Preliminary Results

RNS Number:6839X
i-mate plc
04 June 2007


For Immediate Release                                                4 June 2007


                                   i-mate plc
                           ("i-mate" or the "Group")

              Preliminary results for the year ended 31 March 2007


i-mate plc (London AIM:IMTE), the specialist in Microsoft Windows Mobile(R)
devices and software, today announces its Preliminary Results for the year ended
31st March 2007.


Financial Highlights


   * Turnover $195 million (2006: $206 million)
   * Gross profit margin of 18.6% (2006: 24.1%)
   * Pre-tax loss of $2.1m (2006: $22.5 million pre-tax profit)
   * Cash of $65.8 million


Operational Highlights


  * Transition under way to new, broader supplier base and own-design
    devices
  * Creation of new geographical divisions comprising of four independent
    profit centres
  * Implementation of Quality Assurance teams to ensure first class delivery
    to the market
  * Announced joint Go-To-Market agreement with Microsoft deploying COMS
    (Customisation and Ordering Management System)
  * Signed global deal with Brightpoint, largest distributor of mobile
    devices
  * Development partnership with Microsoft for Windows Vista Sideshow
    devices



Jim Morrison, Chief Executive, commented:


"It has been a challenging but pivotal year for i-mate. Difficult but necessary
steps have been taken to strengthen the business to ensure the problems
experienced during the year are not repeated.


"With multiple supplier agreements, a growing geographical footprint, a broader
product mix, and our ongoing excellent relationship with Microsoft, I remain
positive about the growth opportunities available to the Group."





For further information please contact:

Buchanan Communications
Mark Edwards/Jeremy Garcia/Robin Haddrill                     Tel: [phone]
                                                                            
i-mate plc                                                 Tel: [phone]
Gregor McNeil/Nadine Salem



Chairman's Statement

The year to 31 March 2007 was a very challenging one for our management team and
staff in all areas of operation. The problems we experienced during the year
resulted in an extremely disappointing financial outturn and prompted a
fundamental review of the Group's operations. As we announced in January 2007,
problems in production at our device supplier and quality issues with the
devices themselves led to a major reduction in the level of shipments of i-mate
branded products. In addition, the Group was forced to undertake a costly
program to address customers' concerns and to recall non-performing devices. The
net effect of these problems was that sales for the year to 31 March 2007 were
$195 million (2006:$206 million) and a loss before tax for the year of $2.1
million (2006: profit before tax $22.5 million).

The Board and management team took immediate action to address the problems
encountered during the year with the priority being to look after the customer
base and to return the Group to profitable growth as soon as possible. The
fundamental organisational review is still ongoing. There is a clear roadmap of
new products, unique to i-mate, which are now coming on stream. These new
products are unlikely to start shipping in significant volumes until the second
half of the year and, as a result, we expect that the trends that the Group
experienced in second half of FY2007 will continue into the first half of the
financial year as we complete the transition to full OEM status. It is envisaged
that these new products will produce good margin sales with greater control of
product quality and ownership of the intellectual property of a unique,
innovative range of mobile devices. Our new products are being well received by
customers and sales channels.

The Group is focused on the sale of its Windows Mobile(R) based products to the
professional consumer (the so-called pro-sumer) and the corporate user. A
principal route to market for these products is through the support of network
operators. To this end, I am pleased to report that i-mate has now engaged with
several large operators that it was not previously able to deal with and we hope
to repeat with these operators the success achieved in Australia in
collaboration with Telstra. This could deliver significant volumes of sales for
the new products. i-mate has also signed a global deal with Brightpoint, now the
largest device distributor in the world.

i-mate possesses substantial technical competence in-house that was augmented
during the year by the acquisition in November 2006 of A Living Picture plc,
which brought a new range of converged devices as well as a team skilled in the
electronic design and manufacture of such products. The Group has a very strong
technical management team with a great deal of experience in designing, building
and testing sophisticated mobile devices.


