Ok, I've managed to work out what the problem was with my original code... it would appear that if you have spaces in any of the image directories then it can not locate the file.

There is probably an HTML reason why this is the case, though I have limited understanding of HTML and so don't know why. Anyway, the below code works well and I think is quite simple... hopefully it will be of help of somebody out here but just remember NO SPACES IN DIRECTORIES!!!

Sub EmailImage()
    Dim OL As Object, rng As Range
    Dim EmailItem As Object
    Application.ScreenUpdating = False
    Set OL = CreateObject("Outlook.Application")
     
    Set EmailItem = OL.CreateItem(0)
    
    With EmailItem
        .HTMLBody = "<html><p>This is a picture.</p>" & _
            "<img src=C:\Adrian\Image1.png' >"
        .To = EmailTo
        .CC = ""
        .BCC = YouWillNeverKnow
        .Subject = "*** UPDATE *** @ " & Format(Sheets("Sheet1").Range("K13"), "hh:mm")
        .Display   'or use .Display (.Send to send)
    End With

End Sub