Imagelinx Announcements

Imagelinx PLC
10 March 2008

IMAGELINX PLC

Final results for the year ended 31 December 2007

Group Highlights

? Sales growth of 27% on prior year as a result of Tecnolink acquisition
and Danone contributing in 2007.
? Spend from existing clients was lower than expected but this was offset
by cost savings.
? Operating loss before exceptional items reduced by £1.2m to £0.8m (2006:
£2.0m)
? Second half 2007 result was break-even before non-cash items
(depreciation, amortisation and share based payments).
? Cash generation in second half was £245,000.
? Productivity based on sales per head increased by 14% on prior year.
? New clients won in second half of 2007 have begun contributing strongly
to 2008 revenues.

+------------------------------------------------------+---------+--------+
|Group Results Highlights - £ millions | 2007 | 2006 |
+------------------------------------------------------+---------+--------+
|Sales | 7.5| 5.9|
+------------------------------------------------------+---------+--------+
|Operating loss before operating exceptional items and | (0.8)| (2.0)|
|goodwill impairment | | |
+------------------------------------------------------+---------+--------+
|Other operating exceptional items | (0.1)| (0.3)|
+------------------------------------------------------+---------+--------+
|Intangible assets amortisation | (0.2)| -|
+------------------------------------------------------+---------+--------+
|Goodwill impairment | -| (2.3)|
+------------------------------------------------------+---------+--------+
|Operating loss | (1.1)| (4.6)|
+------------------------------------------------------+---------+--------+
|Net interest | -| 0.1|
+------------------------------------------------------+---------+--------+
|Profit on disposal of discontinued operations | -| 11.7|
+------------------------------------------------------+---------+--------+
|(Loss)/profit before tax | (1.1)| 7.2|
+------------------------------------------------------+---------+--------+
Chairman's Statement

"Imagelinx sales have grown in 2007 through an acquisition and by adding new
clients despite lower expenditure by some of our existing clients. Costs have
come down by integrating acquisitions and by further reducing overheads. We
have added more clients in 2007 which are just beginning to spend with us. We
acquired another business a month ago. Some of last year's overhead cost
reductions still have to show their full year effect. We are therefore
optimistic about further sales growth taking the company into profitability."

The full announcement follows.

Enquiries

Imagelinx plc
Albert Klein, Executive Chairman Tel: +44 7801 910920
Alistair Rae, Chief Executive Tel: +44 7736 883934

Editors Note:

Imagelinx plc is a global provider of graphic brand management services.

It has operations in UK and USA, offices in France and Germany and is quoted on
the Alternative Investment Market in London.
BUSINESS REVIEW

Group performance
Total revenue has increased from £5.88m in 2006 for the Imagelinx group to
£7.53m in 2007. This was due to the addition of revenue for the first full year
from Tecnolink and also a strong contribution for its first year from the Danone
group. Revenue from existing clients fell by approximately £1.5m. This was due
to a generally lower level of spend in 2007 compared to the prior year. This
lower level of spend was below both ours and our customers expectations for
2007.

However, we have been successful in compensating for this by a reduction in
costs across the whole group. Total Tecnolink costs, before exceptional items,
in 2006 (the company was acquired at the end of 2006) were some £2.5m and the
Imagelinx group costs, excluding those relating to LTG Mailaender which was sold
part way through the year were £7.73m, a pro-forma combined cost of some £10.2m.
In 2007, total costs, pre-exceptional charges were £8.4m. With total group costs
therefore reduced in the year by almost £2m, the group operating loss before
exceptional items reduced to £800,000 from £2.0m in 2006.

Operating exceptional charges were also reduced to £319,000 from £2.64m in 2006.
In both cases the major item is goodwill amortisation, with redundancy costs
being just £120,000 in 2007.

More importantly, the second half of the year also saw a considerable
improvement in performance compared to the first half. The operating loss in the
first half before exceptional items was £600,000 and in the second half this was
reduced to just £200,000. EBITDA plus add back of non- cash share option charges
in the second half was almost at the break-even level. The second half of the
year also saw the group generate cash of £245,000 and cash balances at the
year-end were over £500,000. In addition, the group has a working capital
facility of another £500,000.

