Image Scan Holdings Regulatory News (IGE)

31 Jan 2008 07:00

Image Scan Holdings PLC31 January 2008 31 JANUARY 2007 IMAGE SCAN HOLDINGS PLC ("Image Scan" or the "Company") PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2007 Image Scan, specialist in the field of real-time 3D and 2D x-ray imaging for the'Homeland Security' and 'Industrial Inspection' markets, announces preliminaryresults for the year ended 30 September 2007. KEY POINTS • Sales at £1,542,000 (2006: £1,422,000); • Gross margin at 46% (2006: 50%); • Loss on ordinary activities after taxation at £761,000 (2006: £470,000); • Year end order book at £782,000 (2006: £1,682,000); • Year end net cash of £1,531,000 (2006: net debt of £36,000); • Cash balances currently stand at £1,300,000; • Strengthening of the Board; and • Restructure of business strategy for 2008. Gilbert Chalk, Chairman of Image Scan, commented: "The reduction in overheads and other personnel changes implemented since the2007 year end should now place the Company onto a much better base from which toproduce positive results for shareholders. The drive to make Image Scan acustomer focused business will be the Board's main priority and this shouldproduce improving results over the coming months". Enquiries: Image Scan Holdings plc Tel: +44 (0) 1664 503 600Gilbert Chalk, ChairmanNicholas Fox, CEOinfo@ish.co.uk Bishopsgate Communications Ltd Tel: +44 (0) 207 562 3350Dominic BarrettoJenni Herbertimagescan@bishopsgatecommunications.com Seymour Pierce Tel: +44 (0) 207 107 8000David NewtonSarah Jacobs CHAIRMAN'S STATEMENT Introduction I became involved with the Company as a consultant in October 2007 and wasappointed to the Board as Chairman on 30 November 2007. Accordingly I report onthe Preliminary Results for the year ended 30 September 2007, and take theopportunity to detail the actions that have been taken since the 2007 financialyear end and to outline the Board's plans for the future direction of theCompany. Financial Results After half year sales at £1,133,000, the second half year proved disappointingwith total sales for the year of £1,542,000 (2006: £1,422,000), an increase of8%. Revenue arose mainly from contracts with British Nuclear Group and JohnsonMatthey. The reduced activity in the second half saw the gross margin fall for the fullyear to 46% (2006: 50%). Whilst the margins proved strong on the BritishNuclear contract, the need to develop the second generation MDXi-NT industrialinspection system for Johnson Matthey and customer-led delays in theinstallation of that system had a significant impact on the margins and also onadditional R&D expenditure during the year. Overheads rose to £1,522,000 (2006: £1,220,000) mainly reflecting a net increaseof 5 staff in the period to June 2007 partly in order to meet the Company'sobligations on the Johnson Matthey and British Nuclear Group contracts. Thesecontracts and other developments led to a higher R&D spend of £267,000 (2006:£174,000). The shortfall from plan in the second half, together with increased overheadsresulted in a loss of £761,000 (2006: £470,000). These losses includeimpairment provisions against formerly capitalised R&D and IPR, and a provisionagainst a prospective bad debt. The loss per share was 1.9p (2006: 1.3p). During the year the Company raised £3m by means of a placing, part of which wasused to repay £600,000 loan stock. There are warrants outstanding relating tothese loans to subscribe for 6 million shares at 15p, 2m of which expire on 31March 2008 and the remainder on 30 September 2008. The Company also has anagreed £100,000 overdraft facility with the Royal Bank of Scotland to coverworking capital requirements. At 30 September 2007 the net cash balance was£1,531,000 (2006: net debt of £36,000). Overview As indicated above, during the year the Company developed the second generationMDXi-NT industrial inspection system for installation at Johnson Matthey plantsin South Africa and in the UK, and worked closely with British Nuclear Group ondeveloping a new industrial inspection system. In addition, the Companyextended functionality of the TPXi portable suspect package inspection system toincorporate airport-style materials discrimination screening, high penetrationand multilingual functionality. Security The Company worked with the US Government's Transport Security Administration ("TSA") which is the regulator and principal purchasing authority for the USAaviation security sector, to develop a glassesless 3D x-ray baggage inspectionsystem. The need to wear glasses has been perceived as one of the barriers towide-spread adoption of the technology. Following the sale in 2006 of an Axis-3d(R) system into China for evaluationahead of the 2008 Olympic Games, our customer has