TIDMDSY
RNS Number : 9001N
DawMed Systems PLC
26 February 2009
For immediate release 26 February 2009
DAWMED SYSTEMS PLC
UNAUDITED SECOND INTERIM RESULTS FOR THE TWELVE MONTH PERIOD TO
30 SEPTEMBER 2008
The Board of Dawmed Systems plc ("Dawmed" or "the Company"), the AIM listed
medical devices company which designs, manufactures, sells and services
healthcare decontamination equipment and consumables used by NHS Trust
Hospitals, Private Hospitals, Clinics and Primary Care practitioners, today
announces Unaudited Second Interim Results for the twelve month period to 30
September 2008.
KEY POINTS:
* Revenue up 34% at GBP3.6 million for the second six month period;
* Revenue up 49% at GBP7.4 million for the twelve month period;
* Operating costs down by 13% compared with the same six month period last year;
* Ebitda at GBP138,600 profit for second six month period - up by GBP398,700 from
GBP260,100 Ebitda loss in the first six month period and up by GBP113,300 from
Ebitda profit of GBP25,300 for the same period last year;
* Operating profit at GBP81,000 for the second six month period - up by GBP448,700
from loss of GBP367,700 in the first six month period and up by GBP170,100 from
loss of GBP89,100 in the same period last year;
* Net profit at GBP50,000 for the second six month period - up by GBP448,500 from
the net loss of GBP398,500 in the first six month period and up by GBP187,500
from the net loss of GBP137,500 in the same period last year;
* Balance of shareholders funds at GBP177,900 at 30 September 2008 down by
GBP335,700 from GBP513,600 at the same date last year - directly reflecting the
losses incurred in the first six month period which have been partially
recovered by the return to profitability in the second six month period; and
* Profitable trading in third six month period anticipated to be continued into
the balance of the extended accounting period to 31 March 2009;
Kevin Gilmore, Executive Chairman of Dawmed, commented "I am pleased to report a
buoyant period of recovery from the losses of the first six month period with a
second six month period net profit of GBP50,000, representing a favourable
performance turnaround of GBP448,500 over the preceding period and a return to
profitability as I forecast in my preceding half year report. Subject to the
potential effects of GBP/Euro currency exchange rates upon equipment imported
from mainland Europe, I look forward with confidence to continued growth and
profitability across the range of activities of the Company over the final six
months of the extended financial period to 31 March 2009.
=-END--
Enquiries:
Dawmed Systems PLC Tel: 01607 682244
Kevin M Gilmore, Executive ChairmanMob: 07785 39666
Beaumont Cornish Limited Tel: 020 7628 3396
Roland Cornish
Bishopsgate Communications Limited Tel; 020 7652 3350
Maxine Barnes
Siobhra Murphy
For further information please visit Dawmed's website at www.dawmedsystems.co.uk
Chairman's Statement
for the twelve month period ended 30 September 2008
I am pleased to announce that the unaudited results produced by your Company for
the twelve months ended 30 September 2008 continue to show a considerable
increase in turnover over the corresponding period last year, together with the
return to profitability in the second six month period, as I forecast in the
half year results to 31 March 2008.
Change of accounting reference date
On 21 January 2009, it was announced that the Accounting Reference Date of the
Company and its subsidiary, Dawmed International Limited ("DIL"), had
been changed from 30 September to 31 March. The Company's and DIL's business is
geared heavily towards the provision of products to the NHS whose year end is 31
March. The Board believes that this change makes financial sense for the
Company's and DIL's respective financial years to fit in with the NHS budgetary
cycle.
Accordingly, these results comprise a second set of unaudited interim results
for the 12 month period to 30 September 2008. The following set of results will
be the full audited 18 month period to 31 March 2009. Thereafter, the Company
will prepare six monthly reports to 30 September and annual reports to 31 March
each year.
Financials
Revenue for the six month period of GBP3.6 million showed a creditable
improvement of 34% over the same period last year, resulting in a substantial
and continuing recovery from last year's losses. This brings the 12 month
period's revenue to GBP7.4 million, a substantial increase of 49% over the same
period last year. The Board expects that the profitable trading experienced in
the six months to 30 September 2008, will continue into the balance of the
extended accounting period to 31 March 2009.
Sales of the Wassenburg equipment for use in hospital Endoscopy Departments are
continuing at the level that your Board expects should be generated from
this market leading range of products.
