ABAL.L Regulatory News (ABAL)

11 June 2012

Imaginatik Plc

("Imaginatik" or the "Company")

Final Results

Imaginatik plc (AIM: IMTK.L), the world's first full service innovation provider offering a range of technology products and consultancy services, announces its audited results for the year ended 31 March 2012.

Summary

·; Revenue increased by 21% to £3.4 million (FY 2011: £2.8 million)

·; Total costs reduced by 14% to £4.5 million (FY 2011: £5.3 million)

·; Operating losses before share option costs reduced to £0.98 million (FY 2011: £2.28 million)

·; Management team and board significantly strengthened

·; Enhancement of Innovation Central technology offering with launch of Discovery Suite and Results Engine

·; Secured first consultancy-led contracts, with companies such as Mead Johnson, the Mayo Clinic, Newmont Mining and Cotton, Inc

·; 95% of clients by value coming to the end of contracts within the year renewed for additional periods (2011: 72%)

·; Announcement today of conditional placing of up to 333,333,333 new ordinary shares in the Company at 0.3p per share, raising up to £1 million before expenses

Matt Cooper, Executive Chairman of Imaginatik, commented: "Imaginatik has spent the last two years undergoing a transformation from being solely a provider of idea management software into the world's first full service innovation company. Our mission is simple - to help our clients develop a company-wide, innovation competence that can be sustained over the long-term.

"Early results are encouraging and we are pleased with the level of growth achieved in the year. We have received positive feedback on our new proposition from existing and new clients and industry commentators. We have secured our first consultancy-led contracts and the sales pipeline contains many more meaningful opportunities, benefitting from both a stable sales team and greater clarity of messaging.

"Trading in the first two months of the year continues to improve and is ahead of the same period last year. We are now focused on continuing to grow our sales capability and pipeline and on the delivery of increased shareholder value."

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About Imaginatik

Imaginatik provides a range of Innovation solutions comprised of consultancy, enterprise software and program management to deliver innovation results to companies such as The World Bank, NYSE, The Chubb Group of Insurance Companies, Boeing, Pfizer, Goodyear, Paccar, Kellogg and Cargill. Few companies possess the internal capability to consistently generate fresh ideas, identify those worth pursuing and reliably transform them into real, value-enhancing assets. Imaginatik's mission is to help these companies build sustainable innovation competencies.

Imaginatik is a public company whose shares are traded on the AIM market of the London Stock Exchange (LSE:IMTK.L) and is a World Economic Forum Technology Pioneer with offices in Boston, MA, and Winchester, UK. For more information visit www.imaginatik.com.

Executive Chairman's Statement

In today's world, innovation is the key to business success. We believe that companies that fail to innovate lose out to their competitors and ultimately face decline or failure. In addition to this, the business cycle has become shortened so that sporadic innovation is no longer enough. What is required is for innovation to become an embedded process within an organisation, rather than the province of a few people on the periphery. Companies need to harness the creativity of their entire workforce.

For this reason, Imaginatik has spent the last two years developing the capabilities to become the world's first full service innovation company. Our mission is simple - to help our clients develop a company-wide, innovation competence that can be sustained over the long-term.

To that end, we have substantially broadened our technology offering. Not only do we now have a world class idea management platform, but also an innovation front end and project management tools to ensure the ideas generated become reality. We have also gone to great lengths to develop a consultancy capability, combining Imaginatik's 15 years' of experience with a number of senior consultants who bring specific innovation experience. Imaginatik is now able to help companies understand exactly where they are on the innovation journey and what the cultural and process barriers might be to their success. We are well placed to provide a solution.

Together, we believe these two facets make us unique in the industry, being the only company with the depth of offering to help organisations build sustainable innovation.

Matt Cooper

Executive Chairman

11 June 2012

Operational Review

Evolving marketplace

Over the past year or so we have seen the rise of innovation towards the top of corporate agendas. Companies of all sizes, irrespective of sector, are acknowledging that sustainable innovation is no longer a value-add, but a business critical necessity. We have seen the emergence of 'winners' and 'losers' across a range of sectors, with those companies who possess a deep innovation competency consistently winning out on market share, while the others get left behind.

Businesses now acknowledge the need to innovate to survive and, as a result, are allocating more resources to build a corporate culture of innovation. One indication of this is in the emergence of the Chief Innovation Officer, one of the newest and most quickly growing roles in the management team today. The number of businesses with Chief Innovation Officers grew from 33% in 2010 to 43% in 2011 (Innovation Leadership Study by IESE Business School & Capgemini Consulting, March 2012). These early efforts from corporates are a step in the right direction, however, many are lacking the comprehensive tools or support needed to achieve a real and sustainable innovation programme. Only 30% of Chief Innovation Officers believe that they have an effective organisational structure for innovation (Innovation Leadership Study by IESE Business School & Capgemini Consulting, March 2012).

