Final Results

RNS Number : 1788T

Image Scan Holdings PLC

11 December 2012

 



11 DECEMBER 2012

IMAGE SCAN HOLDINGS PLC

('Image Scan' or the 'Company')

PRELIMINARY RESULTS

FOR THE YEAR ENDED 30 SEPTEMBER 2012

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 2012.

KEY POINTS

·      Revenue doubled to £4,301,000 (2011: £2,173,000)

·      Gross margin of 38% (2011: 41%)

·      Increased overheads to £1,624,000 (2011: £1,169,000) reflecting a significant investment of £388,000 (2011: £137,000) in product development to support sales growth

·      Maiden profit on ordinary activities after taxation of £108,000 (2011: loss of £237,000)

·      Current cash balance of £343,000

·      Current order book of £450,000

POST YEAR-END EVENTS

·      The Company is pleased to announce that Vincent James Deery will join its Board as an Executive Director, effective 1 January 2013. Vincent (aged 44) is an experienced sales professional whose early career and comprehensive sales management training was undertaken at the General Electric Company. After attaining an Honours Degree in Manufacturing Engineering, Vincent has subsequently followed a successful career path in sales and business development in a wide range of high technology sectors include power control, oil & petrochemical, and metrology. After gaining extensive experience in developing global networks and distribution channels with his previous employers, Vincent joined 3DX-Ray Limited in 2008 where he has held the position of Sales and Marketing Director.

·      The Company also advises that Nick Fox will be stepping down as Chief Technical Officer as of 11 June 2013 but will be retaining his position on the board as a Non-Executive Director.

·      Vincent Deery is currently a Director of 3DX-Ray Limited and has an interest in 8,077 ordinary shares in the Company.

·      There are no further disclosures that are required to be made pursuant to Schedule 2 (g) of the AIM Rules.

Brian Emslie, Chairman of Image Scan, commented:   "2012 marks the first year of profitable trading for the Company.  Further progress has been made in steering the business, in line with our strategy, towards becoming a more proactive sales and marketing-led organisation.  Coupled with this, there has been a more significant investment in the development of both new products and enhancement of our existing security and industrial product ranges to support business growth. Whilst the Board is encouraged with the progress made in implementing the strategy, it is also mindful that achieving critical mass and sustaining profitability remains challenging with the relatively limited cash resources available."

-END-

Enquiries:

Image Scan Holdings plc                                             Tel: [phone]

Brian Emslie, Chairman

Louise George, Chief Executive

[e-mail]

Seymour Pierce                                                           Tel: [phone]

Tom Sheldon, Guy Peters (Nominated Adviser)

Paul Jewell, Richard Redmayne (Corporate Broking)

CHAIRMAN'S STATEMENT

INTRODUCTION

I am pleased to report on the preliminary results for Image Scan for the year ended 30 September 2012.

Following the break-even results for the second half of the previous financial year, the Board is encouraged to report on a modest profit after taxation for the year ending 30 September 2012 of £108,000 (2011: loss of £237,000).  It should be noted that this is the first 18 month period of profitability for the Company since being founded in 1996. Having achieved its maiden profit, the Board is now focused on endeavouring to maintain the sustainability of the business and enhancing levels of profitability.

Whilst the results are more positive, the Board recognises that achieving critical mass in this increasingly competitive market continues to be challenging. Bearing in mind the risks inherent with the current scale of our business, the Board remains open to exploring all strategic options that may materialise.

BOARD CHANGES

With effect from 11 June 2013, Nick Fox will be stepping down from his position as Chief Technical Officer and moving into the role of Non-Executive Director with the Company.  Nick has decided to pursue other career interests whilst continuing his long association with Image Scan as a Board member.  Having founded the Company, Nick has served as a director for over 16 years in the role of both Chief Executive Officer and latterly Chief Technical Officer responsible for guiding the Company's evolution and development of its core technology. I am sure you will all join me in thanking Nick for his considerable contribution over the years and also look forward to being able to have the continued benefit of his guidance and wisdom as he transitions into the new role as a Non-Executive Director.

I am pleased to announce that Vincent Deery, who has served as a Director of 3DX-RAY Ltd for the past four years, has been appointed as Sales and Marketing Director to the Board of Image Scan with effect from 1 January 2013. Vincent has been responsible for building our sales and marketing team to deliver higher sales volumes in target applications and sectors.  This appointment recognises the importance the Board is placing on the overall business development and the need to listen to our customers and to develop and enhance our product offerings to meet the requirements of end users.

STRATEGY UPDATE

The turnaround in performance achieved during the past two years has validated the strategy of the Company in increasing its range of standard security equipment and identifying high value industrial opportunities with potential for commercial development and repeat business.  Furthermore, the investment in the sales team and the Company's website has both extended the sales reach in a number of key territories and given rise to a higher volume of and more relevant web-based enquiries.  As a result the Company's pipeline of potential business is stronger and of a level to support increased sales activity.

