ABAL.L Regulatory News (ABAL)

14 Nov 2007 14:12

Imaginatik PLC14 November 2007 14 November 2007 Imaginatik Plc ("Imaginatik" or the "Company") Interim Results for the Six Months Ending 30 September 2007 Imaginatik plc (AIM: IMTK),a leading provider of Innovation and CollaborativeProblem-Solving software and processes, announces its Interim Results for thesix months ended 30 September 2007. Financial Highlights • Turnover of £1.15m (2006: £1.27m) • Operating loss of £469,000 (2006: operating profit £155,000) • Increase of recurring revenue on an annualised basis to £1.4m (2006: £0.9m) • Current debtors of just over £1m (2006: £564,000), majority receivable by 31 December 2007 • Cash at bank and in hand of £108,000 (2006: £218,000) Corporate Highlights • Signing of global reselling agreement with IBM • Addition of eight blue chip clients five of whom were converted from pilot programmes to full annual licence fee paying customers, including BSkyB and Xerox • Total number of annual licence customers at period end was 43 (2006: 35) • Total number of active customers on pilot programmes at period end was 15 (2006: 12) • Product enhanced to better support blue chip enterprise customers Chief Executive, Mark Turrell commented: "Imaginatik is still in the earlystages of its development. It is exciting to see the benefits of our strategybeginning to emerge. We are on course to make sound progress this year and thereare clear signs that momentum in the innovation market is increasing, which willdrive our future growth. Therefore, with the securing of further multi-yearcontracts and increased investment in strategic partnerships, such as IBM, webelieve the future for the Company is promising." For further information please contact: Imaginatik plc Tel: 020 7917 2975Mark Turrell, CEO / Shawn Taylor, CFO WH Ireland Tel: 0121 265 6330Tim Cofman / Katy Birkin ICIS Tel: 020 7651 8688Tom Moriarty / Caroline Evans Jones Chairman's statement As was indicated at the time of our AGM statement on 27th July 2007 sales werelower than were expected and the loss has weakened our balance sheet. Whilstthe market is at an early stage of development the investment by majorcorporations in collaborative infrastructures within their organisations isconfirmation that demand for our technology and methodology will grow. Ofparticular note are the conversion of many pilot customers on to long-termcontracts and the winning of some impressive new blue-chip customers. Whilst an exciting position to be in, we also have to be aware of the risks thatcan face companies in emerging markets and as such we are keeping a firm controlon costs and seeking ways in which to attack the market in the most costeffective manner possible. The relationship with IBM is an example of this and,being a small company with limited sales and marketing resources, we anticipatethat partnership with companies that extend our market penetration will be acentral part of our growth strategy. Given our market position and the potential growth of the sector I look forwardto the future with confidence. I would like to thank the management and allthose at Imaginatik for their continued commitment and hard work that has driventhe Company to date. Chief Executive's Review The six months ended 30th September 2007 have seen progress in the developmentof Imaginatik. The strategy that the Board implemented towards the beginning ofthis calendar year to focus on the closing of larger multi-year contracts withcustomers, combined with securing strategic partnerships contributed to a slowstart in Q1 of this year, but it has now started to bear fruit and weexperienced far better sales in Q2. The business is currently negotiating anumber of substantial contracts, the timing of which remains uncertain and oursales pipeline is strong. During the period, the Company has achieved majorcontract wins with blue chip clients including BSkyB, Fireman's Fund (a divisionof Allianz), Kellogg and Xerox. Each of these represents a six figure multi-yearcontract and exemplifies the type of business which will drive the growth ofImaginatik. While this strategy represents a significant opportunity for the future growthof Imaginatik, the investment in time and capital that this has required hasresulted in lower revenues than the same period last year. However, with a largeproportion of licence fees on our recurring revenue base falling to be accountedfor in the second half of the year, we are still confident of achieving asuccessful outcome for the year. We are encouraged by the rise in the recurringrevenue base, which has risen 50% from last year to over £1.4m on an annualisedbasis. These revenues, which comprise annual license, maintenance and hostingfees, help underpin our overheads and provide a solid platform from which theCompany can grow. Financial Review Turnover for the six months ended 30th September 2007 fell 9.4% to £1.15m (2006:£1.27m). This was largely due to the greater focus on securing larger deals andstrategic partnerships and a de-emphasis from small projects. We are confidentthat this is in the best long-term interests of both the Company and itsshareholders. We have therefore seen an operating loss in this period of£469,000, down