Image Scan Holdings Regulatory News (IGE)

15 Jan 2007 07:00

Image Scan Holdings PLC15 January 2007 15 JANUARY 2007 IMAGE SCAN HOLDINGS PLC ("Image Scan" or the "Company") PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2006 Image Scan, a world leader in the field of real-time 3D and 2D x-ray imaging forthe 'Homeland Security' and 'Industrial Inspection' markets, announcespreliminary results for the year ended 30 September 2006, which reflectsignificantly increased sales, reduced losses and an overall improvement ingross margin. KEY POINTS •Five fold increase in the year end order book to £1.7m (2005: £326,000); •Sales up 69% to £1,422,000 (2005: £843,000); •Improved gross margin of 50% (2005: 47%); •Loss on ordinary activities after taxation reduced to £470,000 (2005: £692,000); •Total order intake in 2006 of £2.8m; •Growing maintenance and spares contracts represent a new, repeat income stream; •Signed two distribution and a licence agreement within the security sector; •Progress towards profitability continues. Peter Woods, Chairman of Image Scan, commented:"We have made significant advances in the commercialisation of our technologyand the conversion of sales opportunities. At the year end, the order book stoodat £1.7m (2005: £326,000). Future prospects look strong with a substantial salesleads pipeline resulting from new distribution and licence agreements andincreased marketing activity. The Board anticipates another significant increase in annual turnover, andcontinuing progress towards profitability in 2007." Enquiries: Image Scan Holdings plc Tel: +44 (0) 1664 503 600Peter Woods, ChairmanNicholas Fox, CEOinfo@ish.co.uk Bishopsgate Communications Ltd Tel: +44 (0) 207 562 3350Dominic BarrettoJenni Herbertjenni@bishopsgatecommunications.com KBC Peel Hunt Tel: +44 (0) 121 698 8505Nick Maslennick.maslen@kbcpeelhunt.com CHAIRMAN'S STATEMENTIntroduction I am pleased to report on the Preliminary Results for Image Scan for the yearended 30 September 2006, and comment on the Board's view of your Company'sprospects for the following financial year. Image Scan remains focused on the development and commercialisation of marketleading real-time 3D and 2D x-ray solutions for use in the global industrial andsecurity inspection markets. The Company's industrial inspection solutionsinclude the MDXi unit and the X-line systems. The security portfolio includes aunique 3D baggage inspection system for corporate and airport security and TPXi,a portable bomb and suspect package detection system. Financial Results Sales in the year increased by 69% to £1,422,000 (2005: 843,000), continuing thestrong growth experienced in 2005 and with even greater expectations for 2007. The gross margin of 50% (2005: 47%) has improved in the second half of the year,having reported a 45% margin at the time of the Interim Results. Investment inthe distribution network, and customer-funded development work, suppressed thegross profit in the first six months, with the commercial contracts in thesecond half restoring the overall margin. Overheads of £1,220,000 (2005: £1,116,000) reflect the investment made in salesand marketing by the appointment of a sales manager and a sales & marketingdirector, as well as increased marketing activity. There was also increasedinvestment in research and development to consolidate and extend the Company'sproduct base and to identify future potential for our technology withexpenditure at £174,000 (2005: £128,000). These critical investments willquicken the pace of orders through and beyond 2007, building a sound foundationfor profitability growth. Losses for the year were significantly reduced at £470,000 (2005: £692,000),with the losses in the first half of £279,000 comparing to £191,000 in thesecond half. The loss per share was 1.3p (2005: 2.7p). During the year the Company issued £200,000 9% loan stock followed by a further£200,000 since the year end. These loans are repayable by 31 March 2008 and havewarrants to subscribe for 2 million shares at 20p. The Company has also agreed a£100,000 overdraft facility with the Royal Bank of Scotland to cover workingcapital requirements resulting from the increased order book. At 30 September2006 the bank balance was £164,000. Overview Security The Company has received a welcome endorsement from the US Government'sTransport Security Administration ("TSA") which is the regulator and principalpurchasing authority for the USA aviation security sector. A report, that theTSA is soon to release, details the results of their independent trials on theCompany's 3D x-ray baggage inspection system, Axis-3d(R). This report willclearly indicate the significant benefits of using 3D technology when comparedto conventional 2D systems and goes as far as to quantify that the probabilityof threat detection improves by greater than 10% when using 3D technology. Thisstrong endorsement of the Company's 3D technology will enhance the promotion andpotential sales of the Axis-3d(R) systems over the next 12 months. The launch, in November 2005, of the TPXi portable x-ray imaging system, whichis targeted at the inspection of suspect packages, has led to orders in the yearexceeding £0.3m including units supplied to the British Transport Police for theprotection of London's primary mass transport stations. To promote TPXiworldwide the Company has entered into distribution agreements with UK-basedKeTech Defence Ltd (KeTech) and Belgium-based Industrial Control Machines S.A.