Preliminary Results

RNS Number : 1440V

Image Scan Holdings PLC

11 December 2013

 



                                                                                                                                       11 DECEMBER 2013

IMAGE SCAN HOLDINGS PLC

('Image Scan' or the 'Company')

PRELIMINARY RESULTS

FOR THE YEAR ENDED 30 SEPTEMBER 2013

Image Scan, an AIM-listed specialist in the field of real-time x-ray imaging for the security and industrial inspection markets, announces Preliminary Results for the year ended 30 September 2013; a period that, whilst loss-making,  has seen the broadening of the product base by incremental development,  profitability restored in the second half of the year and a significantly increased order intake.

KEY POINTS

·      Profitability restored in H2 with a profit of £92,000, resulting in an overall loss for the year of £297,000 (2012: profit £108,000)

·      Annual order intake up 32% to £3.3m (2012: £2.5m)

·      Revenue at £2.5m (2012: £4.3m)

·      Gross margin of 37% (2012: 38%)

·      Underlying gross margin, excluding exceptional nuclear costs, at 43%

·      Overheads down 20% to £1.3m (2012: £1.6m)

·      Restructuring of the business to reduce overall break-even point

·      Second half profit of £92,000 compared to interim loss of £389,000

POST YEAR-END EVENTS

·      Cumulative orders deliverable in H1 2014 of £1.4m

·      Current cash balance of £428,000

·      Shipment of significant multiple unit contract to Middle East

·      Appointment of x-ray security sector professional as a consultant to advise on product and market positioning

Brian Emslie, Chairman of Image Scan, commented:   "Having operated at break-even in four of the last five half year periods, it is disappointing to report a loss for 2013.  Much of the loss derived from exceptional costs relating to a one-off contract that was taken three years ago in very difficult economic conditions when the Company was in need of additional revenue.

"Over the last four years the Company has made progress to stem the historic losses and reposition the Company to focus on sales of standard equipment.  Broadening the product base has been achieved entirely through incremental development given limited cash availability.  Having stabilised the Company, the Board is now considering what actions and investments need to take place for the Company to make a significant step-change."

-END-

Enquiries:

Image Scan Holdings plc                                             Tel: [phone]

Brian Emslie, Chairman

Louise George, CEO

[e-mail]

Cantor Fitzgerald Europe                                            Tel: [phone]

Mark Percy / Rick Thompson (Corporate Finance)

Richard Redmayne / Paul Jewell (Corporate Broking)

Yellow Jersey PR Limited                                            Tel: [phone]

Dominic Barretto / Kelsey Traynor

About Image Scan Holdings plc

Image Scan Holdings plc (AIM: IGE) is focused on the development and commercialisation of market leading real-time x-ray solutions for use in the global Security and Industrial inspection markets.  The Company's Security portfolio includes the Axis range of baggage inspection systems; the FlatScan range of portable bomb and suspect package detection systems; and SVXi, a small vehicle inspection system.  The Industrial inspection solutions include the MDXi product range, cabinet x-ray systems for laboratories and production lines. The Company is now broadening its scope to look at other key applications where its technology can be adopted, such as in the Medical devices industry.  The Company was founded in 1996 and joined AIM in 2002.

For further information on the Company, please visit: www.ish.co.uk - and for further information on its products, please visit: www.3dx-ray.com

CHAIRMAN'S STATEMENT

INTRODUCTION

I am pleased to report on the Preliminary Results for Image Scan for the year ended 30 September 2013.

Order intake during 2013 totalled £3.3m (FY12: £2.5million), an increase of 32%.  Capitalising on the investment into product development in 2012, orders received included a repeat sale of two further small vehicle inspection systems to an existing customer targeted at customs and border control in South East Asia; an order for two industrial inspection systems to a new multinational customer in a market where the Company has a niche expertise; and several multiple unit contracts for both the portable and the baggage screening products into Africa and the Middle East. 

Prior to the first half of this financial year the Company had effectively been operating at break even for the previous year and a half, so the interim loss of £390,000 in 2013 was clearly disappointing.  However, profitability was restored again during the second half of the year with a profit of £92,000 resulting in an overall loss for the financial year ending 30 September 2013 of £297,000.

During the year the difficulties associated with delivering the one off nuclear contract resulted in excess costs to the business of £153,000. This contract has taken its toll on the business both financially and in terms of opportunity cost in tying up critical resources, which would otherwise have been used to support development of the core product range. In addition the restructuring carried out by the Board during the first half, to reduce ongoing operating costs by 20%, incurred an exceptional charge of £25,000. It should be noted that, had it not been for these two exceptional costs, the net loss for this year would have been reduced to £119,000 compared to the 2012 profit after tax of £108,000.