The key relationship with Microsoft has continued to strengthen. The depth of
our relationship was illustrated by our announcement of a development
partnership with Microsoft for the next generation of Windows Vista Sideshow
devices in which i-mate will retain ownership of the intellectual property. The
Sideshow is a PC accessory, slimmer than a mobile phone, with a 14 inch screen
which can be used to access the users' own PCs (or any PC, anywhere) from their
laps, view TV broadcasts or photographs and even function as a sophisticated
remote control for a number of applications. The Customisation and Ordering
Management Software (COMS) trial has been confirmed by a Go-To-Market agreement
signed with Microsoft in May.

Our objective for the current year is to realise the potential created by the
progress made so far in completing the transition to full OEM status. We have an
outstanding management team at i-mate and have built a technical and development
expertise which we believe to be capable of delivering market leading products.
We have a strong balance sheet. The challenges of the last year are being
addressed and we have instituted a clear focus on sales, supplier and
distributor management, with the objective of delivering the highest quality
service being delivered to customers. i-mate has the opportunity, following this
transitional period, to become a substantially larger business and to deliver
value to all of its shareholders.


Bernard Cragg

Chairman













Chief Executive's Statement


Introduction

i-mate is evolving its business model as a specialist global provider of
Microsoft Windows Mobile(R) devices and services. The last 12 months have been
challenging for i-mate and we have learnt some painful lessons but we are
working at pace to deliver on our core set of strategic goals. As a result of a
review of operations we have set the following objectives:


   * develop our own unique, exclusive products which are technically
     superior to other Windows Mobile(R) devices in the marketplace
   * embed our proprietary device management software within our products
   * leverage our channels to market to provide global reach for our
     exclusive products
   * implement an operating model structured around four key sales and
     marketing regions supported by centres of technical excellence and expertise
     in product development, software development and research.


Operational review

In December I stated that "I have not been more confident than I am now", having
secured three new handset manufacturers as suppliers and a comprehensive roadmap
of devices to take us into 2009. This product roadmap initially used a mix of
designs supplied by the manufacturers and i-mate, a set of devices based on our
own designs and an additional set of devices designed and manufactured by i-mate
under contract. We had also commenced COMS (Customisation and Ordering
Management System) trials in Australia, in partnership with Microsoft.


However, during this period of significant progress, unexpected problems emerged
with our first new manufacturer. Devices were not delivered to schedule and they
were of inconsistent quality. Additional manufacturing and process problems
meant that the Group had insufficient stock to fulfil existing orders and, on
top of this, stock in circulation had to be recalled or reworked on site - a
costly and time consuming exercise.


We are proud of the fact that throughout these difficulties, we continued to
deliver excellent after-market service to our customers. This is best
illustrated by our achievement of a 94% call answer rate with the resolution of
95% of cases first time - i.e. a customer's problem with a device was owned and
resolved by a single representative without escalation. In cases where a
customer had to return a product for physical repair, we achieved an 85% success
rate against our target of an overall turnaround time (including transit) of
five working days.


The review process we instigated has prompted us to re-evaluate our quality
control systems and we have made a number of key changes. The Group has now put
into place a full Quality Assurance ("QA") team to work alongside our
manufacturers. A separate QA team will run end user approvals and ensure
controls on quality, independently of the engineering teams and factory
production QA teams. We are absolutely committed to ensuring that only the
highest quality devices are shipped to market. As a result of these additional
processes, we will have to extend our go-to-market and development timescales
but this should ensure that we deliver first class, reliable devices.


We have increased the number of our channels to market and are targeting
additional network operators. In February 2007, at 3GSM in Barcelona, we
announced that we had appointed a subsidiary of Brightpoint, Inc. as a major
distributor of the new product line-up in a number of key strategic European
growth markets. Under the agreement, Brightpoint will be responsible for
distribution and channel development in these new markets for us.


Business reorganisation

Shortly after the year end, in April 2007, we restructured the group into four
geographic regions - Europe, the Americas, Australasia & Asia, and the Middle
East including Africa and the Indian subcontinent. Each of these regions will be
run similar to independent profit centres. The regional businesses will access
separate Technology and QA functions as well as the Group's head office.


