TIDMILI
RNS Number : 3271Y
Imagelinx PLC
29 February 2012
Imagelinx Plc. (the "Company" or the "Group")
Unaudited preliminary results for the year ended 31 December
2011
Imagelinx, (AIM: ILI) the provider of graphic brand management
services is pleased to announce the unaudited results for the year
ended 31 December 2011.
Key points
-- Revenue reduction of 14% on prior year following loss of a major customer in the USA.
-- Operating profit before intangible assets amortisation,
exceptional costs, depreciation and share based payments (adjusted
EBITDA) was GBP849,000 compared to GBP1,077,000 in 2010.
-- Continued high levels of cash generated from operating
activities, GBP1,375,000 (2010 GBP1,013,000).
-- Exceptional restructuring costs of GBP432,000 reflect costs
incurred in winding up operations in the USA and relocating IT
systems development from Germany to the UK.
-- USA operations wound up fully with no outstanding liabilities.
-- Healthy revenue pipeline and launch of two new business activities.
Group results highlights GBP millions 2011 2010
--------------------------------------- ------- -------
Revenue 10.35 12.06
--------------------------------------- ------- -------
Adjusted EBITDA * 0.85 1.07
--------------------------------------- ------- -------
Adjusted operating profit * 0.40 0.67
--------------------------------------- ------- -------
Exceptional costs (0.43) (0.20)
--------------------------------------- ------- -------
Intangible assets amortisation (0.23) (0.20)
--------------------------------------- ------- -------
Operating (loss) / profit (0.29) 0.25
--------------------------------------- ------- -------
Net finance costs (0.12) (0.18)
--------------------------------------- ------- -------
(Loss) / profit before tax (0.41) 0.07
--------------------------------------- ------- -------
*Adjusted is before exceptional costs, amortisation and share
based payments and reflects the underlying performance of the
Group
Enquiries:
Imagelinx
Richard
Clothier, Tel: +44 7771 644
Chairman 962
Alistair Tel: +44 7736 883934
Rae,
Chief
Executive
finnCap
Edward Tel: +44 20 7220
Frisby 0500
/
Rose
Herbert
(corporate
finance)
Victoria
Bates
(corporate
broking)
Cadogan
PR Tel: +44 20 7839
Alex 9260
Walters
Emma
Wigan
Chairman's Statement
After a year of reshaping the cost structure of the company in
2010, the loss in 2011 of most of the business of the Group's
largest client, P&G, reported in April 2011, has necessitated
more restructuring to further reduce cost as revenues have declined
during the second half. This has involved the closure of operations
in USA and at the same time the Group's important IT capability has
been relocated. Alistair Rae describes this work and also the
activity he has led to develop the business in his Chief
Executive's review.
Revenues for the year at GBP10.35 million were 14% below the
previous year with all of the reduction of GBP1.71 million
occurring in the second half. A commensurate reduction in the cost
structure has been achieved by the year end but it was not possible
to avoid an operating loss during the second half while the
necessary changes were carried out. First half profit before tax of
GBP0.60 million was eroded to a loss of GBP0.41 million for the
full year (2010 GBP0.07 million profit) with the inclusion of
GBP0.43 million of exceptional costs. Adjusted EBITDA which
excludes the effect of exceptional costs, intangible asset
amortisation and share based payments was GBP0.85 million (2010
GBP1.07 million).
An improvement in working capital resulted in a positive cash
flow for the year which reduced debt by GBP0.64 million and left a
positive cash balance of GBP0.62 million at the year-end after
funding GBP0.68 million of capital expenditure.
Marketing initiatives to replace some of the lost business were
undertaken and towards the end of the year revenues have shown some
improvement. Whilst we recognise the possible adverse effects of
uncertain consumer markets on our customers' business, the
indications during the first few weeks of the year have been
encouraging. Management can take considerable credit for reacting
quickly to the need to reduce the cost structure and secure new
business.
The Group has dealt well with the major change required to move
to a simpler, more efficient, operating structure and is in better
shape to build its earnings. On behalf of the Board, I thank all of
our employees for their contribution during a difficult year.
Richard Clothier
Chairman
Business review
Chief Executive's review
Business developments
The major event of 2011 was the loss of our major client in the
USA. This was announced in April of 2011. Work for this client
declined rapidly throughout the second half of the year while
revenue from other clients remained broadly stable.
As a result of this loss and the need to reduce costs, the Group
reported a loss before tax for the year of GBP413,000. This loss
was caused by exceptional costs of GBP432,000 which mostly related
to the exiting of our business with a major customer in the USA.
This compares to a profit in 2010 of GBP73,000. Our adjusted
operating profit before interest and exceptional costs, annual
intangible assets amortisation charge and share based payments,
however was GBP401,000 in 2011 (2010: GBP666,000). Clearly this was
a disappointing performance against last year and against the more
positive first half of 2011 when the business in the USA was
improving in profitability, albeit with still more to do. However,
the company moved quickly to reduce its costs to match the
reduction in revenue and this process is almost complete, with no
remaining costs in the USA that relate to that activity.
