Image Scan Holdings plc

Interim report 2016

19/04/2016

IMAGE SCAN HOLDINGS PLC

("Image Scan" or the "Company")

(AIM: IGE)

INTERIM RESULTS

Improved performance in both security and industrial sectors

Image Scan, (AIM: IGE) specialists in the field of innovative real-time X-ray imaging for the Security and Industrial Inspection markets, today announces its interim results for the six months ended 31 March 2016 which are in line with the Board's expectations. Given performance during the first six months the Board remains confident of meeting market expectations for the year to 30 September 2016.

Financial summary:

·      Order intake for the period of £1,314k (2015: £977k)

·      Revenue of £1,372k (2015: £863k)

·      Gross profit margin of 44% (2015: 36%)

·      Loss before taxation of £64k (2015: £387k)

·      Period end bank balance of £532k (2015: £455k)

·      Period end order book of £634k (2015: £536k)

Operational highlights:

·      New portable X-ray system demonstrated worldwide

·      Multi unit portable X-ray orders received

·      Good progress with Government supported Precision Linescan Detector development

·      Continued new orders for industrial inspection systems

·      Growth in customer funded research and development for industrial systems

Bill Mawer, Chairman and Chief Executive Officer of Image Scan, commented: "This period shows a marked improvement in the Company's performance, driven by growing sales of standard products in both the security and industrial sectors. Our new systems are well positioned in the very active portable X-ray inspection market and sales have substantially increased from the prior year. It has been gratifying to see the return of substantial multi-unit government orders.

The increase in our industrial inspection activity shows Image Scan's ability to benefit from our deep and longstanding relationships with a number of key customers in the automotive emissions control area. We hope to further strengthen these relationships and extend the deployment of our systems across these customers' global manufacturing operations.

Although we start the second half of the year with a healthy order book, the business will be focussed on continuing the momentum so far achieved and winning further orders."

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's statement

Introduction

Image Scan Holdings plc is a specialist in innovative real-time X-ray technology, operating globally in the security and industrial inspection sectors. The Group'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 Group also supplies high-quality image acquisition systems for non-destructive testing to commercial organisations worldwide.

Financial results

Revenue for the six months ended 31 March 2016 of £1,372k (2015: £863k) represented a significant increase over the prior period. Security sales were £741k (2015: £669k). There was a significant change in security product mix, with almost double the number of portable X-ray units being sold, including two significant multi-unit orders. These increases in portable unit sales offset a decrease in the number of Axis Conveyor systems sold and lead to an improved gross margin for security of 41% (2015: 32%). Industrial sales were £631k (2015: £194k) reflecting an increase of activity in this area.

Overheads were tightly managed at £670k (2015: £697k). The post-tax loss in the business narrowed significantly to £44k (2015: £335k) while growth in orders seen at the end of the previous financial year continued with new orders received during the period totalling £1,314k (2015: £977k) leaving the Company with a period end order book of £634k (2015: £536k).

The company held £532k in cash at the period end (2015: £455k).

Overview

The sales team have continued to demonstrate our range of portable X-ray systems to customers and partners around the world. Important new customers, who have placed their first orders for these systems, have been found in the Middle East, Canada and Europe. The research and development team is working to further extend the portable X-ray products range. This activity includes the development of the Precision Linescan Detector with our partner Ibex Innovations. This Government supported programme continues to make good progress and high resolution images of complex objects have already been produced.

The industrial inspection business area, focussed on scanning catalytic converters and diesel particulate filters in the automotive industry, continues to grow with 3 units in the order book at the period end. Additionally, orders totalling approximately £150k for customer funded development are allowing additional features to be added to these systems.

The nuclear project, which had a negative impact on company performance for a number of years, has completed all its milestones and reached the end of its warranty period and an ongoing support contract has been put in place with the end user.

The Company's commitment to process improvement and quality continues and in December 2015 our quality systems were recertified by an independent assessor as compliant to ISO 9001.

Outlook

The market for security X-ray systems remains strong, reflecting the existence of a continuing terrorist threat and the impact of recent incidents in Paris and Brussels. This has led to multi-unit procurements of our portable X-ray systems and we have submitted tenders against Government requirements for further multi-unit orders on which decisions are expected in the second half of FY 2015/16. Discussions with current and potential customers support the requirement for the Precision Linescan Detector and we remain confident that this system will do well following its anticipated launch in financial year 2017.

In the industrial area we believe that increased demands for in-line quality assurance in the manufacture of automotive emission control systems will continue to drive demand for Image Scan's suite of inspection products. We are enhancing the product range through a combination of customer funded and self-funded research and development.

Although we start the second half of the year with a healthy order book, the business will be focussed on continuing the momentum so far achieved, winning further orders and supporting the continued development of new products. The staff at image Scan are enthusiastic, dedicated and creative and on behalf of my fellow Board members, I would like to formally thank our staff for their contribution during this period.

Bill Mawer

Chairman and Chief Executive Officer

19/04/2016

Consolidated income statement

For the six months ended 31 March 2016

Consolidated statement of changes in equity

For the six months ended 31 March 2016