11 Jun 2008 07:00
11 June 2008
Imaginatik Plc
("Imaginatik" or the "Company")
Preliminary Results for the year ended 31 March 2008
Imaginatik plc (AIM: IMTK), a leading provider of collaborative innovation and problem-solving software and processes, announces its Preliminary Results for the year ended 31 March 2008.
Financial Highlights
Turnover up 27% to £3.16m (2007: £2.49m)
Operating loss reduced to £0.13m (2007: Operating loss £1.04m)
Operating profit in H2 of £0.34m (H2 2007: Operating loss £1.20m)
Annual recurring revenues up 28% to £1.81m (2007: £1.41m)
Cash and cash equivalents of £1.09m (2007: £0.86m)
Corporate Highlights
Continued growth of blue chip customer base with the addition of customers in high technology, financial services, consumer goods and aerospace
Signing of global reselling agreement with IBM
Strategic equity investment from Pfizer Inc of £0.5m
Release of version 8 of Idea Central in September 2007
Named as Technology Pioneer 2008 by the World Economic Forum
Chief Executive, Mark Turrell commented: "After our first full year as a public company we are in better shape than ever. In the last year we have developed the business to make it more efficient, better at selling and more scalable by focusing on becoming the software provider of choice for the innovation industry and by building a partner assisted sales operation. As a result, in the second half year I am pleased to report that we have delivered our first operating profit of £0.34m on revenues of £2.0m.
"We look forward to the continued acquisition of new annual fee paying clients, helping us further build on our recurring revenue base. We believe we are now well positioned to maintain the current momentum and to build on the opportunity in front of us."
For further information please contact:
| Imaginatik plc | Tel: 020 7917 2975 |
| Mark Turrell, CEO / Shawn Taylor, CFO | |
| WH Ireland | Tel: 0121 265 6330 |
| Tim Cofman / Katy Birkin | |
| ICIS | Tel: 020 7651 8688 |
| Tom Moriarty / Caroline Evans-Jones |
Chairman's Statement
I am pleased to report that the year ended 31 March 2008 has been a successful year for the Company, with a more focused operation and an enhanced product set. I am particularly pleased that we were able to meet our challenging profit target in the second half of the financial year. This is a great credit to our employees and the merits of our software and services.
We have continued to grow our customer base, adding nine new customers on annual licences, and importantly increasing our footprint into several of our existing customers including Cargill, Pfizer, Solvay and Whirlpool.
Of particular note has been Pfizer's endorsement of our technology. In February 2008 we announced the equity investment by Pfizer of £500,000 in Imaginatik to support further development of our Idea Central software and the purchase of an additional 10,000 new licences of Idea Central, bringing the total number of subscribers within Pfizer to 25,400. We are immensely proud of what is proving to be an excellent reference site for us in the pharmaceutical industry.
The global reseller agreement signed with IBM in August 2007 is yet another endorsement from one of the world's leading companies of the power of our software. This has already resulted in solid revenue generation with business from market leading companies in retail, pharmaceuticals and investment banking. The agreement is providing a growing number of well-qualified leads from what is an expanding geographical footprint, and we will continue to develop the relationship in line with our drive to increase sales through our partners.
Once again this year our expertise has been recognised through several prestigious awards, in particular we were delighted to be named Technology Pioneer 2008 by the World Economic Forum, a clear demonstration that we have cutting edge enterprise software that has universal application across all industries, placing Imaginatik at the forefront of the collaborative innovation industry.
I would like to thank our employees and customers around the world for their continued support, and look forward to another successful year of growth as we endeavour to capitalise on our increased scalability, enhanced partner reach and the continuing development of the innovation market.
Howard Marshall
Non-Executive Chairman
11 June 2008
Chief Executive's Review
Imaginatik's first full year as a public company has seen the management team focus on further developing the operations of the Company and the manner in which it interacts with both customers and partners in order to best capitalise on the fast evolving innovation marketplace.
During the year we focused our efforts on securing larger multi-year contracts, winning a number of new clients in the period in industries covering aerospace, high technology, financial services, consumer goods and healthcare. We achieved further penetration into a number of existing clients including Cargill, Pfizer, Solvay and Whirlpool. As a result, our annual recurring revenue base has increased to £1.81m, a 28% increase on a year ago, covering over 50% of our 2008 cost base.