Tecnolink

Tecnolink made a maiden contribution to the group in 2007 with sales of £2.7m
(2006: £3.4m) and an EBITDA of £424,000 (2006: £143,000) and an operating profit
(before Imagelinx plc management charges) of £258,000 (2006:£4,000). Although
this has been below expectations in terms of revenue as noted above, the company
has been successful in reducing its cost base.

Imagelinx

We won a further two clients in 2007, Novartis and the Hills pet food division
of Colgate. As it can often take some time to implement operations for new
clients, we saw only a very modest level of revenue in 2007, as expected.
However, the new year has already seen strong contribution to our revenue in
January 2008 and we expect this to continue throughout the year. With a lower
cost base and with a full year's contribution from our new clients, I am
confident that the group will achieve its turnaround in 2008.

We continue with our activity of marketing to new clients and are at present
providing some consultancy advice to a major group in France. We are also at
advanced stages of a re-tender for some of our existing work and for new work
with the Colgate group.

Future developments

I am delighted to report that the good progress made in 2007 towards returning
the group to profitability has continued in 2008 and January has seen the group
achieve this important milestone, in what is generally a weak quarter.

At the beginning of February 2008, we acquired the fixed assets of a business in
Glasgow called Lennox McKinlay Limited from the administrators of that company.
This business is essentially an artwork and reprographic studio and a flexo
plate-making operation with a turnover of £1.5m. We paid a total of £37,000 for
the assets, some of which we required elsewhere in the group to enhance our
flexo plate-making capabilities. We have recently employed a number of people in
Scotland and are now supplying a wide range of clients in the region. With a
lower cost base, we believe we can generate a good return on this modest
investment.

The total number of major consumer goods companies and printers that the group
now supplies is 20, compared to just 6 two years ago. This provides an excellent
base from which to develop further the group's revenue.

We have been approached by a number of both existing and potential customers
over recent months to assist them further in achieving their goals of print
consistency by taking on the task of making flexo plates for them. This
capability was provided by Tecnolink and is further enhanced with the
acquisition of the assets of Lennox McKinlay Limited, which were predominantly
plate-making equipment. By adding in this part of the pre-press process, we
provide a more integrated and complete service to our clients. We are carrying
out one particular project at the moment for one potential new customer and are
in the process of supplying plates directly for two other customers.

I am also pleased to say that we have in the last month been re-awarded all of
our business with the Proctor & Gamble group and have been awarded some
additional business, with one of their fabric and homecare brands.

ITlinx, our wholly owned IT development company in Germany, has completed a
major new development for one of our clients which can be marketed more widely
and is now engaged upon an upgrade to our proprietary workflow and asset
management system which we believe will deliver further efficiencies to our
colleagues. This will be completed by the end of the first half of 2008.

Pensions

The Group accounts include the Crabtree defined benefit pension scheme
("Crabtree pension scheme") in accordance with IAS 19. The financial position of
the Group is sensitive to the position of this scheme, which had £14.1m (2006:
£13.9m) of assets at 31 December 2007. The present value of the schemes
liabilities has been calculated at £19.2m (2006: £19.1m) at 31 December 2007.
The resulting deficit represents the total £5.1m (2006: £5.2m) pension fund
deficit.

During the second half of the year, we took legal advice on the subject of the
Crabtree pension scheme and were advised that we were not contractually liable
for this pension scheme. In view of this - and of the unpredictability of the
eventual scale of the related pension scheme deficit, advice was also received
that we should request the Pensions Regulator ("tPR") to approach the Pension
Protection Fund ("PPF") with a view to taking this scheme into the PPF. This
request was made in January 2008 and we await the outcome of this review.

The size of the calculated deficit is highly sensitive to changes in financial
conditions in the equity and bond markets, in inflation rates and assumed
mortality rates. The scheme has 88 existing pensioners and 256 deferred
pensioners according to the latest information from the Trustees. Annual
payments to pensioners are currently £388,000.

