Final Results

RNS Number : 9727K

Imaginatik PLC

01 July 2014

 



1 July 2014

Imaginatik Plc

("Imaginatik" or the "Company")

Final Results

Imaginatik plc (AIM: IMTK.L), the world's first full service innovation provider offering a range of consultancy and technology products, announces its audited results for the year ended 31 March 2014.

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

Key points

·      Gross bookings increased to £3.44m (FY13: £2.78m)

·      Recognised revenue broadly flat at £2.90m (FY13: £3.01m)

·      Deferred revenue increased significantly to £3.03m as of 31 March 2014 (31 March 2013: £2.40m)

·      Sales pipeline increased to £6.55m in April 2014 (April 2013:£3.64m)

·      Loss after tax* of £1.47m (FY13: £1.14m)

·      15 new blue chip customers secured in the year, including a major Canadian bank, a leading construction business, one of the most highly rated US mutual insurance companies and a major European airline

·      Good client retention: 14 of the 16 clients whose contracts were up for renewal in the year to 31 March 2014 chose to re-contract with the Company, four of which entered into multi-year contracts (FY13: 12 out of 18)

·      Launch of three new consultancy offerings

·      Strengthened sales team, adding new senior people in Boston with experience of selling combined consultancy and technology offerings to senior management

·      Placing in May 2013 raising £1.26m before expenses

Post period highlights

·      Placing in May 2014 raising £1.26m before expenses

·      Five further blue chip businesses added to the customer base

* before exceptional items

Matt Cooper, Executive Chairman of Imaginatik, commented, "We are pleased with the progress made during the year against our key strategic objectives, giving us confidence that our strategy is appropriate for our market. We have seen good customer retention and a solid increase in the sales pipeline over the past year. As a result of these early positive indicators, we remain committed to our stated strategy and will continue to invest in the business to ensure our success in the marketplace.

"We have made steady progress in the first quarter of the new year, adding five additional customers to our client roster. The focus for the remainder of the year will be on building the sales momentum, growing the awareness of our brand and taking our new product offerings out to the market. With what we believe to be the right strategy, a strong team and extended offering, we are 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 Forde / Hilary Millar

About Imaginatik

Imaginatik® is the world's first full-service innovation provider. 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.

Chairman's statement

We remain encouraged by the significant market opportunity available to us, driven by a growing awareness that a deep innovation competency is critical not only to business success, but to business survival. While the acceleration of our growth has been slower than initially expected, we are seeing strong growth in the sales pipeline supported by strong indicators that innovation at a corporate level is gaining wider recognition as an essential element of any long term business vision. The market continues to evolve in the way we have predicted, with consultancy playing a greater role alongside technology and a growing awareness of innovation as a stand-alone industry. We are confident this will translate into sales.

Key industry developments over the last year, such as the first global Chief Innovation Officer summit in both New York and London, increased industry analyst coverage of the sector, and positive feedback from existing and new customers and other industry players have given us confidence that our proposition as an end-to-end innovation provider is the right one for the market in which we operate. We continue to see a growing number of customers and prospective customers elevating innovation to the top of corporate agendas, but who are struggling to implement a sustained and entrenched culture of innovation beyond the superficial level. A global innovation survey that we undertook during the year found that corporate innovation as a structured discipline is still in its infancy. While leadership has the drive and ambition to make innovation a sustained competency, the actual implementation of that vision is uneven.

Our dual focus on Innovation Mind and Body is a necessity for making innovation a powerful contributor to our customers' growth agendas and ultimately their bottom lines. Companies that focus primarily on operational implementation (Innovation Body) predictably achieve only modest incremental returns despite large ambitions - because along the way they lose the strategic picture. In contrast, companies that focus primarily on strategy (Innovation Mind) predictably fail to implement the chosen transformation agenda successfully - because the operational side of the business is unwilling to venture so far into uncharted waters. By focusing on both the Mind and Body, we are uniquely positioned to achieve powerful innovation wins that take root in a lasting change and transformation agenda across large organisations.

We believe that our repositioning and the direction we have taken over the previous two years, including important internal developments over the last year, described below, leave us ideally suited to address this growing need in the market. Our strategy has been to develop a range of innovation solutions that combine both technology and consulting which we believe are the two elements that are jointly required to deliver real innovation change for our customers. During the year we launched 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. We are seeing encouraging early uptake of each three offerings. We believe we are the only provider in the market that offers such a comprehensive solution set and it is our intention to add to this set in the future.

