Interim Results

Image Scan Holdings PLC
28 June 2004


For Immediate Release                                               28 June 2004

                            IMAGE SCAN HOLDINGS PLC

                        ('Image Scan' or the 'Company')

          INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2004


Image Scan, a leading provider of multi-view, 3D X-ray imaging technologies for
the security and industrial inspection markets announces interim results for the
six months ended 31 March 2004.

Key Points

•     Sales £149,000 (2003: £295,000)

•     Loss on ordinary activities before taxation £596,000 (2003: £380,000)

•     Early industrial order of inspection product to GE Healthcare boosts
      sales and margins

•     Rapiscan promotion and endorsement of the 3D screening product commences
      on a worldwide basis.

•     Successful trial at Rampton Hospital demonstrates improvement in
      detection capability when using the 3D product

•     Currently in advanced discussions with a strategic partner that may lead
      to an equity investment

•     Nick Fox, Chief Executive Officer comments:

 'This has been a busy period for the Company in which, finally, the Rapiscan
endorsement of the new 3D product has taken place. With positive feedback from
their sales force and encouraging trial results we expect a high level of
interest in the product.

Of equal importance is the marketing and sales efforts made over the last year
which have produced early industrial sales with the possibility of further
orders from two blue chip organisations. The delays on the security side have
had an impact on our cash reserves and we are in strategic discussions with
trade investors that could prove to be very exciting for the future of the
business.'


For further information:

Nicholas Fox            Chief Executive                            01664 503 600
Ian Johnson             Chairman
Richard Darby           Buchanan Communications                    020 7466 5000
Jonathan Retter         Durlacher                                  020 7459 3600


                              Chairman's Statement

Introduction

I am pleased to present the interim results of Image Scan Holdings plc for the
six months ended 31 March 2004 and the Board's view of the Company's prospects
for the remainder of this financial year.


Financial Results

Sales for the six months were disappointing at £149,000 (2003: £295,000).The
main reason for this was the delay in the launch of the 3D conventional
screening product, although it was encouraging to see sales emerging through the
industrial sector. Sales to Rapiscan Security Products Limited ('Rapiscan')
amounted to £43,000 with over £100,000 coming from the sale of two special
industrial waste screening units to GE Healthcare. In the period there were no '
cost only' funded R&D projects (2003: £250,000) and, as a consequence of the
change in sales mix, margins were impressive at 52% (2003: 12%).

Overheads at £680,000 (2003: £415,000) increased significantly. As stated in my
previous report, we embarked on a proactive, focussed marketing campaign and the
general sales, marketing and trial costs increased in the period by £110,000.
Staff costs increased by £60,000 to £346,000 and depreciation rose by £34,000.

We have continued to invest in, as well as market our products.  Research and
development costs in the period were £69,000 (2003: £91,000) and expensed in
accordance with our group accounting policy. Capital expenditure in the period
of £91,000 includes an industrial x-ray demonstration unit, an Axis-3D(R) trial
machine and new product prototypes.

The loss for the period, after R&D tax credits of £24,000, was £572,000 (2003:
£380,000), a loss per share of 3.04p (2003: 2.34p). In accordance with current
policy there is no dividend proposed.

Net cash increased in the period by £257,000 as a consequence of the capital
raised on 29 October 2003. Bank loans were reduced by £19,000 to £73,000, while
the cash balance at the period end was £466,000.


Commercial Overview

Security Sector

The sales and marketing initiative that was started during our last financial
period has continued with the promotion of the Axis-3D(R) on a worldwide basis
by both Image Scan and our commercial partner, Rapiscan.  The formal launch of
the product by Rapiscan, which is identified by them as their model 3D20, was
announced in January 2004. For logistical reasons the worldwide sales launch
only commenced in April for the markets excluding USA, with the American launch
only completed as late as this June.  However, the on-going promotional
activities by both parties has resulted in Rapiscan's agents, distributors and
potential customers beginning to respond with requests for quotations and
invitations to tender that specify 3D20 technology.   Few sales have yet come
through from this process, but prospects for the next 6 to 12 months look very
encouraging as qualifying leads start to emerge.

To support the marketing efforts for the Image Scan technology into the security
sector, the Company sponsored an independent trial of the 3D20 at the Rampton
Maximum Security Hospital in Nottinghamshire, UK.  This completed in March and,
even with little room for improvement from the highly proficient operators at
Rampton, the trial clearly demonstrated that there was an improvement in
detecting prohibited items when using 3D as opposed to operating in 2D mode. Of
particular comfort was the reaction of users who openly endorsed the excellence
of the product stating that the resolution of the images was extremely clear
enabling the easy detection of prohibited items.


Industrial Sector

Following the positive response we received at the October trade show Vision
2003 in Stuttgart, Image Scan took a stand at the IPOT trade show at the NEC in
February this year.  As a result of these and other targeted marketing efforts,
we are now experiencing a significant increase in sales enquiries for our
industrial inspection technologies; in fact we are approaching a six fold
increase on this time last year.  Most gratifying of all has been the sale of
industrial inspection systems to GE Healthcare.