Impairment review of Intangible assets

In accordance with IAS 36 the Board has undertaken reviews at the half year and
full year for impairment of the carrying value of the goodwill associated with
Imagelinx and Tecnolink. As a result of the most recent review, no impairment
has been taken on the goodwill of either company. The total goodwill now held in
the Group balance sheet is £4.4m, other intangible assets are £0.8m which are
amortised by £198,000 per annum, and the carrying value of the investments of
Imagelinx and Tecnolink in the Company balance sheet is £5.2m.

CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 December
2007

31 December 31 December
2007 2006
£'000 £'000
CONTINUING OPERATIONS
Revenue 7,525 5,880
Cost of sales (4,093) (2,812)
____________ __________
GROSS PROFIT 3,432 3,068

Other operating income 47 44
Administration expenses (4,309) (5,022)
Other operating expenses (319) (2,643)
____________ __________
OPERATING RESULT (1,149) (4,553)

Finance income 31 120
Finance costs (48) (36)
____________ __________
LOSS BEFORE TAX (1,166) (4,469)

Tax income 12 -
____________ __________
LOSS FROM CONTINUING OPERATIONS
AFTER TAX (1,154) (4,469)

DISCONTINUED OPERATIONS
Profit from discontinued - 11,705
operations
____________ __________
RESULT FOR THE YEAR (1,154) 7,236
____________ __________

Loss per ordinary share
From continuing operations
Basic and diluted (0.40p) (1.82p)
From continuing and discontinued
operations
Basic (0.40p) 2.95p
Diluted (0.40p) 2.79p
____________ ___________

CONSOLIDATED STATEMENT OF
RECOGNISED INCOME AND EXPENDITURE
for the year ended 31 December
2007

31 December 31 December
2007 2006
£'000 £'000

Actuarial losses on defined (67) (1,100)
benefit pension scheme
Exchange differences on 4 (32)
translation of foreign operations
___________ ___________
NET EXPENSE RECOGNISED DIRECTLY TO (63) (1,132)
EQUITY
(Loss)/profit for the year (1,154) 7,236
___________ ___________
Total recognised income and (1,217) 6,104
expense for the year
___________ ___________

CONSOLIDATED BALANCE SHEET
for the year ended 31 December 2007

31 December 31 December
2007 2006
£'000 £'000
NON-CURRENT ASSETS
Goodwill 4,384 4,384
Other intangible assets 789 987
Property, plant and equipment 1,166 1,567
_________ _________
6,339 6,938
CURRENT ASSETS
Inventories 39 61
Trade and other receivables 1,691 2,156
Cash and cash equivalents 533 1,479
_________ _________
2,263 3,696
_________ _________
TOTAL ASSETS 8,602 10,634

CURRENT LIABILITIES
Trade and other payables (993) (1,721)
Obligations under finance leases (142) (140)
Bank overdrafts and loans (5) -
Loan notes (200) -
_________ _________
(1,340) (1,861)
NON-CURRENT LIABILITIES
Retirement benefit obligations (5,102) (5,174)
Obligations under finance leases (20) (174)
Loan notes - (200)
_________ _________
(5,122) (5,548)
TOTAL LIABILITiES (6,462) (7,409)
_________ _________
NET ASSETS 2,140 3,225
_________ _________
EQUITY
Share capital 14,452 14,452
Share premium account 38,644 38,644
Translation reserve (28) (32)
Retained earnings (50,928) (49,839)
_________ _________
2,140 3,225
_________ _________
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2007

