REG - Image Scan Holdings - Final Results
07/12/2021 07:00
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RNS Number : 7505U Image Scan Holdings PLC 07 December 2021
The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU) No.
596/2014. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.
7 December 2021
Image Scan Holdings plc
("Image Scan", the "Company" or the "Group")
PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2021
Image Scan (AIM: IGE), the specialist supplier of X-ray screening systems to
the security and industrial inspection markets, today announces preliminary
results for the year ended 30 September 2021.
HIGHLIGHTS
· Order intake increased to £2.8m (2020: £2.4m)
· Sales of £2.9m following subdued first half (2020: £3.5m).
· Tight control of overheads, reduced by 18% to £1.3m (2020: £1.6m)
· Pre-tax trading profit of £189k (2020: £112k)
· Strong year-end cash balance of £1.2m (2020: £1.4m)
· Large portable X-ray order for an Asian government
· First orders for new cabinet X-ray systems
· First orders for government customers in the USA and Canada
· Chairman announces role change as part of succession plan
Bill Mawer, Chairman and Chief Executive of Image Scan commented: "It is
gratifying to be able to report that a second profitable year has been
delivered, despite the continuing Impact of the COVID-19 pandemic on our
customers, our supply chains and our staff. Important "firsts" in the year
included: first sales of the AXIS-CXi cabinet X-ray machine, first portable
X-ray sales in North America and key new customers in the UK. The product
development programme continues to move forward, and I look forward to
launching more new products in FY22.
As part of the Board's succession plan, I will relinquish the CEO role in
January and we will appoint Vincent Deery, currently Sales Director, as
Interim CEO. Vince and I have worked closely on the development of the organic
growth plan for the business, and I have every confidence in his ability to
play a larger part in implementing that plan. I will continue to drive
strategy and product development, allowing Vince to focus on sales and
operations. All the board remain optimistic for the future of Image Scan."
-END-
For further information on the Company, please visit: www.ish.co.uk
(http://www.ish.co.uk/) and for further information on its products, please
visit: www.3dx-ray.com (http://www.3dx-ray.com/)
Enquiries:
Image Scan Holdings plc Tel: +44 (0) 1509 817 400
William Mawer, Chairman and Chief Executive Officer ir@ish.co.uk (mailto:info@ish.co.uk)
Sarah Atwell King, Finance Director and Company Secretary
W H Ireland - Nominated Adviser and Broker Tel: +44 (0)20 7220 1666
Mike Coe/Sarah Mather (Corporate Finance)
About Image Scan Holdings plc
The core activity of the Group is the manufacture of portable X-ray systems
for security and counter terrorism applications. The Group recently launched a
cabinet X-ray machine and is replacing its Axis range of checkpoint X-ray
systems with new machines developed with a partner. All these products are
taken to market across the world through a strong network of international
partners.
In addition, over the last fourteen years, Image Scan has developed and
manufactured industrial X-ray inspection systems, the MDXi range. The primary
market for these systems is in automotive emissions control where they are
used for quality control inspection of catalytic converters and diesel
particulate filters.
For further information on the Company, please visit: www.ish.co.uk
(http://www.ish.co.uk/) - and for further information on its products,
please visit: www.3dx-ray.com (http://www.3dx-ray.com/)
CHAIRMANS STATEMENT
OVERVIEW
I am pleased to announce that the Group has been profitable for the second
year in succession. Whereas COVID-19 only impacted the second half of last
year, in FY2021 the pandemic has been a constant presence for the full year,
impacting us across the full range of our activities. Our sales teams have
been unable to carry out face to face customer demonstrations, trade shows
have been cancelled, supply chains have been disrupted and customer spending
has been diverted. It is a testimony to the resilience of the Image Scan team
that, despite this adverse environment, the value of orders won has increased,
new products have found their first customers, important new markets have been
opened, and the research and development ("R&D") programme has pushed
ahead.
