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Preliminary Results Year End 2014

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 2014.


  • Delayed availability of an X-ray generator in the second half of the year, as announced most recently in the pre-close trading update of 9 October 2014, has led to a decline in financial performance and a full year loss of £451k (2013: loss of £297k)
  • Order intake £1.5m (2013: £3.3m)
  • Revenue down to £2.2m (2013: £2.5m)
  • Labour costs down 17% to £820k (2013: £990k)
  • Nuclear system delivered and accepted by customer
  • Order for Axis checkpoint X-ray systems received from Saudi Arabia
  • New board appointed and in place
  • £945k gross raised to support increasing R&D and sales activity


  • Distribution agreement signed with Sectus Technologies Inc. to extend market reach in North and South America
  • First models of new portable X-ray generator received from US manufacturer and delivered to customers
  • Development project launched for new check point X-ray product range

Bill Mawer, Chairman and Chief Executive of Image Scan, commented: “Having joined the Company in April it is frustrating to have to report such a loss after my first six months leading the business. The company had been working hard to find a replacement X-ray generator for its portable products following the loss of the previous supplier but, despite considerable focus on this area since my appointment, that situation was not rectified before the year end. I am however pleased to announce today that we have made the first customer deliveries of portable systems with the new generator, the superior performance of which is already exciting much customer interest.

The funds raised during the year are allowing us to accelerate our product development and marketing programme and the Board is looking forward to the launch of a number of exciting new products during the coming year. The recent extension of our market reach into North and South America will help drive uptake of these new products. “

Image Scan Holdings plc Tel: +44 (0) 1509 817400
Bill Mawer, Chairman and CEO
Cantor Fitzgerald Europe Tel: +44 (0) 207 894 7000
David Foreman / Rick Thompson/Michael Reynolds (Corporate Finance)
David Banks (Corporate Broking)
Yellow Jersey PR Limited Tel: +44 (0) 7747 788 221
Anna Legge/Dominic Barretto

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 Axis range of baggage inspection systems; the FlatScan range of portable bomb and suspect package detection 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: – and for further information on its products, please visit:


I am pleased to report on the results for Image Scan Group for the year ended 30 September 2014.

Order intake during 2014 totalled £1.5m (2013: £3.3million). Orders for portable X-ray systems were strong in the first half of the year but fell away in the second half of the year as the Company exhausted its remaining supply of the old style portable X-ray generators. The first half of the year also included the delivery of a Small Vehicle Inspection System (SVXI), the second of two systems for which orders were received in the prior year. Because of their high unit value, and the niche nature of the market, the presence or absence of sales of these systems exacerbates already uneven business performance in Image Scan. No new SVXI orders were received during the year. Revenue was £2.2m (2013: £2.5m), with 76% of sales being generated in the first half of the year.

In response to the decrease in activity in the prior year, operating costs were reduced in the year under review, with labour costs decreasing by 17% to £820k (2013: £990k). Within this reduced labour cost, internal research and development expenditure increased from £162k to £245k as resources released from the nuclear project were focussed on new product development. The business made a loss in the year of £451k (2013: loss of £297k).

The Company’s performance has for some years been depressed by a large one-off contract in the nuclear industry. During the year this project generated revenue of £93k and a net loss of £85k. However during the year the system was delivered and accepted by the customer, an engineering company acting as system integrator. It is now installed at the final end user’s site and the remaining tasks are limited to training and final setting to work. These are due for final completion by the end of January 2015. Only minimal involvement of the research and development team is expected to be required to achieve these final tasks.

A successful fund raising and subscription in September 2014 gave the Group a gross cash injection of £945k. This funding is being used to accelerate new product development in the portable X-ray and checkpoint X-ray areas and to expand the sales and marketing activity. At the year end the Group had a positive cash balance of £948k. (2013: £12k)

The sale of more than 40 portable X-ray systems in the first half of the year, points to the buoyant nature of the portable X-ray market. This is supported, in our view, by a continued and visible terrorist threat. In order to take advantage of this market strength the company is driving forward a product strategy that will give it a competitive system in each of the three price/technology sub segments. Only one competitor has as broad a product range. The first element of this strategy is the development of a replacement generator by our US partner. While it was frustrating not to have this before the year end, first production units have now been received and volume deliveries will start in January 2015. This will be the first of a series of new product releases within the portable X-ray range.

The Company is currently in the project definition phase of a programme aimed at replacing the Axis check point X-ray system with a new range of highly competitive systems built around a core X-ray architecture that already exists in prototype form. Formal launch of the development programme is due in January 2015.

In recent years, the Company has created good access to markets in the Middle East and parts of Asia. The first step has now been taken in the expansion of this route to market and the Company now has a very experienced partner in the important markets of Canada, the Caribbean and South America. New initiatives are underway to strengthen the Company’s ability to reach European customers.

The Board will continue to focus investment and resources on new product development and the expansion of the route to market while maintaining a tight focus on overhead cost and operational performance. Management of cash will be particularly important in order to ensure the recently raised funds are focussed on growth projects rather than operational expenses.

