TIDMILI
RNS Number : 4385D
Imagelinx PLC
23 March 2011
Imagelinx Plc (the "Company" or the "Group")
Audited results for the year ended 31 December 2010
Highlights
-- Revenue growth of 2.8% on prior year as a result of
contribution from new brands for the first time and additional
spend from existing customers.
-- Operating profit before intangible assets amortisation,
exceptional costs, depreciation and share based payments (adjusted
operating profit) was GBP1,077,000 compared to GBP1,787,000 in
2009.
-- Second half 2010 adjusted operating profit of GBP877,000
compared with GBP200,000 in first half of 2010.
-- Net cash generated from operating activities of GBP1.01m
(2009 GBP0.96m) has been used to invest in technology.
-- Investment in new systems and reorganisation of resource to
strengthen the business for planned growth has impacted on Group
margins in 2010.
Group Results Highlights for the year ended 31 December
GBP millions 2010 2009
========================================================== ======= =======
Revenue 12.06 11.73
========================================================== ======= =======
Operating profit before exceptional costs and intangible
asset amortisation 0.65 1.47
========================================================== ======= =======
Exceptional costs (0.20) -
========================================================== ======= =======
Intangible assets amortisation (0.20) (0.20)
========================================================== ======= =======
Operating profit 0.25 1.27
========================================================== ======= =======
Net interest (0.18) (0.11)
========================================================== ======= =======
Profit before tax 0.07 1.16
========================================================== ======= =======
Enquiries
Imagelinx Plc
Richard Clothier, Chairman Tel: +44 7771 644 962
Alistair Rae, Chief Executive Tel: +44 7736 883934
finnCap Tel: +44 207 7600 1658
Edward Frisby / Rose Herbert
Corporate Finance
Tony Quirke / Victoria Bates
Corporate Broking
Imagelinx Plc is a global supplier of packaging and printing
related services. It takes packaging designs or artworks from
concept stage by clients and design agencies through to the
printing press to ensure global brand and colour consistency and
ensure accuracy of text and artwork regardless of language or
jurisdiction. The Group supports a range of global brands in fast
moving consumer goods, predominantly in the food and beverage, home
and personal care as well as cosmetics and pharmaceutical
sectors.
Its main locations reflect the coverage needed to support some
of the world's largest most innovative brands. Main locations are;
Milton Keynes and Nottingham (England), Glasgow (Scotland), Boston
and Cincinnati (USA), Hamburg (Germany) and Paris (France).
Chairman's Statement
Despite a further, if modest, improvement in revenues to over
GBP12 million, operating profit before exceptional items in the
year to 31 December 2010 has fallen in 2010 to GBP452,000 (2009:
GBP1,270,000). This was a result of increased costs incurred in the
first half of 2010 while the company reorganised its resources to
meet customer needs more closely. Earnings per share fell
commensurately.
Cash from operations nevertheless increased slightly as a result
of tighter working capital management to over GBP1m (2009:
GBP963,000) and this permitted an increase in capital investment
and a small reduction in the overdraft, so the level of debt
remains insignificant. Investment in production capability and
capacity has been increased with software development and capital
expenditure on production systems.
During the year management has altered the structure of staffing
to deal with structural changes to customer workflows. Numbers
employed remained high during the first half of 2010 but were
reduced by the end of the second half. The necessity to maintain
high levels of service prevented rapid restructuring and resulted
in operating margins of 2.1% of revenues (2009: 10.8%).
The improved second half with an EBITDA of GBP775,000 compared
to first half EBITDA of GBP90,000 clearly indicates that resource
levels and margins have been corrected. We continue to work towards
a more efficient operating structure and procedures.
The response of our customers to spending on their brands and
innovation is not easy to predict in the current market conditions.
However, we will continue to focus on improved service levels,
reduced lead times and a careful balance of our cost base. In order
to further strengthen our technology platform and to preserve cash
for possible acquisitions the Directors believe that the Company,
for the time being, should retain earnings for reinvestment in the
business, building long term shareholder value; we therefore do not
recommend a dividend for 2010.