We have made good progress against our key strategic objectives during the year. We have started seeing evidence of selling into more senior level executives within our customer and prospect base, moving away from a pure technology sale. This trend is also supported by a growing proportion of deals signed having a greater emphasis on consultancy and a rich vein of consulting opportunities within our sales pipeline.

We have seen strong customer retention and a solid increase in the sales pipeline over the past year. As a result of these early positive indicators, we remain committed to our stated strategy and will continue to invest in the business to ensure our success in the marketplace. During the year we have increased the size and capabilities of the sales team with a number of key senior hires. This is to ensure we are well placed to sell more complex solutions in line with the market trend toward combined consultancy and technology sales. The impact on the Company's business of this new team is yet to be felt in terms of revenue during the last financial year, but the sales pipeline has grown substantially, from approximately £3.64m in April 2013 to £6.55m in April 2014. This is evidence of good progress, however given the typical length of contract negotiations with large blue chip organisations, this increased pipeline will take time to flow through into recognised revenues.

We are pleased with the response from institutional shareholders, both existing and new, and the Board and management, who provided us with additional funding both during the year and post period end. This gives us the financial strength to continue to build the business, including increasing marketing activities and further enhancing the sales team as and when required. We are continuing with our search for a full time CEO and I look forward to updating the market later this year.

We look forward to the continued roll out of our strategy, with a consistent focus this year on winning new consultancy deals as well as deepening our engagement within the existing customer base. With a healthy pipeline of new business, an enhanced sales team and growing market opportunity, we believe we are well positioned to achieve a leading position in the innovation market over the next few years.

I would like to thank all Imaginatik's staff, partners and customers for their enthusiasm for our business and what we are trying to achieve.

Matt Cooper

Executive Chairman

30 June 2014

Strategic Report

Imaginatik is the world's first full-service innovation firm. Through a mix of consulting and advisory, hands-on innovation projects and programme management, and award-winning enterprise software, we provide a more complete set of innovation products and services than others in the industry, turning our clients' innovation programmes into competitive advantage.

Imaginatik helps clients develop a sustainable innovation competence. Many organisations achieve innovation excellence once; very few can innovate repeatedly over the long term. Yet innovation is the most important factor for success or failure in today's marketplace. Our strategy continues to be to focus on the "Innovation Body and Mind", providing both the strategic consultancy but also the structure to implement at an operational level - the technology, process and training of people. Through this approach we have generated substantial, identifiable returns, helped our clients launch new product lines, increase customer service and revenues, reduce costs and revolutionise operations.

KPIs & Financial Review

The key performance indicators on which we judge the success of our business are the following:

KPI	2014	2013
Number of customers renewing their contracts	14/ 16	12/ 18
Number of new customer wins in the year	15	24
% of contracts signed that include consultancy	47%	42%
Gross bookings	£3.44m	£2.78m
Recognised revenue	£2.90m	£3.01m
Size of the sales pipeline at year end	£6.55m	£3.64m
Net result before exceptional costs	£(1.47m)	£(1.14m)

We have seen new customer wins and strong customer retention over the past year. We added 15 clients in the year in a mixture of annual license contracts as well as consulting engagements (FY13: 24). New customers include a major Canadian bank, a global infrastructure business, one of the most highly rated US mutual insurance companies and a major European airline. Of the 15 new customers secured in the year, 6 were on annual or multiyear contracts (FY13: 13).

While new customer wins were down on the prior year, they were of a greater average value and for longer terms. This, combined with an increased level of renewals, renewing with 14 out of 16 clients, compared to 12 out of 18 in the prior year, resulted in an increased gross bookings value in the year of £3.44 million versus £2.78 million in FY13.

Of the total bookings figure, 25% was from up-selling our software and consultancy services into existing customers, 40% from selling into new clients, and 35% from renewals business (FY13: 13%: 60%: 27% respectively). 

Recognised revenue for the year was broadly flat compared to the prior year at £2.90 million (FY13: £3.01 million).  While the US continues to be our core market, with revenues recognised from the region in the period accounting for 77% of the total (2013: 88%), the European market had an improved performance in the year, increasing its contribution and we expect this to continue in the current financial year.

Overall, we were behind where we had planned to be in terms of revenue for the year as a whole, due to a slower than anticipated conversion of the sales pipeline into closed contracts during the year. However with momentum in the sales pipeline building in the second half we feel confident the business is set to grow in the years ahead. The sales pipeline grew from approximately £3.64m in April 2013 to £6.55m in April 2014.

