2015 Preliminary Results
08 December 2015
Image Scan, an AIM-listed specialist in the field of real-time X-ray imaging for the security and industrial inspection markets, announces preliminary results for the year ended 30 September 2015.
KEY POINTS
- Order intake for the year of £1.9m (2014: £1.5m) with 40% of orders received in the last quarter;
- Sales of £1.7m (2014: £2.2m) at a gross margin of 38% (2014: 31%) resulted in a pre-tax trading loss of approximately £640k (2014: £523k);
- Research and development spending increased by 49% to drive product launches;
- New portable X-ray system launched during the year and achieved first customer sales;
- Won UK Government grant of £104k to develop new generation portable detector using technology licensed from Ibex Innovations;
- Upturn in orders for industrial inspection systems used for inspection of automotive emission control systems;
- Improvements made in manufacturing and quality control resulting in a re-certification to ISO 9001 in November 2015;
- £469k of cash at the end of the period (2014: £948k);
- Closing order book of £675k (2014: £482k); and
- Appointed an International Sales Manager to head up sales to the European market.
POST YEAR-END EVENTS
- Orders for new portable X-ray systems were received from customers in Asia, the Middle East and Europe;
- Two industrial inspection systems were delivered; and
- Levels of enquiries are growing for both security and industrial products.
Bill Mawer, Chairman and Chief Executive of Image Scan, commented: “Our new portable X-ray system has been released to the market and our sales team and their international partners are demonstrating it widely. As was expected, the initial orders are for small quantities and larger government contracts will take longer to process. It is the delayed availability of this system that is largely responsible for the losses in this report. However interest in the system is strong. The Government funded work with Ibex Innovations on a system with even higher performance is at an early stage but has already produced some exciting results.
It is very pleasing to see a growing order book for our industrial inspection systems. These are used to perform quality inspections on emission control systems in the automotive industry. This is an area that is expected to grow as tighter legislation and controls are introduced following recent press attention. We are very well placed to benefit from that growth.”
-END-
Image Scan Holdings plc Tel: +44 (0) 1509 817400
William Mawer, Chairman
Sarah Atwell-King, Company Secretary
ir@ish.co.uk
Cantor Fitzgerald Europe Tel: +44 (0) 207 894 7000
Rick Thompson / David Foreman / Michael Reynolds (Corporate Finance)
David Banks/ Tessa Sillars(Corporate Broking)
About Image Scan Holdings plc
Image Scan Holdings plc (AIM: IGE) is focused on the development and commercialisation of market leading real-time X-ray solutions for use in the global Security and Industrial inspection markets. The Company’s Security portfolio includes the ThreatScan® range of portable bomb and suspect package detection systems; the Axis range of baggage inspection systems; and SVXi, a small vehicle inspection system. The Industrial inspection solutions include the MDXi product range, cabinet X-ray systems for laboratories and production lines. The Company was founded in 1996 and joined AIM in 2002.
For further information on the Company, please visit: www.ish.co.uk – and for further information on its products, please visit: www.3dx-ray.com
CHAIRMAN and CEO’S STATMENT
I am pleased to report on the results for Image Scan Holdings plc for the year ended 30 September 2015. While the year saw good progress on a number of fronts, that progress was initially slow to feed into an improvement in financial performance.
Order intake during 2015 totalled £1.9m (2014: £1.5m) and strengthened towards the year end. The Company closed the year with an order book of £675k (2014: £482k). Sales for the year were £1.7m (2014: £2.2m) and the business made a pre-tax loss of £640k (2014: £523k).
The financial statements for 2014 followed soon after a successful fund raise and, as a result, the business finished that year with a cash balance of £948k. That position reduced to £455k at the 2015 mid-year report but improved to £469k at year end.
Having completed the 2014 fund raise, 2015 represented a year of focus on new product development. That commitment delivered the successful launch of a new portable X-ray generator in December 2014 and, later in the year, a new high performance detector panel with first delivery in August 2015. Early customer response to these new products has been highly promising. In July 2015, the Company was awarded a UK Government grant worth £104k to support development of a Precision Linescan Detector for the security market, using new technology licensed from Ibex Innovations. This initiative reflects our vision to be a true leader in the security X-ray market.
A recent marked increase in order intake for the Company’s industrial inspection systems, which have a higher unit value than security systems, is also a promising trend which we will further develop.