In the second half of last year, we closed two offices in the
USA. We also moved our IT development office from Germany to the UK
in order to both reduce our costs and also improve the
communication between our IT capability and the business and our
clients. Total exceptional costs relating principally to those
actions were GBP432,000 of which GBP334,000 were cash and the
balance of GBP98,000 related to the write-off of fixed assets in
the USA that we were not able to sell or redeploy elsewhere in the
Group. Most of the exceptional cash payments were redundancy costs,
as well as the payment of some loyalty bonuses for staff who stayed
behind in the USA and in Germany as we transitioned business and
workloads.
We continue to invest in the business, with total new capital
expenditure of GBP680,000. This included not only updating our main
data storage capability but also completing the investment into our
latest management information system as well as into studio tools
which will further enhance the capacity and efficiency of our
studios. We are investing in the current year into new flexo
plate-making equipment in support of our clients which will provide
further improvements in quality and capability and keep us at the
forefront of innovation in this industry.
We took the decisions early in 2011 that we would increase our
marketing activity in Europe and that we would also establish two
separate business activities in addition to our core brand
management business. The first of these two business activities is
our graphic design business which was established almost five years
ago and which has now been given a separate brand identity, The
Pack Republic. While our design capability was originally an
extension of our pre-press activities, it has now worked for almost
every single one of our clients providing them with an effective
design function and has grown each year from inception. This is not
only at a low cost but more importantly, designs are created with
both a deep understanding of the brand and the knowledge that the
design intent can be maintained in terms of print feasibility. Our
second new business activity, The Pack Logic builds on our industry
wide knowledge and is an advisory based activity, providing advice
to clients on solutions across their packaging supply chain. This
has led to one success already and we are currently in discussions
with two other clients on the needs of their business to improve
their packaging process. In addition, we have increased our sales
team at the end of last year with two additional sales people as we
still see good opportunities in Europe. We are still awaiting and
negotiating on the outcome for three tenders for new business and
this year, we are seeing three existing clients re-tender their
business.
Business awards
As announced in January, we saw towards the end of 2011 an
improvement in revenue from some of the clients who had awarded us
additional business a year earlier. In addition, we were awarded a
major drinks brand from one of our existing clients and work
commences for this client at the beginning of the second quarter of
this year. We were also successful in being awarded the pre-press
activity for the European division of another major US business for
whom we had carried out some work earlier in the year. This work
began at the end of 2011 and has made a useful contribution to the
current year already. A third client awarded us some of their
pre-press activity in Europe and this is expected to start also in
the second quarter. Another of our clients has acquired a number of
additional brands over the last year and we will commence work on
these in the first quarter of this year. Finally, one of our
existing clients had, as expected, a very subdued year in terms of
marketing activity in 2010 but this is now expected to treble in
the current year compared to last year.
Strategy
We have continued to make good progress on the implementation of
key elements of our strategy.
Matching our services to the needs of our customers, adding long
term value to customer relationships
The Group's customers continually create new products and
designs and seek to extend and enhance their existing brands while
maximising brand equity and consistency across the regions in which
they sell their products, whether these regions are local or global
in nature. Imagelinx continues to match its service offerings to
meet its customers needs and, where necessary, adapt services as
their needs change and grow. The Group's adaptability is
exemplified by its ability to scale its service offerings, quickly
and efficiently, to set up new locations to address structural
changes in a customer's global branding strategy and to balance
work load between locations in order to deal with surges in
promotional activity.
Leadership through technology led innovation, research and
development
The Group is dedicated to being at the forefront of and, in a
number of cases, initiating technological process developments in
its industry that have applications for a variety of purposes
including, but not limited to, reliability and speed. To build upon
its competitive position, Imagelinx is actively involved in system
and software technical evaluations of various computer systems and
software manufacturers and also independently pursues software
development for implementation at its operating facilities. The
Group continually invests in new technology designed to support its
high quality graphic services. The Group concentrates its efforts
in understanding systems and equipment available in the marketplace
and creating solutions using off-the-shelf products customised to
meet a variety of specific customer and internal requirements. ICON
Core and ICON Tracker are examples of Imagelinx's commitment to its
own research and development.
As an integral part of our commitment to research and
development, the Group developed its own internal technical team,
whose dedicated role is to research and evaluate new technologies
in the graphic arts, workflow and data management and
communications arenas. This team's role is to commercially appraise
new equipment and software and then disseminate the information to
the entire Group and to customers as appropriate.
Margin improvement through the use of technology
The leveraging of externally sourced and internally developed
"best of breed" systems has improved underlying productivity and
quality of service. The Group is now able to deal more effectively
with peaks of customer demand, being able to support process change
within our customers operations.
Strategic acquisitions to add capability and competence
The two acquisitions, since 2007, of Tecnolink and Brandmark
International are fully integrated with the core business and are
generating the predicted sales growth and operating margins.
Imagelinx typically has sought to acquire businesses that represent
niche market companies with target customer lists, excellent
customer services or proprietary products, solid management and/or
offer the opportunity to expand into new service or geographic
markets. Following on from 2010's consolidation phase, we continue
to be active in the search for strategic bolt on acquisitions and
supported by a clean balance sheet expect that these will continue
to form an important part of the development of the Group in the
years ahead.
Employees
We recognise that it is difficult to recruit and retain high
quality people. The Group has sought to balance resource and
workload by the use of skilled temporary staff and planned
overtime, in order to minimise the effects on individuals.
Markets
The Group's strategy is to target markets that have long-term
growth characteristics driven, in particular, by a highly
fragmented supplier base where brand owners are looking for
supplier consolidation as a way of driving out supply chain costs
and improving turnaround times.