We have concluded the financial year with a healthy sales pipeline and, given the significant market opportunity and clear roadmap in place, we believe we are on the right path to revenue growth and subsequent move into profitability in future years.

Administrative costs before exceptional costs increased in the year to £4.19 million (FY13: £3.98 million), reflecting increased investment in sales and consultancy personnel in the US. 

This resulted in an increased loss after tax before exceptional costs of £1.47 million (FY13: £1.14 million). The higher gross bookings in the year resulted in deferred revenues increasing to £3.03 million as at 31 March 2014 (FY13: £2.40 million).

The exceptional costs are those incurred in connection with the placing in May 13, as described below. The shares were issued at nominal value and not above nominal value. The Companies Act prohibits the costs associated with this placing being charged to the share premium account.

Investment into our technology platform remains a key focus of the Company and during the period, the Company capitalised internal development costs amounting to £0.12 million (FY13: £0.23 million).

The Company secured an R&D tax credit from HMRC of £0.10 million (FY13: £0.13 million) 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.

Cash outflows from operating activities were £1.35 million (FY13: £1.07 million). These outflows were met through the institutional fundraising, referred to below.

The Company completed a placing of new ordinary shares with institutional and other investors in May 2013 raising approximately £1.26 million 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.

Costs relating to the above placing were £143,000 and have been included in profit or loss as exceptional items.

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 £0.04 million and has been accounted for as a movement in retained earnings.

In May 2014, post the year end, the Company completed a further placing with investors raising £1.26 million (before expenses) to provide additional working capital to fund the continued development of the Group's business.

Operational Review

We continue to invest in the business, developing our core competencies in technology, consultancy and sales and marketing.

Consultancy

We have been intensely focused on developing our consultancy offering, which we believe to be a compelling proposition in the market, differentiating us from our competitors. A competitor offering both the Innovation Body and Mind has yet to appear.

We have been pleased with the response to the three new integrated consultancy and technology offerings launched during the year. They have been readily accepted as proofs of concept by our customer base and we have made significant progress building our pipeline of sales opportunities for each of the offerings in the year under review and post period end. We will continue to promote them in the year ahead. As a reminder, they are:

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. We have been successful in identifying and pursuing significant new opportunities that increased both the size and scope of our typical consulting proposals, and proving our competitiveness against other renowned innovation consultancies.

Discovery

Building on the success of our newly launched Discovery Central offering, we have extended 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. During this period, we continued to iterate the Discovery Central platform, incorporating our proprietary analytics and additional capabilities further differentiating us in the market. Our Discovery approach has proven to be a successful lever in extending our reach inside existing client organisations, enabling us to grow our revenue base and engage more with senior executives. We are encouraged by client and market feedback, and continue to see a pipeline of opportunities both in the UK & US. This offering is intended to feed our existing challenge work and provide a purposeful hook for our 3rd integrated offering: 'people centric'.

People Centric

This offering capitalises on the corporate trend in social enterprise and is targeted at innovation leaders who want to drive collaboration, leverage their human capital and get more out of their existing investment in social technologies. The goal is to build and scale communities of practice across an organisation, engaging them in purposeful and deliberate ways that both generate ideas and build core knowledge. The offering is underpinned by our core software tools and analytics and is successfully driving additional demand for these tools inside the organisations we currently serve and with new prospects. Our goal is to ultimately secure larger consulting engagements around building full scale innovation programs.

Technology

Our consulting offerings are supported by an award winning enterprise innovation platform, Innovation Central, providing the tools to deliver innovation competencies throughout the innovation life-cycle. We have continued to invest in the platform over the year, developing connectors that link the platform to enterprise social business applications, making it easier for our customers to engage their employees, and allowing workstreams to readily pass from one platform to the other.  During the year we completed the work on making our platform truly multilingual and this in now in use with several customers on their global innovation initiatives. Finally, to ensure we are best positioned to serve large and well-established innovation programs, we have built algorithm-based analytics tools that enable sophisticated filtering and executive decision-making on very large volumes of ideas and social collaboration activity.

We remain committed to ensuring our platform is market leading and increasing the differentiation of our platform.  Plans for the current year include the addition of innovative collaboration capabilities to the platform, further investment in decision support tools for innovation portfolio managers, development of new tools aimed at helping customers to action their ideas, and the provisioning of modern collaboration interfaces across platforms, to encourage innovative activity across organisations.

