8th Dec 2009 07:00
IMAGE SCAN HOLDINGS PLC
("Image Scan" or the "Company")
PRELIMINARY RESULTS
FOR THE YEAR ENDED 30 SEPTEMBER 2009
Image Scan, an AIM-listed specialist in the field of real-time 3D and 2D x-ray imaging for the security and industrial inspection markets, announces preliminary results for the year ended 30 September 2009.
KEY POINTS
Sales at £1,444,000 (2008: £2,004,000);
Gross margin at 48% (2008: 45%);
Reduced overheads of £1,283,000 (2008: £1,360,000);
Loss on ordinary activities after taxation of £537,000 (2008: £331,000);
Year end cash of £850,000 (2008: £1,535,000);
Year end order book of £293,000;
Appointment of regional sales manager for the Middle East;
Appointment of trading partner in Indian sub-continent; and
Appointment of new Chairman, Brian Emslie, to provide sales and marketing lead.
POST YEAR END EVENTS
FlatScan-POD sold into the US Government;
Order intake in first two months exceeds £300,000; and
Company has moved to new premises.
Brian Emslie, Chairman of Image Scan, commented:
"The financial results for 2009 were underpinned by security sales with few orders or enquiries emerging from the industrial inspection market. As a result the Company has focused on developing its range of standard security equipment, strengthening the sales channels worldwide and targeting industrial markets segments only where there is visibility of repeat sales. The immediate target for the Company is to achieve breakeven. During the year the cost base was reduced and the resources realigned to ensure that the Company has a balanced team and the infrastructure capable of achieving short to medium-term growth".
Enquiries:
Image Scan Holdings plc Tel: +44 (0) 1664 503 600
Brian Emslie, Chairman
Louise George, Chief Executive
Seymour Pierce Tel: +44 (0) 207 107 8000
Sarah Jacobs
CHAIRMAN'S STATEMENT
INTRODUCTION
My appointment in July 2009 as Chairman of the Board of Image Scan was at a particularly challenging time for the Company as it entered the last quarter of a very difficult year.
In reporting the Preliminary Results for Image Scan for the year ended 30 September 2009, and having conducted an in depth strategic review as my first priority, I would like to comment on the Board's view of your Company's prospects for the future.
BOARD CHANGES
As reported earlier in the year Louise George, formerly our Finance Director, was appointed as Chief Executive with the remit of exercising strong control over operations and finance, and to oversee a change in focus for the Company towards the commercialisation of the Company's technology. Nick Fox at the same time took the lead as Chief Technical Officer to drive technology development, and to enable him to focus more time and effort in providing high level technical sales support. Ian Johnson who has been on the Board for the past eight years continues to bring industry expertise with his lifelong experience in the security market.
Given my own business development experience within a high technology industry, my appointment as Chairman was to complement the skill set of the Board and add leadership and expertise in sales, marketing and business development to drive the Company's growth and to establish and sustain profitability.
I would like to take this opportunity to thank Jerry Horwood and Gilbert Chalk, who both stood down during the year, for their contribution over the previous period and in particular for initiating some important strategic changes which have enabled the Company to move forward in a more commercial and customer-centric direction.
STRATEGY
The first imperative for the Company is to achieve breakeven and then move to sustainable profit ideally underpinned by a wider customer base and a broader range of standard products. In support of this aim there has been an important cultural change within the Company over the past year towards becoming a proactive technical sales and marketing led organisation. The Board now believes that with the current overhead base, the Company has a balanced team and the infrastructure capable of achieving this growth objective.
Sales into the security sector have been steady with an increasing proportion resulting from exports. In the short term, growth for the Company is expected to emerge from the security sector through the establishment of more diverse overseas sales channels to boost demand for our security products in general and the FlatScan product in particular. The Company intends to introduce new products and enhance existing products in response to market feedback in order to develop its range of security equipment.