During this six month period, sales of the Company's own manufactured
decontamination equipment, namely the AERclens and Clinic machines, have also
shown encouraging growth. These products are designed for use in the high
quality sectors of the Ear, Nose & Throat ("ENT") Departments of hospitals and
Dentistry markets respectively, where compliance with relevant standards is of
growing importance.
Satisfactory growth continues in the supply of Spares and Chemicals in line with
the Board's expectations and is anticipated to be sustained as the Company's
installed base of capital equipment is enlarged.
The Support Services Department continues to be well utilised, with an
expectation of further growth during the balance of the extended accounting
period being generated by the increasing national installed base of equipment
supplied by the Company.
The significant decline in the value of Sterling compared to the Euro continues
to depress the results of the Company due to the value of transactions
denominated in the Euro currency on products imported from mainland Europe.
Total operating costs before depreciation but excluding finance charges, foreign
exchange losses or gains and the compensation received in 2007 for the breach of
contract by a trade debtor, have decreased by 13% over the same six month period
last year. This reduction in expenditure follows ongoing changes to the
infrastructure of the Company to improve efficiency.
In the six months ended 30 September 2008, earnings after finance charges, but
before interest, taxation, depreciation and amortisation ("EBITDA") were a
profit of GBP138,600. This level of EBITDA shows a considerable improvement of
GBP398,700 over the EBITDA loss of GBP260,100 for the first six months and an
improvement of GBP113,300 over the EBITDA profit of GBP25,300 for the same
period last year. Your Board believes that this is an important indicator of the
success of the strategies put in place for the future success of the Company.
The resulting operating profit for the six month period of GBP81,000 represents
a turnaround of GBP448,700 compared to the preceding six month period (operating
loss: GBP367,700) and a turnaround of GBP170,100 compared to the same period
last year (operating loss: GBP89,100).
The net profit before and after tax for the six month period of GBP50,000
represents a turnaround of GBP448,500 compared to the preceding six month period
(loss before taxation: GBP398,500) and a turnaround of GBP187,500 compared to
the same period last year (loss before taxation: GBP137,500).
The balance of shareholders' funds at 30 September 2008 was GBP177,900 compared
with GBP513,600 at the same date last year, directly reflecting the losses
incurred in the first six months of the 12 month period, which have been
partially offset by the return to profitability in the second six months.
Products and Services
In the Annual Report & Accounts for the year ended 30 September 2007, I gave a
full description of the main characteristics and applications of the Company's
range of washer-disinfectors ("WD") for chemical disinfection and
washer-disinfector-dryers ("WDD") for thermal disinfection. All these products
continue to generate an increasing level of post installation quality revenue
from the Chemical Sales, the Spares Sales and the Support Services Department's
Sales that form an integral and important part of the overall business.
The Clinic WDD, designed for use mainly in the primary care dentistry sector,
continues to show good penetration into this important market.
The AERclens total system for the decontamination of both small flexible and
small rigid nasendoscopes used in ENT Departments of hospitals is gaining ground
in the marketplace, with orders increasing and the level of enquiries continuing
to be encouraging.
The traceability system that was launched in 2007, known as the Dawmed "DCTS",
has already achieved a number of sales and is frequently specified with new
installations of the AERclens.
Business in the secondary care Endoscopy Departments of Hospitals, which use
large flexible endoscope WDs, is performing strongly, capitalising on the
introduction to the market in 2007 of the Wassenburg pass-through WD and the
Wassenburg Dry 300 drying/storage cabinet.
Remainder of the Year and Future Prospects
I am pleased to report that there are strong indications that the increased
level of activity enjoyed in the first and second six month periods will
continue for the current extended financial period and possibly further into the
foreseeable future.
Through a tendering process, the NHS in England has recently developed a
national framework agreement for the supply of endoscope washer disinfectors and
drying/storage cabinets. Dawmed International Limited participated in this
tender and, I am pleased to report, was successful in being accepted as an
approved supplier on the agreement. This framework agreement became operational
during the early part of February 2009 and will allow hospitals and trusts to
purchase directly through the contract, thereby avoiding some of the costs and
delays associated with conducting a formal tender. Early indications are that
the national framework agreement is being well received by NHS trusts.
The level of activity in the large flexible endoscope WD market remains buoyant.
It is expected that this level of activity will continue under the auspices of
the framework agreement. Interest in the range of Wassenburg washer-disinfectors
and the storage/drying cabinet is expected to maintain the improvement already
experienced in the first twelve months through to the end of March and beyond,
with a substantial amount of orders being generated.
