RNS Number:1413N
i-mate plc
04 December 2006
Immediate release 4 December 2006
i-mate plc
("i-mate" or the "Company")
Interim results for the 6 months ended 30 September 2006
i-mate plc (London AIM:IMTE), the specialist in Microsoft Windows Mobile(R)
devices and software, today announces its Interim Results for the six months
ended 30th September 2006.
Financial Highlights
* Turnover $111 million (2005: $95 million)
* Gross profit $26.1 million (2005: $24.6 million) - solid gross margins
achieved
* Operating profit $8.7 million (2005: $12.4 million) - reflecting the
absorption costs of investing in new products and future growth
* Net profit $9.5 million (2005: $12.1 million)
Operational Highlights
* Exclusive three year device agreements signed with 3 new manufacturers
* Enterprise sales initiatives have delivered a number of lucrative new
business wins
* Continued investment in product and geographical expansion with related
working capital investment
* Distribution agreements designed to accelerate entry into markets across
Europe, America and Asia
* Awarded Microsoft Gold Certified Partner status
* Running partnership trials with Microsoft
Jim Morrison, Chief Executive, commented:
"The Group has made significant progress since listing on AIM in 2005 and we
have achieved what we set out to do at the start of the year. In particular, we
have extended our supplier base having signed exclusive agreements with three
major device manufacturers enabling us to develop a comprehensive road map of
new devices spanning the next two years. We can now actively expand into
territories that were previously restricted. These results demonstrate that we
are investing for the future and have been achieved against a backdrop of some
difficult trading challenges with our existing supplier."
For further information please contact:
Buchanan Communications
Mark Edwards/Jeremy Garcia/Robin Haddrill Tel: 020 7466 5000
CHAIRMAN'S STATEMENT
This has been six months of considerable investment for the Company and we have
made significant progress towards our stated strategy. Our key objectives have
been to widen the product range and functionality, extend our distribution,
maintain outstanding customer service and, in doing this, continue to build the
i-mate brand. Pursuing these objectives has had a cost so that whilst we have
grown sales 16.5% percent at a gross margin of 24% percent (26% in 2005), we
have also invested significantly in sales and marketing infrastructure in the
first half, the benefits of which are only likely to be seen late in the second
half and thereafter. The net effect of all this has resulted in net profits of
$9.5m ($12.1m in 2005).
Key Achievements In The Period
We have designed and sourced a number of new products which are being produced
by our new manufacturers. The first of these (the JAQ and the SPL) have
commenced shipping and two new 3G Windows Mobile(R) devices with thumb-wheel
menu navigation (the SPJAS and the JASJAM) have been launched. In addition to
the SPL, two mid -range hybrid devices have also been launched designed to
appeal to a wider market (the JAQ3 and the PDAL). We have also conducted trials
of i-mate Suite and will launch an enhanced version in the second half. This is
moving i-mate further up the value chain and towards a recurring income model
rather than a total reliance upon the sales of devices.
Our relationship with Microsoft continues to grow and the trial of our
Customization and Order Management System (COMS) with Microsoft in Australia is
going very well. The granting of Microsoft Gold Certified Partner status puts
i-mate in the league of the world's most cutting edge companies that specialise
in Microsoft technologies and initiatives. Club i-mate is now the world's
largest single Windows Mobile(R) users' community, providing on-line help and
support to over 600,000 members as well as being a retail store for services and
applications.
Strategy And Outlook
There is great potential in this Company. We have grown rapidly over the past
five years and it is now appropriate to establish the infrastructure necessary
to facilitate the next stage of growth. Management has been enhanced with the
promotion of a Chief Operating Officer and Global Sales Director and the
appointment of a Global Marketing Director, Human Resources Director and Chief
Technical Officer. We are also pleased to welcome Gregor McNeil, who will join
the board as Chief Finance Officer in the New Year.
This is a very exciting and challenging time for the i-mate team with the
dependencies of new devices, new manufacturers, new distribution partners and
new territories all having to come together in harmony. I am very encouraged by
the strategic progress that I have witnessed over the last year, and the
positioning of i-mate with the introduction of Windows Vista
Bernard Cragg
Chairman
4 December 2006
CHIEF EXECUTIVE'S STATEMENT
Introduction
i-mate continues to develop as a specialist and global provider of Microsoft
Windows Mobile(R) devices and services, addressing a market that is still in its
early stages. The first six months of the current financial year demonstrates
how we are delivering on our key strategic goals, which are as follows:
*develop unique and exclusive products from a diversified supplier base
*expand our sales territories
*develop software which differentiates our products and which demonstrates
the diverse usability and value of our products
*provide exceptional customer service
*raise the value and profile of our brand and partner more closely with
Microsoft in all territories
November 2006 saw the fifth anniversary of the founding of i-mate. Those five
years have seen the Company deliver exceptional growth, continuous product
development and territory expansion, with the Company now selling product into
over 70 territories. i-mate now has the right blend of new product pipeline,
customer service excellence and market opportunity to deliver another 5 years of
exceptional performance.
