Image Scan Holdings Regulatory News (IGE)

1 Jun 2005 06:30

1 June 2005IMAGE SCAN HOLDINGS PLC("Image Scan" or the "Company")INTERIM RESULTSFOR THE SIX MONTHS ENDED31 MARCH 2005Image Scan (AIM: IGE), a leading provider of multi-view, 3D X-ray imaging technologies forthe security and industrial inspection markets, announces interim results forthe six months ended 31 March 2005.Financial highlights * Order book at 31st March 2005 of ‚£683,000 (2004: ‚£12,000), including the largest order to date which was received from Johnson Matthey of ‚£601,000; * Reduction in overheads to ‚£590,000 (2004: ‚£680,000); * Loss on ordinary activities before taxation ‚£542,000 (2004: ‚£596,000); Business highlights * Launch of MDXI product range at the February 2005 IPOT exhibition; * Preliminary results of Transport Security Administration ("TSA") trial in the US indicates significant improvement in detection rates when comparing 3D to 2D X-ray screening; * Two non-executive directors appointed to strengthen Board; Post period-end highlights * Successful placing and open offer raises over ‚£1million; * Licence agreement signed with Galaxy Scientific Corp ("Galaxy") for sales of an aviation security computer based training software package; * Interim sales and marketing manager appointed; * Company Secretary, Louise George, promoted to Finance Director. Ian Johnson, Chairman comments, "The commercial order book is stronger at ‚£683,000 than at any time in the Company's history. The Company believes thatits reputation has been significantly enhanced by having established a keyreference site in Johnson Matthey."For further information:Nicholas Fox Chief Executive ) 01664 503 600 Ian Johnson Chairman ) Toby Hall GTH Communications ) 020 7153 8039 Howard Drummon Keith Bayley Rogers Ltd ) 020 7871 2232 CHAIRMAN'S STATEMENTIntroductionI am pleased to present the interim results of Image Scan Holdings plc for thesix months ended 31 March 2005 and the Board's view of the Company's prospectsfor the remainder of this financial year.Financial ResultsSales for the six months were ‚£109,000 (2004: ‚£149,000). However, these salesdo not reflect the significantly increased commercial activity that the Companyhas experienced in the current financial year. As explained more fully below,the Company received two significant orders totalling ‚£683,000 in the periodthat are scheduled for delivery in the second half of the current financialyear.In the period, sales to Rapiscan Systems Limited ("Rapiscan") under the salesand marketing agreement amounted to 6 units - ‚£90,000 in total. The Board isdisappointed with the rate of call-off that Rapiscan has been able to achieveand is working closely with Rapiscan to resolve the situation.Margins have remained strong at 50% (2004: 52%) compared to 44% for the 2004full year.Overheads were ‚£590,000 (2003: ‚£680,000) reflecting tighter control onexpenditure and a shift in emphasis towards commercial activity, resulting in a‚£30,000 additional charge of labour against contracts. Counterbalancing thiswas a cost of ‚£47,000 in respect of the compromise agreement reached with theprevious Chief Finance and Operating Officer, who left the Company following acost cutting exercise in January. The benefit of these changes will be evidentin the second half of 2005. Sales and marketing expenditure was reduced by ‚£100,000 compared to 2004 when a one-off expense of carrying out a cost benefitanalysis of the Axis-3d‚® was incurred.The loss for the period was ‚£542,000 (2003: ‚£572,000), a loss per share of2.80p (2004: 3.04p). No dividend is proposed.In November 2004 the Company issued ‚£200,000 9% loan stock ahead of thecompletion of a successful placing and open offer that raised over ‚£1m in April2005. This loan stock was repaid in May 2005. During the period, bank loanswere reduced by ‚£19,000 to ‚£36,000. At 31st March 2005 the bank balance was ‚£68,000.Commercial OverviewSecurity SectorThe TSA are planning a further hand-baggage screening trial at a major USairport following on from the successful trial carried out in 2004, where asignificant improvement in the probability of detection was indicated whenusing 3D when compared to 2D X-ray image presentation formats.In addition to the focus on the promotion of the Axis-3d‚® with Rapiscan, theCompany