In line with the Company's strategy, these early sales of industrial inspection
equipment are direct sales to the end user, not through a third party, so that
we can establish a small but significant portfolio of blue chip customer
reference sites in which we are in full control of the whole technology delivery
process.  This will provide the Company with a strong platform to review its
long term strategy and identify the right partner(s) as we move forward.


Current trading and outlook

Recognition by the security sector of our core competences in image acquisition,
analysis and presentation has led to two orders outside of our Rapiscan
relationship.  One order, for the high resolution detector system for a small
vehicle inspection unit for the British Government, was delivered in early June.
  The other order, related to the development of a critical component of a new
generation of computer based training software for the aviation security sector,
is due for delivery in July 2004.

Although we are now firmly focused on the marketing of our current portfolio of
products, and in particular the Axis-3D(R) the Company is also maintaining its
emphasis on new product development. With new products such as the 100cm x 80cm
tunnel Axis-3D(R) due for delivery in 2 months time and a novel large area
detector panel for explosive ordinance disposal applications due for release in
the 4th quarter 2004, dependence on a single product in the security sector will
be reduced.

The extended launch time of the Axis-3D(R) has introduced significant delays in
the anticipated sales of this new product.  However, on the positive side, the
response to the 3D20 (see Rapiscan's website http://www.rapiscan.com/3d20.html
for more product details) both during the pre-launch marketing and immediately
following the launch has been extremely encouraging and the Company believes
that the medium term prospects for the product remain very high, although we
believe that the sales have been delayed by up to 9 months from our original
estimates in October 2003.

The Company remains focused on developing and providing best-in-class solutions
for the security sector and can now also boast one of the best 2D X-ray systems
available today within the aviation security sector.  As an example of how this
core competence translates into potential sales, the Company was approached and
recently delivered a prototype 2D camera for a customer that will provide
significant additional functionality to their main product range.  It is
anticipated that during the following year we will see the integration of this
new 2D camera into their production systems providing a significant ongoing
revenue stream for the Company independent of the Rapiscan agreement.

Initial reaction to our industrial offerings has been very positive and we have
witnessed, in the period to date, an early uptake of our systems by two major
blue chip manufacturers. The recent order for another industrial inspection unit
from a major automotive component supplier takes the combined value for these
orders to over £190,000.   There are also significant opportunities for
additional sales from both of these customers. These orders have proven our
marketing strategy in terms of helping customers identify their inspection
requirements and providing a technical solution from our modular range of X-ray
systems.  The orders, both won in the face of technical competition, endorse the
capability of the Company.


Strategic Direction

The Company has spent over 7 years developing and evaluating hardware and
software imaging techniques and algorithms for applications worldwide. The Board
believes that it has finally reached a point where the technology is universally
accepted, and now commercially viable in both the security and industrial
sectors. Capturing market share in both sectors is paramount in order to gain a
dominant position. Only with at least one significant industrial partner can
this market share be achieved quickly and with maximum efficiency. In that
regard, and in order to secure the commercial future and financial position of
the Company, we have undertaken a review of the options available to the
business and have sought strategic industrial investment. The Company has
received a proposal and is currently in an advanced stage of discussion that may
lead to an unnamed party acquiring a strategic holding of less than 30% in the
Company's issued share capital by way of an equity injection.

Shareholders will be advised of the outcome of these discussions in due course.


Other Matters

As a final point I should like to offer my personal thanks and acknowledgement
to the unwavering loyalty and dedication I see from the staff on a day-to-day
basis.  It is their skill and expertise that has put this Company at the
forefront of its technological sector.


Ian Johnson
Chairman


Unaudited Consolidated Profit & Loss Account
                                                        6 months to       6 months to               Year to
                                                      31 March 2004     31 March 2003     30 September 2003
                                                        (Unaudited)       (Unaudited)             (Audited)
                                                              £'000             £'000                 £'000

Turnover                                                        149               295                   510
Cost of sales                                                  (71)             (260)                 (389)

Gross profit                                                     78                35                   121

Administration expenses                                       (680)             (415)                 (960)

Operating loss                                                (602)             (380)                 (839)

Interest received                                                 9                 3                     8

Interest payable                                                (3)               (3)                   (7)

Loss on ordinary activities before taxation                   (596)             (380)                 (838)

Taxation                                                         24                 -                    50

Loss on ordinary activities after taxation                    (572)             (380)                 (788)


Loss per share: Basic and fully diluted                    ( 3.03)p           (2.34)p               (4.00)p


Unaudited Consolidated Balance Sheet
                                               31 March 2004      31 March 2003         30 September 2003
                                                 (Unaudited)        (Unaudited)                 (Audited)
                                                       £'000              £'000                     £'000

Fixed Assets
Tangible assets                                          256                146                       222
Intangible assets                                        171                185                       179

