IMAGELINX : PLC - Half Yearly Report

Imagelinx plc (the "Company")

Interim Results

For the six months ended 30 June 2011

22 August 2011

Imagelinx (AIM: ILI), the provider of graphic brand management services is pleased to announce Interim Results for the six months ended 30 June 2011.

Highlights

·      Revenues of £6.07m (2010 £6.10m).

·      Profit before tax of £598,000 (2010 loss of £286,000). 

·      EBITDA of £987,000 (2010 £90,000).

·    Continued reduction in costs particularly in American operations

Commenting today, Richard Clothier, Chairman of Imagelinx plc, said:

"The financial performance of the Group has been much improved by cost reductions.  However, the loss of a major client will reduce revenues in the second half and therefore further re-organisation is under way which will help to mitigate its effect.  Our presence in North America is now substantially reduced and a greater focus is being applied in Europe where we have begun to increase our marketing activities. This will add to cost before the resulting revenue begins to flow."

Enquiries:

Imagelinx Richard Clothier, Chairman Alistair Rae, Chief Executive	Tel: [phone] Tel: [phone]
finnCap Edward Frisby / Rose Herbert (corporate finance) Victoria Bates (corporate broking)	Tel: [phone]
Cadogan PR Alex Walters Emma Wigan	Tel: [phone]

Operational review

Despite no change in revenues of £6.07m for the first half year (2010: £6.1m), a substantial improvement in operating profit at £666,000 was achieved compared to a loss in 2010 of £42,000 before exceptional costs of £170,000. This improvement was achieved mainly by a reduction in administration expenses of over £660,000.

The operating profit before depreciation and amortisation was £987,000 in the first half of 2011 compared to £90,000 in 2010 and therefore, with modest capital expenditure, the cash position has improved to a net cash surplus of £180,000, from a net debt position of £740,000. Debtors remain similar to the year-end, but trade and lease finance creditors have been reduced by approximately £400,000.

Earnings per share were 0.21p, compared to a loss in the first half of 2010 of 0.10p.

As reported in April, the principal development has been the loss of P&G as our USA based client. P&G consolidated well over one hundred mainly regional suppliers, to a handful of global suppliers, as part of a major purchasing driven restructuring of its packaging supply chain. This has had no impact on Imagelinx turnover in the first half of the year but will have a progressive effect during the second half. As a result resource levels have been reduced rapidly in the USA and this process will have been largely completed by the end of the third quarter.

Costs are being reduced by re-organisationelsewhere in the Group and by the end of the year the internal IT development capability will have been transferred to the UK from Germany. This, however, will entail double running costs during the transition period.

Revenue from the awards of additional brands and new clients which were won at the end of last year has not yet begun to flow but is expected later in the year. Work for a major new consumer goods client in Europe has begun and we are increasing our sales effort in a drive for additional revenue which is expected to support the results in 2012 and beyond. Progress may however be limited by the expected lack of economic growth and weaker demand for consumer goods.

Although increased capital expenditure on new systems and infrastructure is likely to be undertaken in the second half, the net cash position should improve further as the working capital previously employed in the North American business is reduced.

CONSOLIDATED INCOME STATEMENT

		(Unaudited)	(Unaudited)	(Audited)
		6 months	6 months	Year
	Notes	ended 30 June	ended 30 June	ended 31 December
		2011	2010	2010
		£'000	£'000	£'000
cONTINUING OPERATIONS
Revenue	3	6,070	6,103	12,059
Cost of sales		(3,676)	(3,746)	(7,283)
		_____________	_____________	_____________
GROSS PROFIT		2,394	2,357	4,776
Other operating income		12	-	19
Administration expenses		(1,641)	(2,300)	(4,145)
Other operating expenses		(99)	(99)	(198)
		_____________	_____________	_____________
OPERATING PROFIT/(LOSS) BEFORE EXCEPTIONAL ITEMS		666	(42)	452
Exceptional costs		-	(170)	(196)
		_____________	_____________	_____________
OPERATING PROFIT/(LOSS)		666	(212)	256
Finance Costs		(68)	(74)	(183)
		_____________	_____________	_____________
PROFIT/(LOSS) BEFORE TAX		598	(286)	73
		_____________	_____________	_____________
Profit/(loss) per ordinary share	4
Basic		0.21p	(0.10p)	0.03p
Diluted		0.21p	(0.10p)	0.02p
		_____________	_____________	_____________

