Imagelinx Announcements

RNS Number : 5931C Imagelinx PLC 03 September 2008  
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Imagelinx plc
("Imagelinx" or the "Company")
 
Interim Results
 
Highlights
Half year turnover up by £0.6m (16%) on the prior period to £4.4m.

Half-year result (pre-exceptional gain relating to pension scheme) of £28,000 operating profit, compared to a loss of £706,000 in the equivalent period in the prior year.

Acquisition of Brandmark Digital Limited for £48,000 in February 2008 has generated £52,000 profit in first 5 months of trading.

£4.5m exceptional gain to Income Statement as a result of the Pensions Regulator granting clearance for Imagelinx to enter its dormant subsidiary holding the 'Crabtree Pension Scheme' into creditors voluntary liquidation.

Operating review

The profit before tax for the group in the first half of 2008 was £4.5m compared with £0.7m loss in the same period last year. This was due both to a £4.5m exceptional gain to the Income Statement due to the dormant company responsible for the 'Crabtree Pension Scheme' being placed into a Creditors Voluntary Arrangement, and also due to the operating business returning to profitability during the first half of 2008.

After adjusting for the exceptional gain above, the operating profit before goodwill amortisation was £128,000 compared to a loss of £606,000 in the first half of 2007. EBITDA for the first half of 2008 was £0.3m compared to a loss of £0.4m in the first half of 2007.

Turnover for the half year was in line with our expectations and rose by £599,000 due largely to the acquisition of Brandmark Digital which was acquired on 6 February 2008. Additional revenue from 2 new clients gained in the second half of 2007 offset the slightly lower spending seen by some UK clients in the current year and we hope to see further growth from these new clients as the scale of their business with us increases in the second half of 2008.  We are mindful of the risk that the timing and amount of our clients' spend may be affected by the worsening economic climate but so far we have seen no evidence of this. 

The major improvement in operating performance was in the Imagelinx business in the UK due to a lower level of costs.  Tecnolink has performed in line with its results last year and our new subsidiary, Brandmark Digital in Scotland, has made a maiden contribution, also in line with expectations. We expect further improvement in the second half of 2008 from this business, which is making a valuable contribution to our capabilities in flexo plate-making. We are increasing our offering in this respect and will be delivering our own flexo plates to some of our existing clients in the Imagelinx business in the second half of this year. This is an important development of our strategy to supply an increasing range of services to our clients and offer a comprehensive service across pre-press activities. 

We are currently making some further operational efficiencies across the group which will place us in a better position to handle increased volumes more effectively in the final quarter of the year and into next year and we continue to monitor and control our costs across the group.

We announced in our annual report for 2007 in March 2008 that following legal advice, we were not contractually liable for the LTG Gateshead ("Crabtree") Pension Scheme and that we had approached the Pension Regulator with a view to the Pension Protection Fund ("PPF") taking this scheme into the Fund. Following negotiations with both the Pension Regulator and the PPF, we announced on 6 August 2008 that we had reached agreement with the Pension Regulator and the PPF that Imagelinx plc would make a final payment of £400,000 to the Crabtree Pension Scheme and the Pension Regulator would grant clearance to Imagelinx plc that no further contribution would be required. Accordingly, LTG Gateshead entered into a creditors voluntary arrangement which reflected this agreement. As the deficit at 31 December 2007 was £5.1m, after allowing for the final contribution of £400,000 and related fees, this has given rise to an exceptional gain of some £4.5m in the first half of 2008 and is largely responsible for the increase in the net assets of the group from £2.1m to £6.7m.  During the first half of this year, our bank have granted facilities of £750,000 which have been partially used to finalise negotiations in respect of the Crabtree Pension Scheme, and also will be used to fund the continued growth of the group.

As stated in the announcement of our 2007 results in March of this year, we are expecting the outcome of major tenders which may have a beneficial impact on our revenue going forwards. 

 
 CONSOLIDATED INCOME STATEMENT
(Unaudited)
(Unaudited)
(Audited)
6 months
6 months
Year

Notes
ended 30 
June
 ended 30 
June 
ended 31 December 
2008
2007
2007
£'000
£'000
£'000
cONTINUING OPERATIONS
Revenue
3
4,401
3,802
7,525
Cost of sales

(2,374)
(2,028)
(4,093)
_____________
_____________
_____________
GROSS PROFIT

2,027
1,774
3,432

Other operating income

-
-
47
Administration expenses

(1,899)
(2,380)
(4,309)
Other operating expenses

(100)
(100)
(319)
Exceptional gain relating to pension scheme
4,527

-

-
_____________
_____________
_____________
OPERATING RESULT

4,555
(706)
(1,149)

Finance income

-
-
31
Finance costs

(10)
(11)
(48)
_____________
_____________
_____________
PROFIT/(LOSS) BEFORE TAX

4,545
(717)
(1,166)

Tax income

-
12
12
_____________
_____________
_____________

RESULT FOR THE PERIOD

4,545
(705)
(1,154)
_____________
_____________
_____________

Profit/(loss) per ordinary share

4

Basic

1.57p
(0.24p)
(0.40)p
Diluted

1.50p
(0.24p)
(0.40)p
_____________
_____________
_____________
consolidated STATEMENT OF TOTAL RECOGNISED income AND expenditure

(Unaudited)
(Unaudited)
(Audited)
6 months
6 months
Year
ended 30 
June
 ended 30 
June 
ended 31 December 
2008
2007
2007
£'000
£'000
£'000