To conclude, I would particularly like to thank Albert Klein,
who resigned as a Director in November, for his service to the
Group and his support in the last year. Also on behalf of the
Board, I thank all of our employees for their contributions in what
has been a difficult year but one in which we have laid foundations
for growth in the Group and opportunity in their careers.
Richard Clothier
Chairman
Business review
Chief Executive's review
I am pleased to report a much improved performance in the second
half of the year compared to the first half. This was largely as
predicted in our interim statement and is due to a reduction in our
costs in the second half of the year. There has also been a further
decrease in costs in the first three months of 2011. While revenue
in the second half was marginally down from the first half by
GBP0.1 million, our total costs were down by GBP0.65 million in the
second half. Of this reduction, GBP0.2 million was due to
capitalisation of some of our internal development costs for
software which has been partially completed and is now in use. The
underlying improvement therefore was some GBP0.4m, generally in
line with our expectations.
Operating cash flow was very strong at GBP1.4 million in the
second half and as a result net debt declined from GBP750,000 to
just GBP19,000 and since the year-end our net cash position has
turned positive. For the year, operating cash inflow was just over
GBP1 million.
Our operating profit before depreciation, amortisation and
exceptional costs was GBP1.1 million, compared to GBP1.8 million in
2009.
Business awards
2010 has been a very substantial year for re-tendering work with
existing clients and we are still awaiting the outcome of the
tender with our major client, but which we expect will be concluded
shortly. In respect of all of our other tenders, I am pleased to
report that we have been successful in retaining all of our clients
and brands and extending our position with some of them.
Notable new awards at the end of last year were the Evian,
Badoit and La Salvetat water brands of Danone affiliates, which are
added to our existing water brands of Volvic and Taillefine for
that client. We started work on these additional brands this
month.
Another major European and UK based foods client has reduced its
four existing suppliers to just ourselves and one other new
supplier and we will see the impact of this change in the second
half of the year.
More substantially, our largest printer client, Rexam, is
awarding us additional volume from across Europe which we expect to
commence towards the end of the first half of this year. This
client is reducing its 15 strong European-wide supplier base to
just five suppliers, with Imagelinx as its lead partner.
We were also successful in being awarded all of the work from
one of our Scottish based printer clients, where previously we were
only one of three suppliers.
As also notified in our interim statement, we were awarded all
of the pre-press work for William Grant & Sons and also for a
European printer earlier in the year. Work for both of these
clients only began towards the end of last year.
Taken together, we expect that the full annualised value of all
of these awards should be in the region of GBP1.25m of which only a
negligible amount has impacted 2010.
We believe that the reasons underlying our recent business
awards are our high service levels, our integrity in dealing with
all of our clients and the innovation that we bring to them. In
2009, we established our own development team which is charged with
reviewing, trialling and installing new studio and client facing
software tools. This team has some 80 combined years of experience
in this industry and we believe we are now at the forefront of
innovation in our industry - confirmed by some of the suppliers
themselves. Bringing new solutions to clients is essential in
assisting them better control their artwork processes and colour
management.
One task for our development team has been to improve the
ability to transfer work seamlessly from one studio to another in
order to take advantage of surplus capacity and also differing time
zones where we can effectively extend the working day. So artworks
traditionally done in Scotland are also now done in Boston, USA and
work traditionally done in Cincinnati can also be done in
Nottingham.
Our new studio in Cincinnati opened in January last year. While
still sub-scale in terms of revenue for much of last year and which
contributed to our higher costs throughout the year, the studio has
performed extremely well in terms of capability for its clients and
in assisting the clients meet their own internal performance
metrics. We have been pleased with the quality and capability of
this new studio.
We have also seen a good improvement from early last year in
terms of our operational metrics across our studios and across our
client base, which has been encouraging and a vindication of the
extra costs we incurred in the first half of last year.
We have assisted one major client install a new text management
database system and we are now marketing this service to a number
of other clients and there has been good interest in this
consultancy approach. We are also trialling innovative colour
management software with certain clients.