Whilst the sales momentum achieved in the market place by the Clinic WDD has
slowed due to a strategic move to place marketing and sales predominantly with
distributors, your Board believes that the product continues to have meaningful
ongoing potential both in the UK and overseas
Interest in the AERclens continues at levels which indicate that significant
sales will be gained in the foreseeable future. The increased attention being
given to automatic machine re-processing for decontamination of small endoscopes
in ENT departments should allow this market to develop to reach its full
potential.
The Board is confident that the range of products and services that is offered
by your Company will allow the final six months of the extended financial period
to maintain the level of growth that has been enjoyed in the first twelve
months. Whilst the continued weakness of Sterling will result in margins on the
imported products (principally Wassenburg products) being impaired, your Board
is hopeful that the underlying significant recovery in the period will be
maintained for the balance of the period. After making appropriate allowance
for the weakness in the Sterling/Euro foreign exchange levels, the Board's
latest projections indicate profitability for the remainder of the extended
financial period.
In spite of the financial credit and economic crises, and as I have previously
stated, the emphasis for the future continues to be the further implementation
of the Company's now established strategy for sales growth and profitability
from all of the underlying higher margin business elements in the UK, the
pursuit of export business to increase turnover and to reduce the dependence
upon the NHS, the control of the Company infrastructure to minimise
overheads and the continuous utilisation of the skills base and experience of
our loyal and contributory staff.
Kevin M Gilmore
Executive Chairman
26 February 2009
Consolidated Income Statement
for the twelve months ended 30 September 2008
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| | Unaudited | Unaudited | Unaudited | Restated | Restated | Restated |
| | 6 months | 6 months | year | Unaudited | Unaudited | Unaudited |
| | to 30 | to 31 | to 30 | 6 months | 6 months | year to |
| | September | March | September | to 30 | to 31 | 30 |
| | 2008 | 2008 | 2008 | September | March | September |
| | GBP'000 | GBP'000 | GBP'000 | 2007 | 2007 | 2007 |
| | | | | GBP'000 | GBP'000 | GBP'000 |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| | | | | | | |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| REVENUE | 3,608.0 | 3,818.7 | 7,426.7 | 2,687.4 | 2,288.7 | 4,976.1 |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| Cost of sales | (2,300.7) | (2,689.7) | (4,990.4) | (1,781.1) | (1,304.9) | (3,086.0) |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| Gross profit | 1,307.3 | 1,129.0 | 2,436.3 | 906.3 | 983.8 | 1,890.1 |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| Administrative | (1,226.3) | (1, 496.7) | (2,723.0) | (995.4) | (1,395.1) | (2,390.5) |
| expenses | | | | | | |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| PROFIT/(LOSS) FROM | 81.0 | (367.7) | (286.7) | (89.1) | (411.3) | (500.4) |
| OPERATIONS | | | | | | |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| Finance income | - | - | - | (4.3) | 4.3 | - |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| Finance costs | (31.0) | (30.8) | (61.8) | (44.1) | (33.0) | (77.1) |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| PROFIT/(LOSS) BEFORE | 50.0 | (398.5) | (348.5) | (137.5) | (440.0) | (577.5) |
| TAXATION | | | | | | |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| Tax expense | - | - | - | - | - | - |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| PROFIT/(LOSS) FOR | 50.0 | (398.5) | (348.5) | (137.5) | (440.0) | (577.5) |
| THE FINANCIAL PERIOD | | | | | | |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| BASIC PROFIT/(LOSS) | 0.24p | (1.93p) | (1.69p) | (0.67p) | (2.15p) | (2.82p) |
| PER SHARE (Note 3) | | | | | | |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
| DILUTED | 0.24p | (1.93p) | (1.69p) | (0.67p) | (2.15p) | (2.82p) |
| PROFIT/(LOSS) PER | | | | | | |
| SHARE (Note 3) | | | | | | |
+----------------------+-----------+------------+-----------+-----------+-----------+-----------+
Group Balance Sheet
as at 30 September 2008
+-----------------------------------+------------+---------------+---------------+
| | | Unaudited | Restated |
| | | 30 September | Unaudited |
| | | 2008 | 30 September |
| | | GBP'000 | 2007 |
| | | | GBP'000 |
+-----------------------------------+------------+---------------+---------------+
| | | | |
+-----------------------------------+------------+---------------+---------------+
| NON-CURRENT ASSETS | | | |
+-----------------------------------+------------+---------------+---------------+
| Property, plant and equipment | | 99.5 | 103.4 |