FINANCIAL RESULTS
After a slow start, order intake improved as the year progressed and included
a 30-unit order for portable systems for an Asian customer. The order came
through one of several reliable partners in the region who supply our systems
to a variety of Government agencies in their territories. Order intake was up
in the year by 16% to £2.8m (2020: £2.4m). Sales followed a similar pattern,
with second half sales over double those seen in the first half. Total sales
for the full year were £2.9m (2020: £3.5m). Despite the impact of the
pandemic on overseas travel, service revenue remained constant. Strong margins
on portable X-ray sales pushed overall margins to 53% (2020: 49%).
Overheads for the year declined by 18% to £1.3m (2020: £1.6m). Contributors
to this decline included reduced travel and trade shows, selective use of the
Government furlough scheme in quiet periods, lower R&D spend and with
qualifying costs being capitalised under IAS38. The R&D spend reduction
was due to less money being spent on prototypes and lower software spend, as
engineer time was allocated to externally funded development projects.
The combination of strong margins and lower overheads led to the Group
recording a pre-tax trading profit for the year of £189k (2020: £112k). Much
of the product development effort to the Group is now focussed on development
of new product ranges, such as cabinet and conveyor X-ray systems which are
expected to generate new revenue streams for the business. The Group is
therefore in a position to apply the policy of capitalising its new product
development spend under IAS38 Intangible Assets. Costs of £96k (2020: £nil)
have been capitalised resulting in the reportable pre-tax profit for the year
of £189k.
The balance sheet strengthened as a result of the financial performance of the
business and cash balances remained strong but fell in the year to £1.2m
(2020: £1.4m). This was due to changes in working capital mix, because the
commercial terms for two contracts to government bodies and the continuing
reduction in stock balances, together with the early repayment of the Bounce
Back Loan.
The Group finished the year with an order book of £516k (2020: £633k) which
has the potential to be fulfilled in the first quarter.
BUSINESS REVIEW
The business started the year with a relatively weak order book, which
impacted first half performance, and the continuing effect of COVID-19 could
be seen in delays to government procurement programmes. Although order intake
improved as the year progressed, the number of portable X-ray units sold
declined by 20% compared to the prior year.
The sales process continued to be impacted by the lack of security technology
trade exhibitions and the inability to travel abroad to carry out live
customer demonstrations. These challenges were partially overcome by working
closely with our international distributers, improved on-line marketing, and
the development of a new demonstration facility, fully equipped for on-line
demonstrations, at the Group's site near Loughborough. Some important new
customers were acquired, including regional and national bomb squads in
Australia, the UK, Canada, and the USA. Since the year end, an additional
order has been received from a federal agency in the USA, further vindication
of our recruitment of an ex-US Marine Corps bomb technician to take our
products to that market.
The customer service team has also been subjected to travel restrictions that
are only now starting to be released. With over 50 heavily used industrial
screening systems deployed from Mexico to Macedonia and from South Africa to
Shanghai, the team has had to find inventive solutions to carry out system
installation, training, routine maintenance, and repair. The fact that all our
customer support contracts have been renewed through this period is testimony
to the combination of remote diagnostics, on-line training, and new service
partners put in place by the team.
Throughout the period, global supply chains have been impacted by a variety of
factors and, over the past year we have had to deal with shortages in items as
varied as microprocessors and packaging materials. So far, these risks have
been mitigated successfully, though it may, in future, be necessary to hold
strategic stock of key components.
A suite of new measurement techniques has been developed for our MDXi
industrial inspection systems and delivered to the customer. Employment of
part of our software team on this project has had some impact on internally
funded product development but that impact is now being recovered. It is hoped
these new techniques will lead to wider adoption of our industrial inspection
systems.
The new product development programme continued to make good progress and
launches of both portable and conveyor X-ray systems are anticipated for early
in FY 2022.
ADAPTING THE OPERATION OF THE BUSINESS
In common with other manufacturing companies, Image Scan has had to adapt its
operations in the light of the ongoing threat posed by the COVID-19 pandemic.