Whilst historically industrial sales have been strong for the Company, the economic recession has adversely affected demand from the industrial markets, and in particular the automotive sector on which the Company's previous industrial sales have largely depended, resulting in few enquiries and no orders materialising for the Company in 2009. New industrial x-ray applications are invariably one-offs and typically take in excess of six months to design, build and install. The Board believes that the development of repeatable industrial applications will take several years but does still offer a significant medium-term opportunity. As a result, the aim will be to proactively develop the business in target market segments where we have clear core competencies and value to offer.
2010 will be a critical year for the Company to demonstrate that it has the right strategy and is taking the necessary management actions to move significantly towards the first goal of achieving a break even position. The Board has introduced a set of key performance indicators to help track progress towards its short-term goals.
The Board believes that despite the long history of underperformance, the Company is in a year of transition where the renewed focus on sales and marketing can deliver growth. However, in light of the risks involved and the limited cash resources available to the Company, the Board will closely monitor performance during the year and revisit the strategy with shareholders by June 2010.
Brian Emslie
Chairman 7 December 2009
CHIEF EXECUTIVE'S REPORT
INTRODUCTION
During 2009 the Company took some important steps in making commercial progress. In the past the Company has relied on the sale of significant but to some extent one-off contracts that have required bespoke development; and our sales and marketing initiatives had tended to depend upon relatively few agents and distributors. The objectives for 2009 were to reduce costs, particularly in non-core areas, to strengthen the sales channels and to focus on sales of standard products.
Cost control
During the first half of the year the Company carried out a cost reduction exercise which took two forms. Firstly, an examination of overheads was undertaken to reduce the overall cost base with particular focus on non-core and corporate expenditure. As a result the Company no longer retains a financial PR agency and will be incorporating the Image Scan website into an investor section within the existing 3DX-RAY Limited trading company website. A small reduction in headcount mainly affected the research and development ('R&D') team and shifted the focus of the Company towards sales support and product delivery. Secondly, a review of suppliers and build costs took place with the aim of driving down the cost of key components within our standard security products. The benefits of these activities became apparent in the second half of the year with reduced overheads and increased gross margins.
It is the Board's intention to contain overheads at the same level in the new financial year. With a few exceptions where there had been a change in responsibilities, no salary increases were awarded for 2010.
Marketing initiatives
Some of the cost savings referred to above allowed the Company to invest in its marketing profile and routes to market. A more industry-specific PR agency was appointed which has been successful in securing editorial in a number of key sector-specific journals. In addition the Company has funded sponsored links to increase its web-based enquiries and has updated its product marketing literature. The Company is currently preparing to relaunch its website early in 2010 which will provide the tools to further improve the use of the website as a proactive means of generating sales leads.
As part of the strategy to establish additional sales channels, the Company has appointed a Delhi-based trading partner with well-established Government and industry contacts, to distribute its products in India. Furthermore, in June 2009 the Company appointed a regional sales manager with direct experience of selling security equipment into the Middle East to increase sales opportunities in that territory. The Company is also working closely with a greater number of agents and distributors throughout the world.
FINANCIAL RESULTS
Revenue in the year ended September 2009 was £1,444,000 (2008: £2,004,000). Whilst security sales have remained consistent with the prior year, industrial sales have halved reflecting the historical reliance on the automotive sector. Consequently, security sales comprised 80% of the overall revenue for the year.
The gross margin of 48% strengthened in the second half of the year partly due to improved sourcing to reduce build costs and a higher level of sales of standard systems.
Overheads were reduced by £77,000 to £1,283,000 (2008: £1,360,000), contributing to a 16% decrease in administrative expenditure over the past two financial years. Overheads included redundancy payments of £50,000 in respect of three staff in the first quarter of the financial year. There has subsequently been an increase in the sales team giving an overall reduction of two staff and an ongoing cost saving of £100,000. The change in personnel during the year saw a shift in emphasis towards sales and operations, which resulted in a lower R&D spend of £130,000 (2008: £211,000).
Whilst all efforts were made to reduce both build costs and overheads, the lower level of revenue emerging from the industrial sector resulted in a net loss of £537,000 (2006: £331,000). The loss per share was 0.96p (2008: 0.59p).
The cash balance of £850,000 (2008: £1,535,000) reflects the loss for the year and increased working capital requirements. The Company has an agreed £100,000 overdraft facility with the Royal Bank of Scotland.
