REG - Image Scan Holdings - Final Results
13/12/2022 07:00
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RNS Number : 4558J Image Scan Holdings PLC 13 December 2022
This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No 596/2014 which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain.
IMAGE SCAN HOLDINGS PLC
("Image Scan" or the "Company")
Preliminary Results for the Year Ended 30 September 2022
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 2022.
HIGHLIGHTS
OPERATIONAL HEADLINES
· New, highly integrated ThreatScan®-AS1 portable X-Ray system
launched
· Australasia territory performed strongly
· New customer in the catalytic converter industry
· Further contracts with UK Police Forces
· Support revenues held firm despite travel restrictions
FINANCIAL HEADLINES
· Order intake £2.2m (2021: £2.8m)
· Sales £2.0m (2021: £2.9m)
· Gross profit 54% (2021:53%)
· Costs £1.4m (2021: £1.3m)
· Pre-tax loss £0.35m (2021 profit: £0.19m)
· Year-end order book £0.712m (2021: £0.52m)
· Year-end cash balance £0.69m (2021: £1.2m)
Image Scan's Chief Executive, Vince Deery, commented:
"Following the organisational changes completed during the year, I would like
to thank Bill Mawer for his leadership and contribution over the last eight
years. Furthermore, I would also like to express my appreciation to the new
Chairman Tim Jackson and the entire Board for their support in this
transitional period. Both myself and the Board take this opportunity to
commend the staff for their valued contribution during a challenging year.
Our goal is to build upon Bill's legacy while focusing on the expansion of our
higher margin portable product line which we believe is our route to returning
to profit in 2023."
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/)
-ENDS-
Image Scan Holdings
plc
Tel: +44 (0) 1509 817400
Vincent Deery CEO
Sarah Atwell-King, CFO & Company Secretary
WH Ireland Limited - Nominated Advisor and Corporate Broker Tel: +44
(0) 207 220 1666
Mike Coe/Sarah Mather (Corporate Finance)
ABOUT IMAGE SCAN HOLDINGS PLC
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 fifteen 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.
The visibility and reach of the Company's 3DX-Ray brand has been further
strengthened through a new LinkedIn profile focussed on its EOD and
counter-terrorism activities. This can be found at:
https://www.linkedin.com/company/3dx-ray/
(https://www.linkedin.com/company/3dx-ray/)
(https://www.linkedin.com/company/3dx-ray/)
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
2022 was a challenging year, balancing lower booking levels with cost
increases whilst maintaining research and development investment which lays
the foundations for a stronger 2023. We are very encouraged by our new product
offerings and the reception these have received in the marketplace both with
our partners and end users.
Introduction
For the year ended 30 September 2022 ("Year" or "Period"), the Group generated
revenues of £2.0m (2021: £2.9m), down 31%, and a loss before tax of £0.35m
(2021: profit of £0.19m). This performance was as a result of the slow
recovery from the COVID-19 pandemic in certain key markets and Government
procurement cycles, coupled with some delays with component sourcing. At 30
September 2022, the Group had net cash of £0.69m (2021: £1.2m).
The launch of new products during the Year and the continued opening up of our
markets gives us confidence for 2023.
Environmental, Social and Governance
Image Scan recognises the importance of adopting a strong environmental,
social and governance ("ESG") framework, and this guides our overarching
business objectives and is influential to serving the needs of all of our key
stakeholders. Improving Image Scan's ESG credentials is important to the
Group's development strategy. We are confident in the robust procedures we
have in place across the business and intend to build on these further in
2023.
Board Composition and Management Changes
Bill Mawer, the former Chairman and CEO, stepped down as CEO in January 2022
and retired from the Board in June 2022. Bill was appointed to the Board in
January 2014 and has played an integral part in the successful development of
the Group since then. The Board extends its thanks to Bill for his dedicated
leadership of the Group.
Following Bill's retirement, in July 2022 the following changes were made to
the Board: -
· Tim Jackson took over as Non-Executive Chairman, having
previously been a Non-Executive Director.
· Dr Richard Leaver became Non-Executive Deputy Chairman, having
previously been a Non-Executive Director.