is looking to expand its product range within the security sector: * A prototype for a large area detector for explosives and ordnance detection, known as PanDEX, has been completed and following pre-launch marketing is due to be launched at the Milipol exhibition in Paris in November 2005. * Following the completion of a prototype high energy X-ray imaging system for screening small vehicles in 2004, the Company is looking further to develop this technology with the customer into a commercial product. Industrial SectorThe Company has actively marketed its industrial products through attendance attwo key exhibitions; INSPEX in October 2004 and IPOT in February 2005. Bothgave rise to a strong lead pipeline and the latter provided the platform forthe launch of the MDXI range of industrial inspection systems.To ensure that the momentum of recent commercial successes is maintained, theCompany will be using some of the funds raised in April to appoint a full timesales and marketing manager to pursue further opportunities and build a strongand sustainable sales pipeline. In the intervening period the Company hasappointed an interim sales and marketing manager to maintain momentum in salesand to assist in the review of the strategic market direction of the Company.Current Trading and OutlookThe commercial order book is stronger at ‚£683,000 than at any time in theCompany's history. The Company believes that its reputation has beensignificantly enhanced by having established a key reference site in JohnsonMatthey. The prototype MDXI inspection system delivered to Johnson Matthey inSeptember 2004 was well received and resulted in the follow-up order of ‚£601,000 for a multi-station industrial inspection system. Subsequent to theformal launch in February 2005 of the MDXI range of X-ray inspection equipmentat the UK's leading industrial vision event, IPOT, we secured our first exportorder of ‚£82,000 for the product from the USA. These successes confirm theefficacy of the Company's products and we believe that there are a number ofother significant opportunities for these systems within the industrial sector.Following the development of a new generation of aviation security computerbased training software for Galaxy in 2004, the Company has now successfullynegotiated a licence agreement with Galaxy to market the system to customersoutside the TSA. This will give rise to income from the licence, furthersoftware development and sales of the Axis-3d‚® system.Strategic DirectionThe Board is committed to applying the balance of the funds raised in therecent placing and open offer to securing the Company's future. This will beachieved by: * the appointment of a full time sales and marketing manager to enhance market awareness of our product portfolio, to pursue existing sales leads and to open up new opportunities; * raising market awareness through increased press coverage, which is already underway following the appointment of GTH Communications Ltd in March as PR agents for both financial and trade press; * introducing our technology and solutions to a wider audience by continued attendance at key trade exhibitions and conferences; * working closely with Rapiscan to exploit the partnership opportunities under the sales and marketing agreement; and * expanding the Company's partnering agreements so that in each product area we are working with specialist companies with experience and an established customer base in that relevant sector. Other MattersI should like to congratulate Mrs Louise George on her appointment as FinanceDirector. Louise has been with the Company for three years as FinancialController and Company Secretary and has clearly demonstrated that she has theskills to step into this new role. I should also like to welcome Peter Hughesand Peter Woods to the Board, both of whom were appointed in March and arealready contributing to the strategic direction of the Company with experiencedrawn from their extensive financial and commercial careers. As a final point,I should like to express my appreciation to the staff for their commitment tothe Company and their dedication in ensuring that the Company continues toretain its position at the forefront of its technological sectors.Ian JohnsonChairman1st June 2005Unaudited Consolidated Profit & Loss Account 