(ILI.L) Imagelinx PLC Buy/Sell

Operating review

As we stated at the Annual General Meeting, we were seeing revenue exceeding expectations and this has continued throughout the first half of the year. The growth has been driven by higher spend by existing clients, assisted by some currency benefit compared to the first half of last year. Whilst we have seen some growth also from new clients this year, we expect this will have a greater impact on the second half of 2009 than the first half.

Nearly all of our clients have increased their expenditure this year and we have also provided additional services to clients. We have seen positive cashflow of £39,000 in the first half of the year and our net bank debt position at 30th June was £328,000. We expect to repay our remaining loan note of £161,000 and to be entirely debt free by the end of this quarter, not withstanding any investment opportunities. In addition we have recently changed our bank facility provider from Royal Bank of Scotland to Lloyds. This will provide the company with a larger facility of £1,000,000 compared to the £750,000 available previously.

Our gross margin has risen from 46% to 51% and seen an increase of £847,000 on the equivalent period in the prior year, and our operating profit margin has risen from 1% to 9% for the first half of 2009.

There is no tax charge for the first half and after interest of £26,000, the basic earnings per share (EPS) was 0.17p. While the EPS in 2008 was 1.58p, this included the benefit of the disposal of the LTGG pension fund deficit. On a comparable basis, the EPS has improved by 0.16p. We are not expecting a tax charge for the year as a whole due to tax losses brought forward.

During the first half of 2009, we have renewed our current business with certain clients, won additional business with some of our clients and we are now in the process of establishing our presence in Eastern Europe on behalf of one of our clients.

We see the opportunity to take advantage of the significant changes in the market we intend to increase our sales presence in the USA and in Europe.

We have also re-branded all of our subsidiaries as Imagelinx, reflecting the continuing integration of the group.

The Board is grateful to all colleagues who have worked hard to deliver the substantial increase in turnover. On 2nd July 2009, the company announced that Albert Klein would become Non-Executive Chairman of the Group with effect from 1st September 2009. The Board is pleased that the company can continue to count on Albert's support and thank Albert for all of his endeavours and for his vision for Imagelinx over the last decade.

Alistair Rae, Chief Executive said "The second half of the year has commenced strongly and while our business has little short term visibility, nonetheless the activity remains high for the third quarter and we believe shareholders will be pleased with the outcome for the full year."

Enquiries:

Imagelinx plc

Alistair Rae, CEO

Tel: +44 (0) 7736 883934

Seymour Pierce Limited

Sarah Jacobs

Tel: +44 (0)20 7107 8000

(Unaudited) (Unaudited) (Audited)
6 months 6 months Year
Notes ended 30 ended 30 ended 31 December
June June

£'000 £'000 £'000

cONTINUING OPERATIONS
Revenue 3 5,648 4,401 9,246
Cost of sales (2,774) (2,374) (4,980)
_____________ _____________ _____________
GROSS PROFIT 2,874 2,027 4,266
Other operating income - - 110
Administration expenses (2,267) (1,899) (3,915)
Other operating expenses (94) (100) (451)
_____________ _____________ _____________

Exceptional gain relating to
pension scheme - 4,527 4,600
_____________ _____________ _____________
OPERATING RESULT 513 4,555 4,610
Finance income - - 8
Finance costs (26) (10) (35)
_____________ _____________ _____________
PROFIT BEFORE TAX 487 4,545 4,583
Tax income - - (17)
_____________ _____________ _____________
RESULT FOR THE PERIOD 487 4,545 4,566
_____________ _____________ _____________
Profit per ordinary share 4
Basic 0.17p 1.57p 1.58p
Diluted 0.16p 1.50p 1.49p
_____________ _____________ _____________

consolidated STATEMENT OF TOTAL RECOGNISED income AND expenditure

(Unaudited) (Unaudited) (Audited)
6 months 6 months Year
ended 30 ended 30 ended 31 December
June June

£'000 £'000 £'000

Exchange differences on (56) - (2)

translation of foreign operations
_____________ _____________ _____________

Profit for the period 487 4,545 4,566
_____________ _____________ _____________
Total recognised income and 431 4,545 4,564

expense for the period
_____________ _____________ _____________

CONSOLIDATED BALANCE SHEET

(Unaudited) (Unaudited) (Audited)
30 30 31 December
June June

£'000 £'000 £'000

Goodwill 4,384 4,384 4,384
Other intangible assets 491 689 591
Property, plant and equipment 919 1,090 950
_________ _________ _________
5,794 6,163 5,925