· Vince Deery was confirmed as Chief Executive Officer following
his appointment to the interim role in January 2022. Vince has been with the
Group since 2008 and has been key in the development of the global customer
base.
· Sarah Atwell King was promoted to Chief Financial Officer.
Outlook
On behalf of the Board and management of Image Scan, I would like to thank all
of our colleagues and customers for their contribution to our business during
2022, without whom we would not be in the position we are today. The trading
performance was below expectations as government procurement continued to be
held back following the pandemic challenges that remain in some of our key
markets. Our balance sheet provides us with a strong operational and financial
platform from which to deliver growth.
We have made an encouraging start to 2023 and are confident in meeting our
expectations for the full year. Whilst there are still macroeconomic
uncertainties and challenges and the domestic economic outlook looks weak, the
Board of Directors is confident in the Group's prospects in the medium to long
term as we continue to seek to capitalise on our extended product range and
global sales channels.
Tim Jackson
CHAIRMAN
CEO REPORT
BUSINESS REVIEW
Against the backdrop of an economy still recovering from the harshest of
business interruptions, the legacy of the pandemic continues to impact the
business and the industry. The product placement, marketing and sales process
has yet to return to the levels experienced prior to the pandemic.
Customer visits, demonstrations and trade shows are recovering but still have
some way to go to return to historic levels. We commenced the Year with a
relatively low order book, experiencing delays and cancellations in government
tendering activities, while global supply chain disruptions have adversely
impacted our lead times, extending delivery times for customers.
Our customer service team has ensured that the installed base continues to
receive the highest level of support to which they have become accustomed,
despite component shortages and travel restrictions.
It is a credit to the team that in this period we have launched a new premium
portable product, ThreatScan®-AS1, positioning itself at the highest level
within the marketplace. Our staff have demonstrated great resilience and
ingenuity in resolving supply chain difficulties and meeting customer
expectations.
The Group finished the Period with a strengthened order book at £0.71m (2021:
£0.52m) which supports the Board's outlook for 2023.
OUR STRATEGY
The Group's strategy focuses on organic growth by expansion of the product
range, greater penetration of existing territories and further development and
investment in new geographic territories. The Group seeks to operate in
profitable, niche security segments for which it can create differentiated
products that it can take to market at good margins.
The Group recognises that, as a small business, it can only support a limited
range of in-house developed products and as such needs to supplement the
product range by agreements with other technology providers that can either be
integrated with our systems or offered as complimentary products.
The Group's core security expertise is the "Counter-Explosive Ordnance" market
to which it sells its portable X-ray systems. We will continue to invest in
this sector, broadening and strengthening our offer to customers as
demonstrated by the launch this Year at the Dubai Intersec security exhibition
of our ThreatScan®-AS1 product which is our highest performing product in our
portable range.
In industrial screening, we will look to retrofit the existing systems within
the customer base with current manufacturing standard equipment and the latest
improved software analysis tools. We will carefully assess the emerging
technologies replacing the combustion engine, and how they might require X-ray
technology in our continued focus in this area.
OUTLOOK
The outlook is improving with many developed countries where the Group
operates transitioning into the post-pandemic era, and experiencing a return
to normality. Current levels of demonstration and attendance at trade shows
are building and we foresee this trend continuing in the coming year. After
the Period end we have seen a noticeable recovery in trade show attendance,
enquiry, tender and demonstration activity.
An area that we look forward for continued strong performance is the
aftersales market, we have performed excellently during the Period, despite
the various challenges imposed by component supply difficulties and travel
restrictions. This has been accomplished by the dedication of our team and the
strength of our partner links in countries and regions still imposing
restrictions.
In the medium term we expect Government Procurement programmes that were
delayed and / or cancelled to re-emerge,
Our focus will be on our core expertise, in particular, our portable X-ray
products and associated software to enable us to maintain and grow market
share by outweighing the growing competitive nature of this market; and by
moving the product offering range up and across into markets with higher
performance and higher value systems.
The first product development in this higher-value range has already gained
sales which were previously inaccessible to the Group. These developments
will also allow a competitive offering in some more mature geographic markets
that have previously been challenging due to our existing technology. This
on-going investment in our portable X-ray products and the software will allow
us to be strong contenders in the delayed government programmes when they
return.
