13 Nov 2008 07:00
13 November 2008
Imaginatik Plc
("Imaginatik" or the "Company")
Interim Results
Imaginatik plc (AIM: IMTK), a leading provider of cost reduction, process improvement and collaborative innovation software and processes, announces its Interim Results for the half year ended 30 September 2008.
Financial Highlights
Turnover up 56% to £1.80m (H1 2007: £1.15m)
Operating loss reduced to £0.25m (H1 2007: Operating loss £0.47m)
Annual recurring revenues up over 100% to £2.93m as at 30 September (H1 2007: £1.41m)
Cash and cash equivalents of £494,000 (H1 2007: £108,000)
Corporate Highlights
Growing number of blue-chip clients on annual contracts including Telstra, Novartis and Bombardier Aerospace
Over £170 million of cost savings realised by clients in the last two years through Idea Central
A quarter of existing customers increased their spend with Imaginatik during the half year
Appointment of new Vice President of Global Sales and increased sales team
Secured £222,000 of new funding via a Placing to accelerate growth via investment in sales
Chief Executive, Mark Turrell commented: "We are exceptionally pleased with the Company's performance in the first half of the year, generating record revenues and significantly reducing losses. A quarter of our existing customer base increased their expenditure with us during the half year and we have added 10 new annual fee paying customers including Novartis and Bombardier Aerospace.
"It is extremely pleasing to note that Imaginatik has been responsible for saving its customers at least £170m over the past two years, and very encouraging for future prospects as organisations look to cut costs in the current climate. Despite the overall economic uncertainties we all face, with over £1.4m of expected renewals revenue to be booked in the second half of the year, and a strong pipeline of new business, we remain confident of a successful outcome as we move into what is traditionally the stronger half of our financial year."
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 |
| Caroline Evans-Jones / Mike Smith |
About Imaginatik
Imaginatik is the leading provider of cost reduction, process improvement and collaborative innovation software and processes to the world's leading companies. More than 100 clients rely on Imaginatik's software, consulting and research to enable their best-of-breed innovation activities.
Named as a World Economic Forum Technology Pioneer for 2008 and a finalist for the IBM Lotus Awards 2008 in the Best Industry Solution category, Imaginatik's software and consulting services have helped clients discover significant sources of additional revenue, as well as tangible cost savings, process improvements and increased product pipeline. Imaginatik is also committed to developing strategic solutions in the field of innovation, working with academic institutions such as the London Business School and the Cass School of Business, London, as well as leading practitioners of corporate innovation.
For further information please visit www.imaginatik.com
Chairman's Statement
I am pleased to report on a strong first half of the year, much improved on last year's performance, securing our highest revenue number to date of £1.80 million (H1 2007: £1.15m). This success reflects the growing maturity of our sales team, the strength of our software, the enterprise innovation market's steady move towards the mainstream and the use of our tool to deliver cost reduction benefits in these challenging times.
Our blue-chip customer base continues to grow, adding 10 new clients on annual contracts during the half and 8 new customers on pilot projects. Of particular note is the success we have had in signing new customers, such as Telstra in Australia and Reed Elsevier in the UK, onto immediate annual licences rather than through the more traditional route of engaging in an initial pilot project. This demonstrates the growing ability of our sales team and the growing understanding of the real difference that innovation management software and process can bring to an organisation. In addition I am also pleased to report that a further annual licence was secured via the partnership with IBM with a major global provider of property and casualty insurance, as this is the first full annual contract to come via the partnership and bodes well for the future potential of this venture.
As stated at the time of our Final Results in June 2008, increased up-sell into our existing customer base continues to be a key focus for the Company, as we seek to capitalise on the outstanding successes we are achieving for our clients utilising Idea Central. This has progressed well with a quarter of our existing customers purchasing additional licences and services in the half.
We were delighted in September 2008 to secure an additional £222,000 of funding via a Placing with some of our existing shareholders. We are currently investing these funds in growing our US based sales team in order to accelerate our market penetration.