Financial summary
Despite modest delays in the delivery of new products, revenue for the period
increased by 16.5% to $110.8m and we achieved solid gross margins of 24%.
Revenue in Italy and Australia strengthened and the Company made a satisfactory
start to its operations in India. Revenue within the Middle East region remained
constant and Europe, with the exception of Italy, showed a fall in sales due to
heavy supply limitations being placed upon i-mate by its existing manufacturer.
With our new roadmap of devices, we look forward to re-energising i-mate sales
in this important territory in the months ahead.
Gross profit increased by 6% to $26.1m, reflecting the increased sales during
the period offset by a reduction in gross margin from 26% to 24%.
The Company invested heavily during the period in the development and marketing
of new products, an additional 40 employees globally and supporting
infrastructure. This resulted in administrative expenses increasing by $4.6
million to $14.9 million and a 21% decline in net profit to $9.5m from $12.1m in
the previous year. However, we look to this significant investment to deliver
strong results starting from late in the second half of the financial year.
Inventories and trade debtors both remained fairly constant over the six month
period. There was however a reduction of $11.9 million in trade creditors during
the period reflecting the unwind of the favourable trade creditor position at 31
March 2006 with our major supplier. As a result, there was a net cash outflow
from operations of $9.4 million with a net decrease in cash of $11.9 million
during the period.
Geographic expansion
i-mate continues to expand its geographic footprint with total revenue for the
period increasing by 16.5%, from $95m in 2005 to $111m, including significant
improvement in Australia and Italy. Although our core market in the Middle East
has experienced increased competition, as part of our emerging market expansion
strategy i-mate has now commenced business in India where an initial
distribution and retail presence across 33 cities has been secured. In Africa,
the Company is expanding beyond South Africa in partnership with a number of
newly appointed distributors with early growth prospects looking positive.
Revenues in Europe outside of Italy fell due to heavy supply limitations being
placed upon i-mate by its current supplier. We believe our new range of devices,
particularly the ULTimate range, will see us resume our growth across Europe and
penetrate new countries in the coming months.
The Company is developing a track record with large enterprises within Europe.
In November 2006, i-mate(TM)was selected as the lead Windows Mobile(R) device
supplier to Rabobank, which is launching a major new mobile business initiative
as a virtual network operator. Rabobank Group has nine million customers and
operates in 38 countries. The selection of i-mate by the bank shows the strength
of our customisation solution.
The USA remains an important growth opportunity for the Company but we have been
unable to secure significant sales and distribution due to the unavailability of
devices. This situation is being resolved by our new status as an OEM and we
have just launched the SPL and JAQ into this market.
Our initial launch into Asia starts in the next few weeks with newly appointed
distributors. The Australia market continues to yield good growth within all
channels.
Product development
i-mate has now secured three-year contracts for exclusive devices with three
major device manufacturers in Asia (Inventec Corporation; Tech Faith Intelligent
Handset Technology (HK) Limited; and Arima Communications Corporation). Two new
devices were launched at CTIA in the USA in September 2006 and a further two at
Gitex in Dubai in November 2006. An additional two devices will be launched in
January 2007 and the Company is confident these products will be the most secure
and theft-proof mobile devices on the market. Next February at 3GSM in
Barcelona, we will launch our new ULTimate platform of devices that work in
harmony with Windows Vista(TM).
The new i-mate devices have been well received within initial launch markets
with strong wins against major suppliers in competitive tenders both in the
consumer and corporate sectors.
The Company has developed a comprehensive road map of devices to be deployed
over the next two years, working effectively with our committed manufacturing
partners. Within these partners we have more than 500 dedicated engineers
working on our exclusive devices. It has been a major achievement to get to this
position in the short time since the IPO last year, augmenting our position as a
high value-add distributor to become a full OEM.
We are now working alongside other manufacturers on further individual products
to facilitate our road map requirements. i-mate continues to distribute HTC
products in agreed territories and will review this arrangement at the end of
the current contract term.
We recently completed the acquisition of the entire issued share capital of A
Living Picture plc ("ALP). The consideration was the issue of approximately 1.2
million ordinary shares in i-mate, valuing ALP at approximately #1.9 million.
This acquisition marks the start of i-mate's product portfolio extension beyond
high end devices into a new breed of personal Windows-based hardware devices.
ALP produces a wireless digital picture frame and related software that allows
pictures to be sent direct to a Momento user from anywhere in the world.
