Last checked at 9 Jun 2008 07:00
9 JUNE 2008
IMAGE SCAN HOLDINGS PLC
("Image Scan" or the "Company")
INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 MARCH 2008
The Board of Image Scan, specialists in the field of real-time 3D and 2D x-ray imaging for the 'Homeland Security' and 'Industrial Inspection' markets, announces interim results for the six months ended 31 March 2008.
KEY POINTS
Revenue of £1,122,000 (2007: £1,133,000);
Gross margin of 46% (2007: 50%) reflecting a change in sales mix;
Loss before tax at £136,000 (2007: £60,000) after incurring redundancy costs of £65,000;
Loss per share of 0.24p (2007: 0.17p);
End of March cash balances at £1,337,000;
Repeat sales to China for the Beijing Olympics, to the Systems Research & Applications Corp in the US, to the British Transport Police and to Johnson Matthey;
New Sales and Marketing Manager who has extensive experience in managing distributors and handling sales in the Far East; and
Enhanced order book at the end of March of £1,219,000 (2007: £945,000), including conditional £630,000 order for further Axis-3d® units into China based on satisfactory acceptance of the second generation 3D technology.
Commenting on the results, Gilbert Chalk, Chairman, stated:
"During the first half of this year the Company focused primarily on the security sector, by developing further its security products and building closer relationships with key trading partners. This activity is expected to continue to strengthen security sales.
"In addition, the Company has conducted a thorough review of the industrial sector, resulting in a more focused product offering to potential customers and an expansion in the routes to market through additional direct selling and appointment of distributors."
Enquiries:
Image Scan Holdings plc Tel: +44 (0) 1664 503 600
Gilbert Chalk, Chairman
Nicholas Fox, CEO
info@ish.co.uk
Bishopsgate Communications Ltd Tel: +44 (0) 207 562 3350
Dominic Barretto
Jenni Herbert
jenni.herbert@bishopsgatecommunications.com
Seymour Pierce Ltd Tel: +44 (0) 207 107 8100
Sarah Jacobs
sarahjacobs@seymourpierce.com
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
I am pleased to present the Company's interim results for the six months ended 31 March 2008.
Financial Results
Revenue for the six months is comparable to the first half of 2007 at £1,122,000 (2007: £1,133,000), but reflects a significant improvement on the 2007 second half revenue of £409,000. The period saw a change in sales mix from being predominantly industrial to a fairly even split of security and industrial; and included £225,000 of the Axis-3d® and £317,000 of TPXi sales and the final £390,000 of the British Nuclear Group ("BNG") contract. This gave rise to a reduced gross margin of 46% (2007: 50%) due to slightly lower margins in the security sector.
Increased operating expenses of £691,000 (2007: £614,000) included redundancy costs of £65,000 (2007: £nil) and R&D expenditure of £91,000 (2007: £32,000). At the start of the period a thorough review of administrative expenditure was carried out with the objective of reducing the overhead to the pre 2007 level. This resulted in a net reduction in headcount of four staff with a number of these functions now being subcontracted as required. The main research and development investment carried out in the period related to the next generation of both the Axis-3d® baggage screening system and the TPXi portable x-ray screening system.
The resultant loss was £136,000 (2007: £60,000) with a loss per share of 0.24p (2007: 0.17p).
At 31 March 2008 the bank balance stood at £1,337,000 and the Company has a £100,000 overdraft facility agreed with the Royal Bank of Scotland plc.
Operations Review
During the first six months Image Scan's technology secured valuable endorsement through repeat orders from existing clients:
The sale of four Axis-3d® baggage screening systems to China was followed by a conditional order of £630,000 subject to satisfactory acceptance of the second generation 3D technology;
The sale of an additional Axis-3d® baggage screening systems to the Systems Research & Applications Corp in the US for use on their ongoing contract with the USA's Transport Security Administration;
After two years of using the TPXi portable suspect package inspection system to provide heightened security measures on the London Underground and mainline stations, the British Transport Police have placed an order for £116,000 for further TPXi-based security systems; and
Johnson Matthey purchased a further MDXi-400 industrial inspection system for its plant in the US.
Close collaboration with the Company's Belgium-based distributor, Industrial Control Machines S.A. ('iCM') in supporting their sales efforts has resulted in orders totalling over £425,000 for the TPXi system. This is almost double the value of orders received in the whole of the previous financial year with notable successes in Taiwan and Thailand.
Following the report by the Transport Security Administration citing 3D and multi-view systems as being the way forward, there has been renewed interest in the Axis-3d® baggage screening system with sales in the period into both the US and China.