Uncertainty has never been greater than at the present time as we endeavour to capitalise on our increased maturity as a business, our market leading position and the growth in the enterprise innovation market. However, we look forward to continued growth in the second half of the year.
Finally, I would like to thank our employees, customers and partners around the world for their continued passion for our software and services and their ongoing support.
Howard Marshall
Non-Executive Chairman
13 November 2008
Chief Executive's Review
We are delighted with the continued progress at Imaginatik. We are maturing as a company, becoming more effective in our sales processes, more focused in our strategy and ultimately achieving outstanding results for our growing number of blue-chip customers.
Our success continues to be founded on the power of our core software, Idea Central, which is delivering excellent levels of return for many of our customers, enabling the collaboration of thousands of employees to identify cost-saving initiatives, revenue and process enhancements, new product development initiatives and many other valuable projects.
Now, perhaps more than ever, the flexibility and broad scope of our software platform is proving to be invaluable in assisting clients in managing their changing business needs in the face of the worsening economic situation. The significant cost saving benefits that the software can be used to identify and the increasing need for organisations to improve efficiency and processes in the current climate, mean that Idea Central is more relevant now than ever.
Financial Review
Turnover for the six months ended 30 September 2008 grew by 56% to £1.80m (2007: £1.15 m). The key to this solid performance was excellent progress in adding new business to the overall mix of revenues, through the contracting of 10 additional blue chip clients, half of which have been converted from pilot programmes with the balance choosing to immediately contract on an annual engagement. The revenue split between geographies remained similar to the previous year, being 78% USA and 22% Rest of World.
The growth in our client base allied to the more favourable $US exchange rate has increased our annual recurring revenues from £1.41m at 30 September 2007 to £2.93m at September 2008, an increase over the six months of £1.52m, of which £0.40m was the result of currency movements.
As we flagged in our statement in June 2008, our renewals continue to have a second half weighting, and we expect this to be 30% in the first half year, with 70% in the second half year. Whilst we have a number of strategies in place to adjust this balance, it may take some time to achieve. With a more even distribution of renewals business, the business would have showed a profit in this half year. It is worth noting that in the last 12 calendar months the business has generated revenues of £3.8m and an operating profit of £80,000.
In September 2008 we raised £222,000 before expenses by way of a conditional placing of 5,550,000 new Ordinary Shares of 0.0625p each (the "Placing Shares") at 4p per Placing Share from institutional placees. The proceeds of the Placing are being utilised to strengthen our sales operation in the US.
Sales and marketing
During this half year the Company has made considerable effort to strengthen and grow the direct sales team. In April 2008 we appointed Jamie Evans to head up our sales operations bringing global enterprise software sales experience from his time with IBM in the UK and France and Chordiant in the US. Based in Boston, Jamie has hired new sales staff in the US and we are currently looking to further strengthen our sales team. Our aim is to increase our global direct sales team to a total of 9 by the end of calendar 2008, with the majority based in the US. We expect to start seeing the impact on revenues of this head-count increase in the next financial year.
The success of our sales team and the strength of our proposition are starting to become apparent. In the period we signed 10 new customers onto annual licences, more than we signed in the whole of the year to 31 March 2008. Five of these new clients chose to go directly to a full implementation, rather than via a pilot project, an increase from just one in the whole of the previous year. We are also now starting to sign longer contracts, including some 2 and 3 year commitments, which adds to the visibility of the Company's revenues. All of our contracts continue to be delivered under the Software as a Service model (SaaS).
We continue to sell into a wide range of industry verticals, with new clients in the quarter coming from the telecommunications, pharmaceutical, insurance, medical, chemicals, publishing and manufacturing industries.
The growing awareness of collaborative innovation and problem solving has resulted in excellent attendance levels at our first European Forum which was held in London earlier in November. Representatives from a record 40 companies attended from across Europe, including both current and prospective customers. This is a strong demonstration of the growing importance of innovation processes to global enterprises.
