the majority of DVD makes, and thiswork continues to ensure even higher compatability thresholds can be achieved. We expect Bubble to be in stores in the Autumn. The SoftwareOur plan was to create six games initially to accompany the launch of thehardware, with more to follow around Christmas and the New Year. So far we havefinalised: Balamory, Teletubbies, Tweenies and Fimbles. Noddy and Thomas (theTank Engine) and Friends were started shortly after the first four and areexpected to be finished in the next few weeks. TV rightsWe have further strengthened our catalogue of children's television show rightswith the agreement with HIT Entertainment. We have also agreed terms for severalshows from other TV companies and are now conducting contract discussions. Weare working towards a portfolio of approximately 20 titles, 10 of which will beavailable as games by the first quarter next year and the rest by Christmas2006. We plan to build on the consumer experience of the launch titles tomaximise the game play experience for our customers. MarketingAll packaging, catalogues, software packs, manuals and materials are nowcomplete. The marketing campaign has been drawn up for the Autumn, including PRand TV advertising. A Bubble magazine has been created which will be bundledwith every box and we have a series of trade press advertisements slated for theselling season. Distribution and BandaiBandai UK will act as our sole distributor in the UK and Eire. We have presentedBubble to key retail buyers over the last few months and we have all beenencouraged by the positive reaction we have received. At this stage we are notproposing to raise guidance on likely unit sales, but will continue to monitorthe position as we move towards launch. We are also in discussions with potential European and American distributorswith the aim of expanding sales next year. The launch in the UK will help ushone the product offering both in terms of the hardware and the software, andthe cost reduction efforts will pay dividends when we go to higher volumemanufacturing. Acquisition of PushPlayWe have recently completed the acquisition of PushPlay Interactive LLC. PushPlayis a US based company which was formed to design and licence a games consoleproduct, including methods capable of delivering interactive DVD content througha remote device. Given the similarities of our business aims and the advanceddevelopment stage of Bubble, we both concluded that our businesses would offer astronger, broader competitive offering if we worked together. The acquisition of PushPlay gives us a team with their own strong relationshipsin the US market. Looking ahead, we believe that the IP of the PushPlay team haspotential to be useful for new product development, based on the technology,including second iterations of Bubble. Furthermore, Push Play has identifiedother commercial uses of the technology that may open new revenue streams toBright Things. PeopleThe original plans have been met and the team at Bright Things have beenimpressive. I would like to thank not only our employees but also the manycontractors who have been so supportive. The developers had the difficult task of creating these games alongside thedevelopment of the actual hardware and firmware, and they have my considerableadmiration for their achievements. I would like to thank Louise Merlin our headproducer and Dominique Colonna-Cesari, Gigi Misra and Christine Webb for theirexcellent production work. They all came to us from the BBC and, like ShamsulRosunally and Nick Lowe, have been invaluable members of the team. We are indebted to our friends at Third Butcher who have been so professional inputting the marketing plans together. I warmly welcome the two founders of Push Play, Art and Craig Gravina. Theirengineering experience and the research they have done in the area ofinteractive DVD will hopefully prove an invaluable asset to Bright Things. OutlookI am pleased with the progress that the company has made and we are nowapproaching a most interesting period. Whilst the pre-school market iscompetitive, we believe we have created a first class product using much lovedchildrens' characters. With UK distribution in place for the Christmas periodand with progress being made in other territories, we remain confident about thefuture. We look forward to updating the market further in due course. Ian LivingstoneChairman28 June 2005 Operational and financial review Bright Things Plc was incorporated on 8 March 2004. On 16 April 2004 the entireshare capital of Bright Entertainment Limited (formerly Bright Things Limited)was acquired by Bright Things Plc. The consideration comprised shares in BrightThings Plc which were issued to the shareholders of Bright Entertainment Limitedon a share for share exchange basis. Bright Things Plc placed 5,000,000 new ordinary shares at a price of 90 penceper share and was admitted to trading on AIM on 30 April 2004. The companyraised £3,957,000 net of costs from this issue of ordinary shares. The shareholders of Bright Things Plc after the share for share exchange and theplacing of new ordinary shares comprised both the controlling managementshareholders, new institutional and private shareholders, and ex-BrightEntertainment Limited shareholders. Bright Things plc took advantage of the merger accounting relief provisionsunder s131 Companies Act 1985 when it issued equity shares on a share for sharebasis to acquire a 100% interest in Bright Entertainment Limited. Merger accounting has been applied and the effect that this has on theconsolidated accounts is as follows: (a) the consolidated results include those of the trading company BrightEntertainment Limited for the fifteen month period to 31 March 2005; (b) a merger reserve with a deficit of £858,000 is created being thedifference between the cost of the investment in Bright Entertainment