This gap between attempted innovation and the achievement of tangible results at the enterprise level has given rise to an industry addressing this opportunity and a number of businesses have emerged, alongside Imaginatik, with niche offerings in the disciplines of either consultancy or idea management software. None of these players, however, have taken a holistic approach to complete innovation support and the result has been only partial solutions on offer.

Transformation of Imaginatik

In recognising this gap in the market, we have embarked on a strategic shift, in order to ensure that we are in a position to fulfil our mission to help clients build a sustainable company-wide innovation competence. We have spent the last two years developing and refining the business from a pure software provider to a full service innovation provider, and we believe that this transition is almost complete. This holistic approach combines our technological capabilities, based on our market leading innovation platform, with strategic and operational consulting from our 15 years of industry experience. As a result, we believe Imaginatik now occupies a unique position in its market as the only company with the proven ability to support sustainable enterprise innovation programmes through a combination of technology, consultancy and a repeatable process.

We believe consultancy is crucial to helping clients achieve innovation outcomes. Stand-alone Idea Management or Innovation Management software is not sufficient. Imaginatik has learned from its clients that sustained innovation success requires strategy consultancy, program management, and "outcomes" ownership.

In order to capitalise on our unique positioning in the market, we have today announced that we propose to raise up to £1 million (before expenses) from new and existing investors via a conditional placing of up to 333,333,333 shares at a price of 0.3p per share subject to approval at a general meeting to take place on 27 June 2012. Funds raised from the placing will assist us in completing the transition and will be used to expand our US-based sales team, add consultancy capacity in both the US and European market, allow us to further invest in our technology, and further develop our branding and marketing efforts.

It is the intention of Matt Cooper, David Gammon and Simon Charles, all being Directors of the Company, to participate in the placing on similar terms.

We believe a major contribution to our future success will be the strength of our Board and management team. We have assembled a team with significant expertise that is capable of developing Imaginatik into a sizeable business. In October 2011, we announced three new Non-executive Directors, Brian Hayes, David Gammon and Simon Charles with Paul Morland stepping down. We would like to thank Paul for his contribution since the Company floated in 2006. In January 2012, we announced the appointment of two new senior executives. Elisa O'Donnell joined as Head of Consultancy and Jonathan Jewett as Head of Sales. Elisa has over 20 years' of management consulting experience in the field of innovation and change management. Jonathan is an experienced sales director with a successful track record of building and motivating high-performance sales teams within the technology industry.

In the same month, Andrew Wainwright stepped down from his position as Chief Technology Officer, and was replaced by Nick Goss. Nick's experience includes numerous technology leadership positions across several medium-sized businesses in the EU and the US, enabling him to build core business strengths in areas such as growth strategy formulation and implementation, turnaround execution, and assisting businesses in transitioning to online, Cloud and SaaS based delivery models. The Board would like to thank Andrew for his valued contribution over the last 10 years and wishes him well in the future.

Development of a full service Innovation capability

We undertook a number of important developments during the year to advance our full service offering, further differentiating us from our competitors. Innovation Central was enhanced with the launch of Discovery Suite and Results Engine in the first half of the year. Discovery Suite helps shape the front end of the innovation process by helping executives formulate their innovation strategy. Discovery Suite was developed in conjunction with innovation guru Rowan Gibson and is based on his "Four Lenses of Innovation" method for generating business insights and innovation opportunities. These opportunities are then fed into the pipeline of Innovation Central challenges. Results Engine is a comprehensive innovation portfolio reporting and management capability. Fully integrated into the Innovation Central platform, this cloud-based tool enables the management and tracking of multiple innovation projects across an enterprise while providing a system for the calculation of return on investment. Through these tools, in combination with consultancy, we are able to support customers through all stages of the innovation journey.

We have made substantial progress this year in developing a system that supports multi-lingual innovation. We expect this to be launched at the end of the calendar year. We have also made progress developing various web connectors for SharePoint, Jive and Yammer. We expect this phase of work to be completed by the end of the current financial year. 

Early results demonstrate success

Early results are encouraging and we are pleased with the level of growth achieved in the year. We have secured our first consultancy-led contracts, with companies such as Mead Johnson, the Mayo Clinic, Newmont Mining and Cotton, Inc., and the sales pipeline contains many more meaningful opportunities, benefitting from both a stable sales team and greater clarity of messaging. We have also re-entered the European market with the reappointment of Geoff Carss as VP Europe and we believe this market will open up substantial further opportunities. We are pleased to report that the vast majority of clients coming to the end of the contracts within the year renewed for additional periods. The nature of our embedded approach has resulted in far more multi-year deals being signed in the year, with seven such contracts signed (2011: 0). We believe this demonstrates the growing confidence our customers have in choosing Imaginatik as their long-term innovation partner.

