Image Scan Holdings Regulatory News (IGE)

Image Scan Holdings plc

Interim Report 2021

28/04/2021

IMAGE SCAN HOLDINGS PLC

("Image Scan" or the "Company")

(AIM: IGE)

INTERIM RESULTS

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 2021. During the first six months the performance of the Company has continued to be impacted by COVID-19, but there is a sufficiently strong orderbook and pipeline of new business for us to expect a stronger second half.

Financial summary:

· Revenue £868k (2020: £2.3m)

· Gross profit margin improved to 55% (2020: 45%)

· Loss before taxation of £201k (2020: profit of £180k)

· Period end bank balance of £1m (2020: £1.1m)

· Order intake £938k (2020: £1.5m)

· Period end order book of £702k (2020: £933k)

· Order book increased to £1.5m at 27 April 2021 including large Asian portable X-ray contract win

Operational highlights:

· First order for new conveyor X-ray system received from USA

· New portable X-ray customer in Canada

· Contract to supply portable X-ray systems to RAF

· New orders for industrial screening systems

· Research and Development effort supported by customer funding

· Large portable X-ray order received from Asian customer after period end

The Board considers that the Company has a sufficiently strong pipeline of new orders to continue to trade in line with market expectations for the year ending 30 September 2021 which are for sales of £3m and a loss of £200k.

Bill Mawer, Chairman and Chief Executive Officer of Image Scan commented: "We expected that the COVID-19 pandemic would continue to impact the flow of new orders into the business in the first half of this financial year, and that impact is reflected in these results. However, we are delighted that our new products are finding their first customers and that we have been able to open up new markets in North America and the UK. The new portable X-ray order and our strong new business pipeline point to a stronger performance in the second half, though we continue to monitor closely the potential impact of COVID-19 outbreaks in important markets such as India and Brazil. Nonetheless, we will continue our ambitious new product development programme as this is putting us in a strong position for when the effects of the pandemic diminish."

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

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

Revenues for the six months ended 31 March 2021 declined to £868k (2020: £2.3m) reflecting the low opening order book of £633k and the fact that much of the order intake of £938k (2020: £1.5m) arrived towards the end of the period. We saw delays in a number of important projects as Governments worldwide continued to focus on battling the pandemic. However, a key new portable X-ray project, one of those directly delayed by COVID-19, was won after the period end.

A favourable mix of sales lead to an improvement in gross margin to 55% (2020: 45%). Costs were carefully managed, and we received £32k from the Government furlough scheme to support salaries in quiet periods, allowing us to reduce overheads by 20% to £682k (2020: £840k). The loss for the period was £201k (2020: profit of £180k).

The Company finished the period with an orderbook of £702k (2020: £933k) and positive cash balance of £1m (2020: £1.1m). Trading in the first part of April, brought the orderbook to £1.5m at April 27th.

Overview

While overall order intake for security systems was at a disappointing level in the period, the orders received did include some notable wins. Examples include: a follow-on order for portable X-ray systems from a major global NGO, who uses our scanners to support its worldwide operations; a first order for a conveyor X-ray system for a customer in the USA, as well as previously announced orders in the UK and Canada. Since the period end, we have received a large contract for portable X-ray systems and the first order for the new Axis-CXi cabinet X-ray screening system, both from customers in Asia

While we have been concerned about the impact of the pandemic on our automotive customers, it is reassuring to have received orders for two new industrial screening systems and to be working on the implementation of new X-ray measurement techniques under a customer funded software development contract.

Our access to global security markets is a key strength of the Company and it has been pleasing to see our investment in appointing a sales consultant in North America bear fruit with new customers in both Canada and the USA. We have also won orders from new customers in Eastern Europe and Asia.

Servicing our large installed base of industrial screening systems has presented a challenge through the pandemic, but we have adapted to this situation through customer training, increased remote machine access and recruitment of overseas service partners.

We continue to invest in our product range and the launch of the Axis-CXi cabinet X-ray scanner in October 2020 was a significant milestone. This system brings new levels of performance to the cabinet X-ray market and we are pleased by the level of customer interest. We expect to have a number of variants of our conveyor X-ray system fully on the market in the next few months. We are exploring new X-ray detection and image processing techniques to further strengthen the differentiation of our products in the security X-ray marketplace.

Outlook - COVID-19 and beyond

The path of the Covid-19 pandemic continues to be unpredictable. Two places where the disease is currently most prevalent are India and Brazil, one a longstanding market for the Company, the other a more recent addition for which we have high hopes for the future. In other parts of the world, the disease has subsided, and more normal levels of activity are starting to return. The new portable X-ray order described above will be delivered in the second half and so we remain cautiously optimistic for an improved performance in the second half and that we can trade in line with market expectations for the year as a whole.

Our strategy continues to be focussed on expansion of the product range so that, as market activity returns to more normal levels, we are well placed to capitalise, offering the broader product range through our excellent network of local partners. Our product development strategy meets several goals: the maintenance and upgrade of existing products, for which recently launched Wi-Fi range extenders for portable X-ray systems would be an example; the broadening of current product ranges to include multiple formats for different users, and, lastly the development of new product ranges such as the recent addition of new conveyor X-ray systems. The partner network continues to expand, and this has led to the recent acquisition of promising new customers in several regions.

To better support the sales activity in an environment where travel is difficult or impossible, we are currently building a demonstration room at our facility that will be fully equipped to support on-site visits, attendance at on-line trade exhibitions and person to person remote presentations and demonstrations. We continue to expand our on-line and social media presence and our participation in counter terrorism forums.

The Company retains a positive outlook and our small but industrious team work hard to build a platform for sustainable growth into the future. On behalf of my fellow Board members, I would like to formally thank all our personnel for their outstanding response to the continuing challenging circumstances.

Bill Mawer

Chairman and Chief Executive Officer

28/04/2021