BUSINESS REVIEW
Security
Security sales were £1.2m (2014: £1.5m) and were depressed by the delayed availability of new portable X-ray systems. However, first customer deliveries of this system were made late in the year and demand for checkpoint X-ray systems was strong. Prior initiatives to extend our global reach into the security market started to produce positive results with both our new partner for North and South America and our newly recruited European sales manager selling their first portable X-ray systems. Margins on security sales have improved slightly to 31% (2014: 29%).
The development programme for new portable X-ray systems took longer than planned as our focused R&D team addressed and prioritised additional demands, particularly from industrial customers. However the new portable X-ray generator from our US partner was launched earlier in the year and the new ultra-thin detector panel and associated software control system were launched during the year. First customer sales were recently made and the order book for these products is growing.
Looking for further ways to differentiate and enhance our portable X-ray systems, we formed a relationship with Ibex Innovations, a University of Durham spin-off with unique X-ray detection technology. This led to a successful bid for a SMART grant award from Innovate UK, a UK Government body that supports innovative product development in small companies. The award is worth £104k. The project aims to incorporate the Ibex technology into a modified version of our new detector panel to produce a product we are calling the Precision Linescan Detector.
The sales team and our network of international partners are conducting presentations, demonstrations and field trials of our portable X-ray systems, using five demonstration systems built specifically for this purpose.
Industrial
Industrial sales of £479k (2014: £658k) included two new-build units, spares and service contracts. Improved gross margin of 56% (2014: 35%) was driven by a higher percentage of service revenue compared to product revenue. We now have a wider customer base in the emissions control area, and our customers are all major global manufacturers. Our focus is to encourage wider deployment of these systems across the customers’ manufacturing bases. Four systems were ordered late in the year for delivery in the 2016 financial year and the order pipeline remains strong. We have three machine configurations that allow on-line and off-line inspection and are planning to develop further performance improvements for these machines in the coming year.
The longstanding nuclear industry contract was completed and we are currently negotiating a long term support contract for this system.
FINANCIAL RESULTS
Orders for the year were £1.9m (2014: £1.5m). £755k of orders were received in the final quarter, for both new portable X-ray systems and industrial inspection systems. Company sales were £1.7m (2014: £2.2m), leaving a year end order book of £675k (2014: £482k). Improved gross margin of 38% (2014: 31%) reflected increased margin on industrial sales. Overheads were £1.3m (2014: £1.2m) the increase being due to higher research and development spending as the business drove to complete the portable X-ray system developments. The business made a pre-tax loss in the year of £640k (2014: £523k) and finished the year with a positive cash balance of £469k (2014: £948k).
OUTLOOK
The Company’s closing order book included orders for four industrial inspection systems and discussions are underway that could lead to orders for further systems. In the short term we will look to increase uptake of these machines by our existing customers. The start of the 2016 financial year has seen steady low volume orders for portable X-ray systems. It is recognised that larger orders, which typically involve more complex procurement processes, will take longer to achieve but market demand for portable security X-ray systems is strong and customer response to our new systems is promising. Sales volumes in security should therefore recover with the market offering good potential for further growth.
Management is also looking to lay the foundations, in terms of product range and market reach, for future growth in both its security and industrial businesses. Growth initiatives include the grant-funded Precision Linescan Detector programme, which, despite being in its early stages, is already demonstrating image quality enhancements over current technology. Work is currently underway with industrial customers to develop plans for enhancements to, and extensions of, our existing range of industrial X-ray inspection systems.
STAFF
The Board values greatly the considerable efforts made by our staff and I would like to take this opportunity to personally thank staff and shareholders for their continued commitment to Image Scan.
Bill Mawer
Chairman & Chief Executive Officer
7th December 2015
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
| 2015 | 2014 | |
| £ | £ | |
| REVENUE | 1,707,768 | 2,194,735 |
| Cost of sales | (1,058,935) | (1,521,574) |
| Gross Profit | 648,833 | 673,161 |
| Operating expenses | (924,152) | (951,207) |
| Research & development expenses | (366,095) | (245,762) |
| Total administrative expenses | (1,290,247) | (1,196,969) |
| OPERATING LOSS | (641,414) | (523,808) |
| Finance Income | 984 | 450 |
| LOSS BEFORE TAXATION | (640,430) | (523,358) |
| Taxation | 90,201 | 71,894 |
| LOSS AND COMPREHENSIVE INCOME FOR TEH YEAR FROM CONTINUING OPERATIONS ATTRIBUTABLE TO THE EQUITY OWERS OF THE PARENT COMPANY | (550,229) | (451,464) |
| Earnings per share | Pence | Pence |
| Basic and diluted loss per share | (0.44) | (0.57) |
Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares in issue on the assumption of conversion of all 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.