There is also a whole layer of brand owners that operate in the
layer below the global super-brands and these clients look to draw
more on our technical and process consultancy services to bring
them best practice in an accelerated manner. Our business is very
customer centric and this further drives where we physically need a
presence around the world.
Outlook
With the reduction in costs and the growth of new business, the
Group has weathered the loss of business elsewhere and I am
grateful to all of our colleagues throughout the business and who
have helped with this difficult transition. I am pleased to be able
to report that the Group was profitable in January 2012 and
activity and revenue levels have been elevated in both January and
February, which gives us confidence that we should see a good
recovery from last year.
Alistair Rae
Chief Executive
Financial Review
Basis of reporting
The preliminary results for the year ended 31 December 2011,
which are an abridged statement of the full Annual Report, have
been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union, and those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS. The following accounting standards, amendments and
interpretations issued by IASB and IFRIC are effective for the
Group's accounting period beginning on or after 1 November 2010 but
had no material effect on the results or financial position of the
Group disclosed in these financial statements:
-- Amendment to IFRS 1 - _First time adoption on financial instrument disclosures'
-- Amendments to IFRS 1 for additional exemptions
-- Amendment to IFRS 2 - 'Share based payments - Group
cash-settled share-based payment transactions'
-- Improvements to IFRSs (2009)
-- Amendments IAS 32 - _Presentation on classification of rights issues'
-- IFRIC 19 - 'Extinguishing financial liabilities with equity instruments'
The preliminary results have been prepared on a going concern
basis. The Directors of Imagelinx plc are confident that, on the
basis of current financial projections and facilities available and
after considering sensitivities, the Group has sufficient resources
for its operational needs for at least the next 12 months.
The preliminary results do not constitute the statutory accounts
of the Group within the meaning of Section 434 of the Companies Act
2006. The statutory accounts for the year ended 31 December 2010
have been filed with the Registrar of Companies. The auditors have
reported on those accounts and on the statutory accounts for the
year ended 31 December 2011, which will be filed with the Registrar
of Companies following the Annual General Meeting. Both the audit
reports were unqualified and did not contain any statement under
section 498 of the Companies Act 2006.
Accounting policies
The Group has reviewed its accounting policies in accordance
with IAS 8 and determined that they are appropriate for the Group
and have been consistently applied.
Results overview
Revenue and profit
The Group has delivered a solid financial performance within
very challenging market conditions. Revenue decreased by 14.2% to
GBP10.35 million (2010: GBP12.06 million). The decrease was as a
result of the loss of P&G as the Group's largest customer.
The gross margin fell from 39.6% to 33.8% compared to the prior
year which was caused by the reduction in revenue outpacing the
reduction in costs over the last few months of 2011. Adjusted
operating profit before exceptional costs, share based payments and
amortisation was 3.9% compared to 5.5% in 2010.
Funding and Cash
Group EBITDA, combined with a considerable improvement in our
working capital, has seen cash flow from operating activities
improve from GBP1,013,000 in 2010 to GBP1,375,000 in 2011. Cash
outflow from investing activities of GBP664,000 has reduced from
2010 (GBP861,000) and a reduction of GBP17,000 in financing costs
of GBP233,000 (2010:GBP250,000), has meant that the net cash
position has improved from a small indebtedness of GBP19,000 at the
end of 2010 to GBP621,000 in net cash at the end of 2011, an
increase of GBP640,000.
Net cash including obligations under finance leases has improved
to GBP325,000 (2010: Net debt of GBP263,000).
The Group operates with an invoice factoring facility that
provides a maximum draw down facility of GBP1,000,000. From the end
of the first quarter the Group's month end cash position has been
positive.. The GBP102,000 cost of running the Lloyds invoice
factoring facility (2010: GBP130,000) reflects a lower reliance on
this working capital line. Undrawn facilities at the end of the
year were GBP999,000.
Investment activity
The Group has reviewed its research and development costs in the
light of IAS 38 and as expected capitalised GBP212,000 of
internally developed systems cost, incurred in the first half of
the year, as an intangible asset. The Directors believe that
development work is now complete and that the resulting asset is
estimated to have a useful economic life of five years.
This year's capital expenditure has seen the completion of a
fundamental upgrade to all operational hardware and software
improving load sharing efficiencies between locations and providing
best in class data storage and disaster recovery
infrastructure.
Taxation
There is no tax charge for 2011 (2010: Nil). With accumulated
trading tax losses in the UK of GBP14 million plus further
accumulated capital losses. We are not expecting to pay corporation
tax for the foreseeable future. See note 10 for deferred tax
position.
Earnings per share
Basic earnings per share fell from 0.03p per share to a loss of
0.14p per share. On a diluted basis, basic loss per share fell to
0.14p (2010: earnings per share of 0.02p). Note 7 provides details
of these calculations and those of the measures of diluted earnings
per share for the period.
Dividend
Analyses of revenue and operating profit or loss by activity are
shown in notes 2 and 3. The Group loss for the year amounted to
GBP413,000 (2010: profit of GBP73,000). The Directors at the moment
are investing in the business and therefore do not recommend
payment of a dividend.