6 months to 6 months to Year to 31 March 2005 31 March 30 September 2004 2004 (Unaudited) (Unaudited) (Audited) ‚£'000 ‚£'000 ‚£'000 Turnover 109 149 425 Cost of sales (55) (71) (239) Gross profit 54 78 186 Administration expenses (590) (680) (1,448) Operating loss (536) (602) (1,262) Interest received 1 9 13 Interest payable (7) (3) (5) Loss on ordinary activities (542) (596) (1,254) before taxation Taxation - 24 44 Loss on ordinary activities (542) (572) (1,210) after taxation Loss per share: Basic and fully diluted (2.80)p ( 3.04)p (6.3)p Unaudited Consolidated Balance Sheet 31 March 2005 31 March 2004 30 September 2004 (Unaudited) (Unaudited) (Audited) ‚£'000 ‚£'000 ‚£'000 Fixed Assets Tangible assets 142 256 191 Intangible assets 19 171 20 161 427 211 Current assets Stock and work in progress 271 24 45 Debtors 60 211 146 Cash at bank and in hand 67 466 50 398 701 241 Creditors - amounts falling due within one year (1,007) (394) (344) Net current assets/ (609) 307 (103) (liabilities) Total assets less current (448) 734 108 liabilities Creditors - amounts falling (6) (36) (17) due after more than one year Provisions for liabilities (13) - (16) and charges Net assets (467) 698 75 Capital and reserves Called up share capital 193 193 193 Share premium account 3,883 3,867 3,883 Profit and loss account (4,543) (3,362) (4,001) Equity shareholders' funds (467) 698 75 Unaudited Consolidated Cash Flow Statement 6 months to 6 months to Year to Notes 31 March 2005 31 March 30 September 2004 2004 (Unaudited) (Unaudited) (Audited) ‚£'000 '000 ‚£'000 Net cash inflow/(outflow) (a) (157) (626) (238) from operating activities Returns on investments and servicing of finance Interest received 1 9 8 Interest paid (7) (3) (7) (6) 6 1 Taxation Corporation tax recovered - - 97 Capital expenditure and financial investment Purchase of tangible (1) (91) (189) fixed assets Purchase of intangible - - (4) fixed assets (1) (91) (193) Net cash flow before (164) (711) (333) management of liquid resources Management of liquid resources Withdrawal/(purchase) of - - 43 short term deposits Financing Issue of ordinary share - 987 - capital Bank loans repaid (19) (19) (36) Other loans issued 200 - - 181 968 (36) Increase in cash in the (b) 17 257 (326) period Note (a) Reconciliation of operating cash flows Operating loss (536) (602) (840) Depreciation 50 57 76 Amortisation 1 8 18 (Increase)/decrease in stock and (226) 3 43 work in progress Decrease/(increase) in 86 (59) 195 debtors Increase/(decrease) in 468 (33) 270 creditors Net cash (outflow) from (157) (626) (238) operating activities Unaudited Consolidated Cash Flow Statement (continued)Note (b) Analysis of net debt 1 October 2004 Cash flow 31 March 2005 ‚£'000 ‚£'000 ‚£'000 Cash at bank and in hand 50 17 67 Debt due within one year (38) (192) (230) Debt due after one year (17) 11 (6) (5) (164) (169) Reconciliation of Movement in Shareholders' Funds 6 months to 6 months to Year to 31 March 2005 31 March 2004 30 September 2004 (Unaudited) (Unaudited) (Audited) ‚£'000 ‚£'000 ‚£'000 Opening shareholders' 75 283 283 funds Issue of shares - at par - 31 31 Issue of shares - share - 956 972 premium Loss attributable to (542) (572) (1,211) members (467) 698 75 Notes to the Unaudited Interim Statement1 Basis of Preparation(a) The interim statement has been prepared in accordance with the accountingpolicies set out in the Company's Annual Report and Accounts for the year ended30 September 2004.(b) The interim statement is neither audited nor reviewed. The figures for theyear ended 30 September 2004 do not comprise statutory accounts for the purposeof section 240 of the Companies Act 1985 and have been extracted from theCompany's full accounts for that year, which received an unqualified Auditors'Report and did not contain a statement under section 237(2) or (3) of theCompanies Act 1985. The accounts have been filed with the Registrar ofCompanies.(c) Basic loss per ordinary share is based on the loss on ordinary activitiesafter taxation of ‚£542,000 and on 19,335,630 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. * Additional Copies Further copies of the Interim Report are available from the Company'sregistered office, Pera Innovation Park, Nottingham Road, Melton Mowbray,Leicestershire, LE13 0PBENDIMAGE SCAN HOLDINGS PLC