Half Yearly Report

RNS Number : 9961T

Imaginatik PLC

27 November 2013

 



27 November 2013

Imaginatik Plc

("Imaginatik" or the "Company")

Interim Results

Imaginatik plc (AIM: IMTK.L), the world's first full service innovation provider, announces its unaudited results for the half year ended 30 September 2013.

Imaginatik enables organisations to compete in the information-rich, rapidly-changing 21^st century by helping them to build a sustainable innovation discipline.

Key points*

·      Revenue of £1.51m (2012 restated: £1.50m)

·      Loss after tax of £0.68m (2012 restated: £0.54m)

·      Deferred revenue as at 30 September 2013 of £2.34m (30 September 2012: restated: £2.36m)

·      Several significant contracts secured with new customers, including Shell in the UK

·      Improved level of renewals, with 97% of available revenue secured

·      Positive references in industry analysis from both Forrester and Gartner

·      Development of three new consultancy offerings, to be launched in the second half of the year

·      Placing in May 2013 raising £1.26m before expenses

·      Cash position strengthened post period end due to signing significant multi-year contract, announced 24 October 2013

·      Strong start to Q3, with the signing of several new contracts; increased new business pipeline for remainder of the year and beyond

*all financials for 2012 have been restated under the Company's revised revenue recognition policy

Matt Cooper, Executive Chairman of Imaginatik, commented, "We have enjoyed a strong start to the third quarter, signing several new contracts and have a steadily growing pipeline of further opportunities, both in the US and Europe. The focus for the remainder of the year will be on building sales momentum and taking our new product offerings out to the market. With the right strategy, a strong team and extended offering, we remain confident in the future success of Imaginatik."

For further information please contact:  

Imaginatik plc	Tel: [phone]
Matt Cooper, Executive Chairman / Shawn Taylor, CFO
finnCap	Tel: [phone]
Charlotte Stranner/ Victoria Bates
Newgate Threadneedle	Tel: [phone]
Caroline Evans-Jones / Hilary Millar

About Imaginatik

Imaginatik® is the world's first full-service innovation provider. We have 16 years of experience building innovation into a sustainable competence at some of the world's largest and most respected companies. Through a mix of consulting and advisory, hands-on innovation projects and program management, and our award-winning enterprise software platform, we help clients develop innovation capability into a permanent competitive advantage. Imaginatik is the trusted partner of leading organisations including Blue Cross Blue Shield, CSC, Cargill, The World Bank, Mayo Clinic, The Chubb Group of Insurance Companies, HCA, Dow Chemical and Goodyear.

Imaginatik is a public company whose shares are traded on the AIM market of the London Stock Exchange (LSE:IMTK.L) and is a World Economic Forum Technology Pioneer with offices in Boston, MA, and Fareham, UK. For more information visit www.imaginatik.com.

Introduction

We have had a solid first half, making operational and strategic progress both in the US and Europe.  The innovation market is emerging in just the way that we envisaged. Leading industry research houses, such as Forrester and Gartner, are now covering the innovation industry as a standalone market. Innovation conferences are taking place around the world, including what we believe to be the world's first Chief Innovation Officer conference next month in the US, at which we will be presenting, and innovation is now broadly acknowledged as a business imperative at board level.

Importantly, we are seeing evidence that our strategy to address the big problem of innovation - how an organization can embed innovation into its culture - is the right one. Analysts like it, with both Gartner and Forrester highlighting Imaginatik as a leading vendor for completeness of offering. Our ability to combine consultancy with technology delivering a complete innovation service continues to set us apart from all others in the market.

Our integrated sales strategy is beginning to pay dividends. We are having conversations with increasingly more senior people at target customers and have secured some impressive new clients in the period and post period end, including Shell in the UK and a major Canadian bank. We are also pleased with the improved level of renewals in the period, which was a key objective as stated in the final results released in July 2013.

We continue to invest in our capabilities, extending aspects of our service and look forward to launching three new consulting offerings in the second half of the year.

