Image Scan Holdings Regulatory News (IGE)

21 May 2007 12:10

Image Scan Holdings PLC21 May 2007 21 MAY 2007 IMAGE SCAN HOLDINGS PLC ("Image Scan" or the "Company") INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2007 Significantly increased turnover and a reduced loss edges the Company towards profitability The Board of Image Scan, a world leader in the field of real-time 3D and 2Dx-ray imaging for the 'Homeland Security' and 'Industrial Inspection' markets,announces interim results for the six months ended 31 March 2007. HIGHLIGHTS • Company approaching break-even; • Loss before tax down to £60,000 (2006: £278,000); • Loss per share down to 0.17p (2006: 0.80p); • Turnover up 50% to £1,133,000 (2006: £755,000); • Gross margin strengthened to 50% (2006: 45%); • Three-fold increase in order book to £945,000 (2006: £253,000); • Ongoing sales with Blue Chip clients such as British Nuclear Group & Johnson Matthey; and • Placing agreed in May to raise £3m before expenses. Commenting on the results, Peter Woods, Chairman, stated: "The Board is pleasedwith the improvement in the Company's financial results as it moves towardsprofitability, and at the high level of interest shown by both the Industrialand Security markets in our products and technology. "The Company is seeking to raise £3m in order to provide the necessary resourcesand working capital to optimise the opportunities we have created and acceleratefuture growth." 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 Seymour Pierce Ltd Tel: +44 (0) 207 107 8100David Newtondavidnewton@seymourpierce.com For further information on the Company, please visit: www.ish.co.uk - and forfurther information on its products, please visit: www.3dx-ray.com. CHAIRMAN'S STATEMENT Introduction I am pleased to present the interim results of Image Scan for the six monthsended 31 March 2007, and the Board's view of the Company's prospects for theremainder of this financial year. Image Scan continues to be focused on the development and commercialisation ofmarket leading real-time 3D and 2D x-ray solutions for use in the globalindustrial and security inspection markets. The Company's industrial inspectionsolutions include the MDXi unit and the X-Line systems. The security portfolioincludes a unique 3D baggage inspection system for corporate and airportsecurity and TPXi, a portable suspect package inspection system for use by bombdisposal experts. Financial Results Sales for the six months have increased by 50% to £1,133,000 (2006: £755,000),reflecting our ongoing relationship with blue chip companies, such as JohnsonMatthey and British Nuclear Group. Over the same period the Company hasmaintained its tight control over costs, with overheads being contained at£614,000 (2006: £619,000). In addition, the increased efficiencies associatedwith higher activity have allowed us to improve our gross margin to 50% (2006:45%). The Board continues to invest in R&D. Total R&D expenditure stood at £188,000(2006: £91,000) but due to the changes required by the international accountingstandards, £156,000 of this has been capitalised and will be written off againstcommercial sales of MDXi-NT and TPXi. The Company moved closer to break-even with the loss for the period down to£60,000 (2006: £278,000), a loss per share of 0.17p (2006: 0.80p). During the period the Company issued £400,000 9% loan stock and negotiated apayment deferment on the existing £200,000 loan stock. All loan stock is nowrepayable on 30 September 2008 and has warrants to subscribe for 3,000,000shares at 20p. A £100,000 overdraft facility was agreed with the Royal Bank ofScotland plc in December 2006. At 31 March 2007 the bank balance was £58,000. Commercial Overview Industrial Industrial sales were dominated by two significant contracts. The Company isinstalling the new MDXi-NT system into the Johnson Matthey UK and South Africansites, and is developing an in-line inspection system for one of the BritishNuclear Group's manufacturing plants. Both contracts are still in progress withfurther revenue falling into the second half of the year. Funded feasibility work has also been carried out for several other blue-chipcompanies and negotiations with these organisations are well underway for fulldevelopment contracts. In line with the Company's business model, it isanticipated that each of these potential new contracts will lead to repeatorders. Earlier this year, a dedicated support group was created within the Company toservice the needs of our growing installed base of industrial systems. This newprofit centre has already secured orders approaching £200,000, representing amix of critical spares and annual maintenance contracts. Security Market interest in the TPXi-675 portable x-ray imaging system remains strong.During the period several orders were received for evaluation units from whichit is anticipated multiple repeat orders will arise within the next two years.To cope with the expected increase in demand, the Company has negotiated anoutsourcing contract for the manufacture of TPXi-675 systems to both improvedelivery times and reduce manufacturing costs. Following the development of a 2D baggage scanning system with Eurologix Ltd(formerly Scanlogik Technology Ltd.), the system was exhibited in the USA inApril. Considerable interest was generated and the sales subscribed to underour licence agreement are now expected to develop. Marketing The Company has been working closely with the distributors appointed last yearto maximise the potential sales arising under these existing agreements. Twofurther distributorships have been negotiated. Within the industrial sector,VOGT Werkstoffpruefsysteme GmbH has already attended a number of key exhibitionsin Germany, and X-metrix LLC will commence their marketing campaign in the USAearly June. As a result of the higher level of interest in our products arising fromincreased exhibition attendance and on-going trade press activity, we haverecently strengthened the applications team to enable us to more efficientlyrespond to these opportunities and to support our