Inventories 70 61 62
Trade and other receivables 3,198 2,532 2,953
Cash and cash equivalents 152 396 296
_________ _________ _________
3,420 2,989 3,311
_________ _________ _________
TOTAL ASSETS 9,214 9,152 9,236

Trade and other payables (1,274) (1,678) (1,461)
Obligations under finance leases (60) (95) (89)
Bank overdrafts and loans (480) (394) (663)
Loan notes (161) (100) (185)
_________ _________ _________
(1,975) (2,267) (2,398)

Other payables - - (15)
Obligations under finance leases - - (15)
Loan notes - (150) -
_________ _________ _________

TOTAL LIABILITiES (1,975) (2,417) (2,428)
_________ _________ _________
NET ASSETS 7,239 6,735 6,808
_________ _________ _________

Share capital 14,452 14,452 14,452
Share premium account 38,644 38,644 38,644
Translation reserve (106) (28) (30)
Profit and loss account (45,751) (46,333) (46,258)
_________ _________ _________
7,239 6,735 6,808
_________ _________ _________

CONSOLIDATED CASH FLOW STATEMENT

(Unaudited) (Unaudited) (Audited)
6 months 6 months Year
ended 30 ended 30 ended 31 December
June June

£'000 £'000 £'000
NET CASH from operating 246 (240) (221)

activitieS
_________ _________ _________

Investing activities
Interest received - - 8
Purchases of property, plant (137) (95) (149)

and equipment
Proceeds from sale of property - - 26

plant and equipment
Acquisition of subsidiary - (14) (502)
________ ________ _________
Net cash used in investing (137) (109) (617)

activities
_________ _________ _________

Financing activities
Interest paid (26) (10) (19)
Repayment of obligations under (44) (67) (97)

finance leases
Repayment of loans - (100) (200)
New loans - - 185
_________ _________ _________
Net cash used from financing (70) (177) (131)

activities
_________ _________ _________
INCREASE/(DECREASE) in cash 39 (526) (969)
_________ _________ _________

1 Basis of Preparation

This interim announcement was approved by the Board of Directors on 31 July 2009.

The financial information set out in this interim report does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006. The group's statutory financial statements for the year ended 31 December 2008, prepared under International Financial Reporting Standards as issued by the IASB and adopted by the European Union (IFRS), have been filed with the Registrar of Companies. The auditor's report on those financial statements was unmodified and did not contain a statement under Section 498(2) or (3) (accounting records or returns inadequate, accounts not agreeing with records and returns or failure to obtain necessary information and explanations) of the Companies Act 2006.

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

2 Accounting Policies

The accounting policies used in this interim report are those set out in the financial statements for the year ended 31 December 2008.

3 segmental analysis

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

Segmental analysis by activity (Unaudited) (Unaudited) (Audited)
30 30 31 December
June June

£'000 £'000 £'000

UK 4,480 3,549 7,467
US 1,168 852 1,779
_________ _________ _________
Total Revenue 5,648 4,401 9,246
_________ _________ _________

Germany (250) (201) (33)

Exceptional gain relating to pension - 4,527 4,600

scheme
_________ _________ _________
Operating result 513 4,555 4,610
Finance income - - 8
Finance costs (26) (10) (35)
_________ _________ _________
Profit before tax 487 4,545 4,583
_________ _________ _________

4 PROFIT per ordinary share

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

Earnings:

(Unaudited) (Unaudited) (Audited)
30 30 31 December
June June

£'000 £'000 £'000
Profit for the year 487 4,545 4,566

Number of shares

30 June 2009 30 June 31 December 2008

No. No. No.
Weighted average number of 289,038,635 289,038,635 289,038,635

ordinary shares for the purposes of basic earnings per share
Effect of dilutive potential 16,959,129 13,416,202 16,916,202

ordinary shares Share options Weighted average number of
ordinary shares for the purposes 305,997,764 302,454,837 305,954,837

of diluted earnings per share

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