Going concern
The Directors continually monitor the financial position of the
Group, taking into account the latest forecasts of future cash
flows and analysis of these forecasts, sensitised in respect of the
key uncertainties facing the Group's ability to generate cash. The
Directors consider that the major uncertainties are the timing of
actual versus targeted sales in Imagelinx while it is building up
the customer base for its services, and that such uncertainties
have increased given the deterioration in the global economic
climate. The Board has identified cash savings which can be
realised in the short term, if necessary, while minimising the
effect on the Group's global operating capability.
Based on this information and assessment, and taking into
account current liquid resources the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the
financial statements.
The financial statements do not reflect any adjustments which
would be required if the going concern assumption was not
appropriate. Given the uncertainty described above it is not
currently possible to determine the extent and quantification of
such adjustments but these might include the write down of the
carrying value of goodwill at Group level and the investments in
the Company's subsidiaries at Company level, to the best estimate
of their net realisable value on disposal, and the write down of
certain assets and the disclosure of, or provision for, additional
liabilities.
Impairment review of intangible assets
The Board has undertaken reviews at the half year and full year
in accordance with IAS 36, for impairment of the carrying value of
the goodwill and intangible assets associated with Imagelinx UK
Limited. As a result of the most recent review, no impairment has
been taken on the goodwill. The total goodwill now held in the
Group is GBP4.4m, customer lists and relationships now have a net
book value of GBPnil having being fully amortised by GBP195,000 in
the year, and other intangible assets are GBP352,000 which have
been amortised by GBP38,000.
The carrying value of the investments in Imagelinx UK Limited in
the Company balance sheet is GBP4.0 million.
Share based payments
The share based payment charge for 2011 was GBP26,000, compared
to GBP16,000 in 2010. This increase arises because of new share
options granted to Executive Directors in 2011, offset by the
impact of leavers and options lapsing.
Principal risks and uncertainties
There are many risks facing a global Group such as Imagelinx;
market and operational as well as financial. Our challenge is to
identify those risks that are most relevant and develop appropriate
methods to avoid or mitigate them.
The principal risks and uncertainties and the way we aim to
manage them are detailed here.
The Group's operating results may be adversely affected by
issues that affect its customers spending decisions during periods
of economic weakness or uncertainty
The Group's revenues are derived from customers in a variety of
industries, some of whose product introduction, marketing and
advertising spending levels can be subject to significant
reductions based on changes in, among other things, general
economic conditions. Imagelinx's operating results may reflect its
customers order patterns and its business is sensitive to the
effects of economic downturns or decreased business and consumer
spending on its customers businesses. In addition, because the
Group's services cover a variety of markets, it is subject to
economic conditions in each of these markets. Circumstances that
result in reductions in the Group's customers investment in product
introduction and innovation or marketing budgets can negatively
impact the Group's sales volume and revenues, its margins and its
ability to respond to competition or to take advantage of business
opportunities.
Our response has been to further strengthen the principal of
joint team working with our customers where we work together to
balance resource with medium term requirements. This increased
visibility of pipeline allows the Group to better plan its required
capacity levels, protecting overall margins. Our strategy for being
a cost effective supplier of services has also paid dividends in so
far as price is now a primary agenda item not just quality of
service for global brand owners.
The Group is dependent on certain key customers
Since 2009 the Group's top six customers have accounted for
approximately 80% percent of its revenue. Since the loss of our
largest customer, during the year, the remaining top five accounts
provide approximately sixty percent of core revenue. The top ten
remaining customers providing approximately 83% of core revenue.
While Imagelinx seeks to build long-term customer relationships,
revenues from any particular customer can fluctuate from period to
period due to customer's purchasing patterns, which, with respect
to the Group's consumer product company customers, may be driven by
increases or decreases in their level of investment in brand
enhancements and product introductions. Any termination of a
business relationship with, or a significant sustained reduction in
business received from, any of the Group's principal customers for
any reason could have a material adverse effect on the
business.
The remaining five largest customers have traded with us for
over five years, during which time we have developed a strong
interdependence and sense of partnership. Relationships often lie
beyond the procurement level and extend far into the supply chain.
This not only helps drive down costs to the benefit of our
customers, it also increases the likelihood of retaining customers,
always provided that we are supplying the quality of product and
service required at a competitive price. Our proprietary IT systems
provided to our customers is an example of how we can cement and
deepen our relationships with customers.
The Group is subject to unpredictable order flows
Although approximately two thirds of the Group's revenues are
derived from customers with whom the Group has contractual
agreements ranging from one to three years in duration, individual
assignments from customers are on an "as needed",
project-by-project basis. The contractual agreements do not require
minimum volumes, therefore, depending on the level of activity with
its customers, the Group can experience unpredictable order flows.
While technological advances have enabled Imagelinx to shorten
considerably its production cycle to meet its customers increasing
speed-to-market demands, the Group may in turn receive less advance
notice from its customers of upcoming projects or the cancellation
or postponement of anticipated projects. Although Imagelinx has
established long-standing relationships with many of its customers
and believes its reputation for quality service is excellent, the
Group is not able to predict with certainty the volume of its
business even in the near future and will remain susceptible to
unexpected fluctuations in customer spending.
The supply of sub-standard products and services would damage
the Group's reputation in the market
Imagelinx's reputation as a business partner relies heavily on
its ability to supply quality products on time and in full.
Consequences of not doing so might include loss of market share,
financial costs and loss of revenue.