As part of the reorganisation, we have streamlined our marketing function and
technology centres for development, with teams based in the USA for software and
in the UAE for hardware. The reorganisation has resulted in a reduction in
headcount of some 25% of employees. The redundancy costs associated with the
reorganisation are $0.4 million, which will be charged in FY2008. The headcount
reduction will result in an annualised cost saving to the Group of about $3
million from May 2007 onwards which will help fund the additional investment
required to complete our transition to full OEM status


Management team

The senior executive management team post the reorganisation comprises myself as
Chief Executive, Gregor McNeil as Chief Financial Officer, Dawn Robson as Chief
Operating Officer and David Hayes (former CEO of A Living Picture plc, acquired
in November 2006) as Chief Technical Officer - all based in Dubai. In addition,
Rob Pledger has become Chief Software Officer based in the USA. The four
regional heads report to COO Dawn Robson. Two of these are in place already -
Michael Cavey is General Manager, Australasia & Asia and Jack Craine is General
Manager, Middle East. We are in the process of recruiting GMs for the Americas
and Europe and Dawn has taken direct responsibility for these regions until the
positions are filled. Similarly, I have taken responsibility for QA pending the
recruitment of a suitably qualified individual.


Product update

Our product roadmap for the year ahead comprises three families of devices: the
JAMA - a low-cost device platform; the Urban - a mid-priced workhorse platform;
and the Ultimate - a high end, high specification device platform. The first of
the JAMA products was launched this month with the remainder of the range due to
launch over the next six months. We anticipate launching the first Ultimate and
Urban ranges in September.


Customers and end users will also benefit from our new and enhanced software
platforms. For our resellers and enterprise customers, our all new COMS
(Customisation and Ordering Management System) platform enables users to buy
online in quantity, customise the devices required before delivery and the
system will then provide order management, processing, invoicing and arrange
dispatch. The i-mate Control platform allows enterprise managers and individual
users to manage their devices, including the ability to lock and wipe in the
event of theft or loss. Finally, club i-mate provides downloads of images,
sounds and other applications once the device is in use. These three platforms
have been wholly integrated into a new solution for customised device sales and
enhanced support and management for our customers, pro-sumers and enterprises.


The upcoming Ultimate and Urban device lines will deliver a unique experience
for users straight out of the box, with minimum fuss and user input. i-mate
enterprise customers will have never-before-seen capabilities including
zero-configuration push email and corporate policy capabilities that will propel
i-mate to the forefront of mobile device service standards for corporate
customers and white-label services for mobile operators. This combination of new
devices and upgraded services, combined with our traditional high quality
technical support for customers, gives us a very powerful offering across the
market.


Financial review

Revenue during the year declined slightly from $206 million to $195 million.
This 5% decrease resulted primarily from the supply and product quality issues
encountered during the second half of the year which delayed the launch of new
devices. All regions were affected by this, albeit some to a greater extent than
others.


The Middle East region continues to be an important market for us, accounting
for $61 million (31%) of the Group's revenue. Australasia revenues increased
significantly to $62 million from $32 million (a 93% increase), benefiting from
a strong relationship with Telstra, a key mobile operator in the region.
Revenues also increased in Asia as the expansion into new territories such as
India continued. Revenue declined in Europe and the Americas, which were the
regions most impacted by the product supply issues.


Gross profit decreased by $13.3 million to $36.3 million and overall gross
margin fell from 24.1% to 18.6%. Overall margin was severely impacted by the
delayed launch of new devices. This meant that the Group's revenues were more
reliant on devices which were nearing end of life and were experiencing the
declining margins typical in this stage of the product life cycle. Overall
margin was also impacted by a stock write-down charge of $1.9 million in respect
of legacy devices coming towards end of life.


Distribution costs increased from $4.2 million to $4.9 million as a result of
the change in geographical spread of sales. Administration expenses, including
sales and customer support, increased by $12.7 million to $36.8 million. This
reflected both expansion of the business and the costs associated with managing
the supply difficulties encountered in the second half of the year and the
expansion into new sales territories and product categories. Marketing costs
increased as a result of the continued expansion into new territories during the
year.


A charge of $1.3 million in respect of share options is included in
administration expenses for the year. Administration expenses also included
exchange gains of $1.9 million arising from the retranslation of non-Dollar
denominated net monetary assets.



