Last checked at 18 May 2011 07:00
18 May 2011
IMAGE SCAN HOLDINGS PLC
("Image Scan" or the "Company")
(AIM: IGE)
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 MARCH 2011
Image Scan, the AIM-listed specialist supplier of real-time 3D and 2D x-ray screening systems to the homeland security and industrial inspection markets, today announces its interim results for the six months ended 31 March 2011.
Financial Highlights:
·; Revenue decreased by 16% to £772,000 (2010: £922,000)
·; Gross profit margin at 41% (2010: 54%)
·; Overheads down to £582,000 (2010: £604,000)
·; Loss on ordinary activities after taxation of £266,000 (2010: loss £108,000)
·; Period-end cash of £197,000 (2010: £643,000)
Operational Highlights:
·; Current year order intake of £1.8m
·; Orders received from across a range of security, industrial and nuclear sectors
·; First sales of the new compact portable FlatScan-15 x-ray screening system following launch in 2011
Corporate Highlight:
·; Announcement of placing of 15m new ordinary shares at 2p each to a strategic investor
Brian Emslie, Chairman of Image Scan, commented: "Whilst the interim results are disappointing, the Board feels encouraged by the visibility on current orders and the expected sales for the current year. Order intake, now standing at £1.8m for the year to date, has resulted from demand for the expanded security product range primarily from new markets in Asia and the Middle East, combined with significant industrial orders in segments where the Company can add value and has a proven track record. The proceeds of the proposed placing as announced today are necessary to provide the Company with additional working capital to fulfil its order book and move towards achieving its key short term goal of breakeven. "
Enquiries:
Image Scan Holdings plc Tel: +44 (0) 1509 503 400
Brian Emslie, Chairman
Louise George, CEO
ir@ish.co.uk
Seymour Pierce Tel: +44 (0) 207 107 8000
Sarah Jacobs / John Cowie
CHAIRMAN'S STATEMENT
Introduction
In recent months there have been signs that the strategy adopted by the Company in the last two years of building a sales team focused on selling standard x-ray security inspection systems whilst pursuing high value industrial opportunities is beginning to come to fruition. Therefore, it is with some regret that in reporting on the Company's interim results for the six months ended 31 March 2011, the impact of the increased order intake during the period is not reflected in these first half results.
Financial results
Revenue for the six months was down 16% to £772,000 (2010: £922,000) and reflected a sales mix of security, industrial and nuclear contracts, reversing the recent trend of sales being predominantly from the security sector. This change of mix is reflected in the gross margin moving from 54% to 41% in the period.
Overheads were reduced further to £582,000 (2010: £604,000) with an increase in headcount being countered by the one-off costs of moving offices and establishing a new website incurred in 2010. The resultant net loss was £266,000 (2010: loss £108,000) and the loss per share was 0.43p (2010: 0.19p).
Delivery of standard systems from stock has required the Company to increase its stock levels to meet customer delivery expectations. This level of stock requirement has inevitably placed pressure on the working capital position, and this will increasingly be the case as the product range is extended further. Coupled with the loss for the period, the cash balance has fallen by £151,000 since the year end to £197,000. The Company has an agreed £100,000 overdraft facility with the Royal Bank of Scotland.
Overview
Security revenue arose predominately from the FlatScan system and reflected the efforts of the sales team to build up sales channels into new territories offering standard security products to a wider range of potential end users. Meanwhile the security market in Europe has been weakened through the reduction in public spending, such that sales into this territory have receded. In March 2011 the Company launched its new smaller panel version of the FlatScan system, FlatScan-15, for which orders have already been secured.
The Company has continued to offer tailored solutions within the industrial and nuclear sectors to meet strategic high value opportunities. This approach has resulted in industrial revenue of £535,000 during the period which included the extension to the new MDXi software platform, a small nuclear contract, and work in progress on the build of two industrial MDXi-NT systems and a major nuclear contract.
Outlook
The Company's current year order intake stands at £1.8m. This represents £1,160,000 of industrial orders including two nuclear contracts totaling £830,000 and two further orders totaling £330,000 from another key industrial customer which is very encouraging given the lack of activity in the industrial market in the previous two years. The remainder represents orders of standard security products comprising numerous smaller orders mainly from developing markets in the Middle East and Asia.
Despite a disappointing first half, the Board is encouraged by the visibility on current orders and expected sales for the current year. With the brought forward order book of £90,000 and the expectation of £400,000 being delivered in the financial year ended September 2012, known contracted sales deliverable in the current financial year stand at £1.5m, and which already exceeds the total sales achieved for the year ended 30 September 2010.
Continued focus on cost management and careful management of assets and cash flows have enabled the Company to achieve its change in strategy. However, with the cash balance standing at £114,000 on 16 May 2011, the Directors believe that the proceeds of the proposed placing announced today will provide the necessary additional working capital to allow the Company more flexibility in fulfilling its order book and moving towards achieving its key short term goal of breakeven. The placing is for the issue of 15,000,000 new ordinary shares at 2p to a strategic investor based in Hong Kong. The Board understands that the investor believes there are opportunities for the Company's products in Asia and wishes to invest in the Company to provide the focus for both reducing the cost of key components through overseas sourcing and for opening up routes to market in the region.
