TIDMIGE
RNS Number : 7505U
Image Scan Holdings PLC
07 December 2021
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.
7 December 2021
Image Scan Holdings plc
("Image Scan", the "Company" or the "Group")
PRELIMINARY RESULTS FOR THE YEARED 30 SEPTEMBER 20 21
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 2021.
HIGHLIGHTS
-- Order intake increased to GBP2.8m (2020: GBP2.4m)
-- Sales of GBP2.9m following subdued first half (2020: GBP3.5m).
-- Tight control of overheads, reduced by 18% to GBP1.3m (2020: GBP1.6m)
-- Pre-tax trading profit of GBP189k (2020: GBP112k)
-- Strong year-end cash balance of GBP1.2m (2020: GBP1.4m)
-- Large portable X-ray order for an Asian government
-- First orders for new cabinet X-ray systems
-- First orders for government customers in the USA and Canada
-- Chairman announces role change as part of succession plan
Bill Mawer, Chairman and Chief Executive of Image Scan
commented: " It is gratifying to be able to report that a second
profitable year has been delivered, despite the continuing Impact
of the COVID-19 pandemic on our customers, our supply chains and
our staff. Important "firsts" in the year included: first sales of
the AXIS-CXi cabinet X-ray machine, first portable X-ray sales in
North America and key new customers in the UK. The product
development programme continues to move forward, and I look forward
to launching more new products in FY22.
As part of the Board's succession plan, I will relinquish the
CEO role in January and we will appoint Vincent Deery, currently
Sales Director, as Interim CEO. Vince and I have worked closely on
the development of the organic growth plan for the business, and I
have every confidence in his ability to play a larger part in
implementing that plan. I will continue to drive strategy and
product development, allowing Vince to focus on sales and
operations. All the board remain optimistic for the future of Image
Scan."
--
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 Tel: +44 (0) 1509 817
William Mawer, Chairman and Chief Executive Officer 400
Sarah Atwell King, Finance Director and Company ir@ish.co.uk
Secretary
-------------------------
W H Ireland - Nominated Adviser and Broker Tel: +44 (0)20 7220 1666
Mike Coe/Sarah Mather (Corporate Finance)
-------------------------
About Image Scan Holdings plc
The core activity of the Group is the manufacture of portable
X-ray systems for security and counter terrorism applications. The
Group recently launched a cabinet X-ray machine and is replacing
its Axis range of checkpoint X-ray systems with new machines
developed with a partner. All these products are taken to market
across the world through a strong network of international
partners.
In addition, over the last fourteen years, Image Scan has
developed and manufactured industrial X-ray inspection systems, the
MDXi range. The primary market for these systems is in automotive
emissions control where they are used for quality control
inspection of catalytic converters and diesel particulate
filters.
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
I am pleased to announce that the Group has been profitable for
the second year in succession. Whereas COVID-19 only impacted the
second half of last year, in FY2021 the pandemic has been a
constant presence for the full year, impacting us across the full
range of our activities. Our sales teams have been unable to carry
out face to face customer demonstrations, trade shows have been
cancelled, supply chains have been disrupted and customer spending
has been diverted. It is a testimony to the resilience of the Image
Scan team that, despite this adverse environment, the value of
orders won has increased, new products have found their first
customers, important new markets have been opened, and the research
and development ("R&D") programme has pushed ahead.
FINANCIAL RESULTS
After a slow start, order intake improved as the year progressed
and included a 30-unit order for portable systems for an Asian
customer. The order came through one of several reliable partners
in the region who supply our systems to a variety of Government
agencies in their territories. Order intake was up in the year by
16% to GBP2.8m (2020: GBP2.4m). Sales followed a similar pattern,
with second half sales over double those seen in the first half.
Total sales for the full year were GBP2.9m (2020: GBP3.5m). Despite
the impact of the pandemic on overseas travel, service revenue
remained constant. Strong margins on portable X-ray sales pushed
overall margins to 53% (2020: 49%).
Overheads for the year declined by 18% to GBP1.3m (2020:
GBP1.6m). Contributors to this decline included reduced travel and
trade shows, selective use of the Government furlough scheme in
quiet periods, lower R&D spend and with qualifying costs being
capitalised under IAS38. The R&D spend reduction was due to
less money being spent on prototypes and lower software spend, as
engineer time was allocated to externally funded development
projects.
The combination of strong margins and lower overheads led to the
Group recording a pre-tax trading profit for the year of GBP189k
(2020: GBP112k). Much of the product development effort to the
Group is now focussed on development of new product ranges, such as
cabinet and conveyor X-ray systems which are expected to generate
new revenue streams for the business. The Group is therefore in a
position to apply the policy of capitalising its new product
development spend under IAS38 Intangible Assets. Costs of GBP96k
(2020: GBPnil) have been capitalised resulting in the reportable
pre-tax profit for the year of GBP189k.
