Interim Results

Image Scan Holdings PLC
04 June 2003


For Immediate Release                                               4 June 2003


                            IMAGE SCAN HOLDINGS PLC
                        ('Image Scan' or the 'Company')


                                 INTERIM RESULTS
                    FOR THE SIX MONTHS ENDED 31 MARCH 2003

Image Scan, a leading provider of multi-view, 3D X-ray imaging technologies for
the security and industrial inspection markets announces interim results for the
six months ended 31 March 2003.

Key Points

  • Turnover £295,000 (2002: £47,000)

  • Group loss before tax of £380,000 (2002: £408,000)

  • Basic and diluted loss per ordinary share of 2.34p (2002: 2.91p)

  • First commercial order worth £120,000 for 3DX-CameraTM from Rapiscan

  • Major trial of the AXIS-3D(R) technology at key reference site - Terminal
    1, Heathrow Airport.

  • Successful demonstration of DEXTM new industrial camera system

  • Research and development expenditure up 25% to £91,000 (2002: £73,000)

  • Gearing at 15.9% (2002: 24.6%)



Commenting on outlook, Nigel Tipple, Chairman of Image Scan said:

'Events, such as the war in Iraq, could not have been predicted even as recently
as six months ago and yet they have had significant consequences for business
across the world, and again added to the ever increasing emphasis on the need
for improved security in our everyday lives.  We believe that the Company is in
a unique position to meet these increasing demands and that we can offer
advanced security solutions to the sector.

Progress over the last six months has been solid at the sales level and is in
line with our expectations.  During the second half of the year we expect the
order intake from our commercial partner Rapiscan (one of the world's leading
suppliers of security inspection equipment) to start gaining momentum. The Board
considers that prospects are encouraging with sizeable orders expected before
the year end, which will place the Company in a strong position for a
significant improvement in performance in the following financial year.'

For further information:

Nicholas Fox, Chief Executive      Image Scan Holdings        )    01664 503 600
Nigel Tipple, Chairman                                        )

Richard Darby                      Buchanan Communications    )    020 7466 5000
James Strong                                                  )



Chairman's Statement



Introduction

I am pleased to present the interim results of Image Scan Holdings plc for the
six months ended 31 March 2003 and the Board's view of  the Company's prospects
for the remainder of this financial year.

Financial Results

Following the strong finish to the last financial year, sales of £295,000 for
the six months to 31 March 2003 were solid and mainly related to the completion
of funded non-profit research and development projects. The low gross margin of
12% (2002 full year: 48%) reflects this temporary change in sales mix in the
period. I expect the margin to improve significantly as we commence sales of
commercial security products.

Overheads of £415,000 include internally funded research and development costs
of £91,000. This discretionary cost is 25% (£18,000) up on the same period last
year, and nearly at the 2002 full year spend of £118,000. Remaining overheads
have been well controlled with an overall reduction of £35,000 below the
previous six months level of £450,000.

Bank loans at 31 March 2003 were £110,000 and are reducing at the annual rate of
£37,000. Consequently interest payable is minimal at £3,000 in the period.
Gearing is 15.9% at the half year compared to 24.6% at 31 March 2002.

The fully diluted loss per share for the period on continuing activities was
2.34p compared to 2.91p at 31 March 2002. Shareholders' funds have been reduced
to £691,000 by the reported loss of £380,000. In accordance with previously
stated policy, no interim dividend is recommended.

During the period we invested £61,000 in fixed assets, being principally the
development of a DEXTM camera system and a specialist X-ray source for ongoing
research. The half year cash balance of £595,000 improved by £17,000 in the
period, boosted by timing deferrals of certain customer payments and good cash
collection from debtors.

Commercial Overview

Security Sector

Given the well publicised increase in security needs and the commitment to
improve the ability to detect threats, the primary focus of the Company has been
the supply of equipment to provide high quality single and multi-view X-ray
imaging systems for security screening of baggage and freight.

During the last six months we have seen the first commercial orders of the
3DX-CameraTM (the core component of the AXIS-3D(R)) from our alliance partner
Rapiscan Security Products Limited ('Rapiscan'). In February of this year, in
conjunction with Rapiscan we also commenced trials of the AXIS-3D(R) system at
Heathrow's busiest terminal, Terminal 1. This trial is being sponsored by BAA
and the Department for Transport.  BAA has recently announced that when the
trial reaches a satisfactory conclusion, they would look forward to its wider
introduction across their seven UK airports.  The indications so far are that
the trial is progressing well; the product is meeting expectations and providing
an enhanced capability for the security operators of baggage screening machines.

