REG - Image Scan Holdings - Interim Results

Image Scan HoldingsAnnouncement

27/04/2022 07:00

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RNS Number : 4361J  Image Scan Holdings PLC  27 April 2022

Image Scan Holdings plc

Interim Report 2022

27/04/2022

 

 

 

IMAGE SCAN HOLDINGS PLC

("Image Scan" or the "Company")

(AIM: IGE)

 

INTERIM RESULTS

 

Image Scan, (AIM: IGE) specialists in the field of X-ray imaging for the
security and industrial inspection markets, today announces its interim
results for the six months ended 31 March 2022. During the first six months
the overall level of trading was disappointing, though some important new
customers were acquired, and a significant new product was launched.

Financial summary:

·    Order intake increased to £1,029k (H1 2021: £938k)

·    Revenue was £790k (H1 2021: £868k)

·    Gross profit margin of 52% (H1 2021: 55%)

·    Loss before taxation of £345k (H1 2021: loss of £201k)

·    Period end bank balance was £777k (H1 2021: £1.1m)

·    Period end orderbook of £721k (H1 2021: £702k)

 

Operational highlights:

·    New, highly integrated ThreatScan®-AS1 portable X-Ray system
launched

·    New portable X-ray orders from UK police forces

·    First order from a US federal agency in the period

·    New global customer for industrial X-ray systems

·    All customer deadlines met despite global supply chain disruptions

As indicated in our trading update on 22 February 2022, while we expect the
overall financial year to be stronger in H2 2022, it is unlikely H2 2022 will
be sufficiently strong to enable the Company to fully recover the H1 2022
loss. We therefore expect to trade in line with market expectations for the
year as a whole.

 

Bill Mawer, Chairman and Chief Executive Officer of Image Scan commented: "The
overall level of trading in our first half is disappointing, an indication of
the sluggish recovery of our markets from the impact of the COVID-19 pandemic.
We consider the ThreatScan®-AS1 portable X-ray system to be our most
significant product launch for some years. This project has aimed to develop
the best performing portable X-ray system in the world and the initial
customer response has been very positive. We look for a number of delayed
government procurements for portable X-ray systems to finally close and are
working hard to ensure this happens early in the second half. The slowdown in
the automotive market is impacting our industrial activity, though the
acquisition of a new customer in this space is a positive development."

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.

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, Executive Chairman                           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) 207 220 1666

 Mike Coe/Sarah Mather (Corporate Finance)

 

Chairman's statement

Introduction

Image Scan Holdings plc is a specialist in innovative X-ray technology,
operating globally in the security and industrial inspection sectors. The
Company's principal activity is the design, manufacture, and supply of both
portable and fixed X-ray security screening systems to governments, security
organisations and law enforcement agencies. The Company also supplies
high-quality screening systems used in the manufacture of catalytic converters
and diesel particulate filters.

 

Financial results

Order intake for the first six months ended 31 March 2022 ("H1 2022")
increased by 10% to £1,029k (H1 2021: £938k) and included the acquisition of
some significant new customers for both industrial and security systems.
Revenues declined by 9% to £790k (H1 2021: £868k). Gross margin on those
revenues was at 52% (H1 2021: 55%), the reduction in part due to increased
costs for materials, components and shipping.

 

Operating expenses increased to £752k (H1 2021: £682k), reflecting the loss
of government COVID-19 support schemes and higher expenditure on marketing and
travel. The latter was driven by the re-opening of travel routes and the
return of security trade shows, which provide an important showcase for the
Company's products. The overall effect of reduced sales and margin, coupled
with higher costs, led to a loss in H1 2022 of £345k (H1 2021: loss of
£201k).

 

Stock increased to £581k (H1 2021: £366k). Part of this increases was driven
by decisions to hold higher than normal quantities of parts, in particular
electronic components, as a buffer against anticipated shortages and price
increases. The process of amortising appropriate research and development
spend, which began in FY 2021, led to an increase in non-current assets to
£425k (H1 2021: £360k).

 

The Company finished H1 2022 with an orderbook of £721k (H1 2021: £702k) and
positive cash balance of £777k (H1 2021: £1.1m).

 

 

Overview

As in the same period last year, the overall level of trading was
disappointing, with delays to several significant overseas government
procurements. However, our high-value ThreatScan®-LSC portable X-ray system,
which combines large format and compact detector panels in a single package,
is proving popular with UK police forces. We now have three customers in this
sector. We have also received a portable X-Ray order from a US Federal agency
and found new customers for the Axis-CXi cabinet X-ray system.

