03/11/2021

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain

IMAGE SCAN HOLDINGS PLC

("Image Scan" or the "Company")

PRE-CLOSE TRADING UPDATE

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 of its unaudited results for the year ended 30 September 2021.

Key Points:

·    Order bookings increased to £2.8m (2020: £2.4m)

·    Sales fell to £2.9m following weak first half (2020: £3.5m).

·    Gross margin increased to 53% (2020: 49%)

·    Strong control of overheads, reduced 18% to £1.3m (2020: £1.6m)

·    Reportable unaudited pre-tax trading profit of £189k (2020: £112k)

·    Pre-tax trading profit (adjusted for capitalized R&D spend) £98k (2020: £112k)

·    First orders for new cabinet X-ray systems

·    First orders for government customers in the USA

·    Period-end order book of £516k (2020: £633k)

·    Strong year-end cash balance of £1.2m (2020: £1.4m)

The COVID-19 pandemic continued to impact activity, with foreign travel for trade shows, sales presentations and in-person customer service only starting to become possible at the very end of the period. Despite the challenges, the business traded throughout the pandemic and careful management of overheads allowed it to make a profit whilst continuing with its ambitious new product development programme.

New orders increased to £2.8m (2020: £2.4m) and included both sales of new products, such as the Axis-CXi cabinet X-ray system, and sales to new customers in new territories. Among the new customer sales, those to government agencies in the USA and Canada were particularly significant, as the Company has invested in developing these important markets. Following a weak first half, sales strengthened to reach £2.9m (2020: £3.5m) at year-end and included a 30-unit portable X-ray sale to an Asian government. Margins were strong at 53% (2020: 49%).

A significant decrease in overheads to £1.3m (2020: £1.6m) reflected lower travel costs caused by the COVID-19 pandemic, a reduction in trade show costs, and judicious use of the Government furlough scheme in quieter periods. This, together with the strong margins, led to an unaudited pre-tax trading profit, calculated on the same basis as the prior year, of £98k (2020: £112k).

Much of the product development effort to the Company is now focussed on development of new product ranges, such as cabinet and conveyor X-ray systems which are expected to generate new revenue streams for the business. The Company is therefore in a position to implement the policy of capitalising its new product development spend under IAS38 Intangible Assets. The adoption of this policy is expected to increase the reportable pre-tax profit for the year by £91k to £189k. 

Stock has continued to be tightly managed, although global disruption in supply chains for a variety of components and commodities has forced the Company to start buying critical items for stock as they become available. This has yet to significantly impact stock levels or delivery times but will continue to require careful management going forward. The Company finished the year with an order book of £516k (2020: £633k) and a healthy cash balance £1.2m (2020: £1.4m).

The new product development programme continued to make good progress and launches of both portable and conveyor X-ray systems are anticipated for early in FY 2022. The R&D team has delivered a new suite of measurement techniques to a key industrial customer, and it is hoped this will lead to wider adoption of our industrial inspection systems.

Image Scan's Chairman and Chief Executive, Bill Mawer, commented:

"The COVID-19 pandemic has continued to impact all aspects of the business. Launching a new product without being able to visit customers or attend trade shows has presented a considerable challenge, as has servicing our widely deployed industrial X-ray machines. However, first orders were received for the new product, our industrial service contracts have been delivered, and it is pleasing to report a profit for the second year in succession. Disruption to global supply chains remains a concern but, with more product launches planned for the new year, and a world that is starting to adjust to the presence of COVID-19, we retain our optimistic outlook for the future."

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