from a profit of £155,000 in 2006. The revenue split between thegeographies was 75% USA vs. 25% Rest of World (2006: 93% USA vs. 7% Rest ofWorld). Current debtors stand at just over £1m, the majority of which are expected to bereceived by the end of December 2007. The Company has deferred revenue of£500,000, most of which will be released into the P&L account in the second halfof the financial year. The increase in costs is primarily due to an increase instaff costs - average headcount during the period was 32 (2006: 23). Cash inhand at the end of the period was £108,000. With the expected increase inrevenues in H2, the Company is expecting to be profitable in the second half ofthe year. Looking at the balance sheet, net total equity attributable toshareholders amounted to £179,000 in comparison to £611,000 as at 31 March 2007reflecting the reported loss for the period. Business and New Customers The Company is pleased to report impressive progress in its existing customerbusiness with an additional eight new annual license paying customers, most ofwhich were converted from pilot projects. All of these clients are blue chipcompanies and represent significant revenue sources for Imaginatik. We have 15existing pilot programmes ongoing at the period end, and as we have alreadyshown with our ability to convert these programmes into full implementations, weare confident of closing more multi-annual deals to boost revenues further. In terms of expanding existing customer revenue, we are also performing wellwith nearly 20% of all new business coming from existing clients. This is anexcellent endorsement of our products and comes as a direct result of ourextremely high customer satisfaction levels. We have proven that once a productof ours is in operation, the opportunities to up sell to customers becomesignificant. In addition, we have put in place contracts that make it easy forour customers to buy additional licences after the first contract is signed. During the period, many customers have reported the success of the Company'stechnology, examples of which include: - One of the world's leading providers of IT hardware and software looking for ideas from its employees as to how they can reduce its carbon footprint. - One of the world's top 5 pharmaceutical companies managing its collaboration with the Scripps Research Institute for continuous review of scientific papers using our Open Innovation module. - One of the world's leading consumer products companies involving its employees in the creation of new brand names. Our list of contracted clients has expanded to include Allianz, Baker Hughes,Bayer, Blue Cross Blue Shield, Capital One, Cargill, Carlson, Chevron, Coca-ColaCompany, Computer Science Corporation, Dow Chemical, Eastman Chemical, GeneralElectric, Goodyear, Grace Chemicals, Hallmark, Henkel, Hewlett-Packard, IBM,IPSOS Group, Kellogg, KPMG, Kraft, Lexmark, Merck, Merrill Lynch, Nokia, Pfizer,Royal Mail, Solvay, The Hartford, Weyerhaeuser, Whirlpool and Xerox. Partners In order to accelerate our global growth and extend our market reach, we areseeking to engage with blue chip partners to act as resellers of our technology,in combination with their consulting services. Over the next few years our goalis to see about 20% of total revenues derived from the partner channel. The Master Reseller Agreement we signed with IBM in August of this year is anexcellent endorsement of the quality of our offering. We have since trained andenabled 30 IBM consultants from the UK, USA, Australia, Sweden and Germany tosell our technology as part of a broader innovation based engagement. Followingthis agreement, we closed our first deal with a tier one US Investment Bank andbelieve that the potential opportunities through this partnership aresignificant. Products and Services We continue to develop our software to ensure that we offer innovative andrelevant products to our client base. During November 2007, the Company willrelease Version 8 of Idea Central, an improved version of our software that tapsinto recent trends such as the social networking phenomenon and the Web 2.0 userexperience. The release includes new reporting tools and offers significantlyenhanced configurability of the core software. A proportion of the investment inthis development has been co-funded by clients, a strong demonstration of theirongoing belief in our solutions. We have made further investment in upgrading our server infrastructure in orderto support the growing size of our hosted customer implementations and allow fora higher number of concurrent users. Market/Competition Imaginatik remains one of the only proven enterprise-level vendors of technologysolutions for Idea Management. The market continues to be relatively fragmentedand we would expect to see consolidation increase over the coming years. Whilst the Idea Management market is still in its infancy, as companies face theever increasing problem of finding new ways to innovate, we are confident thatit will continue to grow significantly. We expect two of the biggest growthindustries to be in pharmaceuticals and banking; industries which are currentlyseeing increased competition and regulation and which intrinsically