+-----------------------------------+------------+---------------+---------------+
| Intangible assets | | 40.2 | 165.6 |
+-----------------------------------+------------+---------------+---------------+
| | | 139.7 | 269.0 |
+-----------------------------------+------------+---------------+---------------+
| CURRENT ASSETS | | | |
+-----------------------------------+------------+---------------+---------------+
| Inventories | | 938.5 | 1,062.0 |
+-----------------------------------+------------+---------------+---------------+
| Trade and other receivables | | 1,777.9 | 1,249.8 |
+-----------------------------------+------------+---------------+---------------+
| Cash and cash equivalents | | 62.2 | 5.2 |
+-----------------------------------+------------+---------------+---------------+
| TOTAL ASSETS | | 2,918.3 | 2,586.0 |
+-----------------------------------+------------+---------------+---------------+
| CURRENT LIABILITIES | | | |
+-----------------------------------+------------+---------------+---------------+
| Financial liabilities | | (571.1) | (1,020.2) |
+-----------------------------------+------------+---------------+---------------+
| Trade and other payables | | (2,169.3) | (1,052.2) |
+-----------------------------------+------------+---------------+---------------+
| | | (2,740.4) | (2,072.4) |
+-----------------------------------+------------+---------------+---------------+
| NON-CURRENT LIABILITIES | | | |
+-----------------------------------+------------+---------------+---------------+
| Trade and other payables | | - | - |
+-----------------------------------+------------+---------------+---------------+
| TOTAL LIABILITIES | | (2,740.4) | (2,072.4) |
+-----------------------------------+------------+---------------+---------------+
| NET ASSETS | | 177.9 | 513.6 |
+-----------------------------------+------------+---------------+---------------+
| Called up share capital | | 1,030.7 | 1,030.7 |
+-----------------------------------+------------+---------------+---------------+
| Share premium account | | 1,878.2 | 1,878.2 |
+-----------------------------------+------------+---------------+---------------+
| Other reserve | | (350.5) | (350.5) |
+-----------------------------------+------------+---------------+---------------+
| Profit and loss account | | (2,380.5) | (2,044.8) |
+-----------------------------------+------------+---------------+---------------+
| SHAREHOLDERS' EQUITY | | 177.9 | 513.6 |
+-----------------------------------+------------+---------------+---------------+
Consolidated Cashflow Statement
for the twelve months ended 30 September 2008
+----------------------------------------+-------------+-------------+------------+
| | | Unaudited | Restated |
| | | year to 30 | Unaudited |
| | | September | year to 30 |
| | | 2008 | September |
| | | GBP'000 | 2007 |
| | | | GBP'000 |
+----------------------------------------+-------------+-------------+------------+
| | | | |
+----------------------------------------+-------------+-------------+------------+
| Cash flows from operating activities | | | |
+----------------------------------------+-------------+-------------+------------+
| Loss from operations | | (286.7) | (500.4) |
+----------------------------------------+-------------+-------------+------------+
| Adjustments for: | | | |
+----------------------------------------+-------------+-------------+------------+
| Depreciation and amortisation charges | | 165.2 | 223.8 |
+----------------------------------------+-------------+-------------+------------+
| Share based payment expense | | 12.8 | 27.9 |
+----------------------------------------+-------------+-------------+------------+
| Changes in working capital: | | | |
+----------------------------------------+-------------+-------------+------------+
| Decrease/(increase) in inventories | | 123.5 | (342.2) |
+----------------------------------------+-------------+-------------+------------+
| Increase in trade and other | | (528.0) | (380.4) |
| receivables | | | |
+----------------------------------------+-------------+-------------+------------+
| Increase in creditors | | 1,117.0 | 69.5 |
+----------------------------------------+-------------+-------------+------------+
| Cash generated from/(absorbed by) | | 603.8 | (901.8) |
| operating activities | | | |
+----------------------------------------+-------------+-------------+------------+
| Cash flows from investing activities | | | |
+----------------------------------------+-------------+-------------+------------+
| Finance expenses | | (61.8) | (77.1) |
+----------------------------------------+-------------+-------------+------------+
| Purchase of non-current assets | | (35.8) | (71.5) |
+----------------------------------------+-------------+-------------+------------+
| Net cash used in investing activities | | (97.6) | (148.6) |