We have also been very active in promoting our AXIS-3D(R) technology to the
world market place. Jointly with Rapiscan we have successfully demonstrated the
product at international exhibitions in London, Dubai, Abu Dhabi and Moscow as
well as maintaining our own programme of open days for key prospective
customers. Considerable interest has been shown from potential buyers and a
number of product enquiries are currently being pursued.

The Company is investing heavily in the production engineering of its 3DX-Camera
TM and its associated software so that it can efficiently meet the anticipated
volumes of product sales whilst still maintaining the exacting standards of this
sector and our customers.

In March we completed development of the beta version of the 3D threat image
projection ('TIP') software for the USA's Transport Security Administration. The
customer is currently installing the TIP software, which is used by end-users to
both train and objectively monitor the performance of their security screening
operatives.  Following the conclusion in June of the funded development
programme for the USA market, our efforts will concentrate on the introduction
of a UK certified system for use in Europe.

Industrial Sector

The initiative to develop a new generation of industrial inspection equipment
has resulted in the successful demonstration of the first DEXTM evaluation
system in March of this year.  The DEXTM system is an in-line X-ray system
targeted at high throughput (80 meters per minute line speeds) high resolution
(0.1 mm feature size) industrial inspection. This new camera adds to the
Company's portfolio of industrial cameras, which can now offer a range of
resolutions capable of detecting minimum feature sizes of 0.5 mm down to 5
(micro)m.

The ability to confirm that products are assembled correctly, are safe from
latent faults and contain no contaminants brings many benefits to manufacturers
including increased customer confidence in the product's efficacy, reduced
wastage and product line downtime, together with enhanced demonstrable product
quality control.

It is with a focus on these market requirements that the Company has developed a
new range of novel single and multi-view, in-line X-ray inspection systems. This
product is based on the DEXTM camera and incorporates the unique knowledge of
the Company's in-house development team and has been designed to address the
high speed (10 products per second) safety critical plastic and plastic/metal
components market typical of the drug delivery and pharmaceutical sector.

Current trading and outlook

The prospects for the Company's technology remain strong and the Company
continues to pursue commercial opportunities in the security and industrial
sectors.  In particular the BAA trial will now provide an important reference
site for the promotion of the AXIS-3D(R) security screening product. The
alliance with Rapiscan is now delivering results and I expect the order intake
from them to gain momentum in the second half of the year.  With the value of
recent quotations to Rapiscan amounting to almost £500,000, the Board considers
that prospects are encouraging for receiving sizeable orders before the year end
which will place the Company in a strong position for a significant improvement
in performance in the following financial year.

Our immediate focus is on developing a growing order intake from Rapiscan over
the next four months to carry into the next year.  To achieve this, resources
have been allocated to enable completion of the production line processes for
the 3DX-CameraTM. This will have a short term impact on overheads in the second
half but will ensure the fulfilment of the expected order intake. Our business
model of aligning ourselves with strategic partners is providing us with a
proven route to market and will undoubtedly be of significant benefit in
transitioning the product development into commercial applications.

The introduction of the new DEXTM camera has already received positive feedback
from the test marketing of the product with prospective customers.  I expect the
second half of this year to see the completion of the product development with
an official launch towards the end of this year.  Sales of the first systems are
anticipated in 2004.

Other Matters

The Company continues to benefit from the enormous energy and dedication of its
staff, particularly those who have been involved in the Heathrow trial and they
are all to be congratulated for their efforts. I look forward to reporting
further progress in my statement, which will accompany the full year results to
30 September 2003.



Nigel J. Tipple,
Chairman



Unaudited Consolidated Profit & Loss Account

                                                  Six months to      Six months to                  Year to
                                                  31 March 2003      31 March 2002        30 September 2002
                                                    (Unaudited)        (Unaudited)                (Audited)
                                                          £'000              £'000                    £'000

Turnover                                                    295                 47                      503
Cost of sales                                             (260)               (40)                    (263)

Gross profit                                                 35                  7                      240

Administration expenses                                   (415)              (385)                    (876)

Operating loss                                            (380)              (378)                    (636)

Interest received                                             3                  7                       13

Interest payable                                            (3)               (37)                     (42)

Loss on ordinary activities before
taxation                                                  (380)              (408)                    (665)

Taxation                                                      -                  -                       62

Loss on ordinary activities
after taxation                                            (380)              (408)                    (603)

Loss per share: Basic and fully
diluted                                                 (2.34)p            (2.91)p                  (4.00)p