Imaginatik is still in a period of transition and operationally there remains much for us to do. But we remain confident that the market is developing as we expected, that our strategy is the right one and that we are well positioned for growth.

Financial Review

These are the first set of interim results to be reported under a revised revenue recognition policy, within which the Company now recognises all Technology revenue on a monthly basis over the life of the contract. Previously a large element of the contract value was attributed to the software licence fee and was recognised in the month the contract was signed. The selection of accounting policies in respect of revenue involves a degree of judgement and having reconsidered this critical judgement, the directors now consider it more appropriate to recognise this revenue evenly over the term of the contract. This revised policy has been applied retrospectively as it results in the financial statements providing reliable and more relevant information about the effects of transactions on the Company's financial position and financial performance. This is due to the revised policy resulting in revenue being recognised over a term which is more reflective of the Company's on-going relationship with clients.

The primary impacts of the policy on the comparative year under report have been as follows:

·      revenue for the six months to 30 September 2012 has decreased from £1.75m to £1.50m

·      the loss after tax for the six months to 30 September 2012 has increased from £0.28m to £0.54m

·      the amount of deferred revenue on the balance sheet as at 30 September 2012 has increased from £0.65m to £2.36m

·      cumulative losses carried forward as at 30 September 2012 have increased from £6.52m to £8.23m

·      EPS for H1 2012 increased to £0.08p loss per share from 0.04p loss per share

All numbers in the section below for the 6 months ended 30 September 2012 have been restated under the revised revenue recognition policy.

Total recorded revenue for the six months to 30 September 2013 was £1.51m (2012: £1.50m). While the US continues to be our core market, with revenues recognised from the region in the period accounting for 85% of the total (2012: 93%), the European market had a strong performance in the period and we anticipate this continuing in the second half.

During the period, the Company had gross bookings of £1.74m (2012: £1.75m) of which 31% was from up-selling our software and consultancy services into existing customers, 30% from selling into new clients, and 39% from renewals business (2012: 7%: 69%: 24% respectively).

During the period we achieved a far higher renewals rate, with 97% by value of the available renewal revenue being contracted (2012: 70%), with the loss of only one small client in the period. This was offset by a lower level of new customers, adding 6 (2012: 17) including a significant multi-year contract with Shell, and others being a mix of consulting or pilot software projects.

The Company had deferred revenue at 30 September 2013 of £2.34m (30 September 2012: restated: £2.36m). This amount has increased in the second half of the year due to the contracts signed post period end.

Investment into our technology platform remains a key focus of the Company. Improvements were made to core functionality in the period and we have now largely completed our work on multi-lingual capabilities and connectors for various corporate and social media platforms.  During the period, the Company capitalised internal development costs amounting to £0.07m (2012: £0.12m).

The Company secured an R&D tax credit from HMRC of £0.11m (2012: £0.13m) reflecting the pioneering nature of the research and development work we undertake. This is reflected in the taxation line in the consolidated statement of comprehensive income.

Administrative expenses for the period increased by 9% to £2.17m compared to the prior year, (2012: £2.00m) reflecting the increased investment in consultancy personnel and marketing activities.  As a result of this investment, losses for the period increased to £0.68m versus £0.54m for the prior period.

Cash outflows from operating activities were £1.02 million (2012: £1.01 million). These outflows were met through the institutional fundraising, referred to below. The Company's cash position has been strengthened post period end as a result of signing a significant multi-year contract announced on 24 October 2013.

The Company completed a placing of new ordinary shares with institutional and other investors in May 2013 raising approximately £1.26m before expenses. In addition, as part of the May 2013 funding round, certain of the Directors committed to being paid a proportion of their salary in equity, subscribing for 262,400,000 new ordinary shares, raising a further £164,000. In addition to providing working capital, these funds have strengthened the financial position of the Company, providing reassurance to existing and new clients as to the Company's continued ability to provide and to develop its software and range of consulting services. The funds are being used to expand Imaginatik's sales and consulting capacity in the US and European markets.

