Preliminary Results

RNS Number : 6517K

Image Scan Holdings PLC

22 December 2008

 



FINAL

23 DECEMBER 2008

IMAGE SCAN HOLDINGS PLC

('Image Scan' or the 'Company')

PRELIMINARY RESULTS 

FOR THE YEAR ENDED 30 SEPTEMBER 2008

Image Scan, AIM-listed specialist in the field of real-time 3D and 2D x-ray imaging for the 'Homeland Security' and 'Industrial Inspection' markets, announces preliminary results for the year ended 30 September 2008.

KEY POINTS

• Sales at £2,004,000 (2007: £1,542,000);

• Gross margin at 45% (2007: 46%);

• Reduced overheads of £1,360,000 (2007: £1,522,000);

• Loss on ordinary activities after taxation down to £331,000 (2007: £761,000); 

• Year end net cash of £1,535,000 (2007: £1,531,000); and

• New international industrial customer in a new segment with further market opportunities.

POST BALANCE SHEET EVENTS

• Confirmation of the £630,000 order from China;

• New order of £141,000 from Johnson Matthey for their plant in Japan;

• Current order book at £743,000;

• Restructuring of the Board; and

• Further reduction in headcount since year end.

Gilbert Chalk, Chairman of Image Scan, commented:   

'The confirmation of the Chinese contract, the further commitment from Johnson Matthey and the success in attracting new customers against international competition, are all positive endorsements of our technology.  However, notwithstanding these recent successes, trading conditions are difficult with both general security and industrial sales being under budget in the first quarter. As a consequence the Company has recognised the need for a particularly tight control of overheads and for a renewed focus of effort on the commercialisation of the existing product range and extension of routes to market. As a result there has been a re-assignment of roles amongst the executive directors and a reduction of headcount to reflect this strategy'.

Enquiries:

Image Scan Holdings plc                                 Tel: [phone]

Gilbert Chalk, Chairman

Louise George, CEO

[e-mail]

Bishopsgate Communications Ltd                   Tel: [phone]

Jenni Herbert

[e-mail]

Seymour Pierce                                              Tel: [phone]

Richard Feigen

Sarah Jacobs

  CHAIRMAN'S STATEMENT

Introduction

I am pleased to report on the Preliminary Results for Image Scan for the year ended 30 September 2008 and comment on the Board's view of your Company's prospects for the following financial year.

The outcome for the financial year 2008 has seen a marked improvement on the previous year in terms of both turnover and reduced losses. Security sales were steady throughout the year. However, industrial sales experienced a slow-down towards the end of the year having completed the final £400,000 of the British Nuclear Group contract in the first half.

Financial Results 

Revenue in the year to September 2008 increased by 30% to £2,004,000 (2007: £1,542,000). Sales growth came from a threefold improvement in the security sector with sales of the 3D x-ray baggage screening system, Axis-3d® into the US and China, and both direct and distributor sales of the portable Flatscan-TPXi device.

The gross margin of 45% was comparable to the prior year (2007: 46%) with both sectors performing at the same level.  

Overheads were reduced by £162,000 to £1,360,000 (2007: £1,522,000) following a net reduction in headcount of 4 staff and lower R&D spend of £211,000 (2007: £267,000). 

The combination of increased revenue and tighter control of costs resulted in a much reduced net loss of £331,000 (2006: £761,000). The loss per share was 0.6p (2007: 1.9p).

Year end cash balances remained stable at £1,535,000 (2007: £1,531,000) due to reduced working capital requirements, careful cash management and other non-operational factors, including the receipt of interest, R&D tax credits and the issue of £60,000 share capital. The current cash balances are £1,258,000 reflecting a shortfall in sales in the first three months of the current year.  The Company also has an agreed £100,000 overdraft facility with the Royal Bank of Scotland to cover working capital requirements.

Overview

Security

Following the initial purchase and evaluation of the Axis-3d® system in March 2006, Shanghai Unitech Ltd, a Chinese company, acquired four units during the year to provide heightened security measures for key locations at the Beijing Olympics. Further comprehensive negotiations with Shanghai Unitech resulted in two additional orders for the second generation Axis-3d® baggage screening system. The first order was for an evaluation machine which was delivered in June 2008. The second order, valued at £630,000, was conditional on the satisfactory acceptance testing of the new design. The original trial period was extended following issues relating to the reliability of certain bought-in components used in both the trial and the earlier units. An alternative source of supply has been identified and these new components have proved to be reliable on the evaluation system.  As a result the conditional contract has been confirmed on the basis that the Company replaces the original defective components on all systems at an estimated cost to the Company of £25,000, with delivery due in the second half of the current financial year.

