1 21 November Imaginatik Plc ( Imaginatik or the Company ) Interim Results Imaginatik plc (AIM: IMTK.L), a leading provider of enterprise innovation services including a range of technology products and consultancy, announces its unaudited interim results for the half year ended 30 September. Key points Revenue increased by 8% to 1.75 million (H1 : 1.62 million) Operating losses before share option costs reduced to 0.36 million (H1 : 0.43 million) Substantial number of new customer wins: 17 new customers on either annual or pilot contracts (H1 : 6) Increasing proportion of customers taking consultancy services alongside software offering including Mead Johnson, Proctor & Gamble and The Society of Petroleum Engineers Successful conclusion of litigation Placing in June raising 1.0 million before expenses Matt Cooper, Executive Chairman of Imaginatik, commented, We believe we have now entered the age of innovation a unique time in the world of business when globalisation, the availability of data and the fast moving nature of product development means that innovation is a required business competence to survive. It is now imperative that companies understand how to innovate and adapt to these fast-changing markets, yet many companies do not have the internal processes or know how to make it a fundamental part of their operations. This is our opportunity and our challenge. Trading in the second half has begun well and, with a strong pipeline of opportunities and renewals for the second half, we are confident of a successful outcome for the year as a whole. For further information please contact: Imaginatik plc Tel: Matt Cooper, Executive Chairman / Shawn Taylor, CFO Northland Capital Partners Limited Tel: Edward Hutton / Tim Metcalfe Newgate Threadneedle Tel: Caroline Evans-Jones / Hilary Millar About Imaginatik Imaginatik provides a range of Innovation solutions comprised of consultancy, enterprise software and program management to deliver innovation results to companies such as The World Bank, The Chubb Group of Insurance Companies, Boeing, Pfizer, Goodyear, Paccar, Kellogg and Cargill. Few companies possess the internal capability to consistently generate fresh ideas, identify those worth pursuing and reliably transform them into real, value-enhancing assets. Imaginatik's mission is to help these companies build sustainable innovation competencies. 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
2 Introduction We believe we have now entered the age of innovation a unique time in the world of business when globalization, the availability of data and the fast moving nature of product development means that innovation is a required business competence to survive. It is now imperative that companies understand how to innovate and adapt to these fast-changing markets. We continue to see evidence that companies are recognising this requirement; for example the role of the Chief Innovation Officer within a large enterprise is becoming more commonplace and companies are now seeking external assistance in developing innovation strategies. While many are making good progress in this respect there remains substantial scope for improvement and this presents a significant opportunity for us. Over the past decade Imaginatik has built the skills, competencies and insights to understand how innovation is best achieved at scale. It is not the domain of a single individual, but rather best accomplished through harnessing the collective wisdom of a company s employees, customers and partners. Via a series of processes, innovation can be learned, institutionalized and then repeated. Our mission is to ensure innovation becomes embedded within our customers, achieved through a mixture of sophisticated software and market leading consultancy. We continue to make good progress in the execution of our strategy to provide a complete innovation solution comprising software and consultancy, and are seeing a growing amount of evidence vindicating our strategic direction. We continue to receive market validation from industry research houses, such as Forrester, from the increasing proportion of customers taking consultancy services alongside our software offering and the accelerated pace at which we have added new customers. We have also been pleased by the positive response to our increased activities in Europe, securing several new customers, with many more opportunities in the pipeline. We believe we now have the right strategy, the right people, the most complete technology solution and the broadest consultancy offering in the market. We are now moving into the next phase which is a focus on the broader marketing of our business, raising awareness of our offering in our two key markets of North America and Europe. Financial Review Total revenue for the half year ended 30 September increased by 8% to 1.75 million (H1 : 1.62 million). During the period, 7% of revenue was generated from up-selling our software and consultancy services into existing customers, 69% from selling into new customers, and 24% from recurring business (H1 : 18%: 29%: 53% respectively). We secured a significantly higher level of new customers during the period, adding 17 (H1 : 6), with 9 of these being on annual contracts (H1 : 3). The US continues to be our core market, with revenues generated from the region in the period accounting for 93% (H1 : 98%). The European market offers significant opportunity and, following an increased presence in the region, we are encouraged by the progress achieved in the period. Revenue from the European market grew to 7% (H1 : 2%). Investment into our technology and software platform remains a key focus of the Company, and we have continued to invest in the development of our software platform, including improved functionality, multi-lingual capabilities and connectors for various corporate platforms. During the period the Company has capitalised development costs amounting to 0.12m, (H1 : nil) as the Company now meets the necessary accounting requirements set out in IAS38: Intangible assets.