consolidated STATEMENT OF comprehensive income

		(Unaudited)	(Unaudited)	(Audited)
		6 months	6 months	Year
		ended 30 June	ended 30 June	ended 31 December
		2011	2010	2010
		£'000	£'000	£'000
Profit/(loss) for the period		598	(286)	73
Exchange differences on translation of foreign operations		12	12	(9)
		_____________	_____________	_____________
Total COMPREHENSIVE income for the period		610	(274)	64
		_____________	_____________	_____________

consolidated STATEMENT OF CHanges in equity

	Share Capital	Share Premium	Translation reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000
At 1 July 2010	289	-	(19)	7,427	7,697
	____________	____________	____________	____________	____________
Credit in respect of share based payments and total transactions with owners	-	-	-	16	16
	____________	____________	____________	____________	____________
Profit for the period	-	-	-	359	359
Currency translation differences	-	-	(21)	-	(21)
	____________	____________	____________	____________	____________
Total comprehensive income	-	-	(21)	375	354
	____________	____________	____________	____________	____________
At 31 December 2010	289	-	(40)	7,802	8,051
	____________	____________	____________	____________	____________
Capital reduction and total transactions with owners	-	-	-	-	-
	____________	____________	____________	____________	____________
Profit for the period	-	-	-	598	598
Currency translation differences	-	-	12	-	12
	____________	____________	____________	____________	____________
Total comprehensive income	-	-	12	598	610
	____________	____________	____________	____________	____________
At 30 June 2011	289	-	(28)	8,400	8,661
	____________	____________	____________	____________	____________

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	(Unaudited)	(Unaudited)	(Audited)
	30 June	30 June	31 December
	2011	2010	2010
	£'000	£'000	£'000
NON-CURRENT ASSETS
Goodwill	4,384	4,384	4,384
Other intangible assets	515	293	402
Property, plant and equipment	1,228	1,247	1,301
	_________	_________	_________
	6,127	5,924	6,087
CURRENT ASSETS
Inventories	84	101	80
Trade and other receivables	3,636	4,117	3,628
Cash and cash equivalents	437	17	162
	_________	_________	_________
	4,157	4,235	3,870
	_________	_________	_________
TOTAL ASSETS	10,284	10,159	9,957
	_________	_________	_________
CURRENT LIABILITIES
Trade and other payables	(1,172)	(1,433)	(1,481)
Obligations under finance leases	(53)	(66)	(108)
Bank overdrafts and loans	(257)	(759)	(181)
	_________	_________	_________
	(1,482)	(2,258)	(1,770)
	_________	_________	_________
NON-CURRENT LIABILITIES
Obligations under finance leases	(141)	(204)	(136)
	_________	_________	_________
	(141)	(204)	(136)
	_________	_________	_________
TOTAL LIABILITiES	(1,623)	(2,462)	(1,906)
	_________	_________	_________
NET ASSETS	8,661	7,697	8,051
	_________	_________	_________
EQUITY
Share capital	289	289	289
Share premium account	-	-	-
Translation reserve	(28)	(19)	(40)
Profit and loss account	8,400	7,427	7,802
	_________	_________	_________
	8,661	7,697	8,051
	_________	_________	_________

