Adams Regulatory News (ADA)

22 Mar 2007 07:00

DawMed Systems PLC22 March 2007 22 MARCH 2007 DAWMED SYSTEMS PLC ("Dawmed" or the "Company") FINAL AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2006 The Board of DawMed Systems plc ("DawMed" or "the Company"), the medical devicescompany, which designs, manufactures, sells and services washer-disinfectorsused by NHS Trust hospitals, private hospitals and clinics, is pleased to present the Final Audited Results for the Company for the year ended 30September 2006 KEY POINTS - Sole reason for the conversion from a healthy pre-tax profit of £133,300to a loss of £70,900 was the breach of contract by a trade debtor who, in theopinions of the Directors and the Company's legal advisors, was and still is in breach of contract; - Board remains confident that the new strategy, implemented in the secondquarter of last year, is beginning to bear fruit and, subject to therestoration of a reasonable degree of normality in the NHS, is equally confidentin the ability of the Company to improve its performance in the current year; - Three innovative products launched during the period comprised a new"OPTIclens" machine for validated decontamination of delicate surgicalinstruments in Ophthalmic Departments and two AERclens" machines as a total solution for the validated decontamination of all small endoscopes in ENTDepartments; - Performance of the "Clinic" bench top WDD in the UK is expected to exceedthe levels of the previous year as a result of general market awareness and theanticipated recommendations of the "A12" BDA document in the dental sector; and - Orders are currently firming in the second quarter of this year withgrowing acceptance of the Company's range of products, and the overall businessis gathering momentum. Commenting on today's announcement, Kevin Gilmore, Executive Chairman of DawMed,said: "Notwithstanding the difficulties of the NHS and its past and current effectsupon your Company, the Board remains confident that the new strategy,implemented in the second quarter of last year, is beginning to bear fruit and,subject to the restoration of a reasonable degree of normality in the NHS,success in the legal proceedings and perhaps some benefits from the exportdrive, is equally confident of the Company's ability to improve its performancein the current year. However, whilst the Board is confident about its claims inthe legal proceedings, it has decided that prudence should prevail, inconsequence of which it has not factored such potential success into its budget,forecasts or plans for the current year." --ENDS-- Enquiries: DawMed Systems plc Tel: 01789 740010Kevin Gilmore, Executive Chairman : 07785 396666 Beaumont Cornish Limited Tel: 020 7628 3396Roland Cornish Bishopsgate Communications Limited Tel: 020 7562 3350Dominic Barretto / Maxine Barnes For further information please visit DawMed's website at www.dawmed.com CHAIRMAN'S STATEMENT I present the Final Audited Results for the year ended 30 September 2006. It is unfortunate that a year of performance in line with the Board'sexpectations, which indicated a Group EBITDA of £263,900, operating profit of£91,800 and pre-tax profit of £133,300, representing an increase of 390% on the£27,200 pre-tax profit of the previous year, ended with a Group pre-tax loss of£70,900. The sole reason for the conversion from a healthy profit to a notinsubstantial loss was the breach of contract by a trade debtor, with whom theCompany had previously enjoyed an excellent relationship for some five years.Your Company has issued legal proceedings and a trial date has been set for June2007. The Board is confident of a satisfactory conclusion to these proceedings. Notwithstanding the foregoing, the relevant year has been a successful period inwhich the newly adopted strategy, described in my 2006 Interim Statement, beganto bear its anticipated fruit. Concentration on the new and more recent productsmentioned in that Statement, together with the continuing growth of the SupportServices activities produced the overall performance growth which was in linewith the Board's expectations. Accordingly, the Board is encouraged by theunderlying trends in the business, which undoubtedly justify the strategicactions it implemented earlier in the year. Financials Total turnover for the year was reduced to £5.08M, being 17.6% below that of theprevious year. Eliminating the sales of SSD machines, there was a 5.0% growth inremaining activities. Sales of Clinic machines improved substantially andSupport Services activities increased by 28.2% over the previous year. Sales ofspare parts produced steady growth of 11.4% due in part to the expandinginstalled base of the Company's medical devices, whilst sales of chemicals forWassenburg machines showed a healthy 26.6% increase. Sales of Wassenburgmachines decreased over the previous year as a result of delays by the NHS inthe placing of orders and the delayed availability of the new Wassenburg"pass-through" machines. The direct consequence of the reduction in turnover was a gross margin of£2.40M, which was a 5.4% decrease on the previous year. However, if the turnoverof the SSD machine sales is excluded from the year and from the previous year,the comparative margin showed a 10.8% increase year-on-year. Encouragingincreases in margins were achieved by the Clinic, chemicals for Wassenburgmachines, spare parts and Support Services' activities. The overall gross marginpercentage increased to 47.4 from 41.3 in the previous year, therebyunderpinning the new strategy of concentration on the new products and SupportServices activities. The spend on total overheads in the year was £2.52M, a modest 2.1% increase overthe previous year. The spend on operating overheads, before