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 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 and also independently pursues software development for
implementation at its operating facilities, through its German
subsidiary ITlinx GmbH. 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 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
There has been a significant amount of retendering of work in
2010. For all our major tenders we have secured at least the same
level of business and have been awarded significant extra new
business in many cases. There is one major tender for our largest
customer outstanding at this time. If we are successful with this
tender then over seventy five percent of our customer base will
have been contracted for at least the next eighteen months.
Revenue in the first part of the year to date has been broadly
similar to the same period last year, and while our current
expectations are that spend by existing customers will be similar
to last year for most customers, there are three customers who will
be spending less this year. Costs however are substantially lower
now than in the same period last year, following a carefully
managed reduction in resource base during the second half of 2010.
Our new business wins are beginning to ramp up and so we forecast
revenue to grow as we go through the year, but currently expect
this to be more in the second half.
Financial Review
In the final half of 2010 the Group returned to target levels of
profitability and achieved a high rate of profit to cash
conversion.
Revenue and profit
The Group has delivered a solid financial performance within
very challenging market conditions. Revenue increased by 2.8% to
GBP12.06 million (2009: GBP11.73 million). The increase in revenue
was based on customers consolidation of suppliers providing higher
revenue to the Group. Two new customers provided incremental
revenue at the very end of the year, somewhat later than expected.
Operating profit fell 80% to GBP256,000 in 2010 (2009:
GBP1,270,000). As a result operating margins fell by 8.7 percentage
points to 2.1% (2009: 10.8%).
UK revenues increased by 3.3% to GBP9,563,000 (2009:
GBP9,254,000). Higher revenues and lower costs lead to an
improvement in operating margins by 2.1 percentage points to reach
13.9% (2009: 11.8%). On the other hand investment in USA
operations, which experienced relatively flat revenue of
GBP2,496,000 (2009: GBP2,474,000), led to negative operating
margins of 20.1% (2009: positive 9.9%). Headcount corrections were
made in the latter half of 2010 to bring resource levels in line
with revised customer projections.
The costs of running the Lloyds invoice discounting facility,
2010: GBP130,000 and 2009: GBP65,000, had been classified as
administration costs in 2009. These costs were more appropriately
identified as financing charges and have been reclassified for
2010. The comparative numbers have been adjusted for this
change.
The Group has reviewed its research and development costs in the
light of IAS 38 and capitalised GBP207,000 of internally developed
systems cost, incurred in the second half of the year, as an
intangible asset. The directors believe that development work will
be completed by the middle of 2011. The resulting asset is
estimated to have a useful economic life of three years.
Annual EBITDA and adjusted operating profit
2010 2009
GBP'000 GBP'000
--------------------------------------- -------- --------
Operating Profit Per Income Statement 256 1,270
Add Back:
Depreciation 411 305
Amortisation 198 198
--------------------------------------- -------- --------
EBITDA 865 1,773
Add back
Exceptional items 196 -
Share based payments 16 14
Adjusted operating profit 1,077 1,787
As is widely accepted practice greater focus is placed on the
performance excluding the majority of non-cash charges and
accordingly the adjusted operating profit is calculated excluding;
depreciation, amortisation, share based payments and exceptional
items. The adjusted operating profit for 2010 fell by 40% to
GBP1,077,000 (GBP1,787,000 in 2009). This reduction is due to a
favourable variance on revenue of GBP331,000 and an adverse
movement in cost of sales and administration of GBP1,077,000.
Half year comparison
The second half profit before tax was GBP359,000 compared to a
first half loss of GBP286,000 a positive variance of GBP645,000.
The table below highlights the key areas that make up the variance
as an adverse movement on revenue (GBP147,000) and a favourable
movement in cost of sales and administration expenses of
GBP664,000.