The balance sheet strengthened as a result of the financial
performance of the business and cash balances remained strong but
fell in the year to GBP1.2m (2020: GBP1.4m). This was due to
changes in working capital mix, because the commercial terms for
two contracts to government bodies and the continuing reduction in
stock balances, together with the early repayment of the Bounce
Back Loan.
The Group finished the year with an order book of GBP516k (2020:
GBP633k) which has the potential to be fulfilled in the first
quarter.
BUSINESS REVIEW
The business started the year with a relatively weak order book,
which impacted first half performance, and the continuing effect of
COVID-19 could be seen in delays to government procurement
programmes. Although order intake improved as the year progressed,
the number of portable X-ray units sold declined by 20% compared to
the prior year.
The sales process continued to be impacted by the lack of
security technology trade exhibitions and the inability to travel
abroad to carry out live customer demonstrations. These challenges
were partially overcome by working closely with our international
distributers, improved on-line marketing, and the development of a
new demonstration facility, fully equipped for on-line
demonstrations, at the Group's site near Loughborough. Some
important new customers were acquired, including regional and
national bomb squads in Australia, the UK, Canada, and the USA.
Since the year end, an additional order has been received from a
federal agency in the USA, further vindication of our recruitment
of an ex-US Marine Corps bomb technician to take our products to
that market.
The customer service team has also been subjected to travel
restrictions that are only now starting to be released. With over
50 heavily used industrial screening systems deployed from Mexico
to Macedonia and from South Africa to Shanghai, the team has had to
find inventive solutions to carry out system installation,
training, routine maintenance, and repair. The fact that all our
customer support contracts have been renewed through this period is
testimony to the combination of remote diagnostics, on-line
training, and new service partners put in place by the team.
Throughout the period, global supply chains have been impacted
by a variety of factors and, over the past year we have had to deal
with shortages in items as varied as microprocessors and packaging
materials. So far, these risks have been mitigated successfully,
though it may, in future, be necessary to hold strategic stock of
key components.
A suite of new measurement techniques has been developed for our
MDXi industrial inspection systems and delivered to the customer.
Employment of part of our software team on this project has had
some impact on internally funded product development but that
impact is now being recovered. It is hoped these new techniques
will lead to wider adoption of our industrial inspection
systems.
The new product development programme continued to make good
progress and launches of both portable and conveyor X-ray systems
are anticipated for early in FY 2022.
ADAPTING THE OPERATION OF THE BUSINESS
In common with other manufacturing companies, Image Scan has had
to adapt its operations in the light of the ongoing threat posed by
the COVID-19 pandemic. The end of FY2021 coincided with the gradual
opening of international travel, but infection levels in the UK
remain high. The rate of serious illness has been eased by high
vaccination take up in the UK. Since the year end, the situation
has again started to become more serious and the Board continues to
monitor it carefully.
The Group has invested in its facility to increase safety
through improving ventilation, the provision of screens between
workspaces, and development of clear protocols for visitors.
It has started to implement a flexible working regime for some
categories of staff, combining working from home with a specified
minimum number of days in the facility. We look to regain the
benefits of face-to-face interaction within teams, while keeping
control on the total number of staff in the building. We will
remain flexible and will carefully monitor future developments.
OUR STRATEGY
The Group's short-term strategy continues to be to pursue
organic growth through expansion of the product range, selling
these products in a wider range of market segments, and filling in
gaps in its geographic reach. The Group seeks to develop profitable
niche security segments for which it can create or source highly
differentiated products that it can take to market at good
margins.
Where it is not cost-effective to entirely develop a product
ourselves, we will look to form partnerships with other companies
in one of two models: collaborations, within which technology
resources of multiple companies are combined to create new
products; and factoring, where we will use our extensive partner
network to sell carefully selected third party products to our
customers. This allows us to further expand the product range and
increase sales and service revenues while keeping our own R&D
investment at affordable levels.
The Group's core security segment is the "bomb squad" market to
whom it sells its portable X-ray systems. We will continue to
invest in this sector, broadening and strengthening our offer to
customers. The new cabinet and conveyor X-ray systems create new
opportunities in building security, mail screening, prisons and
sports stadia. X-ray systems and will increase recurring service
and support revenue as new systems are deployed.
In industrial screening, we will look for customer investment to
enhance the MDXi product range and we have recently delivered a
suite of sophisticated new measurement methods for inspection of
catalytic converters. We will continue to look for new customers in
this sector, while selectively investigating opportunities for our
unique inspection and measurement technologies in the broader
industrial X-ray market.