Financial Review

Total revenue for the year ended 31 March 2012 increased by 21% to £3.4 million (FY 2011: £2.8 million). During the year, 23% of revenue was generated from up-selling our software and services into existing customers, 15% from selling into new clients, and 62% from recurring business (FY 2011: 21%; 29%; 50%). We added 10 new customers during the year (FY 2011: 10).

The US continues to be our core market with the percentage of revenues received from the region in the period being 91% (FY 2011: 96%) with the remaining 9% derived from the Rest of the World (FY 2011: 4%).

We took steps during the year to reduce overheads, largely through lower head count and reduced spend on marketing activities, although the addition of further senior executives to augment the management team meant that costs in the second half of the year were increased. The Company incurred £0.15 million in legal costs during the year in respect of the litigation against the former CEO, Mark Turrell. This litigation is now close to reaching a satisfactory conclusion. In December 2011 judgment was awarded in favour of the Company and Matt Cooper with costs of £0.16 million and damages of £0.04 million in favour of the Company and damages of £0.08 million in favour of Matt Cooper. These costs and damages were not paid and as a result the Company secured a freezing injunction over Mr. Turrell's shareholding in the Company. We shall continue to enforce the judgment and currently expect this process to reach a conclusion in the next few months. The costs and damages recoverable by the Company in relation to the litigation have not been recognised in the Company's financial statements and will be recognised once received.

Total costs have been reduced by 14% in the year to £4.5 million (FY 2011: £5.3 million) and we will continue to maintain a careful control of costs.

We continued to invest in our software platform in the year, upgrading and adding new functionality to improve our competitiveness. In the year we invested £0.45 million (FY 2011: £0.57 million) all of which continues to be written off as incurred. We were pleased to have been awarded an R&D tax credit by HMRC of £0.11 million reflecting the pioneering nature of the research and development work we undertake. This is reflected in the taxation line in the income statement.

Operating losses before share option costs reduced to £0.98 million (FY 2011: £2.28 million).

In February 2012, the remuneration committee of the Board approved changes to the terms of the existing share options issued by the Company, with a cancellation of certain options that were substantially under water and the reissue of these options at an exercise price of 1p per share. The mid-market price of the Company's shares at the time of the rebasing was 0.42p.

Net funds at 31 March 2012 were £0.53 million (2011: £0.47 million). Net cash outflows from operating activities have reduced by 39% to £1.1 million (2011: £1.8 million).

We completed two fundraisings during the year, providing the Company with increased working capital and the ability to continue to invest in its technology and people. In August 2011, the Company raised £1.04 million (before expenses) by way of a conditional Placing, Subscription and Open Offer. In February 2012, the Company raised a further £0.26 million before expenses through the issue of new ordinary shares of 0.0625p each ("Ordinary Shares") to a range of new and existing shareholders.

On 11 June 2012, post the period end, the Company announced that it proposed to raise up to £1 million (before expenses) through a conditional placing of up to 333,333,333 new Ordinary Shares with new and existing institutional and other investors at a price of 0.3 pence per share. 

On the basis of successful completion of the proposed placing The Directors have reviewed the Company's budgets and forecasts for the coming 12 months, which have been prepared with appropriate regard to the current macroeconomic environment and the conditions in the principal markets served by the Group. As a result, and taking into consideration the Group's net funds, the irrevocable commitments of £857,500 already received in respect of the proposed placing, expressions of interest for the balance allowing the Company to raise up to £1 million and the anticipated approval at the General Meeting, at the time of approving the financial statements, the Directors consider that the Company has sufficient financial resources to continue in operational existence for the foreseeable future and, therefore, that it is appropriate to adopt the going concern basis in preparing these financial statements. The Directors cannot guarantee that the going concern basis will remain appropriate given the inherent uncertainty about future events.

Outlook

In the near term, we look forward to completing our transition which will be greatly accelerated through the injection of the new funds from the Placing. These funds will facilitate the expansion of our sales and consultancy teams, the ongoing investment into our technology platform, allow the Company to further develop its branding and marketing and cement our re-entry into the European market place.

In the longer-term, we find that the market trends are encouraging, with innovation more firmly on the corporate agenda and we are excited about the pipeline of opportunities ahead. With our unique, full service offering, we believe we are well placed to become one of the dominant players in the space. At present, the market is highly fragmented, characterised by numerous niche players, but over time we believe we can grow to become one of the consolidators.