+----------------------------------------+-------------+-------------+------------+
| Cash flows from financing activities | | | |
+----------------------------------------+-------------+-------------+------------+
| Overdraft | | (86.8) | 86.8 |
+----------------------------------------+-------------+-------------+------------+
| Factoring and stock advances | | (159.5) | 269.2 |
+----------------------------------------+-------------+-------------+------------+
| Finance leases | | (3.1) | (14.9) |
+----------------------------------------+-------------+-------------+------------+
| Other loans | | (199.6) | 199.6 |
+----------------------------------------+-------------+-------------+------------+
| Net cash (used)/generated in financing | | (449.0) | 540.7 |
| activities | | | |
+----------------------------------------+-------------+-------------+------------+
| Net increase/(decrease) in cash and | | 57.2 | (509.7) |
| cash equivalents | | | |
+----------------------------------------+-------------+-------------+------------+
| Cash and cash equivalents at beginning | | 5.1 | 514.8 |
| of period | | | |
+----------------------------------------+-------------+-------------+------------+
| Cash and cash equivalents at end of | | 62.3 | 5.1 |
| period | | | |
+----------------------------------------+-------------+-------------+------------+
| | | | |
+----------------------------------------+-------------+-------------+------------+
CHANGES IN SHAREHOLDERS' EQUITY
+--------------------------+----------+----------+----------+-----------+----------+
| | Share | Share | Other | Retained | Total |
| | capital | premium | reserve | earnings | GBP'000 |
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | |
+--------------------------+----------+----------+----------+-----------+----------+
| | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| At 1 October 2006 | 1,023.2 | 1,872.2 | (350.5) | (1,481.7) | 1,063.2 |
+--------------------------+----------+----------+----------+-----------+----------+
| Total recognised income | - | - | - | (440.0) | (440.0) |
| and expense | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| Reserve movement arising | - | - | - | 9.0 | 9.0 |
| from share based payment | | | | | |
| reserve | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| At 31 March 2007 | 1,023.2 | 1,872.2 | (350.5) | (1,912.7) | 632.2 |
+--------------------------+----------+----------+----------+-----------+----------+
| Total recognised income | - | - | - | (137.5) | (137.5) |
| and expense | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| Reserve movement arising | - | - | - | 5.4 | 5.4 |
| from share based payment | | | | | |
| reserve | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| Issue of shares in the | 7.5 | 6.0 | - | - | 13.5 |
| period | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| At 30 September 2007 | 1,030.7 | 1,878.2 | (350.5) | (2,044.8) | 513.6 |
+--------------------------+----------+----------+----------+-----------+----------+
| Total recognised income | - | - | - | (398.5) | (398.5) |
| and expense | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| Reserve movement arising | - | - | - | 12.8 | 12.8 |
| from share based payment | | | | | |
| reserve | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| At 31 March 2008 | 1,030.7 | 1,878.2 | (350.5) | (2,430.5) | 127.9 |
+--------------------------+----------+----------+----------+-----------+----------+
| Total recognised income | - | - | - | 50.0 | 50.0 |
| and expense | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| Reserve movement arising | - | - | - | - | - |
| from share based payment | | | | | |
| reserve | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
| At 30 September 2008 | 1,030.7 | 1,878.2 | (350.5) | (2,380.5) | 177.9 |
+--------------------------+----------+----------+----------+-----------+----------+
| | | | | | |
+--------------------------+----------+----------+----------+-----------+----------+
Notes to the Unaudited Results for the Twelve Month Period
1GENERAL INFORMATION
Dawmed Systems plc is a public limited company ('Company') incorporated in the
United Kingdom, whose shares are publicly traded on the Alternative Investment
Market (AIM). The Company is domiciled in the United Kingdom and its registered
address is Eden Close, Hellaby, Rotherham, South Yorkshire S66 8RW, United
Kingdom.
The Group's principal activities are the design, development, manufacture, sale,
distribution, testing and servicing of washer disinfectors and washer
disinfector dryers for the primary and secondary healthcare sectors.
2BASIS OF ACCOUNTING
The financial information has been prepared on the historical cost basis. The
accounting policies set out below have been applied consistently to all periods
presented in this consolidated twelve month report and in preparing an opening
IFRS balance sheet at 1 October 2006 for the purposes of the transition to IFRS.