                                                         427                331                       401

Current assets
Stock and work in progress                                24                 83                        27
Debtors                                                  211                141                       128
Short term investments                                     -                165                         -
Cash at bank and in hand                                 466                430                       209

                                                         701                819                       364

Creditors - amounts falling due
within one year                                        (394)              (386)                     (427)

Net current assets/(liabilities)                         307                433                      (63)

Total assets less current liabilities                    734                764                       338

Creditors - amounts falling due
after more than one year                                (36)               (73)                      (55)

Net assets                                               698                691                       283


Capital and reserves
Called up share capital                                  193                162                       162
Share premium account                                  3,867              2,911                     2,911
Profit and loss account                              (3,362)            (2,382)                   (2,790)

Equity shareholders' funds                               698                691                       283


Unaudited Consolidated Cash Flow Statement
                                                       6 months to        6 months to                Year to
                                          Notes      31 March 2004      31 March 2003      30 September 2003
                                                       (Unaudited)        (Unaudited)              (Audited)
                                                             £'000              £'000                  £'000

Net cash inflow/(outflow) from
operating activities                     (a)                 (626)                 79                  (238)


Returns on investments and servicing
of finance
Interest received                                                9                  3                      8
Interest paid                                                  (3)                (3)                    (7)

                                                                 6                  -                      1

Taxation
Corporation tax recovered                                        -                 19                     97

Capital expenditure and financial
investment
Purchase of tangible fixed assets                             (91)               (61)                  (189)
Purchase of intangible fixed assets                              -                (2)                    (4)

                                                              (91)               (63)                  (193)

Net cash flow before management of
liquid resources                                             (711)                 35                  (333)

Management of liquid resources
Withdrawal/(purchase) of short term
deposits                                                         -              (122)                     43

Financing
Issue of ordinary share capital                                987                  -                      -
Bank loans repaid                                             (19)               (18)                   (36)
Other loans repaid                                               -                  -                      -

                                                               968               (18)                   (36)

Increase in cash in the period           (b)                   257              (105)                  (326)

Note (a) Reconciliation of operating cash flows
Operating loss                                               (602)              (380)                  (840)
Depreciation                                                    57                 24                     76
Amortisation                                                     8                  9                     18
(Increase)/decrease in stock and work
in progress                                                      3               (13)                     43
(Increase)/decrease in debtors                                (59)                211                    195
(Decrease)/increase in creditors                              (33)                228                    270

Net cash inflow/(outflow) from
operating activities                                         (626)                 79                  (238)



Unaudited Consolidated Cash Flow Statement (continued)

Note (b) Analysis of net debt
                                                     2003             Cash flow                 2004
                                                    £'000                 £'000                £'000

Cash at bank and in hand                              209                   257                  466
Debt due within one year                             (37)                     -                 (37)
Debt due after one year                              (55)                    19                 (36)
Current asset investments                               -                     -                    -

                                                      117                   276                  393


Reconciliation of Movement in Shareholders' Funds

                                                6 months to         6 months to                 Year to
                                              31 March 2004       31 March 2003       30 September 2003
                                                (Unaudited)         (Unaudited)               (Audited)
                                                      £'000               £'000                   £'000

Opening shareholders' funds                             283               1,071                   1,071
Issue of shares - at par                                 31                   -                       -
Issue of shares - share premium                         956                   -                       -
Loss attributable to members                          (572)               (380)                   (788)

                                                        698                 691                     283


Notes to the Unaudited Interim Statement

1    Basis of Preparation
     
(a)  The interim statement has been prepared in accordance with the accounting 
     policies set out in the Company's Annual Report and Accounts for the year 
     ended 30 September 2003.

(b)  The interim statement is neither audited nor reviewed. The figures for the 
     year ended 30 September 2003 do not comprise statutory accounts for the
     purpose of section 240 of the Companies Act 1985 and have been extracted 
     from the Company's full accounts for that year, which received an 
     unqualified Auditors' Report and did not contain a statement under section 
     237(2) or (3) of the Companies Act 1985. The accounts have been filed with 
     the Registrar of Companies.

(c)  Basic loss per ordinary share is based on the loss on ordinary activities 
     after taxation of £571,000 and on 19,073,439 ordinary shares being the 
     weighted average of those in issue during the period.

     FRS14 requires presentation of diluted earnings per share (EPS) when a 
     company could be called upon to issue shares that would decrease net profit 
     or increase net loss per share. For a loss making company with outstanding 
     share options, net loss per share would only be increased by the exercise 
     of out-of-the-money options. Since it seems inappropriate to assume that 
     option holders would act irrationally and there are no other diluting 
     future share issues, diluted EPS equals basic EPS.

2    Additional Copies

     Further copies of the Interim Report are available from the Company's 
     registered office, Pera Innovation Park, Nottingham Road, Melton Mowbray, 
     Leicestershire, LE13 0PB.


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