Software development
Our initial field tests have shown that i-matesuite will be a great
differentiator over our competitors as corporate clients place great emphasis on
managing and securing their mobile devices and networks. It provides corporate
clients remote device management to secure, monitor, and protect their mobile
devices in the field from lost or stolen data. File sharing and central control
capabilities are also important features of the i-mateSuite package. The
Company will launch an enhanced version in Barcelona at 3GSM in February 2007
which will demonstrate additional capabilities and work in conjunction with
Windows Vista(TM).
i-mate is currently trialing a new Customization and Order Management System
(COMS) in Australia in partnership with Microsoft. COMS allows users to place
orders for ready to use straight out of the box devices and define a custom
software setup which meets their needs in line with their IT policies. This
enables channel partners to deliver a high value solution to the customer within
an extremely short timeframe. There has been a large amount of positive feedback
from all partners in the trial. The Company plans to launch COMS officially at
3GSM in Barcelona in February 2007 and to roll it out to global channels as fast
as possible.
Customer service
The business dynamics of i-mate have changed as our new product portfolio will
afford us greater product and territory reach. Greater market presence has
presented the challenges of having to communicate with new customers in a
greater number of languages and locations. To resolve this, the Company has now
opened customer support centres in Australia, India, Armenia and Europe, with
the USA planned for early 2007. We have increased resources in our existing
support centre in Dubai and made our Club i-mate website multi-lingual for ease
of customer access. We are in the process of extending and improving our after
market service by increasing our network of service repair centres around the
world from 21 to 45 over the coming months, reflecting once again our increased
global footprint and commitment to great customer support.
Brand Profile and value
i-mate continues to build on its strong brand recognition within the industry.
Our continued investment in marketing and customer support, coupled with our
reputation as a premium Microsoft Windows Mobile(R) brand, will help us to
deliver our goal of becoming a leading brand in this space. A simple measure of
i-mate's growing profile is to track the Google hit count for the Company two
years ago (700,000) compared to today (12 million).
People
I ask a lot of i-mate's employees; in return I firmly believe they should
participate in the growth of the Company as we create future value for
shareholders. As a result we are launching a long term incentive plan in which
everyone will participate. This involves setting a five year objective of
reaching a #10 share price which, if reached, will then vest significant shares
of up to 10 times current salary.
I have built up my top team of managers with several key internal promotions and
external hires, and I believe that this new incentive plan will be a major
motivator and retention mechanism.
Outlook
i-mate has made substantial strides since last year and we have significantly
strengthened the Company in many areas. The Company now has multiple suppliers,
an even stronger relationship with Microsoft, increased its geographical
markets, offers a far wider range of devices and delivers a more powerful
software offering. We believe the business is approaching the optimal balance
between product deployment and geographical expansion.
2006/2007 is a transitional year for us as we migrate away from our dependence
on one supplier and the risk that this implies. Our challenge remains to manage
effectively our growth and opportunities. The Company is focused on hitting key
operational milestones. I have never been more confident in i-mate's future than
I am today.
Jim Morrison
Chief Executive
4th December 2006
INDEPENDENT REVIEW REPORT TO I-MATE PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 September 2006 which comprises the consolidated income
statement, the group statement of changes in equity, the consolidated balance
sheet, the consolidated cashflow statement and related notes 1 to 14. 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 Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review 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 also responsible for ensuring that the accounting policies and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices 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 tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly, we do not express an audit opinion on the financial information.
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 30 September 2006.
Deloitte & Touche LLP
Chartered Accountants
4 December 2006
i-mate plc
Consolidated Income Statement
for the six months ended 30 September 2006
Note Six months Six months Year
ended 30 ended 30 ended 31
September September March
2006 2005 2006
(unaudited) (unaudited) (audited)
$000 $000 $000
Revenue 2 110,787 95,078 206,021
Cost of sales (84,673) (70,476) (156,463)
Gross profit 26,114 24,602 49,558
Distribution costs (2,441) (1,884) (4,187)
Administrative expenses (14,938) (10,348) (24,066)
Operating profit 2,3 8,735 12,370 21,305
Investment revenue 4 1,341 47 1,165
Profit before taxation 10,076 12,417 22,470
Taxation 6 (576) (317) (952)
Profit for the financial period 9,500 12,100 21,518
Attributable to:
Equity holders of the parent 8,291 12,032 20,677
Minority interest 11 1,209 68 841
9,500 12,100 21,518
Earnings per share
Basic 7 7.37c 10.15c 17.44c
Diluted 7 7.31c 10.07c 17.31c
Revenue and operating profit are derived from continuing operations.
There is no difference between the profits stated above and their historical
cost equivalent.
The half year results are unaudited but have been reviewed by the auditors.