The Group has been ISO 9001:2008 certified since 1998 and has
recently passed a full audit of control and quality procedures. As
part of our regularly monitored and internally reported operational
Key Performance Indicators for each customer and site, jobs
completed on time and in full and associated error rates are
reviewed at Board level. This review process follows a formal and
documented "report, review and correct" cycle to ensure there is
corrective action taken to ensure the quality of our products is
maintained to high levels.
The Group operates in a highly competitive industry which may
reduce market share and margins
Imagelinx competes with other providers of graphic imaging and
creative services. The market for such services is highly
fragmented, with several national and many regional participants in
Europe and the United States. The Group faces, and will continue to
face, competition in its business from many sources, including
national and large regional companies, some of which have greater
financial, marketing and other resources than we have. In addition,
local and regional firms specialising in particular markets compete
on the basis of established long-term relationships or specialised
knowledge of such markets. Aggressive pricing from competitors may
cause a reduction in revenue and margins.
To minimise this risk we aim to build long term relationships
with our customers with the aim of becoming an integral part of
their supply chain, helping to drive down costs. We also aim to
ensure we are the supplier of choice by focusing on innovation and
value creation for our customers, maintaining the highest standard
of operational excellence to achieve the target "partner supplier"
status required in highly competitive markets.
The Group is dependent on IT systems for delivery of mission
critical services
The failure of our IT systems for a sustained period of time
could put aspects of the Group's business at risk.
The Group has a disaster management plan that is reviewed
periodically and when major changes in infrastructure or operating
systems occur. The Group has a system of at least daily intra-site
and inter-site backup of all operational data and archives. Secure
off-site storage is also used for weekly and monthly backups of
archive data. Mission critical hardware is specified with an
appropriate level of redundancy and failover. There is an extensive
IT team to monitor and secure operation of the Group's systems.
Financial Statements
Consolidated income statement
2011 2010
(Unaudited) (Audited)
Note GBP'000 GBP'000
------------------------------------------------------------------- ------ ------------- -----------
Revenue 2 10,347 12,059
Cost of sales (6,849) (7,283)
------------------------------------------------------------------- ------ ------------- -----------
Gross profit 3,498 4,776
Other operating income 41 19
Administrative expenses
------------------------------------------------------------------- ------ ------------- -----------
Excluding exceptional costs (3,164) (4,145)
Exceptional costs 5 (432) (196)
------------------------------------------------------------------- ------ ------------- -----------
Administrative expenses including exceptional costs (3,596) (4,341)
Other operating expenses (233) (198)
------------------------------------------------------------------- ------ ------------- -----------
Operating (loss) / profit 3 (290) 256
Finance costs 6 (123) (183)
------------------------------------------------------------------- ------ ------------- -----------
(Loss) / profit before tax (413) 73
Tax expense - -
------------------------------------------------------------------- ------ ------------- -----------
(Loss) / profit after tax attributable to owners of the parent company (413) 73
--------------------------------------------------------------------------- ------------- -----------
(Loss) / earnings per share
Basic 7 (0.14p) 0.03p
Diluted 7 (0.14p) 0.02p
------------------------------------------------------------------- ------ ------------- -----------
All of the activities of the Group are classed as
continuing.
Consolidated statement of comprehensive income
2011 2010
(Unaudited) (Audited)
GBP'000 GBP'000
------------------------------------------------------------------------------------ --- ------------- -----------
(Loss) / profit for the year (413) 73
Exchange differences on translation of foreign operations (54) (9)
----------------------------------------------------------------------------------------- ------------- -----------
Total comprehensive income for the year attributable to owners of the Parent Company (467) 64
----------------------------------------------------------------------------------------- ------------- -----------
Consolidated statement of financial position
31 December 31 December
Note 2011 2010
(Unaudited) (Audited)
GBP'000 GBP'000
--------------------------------------------------- ----- ------------- ------------
Assets
Non current assets
Goodwill 8 4,384 4,384
Other intangible assets 9 352 402
Property, plant and equipment 1,248 1,301
--------------------------------------------------- ----- ------------- ------------
5,984 6,087
--------------------------------------------------- ----- ------------- ------------
Current assets
Inventories 78 80
Trade and other receivables 2,253 3,628
Cash and cash equivalents 622 162
--------------------------------------------------- ----- ------------- ------------
2,953 3,870
--------------------------------------------------- ----- ------------- ------------
Total Assets 8,937 9,957
--------------------------------------------------- ----- ------------- ------------
Liabilities
Current liabilities
Trade and other payables (1,030) (1,481)
Obligations under finance leases (134) (108)
Bank overdrafts and loans (1) (181)
--------------------------------------------------- ----- ------------- ------------
(1,165) (1,770)
--------------------------------------------------- ----- ------------- ------------
Non current liabilities
Obligations under finance leases (162) (136)
Total Liabilities (1,327) (1,906)
--------------------------------------------------- ----- ------------- ------------
Net Assets 7,610 8,051
--------------------------------------------------- ----- ------------- ------------
Equity
Equity attributable to the owners of the parent:
Share capital 289 289
Share premium account - -
Translation reserve (94) (40)
Retained earnings 7,415 7,802
7,610 8,051
--------------------------------------------------- ----- ------------- ------------
