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RNS Number:3882J
Imagestate PLC
28 March 2003
PRESS RELEASE
ImageState PLC
Interim results for the six months ended 31 December 2002
ImageState PLC ("ImageState" or the "Company"), the digital image rights and
content company, announces its results for the six months ended 31 December
2002.
Highlights during the period:
- Revenue of #2.9 million (2001: #3.5 million)
- Reduced group operating loss of #1.3 million (2001: #2.8 million)
Developments since the period end:
- Launch of new integrated e-commerce enabled web site globally
- New royalty free content distribution deals signed
- Agreement of further funding by principal shareholders
Michael Cornish, Executive Chairman, commented:
"The focus of the Group over the last six months has been on increasing our
product offering, integrating the digital image databases, launching a new
e-commerce web site for our US and UK operations and our agent network while
implementing a significant cost reduction programme. We have made substantial
progress on all these fronts. In particular the new web site provides us with a
strong digital offering for our customers".
Enquiries:
ImageState PLC
Michael Cornish, Executive Chairman 020 7225 2577
Cubitt Consulting 020 7367 5100
ImageState PLC
Interim report
31 December 2002
ImageState Plc
Chairman's statement
Introduction
ImageState, the digital image rights and content Group, announces its results
for the six months ended 31 December 2002.
ImageState sells still images, music and video via traditional distribution
channels and the Internet to creative professionals worldwide including
advertising agencies, design studios, multimedia producers and film makers.
ImageState's still image library amounts to 160,000 digital images online
together with an edited analogue library in excess of 1 million images.
Financial Results
During the period from 1 July 2002 to 31 December 2002 Group turnover amounted
to #2.9 million, compared to #3.5 million for the six months ended 31 December
2001. The gross margin was approximately 56 per cent. Excluding catalogue sales
which no longer form part of the core business going forward, during the period
from 1 July to 31 December 2001 adjusted Group turnover amounted to #3.3
million, compared to #2.9 million for the six months ended 31 December 2002.
The split of turnover by region was approximately US 36 per cent., UK 27 per
cent. and rest of world 37 per cent. The Group's products are sold by agents in
over 50 countries. This broad international spread of sales has continued to
insulate the Group from the worst of the steep drop in advertising expenditure
in the US and the UK. 18 per cent. of overall sales were accounted for by
royalty free product and the balance, 82 per cent, by rights protected images
and footage. On-line sales amounted to approximately 6 per cent.
Like for like sales were down 8 per cent. reflecting the difficult market
conditions in the US and Europe. There is no indication of any recovery in the
advertising market either in the US or UK.
The Group lost #0.9 million before interest, tax, depreciation and amortisation
("ebitda") compared to a loss of #1.6 million for the six months ended 31
December 2001. The Group's operating cost run rate in the current third quarter
has been reduced to #375,000 per month (of which approximately #75,000 per month
relates to head office costs) compared to #500,000 per month this time last
year, a reduction of 25 per cent.
The Group loss before taxation was #1.5 million compared to a loss of #3.4
million for the six months ended 31 December 2001. The Group made a loss per
share of 0.6p, compared to a loss per share of 1.6p. for the six months ended 31
December 2001.
On 10 October 2002, the Group arranged a finance facility of #2,350,000, which
was provided by its two largest shareholders OVP2 Limited (a subsidiary of
Pacific Investments PLC, a Group ultimately controlled by Sir John Beckwith) and
Mike Luckwell (both Directors of the Group) who between them hold approximately
58.1 per cent. of the Group (together the " Founders") and Mark Johnson, a
Director of ImageState and Pacific Investments PLC. The facility was
subsequently increased on 17 December 2002 by #750,000 and subsequently on 25
March 2003 by a further #675,000. The terms of the facility remain unchanged.
Under the terms of the agreement the loan is repayable on 31 March 2004 or, at
the lenders' behest, may be converted into ordinary shares in the Group at a
conversion rate of 1p per share. The purpose of the loan is to provide
additional working capital and reduce trade creditors.