have highlevels of knowledge and expertise locked within their employee base. We areactively seeking opportunities in these areas. Outlook Following the IPO at the end of last year, Imaginatik has continued to achievegood progress in the development of its market position. The Company is still inthe early stages of its development and it is exciting to see the benefits ofour strategy beginning to emerge. Although the Company has made an operatingloss over the period, it has made a strategic change to its business model, andthe benefits of this change are starting to emerge. The market is continuing to have a greater appreciation of the business benefitsthat can be derived from tapping into the 'collective genius' withinorganisations. Therefore, with the securing of further multi-year contracts andincreased investment in strategic partnerships, such as IBM, we believe thefuture for the Company is promising. Condensed unaudited consolidated interim income statement For the six months ended 30 September 2007 6 months 6 months Year to to 30 Sept to 30 Sept 31 March 2007 2006 2007 Note £'000 £'000 £'000 Revenue 1,151 1,272 2,492Cost of sales (68) (70) (183)Gross profit 1,083 1,202 2,309 Administrative expenses (1,552) (1,047) (3,353)Analysed as: Administrative expenses before exceptional items (1,552) (1,047) (2,741) Exceptional items 3 - - (612) Operating (loss)/profit before financing costs (469) 155 (1,044) Analysed as: Operating (loss)/profit before financing costs and exceptional items (469) 155 (432) Exceptional items - - (612)Operating (loss)/profit before financing costs (469) 155 (1,044) Financial expenses (1) (57) (85)(Loss)/profit before tax (470) 98 (1,129) Income tax expense - - -(Loss)/profit for the period (470) 98 (1,129) Basic and diluted earnings per share (p) 4 (0.40) 6,144 (2.43) All amounts are attributable to equity holders of the parent, and all arise fromcontinuing operations. No amounts were recognised directly in equity, andtherefore no separate statement of recognised income and expense has beenpresented. Condensed unaudited consolidated interim balance sheet 30 Sept 30 Sept 31 March 2007 2006 2007 Note £000 £000 £000Assets Property, plant and equipment 87 20 92 Intangible assets 117 - 208Total non-current assets 204 20 300 Trade and other receivables 1,090 650 798 Cash and cash equivalents 108 218 862Total current assets 1,198 868 1,660Total assets 1,402 888 1,960 Equity Issued capital 73 - 73 Share premium 1,690 - 1,690 Retained earnings (1,584) (372) (1,152) 6Total equity attributable to equity holders of the parent 179 (372) 611 Liabilities Interest-bearing loans and borrowings - 105 39Total non-current liabilities - 105 39 Interest-bearing loans and borrowings 25 479 27 Trade and other payables 1,198 676 1,283Total current liabilities 1,223 1,155 1,310Total liabilities 1,223 1,260 1,349Total equity and liabilities 1,402 888 1,960 Condensed unaudited consolidated interim statement of cash flows For the six months ended 30 September 2007 Note 6 months 6 months Year to to 30 to 30 31 March Sept 2007 Sept 2006 2007 £000 £000 £000Cash flows from operating activities (699) 163 (378) 7Net interest paid (1) (53) (97)Net cash from operating activities (700) 110 (475) Cash flows from investing activitiesAcquisition of property, plant and equipment (12) (17) (102)Acquisition of intangible fixed assets - - (55)Net cash from investing activities (12) (17) (157) Cash flows from financing activitiesNet proceeds from the issue of share capital - - 1,473Repayment of borrowings (41) (17) (121)Net cash from financing activities (41) (17) 1,352 Net increase in cash and cash equivalents (753) 76 720Cash and cash equivalents at 1 April 862 142 142Cash and cash equivalents at 30 September 108 218 862 Notes to the unaudited condensed consolidated interim financial statements 1. Background Imaginatik plc (the "Company") is a company domiciled in the United Kingd om.The condensed consolidated interim financial statements of the Company for thesix months ended 30 September 2007 comprise the Company and its subsidiary(together referred to as the "Group"). The condensed consolidated interim financial statements were authorised forissuance on 14 November 2007. The interim financial statements are not statutory accounts for the purposes ofS240 of the Companies Act 1985. The Financial Information for the year ended 31March 2007 is based on the statutory accounts for the financial year ended 31March 2007 restated for the effects of the adoption of International FinancialReporting Standards in issue and adopted for use in the European Union ("IFRSs"). The statutory accounts, on which the auditors issued an unqualified opinion,have been delivered to the Registrar of Companies. The half-year figures, whichare for the 6 month period ended 30 September 2007, have not been audited. 