Interim Results

RNS Number : 9948W

Image Scan Holdings PLC

25 April 2019

 

25/04/2019

Image Scan Holdings plc

("Image Scan" or the "Company")

(AIM: IGE)

Interim Results

First half performance behind management expectations but guidance maintained for full year

Image Scan, (AIM: IGE) specialists in the field of X-ray imaging for the security and industrial inspection markets today announces its interim results for the six months ended 31 March 2019. Whilst the performance during the first six months was slightly behind expectations, the Board expects to meet market expectations for the year to 30 September 2019.

Financial summary:

·      Order intake steady at £2.1m (2018: £2.0m)

·      Revenue declined to £1.4m (2018: £2.0m)

·      Gross profit margin increased to 47% (2018: 42%)

·      Loss before taxation of £178k (2018: profit of £39k)

·      Period end bank balance of £750k (2018: £752k)

·      Period end order book of £1.0m (2018: £1.1m)

·      Expected to meet market expectations for the financial year end

Operational highlights:

·      Renewed focus on organic growth with investment in marketing and product development

·      Orders for portable X-ray units up 14% on the prior period

·      Tightening emissions control legislation in India and China supports industrial unit sales

·      Over 90% of industrial units now under long term service contract

·      Aftermarket sales strategy developed, offering significant upgrades to existing portable X-ray users

·      New product development programme is underway targeted at new product sector

·      Sales behind management expectations at the end of H1 due to contract delays with International Government customers but are expected to recover during H2

Bill Mawer, Chairman and Chief Executive Officer of Image Scan, commented: "The recent decline in the share price is clearly disappointing for all shareholders. Our short-term strategy is a simple one: to take more of our X-ray inspection systems, to more markets, as fast as possible. The entire staff of the Company is focused to this activity. We start the second half with a £1.0m order book and sufficient activity in our pipeline for the Board to expect the Company to meet market expectations for the year to 30 September 2019."

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

Enquiries:
Image Scan Holdings plc William Mawer, Chairman and Chief Executive Officer Sarah Atwell King, Company Secretary	Tel: [phone] [e-mail]
Cantor Fitzgerald Europe Rick Thompson / Will Goode (Corporate Finance) Caspar Shand Kydd (Sales)	Tel: [phone]

Chairman's statement

Introduction

Image Scan Holdings plc is a specialist in innovative X-ray technology, operating globally in the security and industrial inspection sectors. The Company's principal activity is the design, manufacture and supply of both portable and fixed X-ray security screening systems to governments, security organisations and law enforcement agencies. The Company also supplies high-quality image acquisition systems for non-destructive testing to commercial organisations worldwide.

Financial results

New order intake was steady at £2.1m, though that figure includes an increase in orders received for portable X-ray systems of 14% over the equivalent period in the prior year.

Revenues for the six months ended 31 March 2019 were £1.4m, (2018: £2.0) which included an order for 20 portable security units delivered to a South East Asian customer close to the period end. Gross margin was increased to 47% (2018:42%) reflecting good margins on security orders.

Overhead costs increased to £854k (2018: £793k) and included an increase in R&D spend across a number of key projects. The business made a pre-tax loss of £178k (2018: profit of £39k).

The Company finished the period with an order book of £1.0m (2018: £1.1m) and a cash balance of £750k (2018: £752k)

Overview

While it is good to see portable X-ray orders increase over the prior period, we recognise that we still have some way to go to reach the record levels recorded in FY17. Key security customers in the period were in South East Asia while shows were attended and demonstrations carried out in South America, Asia and Europe. The business is fully focussed on getting its product to market and has an extensive programme of customer demonstrations and trials organised over the coming months.

Revenues were behind management expectations at the end of the period, reflecting the unpredictable nature of Government procurement processes. However, with customer decisions due on several key projects, activity is expected to increase in the second half.

A number of initiatives are underway to further increase security sales. These including an upgrade programme for existing ThreatScan®LS1 users, including panel and communications upgrades and the ability to use X-ray film with the system.

The Company has launched a new development project, based on our existing technologies, that will produce a new X-ray security system that will be taken to market through our existing network of international partners. A prototype should be available by the end of 2019.

In the industrial area, the period has seen deployments of multiple systems to both India and China, as our major customers respond to demand driven by tighter emissions control regulations in those countries. We finish the period with three further units in the order book and being manufactured for delivery in H2. We have over 90% of all industrial systems in the field under valuable service and support contracts.

Outlook

The Company continues to see strong demand in both its significant product ranges. In security, there is a good pipeline of opportunities and the team is working hard to convert these into orders. We continue to expand the market footprint and frequently add new partners to our network. In industrial, our major customers are selectively building capacity in regions where tighter emissions control legislation, particularly for diesel engines, is driving demand, and this should continue to yield orders for our inspections systems. The addition of new industrial systems to our service scheme will provide additional recurring income.

In order to drive short to medium growth for the business we are now developing new X-ray inspection systems and have a pipeline of such projects. We expect to start seeing revenue from the first of these projects in the next financial year.

The staff at Image Scan continue to be enthusiastic, dedicated and creative and on behalf of my fellow Board members, I would like to formally thank our staff for their contribution during this period.

The Board and staff of Image Scan look forward to the future with confidence.

