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 2020.
· Sales increased 50% to £3.5m (2019: £2.3m) at a gross margin of 49% (2019: 54%)
· Unaudited pre-tax trading profit of £112k (2019: Loss of £402k)
· New cabinet X-ray system launched
· Exciting new partnership with major security technology company
· Period-end order book of £633k (2019: £1.7m)
· Cash generation of £769k (2019: -£142k) giving a year-end balance of £1,409m (2019: £640k)
The Company started the year with a strong order book of £1.7m, which included a large order for portable X-ray systems from a European government customer. That order was successfully delivered early in the year and, together with continued momentum in new security orders from other regions, contributed to a strong first half performance. As anticipated, the COVID-19 pandemic impacted the Company in the second half. However, our facility has remained open and continued to operate in a COVID secure way, processing customer orders and working on our ambitious product development programme.
Sales for the year ended 30 September 2020 were up by 50% to £3.5m (2019: £2.3m), the growth largely driven by portable X-ray sales which doubled from the previous year. Aftersales revenues, which consist primarily of service, spares and training, were up by nearly 50%, supported by valuable spares contracts for a nuclear screening system originally delivered in 2015. For the first time, Image Scan training courses for bomb technicians have been run in the USA.
Gross margins returned to more normal levels at 49% (2019: 54%) reflecting the balance of product mix towards portable X-ray. Overheads declined slightly to £1.6m, as the Company used the Government's Coronavirus Job Retention Scheme to support salaries during periods of reduced activity. Subject to any audit adjustments, the pre-tax trading profit for the year was £112k (2019: loss of £402k), exceeding our previous guidance of a profit of £0 to £100k.
In the second half of the year COVID-19 impacted both security spending by governments and investment in new plant in the automotive sector, resulting in a reduced flow of new contracts. Orders received in the year totalled £2.4m (2019: £3.9m) and the Company ended the period with an order book of £633k (2019: £1.7m).
The high stock holding reported at the end of the previous period was reduced to a more normal level, contributing to strong cash generation of £769k (2019: -£142k) and a healthy year-end cash balance of £1.409m (2019: £640k). Stock has been managed tightly, particularly in the period of the pandemic, with a balance being struck between control of working capital and the need to offer short delivery times to customers.
The Company has continued to invest in the expansion of its product range, using a combination of internal Research and Development and partnership with other technology suppliers. This effort led to the recent launch of the Axis-CXi cabinet X-ray system which is now being shown to customers and partners using a mix of on-line demonstrations, virtual trade exhibitions and newly created video material. In July, a partnership agreement was signed with a major security technology company and work is underway on a new conveyor X-ray machine under this agreement.
Image Scan's Chairman and Chief Executive, Bill Mawer, commented: "The COVID-19 pandemic has impacted our customers, our supply chains and our staff. However, I am proud of the way the whole Company has pulled together through this period to keep the business operating and deliver a profit for the year that exceeded our earlier estimates. The recent launch of the Axis-CXi cabinet X-ray machine is an exciting step forward for the Company and should bring new customers and new sources of revenue. With our strong cash position and our ambitious product development programme we look to emerge from the pandemic well-placed for the future."