During the period ended 30 September 2005, the Group carried out a corporate
restructuring including the introduction of a new holding company. The income
statements for the six months ended 30 September 2006, 30 September 2005 and for
the year ended 31 March 2006 have been prepared using merger accounting and are
presented on a proforma basis as if the new holding company had been in
existence and had been the parent of all group subsidiaries throughout these and
prior periods.
i-mate plc
Group Statement of Changes in Equity
for the six months ended 30 September 2006
Share Share Merger Retained Exchange Total
Capital Premium Reserve Earnings Reserve $000
$000 $000 $000 $000 $000
Six months ended 30
September 2006
(unaudited)
Currency
differences
on foreign currency - - - - 278 278
net investments
Share based payment
provision - - - 502 - 502
Total income and
expense recognised
directly in equity - - - 502 278 780
Profit for the
period - - - 9,500 - 9,500
Total recognised
income and expense
for the period - - 10,002 278 10,280
Opening balances 10,430 62,120 (8,663) 37,190 (889) 100,188
Equity at end of
the 10,430 62,120 (8,663) 47,192 (611) 110,468
period
Attributable to:
Equity holders of
the parent 10,430 62,120 (8,663) 44,546 (611) 107,822
Minority interest - - - 2,646 - 2,646
10,430 62,120 (8,663) 47,192 (611) 110,468
Six months ended 30
September 2005
(unaudited)
Shares issued 10,293 66,850 (8,663) - - 68,480
Cost of issue - (4,842) - - - (4,842)
Currency
differences
on foreign currency - - - - (28) (28)
net investments
10,293 62,008 (8,663) - (28) 63,610
Profit for the
period - - - 12,100 - 12,100
10,293 62,008 (8,663) 12,100 (28) 75,710
Opening balances 137 - - 15,081 (6) 15,212
Equity at end of
the 10,430 62,008 (8,663) 27,181 (34) 90,922
period
Attributable to:
Equity holders of
the parent 10,430 62,008 (8,663) 26,517 (34) 90,258
Minority interest - - - 664 - 664
10,430 62,008 (8,663) 27,181 (34) 90,922
Year ended 31 March
2006 (audited)
Shares issued 10,293 66,850 (8,663) - - 68,480
Cost of issue - (4,730) - - - (4,730)
Currency
differences
on foreign currency - - - - (883) (883)
net investments
Share based payment
provision - - - 591 - 591
10,293 62,120 (8,663) 591 (883) 63,458
Profit for the year - - - 21,518 - 21,518
10,293 62,120 (8,663) 22,109 (883) 84,976
Opening balances 137 - - 15,081 (6) 15,212
Equity at end of
the 10,430 62,120 (8,663) 37,190 (889) 100,188
year
Attributable to:
Equity holders of
the parent 10,430 62,120 (8,663) 35,753 (889) 98,751
Minority interest - - - 1,437 - 1,437
10,430 62,120 (8,663) 37,190 (889) 100,188
i-mate plc
Consolidated Balance Sheet
as at 30 September 2006
Note 30 September 30 September 31 March
2006 2005 2006
(unaudited) (unaudited) (audited)
$000 $000 $000
Non current assets
Intangible assets 8 3,249 603 1,671
Property, plant and equipment 3,007 1,103 1,137
6,256 1,706 2,808
Current assets
Inventories 21,856 15,973 21,680
Trade and other receivables 9 41,288 19,796 37,081
Cash and cash equivalents 57,780 83,926 69,343
120,924 119,695 128,104
Total assets 127,180 121,401 130,912
Current liabilities
Trade and other payables 10 15,561 29,715 29,858
Current tax liabilities 1,151 764 866
Total liabilities 16,712 30,479 30,724
Net assets 110,468 90,922 100,188
Equity
Share capital 12 10,430 10,430 10,430
Share premium account 62,120 62,008 62,120
Merger reserve (8,663) (8,663) (8,663)
Exchange reserve (611) (34) (889)
Retained earnings 44,546 26,517 35,753
Equity attributable to equity
holders of the parent 107,822 90,258 98,751
Minority interest 11 2,646 664 1,437
Total equity 110,468 90,922 100,188
During the period ended 30 September 2005, the Group carried out a corporate
restructuring including the introduction of a new holding company. The balance
sheets as at 30 September 2006, 30 September 2005 and 31 March 2006 have been
prepared using merger accounting and are presented on a proforma basis as if the
new holding company had been in existence and had been the parent of all group
subsidiaries throughout these and prior periods.