Sales and Marketing

Imaginatik's go-to-market strategy rests on building a strong public brand around innovation as a dedicated enterprise competence. As such, significant work has been done to establish foundational principles of Imaginatik's brand-related IP and thought leadership platform. In parallel, we have continued to re-position our offerings and business in line with this goal, with the expectation of pushing the brand much more publicly and visibly in the coming year. The repositioning of the business towards providing an end to end innovation service has removed the reliance on a single software offering and has allowed the Company to move away from selling to technologists who frequently have a more limited budget, to selling into more senior executives with a longer term vision for how a sustained innovation competence can help benefit their businesses and who often have a more substantial budget. 

The sales team was strengthened during the year to support this positioning, adding new senior people in Boston with experience of selling combined consultancy and technology offerings to senior management. Their contribution to revenues in FY14 was minimal, however the Board is confident they will have a positive impact in the current financial year and beyond.

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. We have developed core thought leadership around high level issues such as growth strategy, competitive differentiation and the customer experience. Furthermore, we have increased outbound appointment setting and conference attendance, and increased our use of webinars and blog channels. All of these have combined to enhance our ability to move sales prospects more rapidly through Imaginatik.

In the year ahead we will continue to invest in raising the profile of the brand, as well as investing in further sales people to capitalise on our unique proposition and ensuring that we have the scale required to enter a period of growth.

Principal risks and uncertainties

The Group's financial and operational performance is subject to a number of risks. The Board seeks to ensure that appropriate processes are put in place to manage, monitor and mitigate these risks. The Board considers the principal risks faced by the Group to be as follows:

Loss of major customers

The Group has a small number of major customers. Accordingly, there is a risk of loss of major clients that could result in a reduction in revenue. The Group endeavours to provide an excellent service to customers at competitive pricing. In the event of the loss of a major customer, steps would be taken to reduce the Group's cost base.

Customer failure

The Group has a small number of major customers and, accordingly, is exposed to potentially significant bad debts should a major customer become insolvent. The Group operates a credit control policy to reduce the risk of customer failure, although the Group does not have credit insurance in place.

Competition
The Group's competitors may offer superior services to the market or lower prices, which could reduce the attractiveness of the Group's services and result in a reduction in revenue. In the event of a significant reduction in revenue, steps would be taken to reduce the Group's cost base.

Attraction and retention of Directors and key employees

The success of the Group depends on the abilities and experience of the Directors and key employees. The loss of Directors and key employees or the inability to recruit replacements or further Directors or key employees could have a significant adverse effect on the day to day running of the Group and on the development of the Group's business. The Group seeks to reward Directors and key employees at appropriate levels, including the provision of equity incentive schemes, designed to attract and retain Directors and key employees of appropriate calibre.

Financial risks

The Group finances its operations through a mixture of cash generated from operations and, where necessary to fund expansion or capital expenditure programmes, through leasing or the proceeds of the issue of new equity in the Company.

Management's objectives are to:

- Retain sufficient liquid funds to enable the Group to meet its day to day obligations as they fall due whilst maximising returns on surplus funds; and

- Match the repayment schedule of any external borrowings with the expected future cash flows expected to arise from the Group's trading activities.

As all of the Group's surplus funds are invested in Pound Sterling and US Dollar bank deposit accounts, foreign exchange risk arises.

The Group's surplus funds are held primarily in short term variable rate deposit accounts. The Directors believe that this gives them the flexibility to release cash resources at short notice and also allows them to take advantage of changing conditions in the finance markets as they arise.

Foreign exchange risk arises because the Group has operations located in various parts of the world whose functional currency is not the same as the functional currency in which the Group companies are operating. The Group's policy is, where possible, to allow entities to settle liabilities denominated in their functional currency with the cash generated from their own operations in that currency.

Board Changes

The search for a full time CEO is ongoing. The Company has engaged a US based search firm to assist with the process, we look forward to updating the market once a decision has been made, expected to be later in the current year. As previously stated, once the Company secures the services of a suitable candidate, Matt Cooper will become the Non-Executive Chairman of the Company.

There have been changes to the Board composition this year. In June 2013, the number of board members was reduced from six to four, which is considered more appropriate for a company of our size. Nick Goss (CTO) and Luis Solis (President, Americas) both stepped down from their positions on the Board.