OVERVIEW
Security
Security revenue was underpinned by the successful sale of 14 Axis-3d® baggage screening systems into China. The Company also secured the first sale of its Axis-2d system for the purpose of screening mail at the head office of a major financial institution in the City.
The Company's portable x-ray inspection system, FlatScan-TPXi, continues to perform well with sales into new territories such as Canada, Thailand, India and the Middle East as well as orders received recently from the UK and US Governments. The partnership with ICM, who distribute the FlatScan system through its own network of agents, gave rise to revenue of just under £400,000 during the year. In addition to relying on this route to market, the Company has taken steps to more proactively market and distribute its complete range of security systems directly.
Industrial
During the first half, the Company supplied an MDXi-NT industrial inspection system into Japan. Towards the end of the financial year, the Company received an order to develop the software platform for its catalytic converter inspection system, which will be delivered within the next three months. There has otherwise been little industrial activity over and above recurring sales of spares and support.
OUTLOOK
Order intake in the first two months exceeded £300,000 and comprised FlatScan-TPXi sales into the US, the Middle East, Europe and China and a FlatScan-POD to the US Government. There is increasing interest in the FlatScan-POD, a mobile cabinet screening system currently in use on the London Underground and mainline stations, following the development of a second generation system. The industrial enquiry rate remains low, but the Company continues to actively pursue any applications for which our technology is appropriate and is likely to give rise to repeat sales.
RESOURCES
In October 2009 the Company moved into new premises close to Loughborough. The move was conducted with the minimal loss of productive time and the cost incurred was approximately £50,000 of which £25,000 has been capitalised.
Our staff have responded positively to the need to being more commercially-aware and are committed to ensuring that customer expectations are met both in terms of quality and delivery. I would like to take this opportunity to personally thank everyone at the Company for their continuing support.
Louise George
Chief Executive 7 December 2009
CONSOLIDATED INCOME STATEMENT
For the year ended 30 September 2009
|
2009 £ |
2008 £ |
||||
|
Continuing operations |
|||||
|
REVENUE |
1,444,499 |
2,004,519 |
|||
|
Cost of sales |
(751,317) |
(1,096,538) |
|||
| Gross profit |
693,182 |
907,981 |
|||
|
Administrative expenses |
(1,283,238) |
(1,360,318) |
|||
|
OPERATING LOSS |
(590,056) |
(452,337) |
|||
|
Finance income |
23,489 |
75,068 |
|||
|
LOSS BEFORE TAXATION |
(566,567) |
(377,269) |
|||
|
Taxation |
29,903 |
46,333 |
|||
|
LLOSS FOR THE YEAR FROM CONTINUING OPERATIONS |
(536,664) |
(330,936) |
|||
|
EARNINGS PER SHARE |
2009 £ |
2008 £ |
|||
|
Loss for the year |
536,664 |
330,936 |
|||
|
Weighted average number of ordinary shares in issue |
55,698,120 |
55,620,038 |
|||
|
Basic and diluted loss per share |
0.96 |
0.59 |
|||
IAS 33 requires presentation of diluted earnings per share ('EPS') when a company could be called upon to issue shares that would decrease net profit or increase net loss per share. For a loss making company with outstanding share options, net loss per share would only be increased by the exercise of out-of-the-money options. Since it seems inappropriate to assume that option holders would act irrationally and there are no other diluting future share issues, diluted EPS equals basic EPS.