Strategic Investment
A key development in the year was the strategic investment in Imaginatik by Pfizer, taking a 6.45% stake in the enlarged share capital of the Company for an investment of £500,000. This funding further strengthened the Company's balance sheet providing capital for our company at a critical growth phase enabling us to expand our enterprise social networking and collaboration technology and strengthen the sales team ahead of FY09 (the fiinancial year ended 31 March 2009).
Pfizer is a long-standing customer of Imaginatik which derives significant benefit from the use of our system. The investment represents an excellent endorsement of our technology and overall business vision.
Financial Review
Turnover for the year ended 31 March 2008 grew by 27% to £3.16m (2007: £2.49m). This was driven by increased sales into the existing customer base and the further sign up of additional blue chip clients, several of which have been converted from pilot programmes. Of the £3.16m revenue this year, £1.7m has been up-sell business and recurring revenues, an increase of 41% (2007: £1.2m). This provides Imaginatik with much greater stability and revenue visibility going into FY09. The revenue split between geographies was 83% USA and 17% Rest of World, reflecting a strategy of balancing revenues (2007: USA 94%, Rest of World 6%), although the USA is likely to remain our most important revenue generating market.
Imaginatik has maintained a tight control of costs over the financial year and total operational costs excluding the exceptional item from 2007 have increased only 13% to £3.29m (2007: £2.92m). This has helped the Company to narrow the loss on ordinary activities for the year to £140,000 (2007: £518,000, excluding an exceptional item of £611,000 which was in connection with the issue of shares to key members of the management team upon IPO).
Revenues in the second half year improved significantly on the first half year, following the improved performance of the sales team and higher second half weighting of annual renewals. This weighting of revenues towards the second half of the financial year is likely to be repeated in FY09. The second half year generated over £2.0m in revenues and with our cost base tightly contained we were able to generate an operating profit of over £0.34m at a net operating margin of 16%.
Cash and cash equivalents at the year end was £1.09m (2007: £0.86m) and net total equity attributable to shareholders has risen to £1.06m (2007: £0.61m).
Sales and marketing
As our software becomes more mainstream we are seeing more new business derived from our reach into existing clients. In this financial year the level of our up-sell business increased significantly on last year. This demonstrates the increasing value being associated with Idea Central by our customers. Up-sell into the existing client base is therefore a key focus for our sales team, as we believe the opportunities to extend our reach within our customers, most of whom are multi-national organisations, to be significant.
Idea Central continues to be available as Software as a Service (SaaS), in line with the latest trends in enterprise software provision. This model is very much in demand from within the industry, particularly given the current macro-economic climate, since there is a tighter relationship between usage and cost and is an efficient delivery mechanism for the provider.
The sales team are oriented towards software sales and working with partners with a reduced emphasis on innovation strategy consulting. We have worked to recruit top quality management to run the group, and invested in process technology to support the sales activity on a global basis.
As evidence of the increased appetite for our technology we have seen a marked increase in the number of people attending our regional and national User Groups. The last one was held in Boston in April 2008 with approximately 125 attendees from a broad mix of clients, partners and prospects.
With increased focus, more customers and a greater awareness of the value proposition offered to our clients, in the last year we have seen a significant improvement in average price per seat for new subscription clients. In the year we have added a further nine new clients on an annual subscription, the same number as the previous year, but at double the value being £750,000 of annualised revenue versus approximately £400,000 last year.
We signed 23 new pilot programmes during the year, a 15% increase on last year with eight pilots moving to an annual licence (2007: 6) and 16 ongoing at the end of the period (FY07: 15). In line with our increased average price per seat these new contracts are being signed at significantly higher values than previously.
Customer case studies
Idea Central continues to deliver significant results for some of the world's leading organisations. Some examples of projects implemented over the year through the use of our software are as follows;
Pfizer - has run over 100 projects or campaigns using Idea Central across R&D and most recently in sales, marketing and IT. Some of the most successful uses of Imaginatik's software include the identification of Phase 3 Starts, leading to clinical trials, which yielded over 100 development candidates, and one funded project with a net present value of $100 million; and external "open innovation" use of Idea Central, run in partnership with the Scripps Institute to route scientific Scripps-generated documents for review by Pfizer scientists across R&D and to track and manage outcomes internally and with their research partner.