Consolidated statement of changes in equity
Share
Share premium Translation Retained
capital reserve reserve earnings Total
(Unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- --------- --------- ------------ ---------- --------
At 1 January 2010 14,452 38,644 (31) (45,094) 7,971
Capital reduction (14,163) (38,644) - 52,807 -
Credit in respect
of share based payments - - - 16 16
-------------------------- --------- --------- ------------ ---------- --------
Transactions with
owners (14,163) (38,644) - 52,823 16
-------------------------- --------- --------- ------------ ---------- --------
Profit for the year - - - 73 73
Other comprehensive
expense:
Currency translation
differences - - (9) - (9)
Total comprehensive
(expense) / income - - (9) 73 64
-------------------------- --------- --------- ------------ ---------- --------
At 31 December 2010 289 - (40) 7,802 8,051
-------------------------- --------- --------- ------------ ---------- --------
Credit in respect
of share based payments - - - 26 26
-------------------------- --------- --------- ------------ ---------- --------
Transactions with
owners - - - 26 26
-------------------------- --------- --------- ------------ ---------- --------
Loss for the year - - - (413) (413)
Other comprehensive
expense:
Currency translation
differences - - (54) - (54)
Total comprehensive
expense - - (54) (413) (467)
-------------------------- --------- --------- ------------ ---------- --------
At 31 December 2011 289 - (94) 7,415 7,610
-------------------------- --------- --------- ------------ ---------- --------
Consolidated statement of cash flows
2011 2010
(Unaduited) (Audited)
GBP'000 GBP'000
---------------------------------------------------------------------- -------------- -----------
Operating activities:
Operating (loss) / profit (290) 256
Income tax paid - -
----------------------------------------------------------------------- ------------- -----------
(290) 256
Adjustment to reconcile operating (loss) / profit to net cash flows:
Non-cash
Depreciation of property, plant and equipment 448 411
Amortisation of intangible assets 233 198
Share based payments 26 16
Impairment of intangible fixed assets 43 -
Loss on disposal of property, plant and equipment 43 -
Working capital adjustments
Decrease / (increase) in trade and other receivables 1,375 (70)
Decrease in inventories 2 29
(Decrease) / increase in trade and other payables (505) 173
Net cash generated from operating activities 1,375 1,013
----------------------------------------------------------------------- ------------- -----------
Investing activities
Purchases of property, plant and equipment (454) (654)
Expenditure on intangible assets (226) (207)
Sale of property, plant and equipment 16 -
----------------------------------------------------------------------- ------------- -----------
Net cash used in investing activities (664) (861)
----------------------------------------------------------------------- ------------- -----------
Financing activities
Interest paid (21) (52)
New finance leases 162 195
Payment of finance lease liabilities (110) (68)
Facility charges (102) (130)
----------------------------------------------------------------------- ------------- -----------
Net cash flows used in financing activities (71) (55)
----------------------------------------------------------------------- ------------- -----------
Net increase in cash and cash equivalents 640 97
Cash and cash equivalents at 1 January (19) (125)
Net foreign exchange difference - 9
----------------------------------------------------------------------- ------------- -----------
Cash and cash equivalents at 31 December 621 (19)
----------------------------------------------------------------------- ------------- -----------
Cash and cash equivalents comprise:
Cash and cash equivalents 622 162
Bank overdrafts (1) (181)
----------------------------------------------------------------------- ------------- -----------
621 (19)
----------------------------------------------------------------------- ------------- -----------
Notes to the preliminary announcement
1. Accounting policies
The Group has reviewed its accounting policies in accordance
with IAS 8 and determined that they are appropriate for the Group
and have been consistently applied.
The consolidated financial statements are presented in
accordance with IAS1 Presentation of Accounting Statements (revised
2007). The Group has elected to present the statement of
comprehensive income in two statements; 'the Consolidated income
statement' and 'Consolidated statement of comprehensive
income'.
The consolidated financial statements of Imagelinx Plc have been
authorised for issue in accordance with a resolution of the
Directors passed on 24 February 2012. Imagelinx Plc is a public
limited Company, incorporated and domiciled in the UK and its
shares are publicly traded on AIM.
The preliminary results for the year ended 31 December 2011,
which are an abridged statement of the full Annual Report, have
been prepared in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union, and those parts
of the Companies Act 2006 applicable to companies reporting under
IFRS. The following accounting standards, amendments and
interpretations issued by IASB and IFRIC are effective for the
Group's accounting period beginning on or after 1 November 2010 but
had no material effect on the results or financial position of the
Group disclosed in these financial statements:
-- Amendment to IFRS 1 - _First time adoption on financial instrument disclosures'
-- Amendments to IFRS 1 for additional exemptions
-- Amendment to IFRS 2 - 'Share based payments - Group
cash-settled share-based payment transactions'
-- Improvements to IFRSs (2009)
-- Amendments IAS 32 - _Presentation on classification of rights issues'
-- IFRIC 19 - 'Extinguishing financial liabilities with equity instruments'
The preliminary results have been prepared on a going concern
basis. The Directors of Imagelinx are confident that, on the basis
of current financial projections and facilities available and after
considering sensitivities, the Group has sufficient resources for
its operational needs for at least the next 12 months.
The preliminary results do not constitute the statutory accounts
of the Group within the meaning of Section 434 of the Companies Act
2006. The statutory accounts for the year ended 31 December 2010
have been filed with the Registrar of Companies. The audit report
was unqualified and did not contain any statement under section 498
of the Companies Act 2006.
