Unaudited interim results

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 £3.6 million for the second six month period;


  • Revenue up 49% at £7.4 million for the twelve month period;


  • Operating costs down by 13% compared with the same six month period last year;


  • Ebitda at £138,600 profit for second six month period - up by £398,700 from £260,100 Ebitda loss in the first six month period and up by £113,300 from Ebitda profit of £25,300 for the same period last year;


  • Operating profit at £81,000 for the second six month period up by £448,700 from loss of £367,700 in the first six month period and up by £170,100 from loss of £89,100 in the same period last year;


  • Net profit at £50,000 for the second six month period - up by £448,500 from the net loss of £398,500 in the first six month period and up by £187,500 from the net loss of £137,500 in the same period last year; 


  • Balance of shareholders funds at £177,900 at 30 September 2008 down by £335,700 from £513,600 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 £50,000, representing a favourable performance turnaround of £448,500 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 EuropeI 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 Chairman                                           Mob: 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


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 £3.6 million showed a creditable improvement of 34over 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 £7.4 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 athe 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 machineshave 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 ServiceDepartment 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 £138,600. This level of EBITDA shows a considerable improvement of £398,700 over the EBITDA loss of £260,100 for the first six months and an improvement of £113,300 over the EBITDA profit of £25,300 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 £81,000 represents a turnaround of £448,700 compared to the preceding six month period (operating loss: £367,700) and a turnaround of £170,100 compared to the same period last year (operating loss: £89,100).


The net profit before and after tax for the six month period of £50,000 represents a turnaround of £448,500 compared to the preceding six month period (loss before taxation: £398,500) and a turnaround of £187,500 compared to the same period last year (loss before taxation: £137,500). 


The balance of shareholders' funds at 30 September 2008 was £177,900 compared with £513,600 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 saleand 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 firsand 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 salemomentum 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

6 months to 30 September

2008

£'000


Unaudited

6 months to 31 March

2008

£'000


Unaudited

year

 to 30 September

2008

£'000

Restated

Unaudited

6 months 

to 30 September

2007

£'000


Restated

Unaudited

6 months to 31 March

2007

£'000


Restated

Unaudited

 year to 30

September

2007

£'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 expenses

(1,226.3)

(1, 496.7)

(2,723.0)

(995.4)

(1,395.1)

(2,390.5)

PROFIT/(LOSS) FROM OPERATIONS


81.0


(367.7)


(286.7)


(89.1)


(411.3)


(500.4)

Finance income

-

  -

-

(4.3)

4.3

-

Finance costs

(31.0)

(30.8)

(61.8)

(44.1)

(33.0)

(77.1)

PROFIT/(LOSS) BEFORE TAXATION


50.0


(398.5)


(348.5)


(137.5)


(440.0)


(577.5)

Tax expense

-

-

-

-

-

-

PROFIT/(LOSS) FOR THE FINANCIAL PERIOD


50.0


(398.5)


(348.5)


(137.5)


(440.0)


(577.5)

BASIC PROFIT/(LOSS) PER SHARE (Note 3)


0.24p


(1.93p)


(1.69p)


(0.67p)


(2.15p)


(2.82p)

DILUTED PROFIT/(LOSS) PER SHARE (Note 3)


0.24p


(1.93p)


(1.69p)


(0.67p)


(2.15p)


(2.82p)


  Group Balance Sheet

as at 30 September 2008






Unaudited

30 September

2008

£'000

Restated

Unaudited

30 September 2007

£'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

year to 30 September

2008

£'000

Restated

Unaudited year to 30 September 2007

£'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 receivables


(528.0)

(380.4)

Increase in creditors


1,117.0

69.5

Cash generated from/(absorbed by) operating activities



603.8


(901.8)

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 activities



(449.0)


540.7

Net increase/(decrease) in cash and cash equivalents



57.2


(509.7)

Cash and cash equivalents at beginning of period



5.1


514.8

Cash and cash equivalents at end of period



62.3


5.1






  

CHANGES IN SHAREHOLDERS' EQUITY



Share capital

£'000

Share premium

£'000

Other reserve

£'000

Retained earnings

£'000


Total

£'000







At 1 October 2006

1,023.2

1,872.2

(350.5)

(1,481.7)

1,063.2

Total recognised income and expense


-


-


-


(440.0)


(440.0)

Reserve movement arising from share based payment reserve


-


-


-


9.0


9.0

At 31 March 2007

1,023.2

1,872.2

(350.5)

(1,912.7)

632.2

Total recognised income and expense


-


-


-


(137.5)


(137.5)

Reserve movement arising from share based payment reserve


-


-


-


5.4


5.4

Issue of shares in the period

7.5

6.0

-

-

13.5

At 30 September 2007

1,030.7

1,878.2

(350.5)

(2,044.8)

513.6

Total recognised income and expense


-


-


-


(398.5)


(398.5)

Reserve movement arising from share based payment reserve


-


-


-


12.8


12.8

At 31 March 2008

1,030.7

1,878.2

(350.5)

(2,430.5)

127.9

Total recognised income and expense


-


-


-


50.0


50.0

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 


1    GENERAL 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, developmentmanufacture, sale, distribution, testing and servicing of washer disinfectors and washer disinfector dryers for the primary and secondary healthcare sectors.


2    BASIS 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 3March 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 unauditedhas 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 serviceprovided, 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 saleproceeds 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 £348,465 (2007: loss £577,517) 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 £121,500 (2007: £276,600) and consist of the Loss from Operations of £286,700 (2007: loss of £500,400) less depreciation and amortisation charges of £165,200 (2007: £223,800).


5    APPROVAL 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
 
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