Unaudited Consolidated Balance Sheet


                                              31 March 2003       31 March 2002       30 September 2002
                                                 (Unaudited)        (Unaudited)               (Audited)
                                                       £'000              £'000                   £'000

Fixed Assets
Tangible assets                                          146                105                     109
Intangible assets                                        185                203                     193

                                                         331                308                     302

Current assets
Stock and work in progress                                83                 62                      70
Debtors                                                  141                 38                     370
Short term investments                                   165                  -                      43
Cash at bank and in hand                                 430                671                     535

                                                         819                771                   1,018


Creditors - amounts falling due
within one year                                        (386)              (371)                   (158)

Net current assets/(liabilities)                         433                400                     860

Total assets less current liabilities                    764                708                   1,162

Creditors - amounts falling due
after more than one year                                (73)              (110)                    (91)

Net assets                                               691                598                   1,071


Capital and reserves
Called up share capital                                  162                151                     162
Share premium account                                  2,911              2,255                   2,911
Profit and loss account                              (2,382)            (1,808)                 (2,002)

Equity shareholders' funds                               691                598                   1,071




Unaudited Consolidated Cash Flow Statement


                                                     Six months to      Six months to                Year to
                                          Notes      31 March 2003      31 March 2002      30 September 2002
                                                       (Unaudited)        (Unaudited)              (Audited)
                                                             £'000              £'000                  £'000

Net cash inflow/(outflow) from
operating activities                     (a)                    79              (632)                  (797)

Returns on investments and
servicing of finance
Interest received                                                3                  7                     13
Interest paid                                                  (3)               (37)                   (42)

                                                                 -               (30)                   (29)

Taxation
Corporation tax recovered                                       19                  -                      -

Capital expenditure and
financial investment
Purchase of tangible fixed assets                             (61)               (24)                   (75)
Purchase of intangible fixed assets                            (2)                (6)                   (16)

                                                              (63)               (30)                   (91)

Net cash flow before
management of liquid resources                                  35              (692)                  (917)

Management of liquid resources
Withdrawal/(purchase) of short term
deposits                                                     (122)                  -                    370

Financing
Issue of ordinary share capital                                  -                982                  1,650
Bank loans repaid                                             (18)                  -                   (37)
Other loans repaid                                               -                  -                  (517)

                                                              (18)                982                  1,096

Increase in cash in the period           (b)                 (105)                290                    549


                   Note (a) Reconciliation of operating cash flows

Operating loss                                               (380)              (378)                  (636)
Depreciation                                                    24                 23                     54
Amortisation                                                     9                  -                     18
Research and development
written off                                                      -                 68                     71
(Increase)/decrease
in stock and work in progress                                 (13)               (57)                   (49)
(Increase)/decrease in debtors                                 211                (9)                  (279)
(Decrease)/increase in creditors                               228              (279)                     24

Net cash inflow/(outflow) from
operating activities                                            79              (632)                  (797)



Unaudited Consolidated Cash Flow Statement (continued)


Note (b) Analysis of net debt
                                                     2002          Cash flow                 2003
                                                    £'000              £'000                £'000

Cash at bank and in hand                              535              (105)                  430
Debt due within one year                             (37)                  -                 (37)
Debt due after one year                              (91)                 18                 (73)
Current asset investments                              43                122                  165

                                                      450                 35                  485



Reconciliation of Movement in Shareholders' Funds


                                              Six months to       Six months to                 Year to
                                              31 March 2003       31 March 2002       30 September 2002
                                                (Unaudited)         (Unaudited)               (Audited)
                                                      £'000               £'000                   £'000

Opening shareholders' funds                           1,071                  24                      24
Issue of shares - at par                                  -                  19                      30
Issue of shares - share premium                           -                 963                   1,620
Loss attributable to members                          (380)               (408)                   (603)

                                                        691                 598                   1,071


Notes to the Unaudited Interim Statement

1          Basis of Preparation

(a)        The interim statement has been prepared in accordance with the
accounting policies set out in the Company's Annual Report and Accounts for the
year ended 30 September 2002.

(b)        The interim statement is neither audited nor reviewed. The figures
for the year ended 30 September 2002 do not comprise statutory accounts for the
purpose of section 240 of the Companies Act 1985 and have been extracted from
the Company's full accounts for that year, which received an unqualified
Auditors' Report and did not contain a statement under section 237(2) or (3) of
the Companies Act 1985. The accounts have been filed with the Registrar of
Companies.

(c)        Basic loss per ordinary share is based on the loss on ordinary
activities after taxation of £380,000 and on 16,502,250 ordinary shares being
the weighted average of those in issue during the period.

FRS14 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.


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