The Group has slowly built upon its early sales for the AXIS-CXi cabinet X-ray
system and we hope to see these sales gain momentum as the delayed product
placement activities come to fruition. It is anticipated that this product
will grow in the coming years.
The Group's industrial sector is directly influenced by the automotive market
and, as such, the outlook remains steady. We see the deployment of our systems
in the Asian regions as being most likely as they continue to introduce
European style legislation over emission controls.
We recognise that with the decline of the internal combustion engine and the
transition to net zero, we need to identify other areas where our industrial
inspection technology would be a suitable, and cost-effective solution. We see
the internal combustion engine replacement technologies pursued by the
automotive sector as our most likely route for success. This will be a
medium-term focus.
Image Scan, like many other companies, has been impacted by disruption to
supply chains and logistics difficulties, the impact of which continues to
create challenges in both meeting customer demands and cost control. This area
will continue to require considerable focus and resource in the coming year to
ensure the competing demands of product availability and price for the
customer, versus the management of the company's stock profile.
It is anticipated that the challenges of the Year will decline in influence on
the business, but we are mindful of the global economic pressures of rising
inflation and currency variability and geo-political events which may also
impact on our markets.
We are however very encouraged by our new product offerings and the reception
these have received in the marketplace both with our partners and end users,
which coupled with a strengthened opening order book offer us confidence for a
much improved year ahead.
Vincent Deery
CHIEF EXECUTIVE OFFICER
CFO REPORT
KEY PERFORMANCE INDICATORS
2022 2021 2020 2019 2018
Order intake £2.2m £2.8m £2.4m £3.9m £2.8m
Turnover £2.0m £2.9m £3.5m £2.4m £3.5m
Gross margin 54% 53% 49% 54% 47%
Cash balance £690k £1,186k £1,409k £640k £782k
Inventory Balance £629k £393k £451k £483k £939k
FINANCIAL RESULTS
Revenue in the Year fell by £0.9m to £2.0m (2021: £2.9m) due mainly to
ongoing COVID-19 restrictions in our Asian and Far East markets which saw year
on year sales in these regions fall by £0.73m to £0.61m (2021: £1.34m). We
expect this to start returning to normal levels as these markets open up and
Government's invest in their national security.
The Group, like many manufacturers, faced the challenge in the Year of both
sourcing components and increased component prices. Additional pressures on
our costs included increased delivery charges and a fluctuating exchange rate
and in the face of these pressures, it is a credit to the team that a gross
margin of 54% (2021: 53%) was delivered. This was achieved in part by forward
buying of components which results in an increase in stock levels at the
Year-end.
Cost of sales were also impacted by the decrease in the dollar exchange rate
over the Year and particular the Year-end rate of in September £1: $1.106
(2021 £1:$1.347) which is the basis of the balance sheet valuation. As the
Group does not trade in high volume in currency, we are dependent on natural
hedges between purchases and sales to manage currency fluctuations.
Costs increased by £0.10m to £1.4m (2021: £1.3m) as government support was
withdrawn and the Group invested in marketing activity as markets began to
open up. We expect to see the benefit of this marketing activity in 2023.
The combination of reduced sales and increased costs led to the Group making a
pre-tax loss of £0.35m (2021: profit of £0.19m) which is disappointing
following two years of profit.
The Group continued to invest in our product range and 2022 saw the launch of
the new premium portable X-ray product, the ThreatScan®-AS1 and the first
contract was delivered in the Year. This investment will show returns in
2023 as sales of the product impact performance. Part of this expenditure will
be re-couped via R&D tax credits.
The increase in value of inventories, trading losses and the development costs
delivered a reduction of cash balance by £0.50m to £0.69m (2021: £1.2m).
A focus for 2023 will be on cost reduction to ensure that funds continue to be
available for the business to invest in its products and their marketing to
deliver profits in future years.