Interest receivable rose from $1.2 million to $3.3 million as a result of full
year interest on cash deposits held and $0.6m of interest received from a major
customer in respect of a significant outstanding balance which was fully settled
shortly after 31 March 2007. Surplus funds are currently placed on short term
deposit for periods of up to one month.


The Group had a loss for the financial year of $2.9 million, down from a profit
of $21.5 million. The profit attributable to minority interest of $478,000
(2006: $841,000) in the year arose from HTC's interest of 11.25% in Carrier
Devices UK Limited, the holding company for the Group's subsidiary companies
trading in HTC products. The interest, shown at $1.9 million in the Balance
Sheet at 31 March 2006, was granted to HTC in September 2005 as part of the
distribution agreement.


The Group had cash reserves of $65.8 million at 31 March 2007 and is therefore
well positioned to fund the continued development of exclusive i-mate devices,
the working capital requirements for launching these devices and continuing
geographical expansion.


Microsoft update

i-mate's relationship with Microsoft is central to our ability to remain at the
forefront of suppliers of devices based on Windows Mobile software operating
system. The development partnership between i-mate and Microsoft to produce the
next generation of the Sideshow accessory can only serve to strengthen that
relationship.


In May we signed a joint Go-To-Market agreement with Microsoft. This agreement
is for trialling and marketing of the i-mateTM Customisation and Ordering
Management System (COMS) and i-mateTM Suite software products into the market.
We expect strong sales into the Enterprise market through this partnership.


Outlook

This has been a pivotal year for i-mate. The Group has reorganised and
strengthened many of its business processes as well as increasing significantly
the routes to market for our products in an expanded geographical footprint. We
now have an exciting line-up of potentially market leading products and roadmaps
to launch for these devices.


Delivering the broader product mix has proved challenging but we believe that we
are meeting that challenge. Operationally, we have had to re-engineer many
internal processes but that heavy lifting is almost complete and our focus now
is firmly on delivering the new products - a process that began in May this
year.


We continue to remain positive about the growth opportunities for our business
as we continue to leverage our excellent working relationship with Microsoft and
our routes to market. i-mate's prime objective in the last six months has been
to ensure the difficulties experienced in the second half of the year are not
repeated going forward. I continue to remain positive on our trading prospects
but in the short term, the trends that we experienced in second half of FY2007
will continue into the first half of the financial year as we complete the
transition to OEM supplier and our infrastructure is, deliberately, at a level
that can accommodate the higher revenue streams we expect in due course.


Jim Morrison

Chief Executive





Proforma Group Income Statement

for the year ended 31 March 2007

                                           Note          2007            2006
                                                         $000            $000

Revenue                                     2         195,481         206,021
Cost of sales                                        (159,161)       (156,463)

Gross profit                                           36,320          49,558

Distribution costs                                     (4,930)         (4,187)
Administrative expenses                               (36,793)        (24,066)

Operating (loss)/profit                     2          (5,403)         21,305

Finance revenue                             3           3,335           1,165

(Loss)/Profit before taxation                          (2,068)         22,470

Taxation                                    4            (820)           (952)

(Loss)/Profit for the financial year                   (2,888)         21,518

Attributable to:

Equity holders of the parent                           (3,366)         20,677

Minority interest                                         478             841

                                                       (2,888)         21,518

Earnings per share                          5
Basic                                                   (2.83c)          17.44c
Diluted                                                 (2.83c)          17.31c



In respect of the prior year the Group income statement, Group statement of
recognised income and expense and Group cashflow statement have been prepared
using merger accounting and are presented on a proforma basis as if the new
holding company had been in existence and been the parent of all Group
subsidiaries throughout the prior year period.


Revenue and operating (loss)/profit are all derived from continuing operations.


There is no difference between the results stated above and their historical
cost equivalents.