The end of FY2021 coincided with the gradual opening of international travel,
but infection levels in the UK remain high. The rate of serious illness has
been eased by high vaccination take up in the UK. Since the year end, the
situation has again started to become more serious and the Board continues to
monitor it carefully.
The Group has invested in its facility to increase safety through improving
ventilation, the provision of screens between workspaces, and development of
clear protocols for visitors.
It has started to implement a flexible working regime for some categories of
staff, combining working from home with a specified minimum number of days in
the facility. We look to regain the benefits of face-to-face interaction
within teams, while keeping control on the total number of staff in the
building. We will remain flexible and will carefully monitor future
developments.
OUR STRATEGY
The Group's short-term strategy continues to be to pursue organic growth
through expansion of the product range, selling these products in a wider
range of market segments, and filling in gaps in its geographic reach. The
Group seeks to develop profitable niche security segments for which it can
create or source highly differentiated products that it can take to market at
good margins.
Where it is not cost-effective to entirely develop a product ourselves, we
will look to form partnerships with other companies in one of two models:
collaborations, within which technology resources of multiple companies are
combined to create new products; and factoring, where we will use our
extensive partner network to sell carefully selected third party products to
our customers. This allows us to further expand the product range and increase
sales and service revenues while keeping our own R&D investment at
affordable levels.
The Group's core security segment is the "bomb squad" market to whom it sells
its portable X-ray systems. We will continue to invest in this sector,
broadening and strengthening our offer to customers. The new cabinet and
conveyor X-ray systems create new opportunities in building security, mail
screening, prisons and sports stadia. X-ray systems and will increase
recurring service and support revenue as new systems are deployed.
In industrial screening, we will look for customer investment to enhance the
MDXi product range and we have recently delivered a suite of sophisticated new
measurement methods for inspection of catalytic converters. We will continue
to look for new customers in this sector, while selectively investigating
opportunities for our unique inspection and measurement technologies in the
broader industrial X-ray market.
The Board's longer-term ambition to increase the critical mass of the business
through carefully selected acquisitions remains. However, we recognise that
the opportunities will be limited by the current low share price and market
capitalisation.
THE OUTLOOK FOR IMAGE SCAN
The impact of the COVID-19 pandemic has been felt throughout the financial
year and infection rates in the UK and elsewhere remain high. Only now are
security technology trade shows and travel for customer demonstrations, two
important parts of our product sales process, starting to resume. Servicing of
industrial X-ray machines, an important source of recurring revenue, has also
been impacted and the team have done an exceptional job to retain this revenue
and keep our customers happy. The Board expect it will be at least a further
six months before travel-based activities such as these, return to something
like pre-pandemic levels.
The year has continued to see delays in the larger Government procurements of
portable X-ray systems. However, a number of these programmes are now
underway, and we are participating in the early phases of several Government
competitions. The on-going investment in our portable X-ray products and the
software which supports them should make us strong contenders in these
programmes. The portable X-ray market is increasingly competitive, with
several new players emerging in recent years, and this drives both our
continued evolution of our ThreatScan systems and our diversification into
other X-ray screening systems and markets. We expect the ongoing revenue from
routine portable X-ray purchases to be steady, with year-to-year growth
dependant on the larger system procurements. The Group's success in winning
its first portable X-ray contracts in the US and Canada, starts to build a
customer base in these important markets, both increasing our visibility and
giving us a platform for further growth.
The Group has won its first customers for the AXIS-CXi cabinet X-ray system
and will launch the first versions of the new AXIS conveyor X-ray range early
in FY2022. Revenue contribution from these systems will increase over the next
few years. Our manufacturing partner for conveyor X-ray has made a wide range
or screening systems available to us and we will selectively add these to our
portfolio. A key benefit of achieving installations for cabinet and conveyor
systems is the legal requirement for regular servicing that will, over time,
increase our recurring after-market revenues.