CONSOLIDATED BALANCE SHEET
As at 30 September 2009
|
2009 £ |
2008 £ |
|||||
|
NON-CURRENT ASSETS |
||||||
|
Property, plant and equipment |
73,334 |
140,149 |
||||
|
Other intangible assets |
- |
- |
||||
|
73,334 |
140,149 |
|||||
|
CURRENT ASSETS |
||||||
|
Inventories |
232,592 |
154,027 |
||||
|
Trade and other receivables |
216,461 |
153,405 |
||||
|
Cash and cash equivalents |
850,117 |
1,534,504 |
||||
|
Current tax asset |
29,903 |
46,333 |
||||
|
1,329,073 |
1,888,269 |
|||||
|
TOTAL ASSETS |
1,402,407 |
2,028,418 |
||||
|
CURRENT LIABILITIES |
||||||
|
Trade and other payables |
300,305 |
381,624 |
||||
|
Warranty provision |
22,800 |
35,895 |
||||
|
323,105 |
417,519 |
|||||
|
NET ASSETS |
1,079,302 |
1,610,899 |
||||
|
EQUITY |
||||||
|
Share capital |
556,981 |
556,981 |
||||
|
Share premium account |
7,305,407 |
7,305,407 |
||||
|
Retained earnings |
(6,783,086) |
(6,251,489) |
||||
|
TTOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS |
1,079,302 |
1,610,899 |
||||
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 30 September 2009
|
Share capital £ |
Share premium £ |
Retained earnings £ |
Total £ |
|||
|
As at 1 October 2007 |
549,481 |
7,252,907 |
(5,925,081) |
1,877,307 |
||
|
Share issue |
7,500 |
52,500 |
- |
60,000 |
||
|
Loss for the year |
- |
- |
(330,936) |
(330,936) |
||
|
Share-based transactions |
- |
- |
4,528 |
4,528 |
||
|
As at 30 September 2008 |
556,981 |
7,305,407 |
(6,251,489) |
1,610,899 |
||
|
Loss for the year |
- |
- |
(536,664) |
(536,664) |
||
|
Share-based transactions |
- |
- |
5,067 |
5,067 |
||
|
As at 30 September 2009 |
556,981 |
7,305,407 |
(6,783,086) |
1,079,302 |
||
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 September 2009
|
2009 £ |
2008 £ |
|||||
|
Cash flows from operating activities |
||||||
|
Operating loss |
(590,056) |
(452,337) |
||||
|
Adjustments for: |
||||||
|
Depreciation |
75,387 |
77,447 |
||||
|
Loss on sale of property, plant and equipment |
- |
128 |
||||
|
Transfer of stock to fixed assets |
- |
(81,392) |
||||
|
(Increase)/decrease in inventories |
(78,565) |
135,153 |
||||
|
(Increase)/decrease in trade and other receivables |
(63,056) |
241,500 |
||||
|
Decrease in trade and other payables |
(94,414) |
(97,258) |
||||
|
Share-based payments |
5,067 |
4,528 |
||||
|
Net cash used in operating activities |
(745,637) |
(172,231) |
||||
|
Corporation tax recovered |
46,333 |
66,079 |
||||
|
Net cash outflow from operating activities |
(699,304) |
(106,152) |
||||
|
Cash flows from investing activities |
||||||
|
Interest received |
23,489 |
75,068 |
||||
|
Purchase of property, plant and equipment |
(8,572) |
(25,681) |
||||
|
Net cash from investing activities |
14,917 |
49,387 |
||||
|
Cash flowS from financing activities |
||||||
|
Issue of ordinary share capital |
- |
60,000 |
||||
|
Net cash from financing activities |
- |
60,000 |
||||
|
Net (DECREASE)/Increase in cash and cash equivalents |
(684,387) |
3,235 |
||||
|
Cash and cash equivalents at beginning of year |
1,534,504 |
1,531,269 |
||||
|
Cash and cash equivalents at end of year |
850,117 |
1,534,504 |
||||
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 2009 and 30 September 2008 but is derived from those accounts. Statutory accounts for 2008 have been delivered to the Registrar of Companies, and those for 2009 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 £5,067 (2008: £4,528) 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.
3. Posting of accounts
It is intended that the financial statements for the year ended 30 September 2009 will be posted to shareholders in February 2010 and will also be available thereafter at the registered office, 16-18 Hayhill, Sileby Road, Barrow upon Soar, Leicestershire LE12 8LD.
4. Annual General Meeting
The Annual General Meeting will be held at 11.00am on Thursday 25 March 2010, at the offices of Seymour Pierce, 20 Old Bailey, London EC4M 7EN.
Related Shares:
Image Scan Holdings