In September 2013, the Company sold 54,053,815 ordinary shares in the share capital of the Company that it was awarded in October 2012 as a result of the litigation with the former CEO. The total consideration received as a result of this sale of shares was £0.04m which was received post period end and has been accounted for as a movement in reserves.

Operational Review

Customers

Of the six new customers won in the period, three were in the US, being SPX, Ingredion and Flextronics, and three in the UK; Shell, Digital Life Sciences and NATS, the UK's leading provider of air traffic control services. All contain elements of consultancy and technology, with Shell and Ingredion in particular being excellent examples of the success of our integrated sales approach.

Customer case study: Ingredion

Opportunity
For approximately five years the innovation team at Ingredion Incorporated, a $5 billion global ingredient manufacturer, tried to unlock its potential for big breakthrough ideas with limited success. Incremental innovation was achieved through a steady stream of ideas and insights, but the company wanted to think bigger, commissioning Imaginatik to help produce three or four big ($30-$40M) ideas.

Approach
Imaginatik designed a two-day breakthrough workshop to foster new thinking and new concepts. Using our platform, we worked with internal groups to derive insights into Ingredion's products and business model, and designed a programme pushing the team to look outside Ingredion. The programme used perspectives from customers and other external sources, such as third party experts, to develop new breakthrough concepts.

Results
We identified five ideas that had the potential to meet the brief all of which are moving towards implementation. Ingredion now had a new way to consider its toughest problems, and with Imaginatik's guidance developed a new method for using external catalysts to spark the group's creative thinking process.

Consultancy offerings

Over the last six months we have developed three new offerings integrating both software and consulting. Each offering leverages our existing technology asset base, extends our consulting reach at senior executive levels and represents an increased opportunity for us to deliver on significantly larger sized engagements. 

Innovation Governance

The offering is primarily a consultative and coaching model of engagement, leveraging our decision making and innovation monitoring tools. Innovation Governance targets the needs of senior executives to improve their capability in executing on an innovation agenda and attaining results.  It represents an opportunity for Imaginatik to engage more fully in the back end of innovation, putting in place the operational model (roles, metrics, process, portfolio, systems, structures) necessary for innovation to demonstrate measurable value.

Big Ideas

This offering is intended to feed our existing challenge work and provide a purposeful hook for our 3rd integrated offering: 'people centric' described below. Building on the success of our newly launched Discovery Central offering, we are extending the application of our Discovery method into a business strategy approach to identify disruptive innovation and white space, enabling the client to enter unchartered territories. It positions us distinctly from existing competitors in innovation strategy in that we can uniquely bring to bear a range of virtual tools and live facilitation approaches to not only define but also to help executives execute and monitor progress against expectations.

People Centric

This offering capitalises on the corporate trend in social enterprise and is targeted at innovation leaders who want to get more out of their existing investment in social technologies and approaches. The goal is to build and scale communities across an organisation, engaging them in purposeful and deliberate ways that both generate ideas and build core knowledge. The offering is intended to drive demand for our software and ultimately larger consulting engagements around building full scale innovation programs. 

Marketing activities

Marketing efforts in the period have been focused on furthering Imaginatik's ability to sell and deliver integrated innovation consulting and software solutions to senior decision-makers.

From a brand-building perspective, the focus has been on positioning innovation as an area that is the concern of the board directly. To secure our elevated brand position, we've developed core thought leadership around high level issues such as growth strategy, competitive differentiation, and the customer experience.

Building upon our adjusted positioning, demand generation efforts have focused on relationship-based outreach and networking by Imaginatik's sales organization. Outbound appointment-setting and conference attendance have taken priority, allowing Imaginatik sales and marketing to share our message face-to-face with senior executives whenever possible.

Efforts to reinforce Imaginatik's strong webinar and blog channels have continued to yield value. As the volume and quality of our communications increases, we have seen an increased ability to move sales prospects through the organisation.