Although the automotive sector has been heavily impacted by the pandemic, the
Group has continued to receive orders for new industrial inspection systems in
FY2021, with demand more robust than anticipated. We expect tighter emissions
control legislation to continue to drive demand for installations in India and
China and there may be opportunities to replace some older systems. The
successful development of a new suite of measurement techniques creates
opportunities for further deployment with existing customers and gives us
stronger arguments for adoption of X-ray screening by other catalytic
converter manufacturers. We recognise that with use of petrol and diesel
engines set to decline, we need to find alternative outlets for our industrial
inspection technology, and this will be a focus over the medium term.
Global supply chains are currently suffering considerable disruption caused by
the combination of COVID-19, manufacturing capacity limitations, sea freight
shortages and, in the case of the UK, BREXIT. Image Scan is not immune from
these global issues and continued diligence will be required if potential
increases to product costs and customer lead times are to be avoided.
As anticipated, the past year has been challenging, and some of those
challenges continue to impact our activities. However, we enter the new
financial year with a strong cash balance, a rapidly expanding product range
and important new customers. These are reasons for us to be optimistic for our
ability to achieve organic growth in revenues and profits as market activity
starts to return to more normal levels.
In the longer term, the Board continues to believe that a blend of organic and
acquisition growth is the best way to deliver shareholder value, the greater
scale providing both protection from market shocks and stronger amortisation
of the relatively high fixed costs associated with a stock market listing.
SUCCESSION PLANNING
It is announced that, as the first phase of Image Scan's succession plan, from
1 January 2022, William Mawer, currently Chairman and Chief Executive of Image
Scan, will relinquish the role of Chief Executive and take up a position as
Executive Chairman. He will continue to take responsibility for strategy,
investor relations and product development.
At the same time, Vincent Deery, currently Sales Director, will take up a
position as Interim CEO, adding operations and related matters to his current
responsibilities for sales and service.
Sarah Atwell King will continue as Finance Director and Company Secretary,
while leading on corporate governance, risk management and process
improvement. Tim Jackson and Dr Richard Leaver will remain in place as
Non-Executive Directors.
Over the next 6 months, the Board will support Vince in the Interim CEO role,
whilst assessing the optimal leadership structure to drive the Group forwards
and may announce further changes at the end of that period.
STAFF
Our staff have worked exceptionally hard to maintain the performance of the
business through this difficult period and the Board is grateful for their
efforts.
William Mawer
CHAIRMAN
7 December 2021
IMAGE SCAN HOLDINGS PLC
As at 30 September 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Note
2021 2020
£ £
REVENUE 2,873,595 3,484,410
Cost of sales (1,359,309) (1,760,242)
Gross profit 1,514,286 1,724,168
Administrative expenses (1,325,565) (1,612,366)
OPERATING PROFIT 188,721 111,802
Finance income 103 993
PROFIT BEFORE TAXATION 188,824 112,795
Taxation 51,072 25,160
PROFIT AND TOTAL COMPREHENSIVE INCOME FOR THE YEAR FROM CONTINUING OPERATIONS
ATTRIBUTABLE TO THE EQUITY OWNERS OF THE PARENT COMPANY
239,896 137,955
Pence Pence
Earnings per share
Basic 3 0.18 0.10
Diluted 3 0.17 0.10
IMAGE SCAN HOLDINGS PLC
As at 30 September 2021
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note
2021 2020
£ £
NON-CURRENT ASSETS
Intangible assets 109,590 17,839
Property, plant and equipment 17,795 7,197
Right of use asset 232,428 39,664
359,813 64,700
CURRENT ASSETS
Inventories 393,074 450,574
Trade and other receivables 740,849 314,525
Cash and cash equivalents 1,186,423 1,409,494
2,320,346 2,174,593