With help from it's US distributor, X-metrix, Image Scan has completed a trial of its MDXi-400 system at the USA's Oak Ridge National Research Laboratory (ONRL). The technical results from this trial where considered important enough by ONRL to invite the Company's Chief Technologist to present a joint conference paper in Detroit on non destructive techniques for inspecting catalytic converters and diesel particulate filters industry.
StaffIn January 2008 the Company appointed a new Sales and Marketing Manager who has extensive experience in managing distributors and handling sales in the Far East. Since joining he has focused on building closer relations with the Company's distributors and increasing awareness of the use of x-ray technology for the inspection of catalytic converters.
International Financial Reporting Standards ("IFRS")
The financial information shown in this interim report is presented in accordance with IFRS. The comparative information for the six months to 31 March 2007 and the year to 30 September 2007 have been restated under these standards. The only impact on the Interim Financial Statements has been the adoption of IFRS 2 'Share-based payment', the effect of which is detailed in note 3 to the interim financial statements.
Outlook
At the end of March the order book was £1,219,000 (2007: £945,000) including the £630,000 conditional order from China. It had been hoped that this order could have been fully delivered within the current financial year. However, due to an extension in the trial period from 2 to 4 weeks and slightly longer lead times, the Board anticipates partial delivery by the end of September. The first system is due to be shipped shortly and is currently subject to final engineering and testing. Providing the order is confirmed as anticipated at the end of the trial period, it is expected that the contribution to revenue and profit arising from the order will fall across both the current and the next financial year. The outstanding TPXi orders of over £350,000 are due for delivery by mid July, with further orders anticipated for delivery in the last financial quarter.
During the first half of this year the Company focused primarily on the security sector, by developing further its security products and building closer relationships with key trading partners. This activity is expected to continue to strengthen security sales.
In addition, the Company has conducted a thorough review of the industrial sector. This has resulted in a more focused product offering to potential customers, at a more competitive price whilst not compromising on our product performance. There has also been an expansion in the routes to market through additional direct selling and appointment of distributors. Whilst there has been improvement in prospects, the long lead time for these opportunities mean that significant industrial sales are unlikely to emerge in the remaining part of this financial year.
In recognition that many of the Company's current products have derived from solutions devised to address specific customer requirements, the Company now intends to actively seek to offer consultancy services using some of our best technologists. This specific focus will enhance the Group's ability to respond to client needs and provide a potential additional revenue source.
I'd like to thank all staff and shareholders for their continued support and look forward to providing a further update on trading and activity in due course.
Gilbert Chalk
Chairman
9 June 2008
Consolidated Income Statement
| 6 months to | 6 months to | Year to | |||
| 31 March 2008 | 31 March 2007 | 30 September 2007 | |||
| (Unaudited) | (Unaudited) | (Audited) | |||
| £'000 | £'000 | £'000 | |||
| Revenue | 1,122 | 1,133 | 1,542 | ||
| Cost of sales | (604) | (563) | (830) | ||
| Gross profit | 518 | 570 | 712 | ||
| Administrative expenses | (691) | (614) | (1,522) | ||
| Operating loss | (173) | (44) | (810) | ||
| Finance revenue | 37 | 1 | 31 | ||
| Finance costs | - | (17) | (45) | ||
| Loss before taxation | (136) | (60) | (824) | ||
| Taxation | - | - | 63 | ||
| Loss for the period | (136) | (60) | (761) | ||
| Loss per share: Basic and fully diluted | (0.24)p | (0.17)p | (1.9)p | ||
Consolidated Statement of Changes in Equity
| 6 months to | 6 months to | Year to | |||
| 31 March 2008 | 31 March 2007 | 30 September 2007 | |||
| (Unaudited) | (Unaudited) | (Audited) | |||
| £'000 | £'000 | £'000 | |||
| Opening equity shareholders' funds | 1,877 | (143) | (143) | ||
| Issue of shares - at par | 7 | - | 200 | ||
| Issue of shares - share premium | 53 | - | 2,581 | ||
| Share based payments | 2 | - | - | ||
| Loss attributable to equity shareholders | (136) | (60) | (761) | ||
| 1,803 | (203) | 1,877 | |||
Consolidated Balance Sheet
| 31 March 2008 | 31 March 2007 | 30 September 2007 | |||
| (Unaudited) | (Unaudited) | (Audited) | |||
| £'000 | £'000 | £'000 | |||
| Non-current assets | |||||
| Plant and equipment | 85 | 199 | 111 | ||
| Intangible assets | - | 171 | - | ||