3 We have once again secured an R&D tax credit from HMRC of 0.13 million (H1 : 0.11 million) reflecting the pioneering nature of the research and development work we undertake. This is reflected in the taxation line in the income statement. Administrative expenses for the period were 1.99 million, a slight increase on the previous year (H1 : 1.96 million). This was a result of the addition of senior headcount in the US and Europe but mitigated by the capitalisation of certain development costs referred to previously. Operating losses before share-based payments have again been reduced to 0.36 million (: 0.43 million) and is a function of both the increase in revenues and the stable cost base. Cash outflows from operating activities narrowed to 1.01 million in the first six months of the year (H1 : 1.20 million). As a result of the strong close to the period, the Company had short term receivables amounting to 1.74 million (H1 : 1.62 million) and longer term receivables amounting to 0.34 million (H1 : nil). The longer term receivables arose as a result of a number of multiyear contracts entered into during the half. The vast majority of the short term receivables are expected to be received in the second half of the year. During the period the Company successfully concluded its litigation against the former CEO Mark Turrell. In a concluding hearing on the 27 September the High Court granted the Company and Matt Cooper an order over all of Mr. Turrell s 64.4 million shares in Imaginatik plc. Those shares have been split in an equitable manner between the Company and Matt Cooper, as a result the Company has an order over 54.1 million shares. It is the Company s intention to dispose of the shares in an orderly manner. Under IAS 32 the shares may only be recognized as an asset to the Company at the point of disposal. The Company completed a placing of new ordinary shares with institutional and other investors in June raising 1.0 million before expenses. The net proceeds are being used to expand the Company s US based sales team, to add further consultancy capacity in both the US and European markets, to further develop the Company s technology and to develop our branding and marketing efforts. Operational Review Customers During the period we added 17 new customers, compared to six in the first half of the previous year. Of these, nine were annual contracts, including Air Products and Chemicals, Inc. and Chartis Global Services, Inc., and five were pilot projects, including MillerCoors and Merck & Co., Inc., with the balance being consultancy-led engagements. The general economy stills poses a challenge, as evidenced by the loss of three customers in the period due to budgetary constraints. Each of these contracts was based on our old model with no consultancy support and we are confident that as an increasing number of our customers rely on Imaginatik to provide them with full innovation capabilities, we will increase the resilience of our customer base. Technology The investments we have made in our technology platform over the past year have been directed towards the expansion of our product offerings. We now have a suite of products which spans the innovation spectrum. Starting with Discovery Suite, which helps customers identify where to focus their innovation efforts, through its four lens methodology, through to the core platform, Innovation Central, which enables companies to engage the collective brain power of their employees, partners and customers in innovation challenges, and finally to Results Engine which allows organizations to manage and track projects resulting in implemented ideas.
4 Substantial progress has also been made during this period in incorporating multi-lingual capabilities into the platform and establishing connectors into some of the fastest growing corporate platforms, such as SharePoint, Jive and Yammer. Both of these initiatives are significantly increasing our addressable market. Consultancy We are experiencing solid growth in the number of contracts for consultancy where we provide both guidance to senior management on their long-term innovation strategies and more targeted innovation support in the form of new product, marketing and brand positioning projects. Contracts in the period include with Mead Johnson, Proctor & Gamble and The Society of Petroleum Engineers. In addition, most new annual contracts and renewals now include some element of operational consultancy, to ensure successful implementation of challenges. The period also saw the Company secure the first annual technology contract generated from a consultancy lead. We believe these factors are a strong endorsement of our strategy. The focus in the second half of the year will be the further integration of our technology and consultancy offering. This includes the development and launch of a completely new innovation offering that is supported by a new technology for creative collaboration and insight generation. It will also include a suite of new innovation programmes for senior management and innovation teams designed to strengthen their innovation competency. Sales and Marketing Web-based lead generation continues to be a significant contributor to our sales pipeline and as a result much focus in the first half of the year has been on the development of a new website to enhance our web presence. This project is approaching completion and is expected to be launched in the second half of the year. We continue to host well attended webinars on a regular basis, with four taking place in the first half of the year. These are proving to be a useful lead generation tool. This will be continued in the second half of the year, supplemented by our annual Innovation Leaders Forum which will take place in Boston the early part of In order to develop the business further we have secured relationships with various third parties to assist with lead generation in both the US and Europe which is delivering additional opportunities. Outlook We continue to believe the prospects for Imaginatik to be significant. Innovation is now a crucial business skill and yet many companies do not have the internal processes or know how to make it a fundamental part of their operations. This is our opportunity and our challenge. Trading in the second half has begun well and, with a strong pipeline of opportunities and renewals for the second half, we are confident of a successful outcome for the year as a whole.
5 Condensed unaudited consolidated interim statement of Comprehensive Income For the six months ended 30 September 6 months to 30 Sept Year to 31 March Note '000 Revenue 1,754 1,624 3,447 Cost of sales (170) (158) (321) Gross profit 1,584 1,466 3,126 Administrative expenses (1,997) (1,958) (4,211) Operating loss before financing and taxation (413) (492) (1,085) Operating loss before share option costs (363) (434) (976) Share option costs (50) (58) (109) Finance income/(costs) - - (8) Loss on ordinary activities before taxation (413) (492) (1,093) Taxation Loss on ordinary activities for the period (282) (384) (985) Basic and diluted loss per share (p) 3 (0.04) (0.15) (0.28) 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.