TOTAL ASSETS 2,680,159 2,239,293
CURRENT LIABILITIES
Trade and other payables 752,280 707,630
Lease liability 37,625 38,522
Warranty provision 45,640 33,750
Bank loan - 3,147
835,545 783,049
NON-CURRENT LIABILITIES
Bank loan - 46,853
Lease liability 195,327 -
195,327 46,853
NET ASSETS 1,649,287 1,409,391
EQUITY
Share capital 1,363,546 1,363,546
Share premium account 8,327,910 8,327,910
Profit and loss account (8,042,169) (8,282,065)
TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS 1,649,287 1,409,391
IMAGE SCAN HOLDINGS PLC
As at 30 September 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED Share capital Share premium Profit and loss account
£ £ £ Total
£
As at 1 October 2019 1,363,546 8,327,910 (8,423,897) 1,267,559
Profit for the year and total comprehensive income for the year - - 137,955 137,955
Transactions with owners:
Share-based transactions - - 3,877 3,877
As at 30 September 2020 1,363,546 8,327,910 (8,282,065) 1,409,391
Profit for the year and total comprehensive income for the year - - 239,896 239,896
Transactions with owners:
Share-based transactions - - - -
As at 30 September 2021 1,363,546 8,327,910 (8,042,169) 1,649,287
IMAGE SCAN HOLDINGS PLC
As at 30 September 2021
CONSOLIDATED CASH FLOW STATEMENT
Note
2021 2020
£ £
Cash flows from operating activities
Operating profit 188,721 111,802
Adjustments for:
Depreciation 7,689 9,414
Amortisation of intangible assets 19,432 12,049
Amortisation of right of use asset 43,487 39,269
Impairment of inventories 99 (58,960)
Decrease in inventories 57,401 391,475
(Decrease)/increase in trade and other receivables (426,324) 349,434
Increase/(decrease) in trade and other payables 44,650 (140,407)
Increase in warranty provisions 11,890 17,750
Share-based payments - 3,877
Lease interest 4,142 2,253
Cash (used in)/generated from operating activities (48,813) 737,956
Corporation tax received 51,072 32,310
Net cash flows (used in)/generated from operating activities 2,259 770,266
Cash flows from investing activities
Interest received 103 993
Purchase of intangibles (111,183) (4,555)
Purchase of property, plant and equipment (18,287) (5,035)
Net cash used in investing activities (129,367) (8,597)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of bank loan - 50,000
Repayment of bank loan (50,000) -
Lease payment (45,963) (42,664)
Net cash (used in)/generated from financing activities (95,963) 7,336
Net (DECREASE)/INCREASE in cash and cash equivalents (223,071) 769,005
Cash and cash equivalents at beginning of year 1,409,494 640,489
Cash and cash equivalents at end of year 1,186,423 1,409,494
Notes to the preliminary statement
1. Basis of preparation
While the financial information included in this annual financial results
announcement has been prepared in accordance with the recognition and
measurement principles of International Accounting Standards in conformity of
the requirements of the Companies Act 2006, this announcement does not contain
sufficient information to comply therewith.
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 30 September 2021 or 30 September 2020
but is derived from those accounts. Statutory accounts for 2020 have been
delivered to the Registrar of Companies, and those for 2021 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 498 of the Companies Act 2006.
2. IFRS 2 'Share-based payments'
Operating expenses includes a charge of £nil (2020: £3,877) after valuation
of the Group'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.
3. Earnings per share
Diluted profit per share is calculated by adjusting the weighted average
number of ordinary shares in issue on the assumption of conversion of dilutive
potential ordinary shares. The Company's dilutive potential ordinary shares
are shares issued under the Company's Enterprise Management Incentive (EMI)
scheme and options issued under the Company's Unapproved scheme.
2021 2020
£ £
Profit for the year 239,896 137,955
Weighted average number of ordinary shares in issue 136,354,577 136,354,577
Number of diluted shares 137,868,758 136,463,866
Basic profit per share 0.18p 0.10p
Diluted profit per share 0.17p 0.10p
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