The Independent Directors (comprising the Chairman and Finance Director) have
reviewed the potential sources of funding for ImageState's immediate needs. That
review concluded that currently there were no other sources of acceptable
finance available to the Group, given the current volatile condition of the
stock market and the very cautious nature of the debt capital markets. In
reviewing the terms of the loan the Independent Directors considered the
immediate needs of the business for further funding and the implications of not
receiving such funding in the short term, together with the recent share price
trading range.
The Chairman and Finance Director, who consulted with the Group's nominated
adviser, concluded that the terms of the finance facility are fair and
reasonable and in the best interests of all shareholders and the Group.
In due course a resolution will be put to shareholders to provide the necessary
authority to allot the new shares in the event that the loan is to be repaid
through the issue of shares at 1p. All shareholders will be eligible to vote on
this resolution, except for the Founders and Mark Johnson.
The Group had net liabilities of #3.9 million as at 31 December 2002 with all
investments carried in the balance sheet at the lower of cost or net realisable
value. During the year ended 30 June 2002 the Group provided #14.1 million for
impairment in its carrying value of goodwill. This assessment was performed in
December 2002. No further impairment has arisen in the six month period to 31
December 2002.
The Group has also made a small number of changes to the senior management
structure. Chris Adamson, the Finance Director, has decided to pursue other
opportunities and will leave the Group at the end of October 2003. We wish
Chris well for the future. Chris is being replaced by James Deeny who has
joined as Finance Director Designate.
Current Trading
In the last six months the focus of the Group has been to increase its product
offering, integrate the digital image databases, launch a new e-commerce web
site for its US and UK operations and agent network while implementing a
significant cost reduction programme. The Group has made progress on all these
issues.
The Group has developed the ImageState web site as a portal and has therefore
expanded the collections of images it sells to include other leading publishers'
content. Similarly the Group has expanded the distribution deals it has in
place with third party distributors of its product.
The Group completed the launch of its new e-commerce enabled web site this week.
The new web site (www.imagestate.co.uk) has 160,000 digital images and combines
the digital image collections of the Group in a single site as well as the
collections of other leading image publishers. Up to a further 40,000 digital
images are expected to be added over the next six months. This completes a nine
month project to combine the Group's previous web sites into one integrated
site.
The new web site, which is now fully operational, brings all this additional
content together and enables customers to research, price, buy and download on
line both rights managed and royalty free content. Customer reaction to the new
web site has been very favourable.
A substantial amount of management time has been absorbed on integrating the
acquisitions made over the last 3 years and launching a competitive web
offering. Over the next six months more management time can be directed to
exploiting this new technology and content base to progress sales.
However, the trading environment remains very difficult and there is no sign of
any recovery in advertising expenditure. In particular, the uncertainty created
by the current situation in the Gulf is having a short term adverse impact on
activity levels.
Michael Cornish
Executive Chairman
Independent review report
to ImageState PLC
We have been instructed by the Company to review the financial information for
the six months ended 31 December 2002, which comprises the Consolidated Profit
and Loss Account, Consolidated Statement of Total Recognised Gains and Losses,
Consolidated Balance Sheet, Consolidated Statement of Cash Flows and the related
notes 1 to 8. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the Company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' issued by the
Auditing Practices Board. To the fullest extent permitted by the law, we do not
accept or assume responsibility to anyone other than the Group, for our work,
for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report as required by the AIM Rules
issued by the London Stock Exchange
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
'Review of interim financial information' issued by the Auditing Practice Board
for use in the United Kingdom. A review consists principally of making
enquiries of Group management and applying analytical procedures to the
financial information and underlying financial data, and based thereon,
assessing whether the accounting policies and presentation have been
consistently applied, unless otherwise disclosed. A review excludes audit
procedures such as test of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an audit
opinion on the financial information.