The Board is pleased that having significantly reduced operating costs through restructuring of the Company, profitability was restored in the second half of the year.  The Board closely monitors the cash position of the Company and is focusing on taking measures to enhance the sustainability and value of the business. 

BUSINESS REVIEW

The Board continues to review the Company's operations with the primary goal of achieving a sustainable and more sales and marketing led organisation. The Company is increasing its product range though incremental development of existing product platforms to provide more opportunities for recurrent product sales volumes, as opposed to large one-off contracts.  The intention is to reduce the occurrence of anomalies as experienced in the first half of the year.

Ignoring the exceptional costs incurred in the first half of 2013, the Company has effectively traded at break-even for the past two and a half years.  Further growth in revenues will depend on the development or acquisition of new products and services.  The Board believes that continuing to focus on incremental development will only provide incremental improvement and that a more fundamental approach is now required. The Board has recently appointed a senior x-ray security sector professional to act as a consultant to work with the Board and the management team.  He will review our core capabilities, existing product range and strategy and will make recommendations as to what actions and investments need to take place for the Company to make a significant step change.

Despite the performance of the Company this year the Board believes significant progress has been made despite the relatively limited cash position of the Company.

Brian S Emslie

Chairman        
11 December 2013

CHIEF EXECUTIVE'S REPORT

FINANCIAL RESULTS

Revenue in the year ended 30 September 2013 of £2.5m (2012: £4.3m) derived 70% from the Security and 30% from the Industrial sector.  Performance across both core sectors was down mainly due to commencing the year with a much lower opening order book of £0.4m (2012: £2.2m) and a comparatively slow start to the year.  New orders in the first half were £0.8m compared to £2.5m in the second half, giving annual order intake of £3.3m (2012: £2.5m), across the whole product range. 

Security revenue was underpinned by growing sales of the portable x-ray inspection system, but fell overall by 41% due to a shortfall in sales of the vehicle inspection system.  On the Industrial side, the level of sales of standard industrial equipment remained the same, but there was no further revenue arising from the nuclear contract.

The gross margin of 37% (2012: 38%) was suppressed by the impact of the exceptional excess costs in the year of £153,000 against the nuclear contract.  Without these the underlying margin would have been 43% which is a fairer reflection of the Company's performance.

Overheads at £1.3m (2012: £1.6m) have dropped back in-line with previous years following the significant additional investment into product development last year.  Furthermore, in view of the repositioning of the Company away from one-off sales such as the nuclear contract and towards sales of standard equipment, the Company was restructured accordingly with an approximate 20% saving flowing through into the last quarter of the financial year.  The one-off cost associated with the restructuring was £25,000.

The reported losses after taxation of £389,000 in the interims reflected the low level of the opening order book and new orders in the first half of the year.  Whilst the intake of new orders in the second half was much stronger, the lead time for key components has meant that a significant proportion of these sales will now fall into the first half of 2014 resulting in a closing order book of £1.2m (2012: £0.4m).  As a result, the profit in the second half of the year was £92,000 which leaves an overall loss for the year of £297,000 (2012: Profit £108,000).  The loss per share was 0.39p (2012: profit per share 0.14p).

The year-end cash balance was £12,000 (2012: £74,000).  The Company retains a £100,000 overdraft facility with the Royal Bank of Scotland.  The cash at bank as of 10 December 2013 was £428,000. 

OUTLOOK

The Company continues to incrementally develop its product range and during 2014 is intending to introduce a new vehicle screening system and also to offer a number of combinations of different x-ray panels and generators to the portable screening market.  Whilst industrial sales form a smaller part of the overall revenue, it is an area where the Company intends to invest in the necessary sales resource and product customisation to exploit the opportunities further, building on our expertise and traction in certain markets.  The brought forward order book of £1.2m and new orders of £0.2m in the year to date give cumulative orders of £1.4m deliverable in the first half of 2014.

STAFF

During the period under review the Company underwent a restructuring process with a view to ensuring that the Company had the right mix of skills relevant to the business going forward.  The Company intends to adopt a performance related reward strategy with the introduction of a profit-based staff bonus scheme and the issue of share options to incentivise staff and to promote good staff retention.