Bill Mawer

Chairman and Chief Executive Officer

25/04/2019

 

Consolidated income statement

For the six months ended 31 March 2019

	Note	Six months ended 31 March 2019 (Unaudited) £'000	Six months ended 31 March 2018 (Unaudited) £'000	Year ended 30 September  2018 (Audited) £'000
Revenue		1,423	1,990	3,465
Cost of sales		(747)	(1,158)	(1,820)
Gross profit		676	832	1,645
Other operating income		-	-	48
Operating expenses		(854)	(793)	(1,597)
Exceptional Items		-	-	(251)
Operating profit		(178)	39	(155)
Finance income		-	-	-
Profit before taxation		(178)	39	(155)
Taxation		-	-	(65)
(Loss0/profit for the period		(178)	39	(200)

		Pence	Pence	Pence
Earnings per share
Basic profit per share	[3]	(0.13)	0.03	(0.16)
Diluted profit per share		(0.13)	0.03	(0.16)

Consolidated statement of changes in equity

For the six months ended 31 March 2019

	Note	Six months ended 31 March 2019 (Unaudited) £'000	Six months ended 31 March 2018 (Unaudited)         £'000	Year ended 30 September  2018 (Audited) £'000
Opening equity shareholders' funds		1,630	1,821	1,821
Shares issued in the year		-	6	17
Share-based payments	[4]	3	6	12
(Loss)/Profit attributable to equity shareholders		(178)	39	(220)
Closing equity shareholders' funds		1,455	1,872	1,630

Consolidated statement of financial position

As at 31 March 2019

	As at 31 March 2019 (Unaudited) £'000	As at 31 March 2018 (Unaudited) £'000	As at 30 September  2018 (Audited) £'000
Non-current assets
Plant and equipment	86	20	71
	86	20	71
Current assets
Inventories	804	676	939
Trade and other receivables	499	1,327	783
Cash and cash equivalents	750	752	782
	2,053	2,755	2,504
Total assets	2,139	2,775	2,575
Current liabilities
Trade and other payables	646	855	910
Non-current liabilities
Provisions for liabilities and charges	38	48	35
Total liabilities	684	903	945
Net assets	1,455	1,872	1,630
Equity
Share capital	1,363	1,360	1,363
Share premium account	8.328	8,320	8,328
Retained earnings	(8,236)	(7,808)	(8,061)
Equity shareholders' funds	1,455	1,872	1,630

 

Consolidated cash flow statement

For the six months ended 31 March 2019

	Six months ended 31 March 2019 (Unaudited) £'000	Six months ended 31 March 2018 (Unaudited) £'000	Year ended 30 September  2018 (Audited) £'000
Cash flows from operating activities
Operating (loss)/profit	(178)	39	(155)
Adjustments for:
Depreciation	12	7	16
Impairment of inventories	19	24	43
Increase/(decrease) in provision for warranty	3	-	(12)
Decrease in inventories	115	394	113
Decrease in trade and other receivables	237	267	774
(Decrease) in trade and other payables	(264)	(1,274)	(1,256)
Share-based payment charge	3	6	12
Net cash used in operating activities	(53)	(537	(465)
Corporation tax recovered	47	(30)	-
Net cash outflow from operating activities	(6)	(507)	(465)
Cash flows from investing activities
Purchase of property, plant and equipment	(26)	-	(23)
Net cash used in investing activities	(26)	-	(23)
Cash flows from financing activities
Proceeds from issue of share capital	-	6	17
Net cash from financing activities	-	6	17
Net (decrease)/increase in cash and cash equivalents	(32)	(501)	(471)
Cash and cash equivalents at beginning of period	782	1,253	1,253
Cash and cash equivalents at end of period	750	752	782

Notes to the unaudited interim financial statements

For the six months ended 31 March 2019

1 Basis of preparation

The interim financial statements, which are unaudited, have been prepared on the basis of the accounting policies expected to apply for the financial year to 30 September 2019 and in accordance with recognition and measurement principles of International Financial Reporting Standards ('IFRSs') as endorsed by the European Union. The accounting policies applied in the preparation of these interim financial statements are consistent with those used in the financial statements for the year ended 30 September 2018.

The interim financial statements do not include all of the information required for full annual financial statements and do not comply with all the disclosures in IAS 34 'Interim financial reporting'. Accordingly, whilst the interim statements have been prepared in accordance with IFRSs, they cannot be construed as being in full compliance with IFRSs.

The financial information for the year ended 30 September 2018 does not constitute the full statutory accounts for that period. The annual report and financial statements for the year ended 30 September 2018 have been filed with the Registrar of Companies. The Independent auditor's report on the report and financial statements for the year ended 30 September 2018 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006.

2 Going concern

The interim financial information has been prepared on a going concern basis, which assumes that the Company will have adequate resources to continue in operational existence for the foreseeable future.

3 Earnings per share ('EPS')

Basic earnings per ordinary share is based on the loss on ordinary activities before taxation of £177,841 and on 136,354,577 ordinary shares in issue throughout the period.

Diluted profit per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of dilutive potential ordinary shares, based on the share price at the end of the period.  The Company's dilutive potential ordinary shares are shares issued under the Company's Enterprise Management Incentive ('EMI') scheme and options issued under the Company's Unapproved scheme.

4 IFRS 2 'Share-based payments'

Operating expenses includes a charge of £2,777 (2018: £5,887) after valuation of the Company's employee share option schemes in accordance with IFRS 2. Under this standard, the fair value of the options at the grant date is spread over the vesting period. These charges have been credited to equity in accordance with IFRS2 as presented in the consolidated statement of changes in equity.

5 Additional copies

Further copies of the 2019 interim report are available on the Company's website, www.ish.co.uk, and from the Company's registered office, 16-18 Hayhill Industrial Estate, Sileby Road, Barrow-upon-Soar, Leicestershire LE12 8LD.

 

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