First Second
6 months 6 months Variance Full year 2010
GBP'000 GBP'000 GBP'000 GBP'000
========================== ========== ========== ========= ===============
Revenue 6,103 5,956 (147) 12,059
Cost of sales (3,746) (3,537) 209 (7,283)
Other operating income - 19 19 19
Administration expenses (2,300) (1,845) 455 (4,145)
Other operating expenses (99) (99) - (198)
========================== ========== ========== ========= ===============
Operating profit before
exceptional items (42) 494 536 452
========================== ========== ========== ========= ===============
Exceptional costs (170) (26) 144 (196)
========================== ========== ========== ========= ===============
Operating profit (212) 468 680 256
========================== ========== ========== ========= ===============
Finance costs (74) (109) (35) (183)
========================== ========== ========== ========= ===============
Profit before tax (286) 359 645 73
========================== ========== ========== ========= ===============
Half year EBITDA
First Second
6 months 6 months Variance Full year 2010
GBP'000 GBP'000 GBP'000 GBP'000
================== ========== ========== ========= ===============
Operating profit (212) 468 680 256
------------------ ---------- ---------- --------- ---------------
Add back
Depreciation 203 208 5 411
Amortisation 99 99 - 198
------------------ ---------- ---------- --------- ---------------
EBITDA 90 775 685 865
------------------ ---------- ---------- --------- ---------------
Cash flows
Cash generated from operating activities was GBP1,013,000 (2009:
963,000). This was utilised to invest in capital equipment and
internally developed software of GBP666,000 and financing charges
of GBP250,000. Increase in cash and cash equivalents was therefore
GBP97,000 and net debt stood at GBP19,000 at the end of the year
(2009: GBP125,000) with undrawn facilities of GBP819,000
available.
Taxation
There is no tax charge for 2010 (2009: GBP9,000 relating to US
state taxes). With trading tax losses in the UK, Germany and the
USA of GBP9.8m, EUR2.6m and $6.8m respectively, we are not
expecting to pay corporation tax for the foreseeable future.
Earnings per share
Basic earnings per share fell by 92% from 0.40p per share to
0.03p per share. On a diluted basis, basic earnings per share fell
95% to 0.02p (2009: 0.38p). Note 7 provides details of these
calculations and those of the measures of diluted earnings per
share for the period.
Dividend
The Group profit for the year amounted to GBP73,000 (2009:
profit of GBP1,150,000). The Directors at the moment are investing
in the business and therefore do not recommend payment of a
dividend.
Financing, cash flow and treasury
Net debt at the end of the year was GBP19,000 (2009:
GBP125,000). Net debt represents cash less bank overdraft. Net cash
inflow from operating activities was GBP1,013,000 (2009:
GBP963,000), which has been utilised in investment in capital
equipment and development of underlying core production
systems.
Alistair Rae
Chief Executive
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 2008 the Group's top five customers have accounted for
approximately 75% percent of its 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.
Our 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
For the year ended 31
December
2010 2009
Notes GBP'000 GBP'000
--------------------------------------- -------- ------------ -------------
Revenue 2 12,059 11,728
Cost of sales (7,283) (5,822)
--------------------------------------- -------- ------------ -------------
Gross profit 4,776 5,906
Other operating income 19 98
Administration expenses (4,145) (4,529)
Other operating expenses (198) (205)
--------------------------------------- -------- ------------ -------------
Operating profit before exceptional
items 452 1,270
Exceptional costs 5 (196) -
--------------------------------------- -------- ------------ -------------
Operating profit 256 1,270
Finance costs 6 (183) (111)
--------------------------------------- -------- ------------ -------------
Profit before tax 73 1,159
Tax expense - (9)
--------------------------------------- -------- ------------ -------------
Profit after tax attributable to
owners of the parent company 73 1,150
--------------------------------------- -------- ------------ -------------
Earnings per share from total and
continuing operations
Basic 7 0.03p 0.40p
Diluted 7 0.02p 0.38p
----------------------------- ------------------ ------------ -------------
All of the activities of the Group are classed as
continuing.
Finance costs for the prior year have been adjusted to include
the cost of invoice discounting fees. These fees had previously
been charged to administration expenses in 2009. The impact on the
comparative numbers for 2009 is to increase finance costs by
GBP65,000 and reduce administration expenses by the same amount.