David Gammon stepped down from the Board as a non-executive director of the Company upon completion of the placing of new ordinary shares in the Company on 15 May 2014. The Board thanks him hugely for his strategic and wise counsel since the time of his appointment and wishes him well for the future. Simon Charles has now assumed the chairmanship of the audit committee in addition to that of the remuneration committee.

Current Trading and Outlook

We have made steady progress in the first quarter of the new year, adding five additional customers to our client roster. We are confident in our strategy and remain encouraged by the early progress achieved against our strategic objectives. The focus for the remainder of the year will be on building the sales momentum, growing the awareness of our brand and taking our new product offerings out to the market. With what we believe to be the right strategy, a strong team and extended offering, we are confident in the future success of Imaginatik.

Approved by the Board and signed on its behalf by:

Shawn Taylor

Chief Operating and Financial Officer

30 June 2014

Consolidated Statement of Comprehensive Income for the Year Ended 31 March 2014

	Note	2014 Before exceptional items £ 000	2014 Exceptional items	2014 £ 000	2013 £ 000
Revenue	3	2,899	-	2,899	3,009
Cost of sales		(261)	-	(261)	(295)
Gross profit		2,638	-	2,638	2,714
Administrative expenses		(4,185)	(143)	(4,328)	(3,980)
Operating loss		(1,547)	(143)	(1,690)	(1,266)
Finance costs		(24)	-	(24)	(7)
Loss before tax		(1,571)	(143)	(1,714)	(1,273)
Income tax receipt		105	-	105	131
Loss on ordinary activities for the year and total comprehensive income		(1,466)	(143)	(1,609)	(1,142)
Loss per share - Basic and diluted	5	0.05p	-	0.06p	0.15p

Consolidated Statement of Financial Position as at 31 March 2014

	Note	2014 £ 000	Restated 2013 £ 000
Assets
Non-current assets
Property, plant and equipment		26	29
Intangible assets		291	254
Trade and other receivables		329	339
		646	622
Current assets
Trade and other receivables		1,614	1,063
Cash and cash equivalents		94	136
		1,708	1,199
Total assets		2,354	1,821
Equity and liabilities
Equity
Share capital	6	1,940	528
Share premium		6,405	6,405
Other reserves		967	843
Retained earnings		(10,409)	(8,838)
Equity attributable to owners of the company		(1,097)	(1,062)
Non-current liabilities
Deferred income		1,079	115
Current liabilities
Trade and other payables		2,372	2,768
Total liabilities		3,451	2,883
Total equity and liabilities		2,354	1,821

Consolidated and Company Statement of Cash Flows for the Year Ended 31 March 2014

	Note	2014 £ 000	2013 £ 000
Cash flows from operating activities
Loss for the year		(1,609)	(1,142)
Adjustments to cash flows from non-cash items
Depreciation and amortisation	4	105	62
Share based payment transactions		124	79
Income tax credit		(105)	(131)
		(1,485)	(1,132)
Working capital adjustments
Increase in trade and other receivables		(541)	(262)
Increase in trade and other payables		568	191
Cash generated from operations		(1,458)	(1,203)
Income taxes received		105	131
Net cash flow from operating activities		(1,353)	(1,072)
Cash flows from investing activities
Acquisitions of property plant and equipment		(18)	(17)
Acquisition of intangible assets		(121)	(226)
Net cash flows from investing activities		(139)	(243)
Cash flows from financing activities
Proceeds from issue of ordinary shares, net of issue costs		1,412	908
Proceeds from disposal of treasury shares		38	-
Net cash flows from financing activities		1,450	908
Net decrease in cash and cash equivalents		(42)	(407)
Cash and cash equivalents at 1 April		136	543
Cash and cash equivalents at 31 March		94	136