Technology 

During the period we have completed the work on making our platform truly multilingual and this in now in use with several customers on global initiatives. We have largely completed work on providing connectors between various social media platforms and Innovation Central, allowing workstreams to readily pass from one platform to the other. We expect to complete this work in the second half of the year as well as undertaking work on various new quantitative data analysis tools within Innovation Central providing further differentiation between Imaginatik and its competitors.

Outlook

We have enjoyed a strong start to the third quarter, signing several new contracts and have a steadily growing pipeline of further opportunities, both in the US and Europe.

The focus for the remainder of the year will be on building sales momentum and taking our new product offerings out to the market. With the right strategy, a strong team and extended offering, we remain confident in the future success of Imaginatik.

Matt Cooper

Executive Chairman

27 November 2013

Imaginatik Plc

Condensed Unaudited Consolidated Interim Statement of Comprehensive Income   

For the six months ended 30 September 2013

		Unaudited 6 months to 30 Sept 2013	Restated Unaudited 6 months to 30 Sept 2012	Audited year to 31 March 2013
	Note	£'000	£'000	£'000
Revenue		1,512	1,500	3,009
Cost of sales		(131)	(170)	(295)
Gross profit		1,381	1,330	2,714
Administrative expenses		(2,168)	(1,997)	(3,980)
Operating loss before financing and taxation		(787)	(667)	(1,266)
Operating loss before share option costs		(736)	(617)	(1,187)
Share option costs		(51)	(50)	(79)
Finance income/(costs)		-	-	(7)
Loss on ordinary activities before taxation		(787)	(667)	(1,273)
Taxation		105	131	131
Loss on ordinary activities for the period		(682)	(536)	(1,142)
Basic and diluted loss per share (p)	4	(0.03)	(0.08)	(0.15)

All amounts are attributable to equity holders of the parent, and all arise from continuing operations.  No amounts were recognised directly in equity, and therefore no separate statement of comprehensive income has been presented.

Imaginatik Plc

Condensed Unaudited Consolidated Interim Statement of Financial Position

As at 30 September 2013

		Unaudited 30 Sept 2013	Restated Unaudited 30 Sept 2012	Audited 31 March 2013
	Note	£'000	£'000	£'000
ASSETS
Non-current assets
Property, plant and equipment		24	46	29
Intangible assets		284	161	254
Trade & other receivables		381	345	339
		689	552	622
Current assets
Trade and other receivables		1,499	1,735	1,063
Cash and cash equivalents		215	305	136
		1,714	2,040	1,199
Total assets		2,403	2,592	1,821
EQUITY AND LIABILITIES
Equity
Issued capital	6	1,637	341	341
Share premium	6	6,467	6,592	6,592
Share option reserve	6	894	814	843
Retained earnings	6	(9,482)	(8,232)	(8,838)
Total equity attributable to equity holders of the parent		(484)	(485)	(1,062)
Liabilities
Non-current liabilities
Other payables		852	225	115
Total non-current liabilities		852	225	115
Current liabilities
Trade and other payables		2,035	2,852	2,768
		2,035	2,852	2,768
Total liabilities		2,887	3,077	2,883
Total equity and liabilities		2,403	2,592	1,821

Imaginatik Plc

Condensed Unaudited Consolidated Interim Statement of Cash Flows          

For the six months ended 30 September 2013

	Note	Unaudited 6 months to 30 Sept 2013	Restated Unaudited 6 months to 30 Sept 2012	Audited Year to 31 March 2013
		£'000	£'000	£'000
Cash outflows from operating activities	7	(1,021)	(1,007)	(1,072)
Investing activities
Acquisition of property, plant and equipment		(5)	(18)	(17)
Acquisition of intangible assets		(66)	(120)	(226)
Net cash used in investing activities		(71)	(138)	(243)
Net cash flow before financing activities		(1,092)	(1,145)	(1,315)
Financing activities
Net proceeds from the issue of share capital		1,171	907	908
Net cash generated from financing activities		1,171	907	908
Net (decrease)/increase in cash and cash equivalents		79	(238)	(407)
Cash and cash equivalents at start of period		136	543	543
Net foreign exchange difference		-	-	-
Cash and cash equivalents at end of period		215	305	136