When a loss is incurred, since the conversion of potential ordinary share options to ordinary shares would decrease the net loss per share, options are not dilutive and basic and diluted loss per share are the same.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
| 2015 | 2014 | |
| £ | £ | |
| NON-CURRENT ASSETS | ||
| Property, plant and equipment | 4,069 | 8,382 |
| 4,069 | 8,382 | |
| CURRENT ASSETS | ||
| Inventories | 570,501 | 330,826 |
| Trade and other receiveables | 293,480 | 182,121 |
| Cash and cash equivalents | 469,458 | 948,281 |
| Current tax asset | 90,201 | 71,894 |
| 1,432,640 | 1,533,122 | |
| TOTAL ASSETS | 1,427,709 | 1,541,504 |
| CURRENT LIABILITIES | ||
| Trade and other payables | 777,893 | 363,821 |
| Warranty provision | 33,180 | 21,507 |
| 811,073 | 385,328 | |
| NET ASSETS | 616,636 | 1,156,176 |
| EQUITY | ||
| Share capital | 1,256,046 | 1,256,046 |
| Share premium account | 7,934,528 | 7,934,528 |
| Retained earnings | (8,573,938) | (8,034,398) |
| TOTAL EQUITY ATTRIBUTABEL TO SHAREHOLDERS | 616,636 | 1,156,176 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
| Share Capital | Share Premium | Retained Earnings | Total | |
| £ | £ | £ | £ | |
| As at 1 October 2013 | 762,679 | 7,501,105 | (7,586,264) | 677,520 |
| Shares issued during the year | 479,908 | 490,093 | – | 970,001 |
| Shares issued during the year in payment for creditors | 13,459 | 21,291 | – | 34,750 |
| Share issue costs | – | (77,961) | – | (77,961) |
| Loss for the year | – | – | (451,464) | (451,464) |
| Share-based transactions | – |
– | 3,330 | 3,330 |
| ———— | ————- | ————— | ———— | |
| As at 30 September 2014 | 1,256,046 | 7,934,528 | (8,034,398) | 1,156,176 |
| Loss for year | – | – | (550,229) | (550,229) |
| Share-based transactions | – | – | 10,689 | 10,389 |
| ————- | ————– | ————— | ————- | |
| As at 30 September 2015 | 1,256,046 | 7,934,528 | (8,573,938) | 616,636 |
CONSOLIDATED CASH FLOW STATEMENT
| 2015 | 2014 | |
| £ | £ | |
| CASHFLOWS FROM OPERATING ACTIVITIES | ||
| Operating loss before research & development expenditure | (275,319) | (278,046) |
| Research & developemnt expenditure | (366,095) | (245,762) |
| Operating Loss | (641,414) | (523,808) |
| Adjustments for; | ||
| Depreciation | 5,292 | 13,348 |
| Impairment of Inventories | 17,847 | 44,631 |
| Transfer of fixed assets to inventories | – | 5,681 |
| Loss on disposal of fixed assets | – | 799 |
| (Increase)/decrease in inventories | (257,522) | 83,441 |
| (Increase)/decrease in trade and other receiveables | (111,359) | 937,823 |
| Increase/(decrease) in trade and other payables | 414,072 | (563,974) |
| Increase/(decrease) in warranty provisions | 11,673 | (21,644) |
| Share-based payments | 10,689 | 38,080 |
| Net cash (used in)/generated from operating activities | (550,722) | 14,377 |
| Corporation tax recovered | 71,894 | 36,064 |
| Net cash (used in)/generated from operating activities | (478,828) | 50,441 |
| CASHFLOWS FROM INVESTING INCOME | ||
| Interest received | 984 | 450 |
| Purchase of property,plant and equipment | (979) | (6,223) |
| Net cash generated from/(used in) investing activities | 5 | (5,773) |
| CASH FLOWS FROM FINANCING ACTIVITIES |
||
| Proceeds from issue of share capital | – | 970,001 |
| Financial costs of fundraising | – | (77,961) |
| Net cash generated from financing activities | – | 892,040 |
| NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | (478,823) | 936,708 |
| Cash and cash equivalents at beginning of the year | 948,281 | 11,573 |
| CASH AND CASH EQUIVALENTS AT END OF THE YEAR | 469,458 | 948,281 |
Notes to the preliminary statement
1 Basis of preparation
The financial information set out above does not constitute the Company’s statutory accounts for the years ended 30 September 2015 and 30 September 2014 but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies, and those for 2015 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 £10,689 (2014: £3,330) after valuation of the Company’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.