An important milestone in H1 2022 was the market launch of the new
ThreatScan®-AS1 portable X-Ray system. This is the first time the Company has
used amorphous silicon detector technology, which is the same technology used
in the majority of medical X-ray systems. The new system is highly integrated,
combining generator, detector panel, computer, touch-screen display, Wi-Fi
unit and power supplies in a single rugged case. A second tablet computer adds
further flexibility in the use of the system. In what has become a crowded
market, this bold move by the Company aims to provide the best performing
portable X-ray system in the world. Initial response from early demonstrations
in the Middle East and the UK, has been positive. The system will be
demonstrated at security trade shows in Singapore and North America in the
next few months.

Development of the new Axis conveyor X-ray systems was delayed somewhat due to
the focus on the ThreatScan®-AS1 which is now complete, and the system will
be offered to customers in the second half of FY2022. Following signature of a
distribution agreement, we added the Serstech range of portable chemical
analysers to our product range and are now presenting these to our global
customers and partners. We are also offering other third-party products to
customer and distribution partners through our website.

In the industrial market, with the automotive industry heavily impacted by
COVID-19, it is encouraging that the business was both able to gain a new
customer and received follow-on orders from existing customers. All our
industrial service contracts were maintained through the continuing pandemic,
despite the difficulties arising from travel restrictions.

Global supply chains have been considerably disrupted by multiple factors and
this is reflected in price inflation and shortages across multiple commodities
and components. Transport costs have also increased dramatically. The Company
has worked hard to isolate itself as far as possible from the effects of these
trends. However, we have had to accept higher prices for scarce electronics
components and have taken decisions to protect production schedules by holding
higher stock levels of certain items than would be normal to ensure customer
deliveries continue to be made on time.

Outlook

The pandemic continues to impact global trade and travel, and only recently
has attendance at security trade shows and demonstrations to overseas
customers restarted. This has been a far from ideal environment in which to
launch our ambitious new portable X-ray system but, with additional
demonstration units in production, promotion of this important system is a key
focus for H2 2022. We look for a number of delayed government procurements for
portable X-ray systems to finally close and are working hard to ensure this
happens sufficiently quickly to impact second half sales for FY 2022.

The automotive sector will be slow to recover from COVID-19 and our business
in this sector is likely to be impacted while our customers adjust their
manufacturing footprint to reflect the magnitude and distribution of global
demand for catalytic converters. This makes our success in winning a new
customer even more important, and it is to be hoped that their trial of the
first machine leads to the same type of global deployment carried out by our
other industrial customers. We have now successfully imaged components for an
automotive fuel cell manufacturer and will continue to explore opportunities
in this area.

As indicated in our trading update on 22 February 2022, while we expect the
overall financial year to be stronger in H2 2022, it is unlikely H2 2022 will
be sufficiently strong to enable the Company to fully recover the H1 2022
loss. We therefore expect to trade in line with market expectations for the
year as a whole.

 

 

Bill Mawer

Executive Chairman

27/04/2022

 

Consolidated income statement

For the six months ended 31 March 2022

 

                                Note  Six months      Six months      Year ended

                                      ended           ended           30 September

                                      31 March 2022   31 March 2021    2021

                                      (Unaudited)     (Unaudited)     (Audited)

                                      £'000           £'000           £'000
 Revenue                              790             868             2,873
 Cost of sales                        (383)           (387)           (1,359)
 Gross profit                         407             481             1,514
 Operating expenses                   (752)           (682)           (1,325)
 Operating (loss)/profit              (345)           (201)           189
 Finance income                       -               -               -
 Loss/(profit) before taxation        (345)           (201)           189
 Taxation                             -               -               51
 Loss/(profit) for the period         (345)           (201)           240

 

                                Pence   Pence   Pence
 Earnings per share
 Basic profit per share     3   (0.25)  (0.15)  0.18
 Diluted profit per share       (0.25)  (0.15)  0.17

 

 

Consolidated statement of changes in equity

For the six months ended 31 March 2022

 

                                                    Note  Six months      Six months      Year ended

                                                          ended           ended           30 September

                                                          31 March 2022   31 March 2021    2021

                                                          (Unaudited)     (Unaudited)     (Audited)

                                                          £'000           £'000           £'000
 Opening equity shareholders' funds                       1,649           1,409           1,409
 Shares Issued                                            10              -               -
 (Loss)/profit attributable to equity shareholders        (345)           (201)           240
 Closing equity shareholders' funds                       1,314           1,208           1,649