| 85 | 370 | 111 | |||
| Current assets | |||||
| Inventories | 208 | 94 | 289 | ||
| Trade and other receivables | 725 | 341 | 461 | ||
| Cash and cash equivalents | 1,337 | 58 | 1,531 | ||
| 2,270 | 493 | 2,281 | |||
| Total assets | 2,355 | 863 | 2,392 | ||
| Current liabilities | |||||
| Trade and other payables | (523) | (437) | (486) | ||
| Non-current liabilities | |||||
| Loan notes | - | (600) | - | ||
| Provisions for liabilities and charges | (29) | (29) | (29) | ||
| (29) | (629) | (29) | |||
| Total liabilities | (552) | (1,066) | (515) | ||
| Net assets | 1,803 | (203) | 1,877 | ||
| Equity | |||||
| Share capital | 557 | 349 | 549 | ||
| Share premium account | 7,305 | 4,671 | 7,253 | ||
| Retained earnings | (6,059) | (5,223) | (5,925) | ||
| Equity shareholders' funds | 1,803 | (203) | 1,877 |
This interim financial information was approved by the Board of Directors on 9th June 2008
L J George
Finance Director
Consolidated Cash Flow Statement
| 6 months to | 6 months to | Year to | ||||
| 31 March 2008 | 31 March 2007 | 30 September 2007 | ||||
| (Unaudited) | (Unaudited) | (Audited) | ||||
| £'000 | £'000 | £'000 | ||||
| Cash flow from operating activities | ||||||
| Loss before taxation | (173) | (44) | (810) | |||
| Adjustments for: | ||||||
| Depreciation | 25 | 30 | 57 | |||
| Amortisation | - | 1 | 16 | |||
| IFRS 2 charge | 2 | - | - | |||
| Decrease/(increase) in inventories | 81 | (11) | (123) | |||
| (Increase)/decrease in trade and other receivables | (330) | 43 | (48) | |||
| Increase in trade and other payables | 37 | (298) | (250) | |||
| Cash generated from operations | (358) | (279) | (1,158) | |||
| Corporation tax recovered | 66 | - | 34 | |||
| Net cash from operating activities | (292) | (279) | (1,124) | |||
| Cash flows from investing activities | ||||||
| Purchase of plant and equipment | (3) | (55) | (77) | |||
| Purchase of intangible fixed assets | - | (156) | - | |||
| Proceeds on disposal of plant and equipment | 4 | - | 1 | |||
| Interest received | 37 | 1 | 31 | |||
| Net cash from investing activities | 38 | (210) | (45) | |||
| Cash flows from financing activities | ||||||
| Interest paid | - | (17) | (45) | |||
| Issue of ordinary share capital | 60 | - | 2,781 | |||
| Other loans issued | - | 400 | 400 | |||
| Repayment of other loans | (600) | |||||
| Net cash from financing activities | 60 | 383 | 2,536 | |||
| Net (decrease)/increase in cash and cash equivalents | (194) | (106) | 1,367 | |||
| Cash and cash equivalents at beginning of period | 1,531 | 164 | 164 | |||
| Cash and cash equivalents at end of period | 1,337 | 58 | 1,531 | |||
Notes to the Unaudited Interim Financial Statements
1 Basis of Preparation
The AIM Rules require that the next annual financial statements of the Group for the year ending 30 September 2008, be prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. Therefore, these interim financial statements for the 6 months to 31 March 2008 are prepared using accounting policies in accordance with IFRS and International Financial Reporting Interpretations Committee ("IFRIC") interpretations that are expected to be applicable to the consolidated financial statements for the year ended 30 September 2008. The only impact of the conversion to IFRS related to the adoption of IFRS 2 'Share based payments' which is referred to in note 3 below and a number of presentational differences. The conversion to IFRS involved no significant impact on the income statement, balance sheet and cash flow of the Group nor on the Group's existing accounting policies as set out in the Annual Report and Accounts for the year ended 30 September 2007 which were prepared in accordance with UK accounting standards (UK GAAP).
The interim financial statements are neither audited nor reviewed, and do not constitute statutory accounts as defined by Section 240 of the Companies Act 1985. The financial information for the year to 30 September 2007 has been extracted from the statutory accounts for the Group for that period now amended to comply with the IFRS accounting policies expected to be applied in the consolidated financial statements for the year ended 30 September 2008. These published accounts in a form consistent with UK GAAP were reported on by the auditors without qualification or an emphasis matter reference and did not include a statement under section 237(2) or (3) of the Companies Act 1985 and have been delivered to the Registrar of Companies. The interim financial information for the six months ended 31 March 2007 has been restated in accordance with IFRS.
Basic loss per ordinary share is based on the loss on ordinary activities after taxation of £136,000 and on 55,541,527 ordinary shares in issue throughout the period.
FRS14 requires presentation of diluted earnings per share (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.
Operating expenses includes a charge of £2,000 (2007: £nil) after valuation of the Company'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.
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