Imaginatik Plc

Condensed Unaudited Consolidated Interim Statement of Changes in Equity

For the six months ended 30 September 2013

	Share capital	Share premium	Share option reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000
Balance at 1 April 2012	321	5,704	764	(7,696)	(907)
Loss for the period	-	-	-	(536)	(536)
Share option costs	-	-	50	-	50
Shares issued	20	888	-	-	908
	20	888	50	(536)	422
Balance at 30 September 2012	341	6,592	814	(8,232)	(485)
Loss for the period	-	-	-	(606)	(606)
Share option costs	-	-	29	-	29
Shares issued	-	-	-	-	-
	-	-	29	(606)	(577)
Balance at 31 March 2013	341	6,592	843	(8,838)	(1,062)
Loss for the period	-	-	-	(682)	(682)
Share option costs	-	-	51	-	51
Sale of Treasury shares	-	-	-	38	38
Shares issued	1,296	(125)	-	-	1,171
	1,296	(125)	51	(644)	578
Balance at 30 September 2013	1,637	6,467	894	(9,482)	(484)

Imaginatik Plc

Notes to the Condensed Unaudited Consolidated Interim Financial Statements

For the six months ended 30 September 2013

1.         Background

Imaginatik plc (the "Company") is a company domiciled in the United Kingdom. The unaudited condensed consolidated interim financial statements of the Company for the six months ended 30 September 2013 comprise the Company and its subsidiary (together referred to as the "Group").

The condensed consolidated interim financial statements were authorised for issuance on 27 November 2013.

The interim financial statements are not statutory accounts for the purposes of S435 of the Companies Act 2006. The comparative figures for the year ended 31 March 2013 are not the Company's statutory accounts for that financial year.  The financial information for the year ended 31 March 2013 is based on the statutory accounts for the financial year ended 31 March 2013.  Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies.  The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2.         Basis of preparation   

The financial statements are presented in pounds sterling, rounded to the nearest thousand, unless stated otherwise. They are prepared on the historical cost basis.

These interim financial statements have been prepared using accounting policies based on IFRS as adopted by the European Union (including IAS and interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC")) that are expected to be applicable for the full reporting year in 2013.  These remain subject to ongoing amendment and/or interpretation and are therefore subject to possible change.  Consequently, information contained in these interim financial statements may need updating for any subsequent amendments to IFRS, or for any new standards that the Group may elect to adopt early.

The accounting policies have been applied consistently throughout the Group for purposes of these condensed unaudited consolidated interim financial statements.

3.         Prior period adjustment

The directors revised the revenue recognition policy for the software licence fee element of the Technology services provided in the Audited Financial Statements for the year ended 31 March 2013. Previously an element of the contract value was attributed to provision of the licence and recognised in the month the contract was signed.

The primary impacts of the policy on the financial years under report have been as follows:

·      Revenue for the period ended 30 September 2012 decreased by £0.25m from £1.75m to £1.50m and for the year ended 31 March 2013 decreased by £0.12m from £3.13m to £3.01m.

·      The loss after tax for the period ended 30 September 2012 increased by £0.25m from £0.28m to £0.54m and for the year to 31 March 2013 has increased by £0.12m from £1.02m to £1.14m.

·      The amount of deferred revenue on the balance sheet for the period ended 30 September 2012 increased by £1.71m from £0.65m to £2.36m and for the year ended 31 March 2013 increased by £1.58m from £0.87m to £2.45m.

·      Cumulative losses carried forward as at 30 September 2012 increased by £1.71m from £6.52m to £8.23m and as at 31 March 2013 increased by £1.58m from £7.26m to £8.84m.

·      EPS for the period ended 30 September 2012 decreased to 0.08p loss per share from 0.04p loss per share.

·    EPS for the year ended 31 March 2013 decreased to 0.15p loss per share from 0.13p loss per share.