Actuarial losses on defined benefit pension scheme

-
-
(67)
Exchange differences on translation of foreign operations

-
-
4
_____________
_____________
_____________
NET INCOME RECOGNISED DIRECTLY TO EQUITY

-
-
(63)
Profit/(loss) for the period

4,545
(705)
(1,154)
_____________
_____________
_____________
Total recognised income and expense for the period

4,545
(705)
(1,217)
_____________
_____________
_____________
CONSOLIDATED BALANCE SHEET

(Unaudited)
(Unaudited)
(Audited)

30 
June
30 
June
31 December

2008
2007
2007

£'000
£'000
£'000
NON-CURRENT ASSETS

Goodwill
4,384
4,384
4,384
Other intangible assets
689
887
789
Property, plant and equipment
1,090
1,363
1,166

_________
_________
_________

6,163
6,634
6,339
CURRENT ASSETS

Inventories
61
81
39
Trade and other receivables
2,532
2,564
1,691
Cash and cash equivalents
396
283
533

_________
_________
_________

2,989
2,928
2,263

_________
_________
_________
TOTAL ASSETS
9,152
9,562
8,602
CURRENT LIABILITIES

Trade and other payables
(760)
(888)
(535)
Obligations under finance leases
(95)
(132)
(142)
Bank overdrafts and loans
(394)
-
(5)
Short term provisions 
(918)
(643)
(458)
Loan notes
(100)
(100)
(200)

_________
_________
_________

(2,267)
(1,763)
(1,340)
NON-CURRENT LIABILITIES

Retirement benefit obligations
-
(5,084)
(5,102)
Obligations under finance leases
-
(95)
(20)
Loan notes
(150)
(100)
-

_________
_________
_________

(150)
(5,279)
(5,122)
TOTAL LIABILITiES
(2,417)
(7,042)
(6,462)

_________
_________
_________
NET ASSETS
6,735
2,520
2,140

_________
_________
_________
EQUITY

Share capital
14,452
14,452
14,452
Share premium account
38,644
38,644
38,644
Translation reserve
(28)
(32)
(28)
Profit and loss account
(46,333)
(50,544)
(50,928)

_________
_________
_________

6,735
2,520
2,140

_________
_________
_________

 

CONSOLIDATED CASH FLOW STATEMENT
(Unaudited)
(Unaudited)
(Audited)

6 months
6 months
Year

ended 30 
June
 ended 30 
June 
ended 31 December 

2008
2007
2007

£'000
£'000
£'000
NET CASH from operating activitieS
(240)
(1,029)
(703)

_________
_________
_________
Investing activities

Interest received
-
-
12
Purchases of property, plant and equipment
(95)
(69)
(73)
Proceeds from sale of property plant and equipment
-
-
3
Acquisition of subsidiary
(14)
-
-

________
_________
_________
Net cash used in investing activities
(109)
(69)
(58)

_________
_________
_________
Financing activities

Interest paid
(10)
(11)
(48)
Repayment of obligations under finance leases
(67)
(87)
(152)
Repayment of loans
(100)
-
-

_________
_________
_________
Net cash used from financing activities
(177)
(98)
(200)

_________
_________
_________
DECREASE in cash
(526)
(1,196)
(961)

_________
_________
_________
Basis of Preparation

This interim announcement was approved by the Board of Directors on 2 September 2008.

The financial information set out in this interim report does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The group's statutory financial statements for the year ended 31 December 2007, prepared under International Financial Reporting Standards as issued by the IASB and adopted by the European Union (IFRS), have been filed with the Registrar of Companies. The auditor's report on those financial statements was unmodified and did not contain a statement under Section 237(2) or (3) (accounting records or returns inadequate, accounts not agreeing with records and returns or failure to obtain necessary information and explanations) of the Companies Act 1985.

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.

2    Accounting Policies

The accounting policies used in this interim report are those set out in the financial statements for the year ended 31 December 2007.

  3    segmental analysis
Imagelinx plc operates in only one division, that of packaging graphics services, with all significant operations being based either in the UK, Germany or the United States. The segmental analysis of operations is as follows:

Segmental analysis by activity
 (Unaudited) 
(Unaudited)
(Audited)

30
 June
30 
June
31 December

2008
2007
2007

£'000
£'000
£'000
REVENUE BY ORIGIN

UK 
3,549
2,969
5,891
US
852
833
1,634

_________
_________
_________
Total Revenue
4,401
3,802
7,525

_________
_________
_________
SEGMENT RESULT

UK
4,536
(725)
(1,509)
Germany
(201)
(216)
32
US
220
235
328

_________
_________
_________
Operating result
4,555
(706)
(1,149)
Finance income
-
-
31
Finance costs
(10)
(11)
(48)

_________
_________
_________
Profit/(loss) before tax
4,545
(717)
(1,166)

_________
_________
_________
 PROFIT/(loss) per ordinary share

The calculation of basic and diluted earnings per share is based on the following data.

Earnings:
(Unaudited)
(Unaudited)
(Audited)

30 
June
30 
June
31 December

2008
2007
2007

£'000
£'000
£'000
Profit/(loss) for the year 
4,545 
(705)
(1,154)

Number of shares
30 June 2008
30 June 
2007
31 December 2007

No.
No.
No.
Weighted average number of ordinary shares for the purposes of basic earnings per share
289,038,635
289,038,635
289,038,635
Effect of dilutive potential ordinary shares Share options
13,416,202
13,416,202
13,416,202
Weighted average number of ordinary shares for the purposes of diluted earnings per share

302,454,837

302,454,837

302,454,837

In accordance with IAS 33 'Earnings per Share', 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.
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