Revenue in the year ended 30 September 2014 of £2.2m (2013: £2.5m) was derived 70% from the security sector and 30% from the industrial sector. Security revenue of £1.4m was generated in the first half (£0.1m in the second half) reflecting the loss of portable X-ray system sales from mid-year. In addition to the sale of over 40 portable X-ray systems, the first half year’s performance was underpinned by the sale of a Small Vehicle Inspection System.

Gross margin was 31% (2013: 37%). Margin on security products at 29% was depressed by a large portable X-ray contract taken at lower than normal margin. Margin on portable X-ray systems is expected to return to more normal levels (typically 35-40%) with the launch of the new portable products. Gross margin on industrial products was 34%. A further contributor to low gross margin was the additional and unforeseen cost experienced in the late stages of the nuclear contract, where sales of £93k yielded a net loss of £85k. However significant milestones were achieved, notably the acceptance of the system by the customer and delivery to the end user’s site.

Downward pressure was exerted on costs with overheads being reduced to £1.2m, following a reduction of £300k to £1.3m in 2013. Despite the need to operate within this lower overhead the Company was able to increase the focus on internal research and development with spend increasing to £245k (2013: £162k). This 51% increase was facilitated by the release of resources from the nuclear contract.

The Group traded at close to break-even in the first half of the year with a loss of £36k on sales of £1.7m. The decline in security sales in the second half of the year led to a full year loss of £451k (2013: loss of £297k). The loss per share was 0.57p (2013: loss per share 0.39p).

The closing order book was £482k, (2013: £1.1m) supported by the award in September 2014 of a contract for £250k for multiple Axis checkpoint X-ray systems for Saudi Arabia.  The year-end cash balance was £948k (2013: £12k).

The new US sourced portable X-ray generator will be initially offered with the Company’s current detector panel and software, to be replaced during the first half of the year by a new higher performance panel and new image processing software. This will be supplemented by a bought in medical-type detector panel for customers demanding the very highest image quality. A separate programme will lead to a lower cost system allowing the company to address, for the first time, a group of customers with lower budgets.

The development of the replacement Axis checkpoint X-ray systems is in project definition phase and will continue through the year with product launch not expected until financial year 2014/15. Customer demonstrations of the new portable products have started and will continue through the year, both in established markets and in support of the planned geographical expansion of the Company’s activity.

The Company intends to adopt a performance related reward strategy with the introduction of a profit-based staff bonus scheme and the issue of share options to incentivise staff and to promote good staff retention.

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 the Company.

Bill Mawer
Chairman and Chief Executive Officer
8 December 2014

Consolidated Statement of Comprehensive Income
Continuing operations
REVENUE    2,194,735    2,537,786
 Cost of sales  (1,521,574)  (1,586,820)
 Gross profit  673,161 950,966
 Administrative expenses  (1,196,969)  (1,292,856)
 OPERATING LOSS  (523,808)  (341,890)
 Finance Income  450  80
 (523,358)  (341,810)
 Taxation  71,894  45,155
 Pence  Pence
 Earnings per share  (0.57)  (0.39)

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. Earnings or loss per share would not be affected by the exercise of out-of-the-money options since it is inappropriate to assume that option holders would act irrationally. Accordingly as there are no other diluting future share issues, diluted EPS equals basic EPS.

Consolidated Statement of Financial Position
Property, plant and equipment 8,382 21,987
Inventories 330,826 458,898
Trade and other receivables 182,121 1,119,944
Cash and cash equivalents 948,281 11,573
Current tax asset 71,894 36,064
1,533,122 1,626,479
TOTAL ASSETS 1,541,504 1,648,466
 Trade and other payables  363,821  927,795
 Warranty provision  21,507  43,151
 385,328  970,946
 NET ASSETS  1,156,176  677,520
 Share capital   1,256,046  762,679
 Share premium account   7,934,528  7,501,105
 Retained earnings  (8,034,398)  (7,586,264)


Consolidated Statement of Changes in Equity
Share capital
Share premium
Retained earnings
As at 1 October 2012 762,679 7,501,105 (7,287,045) 976,739
Loss for the year (296,655) (296,655)
Share-based transactions (2,564) (2,564)
As at 30 September 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 of 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


Consolidated Cash Flow Statement
Operating loss (523,808) (341,890)
Adjustments for:
Depreciation 13,348 21,472
Impairment of inventories 44,631
Transfer of fixed assets to inventories 5,681 4,293
Loss on disposal of fixed assets 799
Decrease/(increase) in inventories 83,441 (45,948)
Decrease in trade and other receivables 937,823 1,546
(Decrease)/increase in trade and other payables (585,618) 224,252
Share-based payments 38,080 (2,564)
Net cash from/(used in) operating activities 14,377 (138,839)
Corporation tax recovered 36,064
Net cash flows from operating activities 50,441 (53,771)
Interest received 450 80
Purchase of property, plant and equipment (6,223) (8,518)
Net cash used in investing activities
(5,773) (8,438)
Proceeds from issue of share capital 970,001
Financial costs of Fundraising (77,961)
Net cash from financing activities 892,040
936,708 (62,209)
Cash and cash equivalents at beginning of year 11,573 73,782

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 2014 and 30 September 2013 but is derived from those accounts. Statutory accounts for 2013 have been delivered to the Registrar of Companies, and those for 2014 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 £3,330 (2013 credit: £2,564) 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.