The Board's longer-term ambition to increase the critical mass
of the business through carefully selected acquisitions remains.
However, we recognise that the opportunities will be limited by the
current low share price and market capitalisation.
THE OUTLOOK FOR IMAGE SCAN
The impact of the COVID-19 pandemic has been felt throughout the
financial year and infection rates in the UK and elsewhere remain
high. Only now are security technology trade shows and travel for
customer demonstrations, two important parts of our product sales
process, starting to resume. Servicing of industrial X-ray
machines, an important source of recurring revenue, has also been
impacted and the team have done an exceptional job to retain this
revenue and keep our customers happy. The Board expect it will be
at least a further six months before travel-based activities such
as these, return to something like pre-pandemic levels.
The year has continued to see delays in the larger Government
procurements of portable X-ray systems. However, a number of these
programmes are now underway, and we are participating in the early
phases of several Government competitions. The on-going investment
in our portable X-ray products and the software which supports them
should make us strong contenders in these programmes. The portable
X-ray market is increasingly competitive, with several new players
emerging in recent years, and this drives both our continued
evolution of our ThreatScan systems and our diversification into
other X-ray screening systems and markets. We expect the ongoing
revenue from routine portable X-ray purchases to be steady, with
year-to-year growth dependant on the larger system procurements.
The Group's success in winning its first portable X-ray contracts
in the US and Canada, starts to build a customer base in these
important markets, both increasing our visibility and giving us a
platform for further growth.
The Group has won its first customers for the AXIS-CXi cabinet
X-ray system and will launch the first versions of the new AXIS
conveyor X-ray range early in FY2022. Revenue contribution from
these systems will increase over the next few years. Our
manufacturing partner for conveyor X-ray has made a wide range or
screening systems available to us and we will selectively add these
to our portfolio. A key benefit of achieving installations for
cabinet and conveyor systems is the legal requirement for regular
servicing that will, over time, increase our recurring after-market
revenues.
Although the automotive sector has been heavily impacted by the
pandemic, the Group has continued to receive orders for new
industrial inspection systems in FY2021, with demand more robust
than anticipated. We expect tighter emissions control legislation
to continue to drive demand for installations in India and China
and there may be opportunities to replace some older systems. The
successful development of a new suite of measurement techniques
creates opportunities for further deployment with existing
customers and gives us stronger arguments for adoption of X-ray
screening by other catalytic converter manufacturers. We recognise
that with use of petrol and diesel engines set to decline, we need
to find alternative outlets for our industrial inspection
technology, and this will be a focus over the medium term.
Global supply chains are currently suffering considerable
disruption caused by the combination of COVID-19, manufacturing
capacity limitations, sea freight shortages and, in the case of the
UK, BREXIT. Image Scan is not immune from these global issues and
continued diligence will be required if potential increases to
product costs and customer lead times are to be avoided.
As anticipated, the past year has been challenging, and some of
those challenges continue to impact our activities. However, we
enter the new financial year with a strong cash balance, a rapidly
expanding product range and important new customers. These are
reasons for us to be optimistic for our ability to achieve organic
growth in revenues and profits as market activity starts to return
to more normal levels.
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, the greater scale providing both protection from
market shocks and stronger amortisation of the relatively high
fixed costs associated with a stock market listing.
SUCCESSION PLANNING
It is announced that, as the first phase of Image Scan's
succession plan, from 1 January 2022, William Mawer, currently
Chairman and Chief Executive of Image Scan, will relinquish the
role of Chief Executive and take up a position as Executive
Chairman. He will continue to take responsibility for strategy,
investor relations and product development.
At the same time, Vincent Deery, currently Sales Director, will
take up a position as Interim CEO, adding operations and related
matters to his current responsibilities for sales and service.
Sarah Atwell King will continue as Finance Director and Company
Secretary, while leading on corporate governance, risk management
and process improvement. Tim Jackson and Dr Richard Leaver will
remain in place as Non-Executive Directors.
Over the next 6 months, the Board will support Vince in the
Interim CEO role, whilst assessing the optimal leadership structure
to drive the Group forwards and may announce further changes at the
end of that period.
STAFF
Our staff have worked exceptionally hard to maintain the
performance of the business through this difficult period and the
Board is grateful for their efforts.