The Group financial statements in this report have been prepared
in accordance with IFRS, as adopted for use in the EU, together
with the associated IFR Interpretations Committee (IFRIC)
interpretations and those parts of the Companies Act 2006
applicable to entities reporting under IFRS. The consolidated
financial statements have been prepared using the measurement bases
specified by IFRS for each type of asset, liability, income and
expense.
The Directors continually monitor the financial position of the
Group, taking into account the latest forecasts of future cash
flows and analyses of these forecasts, sensitised in respect of the
key uncertainties facing the Group's ability to generate cash. The
Directors consider that the Group's ability to continue as a going
concern is dependent on the timing of actual versus targeted sales
in Imagelinx while it is building up the customer base for its
services. Based on forecasts performed we are satisfied that the
Group has sufficient resources to continue as a going concern for
the foreseeable future.
2. Revenue and segmental analysis
Imagelinx Plc operates in only one segment, that of packaging
graphics services. The geographical analysis of operations is as
follows:
Segmental analysis by activity
------------------------------------------- ------------- -----------
2011 2010
(Unaudited) (Audited)
GBP'000 GBP'000
------------------------------------------- ------------- -----------
Revenue by origin from external customers
UK 8,773 9,563
US 1,574 2,496
------------------------------------------- ------------- -----------
Total revenue from external customers 10,347 12,059
------------------------------------------- ------------- -----------
The entity derives its revenue from the provision of packaging
graphics services. During 2011 GBP3.8m or 36% of the Group's
revenue depended on a single customer. (2010: GBP5.4m or 45%). This
customer was lost during 2011.
2011 2010
(Unaudited) (Audited)
GBP'000 GBP'000
------------------------------------------- ------------- -----------
Segment result
UK 407 1,334
Germany 79 (380)
US (344) (502)
------------------------------------------- ------------- -----------
Operating result pre exceptional costs 142 452
Exceptional costs (432) (196)
------------------------------------------- ------------- -----------
Operating result (290) 256
Finance costs (123) (183)
------------------------------------------- ------------- -----------
(Loss) / profit before tax (413) 73
Tax expense
UK (4) -
Overseas 4 -
------------------------------------------- ------------- -----------
(Loss) / profit after tax (413) 73
------------------------------------------- ------------- -----------
Other information
Capital additions
UK 672 605
Germany - 9
US 8 247
------------------------------------------- ------------- -----------
680 861
------------------------------------------- ------------- -----------
Depreciation, amortisation and impairment
UK (586) (513)
Germany - (9)
US (138) (87)
------------------------------------------- ------------- -----------
(724) (609)
------------------------------------------- ------------- -----------
2011 2010
(Unaudited) (Audited)
GBP'000 GBP'000
--------------------------------- ------------- -----------
Statement of financial position
Assets
UK 8,586 9,193
Germany 342 27
US 9 737
--------------------------------- ------------- -----------
8,937 9,957
--------------------------------- ------------- -----------
Liabilities
UK (1,190) (1,641)
Germany (67) (7)
US (70) (258)
--------------------------------- ------------- -----------
(1,327) (1,906)
--------------------------------- ------------- -----------
Net assets 7,610 8,051
--------------------------------- ------------- -----------
3. Operating (loss) / profit
The operating (loss) / profit for the year is stated after
charging:
2011 2010
(Unaudited) (Audited)
GBP'000 GBP'000
----------------------------------------------- ------------- -----------
Depreciation of property, plant and equipment 448 411
Amortisation of intangible assets 233 198
Impairment of intangible fixed assets 43 -
Operating lease costs - land and buildings 306 320
Operating lease costs - other 60 36
Staff costs (see note 4) 5,741 7,122
Net foreign exchange losses 33 111
Research and development 249 172
----------------------------------------------- ------------- -----------
Analysis of auditor's remuneration is as follows:
2011 2010
(Unaudited) (Audited)
GBP'000 GBP'000
------------------------------------------------------------ ------------- -----------
Statutory audit of the Parent Company financial statements 25 31
Statutory audit of subsidiary financial statements 30 30
Other services relating to taxation 4 35
59 96
------------------------------------------------------------ ------------- -----------
4. Staff costs
Staff costs (including Directors) are as follows:
2011 2010
(Unaudited) (Audited)
GBP'000 GBP'000
----------------------- ------------- -----------
Wages and salaries 4,988 6,348
Social security costs 608 610
Other pension costs 119 148
Share based payment 26 16
----------------------- ------------- -----------
5,741 7,122
----------------------- ------------- -----------
The average monthly number of employees during the year was made
up as follows:
2011 2010
(Unaudited) (Audited)
No. No.
---------------- ------------- -----------
Direct labour 104 132
Administration 28 32
---------------- ------------- -----------
132 164
---------------- ------------- -----------
5. Exceptional costs
Exceptional costs relate to restructuring and redundancies in
North America and UK following loss of P&G and also redundancy
following transfer of IT development team from Germany to UK.
6. Finance costs
2011 2010
(Unaudited) (Audited)
GBP'000 GBP'000
--------------------------------------- ------------- -----------
Interest on bank overdrafts and loans 15 32
Interest on obligations under finance
leases 6 21
Facility charges 102 130
123 183
--------------------------------------- ------------- -----------
Facility charges represent cost of invoice discounting
facilities provided by Lloyds.