Going concern
We have considered the adequacy of the disclosures made in the financial
information concerning the availability to the Group of continuing finance. The
Group is dependent on continuing finance being made available by its
shareholders and/or its bankers to enable it to continue operating and meet its
liabilities as they fall due. Two major shareholders have agreed to provide
funds to the Group, which the Directors believe will be sufficient for these
purposes.
Further details of this fundamental uncertainty are included in note 1 to the
financial information. In view of the significance of the fact that the
preparation of the financial information on the going concern basis assumes such
ongoing provision of funds, we consider that these disclosures should be brought
to your attention. The financial information does not include any adjustments
that would result should continuing finance not be made available to the Group.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 December 2002.
Ernst & Young LLP
London
ImageState PLC
Group profit and loss account
for the 6 month period ended 31 December 2002
6 month 6 month 12 months
period ended period ended ended
31 December 31 December 30 June
2002 2001 2002
Notes #000 #000 #000
Turnover
Continuing operations
Ongoing 2,948 2,964 5,981
Acquisitions - 489 1,051
----------- ----------- -----------
2 2,948 3,453 7,032
Cost of sales
Ongoing (1,291) (1,003) (1,858)
Acquisitions - (239) (343)
----------- ----------- -----------
Gross profit 1,657 2,211 4,831
Operating expenses
Continuing operations
Ongoing (2,929) (4,672) (11,160)
Acquisitions - (186) -
Exceptional Items - - (15,257)
Discontinued operations - (184) -
Operating loss
Continuing operations
Ongoing (1,272) (2,711) (21,586)
Acquisitions - 64 -
Discontinued operations - (184) -
----------- ----------- -----------
Group operating loss 2 (1,272) (2,831) (21,586)
Costs of fundamental restructuring and reorganisation - (514) -
Interest receivable 9 10 34
Interest payable (220) (56) (558)
----------- ----------- -----------
Loss on ordinary activities before taxation (1,483) (3,391) (22,110)
Taxation - - -
----------- ----------- -----------
Loss after taxation and minority interest (1,483) (3,391) -
----------- ----------- -----------
Loss retained for the financial period (1,483) (3,391) (22,110)
----------- ----------- -----------
ImageState PLC
Group profit and loss account (continued)
for the 6 month period ended 31 December 2002
6 month 6 month 12 months
period ended period ended ended
31 December 31 December 30 June
2002 2001 2002
Notes #000 #000 #000
Loss per share
Basic and diluted 4 (0.6p) (1.6p) (9.7p)
Adjusted basic and diluted 4 (0.5p) (0.8p) (2.0p)
ImageState PLC
Group statement of total recognised gains and losses
for the 6 month period ended 31 December 2002
6 month 6 month 12 months
period ended period ended ended
31 December 31 December 30 June
2002 2001 2002
#000 #000 #000
Loss for the financial year (1,483) (3,391) (22,110)
Exchange difference on retranslation of net assets
of subsidiary undertakings (88) (107) (197)
----------- ----------- -----------
Total recognised losses (1,571) (3,498) (22,307)
----------- ----------- -----------
ImageState PLC
Group balance sheet
at 31 December 2002
31 December 31 December 30 June
2002 2001 2002
Notes #000 #000 #000
Fixed assets
Intangible assets 6 4,629 20,142 5,000
Tangible assets 73 331 179
Investments 316 316 316
----------- ----------- -----------
5,018 20,789 5,495
----------- ----------- -----------
Current assets
Debtors 1,586 3,102 1,532
Cash at bank and in hand 692 2,564 791
----------- ----------- -----------
2,278 5,666 2,323
Creditors: amounts falling due within one year (10,644) (8,887) (9,275)
Net current liabilities (8,366) (3,221) (6,952)
Total assets less current liabilities (3,348) 17,568 (1,457)
Creditors: amounts falling due after more than one (577) (826) (897)
year
Provisions for liabilities and charges - (390) -
_______ _______ _______
Net (liabilities)/assets (3,925) 16,352 (2,354)
----------- ----------- -----------
Capital and reserves
Called up share capital 19,277 19,265 19,277
Share premium accounts 8,848 8,810 8,848