Brian Emslie
Chairman
17 May 2011
CONSOLIDATED INCOME STATEMENT
for the six months ended 31 March 2011
Six months to | Six months to | Year to | |
31 March 2011 | 31 March 2010 | 30 September 2010 | |
(Unaudited) | (Unaudited) | (Audited) | |
£'000 | £'000 | £'000 | |
Revenue | 772 | 922 | 1,472 |
Cost of sales | (456) | (427) | (666) |
Gross profit | 316 | 495 | 806 |
Administrative expenses | (582) | (604) | (1,218) |
Operating loss | (266) | (109) | (412) |
Finance revenue | - | 1 | 2 |
Loss before taxation | (266) | (108) | (410) |
Taxation | - | - | 28 |
Loss for the period | (266) | (108) | (382) |
Pence | Pence | Pence | |
Earnings per share | |||
Basic and diluted loss per share | 0.43 | 0.19 | 0.65 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 March 2011
Six months to | Six months to | Year to | |
31 March 2011 | 31 March 2010 | 30 September 2010 | |
(Unaudited) | (Unaudited) | (Audited) | |
£'000 | £'000 | £'000 | |
Opening equity shareholders' funds | 814 | 1,079 | 1,079 |
Issue of shares - at par | - | 56 | 56 |
Issue of shares - share premium | - | 56 | 56 |
Share-based payments | 2 | 2 | 5 |
Loss attributable to equity shareholders | (266) | (108) | (382) |
550 | 1,085 | 814 |
CONSOLIDATED BALANCE SHEET
as at 31 March 2011
As at | As at | As at | |
31 March 2011 | 31 March 2010 | 30 September 2010 | |
(Unaudited) | (Unaudited) | (Audited) | |
£'000 | £'000 | £'000 | |
Non-current assets | |||
Plant and equipment | 43 | 96 | 49 |
Intangible assets | - | - | - |
43 | 96 | 49 | |
Current assets | |||
Inventories | 320 | 273 | 273 |
Trade and other receivables | 460 | 340 | 320 |
Cash and cash equivalents | 197 | 643 | 348 |
Current tax asset | - | 30 | 28 |
977 | 1,286 | 969 | |
Total assets | 1,020 | 1,382 | 1,018 |
Current liabilities | |||
Trade and other payables | 459 | (284) | 197 |
Non-current liabilities | |||
Provisions for liabilities and charges | 11 | (13) | 7 |
Total liabilities | 470 | (297) | 204 |
Net assets | 550 | 1,085 | 814 |
Equity | |||
Share capital | 613 | 613 | 613 |
Share premium account | 7,361 | 7,361 | 7,361 |
Retained earnings | (7,424) | (6,889) | (7,160) |
Equity shareholders' funds | 550 | 1,085 | 814 |
This interim financial information was approved by the Board of Directors on 17 May 2011.
Brian S Emslie
Chairman
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 31 March 2011
Six months to | Six months to | Year to | |
31 March 2011 | 31 March 2010 | 30 September 2010 | |
(Unaudited) | (Unaudited) | (Audited) | |
£'000 | £'000 | £'000 | |
Cash flows from operating activities | |||
Operating loss | (266) | (109) | (412) |
Adjustments for: | |||
Depreciation | 21 | 36 | 71 |
Loss on sale of property, plant and equipment | - | - | 2 |
Increase in inventories | (47) | (40) | (40) |
Increase in trade and other receivables | (140) | (124) | (103) |
(Decrease)/increase in trade and other payables | 266 | (25) | (119) |
Share-based payment charge | 2 | 2 | 5 |
(164) | (260) | (596) | |
Corporation tax recovered | 28 | - | 31 |
Net cash outflow from operating activities | (136) | (260) | (565) |
Cash flows from investing activities | |||
Interest received | - | 1 | 2 |
Purchase of property, plant and equipment | (17) | (59) | (50) |
Proceeds on disposal of property, plant and equipment | 2 | - | - |
Net cash (used in)/generated from investing activities | (15) | (58) | (48) |
Cash flows from financing activities | |||
Issue of ordinary share capital | - | 111 | 111 |
Net cash from generated from financing activities | - | 111 | 111 |
Net (decrease) in cash and cash equivalents | (151) | (207) | (502) |
Cash and cash equivalents at beginning of period | 348 | 850 | 850 |
Cash and cash equivalents at end of period | 197 | 643 | 348 |
NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS
for the six months ended 31 March 2011
1 Basis of preparation
The interim financial information for the six months ended 31 March 2011 has been prepared under International Financial Reporting Standards ('IFRS') as adopted by the EU in accordance with International Accounting Standard 34 'Interim Financial Reporting'. The interim financial statements have been prepared in accordance with the Company's accounting policies under IFRS and the historical cost convention. The interim financial statements are neither audited nor reviewed, and do not constitute statutory accounts as defined by Section 434 of the Companies Act 2006. The comparatives for the financial year ended 30 September 2010 are not the Company's full statutory accounts for the year. The auditors' report on those accounts was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies.
2 Going concern
The interim financial information has been prepared on a going concern basis, which assumes that the Company will have adequate resources to continue in operational existence for the foreseeable future.
3 Earnings per share ('EPS')
Basic loss per ordinary share is based on the loss on ordinary activities after taxation of £266,000 and on 61,267,932 ordinary shares in issue throughout the period.
IAS 33 requires presentation of diluted 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.
4 IFRS 2 'Share-based Payments'
Operating expenses includes a charge of £2,000 (2010: £2,000) after valuation of the Company's employee share option 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 consolidated statement of changes in equity.
5 Additional copies
Further copies of the interim report 2011 are available on the Company's website, www.ish.co.uk, and from the Company's registered office, 16-18 Hayhill Industrial Estate, Sileby Road, Barrow-upon-Soar, Leicestershire LE12 8LD.