Proforma Group Statement of Changes in Equity

for the year ended 31 March 2007



                Share     Share    Merger Share based  Retained Exchange    Total    Minority    Total
                                              payment            Reserve
              Capital   Premium   Reserve     Reserve  Earnings   $000       $000    Interest     $000
               $000      $000      $000        $000      $000                          $000
Opening
balances     10,430    62,120    (8,663)        591    35,162     (889)    98,751     1,437    100,188

Shares          119     3,615         -                     -        -      3,734                3,734
issued
Cost of                     -         -                     -        -          -                    -
issue
Currency
differences
on
foreign
currency          -         -         -                     -      535        535         -        535
net
investments
Share based
payment
provision         -         -         -       1,301         -        -      1,301         -      1,301
Loss for
the               -         -         -           -    (3,366)       -     (3,366)      478     (2,888)
period

Equity at
end          10,549    65,735    (8,663)      1,892    31,796     (354)   100,955     1,915    102,870
of the year





for the year ended 31 March 2006

                Share     Share    Merger     Share based  Retained Exchange   Total    Minority    Total
                                          payment Reserve            Reserve
                                                     $000
              Capital   Premium   Reserve                  Earnings   $000      $000    Interest     $000
               $000      $000      $000                      $000                         $000
Opening
balances        137         -         -               -    15,081       (6)   15,212         -     15,212

Shares       10,293    66,850    (8,663)                        -        -    68,480               68,480
issued
Cost of           -    (4,730)        -                         -        -    (4,730)              (4,730)
issue
Currency
differences
on
foreign
currency          -         -         -                         -     (883)     (883)                (883)
net
investments
Share based
payment
provision         -         -         -             591         -        -       591                  591
Profit for
the               -         -         -               -    20,081        -    20,081     1,437     21,518
period

Equity at
end          10,430    62,120    (8,663)            591    35,162     (889)   98,751     1,437    100,188
of the year



Group Balance Sheet

as at 31 March 2007

                                                      Note     2007       2006
                                                               $000       $000

Non current assets
Goodwill                                                      4,325          -
Other intangible assets                                6      7,532      1,671
Property, plant and equipment                                 3,253      1,137
                                                             15,110      2,808

Current assets
Inventories                                                  11,373     21,680
Trade and other receivables                            7     36,720     37,081
Cash and cash equivalents                                    65,815     69,343
                                                            113,908    128,104

Total assets                                                129,018    130,912

Current liabilities
Trade and other payables                               7     25,737     29,858
Tax liabilities                                                 411        866
                                                             26,148     30,724


Net assets                                                  102,870    100,188

Equity
Share capital                                          8     10,549     10,430
Share premium account                                        65,735     62,120
Merger reserve                                               (8,663)    (8,663)
Exchange reserve                                               (354)      (889)
Share based payment reserve                                   1,892        591
Retained earnings                                            31,796     35,162

Equity attributable to equity holders of the parent         100,955     98,751

Minority interest                                             1,915      1,437

Total equity                                                102,870    100,188





Proforma Group Cashflow Statement

for the year ended 31 March 2007

                                                        Note    2007      2006
                                                                $000      $000

Net cash from operating activities                       9     2,893    (7,181)

Investing activities
Interest received                                              3,335     1,103
Proceeds on disposal of property, plant and equipment             56         -
Purchase of property, plant and equipment                     (2,772)     (804)
Expenditure on intangible assets                              (5,317)   (1,706)
Acquisition of subsidiary                                     (2,451)        -

Net cash used in investing activities                         (7,149)   (1,407)

Financing activities
Net proceeds on issue of shares                                    -    63,750

Net increase in cash and cash equivalents                     (4,256)   55,162

Cash and cash equivalents at beginning of year                69,343    14,311

Effect of foreign exchange rate changes                          728      (130)

Cash and cash equivalents at end of year                      65,815    69,343







Proforma Notes

For the year ended 31 March 2007


1. General information

The financial information set out in the announcement does not constitute the
Group's statutory accounts for the years ended 31 March 2007 or 2006.  The
financial information for the year ended 31 March 2006 is derived from the
statutory accounts for that year which have been delivered to the Registrar of
Companies.  The auditors report on those accounts; their report was unqualified
and did not contain a statement under s237(2) or (3) Companies Act 1985.  The
statutory accounts for the year ended 31 March 2007 will be finalised on the
basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Group's annual general meeting.


