Board Appointment and Pre-Close Trading Update
24 October 2018
Image Scan (AIM: IGE), the specialist supplier of X-ray screening systems to the security and industrial inspection markets provides a pre-close trading update ahead of its results for the year ended 30 September 2018 and announces the appointment of Sarah Atwell-King to the board.
- Sales of £3.5m (2017: £5.0m) at a gross margin of 48% (2017: 39%)
- Unaudited trading profit before exceptional expenditure and tax of approximately £45k (2017: £480k)
- Exceptional costs of approximately £245k against the aborted acquisition of Todd Research Limited led to a loss for the year of £200k
- £1.0m order for portable X-ray systems was cancelled, with the Company’s agreement, in January 2018. The units were re-sold
- Record number of industrial systems were delivered including to customers in the Eastern Europe and Asia
- A new research and development programme to create a new range of security X-ray systems alongside the current portable range will be started in FY 2019
- An internal restructuring has started with Sarah Atwell-King joining the board as Financial Director and the appointments of a new head of operations and sales manager
- £780k of cash at the end of the period (2017: £1.2m)
After a strong FY 2017, the Company, as previously announced, suffered two setbacks during FY 2018. The first of these was the cancellation of a large order from an important Asian customer in February; the second was the failure to garner support from the Company’s largest shareholder for the intended acquisition of security X-ray company Todd Research Limited. The first of these contributed to adverse sales performance, the second added £245k of exceptional costs. The impact of these setbacks was partially offset by strong performance in the industrial area, where the company provides X-ray machines for inspection of catalytic converters in the manufacturing process. A record number of these machines were delivered as major customers continued with the role out of X-ray inspection into their global manufacturing operations.
Sales declined to £3.5m (2017: £5.0m), impacted both by the cancelled order and lower security system sales in the Indian subcontinent. Gross margins were strong at 48% (2017: 39%) reflecting the change in the sales mix. Overheads (excluding the transaction costs relating to the failed acquisition of Todd Research Limited) were fractionally higher at £1.6m (2017: £1.5m) and included a planned £100k increase in Research and Development spend. Subject to any audit adjustments, profit before tax and exceptional costs was approximately £45k (2017: £480k).
The acquisition of Todd Research Limited had been a part of the Company’s strategy for some time prior to FY 2018. It was disappointing that, despite extensive face to face communication with Rise Step International Development Limited, the Company’s largest shareholder, in the latter stages of the process, we were unable to achieve a positive vote for the resolutions required to complete the acquisition. A further extended face to face meeting was held after the adjournment on the General Meeting, but Rise Step, while supporting the overall strategy, remained opposed to the issuing of shares at the price achieved in the fund raising. Legal and other costs totaling approximately £245k had been occurred leading to a pre-tax loss, after exceptional expenditure of approximately £200k.
The year ended with a positive cash balance of £780k (2017: £1.2m).
The Company’s stock includes portable systems in Work in Progress, manufactured in anticipation of new orders. This will allow a rapid response as they are received early in the new financial year.
In order to return the company to the growth path seen from FY 2015 to FY 2017 a number of changes will be made: Sarah Atwell-King, previously Financial Controller, will join the board as Financial Director, retaining her Company Secretary role. Sarah brings considerable organisational and management strength to the board.
A new operations manager is expected to join the Company in November who will focus on manufacturing quality and new product development; the European sales manager is being replaced with the incoming person focusing on sales growth in both Europe (including the UK) and South America. The Company’s product strategy is evolving and a product development programme is to be launched that will add a new range of security X-ray systems serving a different customer group from the current portable scanners.
The following information is disclosed pursuant to Schedule Two paragraph (g) of the AIM Rules for Companies. Sarah Ann Atwell-King, aged 50 years, has been a director of the following companies during the five years preceding the date of this announcement:
|Current directorships||Past directorships|
Save as set out above there are no further disclosures pursuant to Rule 17 or Schedule Two paragraph (g) of the AIM Rules for Companies.
Sarah is the beneficial owner of 75,000 ordinary shares of the Company (representing 0.06 per cent. of the Company’s current issued share capital) and holds 800,000 options over Ordinary Shares.
Image Scan’s Chairman and Chief Executive, Bill Mawer, commented: “After three years of rapid growth in sales and profits, the cancelled order and the failure of the attempted acquisition have come as disappointments. A decline in portable X-ray orders has exacerbated this. While the instant increase in scale that the acquisition of Todd Research would have brought would have been welcome, our order pipeline is strong, and I am confident the changes to our team and the re-focus of our research and development efforts can return us to our previous growth path. I would like to welcome Sarah to her new, expanded role on the Board.”
For further information, please contact:
Image Scan Holdings plc Tel: +44 (0) 1509 817400
William Mawer, Chairman
Sarah Atwell-King, Company Secretary
Cantor Fitzgerald Europe Tel: +44 (0) 207 894 7000
Rick Thompson / Will Goode (Corporate Finance)
Caspar Shand Kydd (Sales)
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.