Additionally, the focus on cost reduction, process improvement and doing more with fewer employees is helping our clients improve their businesses even in this challenging economic climate and at the same time drive significant returns on their investment in Idea Central.
At this time, cost savings are clearly going to be at the forefront of management minds around the world, and the proven cost saving benefits that our software can bring will be an integral part of our sales strategy going forward.
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 identified that the cleaning of large chemical reactors was a bottleneck and required a solution to this problem. Using our Idea Central software, a targeted challenge was created and communicated to a select group of employees who are involved in carrying out such work. The challenge elicited a number of excellent ideas that helped resolve the problem. This is an example of one of many Idea Central challenges regularly taking place across Pfizer, leading to significant benefits to the business.
"CSC has been aware of Ideation for some time, but the in past year we have more deliberately moved through the "early adopter" phase and are deploying the tool more broadly. Two early CSC events in Europe yielded significant cash savings on the order of $30 million. More recently, an event was designed to improve the end-to-end cash flow in our North American Public Sector. In another, participants at a major internal conference were asked to identify the "elephants in the room" preventing progress on a new agenda. CSC is also applying Ideation in enterprise risk management (ERM) to shape our Green agenda and solution offerings. Results from Ideation depends on how smart an organisation is in setting challenges and deciding which emerging ideas to go after. Ideation is limited only by our imaginations." Martha Johnson and Howard Smith, CSC Collective Intelligence, quoted in CSC World [www.csc.com].
Partnering and Reselling
We continue to work with various partners and are actively seeking ways in which to grow this channel to market and extend our global reach.
As mentioned above, we were delighted to sign the first annual licence deal to come through our partnership with IBM, as well as additional pilot and project work. There are now over 30 Idea Central-trained employees within IBM covering the US, UK, Europe and Asia Pacific actively promoting Idea Central and we expect to see further clients coming to us through this network in the year. We have also been pleased with the growth in revenue coming through CSC in the UK and believe this will prove to be a valuable channel for us in the future.
Product and Services
We have continued to invest in the development of Idea Central to ensure the product is oriented correctly as the market of innovation and collaboration management evolves. In September 2008 we launched version 8.3 of Idea Central which has an enhanced reporting structure and increased functionality in the area of corporate social networking, and we anticipate the release of 8.4 later this month which includes improvements on scalability and enterprise capabilities. Our software is modular in nature and we are exploring additional modules which may be added to the core software over the coming year.
Outlook
We are exceptionally pleased with the Company's performance in the first half of the year, generating record revenues and significantly reducing losses. Over a quarter of our existing customer base increased their expenditure with us during the half year and we have added 10 new annual fee paying customers including Novartis and Bombardier Aerospace.
It is extremely pleasing to note that Imaginatik has been responsible for saving our customers at least £170m over the past two years, and very encouraging for future prospects as organisations look to cut costs in the current climate. Despite the overall economic uncertainties we all face, with over £1.4m of expected renewals revenue to be booked in the second half of the year, and a strong pipeline of new business, we remain confident of a successful outcome as we move into what is traditionally the stronger half of our financial year.
Mark Turrell
Chief Executive
13 November 2008
Condensed unaudited consolidated interim income statement
For the six months ended 30 September 2008
| 6 months to 30 Sept 2008 | 6 months to 30 Sept 2007 | Year to 31 March 2008 | ||
| Note | £'000 | £'000 | £'000 | |
| Revenue | 1,801 | 1,151 | 3,159 | |
| Staff costs | (1,159) | (1,021) | (2,030) | |
| Depreciation written off tangible non-current assets | (30) | (18) | (57) | |
| Amortisation written off intangible non-current assets | (17) | (91) | (34) | |
| Other external charges | (136) | (68) | (173) | |
| Other operating charges | (712) | (422) | (996) | |
| Operating loss before financing and taxation | (253) | (469) | (131) | |
| Finance costs | - | (1) | (9) | |
| Finance income | 3 | - | - | |
| Loss on ordinary activities before taxation | (250) | (470) | (140) | |
| Taxation expense | - | - | - | |
| Loss on ordinary activities for the period | (250) | (470) | (140) | |
| Basic and diluted loss per share (p) | 4 | (0.19) | (0.40) | (0.12) |
All amounts are attributable to equity holders of the parent, and all arise from continuing operations. No amounts were recognised directly in equity, and therefore no separate statement of recognised income and expense has been presented.