Consolidated Statement of Changes in Equity for the Year Ended 31 March 2014

	Share capital £ 000	Share premium £ 000	Other reserves £ 000	Retained earnings £ 000	Total £ 000	Total equity £ 000
At 1 April 2012	321	5,704	764	(7,696)	(907)	(907)
Employee share-based payment options	-	-	79	-	79	79
Issue of share capital (restated)	207	701	-	-	908	908
Transactions with owners (restated)	207	701	79	-	987	987
Loss for the year and total comprehensive income	-	-	-	(1,142)	(1,142)	(1,142)
At 31 March 2013 (restated)	528	6,405	843	(8,838)	(1,062)	(1,062)
	Share capital £ 000	Share premium £ 000	Other reserves £ 000	Retained earnings £ 000	Total £ 000	Total equity £ 000
At 1 April 2013 (restated)	528	6,405	843	(8,838)	(1,062)	(1,062)
Employee share-based payment options	-	-	124	-	124	124
Issue of share capital	1,412	-	-	-	1,412	1,412
Transactions with owners	1,412	-	124	-	1,536	1,536
Treasury shares sold	-	-	-	38	38	38
Loss for the year and total comprehensive income	-	-	-	(1,609)	(1,609)	(1,466)
At 31 March 2014	1,940	6,405	967	(10,409)	(1,097)	(1,097)

Imaginatik plc

Notes to the Financial Statements for the Year Ended 31 March 2014

1. General Information

The Group, headed by Imaginatik plc, is one of the leading providers of collaborative innovation software and related professional services to large and medium-sized enterprises.

The Company is a public company limited by share capital incorporated and domiciled in the UK.

The address of its registered office is:

22 Melton Street

London

NW1 2BW

The company's ordinary shares are traded on the AIM market of the London Stock Exchange.

Authorised for issue on 30 June 2014.

The Company has adopted the requirements of International Financial Reporting Standards (IFRS) and IFRIC interpretations endorsed by the European Union (EU) and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention and are in accordance with applicable accounting standards.

These financial statements have been prepared in accordance with the accounting policies set out below, which have been consistently applied to all the years presented. These accounting policies comply with applicable IFRS and IFRIC interpretations issued and effective at the time of preparing these statements.

The financial information contained in this preliminary announcement does not constitute the Group's statutory financial statements for the year ended 31 March 2014 or 2013, but is derived from these financial statements. The financial statements for the year ended 31 March 2013 have been delivered to the Registrar of Companies. 

2. Accounting Policies

Going concern

Net funds at 31 March 2014 were £94,000 (2013: £136,000).

The Company completed a placing of new ordinary shares with institutional and other investors in May 2013 raising a total of £1.42 million before expenses. The Company completed a further placing of new ordinary shares in May 2014, post period end, raising approximately £1.26 million before expenses.

The Directors have prepared detailed Group budgets and forecasts for the period to March 2016. They have reviewed the Group's budgets and forecasts for the coming 12 months, which have been prepared with appropriate regard to the current macroeconomic environment and the conditions in the principal markets served by the Group. The Directors have taken into consideration the Group's net funds, the level of anticipated renewals by reviewing on a customer by customer basis, forecast new and up sell revenues based on sales in the pipeline and anticipated costs including the ability to flex these costs should predicted revenues be lower than forecast. As a result, at the time of approving the financial statements, the Directors consider that the Company has sufficient financial resources to continue in operational existence for the foreseeable future and, therefore, that it is appropriate to adopt the going concern basis in preparing these financial statements. As with all business forecasts, the Directors' statement cannot guarantee that the going concern basis will remain appropriate given the inherent uncertainty about future events.

Basis of consolidation

The Group's financial statements for the year ended 31 March 2014 consolidate the financial statements of Imaginatik PLC and its subsidiary undertaking using the acquisition method. Subsidiaries are entities that are directly or indirectly controlled by the group. Inter-company balances are eliminated on consolidation.

The Company has taken advantage of the exemption under S408 of the Companies Act 2006 and has not presented its own statement of comprehensive income. Of the consolidated result for the year ended 31 March 2014 a loss of £1,630,000 (2013: loss of £1,164,000) is attributable to the Company.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable net of sales related taxes. Income for the group is derived from two sources: Technology and Consultancy. These sources are service-based rather than through the sale of goods. Following the principles of IAS 18 Revenue, the policies for income recognition in respect of each of the different sources of income are such that income is recognised by reference to the stage of completion of the transaction at the end of the reporting period. In applying the income recognition policies below where there is a requirement for a contract to be signed, income is recognised in accordance with the policy when the contract has been signed or persuasive evidence of an arrangement exists.

a) Consulting:

Income derived from our consulting offering subject to contracts is recognised in the month in which the consulting takes place. Income from longer term consulting arrangements shall be recognised evenly over the term of the contract.

b) Technology:

The provision of our suite of technology products includes provision of software licences, hosting and maintenance in relation to the product over the contract term. Income arising from the provision of these bundled services are recognised evenly over the term of the contract, once an agreement has been signed or persuasive evidence of an arrangement exists.