Sarah Atwell King
CHIEF FINANCIAL OFFICER
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2022
Note
2022 2021
£ £
REVENUE 2,002,299 2,873,595
Cost of sales (924,380) (1,359,309)
Gross profit 1,077,919 1,514,286
Administrative expenses (1,421,456) (1,325,565)
OPERATING (LOSS)/PROFIT (343,537) 188,721
Finance income 440 103
Interest payable and similar charges (6,426) -
(LOSS)/PROFIT BEFORE TAXATION (349,523) 188,824
Taxation 77,998 51,072
(LOSS)/PROFIT AND TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR FROM
CONTINUING OPERATIONS ATTRIBUTABLE TO THE EQUITY OWNERS OF THE PARENT COMPANY
(271,525) 239,896
Pence Pence
(Loss)/earnings per share 2
Basic (0.20) 0.18
Diluted (0.20) 0.17
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 September 2022
Note
2022 2021
£ £
NON-CURRENT ASSETS
Intangible assets 257,554 109,590
Property, plant and equipment 13,559 17,795
Right of use asset 193,053 232,428
464,166 359,813
CURRENT ASSETS
Inventories 628,903 393,074
Trade and other receivables 638,292 740,849
Cash and cash equivalents 689,543 1,186,423
1,956,738 2,320,346
TOTAL ASSETS 2,420,904 2,680,159
CURRENT LIABILITIES
Trade and other payables 793,459 752,280
Lease liability 37,625 37,625
Warranty provision 37,930 45,640
869,014 835,545
NON-CURRENT LIABILITIES
Lease liability 164,128 195,327
164,128 195,327
NET ASSETS 1,387,762 1,649,287
EQUITY
Share capital 1,368,546 1,363,546
Share premium account 8,332,910 8,327,910
Profit and loss account (8,313,694) (8,042,169)
TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS 1,387,762 1,649,287
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2022
Share capital Share premium Profit and loss account
£ £ £ Total
£
As at 1 October 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
As at 30 September 2021 1,363,546 8,327,910 (8,042,169) 1,649,287
Shares issued in the year 5,000 5,000 - 10,000
Loss for the year and total comprehensive loss for the year - - (271,525) (271,525)
As at 30 September 2022 1,368,546 8,332,910 (8,313,694) 1,387,762
CONSOLIDATED CASH FLOW STATEMENT
Year ended 30 September 2022
Note
2022 2021
£ £
Cash flows from operating activities
Operating (loss)/ profit (343,537) 188,721
Adjustments for:
Depreciation 6,098 7,689
Amortisation of intangible assets 29,381 19,432
Amortisation of right of use asset 39,375 43,487
(Decrease)/increase in impairment of inventories (11,263) 99
(Increase)/decrease in inventories (224,566) 57,401
Decrease in trade and other receivables 132,441 (426,324)
Increase in trade and other payables 41,179 44,650
(Decrease)/increase in warranty provisions (7,710) 11,890
Lease interest - 4,142
Cash used in operating activities (338,602) (48,813)
Corporation tax received 48,114 51,072
Net cash flows (used in)/generated from operating activities (290,488) 2,259
Cash flows from investing activities
Interest received 440 103
Purchase of intangibles (177,345) (111,183)
Purchase of property, plant and equipment (1,862) (18,287)
Net cash used in investing activities (178,767) (129,367)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of bank loan - (50,000)
Lease payments (capital and interest) (37,625) (45,963)
Proceeds from issue of share capital 10,000 -
Net cash used in financing activities (27,625) (95,963)
Net (DECREASE)/INCREASE in cash and cash equivalents (496,880) (223,071)
Cash and cash equivalents at beginning of year 1,186.423 1,409,494
Cash and cash equivalents at end of year 689,543 1,186,423
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 UK adopted international accounting standards, 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 2022 or 30 September 2021
but is derived from those accounts. Statutory accounts for 2021 have been
delivered to the Registrar of Companies, and those for 2022 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. 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. Some of the
share options could potentially dilute basic earnings per share in the future
but were not included in a calculation of diluted earnings per share in the
current year. This is because the exercise price of the share options is below
the average share price in the year and, in light of the losses being
reported, all options are therefore considered to be anti-dilutive.
2022 2021
£ £
(Loss)/profit for the year (271,525) 239,896
Weighted average number of ordinary shares in issue 136,753,207 136,354,577
Number of diluted shares 136,757,988 136,463,866
Basic (loss)/profit per share (0.20)p 0.18p
Diluted (loss)/profit per share (0.20)p 0.17p
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