The financial information set out in this announcement has been prepared on the
basis of the accounting policies as stated in the previous year's financial
statements, and are consistent with the current year's full financial statements
which are yet to be published


2. Segmental information

For management purposes, the Group's primary segment is geographical. The
business operates in two business segments, hardware and software. Revenue and
the carrying value of assets in respect of software are less than 10% in the
current year and so have not been disclosed separately.


(a) Segmental revenue by source
                                        2007                             2006
                              Inter                            Inter
                            Segment    Total                 Segment    Total
                   Sales      Sales    Revenue      Sales      Sales    Revenue
                  $000       $000       $000       $000       $000       $000

Middle East    180,119    (69,902)   110,217    208,151    (60,551)   147,600
Australasia     61,797          -     61,797     31,910          -     31,910
Italy           19,291          -     19,291     23,262          -     23,262
UK               4,176          -      4,176      3,249          -      3,249

               265,383    (69,902)   195,481    266,572    (60,551)   206,021



Inter segment sales are charged on an agreed transfer pricing basis.


(b) Segmental result
                                                          2007            2006
                                                          $000            $000

Middle East                                             (4,774)         20,339
Australasia                                              1,299             551
Italy                                                      (64)            615
UK                                                      (2,055)           (195)
North America                                              191             135

                                                        (5,403)         21,445
Unallocated operating expenses                               -            (140)

Operating (loss)/profit                                 (5,403)         21,305
Finance revenues                                         3,335           1,165
Taxation                                                  (820)           (952)

(Loss)/profit after taxation                            (2,888)         21,518



(c) Additional information

Sales by destination
                                                  2007                    2006
                                                  $000                    $000

Middle East                                     61,291                  70,117
Australasia                                     61,583                  31,885
Africa                                          19,935                  16,073
Italy                                           19,292                  23,265
UK                                              12,406                  22,970
Rest of Europe                                   8,961                  28,434
North America                                    4,501                   5,880
Asia                                             7,512                   7,397

                                               195,481                 206,021



3. Finance revenue

                                                           2007           2006
                                                           $000           $000
Bank interest receivable                                  2,779          1,165
Trade debtor interest receivable                            556              -
                                                          3,335          1,165




4. Taxation


                                                          2007           2006
                                                          $000           $000
The tax charge comprises:
UK corporation tax                                         120            171
Foreign tax                                                700            781

Total current tax                                          820            952



The actual tax charges for the years differs from the standard rate applicable
in the UK of 30% (2006: 30%) for the reasons set out in the following
reconciliation:
                                                              2007       2006
                                                              $000       $000

(Loss)/profit on ordinary activities before tax             (2,068)    22,470

Tax at 30% thereon                                            (620)     6,741
Factors affecting charge for the year:
Profits/(losses) arising in territories where no tax is
charged                                                        499     (6,151)
Losses on which group relief not available                     664          -
Capital allowances in excess of depreciation                     -         (1)
Non deductible expenses                                        139        206
Higher tax rates on overseas earnings                           52        157
Adjustment to prior year tax charge                             86          -

Current tax charge for the year                                820        952



Taxation for other jurisdictions is calculated at the rates prevailing in the
respective jurisdictions. Carrier Devices Middle East FZ-LLC and I-Mate Middle
East FZ-LLC, subsidiary companies, operate in a tax free zone; profits from
these companies, therefore, are not subject to corporation tax.

At 31 March 2007 the Group had unused tax losses of $6,516,000 available for
offset against future taxable profits arising in the UK. No deferred asset has
been recognised due to the uncertainty of future profit streams in the UK.


5. Earnings per share

Basic earnings per share is calculated on the loss of the Group attributable to
equity holders of the parent of $3,366,000 (2006: $20,677,000 profit) and on
118,926,503 (2006: 118,528,297) equity shares, being the weighted average number
of shares in issue during the year.

The diluted earnings per share is calculated based on the weighted average
number of shares in issue during the year of 118,926,503. In the prior year, the
weighted average number of shares was adjusted for the dilutive effect of
855,598 share options.