As reported in June, the Board has revisited the strategy with the aim of taking a longer-term strategic view of how to strengthen the business. A detailed review has now been undertaken including the potential to seek additional funding to enhance and expand the Company's product range. The conclusion of this review was that the business risks, forecasted margins and resultant return rendered such an investment step not in the best interest of shareholders and potential investors at this time.  On this basis our strategy will continue to involve incremental investment in broadening and enhancing our product range on an ongoing basis.

The next steps for 2013 are to capitalise on the significant investment made in product development, to consolidate recent business growth and to focus on enhancing margins to achieve more acceptable levels of profitability.

The Board believes that the Company has progressed well in implementing the strategy. Development of a profitable and sustainable business with less reliance on one-off large contracts and a wider, more diffuse set of customers in both sectors is the challenge for 2013. Whilst remaining confident that the business can develop further we remain cognisant of the risks involved and the relatively limited cash position of the Company.

Brian S Emslie

Chairman        
10 December 2012

CHIEF EXECUTIVE'S REPORT

FINANCIAL RESULTS

Revenue in the year ended 30 September 2012 doubled to £4,302,000 (2011: £2,174,000) with strong growth across both the security and the industrial sectors.  Sales of security equipment increased by 119% to £2,954,000 (2011: £1,351,000) primarily as a result of sales of the new small vehicle x-ray inspection system, SVXi. On the industrial side revenue grew by 64% to £1,348,000 (2011: £823,000) due to revenue accruing on the nuclear contract secured in 2011 and sales of the new MDXi-200 industrial inspection system.

The gross margin of 38% (2011: 41%) has been reduced compared to the previous year's by the high costs of delivering the nuclear contract, the substantial amount of subcontracted work on the SVXi system by comparison to smaller builds that have been historically assembled in-house and the incurrence of one-off engineering costs associated with product introduction.

Overheads at £1,624,000 (2011: £1,169,000) have shown a sharp increase due to the necessary and significant investment of £388,000 (2011: £137,000) in the development of new products and variants of existing products in order to expand the product range and in turn support the sales growth.

As a result of the reported trading activities in 2012, the Company has secured its maiden profit after taxation of £108,000 (2011: loss of £237,000).  The earnings per share was 0.14p (2011: loss per share 0.65p).

The year-end cash balance of £74,000 (2011: £945,000) was low by comparison to last year because the 2011 balance included upfront contract payments of £520,000, whereas in 2012 there are significant trade debtor balances relating to September sales against which £350,000 was received within a few days of the year end.  In addition there has been further investment in stock to support the enlarged product range.  The cash at bank as of 10 December 2012 stands at £343,000.  The Company has retained its £100,000 overdraft facility with the Royal Bank of Scotland.

PRODUCT DEVELOPMENT

Over the last few years the Company has extended its product offering through incremental development of existing products and investment in new products aimed specifically at meeting end user requirements:

Ø AXIS - The range of baggage screening products has been extended from one to four systems to include three different tunnel sizes and one 3D variant.

Ø FlatScan - In addition to the original FlatScan-TPXi large, thin panel system, the portable screening range now includes a smaller panel providing increased portability with the same high quality resolution.  The second generation of the TPXi system is due to be launched early in 2013 incorporating the latest ThreatSpect software, giving greater image clarity and providing a 3D option of this system for the first time.

Ø SVXi - A significant element of the development carried out in 2012 related to a mobile trailer x-ray system for the screening of small vehicles.  Although this was based on earlier work carried out with the UK Home Office to build a proof of technology, the mechanical design and build of the x-ray system and the development of the software involved what was effectively a complete new product program.  Looking forward the Company is focusing most of its R&D efforts in 2013 on the further development of the vehicle screening product range.

Ø MDXi - Following a long period of collaboration with a key customer researching the requirements for a compact, low cost x-ray system the Company has now developed the MDXi-200 system to complement the existing MDXi-400 and MDXi-NT systems which were originally developed over 5 years ago.  It is believed that the MDXi-200 system will have a broader range of industrial applications where inspection system footprint is a key consideration for incorporation into the planning and cost of production lines.

Ø Medspect - Again following lengthy discussions with our customer, in 2012 the Company secured an order for anindustrial x-ray system applicable for the inspection of small medical devices. 

OUTLOOK

Order intake during 2012 totalled £2.5million (FY11: £4.3million).  Although lower by comparison to the previous year, there were two substantial contracts in 2011 which accounted for over half of the order intake.  Orders received during 2012 involved a stream of smaller contracts with a mix of 69% security and 31% industrial sales across a wider range of customers and geographical spread.

The investment in increased activity in territory during 2012 is evident in the strong sales enquiry pipeline.  This is giving greater visibility on future sales to support budgeting and production planning.  Similarly, the investment in the product range described above coupled with having more established reference sites is providing the Company with a platform from which to grow sales opportunities.