Limited(as shown in Bright Things Plc's balance sheet of £1,000,000) and the nominalvalue of the share capital and share premium as shown in Bright EntertainmentLimited's balance sheet of £142,000. Bright Things Plc entered into an agreement with BBC Worldwide Limited on 7 May2004. This agreement included licensing rights to seven children's propertiesand the secondment of a dedicated software development management team from BBCWorldwide's award winning multi-media business. Part of the considerationpayable on this agreement was settled by the issue of 333,333 ordinary shares at90 pence each to BBC Worldwide Limited on 14 May 2004. In March 2005 an option holder exercised an option over 350,945 shares at 90pence per share. These ordinary shares commenced trading on AIM on 9 March 2005. Bright Things Plc placed 4,000,000 new ordinary shares at a price of £1.50 pershare. The shares were admitted to trading on AIM on 29 March 2005. The companyraised £5,737,000 net of costs from this issue of ordinary shares. Results for operations The group made an operating loss of £3,576,000 (2003 - £98,000) Research and development and administrative expenses relate to the fifteenmonths ended 31 March 2005; and these are the main components of the loss onordinary activities during the period. Key figures: Period from Year ended 1 January 2004 31 December to 31 March 2005 2003 £,000 £,000 Research and Development 2,266 26 ----------- ----------- Other administrative expenses 1,310 72 ----------- ----------- Net assets/(liabilities) 6,810 (120) ----------- ----------- Increase/(decrease) in cash 6,988 (19) ----------- ----------- Basic and diluted loss per share (25.1)p (1.0)p =========== =========== Research and Development All research and development expenditure has been charged to the profit and lossaccount as incurred. This includes all hardware development expenditure,software development expenditure on individual titles and advance royalties paidunder licensing arrangements. Hardware, £782,000 Hardware development is taking place using specialised engineering firmsprimarily based in California, USA. Software, £756,000 All products are developed through outsource contracts with third partydevelopers. As part of the BBC Worldwide contract, six members of staff from BBCWorldwide Limited were seconded to the company to work on the development of thesoftware, this team forms the internal management for all outsource contracts. Licensing expenditure, £728,000 Licensing expenditure includes payments made to acquire the rights to licensedproperties and to develop interactive DVD games which work on our hardwareplatform for commercial exploitation. Licensing expenditure includes £148,000relating to advances paid which are recoupable against future royalties payable.Licensing expenditure also includes £300,000 which was settled by the issue of333,333 new ordinary shares. Licence fees payable to organisations for use of their Intellectual Propertyover a number of years are charged to the profit and loss account on the basisof actual product sales. Management relies on forecasts of sales to determinethe relevant amortisation rate of the licence fee. Management regularly reviewsthe carrying value of such licences. Due to the uncertainty of not having any actual sales data to compare againstforecasts, management have taken the decision to amortise all licence feeexpenditure during the current period. Administrative expenses Other administrative costs comprise all the costs of running Bright Thing'soperating and corporate functions. This includes the staff, contractors andagencies together with associated costs employed in sales, marketing, PR,design, project management, production, IT, quality assurance, finance, legaland licensing. Total administration costs of £1,310,000 were incurred during theperiod. The company seeks to outsource as many administrative overheads as possible.External agencies and contractors have been used to assist in sales, marketingand PR roles. The company opened offices in London and Palo Alto, California, USA during theperiod. The board continues to monitor the organisation's general overhead. The boardconstantly seeks internal efficiencies as appropriate to the growth phase of thebusiness. Taxation No tax charge arises on the profit for the financial year. At 31 March 2005 theGroup has approximately £3.6 million of losses available to carry forward to setagainst future taxable profits, subject to agreement with the Inland Revenue.Earnings per share Basic loss per share of 25.1p (2003 loss of 1.0p) has increased due to thescaling up of the group's research and development activities. Working Capital The Group's operational cash position has been strengthened by the placing inMarch 2005. At 31 March 2005, the Group had cash of £6,991,000 (2003 £3,000).The Group has no debt. At the end of the financial year the group had netcurrent assets of £6,732,000 (2003 net current liabilities £130,000). The increase in Net Assets to £6,810,000 (2003 net liabilities £120,000) islargely due to the increase in cash resulting from the issue of new shares fromthe placing of ordinary shares in April 2004 and March 2005. Financial Instruments During the period, the Group's financial instruments, comprised cash and variousitems such as trade creditors that arise directly from operations. The mainpurpose of these financial instruments is to finance the Group's operations.After the period end the Group has entered into derivative transactions in theform of foreign currency contracts in order to manage the currency risk arisingfrom the Group's operations. The Group's policy is, and was throughout theperiod under review, not to trade in financial instruments. The main riskarising from the Group's financial instruments are liquidity risk and foreigncurrency risk. The Board reviews and agrees policies for