6 Condensed unaudited consolidated interim Statement of Financial Position As at 30 September 30 Sept 30 Sept 31 March Note '000 '000 '000 ASSETS Non-current assets Property, plant and equipment Intangible assets Trade & other receivables Current assets Trade and other receivables 1,735 1,624 1,034 Cash and cash equivalents ,040 1,868 1,577 Total assets 2,593 2,011 1,785 EQUITY AND LIABILITIES Equity Issued capital Share premium 6,591 5,539 5,704 Other reserves 5 (5,706) (4,924) (5,474) Total equity attributable to equity holders of the parent 1, Liabilities Non-current liabilities Other payables Total non-current liabilities Current liabilities Trade and other payables 1,367 1,129 1,098 1,367 1,129 1,098 Total liabilities 1,367 1,129 1,234 Total equity and liabilities 2,593 2,011 1,785
7 Condensed unaudited consolidated interim statement of cash flows For the six months ended 30 September Note Year to 31 March '000 '000 '000 Cash outflows from operating activities 6 (1,007) (1,204) (1,115) Investing activities Acquisition of property, plant and equipment (18) (1) (9) Acquisition of intangible assets (120) - - Net cash used in investing activities (138) (1) (9) Net cash flow before financing activities (1,145) (1,205) (1,124) Financing activities Net proceeds from the issue of share capital ,199 Net cash generated from financing activities ,199 Net (decrease)/increase in cash and cash equivalents (238) (225) 75 Cash and cash equivalents at start of period Net foreign exchange difference - - (1) Cash and cash equivalents at end of period
8 Condensed unaudited consolidated interim statement of changes in equity For the six months ended 30 September Share Share Share option Retained Total capital premium reserve earnings '000 '000 '000 '000 '000 Balance at 1 April 135 4, (5,253) 228 Loss for the period (384) (384) Share option costs Shares issued (384) 654 Balance at 30 September 267 5, (5,637) 882 Loss for the period (601) (601) Share option costs Shares issued (601) (331) Balance at 31 March 321 5, (6,238) 551 Loss for the period (282) (282) Share option costs Shares issued (282) 675 Balance at 30 September 341 6, (6,520) 1,226
9 Notes to the unaudited condensed consolidated interim financial statements 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 comprise the Company and its subsidiary (together referred to as the Group ). The condensed consolidated interim financial statements were authorised for issue on 21 November. The interim financial statements are not statutory accounts for the purposes of section 435 of the Companies Act The comparative figures for the year ended 31 March are not the Company s statutory accounts for that financial year. The financial information for the year ended 31 March is based on the statutory accounts for the financial year ended 31 March restated for the effects of the adoption of International Financial Reporting Standards in issue and adopted for use in the European Union ( IFRSs ). 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 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. 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. Loss per share Basic loss per share The calculation of basic loss per share for the period ended 30 September was based on the loss attributable to ordinary shareholders of 282,000 (period ended 30 September : 384,000; year ended 31 March : 985,000) and a weighted average number of ordinary shares outstanding during the period ended 30 September of 684,252,511 (period ended 30 September : 256,097,842; year ended 31 March : 347,464,893). Diluted loss per share The options in place during the periods ended 30 September and 30 September and during the year ended 31 March are considered to have an anti-dilutive effect. Therefore, basic and diluted loss per share is the same for each of the three periods.
10 4. Segment reporting Segment information is presented in the condensed consolidated interim financial statements in respect of the Group s geographical segments, which are the primary basis of segment reporting. The geographical segment reporting format reflects the Group s management and internal reporting structure. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Geographical segments The Group s operations comprise the following main geographical segments, determined on the basis of the location of customers: Year to 31 March '000 '000 Segment revenue United States of America 1,633 1,590 3,122 Rest of the world ,754 1,624 3,447 Segment (loss) United States of America (253) (163) (896) Rest of the world (29) (221) (89) (282) (384) (985) 30 Sept 30 Sept 31 March Segment total assets '000 '000 '000 United States of America 2,054 1,517 1,333 Rest of the world ,592 2,011 1,785
11 5. Share Capital and Reserves Year to 31 March '000 '000 '000 Share Capital At the beginning of the period Shares issued At the end of the period Share premium At the beginning of the period 5,704 4,691 4,691 Shares issued in the period, net of expenses ,013 At the end of the period 6,591 5,539 5,704 Other reserves At the beginning of the period (5,474) (4,598) (4,598) Loss for the period (282) (384) (985) Share-based payments At the end of the period (5,706) (4,924) (5,474) 6. Cash flows from operating activities Year to 31 March '000 '000 '000 Operating loss (282) (384) (1,085) Depreciation of tangible fixed assets Amortisation of intangible fixed assets Share-based payment expense Operating cash flows before movements in working capital (199) (264) (864) (Increase) in trade and other receivables (941) (641) (157) (Decrease) / increase in payables 133 (299) (194) Net movement in working capital (808) (940) (351) Cash used by operations (1,007) (1,204) (1,215) Corporation tax received Net interest expense - - (8) Net cash from operating activities (1,007) (1,204) (1,115) 7. 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,