Sales of the Flatscan-TPXi system through our Belgium-based distributor, Industrial Control Machines S.A. ('iCM') increased from 15 in 2007 to 44 in 2008.  In addition, within the UK, the British Transport Police, who were the first adopters of the technology, acquired two Flatscan-TPXi systems and four portable screening cabinets to launch their new stop and search initiative on the London Underground and mainline stations.

Industrial

During the first half, the Company successfully completed the £1m contract to British Nuclear Group and in the second half sold a system to Boston Power Inc for the inspection of laptop batteries at their plant in Taiwan. This contract with Boston Power was won against major international competition, and represented further endorsement of the Company's technology. This is expected to result in follow on sales into the same sector in the current financial year.

The Company was delighted to receive recently a £141,000 order from Johnson Matthey for an MDXi-NT system for the inspection of catalytic converters at their plant in Japan. This order is scheduled for delivery in March 2009.

Outlook

In spite of recent successes in securing the orders from China and Japan, visibility of future orders is uncertain due to the general downturn in the world economy. Other anticipated orders have been delayed due to the impact of the economic climate in the automotive sector.  There also appears to have been a slower take-up of Flatscan-TPXi sales in recent months, although experience has shown that impetus for sales within the security sector can often be event-driven. As a result it is difficult to predict when the current sales prospects will convert into firm orders.

In the light of the above, the Board has taken the following remedial measures to restructure the Company and reduce overheads:

• Louise George, hitherto the Company's Finance Director, has been appointed Chief Executive.  This has enabled Nick Fox to step into the role of Technical and Business Development Director, providing the technical lead throughout the Company and in particular to the sales process. The group's finance and accounting function will be under the overall direction of Louise George with support principally being provided from existing and, if necessary, outsourced temporary staff.

• The Company's Sales and Marketing function will be strengthened through the recruitment of an additional sales executive who will report to Vince Deery, the Sales and Marketing Director of the Company's principal operating subsidiary, 3DX-RAY Ltd. The Board is encouraged by the progress to date in widening and extending the Company's sales opportunities but further resource is required in this key function to capitalise on the prospects and to convert them to firm orders.

• A reassignment of roles and responsibilities amongst the technical and engineering staff has resulted in a reduction in headcount, taking the number of permanent full-time equivalent staff, excluding the Board, to twelve.

• The above changes result in annualised savings of £100,000. Associated redundancy costs in the current year are expected to be approximately £30,000.

• Additional technical and engineering support will be contracted in as and when required to meet peak demands on the business. 

The Board believes that the above changes will result in the management of the business being more focused with costs being tightly controlled on a reduced overall overhead and with resource being directed to marketing and project priorities. It is clearly a fundamental requirement in the current difficult trading environment to give the Company the best opportunity to garner its resources to maximum effect, and to continue progress towards profitability. However, the Board continues to pursue a wider strategic solution that will enable the Company and shareholders to recover value over a shorter time horizon.  

Staff 

During the year our staff have shown great loyalty and commitment in meeting tight customer deadlines. Their ability to achieve a quick turnaround on the contract with Boston Power was one of the critical success factors on that project. I would like to take this opportunity to thank everyone at the Company for their continuing support.

Gilbert Chalk

Chairman                                                                                                                   22 December 2008

GROUP PROFIT AND LOSS ACCOUNT

Year ended 30 September 2008

				2008 £	2007 £
Continuing Operations
REVENUE				2,004,519	1,541,862
Cost of sales				(1,096,538)	(830,327)
Gross profit				907,981	711,535
Administrative expenses				(1,360,318)	(1,521,716)
OPERATING LOSS				(452,337)	(810,181)
Finance income				75,068	31,191
Finance costs				-	(45,236)
LOSS BEFORE TAXATION				(377,269)	(824,226)
Taxation				46,333	62,831
LOSS FOR THE YEAR FROM CONTINUING OPERATIONS				(330,936)	(761,395)

EARNINGS PER SHARE				2008 £	2007 £
Loss for the year				330,936	761,395
Weighted average number of ordinary shares in issue				55,620,038	40,865,928
Basic and diluted loss per share				0.6	1.9

IAS33 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.    