 

Consolidated statement of financial position

As at 31 March 2022

 

                                 As at           As at           As at

                                 31 March 2022   31 March 2021   30 September

                                 (Unaudited)     (Unaudited)      2021

                                 £'000           £'000           (Audited)

                                                                 £'000
 Non-current assets
 Intangible and tangible assets  425             61              360
                                 425             61              360
 Current assets
 Inventories                     581             366             393
 Trade and other receivables     591             404             741
 Cash and cash equivalents       777             1,048           1,186
                                 1,949           1,818           2,320
 Total assets                    2,374           1,879           2,680
 Current liabilities
 Trade and other payables        874             671             836
 Non-current liabilities         186             -               195
 Total liabilities               1,060           671             1,031
 Net assets                      1,314           1,208           1,649
 Equity
 Share capital                   1,368           1,363           1,363
 Share premium account           8,333           8,328           8,328
 Retained earnings               (8,387)         (8,483)         (8,042
 Equity shareholders' funds      1,314           1,208           1,649

 

Consolidated cash flow statement

For the six months ended 31 March 2022

 

                                                     Six months      Six months ended 31 March 2021 (Unaudited) £'000   Year ended

                                                     ended                                                              30 September

                                                     31 March 2022                                                       2021

                                                     (Unaudited)                                                        (Audited)

                                                     £'000                                                              £'000
 Cash flows from operating activities
 Operating (loss)/profit                             (345)           (201)                                              189
 Adjustments for:
 Depreciation                                        7               10                                                 8
 Amortisation of Intangibles                         12              -                                                  19
 Impairment of inventories                           5               9                                                  -
 Amortisation of right of use asset                  23              21                                                 43
 (Decrease)/increase in provision for warranty       (13)            (9)                                                12
 (Increase)/decrease in inventories                  (196)           75                                                 57
 Decrease/(increase) in trade and other receivables  148             (90)                                               (426)
 Increase/(decrease) in trade and other payables     67              (98)                                               45
 Lease Interest                                      (3)             -                                                  4
 Net cash used in operating activities               (295)           (283)                                              (49)
 Corporation tax recovered                           (5)             (1)                                                51
 Net cash outflow from operating activities          (300)           (284)                                              2

 Cash flows from investing activities
 Interest received                                   -               -                                                  -
 Purchase of intangible and tangible assets          (103)           (7)                                                (130)
 Net cash used in investing activities               (103)           (7)                                                (130)

 Cash flows from financing activities
 Share Issue                                         10
 (Repayment)/proceeds from bank loan                 -               (50)                                               (50)
 Lease payments                                      (16)            (21)                                               (46)
 Net cash used in financing activities               (6)             (71)                                               (96)

 Net decrease in cash and cash equivalents           (409)           (362)                                              (224)
 Cash and cash equivalents at beginning of period    1,186           1,410                                              1,410
 Cash and cash equivalents at end of period          777             1,048                                              1,186

 

Notes to the unaudited interim financial statements

For the six months ended 31 March 2022

 

1 Basis of preparation

The interim financial statements, which are unaudited, have been prepared on
the basis of the accounting policies expected to apply for the financial year
to 30 September 2022 and in accordance with recognition and measurement
principles of International Financial Reporting Standards ('IFRSs') as
endorsed by the European Union. The accounting policies applied in the
preparation of these interim financial statements are consistent with those
used in the financial statements for the year ended 30 September 2021.

 

The interim financial statements do not include all of the information
required for full annual financial statements and do not comply with all the
disclosures in IAS 34 'Interim financial reporting'. Accordingly, whilst the
interim statements have been prepared in accordance with IFRSs, they cannot be
construed as being in full compliance with IFRSs.

 

The financial information for the year ended 30 September 2021 does not
constitute the full statutory accounts for that period. The annual report and
financial statements for the year ended 30 September 2021 have been filed with
the Registrar of Companies. The Independent auditor's report on the report and
financial statements for the year ended 30 September 2021 was unqualified, did
not draw attention to any matters by way of emphasis, and did not contain a
statement under Section 498(2) or 498(3) of the Companies Act 2006.

 

2 Going concern

The interim financial information has been prepared on a going concern basis,
which assumes that the Company will have adequate resources to continue in
operational existence for the foreseeable future.

 

3 Earnings per share ('EPS')

Basic earnings per ordinary share is based on the loss on ordinary activities
before taxation of £345k and on 136,854,577 ordinary shares in issue
throughout the period.

 

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, based on the share price at the end of the
period.  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.

 

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