i-mate plc
Consolidated Cashflow Statement
For the six months ended 30 September 2006
Note Six months Six months Year
ended 30 ended 30 ended 31
September September March
2006 2005 2006
(unaudited) (unaudited) (audited)
$000 $000 $000
Net cash (used in)/generated from
operations 13 (9,358) 5,959 (7,181)
Investing activities
Interest received 1,341 47 1,103
Purchase of property, plant and
equipment (2,068) (331) (804)
Expenditure on intangible assets (1,847) (603) (1,706)
Net cash used in investing activities (2,574) (887) (1,407)
Financing activities
Net proceeds on issue of shares - 64,562 63,750
Net (decrease)/increase in cash and
cash equivalents (11,932) 69,634 55,162
Cash and cash equivalents at
beginning 69,343 14,311 14,311
of period
Effect of foreign exchange rate 369 (19) (130)
changes
Cash and cash equivalents at end of
period 57,780 83,926 69,343
During the period ended 30 September 2005, the Group carried out a corporate
restructuring including the introduction of a new holding company. The cashflow
statements for the six months ended 30 September 2006, 30 September 2005 and for
the year ended 31 March 2006 have been prepared using merger accounting and are
presented on a proforma basis as if the new holding company had been in
existence and had been the parent of all group subsidiaries throughout these and
prior periods.
i-mate plc
Notes to Interim Financial Information
30 September 2006
1. Significant accounting policies
Basis of accounting
This interim financial information has been prepared in U.S. Dollars, the
functional currency of the Group, using accounting policies consistent with
International Financial Reporting Standards (IFRS). The directors have chosen
not to adopt IAS 34 "Interim Financial Reporting". Accordingly, the interim
financial information has been prepared in accordance with the recognition and
measurement criteria of IFRS and the disclosure requirements of the Listing
Rules that would be applicable if the Company were admitted to the Official
List. The financial statements for the year ended 31 March 2006 were the first
to be prepared under IFRS. No adjustments were identified on the transition from
UK GAAP to IFRS and consequently no adjustments are necessary to the results for
the six months ended 30 September 2005 presented as a comparative in this
interim financial information. The same accounting policies and methods of
computation have been followed in these interim financial statements as in the
financial statements for the year ended 31 March 2006.
The interim financial information has been prepared under the historical cost
convention. The principal accounting policies are set out below.
The financial information for the year ended 31 March 2006 does not constitute
statutory accounts as defined in section 240 of the Companies Act 1985. A copy
of the statutory accounts for that year has been delivered to the Registrar of
Companies. The auditors' report on those accounts was not qualified and did not
contain statements under section 237(2) or (3) of the Companies Act 1955.
Basis of consolidation
The interim financial information consolidates the Company and entities
controlled by the Company (its subsidiaries). Control is achieved where the
Company has the power to govern the financial and operating policies of an
investee entity so as to obtain benefits from its activities.
On acquisition, the assets and liabilities and contingent liabilities of a
subsidiary are measured at their fair value at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the identifiable net
assets acquired is recognised as goodwill. Any deficiency of the cost of
acquisition below the fair values of the identifiable net assets acquired (i.e.
discount on acquisition) is credited to the income statement in the period of
acquisition. The interest of minority shareholders is stated at the minority's
proportion of the fair values of the assets and liabilities recognised.
Subsequently, any losses applicable to the minority interest in excess of the
minority interest are allocated against the interests of the parent.
The results of subsidiaries acquired or disposed of during a period are included
in the consolidated income statement from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of
subsidiaries to bring the accounting policies used into line with those used by
the Group.
All intra-group transactions, balances, income and expenses are eliminated on
consolidation.
During the period ended 30 September 2005, the Group carried out a corporate
restructuring, including the introduction of a new holding company. The
restructuring represented a change in the identity of the holding company rather
than an acquisition of the underlying businesses. Consequently, the
restructuring was accounted for using merger accounting principles.
Therefore, although i-mate plc did not become the parent company of the Group
until 25 August 2005, the financial information was presented as if the Company
and its subsidiaries had always been part of the same Group. The results and
cash flows of the entities were combined from the beginning of the year in which
the merger occurred and their assets and liabilities were combined at the
amounts at which they were previously recorded.
In accordance with sections 131 and 133 of the Companies Act 1985, the Company
took no account of any premium on the shares issued and recorded the cost of
investment at the nominal value of the shares issued. The resulting difference
on consolidation was debited to a merger reserve.
i-mate plc
Notes to Interim Financial Information
30 September 2006
1. Significant accounting policies (continued)
Goodwill
Goodwill arising on businesses acquired represents the excess of the cost of
acquisition over the Group's interest in the fair value of the identifiable
assets and liabilities of a subsidiary at the date of acquisition.
Goodwill is initially recognised as an asset at cost and subsequently measured
at cost less any accumulated impairment losses. Goodwill which is recognised as
an asset is reviewed for impairment annually; any impairment is recognised
immediately in the income statement and is not subsequently reversed.
To date, all goodwill has been written off on acquisition as the goodwill value
was attributable to intangible assets, specifically intellectual property rights
and in-process research and development. The acquired intangible assets were
tested for impairment and have been fully written off in accordance with IAS 38,
predominantly due to the assessment of the degree of certainty regarding future
commercial revenue streams.