Wal-Mart - We worked with our strategic partner, IBM, to deliver a Sustainability campaign for Wal-Mart called "Tap into our Power". The goal was to generate $5 million cost saving ideas to reduce electricity consumption in US stores through the implementation of associate ideas. More than 5,000 associates were involved and hundreds of cost and energy saving ideas were identified and are being implemented, with savings of over $30 million either realised or underway.
Weyerhaeuser - Imaginatik implemented Idea Central across the iLevel division of this Fortune 100 Company to support process improvements, safety, revenue generation and new product development. The internal team ran 29 events with over 90% of locations participating. The system helped implement over 500 major process innovations, delivering $22.5 million in identifiable bottom line returns, and created and launched four new products in Q1 2008.
Partnering and Reselling
We continue to work with various partners and in line with our stated strategy of growing this channel to market the partner channel revenues more than double those achieved in 2007.
We are experiencing good progress with IBM where collaborative software technologies are seen as an exciting growth area for the future. We are seeing our footprint expand into additional divisions within IBM and other regions, including Europe and Asia Pacific.
During the course of the year we have identified and have contracted business through further consulting alliance partners including CSC in the UK and TRD in Norway. Both have begun generating revenues for the Company whilst still in the early stages of development.
We have established a certification programme for potential partners. This will help ensure that all partners reach a high level of competence in the selling and the implementation of our software and should enhance our market penetration.
Market and Competition
The awareness of the concept of collaborative innovation is higher than it has ever been. It is now more generally accepted that innovation from within is an activity that organisations should be actively pursuing. A greater understanding of collaborative thinking within businesses has been driven by a greater interest in consumer collaborative behaviour or 'social networking' as it is often called. Increasingly this whole area of idea management is being referred to as enterprise social networking. Industry research houses are anticipating significant growth in this area and, being at the forefront of this industry, as evidenced by the awards we have received in the year, combined with our continued sales and market drive, we expect to be one of the beneficiaries of this expansion in demand.
During the year, Imaginatik's market credibility has been reinforced by significant industry acclaim, with Imaginatik receiving three major accolades from influential global organisations. In January 2008 the World Economic Forum named Imaginatik a "Technology Pioneer 2008," one of only three UK companies to receive the award, providing us with a wonderful showcase in an environment that is full of the world's business leaders. Also in January, Imaginatik's Idea Central software was named one of three finalists in the "Best Industry Solution" category at the IBM Lotus Awards 2008. In February 2008, Imaginatik was selected as a 2008 FiReStarter company by the Strategic News Service, host of the influential Future in Review (FiRe) technology conference.
Product and Services
During the year we have invested in the further development of Idea Central with the release of Version 8.0 in September 2007. This supported more social networking activities and was in line with industry trends for Enterprise Web 2.0 software based on open standards. This has been followed by the release of 8.2 in April 2008, one of the key themes of which is to provide sector specific functionality that better aligns Idea Central towards the challenges faced by our customers in their various industries. These upgrades have been welcomed by customers and we will continue to invest in this way to ensure the product is oriented correctly for the evolving market.
Outlook
After our first full year as a public company we are in better shape than ever. In the last year we have developed the business to make it more efficient, better at selling and more scalable by focusing on becoming the software provider of choice for the innovation industry and by building a partner assisted sales operation. As a result, in the second half year I am pleased to report that we have delivered our first operating profit of £0.34m on revenues of £2.0m.
Our goal is for Idea Central to become a ubiquitous asset within organisations designed to enable contribution and participation by its biggest asset, its people. We believe not only is Idea Central the best way to create and drive a culture of open innovation, it allows for inclusion and individual recognition in a business culture that increasingly values the economic advantages of being a democratic business.
We can look forward to the continued acquisition of new annual fee paying clients, helping us further build on our recurring revenue base. We believe we are now well positioned to maintain the current momentum and to build on the opportunities in front of us.