Condensed unaudited consolidated interim balance sheet
| 30 Sept 2008 | 30 Sept 2007 | 31 March 2008 | ||
| Note | £000 | £000 | £000 | |
| ASSETS | ||||
| Non-current assets | ||||
| Property, plant and equipment | 69 | 87 | 60 | |
| Intangible assets | 83 | 117 | 100 | |
| 152 | 204 | 160 | ||
| Current assets | ||||
| Trade and other receivables | 1,582 | 1,090 | 885 | |
| Cash and cash equivalents | 494 | 108 | 1,090 | |
| 2,076 | 1,198 | 1,975 | ||
| Total assets | 2,228 | 1,402 | 2,135 | |
| EQUITY AND LIABILITIES | ||||
| Equity | ||||
| Issued capital | 82 | 73 | 78 | |
| Share premium | 2,403 | 1,690 | 2,170 | |
| Retained earnings | 6 | (1,409) | (1,584) | (1,192) |
| Total equity attributable to equity holders of the parent | 1,076 | 179 | 1,056 | |
| Liabilities | ||||
| Non-current liabilities | ||||
| Interest-bearing loans and borrowings | 5 | - | 17 | |
| Total non-current liabilities | 5 | - | 17 | |
| Current liabilities | ||||
| Interest-bearing loans and borrowings | 27 | 25 | 27 | |
| Trade and other payables | 1,120 | 1,198 | 1,035 | |
| 1,147 | 1,223 | 1,062 | ||
| Total liabilities | 1,152 | 1,223 | 1,079 | |
| Total equity and liabilities | 2,228 | 1,402 | 2,135 |
Condensed unaudited consolidated interim statement of cash flows
For the six months ended 30 September 2008
| Note | 6 months to 30 Sept 2008 | 6 months to 30 Sept 2007 | Year to 31 March 2008 | |
| £000 | £000 | £000 | ||
| Cash flows from operating activities | 7 | (782) | (701) | (210) |
| Cash flows from investing activities | ||||
| Acquisition of property, plant and equipment | (39) | (12) | (25) | |
| Acquisition of intangible fixed assets | - | - | - | |
| Net cash from investing activities | (39) | (12) | (25) | |
| Cash flows from financing activities | ||||
| Net proceeds from the issue of share capital | 237 | - | 485 | |
| Repayment of borrowings | (12) | (41) | (22) | |
| Net cash from financing activities | 225 | (41) | 463 | |
| Net increase /(decrease) in cash and cash equivalents | (596) | (754) | 228 | |
| Cash and cash equivalents at start of period | 1,090 | 862 | 862 | |
| Cash and cash equivalents at end of period | 494 | 108 | 1,090 |
Notes to the unaudited condensed consolidated interim financial statements
1. Background
Imaginatik plc (the "Company") is a company domiciled in the United Kingdom. The condensed consolidated interim financial statements of the Company for the six months ended 30 September 2008 comprise the Company and its subsidiary (together referred to as the "Group").
The condensed consolidated interim financial statements were authorised for issuance on 13 November 2008.
The interim financial statements are not statutory accounts for the purposes of S240 of the Companies Act 1985. The comparative figures for the year ended 31 March 2008 are not the Company's statutory accounts for that financial year. The financial information for the year ended 31 March 2008 is based on the statutory accounts for the financial year ended 31 March 2008 restated for the effects of the adoption of International Financial Reporting Standards in issue and adopted for use in the European Union ("IFRSs"). Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
2. Basis of preparation
The financial statements are presented in pounds sterling, rounded to the nearest thousand, unless stated otherwise. They are prepared on the historical cost basis.