6. Intangible fixed assets
Group                                  Development        Software       Total
                                             Costs         $'000         $'000
                                           $'000
Cost
At 1 April 2005                                -             123           123
Additions                                  1,609              97         1,706

At 1 April 2006                            1,609             220         1,829
Additions                                  5,317               -         5,317
Acquisition of subsidiary                  1,646               -         1,646

At 31 March 2007                           8,572             220         8,792

Amortisation
At 1 April 2005                                -              78            78
Charge for the year                            -              80            80

At 1 April 2006                                -             158           158
Charge for the year                        1,040              62         1,102

At 31 March 2007                           1,040             220         1,260

Net book value
At 31 March 2007                           7,532               -         7,532

At 31 March 2006                           1,609              62         1,671



Intangible fixed assets at 31 March 2007 comprises capitalised development
expenditure during the year in respect of products and i-mateTM Suite. The
amortisation period for development costs incurred on products is between one
and three years and for software is between two and three years.


7. Other financial assets and liabilities

Trade and other receivables

                                                          2007            2006
                                                          $000            $000
Current:
Trade receivables                                       31,419          35,230
Other debtors                                              212              68
Prepayments and accrued income                           5,089           1,783

                                                        36,720          37,081



The Group's credit risk is primarily attributable to its trade receivables. The
amounts presented in the balance sheet are net of allowances for doubtful
debtors. An allowance for impairment is made where there is an identified loss
event which, based on previous experience, is evidence of a reduction in the
recoverability of the cash flows. An allowance has been made for the estimated
irrecoverable amounts from the sale of goods of $104,000 (2006: $53,000). The
average credit period taken on sales is 40 days (2006: 30 days). No interest is
charged on receivables in the normal terms of business. Credit risk attributable
to trade receivables is mitigated through the use of letters of credit and
credit insurance where possible.


The Directors consider that the carrying amount of trade and other receivables
approximates their fair value.

The Group's principal financial assets are bank balances and cash, and trade and
other receivables.

The credit risk on liquid funds is limited because the counterparties are all
banks with high credit ratings assigned by international credit rating agencies.

Trade and other payables

                                                          2007            2006
                                                          $000            $000
Current:
Trade creditors                                         18,925          23,123
Accruals and deferred income                             6,271           4,402
Social security and other taxes                            407           1,599
Other creditors                                            134             734

                                                        25,737          29,858

Trade creditors and accruals principally comprise amounts outstanding for trade
purchases and ongoing costs. The average credit period taken for trade purchases
is 47 days (2006: 51 days). The Directors consider that the carrying amount of
trade payables approximates their fair value.



8. Share capital

                                                            2007          2006
                                                            $000          $000

Authorised
i-mate plc
200,000,000 ordinary shares of 5p each                    17,600        17,600
(translated at historic rate of $1.76)

Allotted, issued, and fully paid:
i-mate plc
118,528,297 ordinary shares of 5p each
(translated at historic rate of $1.76)                    10,430        10,430

1,194,619 ordinary shares of 5p each
(translated at historic rate of $1.98)                       119             -

                                                          10,549        10,430



On 4 December 2006, the Company acquired all of the issued share capital of A
Living Picture plc for a consideration which included 1,194,619 ordinary shares
of 5p each in the Company.


The Company has one class of ordinary shares which carry no right to fixed
income.



9. Notes to the cash flow statement


                                                               2007       2006
                                                               $000       $000

Operating (loss)/profit                                      (5,403)    21,305
Amortisation of intangible costs                              1,102         80
Depreciation of property, plant and equipment                   766        505
(Profit)/loss on disposal of property, plant and equipment      (19)       145
Share based payment provision                                 1,301        591

Operating cash flows before movements in working capital     (2,253)    22,626

Decrease/(Increase) in inventories                           10,491    (16,811)
Decrease/(Increase) in receivables                              573    (19,316)
(Decrease)/Increase in payables                              (4,592)     6,934

Cash generated from/(used in) operations                      4,219     (6,567)

Income taxes paid                                            (1,326)      (614)

Net cash from/(used in) operating activities                  2,893     (7,181)



Cash and cash equivalents (which are presented as a single class of assets on
the face of the balance sheet) comprise cash held by the Group with an original
maturity of three months or less. The carrying amount of these assets
approximates their fair value.




                      This information is provided by RNS
            The company news service from the London Stock Exchange

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