Mark Turrell
Chief Executive
11 June 2008
Consolidated income statement for the year ended 31 March 2008
| 2008 | 2007 | ||
| £ | £ | ||
| Revenue | 3,159,002 | 2,491,708 | |
| Staff costs | (2,029,927) | (2,305,634) | |
| Depreciation written off tangible non-current assets | (56,820) | (18,626) | |
| Amortisation written off intangible non-current assets | (33,992) | - | |
| Other external charges | (172,407) | (176,664) | |
| Other operating charges | (996,404) | (1,035,281) | |
| Operating loss before financing and taxation | (130,548) | (1,044,497) | |
| Finance costs | (9,099) | (84,479) | |
| Loss on ordinary activities before taxation | (139,647) | (1,128,976) | |
| Taxation expense | - | - | |
| Loss on ordinary activities for the year | (139,647) | (1,128,976) | |
| Loss per share: basic and diluted (note 4) | (0.12p) | (2.43p) |
All of the activities of the group are classed as continuing.
Consolidated statement of changes in equity for the year ended 31 March 2008
|
| Share capital | Share premium | Share option reserve | Retained earnings | Total |
| £ | £ | £ | £ | £ | |
| Loss for the period | - | - | - | (139,647) | (139,647) |
| Share option charge | - | - | 77,015 | - | 77,015 |
| Other share-based payments | - | - | - | 21,841 | 21,841 |
| - | - | 77,015 | (117,806) | (40,791) | |
| Shares issued | 5,306 | 480,023 | - | - | 485,329 |
| Balance at 1 April 2007 | 72,876 | 1,690,235 | 26,500 | (1,178,128) | 611,483 |
| Balance at 31 March 2008 | 78,182 | 2,170,258 | 103,515 | (1,295,934) | 1,056,021 |
Consolidated balance sheet at 31 March 2008
| 2008 | 2007 | |||
| £ | £ | £ | £ | |
| ASSETS | ||||
| Non-current assets | ||||
| Property, plant and equipment | 59,935 | 91,991 | ||
| Intangible assets | 99,626 | 207,510 | ||
| 159,561 | 299,501 | |||
| Current assets | ||||
| Trade and other receivables | 885,486 | 797,993 | ||
| Cash and cash equivalents | 1,090,490 | 862,446 | ||
| 1,975,976 | 1,660,439 | |||
| Total assets | 2,135,537 | 1,959,940 | ||
| EQUITY AND LIABILITIES | ||||
| Equity | ||||
| Issued capital (note 5) | 78,182 | 72,876 | ||
| Share premium | 2,170,258 | 1,690,235 | ||
| Share option reserve | 103,515 | 26,500 | ||
| Retained earnings | (1,295,934) | (1,178,128) | ||
| Total equity attributable to equity holders of the parent | 1,056,021 | 611,483 | ||
| Liabilities | ||||
| Non-current liabilities | ||||
| Interest-bearing loans and borrowings | 17,184 | 39,057 | ||
| 17,184 | 39,057 | |||
| Current liabilities | ||||
| Interest-bearing loans and borrowings | 27,051 | 27,051 | ||
| Trade and other payables | 1,035,281 | 1,282,349 | ||
|
| ||||
| 1,062,332 | 1,309,400 | |||
| Total liabilities | 1,079,516 | 1,348,457 | ||
| Total equity and liabilities | 2,135,537 | 1,959,940 | ||
Consolidated cash flow statement for the year ended 31 March 2008
| 2008 | 2007 | |||
| £ | £ | £ | £ | |
| Cash flows from operating activities (note 6) | (210,364) | (475,614) | ||
| Investing activities | ||||
| Acquisition of property, plant and equipment | (24,764) | (102,113) | ||
| Acquisition of intangible assets | - | (54,510) | ||
| Net cash used in investing activities | (24,764) | (156,623) | ||
| Net cash flow before financing activities | (235,128) | (632,237) | ||
| Financing activities | ||||
| Net proceeds from the issue of share capital | 485,045 | 1,472,969 | ||
| Repayment of borrowings | (21,873) | (120,712) | ||
| Net cash generated from financing activities | 463,172 | 1,352,257 | ||
| Net increase in cash and cash equivalents | 228,044 | 720,020 | ||
| Opening net cash and cash equivalents | 862,446 | 142,426 | ||
| Closing net cash and cash equivalents | 1,090,490 | 862,446 | ||
Notes to the consolidated financial statements
1. General information
This announcement has been agreed with the auditors and was approved by the Board of Directors on 11 June 2008.