central costs anddepreciation/amortisation was £2.14M, again a modest 2.1% increase on theprevious year. However, these spends include the trade debtor provision pendingthe outcome of litigation. If the trade debtor amount is excluded, the totalspend of £2.39M showed a 3.0% reduction over the previous year. The only areasof increased overhead spend in the year were for marketing and sales of thevarious new products and the design and implementation of the new web site. Someadditional administration was introduced into the Support Services Department tostrengthen its continuing growth. Earnings after finance charges, after the trade debtor provision of £124,300,but before interest, taxation, depreciation and amortisation ("EBITDA") andincluding the profit on disposal of the SSD fixed assets, were £125,000 comparedwith £264,800 in the prior year. The operating loss for the year, before asset disposals, was £112,400 comparedwith a profit in the previous year of £75,600. The major factor for theshortfall was the aforementioned trade debtor provision and the aforementionedloss of the further non-invoiced income from that source in the final quarter ofthe year. The disposal of the intellectual property and know-how assets of the SSDequipment produced a profit of £65,400 after the deduction of all directlyrelated costs. The net loss after interest and taxation was £70,900 compared with a net profitafter interest and taxation of £27,200 in the previous year. The balance sheet showed shareholders' funds of £1,063,200 at 30 September 2006,a reduction of £70,900 in the year reflecting the net loss incurred. The working capital position was stable with net current assets improving by£20,100, cash balances at £514,800 reducing by £86,300 in the year and no netdebt at the year-end. Products and Services The re-alignment of the Company's product portfolio, described in my lastInterim Statement, enabled a satisfactory overall increase in the marginpercentage to be achieved for the year. Although the disposal of the intellectual property and know-how assets of theSSD machines resulted in the elimination of the sales of such machines, theretention of after sales services and sales of spare parts to our existingcustomers' installed base of SSD machines has protected the income stream fromthat sector. The Support Services Department again performed well and recruitment of furtherfield engineers has continued in the current year to support the large andgrowing installed base of machines, to ensure the business has full UK coverageand to constantly improve efficiency. The performance of the "Clinic" bench top washer-disinfector-dryer constituted aconsiderable improvement compared with the previous year, with a number ofsignificant multi-machine orders having been won. The UK dental market is currently awaiting the imminent publication of theBritish Dental Association's ("BDA") "A12" document, which provides guidelinesand recommendations to all dentists on the decontamination of dentalinstruments. Constant efforts are being made by the Company to increasepenetration into this market and the Directors believe that this should be aidedby the publication of the A12 document and by the "pass-through" facility andfull compliance features of the Clinic. Whilst sales of Wassenburg products suffered a decline in the last year as aresult of tightening of NHS funding for capital expenditure, resulting in manypurchasing decisions being delayed, these orders are now being confirmed. Asanticipated, the introduction of the new Wassenburg Drying/Storage cabinets,which provide a sterile environment, has been a success with a satisfactorynumber of units being sold in the year. In order to satisfy customer demands to enjoy a wider choice of chemicals, stepswere taken to exert more active control over the sourcing of such products.Accordingly, your Company now offers a wider range of chemicals and this rangeof products is now an integral constituent of the product portfolio. Growth ofsales of these products during the year was not inconsiderable and provides anongoing revenue stream. The Company's adherence to the fast turnaround of orders for spare parts, andthe provision of technical expertise and assistance in addressing customers'needs, has provided steady and profitable growth year on year. Furthermore, theretention of the supply of spare parts to the SSD range of machines in ourcustomers' installed base has assisted in the consolidation of our performancein this sector. Enhanced Product Portfolio Existing medical device products and new medical device products which wereintroduced in the period, include: • "Clinic" bench top washer-disinfector-dryer ("WDD") - providing washing, thermal disinfection and drying for use in NHS hospitals, all NHS and private dentists, clinics and other Primary Healthcare practitioners; • "AERclens Chemical" washer-disinfector ("WD") system for the decontamination of small flexible endoscopes - providing washing and chemical disinfection for use in all NHS and private Ear, Nose and Throat ("ENT") Departments of hospitals, clinics, and consulting rooms; • "AERclens Thermal" WDD system for the decontamination of small rigid metal endoscopes - a completely new product providing washing, thermal disinfection and drying for use in all NHS and private ENT Departments of hospitals, and in NHS and private clinics; • "OPTIclens" WDD system for the decontamination of delicate rigid metal ophthalmic surgical instruments - a completely new product providing washing, thermal disinfection and drying for use in all NHS and private Ophthalmic Departments of hospitals, and in NHS and private clinics; • Wassenburg original space-saving WD for the decontamination of large flexible endoscopes