There is no impact on earnings per share.
Consolidated statement of comprehensive income
For the year ended 31 December
2010 2009
GBP'000 GBP'000
------------------------------------------- ---------------- ---------------
Profit for the year 73 1,150
Exchange differences on translation of
foreign operations (9) (1)
------------------------------------------- ---------------- ---------------
Total comprehensive income for the year
attributable to owners of the parent
company 64 1,149
------------------------------------------- ---------------- ---------------
Consolidated statement of financial position
31 December 31 December
2010 2009
GBP'000 GBP'000
---------------------------------------------- ------------ ------------
Assets
Non current assets
Goodwill 8 4,384 4,384
Other intangible assets 9 402 393
Property, plant and equipment 1,301 1,053
---------------------------------------------- ------------ ------------
6,087 5,830
---------------------------------------------- ------------ ------------
Current assets
Inventories 80 109
Trade and other receivables 3,628 3,557
Cash and cash equivalents 162 166
---------------------------------------------- ------------ ------------
3,870 3,832
---------------------------------------------- ------------ ------------
Total Assets 9,957 9,662
---------------------------------------------- ------------ ------------
Liabilities
Current liabilities
Trade and other payables (1,481) (1,310)
Obligations under finance leases (108) (32)
Bank overdrafts and loans (181) (291)
---------------------------------------------- ------------ ------------
(1,770) (1,633)
---------------------------------------------- ------------ ------------
Non current liabilities
Obligations under finance leases (136) (58)
Total Liabilities (1,906) (1,691)
---------------------------------------------- ------------ ------------
Net Assets 8,051 7,971
---------------------------------------------- ------------ ------------
Equity Equity attributable to the owners of
the parent:
Share capital 289 14,452
Share premium account - 38,644
Translation reserve (40) (31)
Retained earnings 7,802 (45,094)
8,051 7,971
---------------------------------------------- ------------ ------------
Consolidated statement of changes in equity
Share
Share premium Translation Retained
capital reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- --------- --------- ------------ ---------- --------
At 1 January 2009 14,452 38,644 (30) (46,258) 6,808
Credit in respect
of share based
payments - - - 14 14
-------------------- --------- --------- ------------ ---------- --------
Transactions with
owners - - - 14 14
-------------------- --------- --------- ------------ ---------- --------
Profit for the year - - - 1,150 1,150
Other comprehensive
income:
Currency
translation
differences - - (1) - (1)
Total comprehensive
income - - (1) 1,150 1,149
-------------------- --------- --------- ------------ ---------- --------
At 31 December 2009 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
income:
Currency
translation
differences - - (9) - (9)
Total comprehensive
income - - (9) 73 64
-------------------- --------- --------- ------------ ---------- --------
At 31 December 2010 289 - (40) 7,802 8,051
-------------------- --------- --------- ------------ ---------- --------
Consolidated statement of cash flows
For the year ended 31 December
2010 2009
GBP'000 GBP'000
------------------------------------------ ------------------ --------------
Operating activities:
Operating profit 256 1,270
Income tax paid - (9)
----------------------------------------------- ------------- --------------
256 1,261
Adjustment to reconcile operating profit to
net cash flows:
Non-cash
Depreciation of property, plant and equipment 411 305
Amortisation of intangible assets 198 198
Share-based payments 16 14
Working capital adjustments
Increase in trade and other receivables (70) (604)
Decrease / (increase) in inventories 29 (47)
Increase / (decrease) in trade and other
payables 171 (165)
Exchange adjustment 2 1
Net cash from operating activities 1,013 963
----------------------------------------------- ------------- --------------
Investing activities
Purchases of property, plant and equipment (459) (320)
Expenditure on intangible assets (207) -
----------------------------------------------- ------------- --------------
Net cash used in investing activities (666) (320)
----------------------------------------------- ------------- --------------
Financing activities
Interest paid (52) (30)
Payment of finance lease liabilities (68) (120)
Repayment of loans - (185)
Facility charges (130) (65)
----------------------------------------------- ------------- --------------
Net cash flows used in financing activities (250) (400)
----------------------------------------------- ------------- --------------
Net increase in cash and cash equivalents 97 243
Cash and cash equivalents at 1 January (125) (367)
Net foreign exchange difference 9 (1)
----------------------------------------------- ------------- --------------
Cash and cash equivalents at 31 December (19) (125)
----------------------------------------------- ------------- --------------
Cash and cash equivalents comprise:
Cash and cash equivalents 162 166
Bank overdrafts (181) (291)
----------------------------------------------- ------------- --------------
(19) (125)
----------------------------------------------- ------------- --------------
Notes to the Preliminary announcement
1. Accounting policies
Basis of preparation
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2010
or 2009, but is derived from those accounts. Statutory accounts for
2009 have been delivered to the Registrar of Companies and those
for 2010 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 2006, s498 (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).