future sales. Staff The Board is delighted at how well staff has reacted to the increased pressuresof meeting our customers needs and their continued dedication to both thetechnology and our Company. The Board would like to extend its sincereappreciation of this commitment. Outlook At the end of March the order book was £945,000 (2006: £253,000). Lookingforward, the prospects for the Company remain strong with increasing interest inImage Scan's products and opportunities for significant long term salesimproving as we complete a series of funded feasibility studies for a number ofnew clients. To ensure we keep our technology ahead of our competitors we shall also maintainour investment in R&D targeted towards enhancing our existing and developing newproducts to meet market needs. Where appropriate the Company will seek toformally protect its IP as in the recent patent application relating to our TPXiproduct. A significant programme of work to be initiated during the second halfof our financial year will be a value engineering exercise to reduce prime costswithin the TPXi and MDXi product ranges. To provide the necessary resources and working capital to achieve the strategicobjectives of the Company and to accelerate future growth, the Company isseeking to raise £3 million before expenses. Peter Woods Chairman 21 May 2007 Unaudited Consolidated Profit & Loss Account 6 months to 6 months to Year to 31 March 2007 31 March 2006 30 September 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Turnover 1,133 755 1,422Cost of sales (563) (416) (705) Gross profit 570 339 717Administration expenses (614) (619) (1,220) Operating loss (44) (280) (503)Interest received 1 2 4Interest payable (17) - (9) Loss on ordinary activities beforetaxation (60) (278) (508)Taxation - - 37 Loss on ordinary activities aftertaxation (60) (278) (471) Loss per share: Basic and fully diluted (0.17)p (0.80)p (1.3)p Unaudited Consolidated Balance Sheet 31 March 2007 31 March 2006 30 September 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Fixed AssetsTangible assets 199 119 174Intangible assets 171 17 16 370 136 190 Current assetsStock and work in progress 94 77 83Debtors 341 351 384Cash at bank and in hand 58 40 164 493 468 631 Creditors - amounts falling duewithin one year (437) (538) (742)Net current assets/(liabilities) 56 (70) (111) Total assets less current liabilities 426 66 79 Creditors - amounts falling dueafter more than one year (600) - (200)Provisions for liabilities and charges (29) (29) (22) Net assets (203) 37 (143) Capital and reservesCalled up share capital 349 349 349Share premium account 4,671 4,660 4,671Profit and loss account (5,223) (4,972) (5,163) Equity shareholders' funds (203) 37 (143) Unaudited Consolidated Cash Flow Statement 6 months to 6 months to Year to Notes 31 March 2007 31 March 2006 30 September 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Net cash outflow from operatingactivities (a) (279) (183) (146) Returns on investments and servicing offinanceInterest received 1 2 4Interest paid (17) - (9) (16) 2 (5) TaxationCorporation tax recovered - 30 30 Capital expenditure and financial investmentPurchase of tangible fixed assets (55) (12) (136)Purchase of intangible fixed assets (156) - -Receipts from sales of tangible fixed assets - - 72 (211) (12) (64) Net cash outflow (506) (163) (185) FinancingIssue of ordinary share capital - - 12Bank loans repaid - (11) (17)Other loans issued 400 60 200 400 49 195 Increase in cash in the period (b) (106) (114) 10 Note (a) Reconciliation of operating cash flows Operating loss (44) (280) (503)Depreciation 30 49 97Amortisation 1 1 2Profit on sales of tangible fixed - - (52)assetDecrease/(increase) in stock and work in (11) 18 12progress(Increase)/decrease in debtors 43 (40) (36)Increase in creditors (298) 69 334 Net cash outflow from operating activities (279) (183) (146) Unaudited Consolidated Cash Flow Statement (continued) Note (b) Analysis of net debt 1 October 2006 Cash flow 31 March 2007 £'000 £'000 £'000 Cash at bank and in hand 164 (106) 58Debt due within one year (200) (400) (600) (36) (506) (542) Reconciliation of Movement in Shareholders' Funds 6 months to 6 months to Year to 31 March 2007 31 March 2006 30 September 2006 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000 Opening shareholders' funds (143) 315 315Issue of shares - at par - - 1Issue of shares - share premium - - 11Loss attributable to members (60) (278) (470) (203) 37 (143) Notes to the Unaudited Interim Statement 1 Basis of Preparation (a) The interim statement has been prepared in accordance withthe accounting policies set out in the Company's Annual Report and Accounts forthe year ended 30 September 2006, with the exception of the research anddevelopment accounting policy. From 1 October 2006, the Company has dealt with research and developmentexpenditure in accordance with IAS 38; such expenditure was previously accountedfor under UK GAAP. Development expenditure that meets the criteria forrecognition as an asset has been included in intangible assets. The totalcapitalised in this interim statement amounted to £156,000. (b) The interim statement is neither audited nor reviewed. The figuresfor the year ended 30 September 2006 do not comprise statutory accounts for thepurpose of section 240 of the Companies Act 1985 and have been extracted fromthe Company's full accounts for that year, which received an unqualifiedAuditors' Report and did not contain a statement under section 237(2) or (3) ofthe Companies Act 1985. The accounts have been filed with the Registrar ofCompanies. (c) Basic loss per ordinary share is based on the loss on ordinaryactivities after taxation of £60,000 and on 34,948,120 ordinary shares in issuethroughout the period. 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. 2 Additional Copies Further copies of the Interim Report are available from the Company's registeredoffice, Pera Innovation Park, Nottingham Road, Melton Mowbray, Leicestershire,LE13 0PB This information is provided by RNS The company news service from the London Stock Exchange