31 December 31 December
2007 2006
£'000 £'000
Operating activities:
Loss before tax from continuing operations (1,149) (4,469)
Profit from discontinued operations - 11,705
_________ _________
Profit before tax (1,149) 7,236
Adjustment to reconcile loss before tax to net
cash flows:
Non-cash
Depreciation of property plant and equipment 474 493
Amortisation and impairment of intangible assets 198 2,583
Share-based payments 132 137
Profit on disposal of property, plant and (3) -
equipment
Profit on disposal of discontinued operations - (12,309)
Working capital adjustments
Decrease in trade and other receivables 465 3,077
Decrease in inventories 22 (2,081)
(Decrease)/increase in trade and other payables (728) 866
Decrease in other provisions - (332)
Exchange adjustment (6) 106
Employers' pension contribution (120) (180)
Income tax received 12 (6)
_________ _________
NET CASH from operating activitieS (703) (410)
_________ _________
Investing activities
Interest received 12 13
Purchases of property, plant and equipment (73) (95)
Expenditure on product development - (62)
Proceeds from sale of property, plant and 3 -
equipment
Acquisition of subsidiary - (1,125)
Disposal of subsidiary, net of cash disposed - 2,679
_________ _________
Net cash generated/(used) in investing activities (58) 1,410
_________ _________
Financing activities
Interest paid (48) (249)
Payment of finance lease liabilities (152) (82)
Repayment of loans - (1,780)
Issue of ordinary shares - 2,051
_________ _________
Net cash flows used in financing activities (200) (60)
_________ _________
Net (DECREASE)/INCREASE in cash and cash (961) 940
equivalents
Cash and cash equivalents at 1 january 1,479 513
Net foreign exchange difference 10 26
_________ _________
Cash and cash equivalents at 31 december 528 1,479
_________ _________

Notes to the consolidated financial statements
for the year ended 31 December 2007

1. Accounting policies

Basis of preparation

The financial information set out above does not constitute the company's
statutory accounts within the meaning of section 240 of the Companies Act 1985
for the years ended 31 December 2007 or 2006, but is derived from those
accounts. Statutory accounts for 2006 have been delivered to the Registrar of
Companies and those for 2007 will be delivered following the company's annual
general meeting. The auditor has reported on those accounts; their reports
were unqualified and did not contain statements under the Companies Act 1985, s
237(2) or (3).

The preliminary announcement has been prepared in accordance with the
International Financial Reporting Standards as issued by the IASB as adopted by
the European Union (IFRSs) for the first time. Comparatives have been restated.
The date of transition is 1 January 2006.

The financial statements have been prepared under the historical cost convention
except that they have been modified to include the valuation of certain
financial assets and liabilities.

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 dependant on the timing of actual versus targeted
sales in Imagelinx while it is building up the client base for its services, and
the agreement with the Pensions Regulator of a schedule of payment with regard
to contributions required for the Crabtree pension scheme.
The Group has adopted the accounting policies most appropriate to its
circumstances for the purposes of giving a true and fair view.

2. Post balance sheet events

Imagelinx plc and the Trustees of the Crabtree pension scheme have received
legal advice confirming that Imagelinx plc has no contractual liability to fund
the scheme. A clearance application has therefore been submitted to The Pensions
Regulator in the light of LTG Gateshead's inability to continue to fund the
pension deficit offering £75,000 to settle the liability of LTG Gateshead. The
directors consider that the risk of action by the Regulator is low and the final
payment cannot be reliably quantified. The impact on the balance sheet at 31
December 2007 would be to eliminate the pensions liability of £5.1m. If the
final payment is in the region of £75,000, the net increase in the balance sheet
based on the 31 December 2007 net liability in respect of the pension scheme
will be to increase net assets by £5.1m.

On 6 February 2008, Imagelinx plc acquired the trade and assets of a business in
Glasgow called Lennox Mckinlay Limited from the administrators of that company,
through a subsidiary of the Group, formed for the purpose of acquiring these
assets called Brandmark Digital ("BMD"). This business is essentially an artwork
and reprographic studio and a flexo plate-making operation with a turnover of
£1.5m. The consideration was £37,000 for the assets, some of which were required
elsewhere in the group to enhance the Group's flexo plate-making capabilities.
BMD have recently employed a number of people in Scotland and is now supplying a
wide range of clients in the region. With a lower cost base, we believe we can
generate a good return on this modest investment.
This information is provided by RNS
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