Merger relief reserve 6,055 6,054 6,055
Shares alloted not yet issued 195 143 195
Profit and loss account (38,300) (17,920) (36,729)
----------- ----------- -----------
Equity shareholders' funds (3,925) 16,352 (2,354)
----------- ----------- -----------
ImageState PLC
Group statement of cash flows
for the 6 month period ended 31 December 2002
31 December 31 December 30 June
2002 2001 2002
Notes #000 #000 #000
Net cash outflows from operating activities 7 (1,443) (3,071) (5,353)
Returns on investments and servicing of finance (159) (74) (241)
Taxation (paid)/received - 46 47
Capital expenditure and financial investment 9 4 (63)
Acquisitions and disposals (56) (739) (797)
----------- ----------- -----------
Net cash outflow before management of
liquid resources and financing (1,649) (3,834) (6,407)
Financing 1,661 5,659 6,733
----------- ----------- -----------
Increase in cash 7 12 1,825 326
----------- ----------- -----------
ImageState PLC
Notes to the financial statements
at 31 December 2002
1. Accounting policies
Basis of preparation
The interim financial information has been prepared on the basis of the
accounting policies set out in the Group's statutory accounts for the year ended
30 June 2002.
The auditors have reviewed the results for the period and their report is on
page 4.
The taxation charge is calculated by applying the directors' best estimate of
the annual tax rate to the profit for the period. Other expenses are accrued in
accordance with the same principles used in the preparation of the annual
accounts.
Going concern
At 31 December 2002, the Group had net current liabilities of #8,366,000,
including a net overdraft totalling #4,000,000. The overdraft facility made
available to the Group by its bankers is repayable on demand. The facility is
subject to a number of financial covenants including minimum net assets, which
the Group has not met. The bankers have not demanded repayment and the Directors
expect the covenants to be reset in due course.
Continuing financial support from the shareholders and/or the Group's bankers is
required to enable the Group to meet its liabilities as they fall due and to
continue operating without immediate realisation of all its assets. The
Directors have discussed the Group's financing arrangements with the two major
shareholders, who have confirmed that it is their intention to provide financial
support until at least 31 March 2004. In the six months to 31 December 2002,
additional finance of #2.4m has been raised from the shareholders in the form of
a convertible loan. Since 31 December 2002 this facility has been increased by
#1,425,000. Whilst the Directors believe that sufficient ongoing financial
support will be made available to the Group, there can be no certainty in
relation to such matters.
The Directors have reviewed cash flow forecasts for the Group for the period to
31 March 2004 and on the basis of these and the undertakings from the
shareholders above, believe that the Group has adequate cash resources to meet
its commitments for the foreseeable future, and therefore that it is appropriate
to prepare the interim report on a going concern basis.
2. Segmental analysis
The Group's principal areas of activity during the period involved the provision
of pre-edited off and online still images, video and music for the creative
professional user worldwide.
Turnover, Group loss on ordinary activities before interest, tax and minority
interest is analysed as follows:
For the six month period ended 31 December 2002
Geographical area Turnover Loss
#000 #000
United States 1,050 (653)
Rest of the world: 1,898 (619)
----------- -----------
2,948 (1,272)
----------- -----------
For the six month period ended 31 December 2001
Geographical area Turnover Loss
#000 #000
United States 1,568 (2,714)
Rest of the world 1,885 (117)
----------- -----------
3,453 (2,831)
----------- -----------
For the twelve months ended 30 June 2002
Geographical area Turnover Loss
#000 #000
United States 3,624 (8,709)
Rest of the world 3,408 (12,877)
----------- -----------
7,032 (21,586)
----------- -----------
3. Dividends
The directors do not recommend payment of a dividend.