Trading in the first two months of the year continues to improve and is ahead of the same period last year. We are now focused on continuing to grow our sales capability and pipeline and on the delivery of increased shareholder value.

Shawn Taylor

Chief Operating and Financial Officer

11 June 2012

Consolidated statement of comprehensive income for the year ended 31 March 2012

Consolidated statement of financial position as at 31 March 2012

Consolidated cash flow statements for the year ended 31 March 2012

Consolidated statement of changes in equity for the year ended 31 March 2012

Notes forming part of the financial statements for the year ended 31 March 2012

1. Basis of preparation and statement of compliance

The financial information contained in this preliminary announcement does not constitute the Group's statutory financial statements for the year ended 31 March 2012 or 2011, but is derived from these financial statements. The financial statements for the year ended 31 March 2011 have been delivered to the Registrar of Companies. 

The financial statements for the year ended 31 March 2012 have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and the Group has complied with International Financial Reporting Standards as issued by the IASB. Those financial statements have not yet been delivered to the Registrar.

In preparing the financial statements the Directors are required to make judgements and estimates in applying accounting policies. The most significant areas where judgements and estimates have been applied are as follows:

Judgements

The value of the awards under the modified and new share option scheme was measured, in accordance with IFRS 2, by reference to their fair value at the date on which they were granted. Judgement was required in determining the most appropriate valuation model.

The costs and damages recoverable by the Company in relation to the M Turrell litigation have not been recognised in the Company's financial statements and will be recognised once received.

Estimates

Significant assumptions were necessary in arriving at the inputs into the valuation model for the modified and new share option scheme.

Going Concern

On the basis of successful completion of the proposed placing to raise up to £1 million announced on 11 June 2012, the Directors have reviewed the Company's budgets and forecasts for the coming 12 months, which have been prepared with appropriate regard to the current macroeconomic environment and the conditions in the principal markets served by the Group. As a result, and taking into consideration the Group's net funds, the irrevocable commitments of £857,500 already received in respect of the proposed placing, expressions of interest for the balance allowing the Company to raise up to £1 million and the anticipated approval of the proposed placing at the General Meeting, at the time of approving the financial statements, the Directors consider that the Company has sufficient financial resources to continue in operational existence for the foreseeable future and, therefore, that it is appropriate to adopt the going concern basis in preparing these financial statements. The Directors cannot guarantee that the going concern basis will remain appropriate given the inherent uncertainty about future events.

2. Segmental reporting

These services are provided to clients in different geographical areas. The segmental information is presented by geographical area in line with the monthly financial information provided to the chief operating decision maker.

Both segments generate their revenues from the provision of collaborative innovation software and related consultancy services.

The Group has two customer (2011: nil customers), who accounted for revenues of £914,000 (2011: £138,000), both of which amount to more than 10% of Group revenues.

Both of these revenues arose in the United States of America segment.

3. Loss per share

Basic loss per share has been calculated in accordance with IAS 33 'Earnings per share'. The calculation of loss per share is based on losses of £985,000 (2011: £2,415,000) and on a weighted average number of ordinary shares in existence during the year of 347,464,893 (2011: 191,084,986).

The share options issued during the current and prior year are considered to be anti-dilutive, and therefore diluted loss per share equals basic loss per share.

4. Barter transactions

During the year barter transactions totalling £nil (2011: £6,000) were entered into by the Group. There was no profit or loss recorded on these transactions. At the year end there was deferred income balance of £nil (2011: £nil) and deferred costs of £nil (2011: £nil) in respect of barter transactions.

5. Share capital

On 1 May 2011:

- 3,400,000 new ordinary shares of 0.0625p each were placed with investors for a gross cash consideration of £51,000. There were no costs in relation to this issue.

On 31 August 2011:

- 208,569,550 new ordinary shares of 0.0625p each were issued for a gross cash consideration of £1,043,000. Issue costs relating to the above placing were £128,000 and have been deducted from the share premium account.

On 28 February 2012:

- 85,505,352 new ordinary shares of 0.0625p each were issued for a gross cash consideration of £257,000. Issue costs relating to the above placing were £24,000 and have been deducted from the share premium account.

6. Reconciliation of operating loss to net cash outflow from operating activities

7. Report and Accounts

Copies of the Company's full statutory financial statements will be available from the offices at 6 Wessex Way, Colden Common, Winchester SO21 1WP and on its website, www.imaginatik.com. A copy of the Report and Accounts will be sent to all shareholders with notice of the AGM in due course.