On disposal of a subsidiary, the attributable amount of goodwill is included in
the determination of the profit or loss on disposal.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services provided in
the normal course of business, net of discounts, VAT and other sales related
taxes.
Sales of goods are recognised when goods are delivered and title has passed.
Sales in respect of services and licences are recognised on completion of
contractual performance.
Subscription revenue in relation to i-mate Suite and other software products is
recognised on a straight line basis over the subscription period in order to
match service delivery. Subscription revenues received at the period end where
the service is yet to be provided are included in deferred income.
Software sales are recognised on delivery of related products. Fees charged for
access to subsequently download available software for no additional charge are
recognised on a straight line basis over the period of access or, where the
period is unlimited, on the granting of initial access.
Finance income is recognised as it arises.
Foreign currencies
The individual financial statements of each Group company are presented in the
currency of the primary economic environment in which it operates (its
functional currency). For the purpose of consolidated financial statements, the
results and financial position of each Group company are expressed in U.S.
Dollars, which is the functional currency of the Group and the presentation
currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions
in currencies other than the entity's functional currency are recorded at the
rates of exchange prevailing on the dates of the transactions. At each balance
sheet date, monetary assets and liabilities that are denominated in foreign
currencies are retranslated at the rates prevailing on the balance sheet date.
Non-monetary items carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date when the fair
value was determined. Non-monetary items that are measured in terms of historic
cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items and on the
retranslation of non-monetary items carried at fair value are included in the
income statement for the period except for differences arising on the
retranslation of non-monetary items in respect of which gains and losses are
recognised directly in equity.
i-mate plc
Notes to Interim Financial Information
30 September 2006
1. Significant accounting policies (continued)
On consolidation, the assets and liabilities of the Group's subsidiaries whose
functional currency is not U.S. Dollars are translated at exchange rates
prevailing on the balance sheet date. Income and expense items are translated at
the average exchange rates for the period. Exchange differences arising, if any,
are classified as equity and transferred to the Group's retained earnings. Such
translation differences are recognised as income or as expenses in the period in
which the operation is disposed of.
Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and
translated in accordance with the policy above.
The share capital and share premium of the Company is Sterling denominated and
is translated at actual historic rates.
Property, plant and equipment
Property, plant and equipment balances are stated at cost, net of depreciation
and any provision for impairment.
Depreciation is provided on all property, plant and equipment in equal annual
instalments over the estimated useful lives of the assets. The rates of
depreciation are as follows:
Buildings 2.5% per annum
Equipment, fixtures and fittings Between 33% and 50% per annum
Motor vehicles 33% per annum
The gain or loss arising on the disposal or retirement of an asset is determined
as the difference between the sales proceeds and the carrying amount of the
asset and is recognised in the income statement.
Research and development
Research expenditure is written off as incurred.
Development expenditure relating to identifiable projects is capitalised
provided it is probable that the project will generate future economic benefits
and the development cost of the project can be measured reliably. In such cases,
the identifiable expenditure is capitalised and amortised over the period during
which the Group is expected to benefit. All other development expenditure is
written off as incurred.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication that
those assets have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to quantify the
impairment loss. Any impairment loss is recognised as an expense immediately.
Inventories
Inventories are stated at the lower of cost and net realisable value, measured
on a FIFO basis. Cost comprises all costs in bringing the inventories to their
present location and condition. Net realisable value is based on estimated
selling price less further costs expected to be incurred to completion and
disposal. Provision is made for obsolete, slow moving or defective items where
appropriate.
Leases
Operating lease rentals are charged to the income statement in equal annual
amounts over the lease term.
Financial instruments
Financial assets and financial liabilities are recognised on the Group's balance
sheet when the Group becomes a party to the contractual provisions of the
instrument.
The Group's activities give rise to some exposure to the financial risks of
changes in interest rates and foreign currency exchange rates. The Group has no
borrowings and is principally funded by equity, maintaining all its funds in
bank accounts. Surplus funds are placed in risk free cash deposits.
i-mate plc
Notes to Interim Financial Information
30 September 2006
1. Significant accounting policies (continued)
The Group's exposure to foreign currency exchange rates arising from its net
investment in currencies other than the U.S. Dollar is unhedged as this exposure
is currently not viewed as material. The Group does not use derivative financial
instruments for speculative purposes.
Trade receivables
Trade receivables do not carry any interest and are stated at their nominal
value as reduced by appropriate allowances for irrecoverable amounts.
Trade payables
Trade payables are not interest bearing and are stated at their nominal value.
Taxation
The tax expense represents the sum of the tax currently payable and deferred
tax.