BASIS OF PREPARATION
For all periods to 30 September 2007, the Group prepared its audited financial
statements under UK Generally Accepted Accounting Principles (UK GAAP). For the
period ending 31 March 2009 the Group is required to prepare its annual
consolidated financial statements in accordance with accounting standards
adopted for use in the European Union (International Financial Reporting
Standards (IFRS)).
This twelve month report has been prepared in accordance with the accounting
policies set out below (which are expected to be applied in preparing the
financial statements), taking into account the requirements and options in IFRS
1 'First-time adoption of International Financial Reporting Standards'. The
Group has not adopted the reporting requirements of IAS 34 'Interim Financial
Reporting'. The transition date for the Group's application of IFRS is 1 October
2006 and the comparative figures for the six month period ended 30 September
2007 and the annual period ended 30 September 2007 have been restated
accordingly. A reconciliation of the income statement (previously profit and
loss account) and balance sheet from previously reported UK GAAP to IFRS is not
required as the transition to IFRS has not resulted in any changes being
required to the amounts already disclosed.
The information relating to the twelve months ended 30 September 2008 and 30
September 2007 is unaudited, has not been reviewed by the Group's auditors and
does not constitute statutory accounts.
The comparative figures for the year ended 30 September 2007 have been restated
for the adoption of IFRS. The comparative figures for the year ended 30
September 2007 are not the Company's statutory accounts for that financial year.
Those accounts, which were prepared under UK GAAP, have been reported on by
the Company's auditors and delivered to the Registrar of Companies. The report
of the auditors was unqualified, did not include references to any matter to
which the auditors drew attention by way of emphasis without qualifying their
report, and did not contain statements under section 237(2) or (3) of the
Companies Act. The financial information in this document does not constitute
statutory financial statements within the meaning of the Act.
GOING CONCERN
The Group primarily meets its day to day working capital requirements through an
invoice factoring and stock financing facility which is secured on trade debtors
and stocks of finished goods. The nature of the Group's business is such that
the timing of cash inflows can be unpredictable. The availability of the invoice
factoring facility provides an appropriate method of managing this level of
unpredictability. In addition, the Group's principal supplier of goods is
providing extended credit facilities to assist in accommodating the substantial
increase in activity.
The directors have prepared cash flow projections covering the next twelve
months which anticipate a significant increase in the level of business. These
forecasts are supported by the current level of activity, a substantial order
book and identified future projects. Additionally, the continuing enhancement of
existing machines and the growth in demand for the AERclens and Clinic machines
are providing prospects for growth. The directors consider that, with the
continuation of the increased level of business that is being experienced, these
projections should be achievable. However, there can be no certainty in relation
to these matters.
These forecasts indicate that with the support and cooperation provided by the
Group's principal supplier and the utilisation of the invoice factoring and
stock financing facility, the Group has adequate resources to meet its ongoing
requirements. On this basis, the directors consider it appropriate to prepare
the financial statements on the going concern basis. The financial statements do
not include any adjustments that would result if the increase in the levels of
business was not achieved.
BASIS OF CONSOLIDATION
The consolidated financial information incorporates those of Dawmed Systems plc
and its subsidiary undertaking for each reporting period.
In preparing this half yearly report, any intra-group balances, unrealised gains
and losses or income and expenses arising from intra-group trading are
eliminated.
Subsidiaries are entities over which the Group has the power to govern the
financial and operating policies to obtain economic benefit to the Group.
Subsidiary companies acquired during the year are consolidated using the
purchase method. The results of subsidiary companies acquired are included in
the consolidated income statement from the effective date of acquisition.
The cost of an acquisition is measured as the fair value of the assets given,
equity instruments issued and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the acquisition. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business
combination are initially measured at fair value at the acquisition date.
The excess of cost of acquisition over the fair values of the Group's share of
identifiable net assets acquired is recognised as goodwill. Any deficiency of
the cost of acquisition below the fair value of identifiable net assets acquired
(i.e. discount on acquisition) is recognised directly in the income statement.