William Mawer
CHAIRMAN
7 December 2021
IMAGE SCAN HOLDINGS PLC
As at 30 September 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note 2021 2020
GBP GBP
REVENUE 2,873,595 3,484,410
Cost of sales (1,359,309) (1,760,242)
Gross profit 1,514,286 1,724,168
Administrative expenses (1,325,565) (1,612,366)
OPERATING PROFIT 188,721 111,802
Finance income 103 993
PROFIT BEFORE TAXATION 188,824 112,795
Taxation 51,072 25,160
PROFIT AND TOTAL COMPREHENSIVE
INCOME FOR THE YEAR FROM CONTINUING
OPERATIONS ATTRIBUTABLE TO
THE EQUITY OWNERS OF THE PARENT
COMPANY 239,896 137,955
Pence Pence
Earnings per share
Basic 3 0.18 0.10
Diluted 3 0.17 0.10
IMAGE SCAN HOLDINGS PLC
As at 30 September 2021
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note 2021 2020
GBP GBP
NON-CURRENT ASSETS
Intangible assets 109,590 17,839
Property, plant and equipment 17,795 7,197
Right of use asset 232,428 39,664
359,813 64,700
CURRENT ASSETS
Inventories 393,074 450,574
Trade and other receivables 740,849 314,525
Cash and cash equivalents 1,186,423 1,409,494
2,320,346 2,174,593
TOTAL ASSETS 2,680,159 2,239,293
CURRENT LIABILITIES
Trade and other payables 752,280 707,630
Lease liability 37,625 38,522
Warranty provision 45,640 33,750
Bank loan - 3,147
835,545 783,049
NON-CURRENT LIABILITIES
Bank loan - 46,853
Lease liability 195,327 -
195,327 46,853
NET ASSETS 1,649,287 1,409,391
EQUITY
Share capital 1,363,546 1,363,546
Share premium account 8,327,910 8,327,910
Profit and loss account (8,042,169) (8,282,065)
TOTAL EQUITY ATTRIBUTABLE
TO SHAREHOLDERS 1,649,287 1,409,391
IMAGE SCAN HOLDINGS PLC
As at 30 September 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED Share capital Share premium Profit Total
GBP GBP and loss GBP
account
GBP
As at 1 October 2019 1,363,546 8,327,910 (8,423,897) 1,267,559
Profit for the year and total
comprehensive income for
the year - - 137,955 137,955
Transactions with owners:
Share-based transactions - - 3,877 3,877
As at 30 September 2020 1,363,546 8,327,910 (8,282,065) 1,409,391
Profit for the year and total
comprehensive income for
the year - - 239,896 239,896
Transactions with owners:
Share-based transactions - - - -
As at 30 September 2021 1,363,546 8,327,910 (8,042,169) 1,649,287
IMAGE SCAN HOLDINGS PLC
As at 30 September 2021
CONSOLIDATED CASH FLOW STATEMENT
Note 2021 2020
GBP GBP
Cash flows from operating activities
Operating profit 188,721 111,802
Adjustments for:
Depreciation 7,689 9,414
Amortisation of intangible assets 19,432 12,049
Amortisation of right of use asset 43,487 39,269
Impairment of inventories 99 (58,960)
Decrease in inventories 57,401 391,475
(Decrease)/increase in trade and other receivables (426,324) 349,434
Increase/(decrease) in trade and
other payables 44,650 (140,407)
Increase in warranty provisions 11,890 17,750
Share-based payments - 3,877
Lease interest 4,142 2,253
Cash (used in)/generated from operating
activities (48,813) 737,956
Corporation tax received 51,072 32,310
Net cash flows (used in)/generated
from operating activities 2,259 770,266
Cash flows from investing activities
Interest received 103 993
Purchase of intangibles (111,183) (4,555)
Purchase of property, plant and equipment (18,287) (5,035)
Net cash used in investing activities (129,367) (8,597)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of bank loan - 50,000
Repayment of bank loan (50,000) -
Lease payment (45,963) (42,664)
Net cash (used in)/generated from
financing activities (95,963) 7,336
Net (DECREASE)/INCREASE in cash and cash equivalents (223,071) 769,005
Cash and cash equivalents at beginning
of year 1,409,494 640,489
Cash and cash equivalents at end
of year 1,186,423 1,409,494
Notes to the preliminary statement
1. Basis of preparation
While the financial information included in this annual
financial results announcement has been prepared in accordance with
the recognition and measurement principles of International
Accounting Standards in conformity of the requirements of the
Companies Act 2006, this announcement does not contain sufficient
information to comply therewith.
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 30 September 2021 or
30 September 2020 but is derived from those accounts. Statutory
accounts for 2020 have been delivered to the Registrar of
Companies, and those for 2021 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 charge of GBPnil (2020: GBP3,877)
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.
2021 2020
GBP GBP
Profit for the year 239,896 137,955
Weighted average number of ordinary
shares in issue 136,354,577 136,354,577
Number of diluted shares 137,868,758 136,463,866
Basic profit per share 0.18p 0.10p
Diluted profit per share 0.17p 0.10p
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