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 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. Revenue and segmental analysis
Imagelinx Plc operates in only one segment, that of packaging
graphics services, with all significant operations being based
either in the UK, Germany or the United States. The entity is
therefore organised on this basis. The geographical analysis of
operations is as follows:
Segmental analysis by activity
------------------------------------------- -------- --------
2010 2009
GBP'000 GBP'000
------------------------------------------- -------- --------
Revenue by origin from external customers
UK 9,563 9,254
US 2,496 2,474
------------------------------------------- -------- --------
Total revenue from external customers 12,059 11,728
------------------------------------------- -------- --------
The entity derives its revenue from the provision of packaging
graphics services. During 2010 GBP5.4m or 45% of the Group's
revenues depended on a single customer (2009: GBP5m or 43%).
2010 2009
GBP'000 GBP'000
---------------------------------------- -------- --------
Segment result
UK 1,334 1,088
Germany (380) (63)
US (502) 245
---------------------------------------- -------- --------
Operating result pre exceptional costs 452 1,270
Exceptional costs (196) -
---------------------------------------- -------- --------
Operating result 256 1,270
Finance costs (183) (111)
---------------------------------------- -------- --------
Profit before tax 73 1,159
Tax expense
UK - (5)
US - (4)
---------------------------------------- -------- --------
Profit after tax 73 1,150
---------------------------------------- -------- --------
Other information
Capital additions
UK 605 289
Germany 9 9
US 247 112
------------------------------- ------ ------
861 410
------------------------------- ------ ------
Depreciation and amortisation
UK (513) (453)
Germany (9) (10)
US (87) (40)
------------------------------- ------ ------
(609) (503)
------------------------------- ------ ------
2010 2009
GBP'000 GBP'000
--------------------------------- -------- --------
Statement of financial position
Assets
UK 9,193 8,031
Germany 27 312
US 737 1,319
--------------------------------- -------- --------
9,957 9,662
--------------------------------- -------- --------
Liabilities
UK (1,641) (1,250)
Germany (7) (7)
US (258) (434)
--------------------------------- -------- --------
(1,906) (1,691)
--------------------------------- -------- --------
Net assets 8,051 7,971
--------------------------------- -------- --------
3. Operating profit
The operating profit for the year is stated after charging:
2010 2009
GBP'000 GBP'000
----------------------------------------------- -------- --------
Depreciation of property, plant and equipment 411 305
Amortisation of intangible assets 198 198
Operating lease costs - land and buildings 320 279
Operating lease costs - other 36 29
Staff costs (see note 4) 7,122 6,047
Net foreign exchange losses 111 35
----------------------------------------------- -------- --------
Analysis of auditor's remuneration is as follows:
2010 2009
GBP'000 GBP'000
----------------------------------------------- -------- --------
Statutory audit of these financial statements 31 31
Audit of subsidiary financial statements 30 30
Other services relating to taxation - UK 20 32
Other services relating to taxation Overseas 15 -
96 93
----------------------------------------------- -------- --------
4. Staff costs
Staff costs (including Directors) are as follows:
2010 2009
GBP'000 GBP'000
----------------------- -------- --------
Wages and salaries 6,348 5,327
Social security costs 610 557
Other pension costs 148 149
Share-based payment 16 14
----------------------- -------- --------
7,122 6,047
----------------------- -------- --------
The average monthly number of employees during the year was made
up as follows:
2010 2009
No. No.