CONSOLIDATED BALANCE SHEET

30 September 2008

					2008 £	2007 £
NON-CURRENT ASSETS
Property, plant and equipment					140,149	110,651
Other intangible assets					-	-
					140,149	110,651
CURRENT ASSETS
Inventories					154,027	289,180
Trade and other receivables					199,738	460,984
Cash and cash equivalents					1,534,504	1,531,269
					1,888,269	2,281,433
TOTAL ASSETS					2,028,418	2,392,084
CURRENT LIABILITIES
Trade and other payables					381,624	485,810
Warranty provision					35,895	28,967
					417,519	514,777
NET ASSETS					1,610,899	1,877,307
EQUITY
Share capital					556,981	549,481
Share premium account					7,305,407	7,252,907
Retained earnings					(6,251,489)	(5,925,081)
TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS					1,610,899	1,877,307

STATEMENT OF CHANGES IN EQUITY

Year ended 30 September 2008

GROUP			Share Capital £	Share Premium £	Retained Earnings £	Total £
As at 1 October 2006			349,481	4,671,249	(5,163,686)	(142,956)
Share issue			200,000	2,581,658	-	2,781,658
Loss attributable to members of the group			-	-	(761,395)	(761,395)
As at 30 September 2007			549,481	7,252,907	(5,925,081)	1,877,307
Share issue			7,500	52,500	-	60,000
Loss attributable to members of the group			-	-	(330,936)	(330,936)
Share based transactions			-	-	4,528	4,528
As at 30 September 2008			556,981	7,305,407	(6,251,489)	1,610,899

  CONSOLIDATED CASH FLOW STATEMENT

Year ended 30 September 2008

	Note				2008 £	2007 £
Cash flows from operating activities
Operating loss					(452,337)	(810,181)
Adjustments for:
Depreciation					77,448	56,581
Amounts written off intangible fixed assets					-	16,231
Loss/(Profit) on sale of property, plant and equipment					128	(104)
Transfer of stock to fixed assets					(81,393)	-
Decrease/(Increase) in inventories					135,153	(123,094)
Decrease/(Increase) in trade and other receivables					241,500	(47,983)
Decrease in trade and other payables					(97,258)	(249,932)
Share based payment charge used in operating activities					4,528	-
Net cash used in operating activities					(172,231)	(1,158,482)
Interest paid					-	(45,236)
Corporation tax recovered					66,079	34,035
Net cash outflow from operating activities					(106,152)	(1,169,683)
Cash flows from investing activities
Interest received					75,068	31,191
Purchase of property, plant and equipment					(25,681)	(76,692)
Proceeds on disposal of property, plant and equipment					-	749
Net cash from/(used in) investing activities					49,387	(44,752)
Cash flow from financing activities
Issue of ordinary share capital					60,000	2,781,658
Other loans advanced					-	400,000
Other loans repaid					-	(600,000)
Net cash from financing activities					60,000	2,581,658
Net Increase in cash and cash equivalents					3,235	1,367,223
Cash and cash equivalents at beginning of year					1,531,269	164,046
Cash and cash equivalents at end of year					1,534,504	1,531,269

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 2008 and 30 September 2007 but is derived from those accounts. Statutory accounts for 2007 have been delivered to the Registrar of Companies, and those for 2008 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 237(2) or (3) of the Companies Act 1985.      

The AIM Rules require that the financial statements of the Group for the year ending 30 September 2008 be prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. Therefore, these consolidated financial statements for the year to 30 September 2008 are prepared using accounting policies in accordance with IFRS and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations. The conversion to IFRS involved no significant impact on the income statement, balance sheet and cash flow of the Group nor on the Group’s existing accounting policies as set out in the Annual Report and Accounts for the year ended 30 September 2007 which were prepared in accordance with UK accounting standards (UK GAAP). 

 

2        IFRS 2 Share Based Payments

Operating expenses includes a charge of £4,528 (2007: £nil) 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 2008 will be posted to shareholders in February 2009 and will also be available thereafter at the registered office, Pera Innovation Park, Nottingham Road, Melton Mowbray, Leicestershire, LE13 0PB.

 

4         Annual General Meeting

The Annual General Meeting will be held at 11am on Thursday 19^th March 2009, at the offices of Seymour Pierce, 20 Old Bailey, London, EC4M 7EN.

 

END

 

 

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