TIDMIGE
RNS Number : 4079V
Image Scan Holdings PLC
03 December 2019
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014. Upon the publication of this
announcement, this inside information is now considered to be in
the public domain.
PRELIMINARY RESULTS FOR THE YEARED 30 SEPTEMBER 2019
Image Scan (AIM: IGE), the specialist supplier of X-ray
screening systems to the security and industrial inspection
markets, today announces preliminary results for the year ended 30
September 2019.
HIGHLIGHTS
-- Strong order bookings of GBP3.9m (2018: GBP2.8m)
-- Gross margin increased to 54% (2018: 47%)
-- Operating loss before tax GBP403k (2018: operating profit of GBP48k)
-- Period-end orderbook more than tripled to GBP1.7m (2018: GBP465k)
-- Year-end cash balance of GBP640k (2018: GBP782k) and high level of stock
-- Significant portable X-ray order from a European customer
-- New security screening system in development
-- New international sales partners appointed
Bill Mawer, Chairman and Chief Executive of Image Scan,
commented: "It is disappointing to be reporting a decline in sales
and profits. However, while the portable X-ray market has
undoubtably become more competitive, recent orders show that our
strong product range and focused international sales activity can
still deliver. I am pleased to report that we start the new
financial year with an order book that includes more portable
systems than were delivered in all of last year.
In FY 2020 we will continue our focus on expanding the security
product range and filling gaps in our international partner network
as we look to drive organic growth in our key markets. We will also
seek out larger security screening projects that build on our
capability and expertise. The industrial screening market continues
to present opportunities for growth as emissions control
legislation tightens in key markets and we look for new customers
for our sophisticated X-ray systems.
The company has started the new year strongly and we expect to
see a material improvement in our performance in the year."
--
Image Scan Holdings plc Tel: +44 (0) 1509 817400
William Mawer, Chairman
Sarah Atwell-King, Company Secretary
Cantor Fitzgerald Europe Tel: +44 (0) 207 894 7000
Rick Thompson / William Goode (Corporate Finance)
Caspar Shand Kydd (Sales)
Person responsible: The person responsible for arranging the
release of this announcement on behalf of Image Scan is William
Mawer.
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 ThreatScan(R) range
of portable bomb and suspect package detection systems; the Axis
range of baggage inspection 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 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
CHAIRMANS STATEMENT
OVERVIEW
The results for the Image Scan Group for the year ending 30
September 2019 reflect the low order book with which the Group
started the year and a long period where order intake continued at
a relatively subdued level. Orders were impacted by delays or
cancellations to procurement programmes by key international
customers. Additionally, sales of industrial systems returned to a
more normal level after the record high of the previous year.
However, the final quarter saw a turnaround in order intake, with
some significant portable X-ray contracts being received, and the
Group finished the period with a strong order book.
FINANCIAL RESULTS
Following an intensive effort by the sales team, total order
booking in the year was up 39% at GBP3.9m (2018: GBP2.8m).
Sales reduced to GBP2.4m (2018: GBP3.5m) impacted by delays in
Government orders and a fall in sales to the Indian subcontinent
where, for the second year, budgets have been tight. This region
did, however, see a number of deployments of industrial units.
Margins strengthened to 54% (2018: 47%) partly driven by new
service contracts on the exceptionally high number of industrial
units deployed in FY 2018.
Overheads rose slightly to GBP1.68m (2018: GBP1.60m) largely due
to small, planned increases in research & development and
marketing spend. The pre-tax trading loss for the year was GBP403k
(2018: operating profit of GBP48k).
The financial position of the Group remained strong with net
assets of GBP1.27m (2018: GBP1.63m) at the year end which includes
a cash balance of GBP640k (2018: GBP782k). The Group has been able
to meet its working capital requirements for the year under review.
The period ended with an orderbook of GBP1.7m (2018: GBP465k), most
of which should be delivered in the first half of FY 2020.
The Group currently holds high levels of stock, particularly
part-complete portable X-ray systems. With most of this stock
allocated to the recently received orders, the stock level is
expected to decline over the next few months. A stock control
policy, constantly reviewed by management, strikes a balance
between control of working capital and the need to offer short
delivery times to customers.
BUSINESS REVIEW
The business started the year with only a small order book and
much of this was delivered in the first quarter. Some significant
orders that had been expected during the year were delayed, in some
cases until late in the final quarter, leaving the business with an
overall reduction in sales but a strong year end order book.
Throughout the year the business worked very closely with a key
partner in a European country on a large portable X-ray project.
The customer's procurement process involved extensive trials and
evaluations over a long period and, as might be expected for such a
significant project, attracted a large field of portable X-ray
competitors. The contract, worth over GBP800k was eventually
received only in the final month of the year, too late for sales to
be delivered in the reporting period. An additional significant
contract won close to the year end, this time from an Asian
customer, further added to the order book. The Group aims to
deliver both of these orders in the first half of FY 2020.
An intensive marketing effort saw the Group undertake
demonstrations and trials across the globe and especially in in
Europe, South America, Asia and the Middle East. New partners were
taken on in a number of important territories and opportunities
were identified in new markets.
