Kuju set to raise new funds for development R&D

British developer Kuju has announced plans for a share offering which is aimed at raising up to £750,000 of new funding, some of which will be used for research and development work related to next-generation consoles.

The company, which operates studio locations in Godalming (Surrey), London and Sheffield, plans to place 7,272,727 new ordinary shares at an offer price of 11 pence, with 1,036,363 of those (14.25 per cent) being purchased by Kuju's executive directors.

The money raised will be used for a number of purposes within the company, including supporting growth over the coming year, but a significant amount has been earmarked for R&D work on next generation consoles including Sony's PlayStation Portable and the new home console range, which is expected to arrive in 2006.

"The funds will be used to support growth over the next 12 months as well as next generation R&D," Kuju business development director Ian Baverstock told gi.biz. "Essentially as projects have got bigger and the number of projects has gone up we need more working capital."

Kuju is currently in the process of moving to a new business model outlined in its recent financial statements, whereby an increasing amount of its development work is being outsourced or undertaken by contractors rather than full-time staff - a model not dissimilar to that used in other creative industries.

However, according to Baverstock, the bulk of the company's next-generation R&D work will be done by existing staff. "The company is currently expanding," he stated, "but the R&D will mostly be undertaken by the existing Tools And Technology team. The team may get some new hires."

Kuju isn't the first UK developer to announce that it is moving ahead with early development work on the next generation of console hardware - with another major studio group, Climax, stating recently that it had upgraded its engine technology to take account of next-gen systems, and known to be one of the early recipients of the Apple PowerMac G5 based Xbox 2 development kits.

Baverstock is confident that the transition to the next generation of hardware will be beneficial for Kuju, despite concerns voiced by some commentators that the industry may repeat the mistake made at the last transition period by rushing to provide games for PS3-generation hardware and failing to provide for continued demand on the PS2-era platforms.

"We found the transition last time to be a huge opportunity for Kuju," he explained, "as we exploited the technical strengths of the company to grow while others struggled with the new hardware. Having said that, we are still seeing royalties from our later PS1 titles and there is clearly still an enormous market for games on the PS2 generation that will have every chance of making Kuju royalties for years to come."

Kuju also released a brief trading update this week, revealing that the company is operating in line with expectations, and is currently in negotiations for a number of new development projects which it hopes to announce shortly. The statement also noted that despite the termination of a development contract with THQ in January, the receipt of a termination payment and the success of its new outsourcing model should prevent this termination from having any significant effect on its current financial year.