STAFF

During the year the Company appointed a new Engineering Manager and implemented some internal restructuring to give additional operational responsibility to a number of long-standing members of staff.  Due to the high level of product development and first builds in 2012, it was necessary for the Board to balance resourcing so as to retain knowledge within the Company whilst maintaining the flexibility to supplement with temporary staff.  Based on the increased level of activity in 2012 and visibility of sales projections for 2013, the Company has now invested in additional permanent staff within the software, engineering and sales teams. 

The Board greatly appreciates the considerable efforts made by our staff to meet the challenges of the past year, so I would like to take this opportunity to personally thank everyone for their continuing commitment to the Company.

Louise J George

Chief Executive Officer

10 December 2012                                                                                                                     

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 September 2012

				2012 £	2011 £
Continuing operations
REVENUE				4,301,983	2,173,757
Cost of sales				(2,647,129)	(1,272,548)
Gross profit				1,654,854	901,209
Administrative expenses				(1,624,063)	(1,169,323)
OPERATING PROFIT/(LOSS)				30,791	(268,114)
Finance income				880	875
PROFIT/(LOSS) BEFORE TAXATION				31,671	(267,239)
Taxation				76,314	30,056
L PROFIT/(LOSS) FOR THE YEAR FROM CONTINUING OPERATIONS				107,985	(237,183)

EARNINGS PER SHARE				2012 £	2011 £
Profit/(loss) for the year				107,985	(237,183)
Weighted average number of ordinary shares in issue				76,267,932	65,418,617
Basic and diluted earnings/(loss) per share				0.14	(0.36)

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 equals basic EPS.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 September 2012

					2012 £	2011 £
NON-CURRENT ASSETS
Property, plant and equipment					39,234	43,548
Other intangible assets					-	-
					39,234	43,548
CURRENT ASSETS
Inventories					412,950	315,450
Trade and other receivables					1,121,490	566,632
Cash and cash equivalents					73,782	945,201
Current tax asset					75,385	29,474
					1,683,607	1,856,757
TOTAL ASSETS					1,722,841	1,900,305
CURRENT LIABILITIES
Trade and other payables					699,962	999,380
Warranty provision					46,140	29,449
TOTAL LIABILITIES					746,102	1,028,829
NET ASSETS					976,739	871,476
EQUITY
Share capital					762,679	762,679
Share premium account					7,501,105	7,501,105
Retained losses					(7,287,045)	(7,392,308)
TTOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS					976,739	871,476

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Year ended 30 September 2012

				Share capital £	Share premium £	Retained earnings £	Total £
As at 1 October 2010				612,679	7,361,105	(7,159,758)	814,026
Share issue				150,000	140,000	-	290,000
Loss for the year				-	-	(237,183)	(237,183)
Share-based transactions				-	-	4,633	4,633
As at 30 September 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

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 30 September 2012

					2012 £	2011 £
Cash flows from operating activities
Operating profit/(loss)					30,791	(268,114)
Adjustments for:
Depreciation					33,435	39,615
Increase in inventories					(97,500)	(42,443)
Increase in trade and other receivables					(554,857)	(246,892)
Decrease/(increase) in trade and other payables					(282,727)	825,041
Share-based payments					(2,722)	4,633
Net cash (used in)/generated from operating activities					(873,580)	311,840
Corporation tax recovered					30,403	28,525
Net cash (outflow)/inflow from operating activities					(843,177)	340,365
Cash flows from investing activities
Interest received					880	875
Purchase of property, plant and equipment					(29,122)	(35,731)
Receipt from disposal of assets					-	2,055
Net cash outflow from investing activities					(28,242)	(32,801)
Cash flowS from financing activities
Issue of ordinary share capital					-	290,000
Net cash inflow from financing activities					-	290,000
Net (DECREASE)/INCREASE in cash and cash equivalents					(871,419)	597,564
Cash and cash equivalents at beginning of year					945,201	347,637
Cash and cash equivalents at end of year					73,782	945,201

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 2012 and 30 September 2011 but is derived from those accounts.  Statutory accounts for 2011 have been delivered to the Registrar of Companies and those for 2012 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 (£2,722) (2011 charge: £4,633) 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.

3    Posting of accounts

It is intended that the financial statements for the year ended 30 September 2012 will be made available to shareholders on the Company's website by  31 January 2013 and will also be available thereafter at the registered office, 16-18 Hayhill, Sileby Road, Barrow upon Soar, Leicestershire LE12 8LD.

4    Annual General Meeting

The Annual General Meeting will be held at 11.00am on Wednesday 27 February 2013 at the offices of Seymour Pierce, 20 Old Bailey, London EC4M 7EN.

 

END

 

 

FR BKKDBPBDDQBD