ImageState 2004 Results

Posted on 1/4/2005 by Jim Pickerell | Printable Version | Comments (0)

In late December ImageState filed its annual report for fiscal 2004 and reported net earning for the year of about 3.7 million pounds or roughly $6,685,573 (The company's fiscal year ended June 30, 2004, but UK law does not require them to report the numbers until almost 6 months after the end of the reporting period.) Thus, it should be noted that we have no idea what has been happening in the last six months of business activity.

The Board told investors that during the year it "focused upon rationalization of processes and elimination of resource duplication" and took steps to "reduce the Group's cost base to a level more in line with the revenue stream." In November 2003 the Group hired Leslie Hughes as CEO and has made a number of key appointments since that time including Chief Financial Officer, Chief Technology Officer, Chief Creative Officer and Director of Strategic Alliances.

The company has operating businesses in New York and London with 22 people in New York. The London staff of 23 is focused on UK domestic sales and international service support.

The Board acknowledged that the financial results "were disappointing," and said the changes implemented have resulted in improved efficiency, but as yet are not reflected in improved revenue.

Revenues for the last three years are as follows:


July 1, 2001 to June 30, 2002  




July 1, 2002 to June 30, 2003  




July 1, 2003 to June 30, 2004  




Of the fiscal 2004 revenue about 31% was from U.S. sales, 24% from the UK and 45% from the Rest of the World. The breakout of regional revenue for the last three years is as follows:









United States  








United Kingdom  








Rest Of The World  









While ImageState has finally recruited an excellent staff with solid industry experience they face a very difficult challenge in renewing customer interest in their offering in two key markets - the U.S. and the UK.

Unfortunately, during the past three years as they stumbled along in their growth and integration phase, many of the customers of the former brands they acquired have found other places to get the images they need. The decline was much more severe in the U.S. than in the UK because many of the brands acquired were U.S. based companies that had been making strong sales into the U.S. market.

In my opinion this decline occurred for three major reasons: (1) ImageState was not marketing as aggressively as the other brands, (2) they were not supplying the same level of service, and (3) they were slower than their competitors to add new images. At this point, re-positioning the company is almost like starting from scratch in these markets - a very difficult challenge in today's market environment.

It is interesting that their strongest sales are being made by agents in more than 50 countries around the world, not by their direct sales offices in their two major markets.
Over the past three years these agent sales have been relatively steady. Since these agents retain, on average, 40% of the gross revenue before sending ImageState its share the actual gross sales of these Rest of the World agents was in excess of $5 million for fiscal 2004. When considering the potential revenue generating ability of the collection the $5 million figure should be compared with $2 million in the U.S. and $1.6 in the UK to understand how very weak the direct selling ability of ImageState really is.

Part of the reason that the agents have been so successful is that all of them have been in business in their local areas for many years. They have built relationships with their customers and they have continued to offer their customers a strong selection of imagery from a variety of sources. They have also offered those customers continuing good service. If one of their sources of images falters, and stops supplying the same level of imagery as in the past, the agent's customers hardly notice the difference because the agent has new imagery flowing in from lots of other sources. And the agent is still providing the same level of good service it has supplied all along.

On the other hand when a new company (ImageState) takes over the prime direct selling operation of several acquired companies, as was the case in the U.S. and the UK, and there is confusion and a lack of new material because the only images they represent are the images they produce themselves, customers quickly move to other sources and are very slow to come back.

As of June 30, 2004 the Group had net current liabilities of $21,327,320, including a bank loan of $7,229,600 and a loan of $11,205,880 from the principal shareholder, Sir John Beckwith. While Sir John Beckwith seems committed to making the company profitable, and ready to provide continued financial support for as long as necessary, there is no evidence that Image State is likely to be profitable soon. But, in this industry we have the precedent of Bill Gates' fifteen year odyssey to make Corbis profitable, so maybe Beckwith still has a long way to go.


Copyright © 2005 Jim Pickerell. The above article may not be copied, reproduced, excerpted or distributed in any manner without written permission from the author. All requests should be submitted to Selling Stock at 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-461-7627, e-mail: wvz@fpcubgbf.pbz

Jim Pickerell is founder of, an online newsletter that publishes daily. He is also available for personal telephone consultations on pricing and other matters related to stock photography. He occasionally acts as an expert witness on matters related to stock photography. For his current curriculum vitae go to:  


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