('ICM'). In April 2006, the Company successfully entered into a five year licenceagreement with Scanlogik LLC for the development, supply and maintenance ofimaging hardware and software for their new range of baggage screening system,the Vertigo range. Industrial Following the installation of two X-Line inspection systems onto JohnsonMatthey's production lines in the US and the UK in the first half of the year,the Company was awarded additional contracts for the supply of second generationMDXi systems for installation at plants in South Africa and in the UK. To support the increasing installed base of X-Line and MDXi systems across theworld, the Company has formed a dedicated group focused on maintenance andafter-sales support. This new group has already been awarded maintenance andspares contracts in excess of £100,000. This represents a new, recurring revenuestream for the Company which will grow significantly in line with our increasinginstalled base. Another major success for the Company was the award of a £1m contract withBritish Nuclear Group for in-line x-ray inspection systems to enhance theircurrent manufacturing inspection capability. This contract was awarded to theCompany following a 12 month international competitive tendering process inwhich the Company was able to demonstrate superior technical advantages over thecompetition. It is believed that this first major contract into the nuclearpower industry will lead to further opportunities for the Company's specialprojects group. Clients Image Scan is a business of its time, providing complete solutions in thetopical areas of 'Homeland Security' and 'Industrial Inspection'. Image Scan'sproducts provide leading edge solutions and products to commercial organisationsand Government Agencies such as regulators and Police Forces. The Company's portfolio of clients over the last year have included world classnames such as Johnson Matthey, British Nuclear Group, British Transport Police,Rapiscan Systems Ltd, Crown Cork & Seal, a Johnson & Johnson company and theTransport Security Administration. Marketing During the period, we invested soundly in the sales and marketing organisationand staffing, appointed three new security trading partners: KeTech, ICM andScanlogik, attended a greater number of trade exhibitions and increased tradepress coverage. The benefit of this investment can be seen in the five foldincrease in the year end order book. Sales to the industrial sector have been managed directly to date, but theCompany intends to shortly appoint a distributor to drive the sales of ourindustrial inspection equipment within the healthcare and automotive markets inmainland Europe. Staff Image Scan's staff have continued to show outstanding commitment to the Companythrough a very demanding and challenging year, for which the Board expresses itsappreciation. The Company has recruited four additional technical staff sincethe year end to provide the essential resources required to meet the salestargets for 2007. Outlook The Company has continued to make good progress with the investment in sales andmarketing resulting in a very positive end to the financial year both in termsof financial results and improved order book. There is now internationalrepresentation for the baggage screening technology through Rapiscan andScanlogik and for the TPXi system through KeTech and ICM. Our ability todirectly market the industrial inspections systems ourselves has beensuccessful, but we intend to strengthen this further with the appointment ofEuropean distributors. At the year end the order book stood at £1.7m (2005: £326,000). In addition, ourlead pipeline is stronger than ever as a result of our distribution and licenceagreements and the increased marketing activity referred to above. The Boardanticipates another significant increase in annual turnover and sound growthtowards profitability in 2007. Peter WoodsChairman 12 January 2007 GROUP PROFIT AND LOSS ACCOUNT NoteYear ended 30 September 2006 2006 2005 £ £ TURNOVER 1,422,272 843,089Cost of sales (705,082) (444,252) ---------- ---------Gross profit 717,190 398,837 Administrative expenses (1,219,813) (1,116,370) ---------- ---------OPERATING LOSS (502,623) (717,533) Interest receivable 4,016 5,580 Interest payable (9,126) (10,446) -------- --------LOSS ON ORDINARY ACTIVITIES BEFORETAXATION (507,733) (722,399) Taxation 37,283 30,289 --------- --------RETAINED LOSS FOR THE FINANCIAL YEAR (470,450) (692,110)Retained reserves brought forward (4,693,236) (4,001,126) ---------- --------Revenue reserves carried forward (5,163,686) (4,693,236) ---------- --------- Pence PenceEarnings per share (i)Basic and diluted loss per share 1.3 2.7 -------- --------- (i) EARNINGS PER SHARE 2006 2005 Pence Pence Loss for the year 470,450 692,110 --------- ---------Weighted average number of ordinary shares in issue 34,888,284 25,931,619 -------- ---------Basic and diluted loss per share 1.3 2.7 -------- -------- FRS14 requires presentation of diluted earnings per share (EPS) when a companycould be called upon to issue shares that would decrease net profit or increasenet 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-moneyoptions. Since it seems inappropriate to assume that option holders would actirrationally and there are no other diluting future share issues, diluted EPSequals basic EPS. CONSOLIDATED BALANCE SHEET30 September 2006 2006 2005 £ £FIXED ASSETSTangible fixed assets 174,198 155,760Intangible fixed assets 16,231 17,913 --------- -------- 190,429 173,673 CURRENT ASSETSStock and work in progress 83,073 94,645Debtors 384,205 341,175Cash at bank and in hand 164,046 153,857 -------- -------- 631,324 589,677 CREDITORS: amounts falling due (742,336) (427,356)within one year -------- --------NET CURRENT ASSETS/(LIABILITIES) (111,012) 162,321 --------- --------TOTAL ASSETS LESS CURRENT LIABILITIES 79,417 335,994 CREDITORS: amounts falling due after morethan one year (200,000) - Provisions for liabilities and charges (22,373) (20,500) -------- -------- (142,956) 315,494 -------- -------CAPITAL AND RESERVESCalled up share capital 349,481 348,681Share premium account 4,671,249 4,660,049Profit and loss account (5,163,686) (4,693,236) --------- ---------EQUITY SHAREHOLDERS' FUNDS (142,956) 315,494 --------- --------- CONSOLIDATED CASH FLOW STATEMENT NoteYear ended 30 September 2006 2006 2005 £ £ Net cash outflow from operatingactivities (ii) (146,278) (738,032) Returns on investments and servicing of financeInterest received 4,016 5,580Interest payable (9,126) (10,446) ------- ------- (5,110) (4,866)TaxationCorporation tax recovered 30,288 20,564 Capital expenditure and financial investmentPurchase of tangible fixed assets (135,904) (70,764)Receipts from sales of tangible fixedassets 72,500 1,796Purchase of intangible fixed assets - - -------- ------- (63,404) (68,968) -------- --------Net cash outflow (184,504) (791,302) -------- --------FinancingIssue of ordinary share capital 12,000 932,495Bank loans repaid (17,307) (37,363)Other loans advanced 200,000 - -------- ------- 194,693 895,132 -------- -------Increase in cash in the year (iii), (iv) 10,189 103,830 -------- ------- ii) RECONCILIATION OF OPERATING CASH FLOWS 2006 2005 £ £ Operating loss (502,623) (717,533)Depreciation 97,478 104,787Amounts written off intangible fixed assets 1,682 1,681Profit on sale of tangible fixed asset (52,512) -Decrease/(increase) in stock 11,572 (50,196)Increase in debtors (excluding corporation taxrecoverable) (36,035) (185,262)Increase in creditors 334,160 108,491 --------- --------Net cash outflow from operating activities (146,278) (738,032) --------- -------- iii) ANALYSIS OF NET FUNDS 2005 2006 Other 2006 £ Cash non-cash £ changes flow £ £ Cash at bank and in hand 153,857 10,189 - 164,046 Debt due within one year (17,307) 17,307 - -Debt due after one year - (200,000) - (200,000) --------- --------- -------- --------- 136,550 (172,504) - (35,954) --------- --------- -------- -------- iv) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET(DEBT)/FUNDS 2006 2005 £ £ Increase in cash in the period 10,189 103,830Cash inflow from increased debt (200,000) -Cash outflow from decrease in debt 17,307 37,363 ------- -------Change in net (debt)/funds resulting from cashflows (172,504) 141,193 Net funds/(debt) at 1 October 136,550 (4,643) ------- -------Net (debt)/funds at 30 September (35,954) 136,550 ------- ------- Notes to the Preliminary Statement 1. The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2006 and 30 September 2005 but is derived from those accounts. Statutory accounts for 2005 have been delivered to the Registrar of Companies, and those for 2006 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 financial information has been prepared in accordance with the accounting policies adopted for the 2005 accounts. 2. It is intended that the financial statements for the year ended 30 September 2006 will be posted to shareholders in February 2007 and will also be available thereafter at the registered office, Pera Innovation Park, Nottingham Road, Melton Mowbray, Leicestershire, LE13 0PB. 3. The Annual General Meeting will be held on 23 March 2007, at the offices of DMH Stallard, Centurion House, 37 Jewry, London, EC3N 2ER. This information is provided by RNS The company news service from the London Stock Exchange