In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy, accounting estimate or assumption to be followed could materially affect the reported results or net asset position of the Group should it later be determined that a different choice would be more appropriate. The most significant areas where judgements and estimates have been applied are as follows:

Judgements

The value of the awards under the modified and new share option scheme was measured, in accordance with IFRS 2, by reference to their fair value at the date on which they were granted. Judgement was required in determining the most appropriate valuation model.

Estimates

Significant assumptions were necessary in arriving at the inputs into the valuation model for modified and new share option scheme.

Exceptional items

The Group presents as exceptional items, on the face of the statement of comprehensive income, those material items of income and expense which, because of their nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance during the period, so as to facilitate comparison with prior periods and to assess better trends in financial performance.

Adjustment

An error was found in the prior year share capital and share premium reserve. The 2013 financial statements have been restated to reclassify this difference. The change has no effect on net assets, income, EPS or cashflows.

3. 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. For these operating segments only revenues are reported the Group's chief operating decision maker as results, other costs and assets and liabilities cannot be reliably allocated to the operating segments.

	2014	2013
	£'000	£'000
Segmental revenue:
Technology	2,463	2,456
Consultancy	436	553
	2,899	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:

	2014	2013
	£'000	£'000
Segmental revenue:
United States of America	2,243	2,628
Rest of the World	656	381
	2,899	3,009
Segmental non-current assets:
United States of America	189	309
Rest of the World	457	313
	646	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 (2013: one customer), who accounted for revenues of £343,000 (2013: £302,000), which amount to more than 10% of total Group revenues. These revenues arose in the Technology segment.

4. Operating profit

Arrived at after charging/(crediting)

	2014 £ 000	2013 £ 000
Depreciation expense	21	39
Amortisation expense	84	23
Research and development cost	226	183
Foreign exchange (losses)/gains	(158)	127
Operating lease expense - property	91	84
Auditors' remuneration
	2014 £ 000	2013 £ 000
Audit of these financial statements	21	19
Audit of the financial statements of subsidiaries of the company pursuant to legislation	1	1
	22	20
Other fees to auditors
Taxation compliance services	5	7
All other non-audit services	3	2
	8	9

Finance income and costs
	2014 £ 000	2013 £ 000
Finance costs
Other finance costs	(24)	(7)

5. Earnings per share

Basic loss per share (EPS) has been calculated in accordance with IAS 33 'Earnings per share' at 0.06p (2013: 0.15p). The calculation of EPS is based on losses of £1,609,000 (2013: £1,142,000) and on a weighted average number of ordinary shares in existence during the year of 2,736,783,781 (2013: 763,032,110).

The share options issued during the current and prior year are anti-dilutive due to losses, and therefore diluted EPS equals basic EPS.

6. Share capital and reserves

Allotted, called up and fully paid shares

	2014		2013
	No. 000	£ 000	No. 000	£ 000
Ordinary shares of 0.0625p (2013 - 0.0625p) each	3,104,695	1,940	846,365	528

New shares allotted

During the year 2,258,329,298 ordinary shares having an aggregate nominal value of £1,411,456 were allotted for an aggregate consideration of £1,411,456. Issue costs relating to the above shares were £143,000 and have been included in profit or loss as exceptional items.

Share premium account

This reserve records the consideration premium for shares issued at a value that exceeds their nominal value, less any costs incurred relating directly to the issue of these shares.

Other reserve account

This account acts as the share option reserve and records the charges to profit with respect to unexercised share options.

Retained earnings

During the year the Company disposed of 54,053,815 treasury shares it acquired as settlement in a legal action at a price of 0.07p per ordinary share. The amount was credited directly to retained earnings.

7. Non adjusting events after the financial period

The Company announced on 25 April 2014 that it had successfully raised £1.26m (before expenses) by way of a conditional placing of new ordinary shares in the Company ("Placing"). The terms of the Placing were described in a circular which was dispatched to shareholders of the Company on 25 April 2014. The shares were admitted to trading on AIM on 15 May 2014.

8.         Report and Accounts

Copies of the Company's full statutory financial statements will be available from the offices at Carnac Cottage, Cams Hall Estate, Fareham, PO16 8UU and on its website, www.imaginatik.com. A copy of the Report and Accounts will be sent to all shareholders with notice of the AGM in due course.  

 

END

 

 

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