recently placed an order for afurther four units to provide heightened security measures for key locations atthis year's Beijing Olympics. Sales of the TPXi system through our Belgium-based distributor, IndustrialControl Machines S.A. ('ICM') totalled 15 in 2007 and were followed by a further14 systems in the first quarter of our current financial year. ICM spent muchof 2007 working with their world-wide network of agents to get the TPXi systemon the relevant tender lists and to place evaluation units with key potentialpurchasers. As a result of their marketing activities and the enhancedfunctionality of the TPXi system, ICM now have a substantial sales leadpipeline. Achievement of the 2008 budget will be dependent on ICM meeting theirindicated sales targets. In addition, within the UK, the British TransportPolice, who were the first adopters of the technology, have recently placed a£116,000 order for further systems. Industrial During the year the Company installed the new MDXi-NT system at two JohnsonMatthey plants and has been awarded the maintenance contracts for the installedx-ray inspection equipment at Johnson Matthey bases in the UK, the US and SouthAfrica. Annual support revenue arising under these contracts exceeds £100,000plus sales of spares. Discussions are underway regarding the provision ofequipment at future Johnson Matthey production lines. The Company has made good progress on the British Nuclear Group contract with£450,000 of revenue falling in 2007 and the final £400,000 expected within thefirst half of 2008. Further opportunities within the nuclear industry are beingexplored. Sales & Marketing The Company had high expectations for revenue growth which did not materialisein the second half of 2007. As a result changes have been made to the sales andmarketing personnel with Nick Fox taking on the responsibility for the salesarea at the Board level and the appointment of Jerry Horwood as a non executivedirector in November 2007 to provide fresh impetus to this area. I am alsopleased to announce the appointment of Vince Deery as Group Sales and MarketingManager as of 1 January 2008. Sales to the industrial sector are being managed directly within Europe andthrough a distributor, X-metrix, within the US. Focus continues to be on thepharmaceutical and automotive industries. Staff During the year Image Scan invested in additional staff with key industrialexperience of project management, operations, service and applications.Following the shortfall in orders in the second half, headcount was reduced by3, and subsequent to the year end there has been a further net reduction of 4staff. These changes reflect a shift from a technology-driven, R&D organisationto a business focused on its customers and the delivery of commercial solutions.Total overhead savings as a result of these reductions amount to approximately£330,000 in a full year. Current headcount is 16 staff and in addition 2executive and 3 non-executive directors. This has been a difficult and challenging year for all concerned and the Boardwould like to express its appreciation for the loyalty and dedication of ourstaff. We believe that we now have a strengthened operational team that should bebetter able to deliver on the sales opportunities that are clearly available forthe Company's leading technology and to deliver projects on time and to budget. Outlook On being invited to join the Board of Image Scan, I carried out my own review ofthe Company's products and this included discussions with some of Image Scan'smajor customers. My findings were positive with regard to the technicalcapability of the products and the close working relationships with customers.The challenge is to position the Company to best exploit its leading technologythrough further focus on its existing and potential customer base. With thesupport of Jerry Horwood and Ian Johnson on the sales and marketing strategy andof myself on corporate strategy, this step-change is achievable, but the Companystill has to demonstrate that it can deliver on its promise. The objective forthe current year is to strengthen the financial position of the Company throughincreased trading. This achievement will be skewed towards the second half ofthe year and remains particularly dependent on the Company convertingsignificant order prospects in the homeland security market into firm saleswins. Given that the Company has now reduced its overheads substantially suchsales conversion will lead to the fulfilment of this objective. At the year end the order book stood at £0.8m (2006: £1.7m). As stated oursales lead pipeline has some strong prospects both from direct sales and throughour distributor activity. The Board will remain focused on increasing turnoverthrough