The research and development team continued to develop upgrades
to the range of portable X-ray systems, including new digital
communications technology and an "Image Stitching" feature which
allows a series of images taken of a large object to be combined
into a single high-resolution picture of the threat. Additionally,
the team produced an engineering development model for a completely
new X-ray system using the core "Linescan" detector technology for
a new application, quite separate from portable X-ray. Following
extensive engineering evaluation, a full prototype is now in
development and the product should be released in FY 2020.
A new measurement technique has been developed for the MDXi
range of industrial X-ray systems and is currently being marketed
to our key customers with a view to deploying the algorithms into
our large installed base of systems during FY 2020. Deliveries of
industrial systems were down from the record seen in FY 2018 but
the order book is again building in this area. The number of
support contracts increased as the systems deployed in FY 2018 came
into service and this work provides valuable, and growing,
sustainable income, with the support team regularly visiting our
key customers' international manufacturing sites and carrying out
preventative maintenance.
OPERATIONAL IMPROVEMENTS
The Group continued to upgrade and improve its internal
processes during the period, in line with its ISO 9001:2015
compliant quality system. The Continuous Improvement process drove
on-time delivery and quality performance. An extensive review of
the supply chain was carried out with potential improvements in
cost and quality identified and implemented. A UK based supplier
for a large machined component, hitherto sourced from Belgium, was
identified and vetted, reducing the scope for post Brexit
disruption of supply for this important item. Other initiatives
focussed on cross functional teamwork within the business and
improvements to the working environment within the Group's factory
units near Loughborough.
OUR STRATEGY
The core strategy continues to be to build the Group through a
combination of organic and acquisition growth. However, the Board
recognizes that the opportunities for acquisition will be limited
by the current low share price and market capitalisation. For these
reasons the short-term strategy is focussed on organic growth, with
the immediate target of returning sales and profits to the 2017
level, while laying the foundations for further growth beyond
this.
The key elements of this organic growth strategy are the further
enhancement of the portable X-ray range in order to strengthen the
position in this highly competitive market; the development of new
products based on the Group's core technologies and the further
expansion of the product range through partnering with other
security technology companies. We will continue to look for new and
stronger sales partners in the more attractive regional markets and
will seek out additional users for our portable X-ray systems
beyond the conventional "bomb squad" market.
The Group will look to further strengthen the industrial product
range and increase its deployment into the international
manufacturing operations of current customers, while looking to add
new customers in this important sector. We will continue to develop
the product line and recently added important new analysis
techniques which we hope to deploy during FY 2020.
The Board's longer-term ambition to increase the critical mass
of the business through carefully selected acquisitions
remains.
OUTLOOK
The substantial portable X-ray orders won towards the end of the
period demonstrate that our product technology and our sales team
and our strong network of international partners, can continue to
create and win opportunities in the security marketplace. However,
some countries, including the UK, have decreased their assessment
of the security threat level, which might be expected to lead to
softness of budgets for security equipment. Additionally, portable
X-ray is a small, niche market, within which many governments have
sufficient equipment to meet their short-term needs and face an
increasing choice of suppliers when they do run procurement
programmes in this category. In response to this, the Group is
planning upgrades to its portable X-ray systems and is focussing
attention on less highly penetrated markets such as those in South
America and Eastern Europe. The strength of our partner network
should allow us rapidly to get new products into the market as they
become available.
While sales of industrial systems returned to a more normal
level in FY 2019, we continue to see opportunity in the market for
inspecting automotive catalytic converters and diesel particulate
filters. Our key customers are building capacity in a number of
territories, not least China and India, and we are seeing new
orders for systems to be deployed in these markets.
In the longer term, the Board continues to believe that a blend
of organic and acquisition growth is the best way to deliver
shareholder value, as the greater scale will provide both
protection from market shocks and stronger amortisation of the
relatively high fixed costs associated with a stock market
listing.
STAFF
The Board values greatly the considerable efforts made by our
staff and, on behalf of the Directors, I would like to take this
opportunity to personally thank staff and shareholders for their
continued commitment to Image Scan.