4. Loss per share
Reconciliation of adjusted earnings
6 month 6 month 12 months
period ended period ended ended
31 December 31 December 30 June
2002 2001 2002
#000 per share #000 per share #000 per share
Loss/Basic EPS (1,483) (0.6)p (3,391) (1.6)p (22,110) (9.7)p
Adjustments:
Amortisation 295 0.1p 1,120 0.5p 2,245 (1.0)p
Exceptional items - - 515 0.3p 15,257 6.6p
---------- ----------- ----------- ----------- ----------- -----------
Adjusted loss/
adjusted EPS (1,188) (0.5)p (1,756) (0.8)p (4,608) (2.0)p
Adjusted dilution impact - - - - - -
---------- ----------- ----------- ----------- ----------- -----------
Adjusted loss/adjusted
diluted EPS (1,188) (0.5)p (1,756) (0.8)p (4,608) (2.0)p
---------- ----------- ----------- ----------- ----------- -----------
Basic and diluted loss per ordinary shares is calculated as follows
6 month 6 month 12 months
period ended period ended ended
31 December 31 December 30 June
2002 2001 2002
Loss - # 000's (1,482) (3,391) #(22,110)
Weighted average number of ordinary share in issue 229m 207.9m 229m
Loss per ordinary share (0.6)p (1.6)p (9.7)p
--------------- --------------- ---------------
Adjusted basic and diluted loss per
ordinary share is calculated as follows
Adjusted loss - # 000's (1,187) (1,756) (4,608)
Weighted average number of ordinary shares in issue 229m 207.9m 229m
Adjusted loss per ordinary share (0.5)p (0.8)p (2.0)p
--------------- --------------- ---------------
Adjusted earnings per ordinary share calculations are based on loss before the
impact of both operating and non - operating exceptional items and amortisation
of goodwill. These calculations are included as they provide a better
understanding of the underlying trading performance of the Group on a normalised
basis.
6. Intangible fixed assets
Goodwill
#000
Cost: 22,553
Additions 57
Exchange difference (153)
-----------
At 31 December 2002 22,457
-----------
Amortisation:
At 30 June 2002 17,553
Provided during the period 295
Exchange differences (20)
At 31 December 2002 ------
17,828
-------
Net book value:
At 31 December 2002 4,629
-----------
At 31 December 2001 20,142
-----------
At 30 June 2002 5,000
-----------
7. Notes to the statement of cash flows
(a) Reconciliation of operating loss to net cash flow from operating
activities
31 December 31 December 30 June
2002 2001 2002
#000 #000 #000
Operating loss (1,272) (2,831) (21,586)
Depreciation 93 95 233
Amortisation of goodwill 295 1,120 2,245
Amount written off tangible and intangible - - 14,090
assets
(Increase)/decrease in debtors (51) (502) 300
(Decrease)/increase in creditors (557) (830) (415)
Exchange differences 49 2 120
Exceptional items - (125) (340)
----------- ----------- -----------
Net cash flow from operating activities (1,443) (3,071) (5,353)
----------- ----------- -----------
(b) Analysis and reconciliation of net debt
31 December 31 December 30 June
2002 2001 2002
#000 #000 #000
Increase in cash 12 1,825 326
Cash flow from decrease/(increase) in loans 783 (2,960) (2,960)
Cash acquired with subsidiaries - 35 -
----------- ----------- -----------
Change in net debt arising from cash flows 795 (1,100) (2,634)
Additions (repayments) to finance leases 31 December/30 June (31) (48) 50
Loan notes issued (2,398) - (700)
Net debt at 1 July/1 January (5,374) (2,036) (2,090)
----------- ----------- -----------
Net debt at 31 December/30 June (7,008) (3,184) (5,374)
----------- ----------- -----------
8. Publication of non - statutory accounts
The financial information contained in this interim statement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information for the full preceding year is based on the
statutory accounts for the financial year ended 30 June 2002.Those accounts upon
which the auditors issued on unqualified opinion, have been delivered to the
Registrar of Companies.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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