These interim financial statements have been prepared using the IFRS accounting policies as adopted by the European Union (including IAS and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") that are expected to be applicable for the full reporting year in 2009. These remain subject to ongoing amendment and/or interpretation and are therefore subject to possible change. Consequently, information contained in these interim financial statements may need updating for any subsequent amendments to IFRS, or for any new standards that the Group may elect to adopt early.
The accounting policies have been applied consistently throughout the Group for purposes of these condensed unaudited consolidated interim financial statements.
3. Barter transactions
During the period the Group entered into barter transactions with certain customers for the first time. The accounting policy for this new revenue source is as follows:
The company enters into sale agreements with certain customers on a barter basis whereby the consideration for the supply of software and services by the company is the receipt of certain other goods and services from the customer instead of the payment of cash.
These barter transactions are recognised in the financial statements on the basis of the fair value of the goods and services received, and where appropriate the income and expense is spread across the period during which the service is provided.
During the period barter transactions totalling £80,000 were entered into.
4. Loss per share
Basic loss per share
The calculation of basic loss per share for the period ended 30 September 2008 was based on the loss attributable to ordinary shareholders of £249,659 (period ended 30 September 2007: £470,463; year ended 31 March 2008: £139,647) and a weighted average number of ordinary shares outstanding during the period ended 30 September 2008 of 126,304,402 (period ended 30 September 2007: 116,601,225; year ended 31 March 2008: 117,270,883).
Diluted loss per share
The options in place during the period ended 30 September 2008 and 30 September 2007 and during the year ended 31 March 2007 are considered to have an anti-dilutive effect. Therefore basic and diluted loss per share is the same for each of the three periods.
5. Segment reporting
Segment information is presented in the condensed consolidated interim financial statements in respect of the Group's geographical segments, which are the primary basis of segment reporting. The geographical segment reporting format reflects the Group's management and internal reporting structure.
Segment results include items directly attributable to a segment as well as those 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:
| 6 months to 30 Sept 2008 | 6 months to 30 Sept 2007 | Year to 31 March 2008 | |
| £000 | £000 | £000 | |
| Segment revenue | |||
| United States of America | 1,397 | 861 | 2,619 |
| Rest of the world | 404 | 290 | 540 |
| 1,801 | 1,151 | 3,159 | |
| Segment (loss)/profit | |||
| United States of America | (135) | (401) | 242 |
| Rest of the world | (115) | (69) | (382) |
| (250) | (470) | (140) |
6. Share Capital and Reserves
| 30 Sept 2008 | 30 Sept 2007 | 31 March 2008 | |
| £000 | £000 | £000 | |
| Share Capital | |||
| At the beginning of the period | 78 | 73 | 73 |
| Shares issued | 4 | - | 5 |
| At the end of the period | 82 | 73 | 78 |
| Share premium | |||
| At the beginning of the period | 2,170 | 1,690 | 1,690 |
| Shares issued in the period, net of expenses | 233 | - | 480 |
| At the end of the period | 2,403 | 1,690 | 2,170 |
| Retained earnings | |||
| At the beginning of the period | (1,192) | (1,152) | (1,152) |
| Loss for the period | (250) | (470) | (140) |
| Share-based payments | 33 | 38 | 100 |
| At the end of the period | (1,409) | (1,584) | (1,192) |
7. Cash flows from operating activities
| 6 months to 30 Sept 2008 | 6 months to 30 Sept 2007 | Year to 31 March 2008 | |
| £000 | £000 | £000 | |
| Operating loss | (253) | (469) | (131) |
| Depreciation of tangible fixed assets | 30 | 18 | 57 |
| Amortisation of intangible fixed assets | 17 | 91 | 33 |
| Net interest expense | 3 | (1) | (9) |
| Share-based payment expense | 33 | 38 | 100 |
| (Increase)/decrease in trade and other receivables | (697) | (292) | (87) |
| Increase/(decrease) in payables | 85 | (86) | (173) |
| Net cash from operating activities | (782) | (701) | (210) |