TRANSITION TO IFRS
IFRS 1 grants certain exemptions from the full requirements of IFRSs in the
transition period. The following exemptions have been taken in these
consolidated financial statements:
i) IFRS 3 - Business combinations
The Group has elected not to apply IFRS 3 'Business Combinations'
retrospectively to acquisitions that took place prior to 1 April 2006. As a
result, the carrying amount of goodwill in the UK GAAP balance sheet at 31 March
2006 is brought forward to the IFRS opening balance sheet without adjustment.
ii) IFRS 2 - Share-based payment
IFRS 2 has not been applied to share-based payments granted before 7 November
2002 nor those granted after 7 November 2002 that had vested prior to 1 October
2006. The Group has adopted IFRS 2 'Share Based Payment' for share options
granted after 7 November 2002 which had not vested at 1 October 2006. The
adoption of IFRS 2 has not required numerical adjustments to be made to the
balance sheet at 1 October 2006 or to the income statement for the year ended 30
September 2007.
REVENUE RECOGNITION
Group revenue is the fair value of the consideration received or receivable by
the Group for goods supplied and services provided, excluding VAT and trade
discounts.
Where services are provided on annual contracts, revenue is spread evenly over
the duration of the contract. Where annual contracts do not apply then revenue
is recognised at fair value by reference to the stage of completion of the
provision of services.
Sales of goods are recognised when goods are delivered and title has passed.
Interest income is accrued on a time-apportioned basis, by reference to the
principal outstanding and at the effective interest rate applicable, which is
the rate that exactly discounts estimated future cash receipts through the
expected life of the financial asset to that asset's net carrying amount.
RESEARCH AND DEVELOPMENT
Where the future recoverability of development expenditure on a particular
project can be foreseen with reasonable certainty such expenditure is
capitalised at cost under intangible assets in the balance sheet.
These development costs are then amortised, commencing from the date that
revenues begin to be earned from the project, over the expected useful economic
life. The useful economic life is determined such that the expenditure is then
matched with the revenues then earned.
All other research and development expenditure is recognised as an expense as
incurred.
PROPERTY, PLANT & EQUIPMENT
Property, plant and equipment assets are stated at cost less accumulated
depreciation and any recognised impairment loss.
Depreciation is charged so as to write off the cost of assets, over their
estimated useful economic lives. The rates used for each major asset category,
which are reviewed annually, are:
Leasehold improvements - 25%
Plant and machinery - 25%
Fixtures, fittings and computer equipment- 25%
Motor vehicles - 25%
Assets held under finance leases are depreciated over their expected useful
lives on the same basis as owned assets or, where shorter, the term of the
relevant lease.
The gain or loss arising on the disposal or retirement of an asset is determined
as the difference between the sales proceeds and the carrying amount of the
asset and is recognised in profit or loss.
IMPAIRMENT OF ASSETS
At each balance sheet date the Group reviews the carrying value of its property,
plant and equipment and intangible assets to determine whether there is any
indication that those assets have suffered an impairment loss. If any such
indication exists the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss.
An impairment loss is only reversed if there is a subsequent increase in the
recoverable amount that can be related objectively to an event occurring after
the impairment loss was recognised.
LEASING
Leases are classified as finance leases whenever the terms of the lease transfer
substantially all the risks and rewards of ownership to the Group. All other
leases are classified as operating leases.
Assets held under finance leases are recognised as assets of the Group at their
fair value or, if lower, at the present value of the minimum lease payments,
each determined at the inception of the lease. The corresponding liability is to
be included in the balance sheet as a finance lease obligation. The interest
element of leasing payments represents a constant proportion of the capital
balance outstanding and is charged to the income statement over the period of
the lease.
Rentals payable under operating leases are charged to income on a straight-line
basis over the term of the relevant lease.
BORROWING COSTS
Borrowing costs are recognised as an expense when incurred.
TAXATION
The tax expense represents the sum of the current tax expense and deferred tax
expense.
The current tax payable is based on an estimation of the amount due on the
taxable profit for the year. Taxable profit is different from net profit as
reported in the income statement because it excludes items of income or
expenditure which are not taxable or deductible in the year as a result of
either the nature of the item or the fact that it is taxable or deductible in
another period. The Group's liability for current tax is calculated by using tax
rates that have been enacted or substantially enacted by the balance sheet date.
Deferred tax is accounted for on the basis of temporary differences arising from
the differences between the tax base and accounting base of assets and
liabilities.
Deferred tax is recognised for all taxable temporary differences, except to the
extent where it arises from the initial recognition of an asset or liability in
a transaction that is not a business combination. Deferred tax is not provided
for on the initial recognition of goodwill. Deferred tax assets are recognised
only to the extent that it is probable that future taxable profits will be
available against which temporary differences can be utilised.