the commercial realisation of our technology whilst retaining a tightcontrol over costs. The Board will also pursue strategic options available forexpansion of the Company. Gilbert ChalkChairman31 January 2008 2007 2006GROUP PROFIT AND LOSS ACCOUNT Note £ £Year ended 30 September 2007 TURNOVER 1,541,862 1,422,272Cost of sales (830,327) (705,082) Gross profit 711,535 717,190 Administrative expenses (1,521,716) (1,219,813) OPERATING LOSS (810,181) (502,623) Interest receivable 31,191 4,016 Interest payable (45,236) (9,126) LOSS ON ORDINARY ACTIVITIES BEFORE (824,226) (507,733)TAXATION Taxation 62,831 37,283 RETAINED LOSS FOR THE FINANCIAL YEAR (761,395) (470,450)Retained reserves brought forward (5,163,686) (4,693,236) Revenue reserves carried forward (5,925,081) (5,163,686) Pence PenceEarnings per share (i)Basic and diluted loss per share 1.9 1.3 (i) EARNINGS PER SHARE 2007 2006 Pence Pence Loss for the year 761,395 470,450 Weighted average number of ordinary shares in issue 40,865,928 34,888,284 Basic and diluted loss per share 1.9 1.3 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. 2007 2006CONSOLIDATED BALANCE SHEET 30 September 2007 £ £ FIXED ASSETSTangible fixed assets 110,651 174,198Intangible fixed assets - 16,231 110,651 190,429 CURRENT ASSETSStock and work in progress 289,180 83,073Debtors 460,984 384,205Cash at bank and in hand 1,531,269 164,046 2,281,433 631,324 CREDITORS: amounts falling due within one year (485,810) (742,336) NET CURRENT ASSETS/(LIABILITIES) 1,795,623 (111,012) TOTAL ASSETS LESS CURRENT LIABILITIES 1,906,274 79,417 CREDITORS: amounts falling due aftermore than one year - (200,000) Provisions for liabilities and charges (28,967) (22,373) 1,877,307 (142,956) CAPITAL AND RESERVESCalled up share capital 549,481 349,481Share premium account 7,252,907 4,671,249Profit and loss account (5,925,081) (5,163,686) EQUITY SHAREHOLDERS' FUNDS 1,877,307 (142,956) 2007 2006CONSOLIDATED CASH FLOW STATEMENT Note £ £Year ended 30 September 2007 Net cash outflow from operating (ii) (1,158,482) (146,278)activities Returns on investments and servicing of financeInterest received 31,191 4,016Interest payable (45,236) (9,126) (14,045) (5,110)TaxationCorporation tax recovered 34,035 30,288 Capital expenditure and financial investmentPurchase of tangible fixed assets (76,692) (135,904)Receipts from sales of tangible fixed 749 72,500assets (75,943) (63,404) Net cash outflow (1,214,435) (184,504) FinancingIssue of ordinary share capital 2,781,658 12,000Bank loans repaid - (17,307)Other loans advanced 400,000 200,000Other loans repaid (600,000) - 2,581,658 194,693 Increase in cash in the year (iii), (iv) 1,367,223 10,189 2007 2006ii) RECONCILIATION OF OPERATING CASH FLOWS £ £ Operating loss (810,181) (502,623)Depreciation 56,581 97,478Amounts written off intangible fixed assets 16,231 1,682Profit on sale of tangible fixed asset (104) (52,512)(Increase)/decrease in stock (123,094) 11,572(Increase) in debtors (excluding corporation tax recoverable) (47,983) (36,035)(Decrease)/increase in creditors (249,932) 334,160 Net cash outflow from operating activities (1,158,482) (146,278) 2007 Otheriii) ANALYSIS OF NET FUNDS Cash non-cash 2006 flow changes 2007 £ £ £ £ Cash at bank and in hand 164,046 1,367,223 - 1,531,269 Debt due after one year (200,000) 200,000 - - (35,954) 1,567,223 - 1,531,269 iv) RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET (DEBT)/FUNDS 2007 2006 £ £ Increase in cash in the period 1,367,223 10,189Cash inflow from increase in debt - (200,000)Cash outflow from decrease in debt 200,000 17,307 Change in net funds/(debt) resulting from cash flows 1,567,223 (172,504) Net (debt)/funds at 1 October (35,954) 136,550 Net funds/(debt) at 30 September 1,531,269 (35,954) Notes to the Preliminary Statement 1. The financial information set out above does not constitute the Company's statutory accounts for the years ended 30 September 2007 and 30 September 2006 but is derived from those accounts. Statutory accounts for 2006 have been delivered to the Registrar of Companies, and those for 2007 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. The financial information has been prepared in accordance with the accounting policies adopted for the 2006 accounts. 2. It is intended that the financial statements for the year ended 30 September 2007 will be posted to shareholders in February 2008 and will also be available thereafter at the registered office, Pera Innovation Park, Nottingham Road, Melton Mowbray, Leicestershire, LE13 0PB. 3. The Annual General Meeting will be held at 11am on Thursday 13 March 2007, at the offices of Seymour Pierce, 20 Old Bailey, London, EC4M 7EN. This information is provided by RNS The company news service from the London Stock Exchange