The Board values greatly the considerable efforts made by our staff and I would like to take this opportunity to personally thank staff and shareholders for their continued commitment to the Company.

Louise J George

Chief Executive Officer

11 December 2013                                                                                                                     

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 September 2013

				2013 £	2012 £
Continuing operations
REVENUE				2,537,786	4,301,983
Cost of sales				(1,586,820)	(2,647,129)
Gross profit				950,966	1,654,854
Administrative expenses				(1,292,856)	(1,624,063)
OPERATING (LOSS)/PROFIT				(341,890)	30,791
Finance income				80	880
(LOSS)/PROFIT BEFORE TAXATION				(341,810)	31,671
Taxation				45,155	76,314
LTOTAL COMPREHENSIVE INCOME FOR THE YEAR FROM CONTINUING OPERATIONS TO THE EQUITY OWNERS OF THE PARENT COMPANY				(296,655)	107,985

EARNINGS PER SHARE				2013 £	2012 £
(Loss)/profit for the year				(296,655)	107,985
Weighted average number of ordinary shares in issue				76,267,932	76,267,932
Basic and diluted (loss)/earnings per share				(0.39p)	0.14p

IAS 33 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. Earnings or loss per share would not be affected by the exercise of out-of-the-money options since it is inappropriate to assume that option holders would act irrationally.  Accordingly as there are no other diluting future share issues, diluted EPS is equal to basic EPS.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2013

					2013 £	2012 £
NON-CURRENT ASSETS
Property, plant and equipment					21,987	39,234
Other intangible assets					-	-
					21,987	39,234
CURRENT ASSETS
Inventories					458,898	412,950
Trade and other receivables					1,119,944	1,121,490
Cash and cash equivalents					11,573	73,782
Current tax asset					36,064	75,385
					1,626,479	1,683,607
TOTAL ASSETS					1,648,466	1,722,841
CURRENT LIABILITIES
Trade and other payables					927,795	699,962
Warranty provision					43,151	46,140
TOTAL LIABILITIES					970,946	746,102
NET ASSETS					677,520	976,739
EQUITY
Share capital					762,679	762,679
Share premium account					7,501,105	7,501,105
Retained losses					(7,586,264)	(7,287,045)
TTOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS					677,520	976,739

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 30 September 2013

				Share capital £	Share premium £	Retained earnings £	Total £
As at 1 October 2011				762,679	7,501,105	(7,392,308)	871,476
Profit for the year				-	-	107,985	107,985
Share-based transactions				-	-	(2,722)	(2,722)
As at 30 September 2012				762,679	7,501,105	(7,287,045)	976,739
	Loss for the year			-	-	(296,655)	(296,655)
	Share-based transactions			-	-	(2,564)	(2,564)
	As at 30 September 2013			762,679	7,501,105	(7,586,264)	677,520

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 30 September 2013

					2013 £	2012 £
Cash flows from operating activities
Operating (loss)/profit					(341,890)	30,791
Adjustments for:
Depreciation					21,472	33,435
Transfer of fixed assets to stock					4,293	-
Increase in inventories					(45,948)	(97,500)
Decrease/(increase) in trade and other receivables					1,546	(554,857)
Increase/(decrease) in trade and other payables					224,252	(282,727)
Share-based payments					(2,564)	(2,722)
Net cash used in operating activities					(138,839)	(873,580)
Corporation tax recovered					85,068	30,403
Net cash outflow from operating activities					(53,771)	(843,177)
Cash flows from investing activities
Interest received					80	880
Purchase of property, plant and equipment					(8,518)	(29,122)
Net cash outflow from investing activities					(8,438)	(28,242)
Net DECREASE in cash and cash equivalents					(62,209)	(871,419)
Cash and cash equivalents at beginning of year					73,782	945,201
Cash and cash equivalents at end of year					11,573	73,782

Notes to the preliminary statement

1    Basis of preparation

The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2013 and 30 September 2012 but is derived from those accounts.  Statutory accounts for 2012 have been delivered to the Registrar of Companies and those for 2013 will be delivered following the Company's Annual General Meeting.  The auditors have reported on those accounts; their reports were unqualified and did not contain statements under Section 498 of the Companies Act 2006.       

2    IFRS 2 'Share-based payments'

Operating expenses includes a credit of £2,564 (2012 credit of £2,722) after valuation of the Company's employee share options schemes in accordance with IFRS 2 'Share-based payments'.  Under this standard, the fair value of the options at the grant date is spread over the vesting period.  These items have been added back in the statement of changes in equity.

 

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