Deferred tax is charged or credited to the income statement, except when it
relates to items charged or credited directly to equity, in which case it is
dealt with within equity. It is calculated at the tax rates that are expected to
apply to the period when the asset is realised or the liability is settled.
FINANCIAL INSTRUMENTS
Financial assets or liabilities are recognised when, and only when the company
becomes a party to the contractual provisions of the instrument.
Classification of financial instruments
Financial instruments are classified as financial assets, financial liabilities
or equity instruments.
Following the adoption of IAS 32, financial instruments issued by the Group are
treated as equity only to the extent that they meet the following two
conditions:
* They include no contractual obligations upon the Group to deliver cash or other
financial assets that are potentially unfavourable to the Group; and
* Where the instrument will or may be settled in the Group's own equity
instruments, it is either a non-derivative that includes no obligation to
deliver a variable number of the Group's own equity instruments or is a
derivative that will be settled by the Group exchanging a fixed amount of cash
or other financial assets for a fixed number of its own equity instruments.
Recognition and valuation of financial assets
Trade Receivables
Trade receivables do not carry interest and are reduced by appropriate
allowances for estimated irrecoverable amounts.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and at bank. Cash and cash
equivalents excludes overdrafts.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the
substance of the contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities.
Bank borrowings
Interest bearing bank loans and overdrafts are recorded at their fair value.
Finance charges are allocated to the income statement using an effective
interest rate, on the outstanding carrying value of the instrument.
Trade payables
Trade payables are not interest bearing and are stated at their amortised cost.
Foreign exchange
Assets and liabilities denominated in foreign currencies are translated at the
rate of exchange ruling at the balance sheet date. Transactions in foreign
currencies are recorded at the rate ruling at the date of the transaction. All
differences are taken to the income statement.
Warranty costs
Provision is not made for the warranty costs on goods bought for re-sale as the
liability for those warranty costs lies with the manufacturer. Provision is not
made for warranty costs on manufactured equipment as such costs are considered
to be insignificant.
Equity instruments
Equity instruments are initially measured at fair value.
GOVERNMENT GRANTS
Grants received towards the purchase of property, plant and equipment are
carried in the balance sheet as deferred income and credited to the income
statement over the expected useful lives of the assets acquired. Grants
receivable for revenue expenditure are credited to revenue when received.
RETIREMENT BENEFITS
Payments to defined contribution retirement benefit plans are charged as an
expense as they fall due. Any contributions unpaid at the balance sheet date are
included as an accrual as at that date. The Group has no further payment
obligations once the contributions have been paid.
SHARE BASED PAYMENT
The Group has applied the requirements of IFRS 2 Share-based Payment. In
accordance with the IFRS1 exemption, IFRS 2 has been applied to all grants of
equity instruments after 7 November 2002 that had not been vested prior to 1
October 2006.
The Group issues equity-settled share-based payments to certain employees,
whereby employees render services in exchange for share options.
Where employees are rewarded using share based payments, the fair values of
employees' services are determined indirectly by reference to the fair value of
the instrument granted to the employee. This fair value is appraised at the
grant date using an option-pricing model (Black-Scholes) and excludes the impact
of non-market vesting conditions.
Equity-settled share based payments are expensed in the income statement. Upon
exercise of share options, the proceeds received net of attributable transaction
costs are credited to share capital, and where appropriate share premium.
3 EARNINGS PER SHARE
The calculation of basic loss per share is based upon the loss of GBP348,465
(2007: loss GBP577,517) and on 20,613,292 shares (2007: 20,513,292 shares),
being the weighted average number of shares in issue during the period.
Since the exercise price of the 2,846,676 share options is above the average
fair price for the twelve months ended 30 September 2008 (2007: 2,846,676 share
options), the diluted loss per share is equivalent to the basic loss per share.
4 EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTISATION ("EBITDA")
Earnings before interest, tax, depreciation and amortisation ("EBITDA") amount
to a loss of GBP121,500 (2007: GBP276,600) and consist of the Loss from
Operations of GBP286,700 (2007: loss of GBP500,400) less depreciation and
amortisation charges of GBP165,200 (2007: GBP223,800).
5APPROVAL OF THE SECOND INTERIM HALF YEAR REPORT
The unaudited second interim report for the twelve month period to 30 September
2008 was approved by the board of directors on 24 February 2009.
6 WEBSITE
The half year report and accounts are being posted to shareholders and will be
available on the website: www.dawmedsystems.co.uk
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Dawmed Systems (LSE:DSY)
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