The tax currently payable is based on taxable profit for the period. Taxable
profit differs from the net profit as reported in the income statement because
it excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or subsequently enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition of other assets
and liabilities in a transaction that affects neither the tax profit nor the
accounting profit.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised. Deferred tax is
charged or credited in the income statement, except when it relates to items
charged or credited directly to equity, in which case the deferred tax is also
dealt with in equity.
Carrier Devices Middle East FZ LLC, a subsidiary company, operates in a tax free
zone; profits are therefore not subject to corporation tax.
Provisions
Provisions are recognised when the Group has a present obligation as a result of
a past event and it is probable that the Group will be required to settle that
obligation. Provisions are measured at the Directors' best estimate of the
expenditure required to settle the obligation at the balance sheet date, and are
discounted to present value where the effect is material.
Share based payments
The Group issues equity-settled share based benefits to employees. These share
based payments are measured at their fair value at the date of grant and the
fair value of expected shares is expensed and recorded through equity on a
straight-line basis over the vesting period. Fair value is measured using the
Black Scholes Model.
Dividends
Dividends payable to the Company's shareholders are recorded as a liability in
the period in which the dividends are approved. No dividends have been paid or
approved by the Company to date.
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 and prior periods and so have not been disclosed separately. This may
change with the potential future growth of software and service revenue.
(a) Segmental revenue
Sales Inter Total
$000 Segment Revenue
Sales $000
$000
Six months ended 30 September 2006
(unaudited)
Middle East 96,817 (26,190) 70,627
Australasia 26,742 - 26,742
Italy 13,333 - 13,333
UK 85 - 85
136,977 (26,190) 110,787
Six months ended 30 September 2005
(unaudited)
Middle East 94,536 (23,780) 70,756
Australasia 14,143 - 14,143
Italy 7,078 - 7,078
UK 3,101 - 3,101
118,858 (23,780) 95,078
Year ended 31 March 2006 (audited)
Middle East 208,151 (60,551) 147,600
Australasia 31,910 - 31,910
Italy 23,262 - 23,262
UK 3,249 - 3,249
266,572 (60,551) 206,021
Inter segment sales are charged on an agreed transfer
pricing basis.
i-mate plc
Notes to Interim Financial Information
30 September 2006
2. Segmental Information (continued)
(b) Segmental result Six months Six months Year
ended 30 ended 30 ended 31
September September March
2006 2005 2006
(unaudited) (unaudited) (audited)
$000 $000 $000
Middle East 8,364 11,610 20,474
Australasia 535 424 551
Italy 341 387 615
UK (311) 84 (195)
8,929 12,505 21,445
Unallocated operating expenses (194) (135) (140)
Operating profit 8,735 12,370 21,305
Investment revenue 1,341 47 1,165
Taxation (576) (317) (952)
Profit after taxation 9,500 12,100 21,518
All development, new venture start-up and the majority of sales force expansion
costs are allocated to the Middle East segment.
3. Operating profit
Operating profit is stated after charging/(crediting):
Six months Six months Year ended
ended 30 ended 30 31 March
September September 2006
2006 2005 (audited)
(unaudited) (unaudited) $000
$000 $000
Amortisation of intangible assets 269 25 80
Depreciation of property, plant and
equipment 232 273 505
Loss on disposal of property, plant
and - - 145
equipment
Research and development costs 32 145 164
Staff costs 5,278 3,671 9,182
Auditors' remuneration 19 20 73
Exchange differences (706) 353 374
i-mate plc
Notes to Interim Financial Information
30 September 2006
3. Operating profit (continued)
In addition to auditors' remuneration shown above, the auditors received the
following fees for non audit services:
Six months Six months Year ended
ended 30 ended 30 31 March
September September 2006
2006 2005 (audited)
(unaudited) (unaudited) $000
$000 $000
Taxation compliance and advisory 81 50 253
Other services 10 - 38
Costs in connection with the IPO - 563 579
91 613 870
Costs in connection with the IPO have been charged against the Share Premium
Account.
4. Investment revenue
Six months Six months Year ended
ended 30 ended 30 31 March
September September 2006
2006 2005 (audited)
(unaudited) (unaudited) $000
$000 $000
Bank interest receivable 1,341 47 1,165
5. Employee information
The average number of employees, including executive Directors and key
management personnel, employed by the Group during the period was:
Six months Six months Year ended
ended 30 ended 30 31 March
September September 2006
2006 2005 (audited)
(unaudited) (unaudited) $000
$000 $000
Development 61 33 59
Sales and Customer Support 56 41 38
Administration 36 40 34
153 114 131
The aggregate payroll costs of the people employed by the Group (including
executive Directors) were as follows:
Six months Six months Year ended
ended 30 ended 30 31 March
September September 2006
2006 2005 (audited)
(unaudited) (unaudited) $000
$000 $000
Wages and salaries 5,009 3,572 8,694
Social security costs 269 99 488
5,278 3,671 9,182
In addition to the above, $502,000 was charged to the income statement in
respect of awards to employees under share option agreements (six months to 30
September 2005:$nil, year to 31 March 2006:$591,000).