4.         Loss per share

Basic loss per share

The calculation of basic loss per share for the period ended 30 September 2013 was based on the loss attributable to ordinary shareholders of £682,000 (period ended 30 September 2012: £536,000; year ended 31 March 2013: £1,142,000) and a weighted average number of ordinary shares outstanding during the period ended 30 September 2013 of 2,420,597,410 (period ended 30 September 2012: 684,252,511; year ended 31 March 2013: 763,032,110).

Diluted loss per share

The options in place during the periods ended 30 September 2013 and 30 September 2012 and during the year ended 31 March 2013 are considered to have an anti-dilutive effect.  Therefore, basic and diluted loss per share is the same for each of the three periods.

5.         Segmental reporting

Management currently identifies the Group's two revenue streams as its operating segments. These operating segments are monitored by the Group's Chief Operating Decision Maker. Only revenues are reported by operating segment to the Group's Chief Operating Decision Maker as profits or losses, other costs and assets and liabilities cannot be reliably allocated to the operating segments.

	Unaudited 6 months to 30 Sept 2013	Restated Unaudited 6 months to 30 Sept 2012	Audited Year to 31 March 2013
	£'000	£'000	£'000
Segmental revenue
Technology	1,252	1,209	2,456
Consultancy	260	291	553
	1,512	1,500	3,009

All other information presented to the Chief Operating Decision Maker is the same as is reported in these financial statements.

The Group's revenues from external customers and its non-current assets are divided into the following geographical areas:

	Unaudited 6 months to 30 Sept 2013	Restated Unaudited 6 months to 30 Sept 2012	Audited Year to 31 March 2013
	£'000	£'000	£'000
Segmental revenue
United States of America	1,284	1,397	2,628
Rest of the world	228	103	381
	1,512	1,500	3,009
Segmental non-current assets
United States of America	265	205	309
Rest of the world	424	347	313
	689	552	622

Revenues from external customers have been identified on the basis of the customer's geographical location.  Non-current assets are allocated based on their physical location.

The Group has one customer (2012: nil customers), who accounted for revenues of £164,000 (2012: £nil), which amounted to more than 10% of Group revenues. These revenues arose in the Technology segment.

6.         Share Capital and Reserves

	Unaudited 6 months to 30 Sept 2013	Restated Unaudited 6 months to 30 Sept 2012	Audited Year to 31 March  2013
	£'000	£'000	£'000
Share Capital
At the beginning of the period	341	321	321
Shares issued	1,296	20	20
At the end of the period	1,637	341	341
Share premium
At the beginning of the period	6,592	5,704	5,704
Shares issued in the period, net of expenses	(125)	888	888
At the end of the period	6,467	6,592	6,592
Share option reserve
At the beginning of the period	843	764	764
Share-based payments	51	50	79
At the end of the period	894	814	843
Retained earnings
At the beginning of the period	(8,838)	(7,696)	(7,696)
Loss for the period	(682)	(536)	(1,142)
Sale of Treasury shares	38	-	-
At the end of the period	(9,482)	(8,232)	(8,838)

7.         Cash flows from operating activities

	Unaudited 6 months to 30 Sept 2013	Restated Unaudited 6 months  to 30 Sept 2012	Audited Year to 31 March 2013
	£'000	£'000	£'000
Operating loss	(787)	(667)	(1,266)
Depreciation of tangible fixed assets	10	23	39
Amortisation of intangible fixed assets	36	10	23
Share-based payment expense	51	50	79
Operating cash flows before movements in working capital	(690)	(584)	(1,125)
(Increase) / decrease in trade and other receivables	(440)	(941)	(262)
Increase / (decrease) in payables	4	387	191
Net movement in working capital	(436)	(554)	(71)
Cash used by operations	(1,126)	(1,138)	(1,196)
Corporation tax received	105	131	131
Net interest expense	-	-	(7)
Net cash from operating activities	(1,021)	(1,007)	(1,072)

8. Availability of announcement

Copies of this announcement will be available from the Company's offices at Carnac Cottage, Cams Hall Estate, Fareham, Hampshire, PO16 8UU and from its website, www.imaginatik.com.

 

END

 

 

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