The interim financial information has been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards as adopted for use in the European Union ('IFRS') that are effective (or available for early adoption) at 31 March 2008, the first annual reporting date at which Imaginatik is required to use IFRS.
Whilst the financial information included in this preliminary announcement has been prepared in accordance with IFRS, this announcement itself does not contain sufficient financial information to comply with IFRS. A copy of the statutory accounts prepared under IFRS for the year ended 31 March 2008 will be issued to shareholders prior to the Company's Annual General Meeting.
The financial information set out above does not constitute the company's statutory accounts for the periods ended 31 March 2008 or 2007 as defined in section 240 Companies Act 1985. Statutory accounts for 2007, which were prepared under UK GAAP, have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. The statutory accounts for 2008 will be delivered to the Registrar of Companies in due course.
2. Basis of preparation
The accounting policies used have been applied consistently to all periods presented in these consolidated financial statements and comply with applicable IFRS standards and IFRIC interpretations issued and effective at the time of preparing these statements.
The preparation of these financial statements in accordance with IFRS resulted in no significant changes to the accounting policies as compared with last year's annual financial statements prepared under UK GAAP. They also have been applied by preparing an opening IFRS balance sheet at 1 April 2006 for the purpose of the transition to IFRS, as required by IFRS 1.
The transition from previous UK GAAP to IFRS had no impact on the net assets, results or cash flows reported previously by the group. As a result of adopting IFRS there have been numerous changes to the presentation of the financial statements.
3. Segmental reporting
The directors consider that the group has one class of business, being the provision of innovation software and related professional services. These services are provided to clients in different geographical areas using resources shared between those markets. Therefore segmental information is presented in respect of the group's geographical segments relating to where customers are based. This is the primary basis of segmental reporting. The geographical segmental reporting reflects the group's management and internal reporting structure.
Segmental results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. The location of customers is not significantly different to the location of assets.
| 2008 | 2007 | |
| £ | £ | |
| Segmental revenue: | ||
| United States of America | 2,619,246 | 2,346,597 |
| Rest of the world | 539,756 | 145,111 |
| 3,159,002 | 2,491,708 | |
| Segmental result: | ||
| United States of America | 241,911 | (858,019) |
| Rest of the world | (381,558) | (270,957) |
| (139,647) | (1,128,976) |
4. Earnings per share
Basic loss/earnings per share (EPS) has been calculated in accordance with IAS 33 'Earnings per share'. The calculation of EPS is based on losses of £139,647 (2007: losses of £1,128,976) and on a weighted average number of ordinary shares in existence during the year of 117,270,883 (2007: 46,456,587).
The share options in issue are considered to be anti-dilutive, and therefore diluted EPS equals basic EPS.
5. Share capital
| 2008 £ | 2007 £ | |||
| Authorised | ||||
| 500,000,000 ordinary shares of 0.0625p each | 312,500 | 312,500 | ||
| Allotted, called up and fully paid | ||||
| 116,601,226 ordinary shares of 0.0625p each | - | 72,876 | ||
| 125,090,957 ordinary shares of 0.0625p each | 78,182 | - | ||
| 78,182 | 72,876 | |||
On 27 February 2008 8,035,885 0.0625p ordinary shares were placed with investors for net cash consideration of £485,045 after deducting issue costs of £14,955. The issue costs have been deducted from the share premium account.
On 7 March 2008 453,846 0.0625p ordinary shares were issued to directors and staff in lieu of accrued salary and net of taxes for a consideration of £22,125.
6. Reconciliation of operating loss to net cash outflow from operating activities
| 2008 | 2007 | |
| £ | £ | |
| Operating loss | (130,548) | (1,044,497) |
| Depreciation of tangible fixed assets | 56,820 | 18,626 |
| Amortisation of intangible fixed assets | 33,992 | - |
| Share option charge | 77,015 | 26,500 |
| Other share-based payments | 22,125 | 420,449 |
| Interest paid | (9,099) | (96,590) |
| Operating cash flows before movements in working capital | 50,305 | (675,512) |
| (Increase)/decrease in trade and other receivables | (87,493) | (320,260) |
| Increase/(decrease) in payables | (173,176) | 520,158 |
| Net movement in working capital | (260,669) | 199,898 |
| Net cash from operating activities | (210,364) | (475,614) |