managing each of theserisks on a regular basis. Liquidity risk The Group continually monitors the operational working capital requirements ofthe business. In particular the point where seasonal sales spikes requirefulfilling with shipments by sea from the Far East. The group continues toassess whether a trade finance line is appropriate taking into account thecurrent cash position of the company. Foreign currency risk At present the Group makes significant payments in US dollars for themanufacture of finished products and the development of new games. The Groupmanages the foreign currency exposure from this through forward contracts. Dueto the significant nature of this risk the Group has entered into US Dollarforward contracts based on forecast US Dollar requirements up to June 2006. Adrian MooresFinance Director Bright Things Plc Consolidated profit and loss account for the period ended 31 March 2005 Note Period from Year ended 1 January 2004 to 31 December 31 March 2005 2003 £,000 £,000 --------- ----------Research and Development (2,266) (26)Other administrative expenses (1,310) (72) --------- ---------- --------- ---------- Administrative expenses and operatingloss (3,576) (98) Interest receivable 74 - --------- ---------- ========= ==========Loss on ordinary activities before andafter taxation (3,502) (98)and retained profit ========= ========== Loss per shareBasic and diluted 2 (25.1)p (1.0)p ========= ========== All amounts relate to continuing activities.All recognised gains and losses are included in the profit and loss account. Bright Things Plc Consolidated balance sheet at 31 March 2005 31 March 31 March 31 December 31 December 2005 2005 2003 2003 £,000 £,000 £,000 £,000 Fixed assetsIntangible assets 7 9Tangible assets 71 1 -------- ---------- 78 10Current assetsDebtors 182 -Cash at bank and in hand 6,991 3 -------- ---------- 7,173 3 -------- ----------Creditors: amounts fallingdue (441) (133)within one year -------- ---------- Net currentassets/(liabilities) 6,732 (130) -------- ---------- Total assets less currentliabilities 6,810 (120) ======== ========== Capital and reservesCalled up share capital 1,968 1,000Share premium account 9,342 -Merger reserve (858) (980)Profit and loss account (3,642) (140) -------- ----------Shareholders' funds - equity 6,810 (120) ======== ========== Bright Things Plc annual report and accounts 2005 Consolidated cash flow statement for the period ended 31 March 2005 Note Period from Period from Year ended Year ended 1 January 2004 to 1 January 2004 to 31 December 31 December 31 March 2005 31 March 2005 2003 2003 £,000 £,000 £,000 £,000 Net cashoutflow fromoperating 3 (2,578) (18)activities Returns oninvestmentsandservicing offinanceInterestreceived 74 - -------- -------- Net cashinflow fromreturns on 74 -investmentand servicingof finance CapitalexpenditureandfinancialinvestmentPurchase oftangiblefixed (90) (1)assetsPurchase ofintangiblefixed assets (428) - -------- -------- -------- --------Cash outflowfrom capitalexpenditure (518) (1)and financialinvestment -------- -------- Cash outflowbeforemanagement (3,022) (19)of liquidresources andfinancing Management ofliquidresourcesIncrease infixed termdeposits (6,250) - -------- -------- Net cashoutflow frommanagement ofliquid (6,250) -resources(6,250) - FinancingNet proceedsfrom issue ofnew sharecapital 9,694 -Exercise ofshare options 316 - -------- --------Net cashinflow fromfinancing 10,010 - -------- --------Increase/(decrease) in cash 738 (19)in the year ======== ======== Notes 1. The announcement set out above does not constitute a full financial statementof the Company's affairs for the period ended 31 March 2005. The Company'sauditors have reported on the full accounts for the said year and haveaccompanied them with an unqualified report. The accounts have yet to bedelivered to the Registrar of Companies. The annual report and accounts will beposted to shareholders in due course. Copies of the annual report and accountswill be available for members of the public at the Company's registered office,7 Pilgrim Street, London, EC4V 6LB. The preliminary statement was approved bythe board on 28 June 2005. 2. Earnings per share Earnings per share has been calculated using the following: Earnings Weighted Earnings Weighted Period from average number Year ended average number 1 January 2004 of shares 31 December of shares to Period from Year ended Year ended 31 31 March 2005 1 January 2004 2003 December to 2003 31 March 2005 £,000 £,000 £,000 £,000 Basic anddiluted (3,502) 13,964 (98) 10,000 ========== ============ ========== ============ Earnings per ordinary share have been calculated using the weighted averagenumber of shares in issue during the relevant financial periods. The weightedaverage number of equity shares in issue, is 13,963,607 (2003 - 10,000,000) andthe earnings, being loss after tax is £3,502,000 (2003 - £98,000). 3. Reconciliation of operating loss to net cash inflow from operating activities Period from Year ended 1 January 2004 to 31 December 31 March 2005 2003 £,000 £,000 Operating loss (3,576) (98)Amortisation of intangibles 730 -Depreciation 20 1Increase in debtors (182) -Increase in creditors 430 79 ------------ ---------- Net cash inflow from operating activities (2,578) (18) ============ ========== 4. Reconciliation of net cash flow to movement in net funds Period from Year ended 1 January 2004 to 31 December 31 March 2005 2003 £,000 £,000 Increase/(decrease) in cash in the period 738 (98)Cash inflow from increase in liquidresources 6,250 - ------------ ---------- Movement in net funds during the period 6,988 (19) Net funds at 1 January 2004 3 22 ------------ ---------- Net funds at 31 March 2005 6,991 3 ============ ========== 5. Dividend The directors do not recommend the payment of a dividend in the period (2003£nil). 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