7. (Loss) / earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
2011 2010
(Unaudited) (Audited)
GBP'000 GBP'000
----------------------------- ------------- ----------
(Loss) / profit for the year (413) 73
----------------------------- ------------- ----------
Number of shares
2011 2010
(Unaudited) (Audited)
Number Number
----------------------------------------------------------------------------------------- ------------- ------------
Weighted average number of ordinary shares for the purposes of basic earnings per share 289,038,635 289,038,635
Effect of dilutive potential ordinary shares: Share options - 5,674,603
----------------------------------------------------------------------------------------- ------------- ------------
Weighted average number of ordinary shares for the purposes of diluted earnings per share 289,038,635 294,713,238
----------------------------------------------------------------------------------------- ------------- ------------
In accordance with IAS 33, diluted earnings per share is taken
as being equal to basic earnings per share where the Group has
recorded a loss, as the effect of including share options is
anti-dilutive.
8. Goodwill
(Unaudited) GBP'000
------------------------- --------
Cost:
At 1 January 2011 and
At 31 December 2011 10,186
------------------------- --------
Accumulated impairment:
At 1 January 2011 and
At 31 December 2011 5,802
Carrying amount:
At 31 December 2011 and 4,384
------------------------- --------
At 1 January 2011
Goodwill is attributed to the following cash generating
unit:
GBP'000
-------------- --------
Imagelinx UK 4,384
-------------- --------
Goodwill has been tested for impairment by assessing the value
in use of the relevant cash generating unit. The value in use
calculations are based on projected cash flows from financial
budgets approved by the Board of Directors for the years 2012 to
2014. The growth rates used in these forecasts are 2012: -20%,
2013: 10% and 2014: 0%. Projected cash flows, pre-tax are
discounted at 15.75% per annum (2010: 19.1%) to calculate their net
present value. Cash flows beyond the three year period are
extrapolated using a 2.25% growth rate (2010: 2.25%).
Key assumptions included in the carrying amount calculation
include:
-- Revenue and margins: Forecasts are based on management
analyses of revenue for the budget projections. Consideration was
given to past experience and knowledge of future contracts
-- Exchange rates: Forecasts are based on analysis by management
of factors likely to affect exchange rates for the budget
projections including interest rates and economic growth rates.
If revenue growth for 2013 was zero instead of 10%, no
impairment write down would be required. As a result of these
tests, no impairment is considered necessary.
9. Other intangible assets
Assets under construction Customer lists
Internally generated software and
development costs relationships Total
(Unaudited) GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------------------------- ---------------------------------- --------------- --------
Cost:
At 1 January 2011 - 207 987 1,194
Additions during the year 14 212 - 226
Impairment - (43) - (43)
--------------------------- -------------------------- ---------------------------------- --------------- --------
At 31 December 2011 14 376 987 1,377
--------------------------- -------------------------- ---------------------------------- --------------- --------
Accumulated amortisation:
At 1 January 2011 - - 792 792
Provided during the year - 38 195 233
--------------------------- -------------------------- ---------------------------------- --------------- --------
At 31 December 2011 - 38 987 1,025
--------------------------- -------------------------- ---------------------------------- --------------- --------
Net book value:
--------------------------- -------------------------- ---------------------------------- --------------- --------
At 31 December 2011 14 338 - 352
--------------------------- -------------------------- ---------------------------------- --------------- --------
At 1 January 2011 - 207 195 402
Customer lists and relationships are amortised over five years.
The Group has performed a valuation of the customer lists and
relationships and considered its results to be a fair reflection of
the value of the intangible assets. The review and the assumptions
used are the same as those used in the goodwill impairment review
detailed in note 8. Internally generated software consists of the
new order processing system. The Group has performed a valuation of
the revenue and profit that derives through the system and
considers that this supports the value of the intangible asset.
Asset under construction represents consultancy in respect of
alternative internal systems.
10. Deferred taxation
The Group has an overall deferred tax asset position as shown in
the table below. However, none of this has yet been recognised as
the Group is not expected to make sufficient taxable profits to
absorb these amounts in the forseeable future.
Not recognised Not recognised
2011 2010
(Unaudied) (Audited)
GBP'000 GBP'000
---------------------------------------------- --------------- ---------------
Depreciation in excess of capital allowances (207) (264)
Other temporary differences (13) (64)
Tax losses carried forward (8,979) (11,856)
---------------------------------------------- --------------- ---------------
(9,199) (12,184)
---------------------------------------------- --------------- ---------------
The reduction in the unrecognised deferred tax asset of
GBP2,985,000 has, in the most part, been caused by the closure of
US and German subsidiaries. The accumulated losses sitting in these
companies can no longer be offset against future profits and has
therefore been removed from the calculation. GBP4,351,000 of the
deferred tax asset relates to capital losses which are unlikely to
be utilized against capital gains in the future
11. Annual report and accounts
Copies of the annual report and accounts will be dispatched to
shareholders in due course. Copies will also be available on the
Company's website (www.imagelinx.co.uk) and from the registered
office of the Company; Julias Way, Station Park, Lowmoor Road,
Kirkby-in-Ashfield, Nottinghamshire, NG17 7RB.
12. Annual General Meeting
The AGM will be held at the offices of DWF LLP, Capital House,
85 King William Street, London, EC4N 7BL on 9 May 2012 at 10.00
a.m.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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