6. Taxation
Six months Six months Year ended
ended 30 ended 30 31 March
September September 2006
2006 2005 (audited)
(unaudited) (unaudited) $000
$000 $000
The tax charge comprises:
UK corporation tax 144 45 171
Foreign tax 432 272 781
Total current tax 576 317 952
7. Earnings per share
The basic earnings per share are calculated on the profit of the Group
attributable to equity holders of the parent of $8,731,000 (six months to 30
September 2005: $12,032,000, year to 31 March 2006: $20,677,000) and on
118,528,297 equity shares, being the number of shares in issue at 30 September
2006 and deemed to be in issue throughout all periods in accordance with the
merger accounting principles described in the Accounting Policies.
The diluted earnings per share are calculated on the above figures for basic
earnings, adjusted for the dilutive effect of 2,165,659 share options
outstanding at 30 September 2006 (30 September 2005: 918,474, 31 March 2006:
855,598).
8. Intangible fixed assets
Intangible fixed assets at 30 September 2006 comprise capitalised development
expenditure, net of amortisation, in respect of i-matesuite and hardware
product and software development costs.
9. Trade and other receivables
30 September 30 September 31 March
2006 2005 2006
(unaudited) (unaudited) (audited)
$000 $000 $000
Trade debtors 37,919 17,167 35,230
Other debtors 191 298 68
Prepayments and accrued income 3,178 2,331 1,783
41,288 19,796 37,081
10. Trade and other payables
30 September 30 September 31 March
2006 2005 2006
(unaudited) (unaudited) (audited)
$000 $000 $000
Trade creditors 11,187 25,079 23,123
Accruals and deferred income 2,803 2,685 4,402
Social security and other taxes 635 181 1,599
Other creditors 936 1,770 734
15,561 29,715 29,858
11. Reconciliation of movements in equity minority interest
Six months Six months Year ended
ended 30 ended 30 31 March
September September 2006
2006 2005 (audited)
(unaudited) (unaudited) $000
$000 $000
At 1 April 2006 1,437 - -
Minority interest share of
net assets acquired - 596 596
Share of profit for the
period 1,209 68 841
At 30 September 2006 2,646 664 1,437
In September 2005, the Group issued shares in Carrier Devices UK Limited (a
subsidiary which is an intermediate holding company) to HTC, then the Group's
principal manufacturing partner. This 11.25% interest was granted to HTC as part
of a distribution agreement.
i-mate plc
Notes to Interim Financial Information
30 September 2006
12. Share capital
30 September 30 September 31 March
2006 2005 2005
(unaudited) (unaudited) (audited)
$000 $000 $000
Authorised
200,000,000 ordinary shares of 5p each 17,600 17,600 17,600
(translated at historic rate of $1.76)
Alloted, issued and fully paid
118,528,297 ordinary shares of 5p each 10,430 10,430 10,430
(translated at historic rate of $1.76)
13. Notes to the cashflow statement
Six months Six months Year ended
ended 30 ended 30 31 March
September September 2006
2006 2005 (audited)
(unaudited) (unaudited) $000
$000 $000
Operating profit 8,735 12,370 21,305
Adjustments for:
Amortisation of intangible assets 269 25 80
Depreciation of property, plant and
equipment 232 273 505
Loss on disposal of property, plant
and equipment - - 145
Share based payment provision 502 - 591
Operating cashflows before movements 9,738 12,668 22,626
in working capital
Decrease/(increase) in inventories 210 (10,919) (16,811)
Increase in receivables (4,454) (1,545) (19,316)
(Decrease)/increase in payables (14,522) 5,880 6,934
Cash (used in)/generated from
operations before tax (9,028) 6,084 (6,567)
Income taxes paid (330) (125) (614)
Net cash (used in)/generated from
operations (9,358) 5,959 (7,181)
i-mate plc
Notes to Interim Financial Information
30 September 2006
14. Financial commitments
Minimum lease payments under operating leases recognised in the income statement
for the period:
Six months Six months Year ended
ended 30 ended 30 31 March
September September 2006
2006 2005 (audited)
(unaudited) (unaudited) $000
$000 $000
341 348 822
At 30 September 2006, the Group had outstanding commitments for future minimum
lease payments under non cancellable operating leases which fall due as follows:
30 September 30 September 31 March
2006 2005 2005
(unaudited) (unaudited) (audited)
$000 $000 $000
- within one year 922 408 509
- between one and two years 580 145 250
- between two and five years 1,141 110 181
2,643 663 940
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QXLFBQLBEFBZ
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