CONSOLIDATED STATEMENT OF CASH FLOWS

	(Unaudited)	(Unaudited)	(Audited)
	6 months	6 months	Year
	ended 30 June	ended 30 June	ended 31 December
	2011	2010	2010
	£'000	£'000	£'000
NET CASH (outflow)/inflow from operating activitieS	672	(332)	1,013
	_________	_________	_________
Investing activities
Purchases of property, plant and equipment	(143)	(191)	(459)
Expenditure on intangible assets	(212)		(207)
	________	________	_________
Net cash used in investing activities	(355)	(191)	(666)
	________	_________	_________
Financing activities
Interest paid	(6)	(14)	(52)
Repayment of obligations under finance leases	(50)	(20)	(68)
Facility charges	(62)	(60)	(130)
	_________	_________	_________
Net cash used by financing activities	(118)	(94)	(250)
	_________	_________	_________
(DECREASE)/INCREASE in cash	199	(617)	97
Cash and cash equivalents at start of period	(19)	(125)	(125)
Net foreign exchange difference	-	-	9
	_________	_________	_________
Cash and cash equivalents at end of period	180	(742)	(19)
	________	_________	_________
Cash and cash equivalents comprise
Cash and cash equivalents	437	17	162
Bank overdrafts	(257)	(759)	(181)
	_________	_________	_________
	180	(742)	(125)
	_________	_________	_________

1       Basis of Preparation

This interim announcement was approved by the Board of Directors on 22 August 2011.

The financial information set out in this interim report does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. The group's statutory financial statements for the year ended 31 December 2010, prepared under International Financial Reporting Standards as issued by the IASB and adopted by the European Union (IFRS), have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unmodified and did not contain a statement under Section 498(2) or (3) (accounting records or returns inadequate, accounts not agreeing with records and returns or failure to obtain necessary information and explanations) of the Companies Act 2006.

The directors continually monitor the financial position of the group, taking into account the latest forecasts of future cash flows and analyses of these forecasts, sensitised in respect of the key uncertainties facing the group's ability to generate cash.  The directors consider that the group's ability to continue as a going concern is dependant on the timing of actual versus targeted sales in Imagelinx while it is building up the client base for its services.

A copy of the Interim Results is available on the Company's website www.imagelinx.co.uk

2       Accounting Policies

The accounting policies used in this interim report are the same as those set out in the financial statements for the year ended 31 December 2010.

3       segmental analysis

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

Segmental analysis by activity	(Unaudited)	(Unaudited)	(Audited)
	30  June	30 June	31 December
	2011	2010	2010
	£'000	£'000	£'000
REVENUE BY ORIGIN FROM EXTERNAL CUSTOMERS
UK	4,879	4,694	9,563
US	1,191	1,409	2,496
	_________	_________	_________
Total Revenue	6,070	6,103	12,059
	_________	_________	_________
SEGMENT RESULT
UK	718	371	1,334
Germany	(9)	(190)	(380)
US	(43)	(223)	(502)
	_________	_________	_________
Operating result pre exceptional items	666	(42)	452
Exceptional loss	-	(170)	(196)
Operating Result	666	(212)	256
Finance costs	(68)	(74)	(183)
	_________	_________	_________
Profit/(loss) before tax	598	(286)	73
	_________	_________	_________

4      PROFIT per ordinary share

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

Earnings:

	(Unaudited)	(Unaudited)	(Audited)
	30 June	30 June	31 December
	2011	2010	2010
	£'000	£'000	£'000
Profit/(loss) for the period	598	(286)	73

Number of shares

	30 June 2011	30 June 2010	31 December 2009
	No.	No.	No.
Weighted average number of ordinary shares for the purposes of basic earnings per share	289,038,635	289,038,635	289,038,635
Effect of dilutive potential ordinary shares Share options	-	18,576,979	5,674,603
Weighted average number of ordinary shares for the purposes of diluted earnings per share	289,038,635	307,615,614	294,713,238

In accordance with IAS 33 "Earnings per share", diluted earnings per share for 30 June 2010 is taken as being equal to basic earnings per share, where the Group has recorded a loss, as the effect of including share options is anti-dilutive.