---------------- ----- -----
Direct labour 132 101
Administration 32 37
---------------- ----- -----
164 138
---------------- ----- -----
5. Exceptional costs
Exceptional costs relate to redundancies and changes in senior
management in North America.
6. Finance costs
2010 2009
GBP'000 GBP'000
---------------------------------------------- -------- --------
Interest on bank overdrafts and loans 32 21
Interest on obligations under finance leases 21 16
Interest on loan notes - 9
Facility charges 130 65
183 111
---------------------------------------------- -------- --------
Facility charges represent cost of invoice discounting
facilities provided by Lloyds.
7. Earnings per share
The calculation of the basic and diluted earnings per share is
based on the following data:
2010 2009
GBP'000 GBP'000
-------------------- -------- -------
Profit for the year 73 1,150
-------------------- -------- -------
Number of shares
2010 2009
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 11,580,261
-------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares for the
purposes of diluted earnings per share 294,713,238 300,618,896
-------------------------------------------------- ------------ ------------
8. Goodwill
GBP'000
-------------------------------- --------
Cost:
At 1 January 2009,
At 1 January 2010 and
At 31 December 2010 10,186
-------------------------------- --------
Accumulated impairment losses:
At 1 January 2009,
At 1 January 2010 and
At 31 December 2010 5,802
Carrying amount:
At 31 December 2010 4,384
-------------------------------- --------
At 1 January 2010 and
At 1 January 2009
Goodwill is primarily attributed to the following cash
generating units:
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 2011 to
2013. The growth rates used in these forecasts are 2011: 9%, 2012:
7% and 2013: 2.25%. Projected cash flows, pre-tax are discounted at
19.1% per annum (2009: 19.1%) to calculate their net present value.
Cash flows beyond the three year period are extrapolated using a
2.25% growth rate (2009: 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 2011 was 5% instead of 9%, no impairment
write down would be required. As a result of these tests, no
impairment is considered necessary.
9. Other intangible assets
Internally generated Customer lists
software development and
costs relationships Total
GBP'000 GBP'000 GBP'000
------------------------- ------------------------ --------------- --------
Cost:
At 1 January 2009 and 1
January 2010 - 987 987
Additions during the
year 207 - 207
------------------------- ------------------------ --------------- --------
At 31 December 2010 207 987 1,194
------------------------- ------------------------ --------------- --------
Amortisation:
At 1 January 2009 - 396 396
Provided during the year - 198 198
------------------------- ------------------------ --------------- --------
At 1 January 2010 - 594 594
Provided during the year - 198 198
------------------------- ------------------------ --------------- --------
At 31 December 2010 - 792 792
------------------------- ------------------------ --------------- --------
Net book value:
------------------------- ------------------------ --------------- --------
At 31 December 2010 207 195 402
------------------------- ------------------------ --------------- --------
At 1 January 2010 Nil 393 393
At 1 January 2009 Nil 591 591
Customer lists and relationships are amortised over 5 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 10. 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. No
intangible assets have been pledged as security for
liabilities.
10. Deferred taxation
A deferred tax liability is not provided in the accounts as the
Group has an overall deferred tax asset as shown in the table
below. However, none of this has yet been recognised as recovery is
not considered to be more likely than not.
Not recognised Not recognised
2010 2009
GBP'000 GBP'000
-------------------------------------------- --------------- ---------------
Depreciation in excess of capital
allowances (264) (326)
Other temporary differences (64) (75)
Tax losses carried forward (11,856) (12,019)
-------------------------------------------- --------------- ---------------
(12,184) (12,420)
-------------------------------------------- --------------- ---------------
No provision has been made for deferred taxation in respect of
earnings which are retained overseas because the availability of
double tax relief should ensure that no tax will be payable on any
earnings remitted to the UK.
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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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