William Mawer
CHAIRMAN
3 December 2019
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note As restated
2019 2018
GBP GBP
REVENUE 2,365,202 3,464,910
Cost of sales (1,086,595) (1,819,617)
Gross profit 1,278,607 1,645,293
Operating expenses (1,272,779) (1,213,842)
Research and development
expenses (408,531) (383,187)
Total administrative expenses (1,681,310) (1,597,029)
OPERATING (LOSS)/ PROFIT
BEFORE EXCEPTIONAL COSTS (402,703) 48,264
Exceptional costs - (250,458)
OPERATING LOSS (402,703) (202,194)
Finance income 892 344
LOSS BEFORE TAXATION (401,811) (201,850)
Taxation 33,939 (17,839)
LOSS AND TOTAL COMPREHENSIVE
INCOME FOR THE YEAR FROM
CONTINUING OPERATIONS ATTRIBUTABLE
TO THE EQUITY OWNERS OF THE
PARENT COMPANY (367,872) (219,689)
Pence Pence
Earnings per share 3
Basic (0.27) (0.16)
Diluted (0.27) (0.16)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As restated
2019 2018
GBP GBP
NON-CURRENT ASSETS
Intangible Assets 25,334 18,877
Property, plant and equipment 11,575 15,067
Deferred Tax Asset 7,150 37,344
44,059 71,288
CURRENT ASSETS
Inventories 783,089 938,639
Trade and other receivables 663,959 783,470
Cash and cash equivalents 640,489 781,635
2,087,537 2,503,744
TOTAL ASSETS 2,131,596 2,575,032
CURRENT LIABILITIES
Trade and other payables 848,037 909,966
Warranty provision 16,000 34,999
864,037 944,965
NET ASSETS 1,267,559 1,630,067
EQUITY
Share capital 1,363,546 1,363,546
Share premium account 8,327,910 8,327,910
Retained earnings (8,423,897) (8,061,389)
TOTAL EQUITY ATTRIBUTABLE
TO SHAREHOLDERS 1,267,559 1,630,067
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED Share capital Share premium Retained
GBP GBP earnings Total
GBP GBP
As at 1 October 2017 1,357,046 8,317,410 (7,853,357) 1,821,099
Loss for the year and total
comprehensive income/(expenditure)
for the year - - (219,689) (219,689)
Transactions with owners:
Shares issued during the
year 6,500 10,500 - 17,000
Share issue Costs - - -
Share-based transactions - - 11,657 11,657
As at 30 September 2018 1,363,546 8,327,910 (8,061,389) 1,630,067
Loss for the year and total
comprehensive income/(expenditure)
for the year - - (367,872) (367,872)
Transactions with owners:
Shares issued during the - - - -
year
Share issue Costs - - - -
Share-based transactions - - 5,364 5,364
As at 30 September 2019 1,363,546 8,327,910 (8,423,897) 1,267,559
CONSOLIDATED CASH FLOW STATEMENT
As restated
2019 2018
GBP GBP
Cash flows from operating activities
Operating profit before research
and development expenditure and exceptional
costs 5,828 431,451
Research and development expenditure (408,531) (383,187)
Exceptional costs - (250,458)
Operating loss (402,703) (202,194)
Adjustments for:
Depreciation 13,482 14,763
Amortisation of intangible assets 10,458 1,081
Impairment of inventories 13,297 43,602
Decrease in inventories 142,253 112,638
Decrease in trade and other receivables 119,511 774,208
Decrease in trade and other payables (61,929) (1,256,282)
Decrease in warranty provisions (18,999) (12,978)
Share-based payments 5,364 11,657
Cash generated used in operating
activities (179,266) (513,505)
Corporation tax 64,133 47,628
Net cash flows used in operating
activities (115,133) (465,877)
Cash flows from investing activities
Interest received 892 344
Purchase of intangibles (16,915) (19,958)
Purchase of property, plant and
equipment (9,990) (2,988)
Net cash used in investing activities (26,013) (22,602)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share
capital - 17,000
Financial costs of fundraising - -
Net cash generated from financing
activities - 17,000
Net DECREASE in cash and cash equivalents (141,146) (471,479)
Cash and cash equivalents at beginning
of year 781,635 1,253,114
Cash and cash equivalents at end
of year 640,489 781,635
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 2019
and 30 September 2018 but is derived from those accounts. Statutory
accounts for 2018 have been delivered to the Registrar of
Companies, and those for 2019 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.
Restatement of comparative period results
The directors have reassessed the classification of the R&D
tax credit in the statement of comprehensive income and decided to
present this within taxation expense for the year ended 30
September 2019 rather than other operating income. The comparative
period has been restated to be consistent and GBP47,628 previously
reported as other operating income has been reclassified and
included in taxation expense. This reclassification has also
resulted in a restatement of the operating profit before research
and development expenditure and exceptional costs and the corporate
tax receipt in the cash flow statement.
In addition the directors have reassessed the classification of
software and licensing and reclassified the presentation of this
from property plant and equipment to intangible assets for the year
ended 30 September 2019. The comparative period figures have been
restated to be consistent resulting in GBP19,958 being reclassified
from property, plant and equipment to intangible assets for the
year ended 30 September 2019.
The reclassifications explained above have not affected
previously reported profit after tax or earnings per share.
2. IFRS 2 'Share-based payments'
Operating expenses includes a charge of GBP5,364 (2018:
GBP11,657) after valuation of the Group'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. Earnings per share
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. 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. The share options
could potentially dilute basic earnings per share in the future,
but were not included in a calculation of diluted earnings per
share in the current year because they are antidilutive.
2019 2018
GBP GBP
Loss for the year (367,872) (219,689)
Weighted average number of ordinary
shares in issue 136,354,577 135,774,838
Number of diluted shares 141,966,352 141,207,627
Basic loss per share (0.27p) (0.16p)
Diluted loss per share (0.27p) (0.16p)
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END
FR UGGBCPUPBGMP
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December 03, 2019 02:00 ET (07:00 GMT)
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