2. Basis of preparation The financial statements are presented in pounds sterling, rounded to thenearest thousand, unless stated otherwise. They are prepared on the historicalcost basis. These condensed unaudited consolidated interim financial statements have beenprepared on the basis of IFRSs that are effective or available for earlyadoption at the Group's first IFRS annual reporting date, 31 March 2008. Basedon these IFRSs, the Board of Directors have made assumptions about theaccounting policies expected to be adopted when the first IFRS annual financialstatements are prepared for the year-ended 31 March 2008. The IFRSs that will be effective or available for voluntary early adoption inthe annual financial statements for the period ended 31 March 2008 are stillsubject to change and to the issue of additional interpretation(s) and thereforecannot be determined with certainty. Accordingly, the accounting policies forthat annual period that are relevant to this interim financial information willbe determined only when the first IFRS financial statements are prepared at 31March 2008. The preparation of the condensed consolidated interim financial statements inaccordance with IFRSs resulted in no significant changes to the accountingpolicies as compared with the most recent annual financial statements preparedunder previous GAAP. The accounting policies have been applied consistently toall periods presented in these condensed consolidated interim financialstatements. They also have been applied in preparing an opening IFRS balancesheet at 1 April 2006 for the purposes of the transition to IFRSs, as requiredby IFRS 1. The transition from previous GAAP to IFRSs had no impact on the netassets, results or cash flows reported previously by the Group. The accounting policies have been applied consistently throughout the Group forpurposes of these condensed unaudited consolidated interim financial statements. 3. Exceptional items The exceptional items in the year ended 31 March 2007 comprise £611,930 of staffcosts. Certain directors and staff were issued shares upon the flotation of thecompany. Those shares have been accounted for as an equity-settled share-basedtransaction in accordance with IFRS 2 'Share-based Payment'. The exceptionalstaff costs include the fair value of the shares issued together with therelated national insurance charge and other associated costs. 4. Earnings per share Basic earnings per share The calculation of basic earnings per share for the six months ended 30September 2007 was based on the loss attributable to ordinary shareholders of£470,463 (six months ended 30 September 2006: profit of £98,318; year ended 31March 2007: loss of £1,128,976) and a weighted average number of ordinary sharesoutstanding during the six months ended 30 September 2007 of 116,601,225 (sixmonths ended 30 September 2006: 1,600; year ended 31 March 2007: 46,456,587),calculated as follows: Weighted average number of ordinary shares Note 6 months to 6 months to Year to 30 Sept 30 Sept 31 March 2007 2006 2007Shares in issue at the beginning of the period a 116,601,226 1,600 1,600Effect of shares issued in the period - - 46,454,987Weighted average number of ordinary shares for the period 116,601,226 1,600 46,456,587 Note a: Adjusted for the share split in October 2006. Diluted earnings per share There were no share options or other dilutive instruments in place in the periodended 30 September 2006. The options in place during the period ended 30September 2007 and during the year ended 31 March 2007 are considered to have ananti-dilutive effect. Therefore basic and diluted earnings per share are thesame for each of the three periods. 5. Segment reporting Segment information is presented in the condensed consolidated interim financialstatements in respect of the Group's geographical segments, which are theprimary basis of segment reporting. The geographical segment reporting formatreflects the Group's management and internal reporting structure. Segment results include items directly attributable to a segment as well asthose that can be allocated on a reasonable basis. Geographical segments The Group's operations comprise the following main geographical segments,determined on the basis of the location of customers: United States of America The rest of the world 6 months 6 months Year to 30 to 30 to 31 Sept Sept March 2007 2006 2007 £000 £000 £000Segment revenueUnited States of America 861 1,178 2,346Rest of the world 290 94 145 1,151 1,272 2,491 Segment resultUnited States of America (401) 87 (271)Rest of the world (69) 11 (858) (470) 98 (1,129) 6. Reserves 6 months 6 months Year to 30 to 30 to 31 Sept Sept March 2007 2006 2007 £000 £000 £000 Retained earningsAt the beginning of the period (1,152) (470) (470)(Loss)/profit for the period (470) 98 (1,129)Share-based payments 38 - 447At the end of the period (1,584) (372) (1,152) Share premiumAt the beginning of the period 1,690 - -Shares issued in the period, net of expenses - - 1,690At the end of the period 1,690 - 1,690 7. Cash flows from operating activities 6 months 6 months Year to 30 to 30 to 31 Sept Sept March 2007 2006 2007 £000 £000 £000 Net (loss)/profit (470) 98 (1,129)Depreciation of tangible fixed assets 18 5 19Amortisation of intangible fixed assets 91 - -Net interest expense 1 57 85Share-based payment expense 38 - 447(Increase)/decrease in trade and other receivables (292) (178) (320)Increase/(decrease) in payables (85) 181 520Net cash from operating activities (699) 163 (378) This information is provided by RNS The company news service from the London Stock Exchange