providing washing and chemical disinfection for use in NHS and private Hospital Endoscopy Departments et al in the UK; • Wassenburg "pass through" WD similar to the Wassenburg original space saving WD, but for use in NHS and private Hospital Endoscopy Departments which have sufficient accommodation for a "Dirty Room" and an adjacent "Clean Room", in the wall between which this WD is placed; • Wassenburg "Dry 300" - a storage/drying cabinet providing a daytime and overnight sterile environment for large flexible endoscopes for use in NHS and private Hospital Endoscopy Departments et al in the UK. Outlook and Future Prospects Ever since the Minister of Health vowed to resign that position if the NHS wasto be in financial deficit by the end of its financial year, namely 31 March2007, the NHS has cut back massively on purchases of both capital and revenuesupplies to an extent which the Directors believe to be unprecedented. Thisaction has adversely affected many companies, including your Company during thesecond half of last year, and will continue to do so during the first half ofthe current year or until normality is resumed. Notwithstanding the NHS expenditure cuts, orders are currently firming in thesecond quarter of this year with growing acceptance of the Company's range ofproducts, and the overall business is gathering momentum. The direct sales forcein the UK has been increased in anticipation of your Company's current yearencompassing sales of the unchanged products and services, consolidation of thenew product introductions indicated above and maximisation of the salespotential from all of those products at home and for export. Sales of the AERclens Chemical system and the AERclens Thermal system areanticipated to become an important contributor to the current year's overallpotential, particularly because no competitive validated total solution systemfor both rigid and flexible small endoscopes is yet available, so far as theDirectors are aware. Similarly, sales of the OPTIclens system in the current year will, in theopinion of the Directors, benefit from the absence of any competitive validatedsystem for the decontamination of particularly delicate ophthalmic surgicalinstruments. The sales performance of the "Clinic" bench top WDD in the UK is expected toexceed the levels of the previous year as a result of general market awarenessand the anticipated recommendations of the "A12" BDA document in the dentalsector. A funding support structure has been implemented in Scotland for NHSdentists and every effort is being made to capitalise on this for sales in thatcountry. Support Services Department activities are expected to increase its level ofbusiness in the current year based upon the anticipated expansion of theinstalled base of machines following increased sales of the Company's widerrange of medical device products. The Company views the sale of chemicals as a candidate range of products forsustained growth in the current year and in the longer term future, particularlyin connection with the three new medical device products launched during theyear. In consequence of the implementation of the Company's new strategy in the secondquarter of last year, the Board has been intent upon lowering the Company'sdependence on the UK markets in general and on the NHS in particular byexploiting the export potential of its range of products. In this endeavour, anExport Department has been established, which will commence operations on 1April 2007. As part of the Company's export drive, the Company has announced that anexclusive distributor agreement for a minimum annual volume of Clinics hasalready been signed with a subsidiary of a substantial European organisation foran own-label version of the "Clinic". This represents a significant breakthroughfor the Company into a market of high growth potential. The markets in which the Company operates are competitive and demand not onlyconstant product innovation, but also tight control over manufacturing costs ifacceptable margins are to be achieved. As part of these endeavours, the Board iscurrently engaged in efforts to reduce manufacturing costs with a plannedachievement in the second half of the current financial year. If such effortsare successful, it is expected that, whilst some benefit would be derived inthat half, the full benefits would come through in the next financial year. On behalf of the Board and the shareholders I am pleased to thank all of ouremployees for their assiduous efficiency and resultant contribution to theachievement of your Company's targets. Notwithstanding the difficulties of the NHS and its past and current effectsupon your Company, the Board remains confident that the new strategy,implemented in the second quarter of last year, is beginning to bear fruit and,subject to the restoration of a reasonable degree of normality in the NHS,success in the legal proceedings and perhaps some benefits from the exportdrive, is equally confident of the Company's ability to improve its performancein the current year. Kevin M Gilmore Executive Chairman 22 March 2007 Dawmed Systems plcCONSOLIDATED PROFIT AND LOSS ACCOUNTfor the year ended 30 September 2006 2006 2005 £ £ TURNOVER 5,077,316 6,158,223 Cost of sales (2,673,102) (3,616,602) Gross profit 2,404,214 2,541,621 Administrative expenses (2,516,657) (2,466,066) OPERATING(LOSS)/PROFIT (112,443) 75,555 Profit on disposal of fixed assets 65,445 - Interest receivable and similar income 16,745 10,292 Interest payable and similar charges (40,658) (58,619) (LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORETAXATION (70,911) 27,228 Taxation - - (LOSS)/PROFIT FOR THE YEAR (70,911) 27,228 (LOSS)/EARNINGS PER SHARE (0.35)p 0.14p DILUTED (LOSS)/EARNINGS PER SHARE (0.35)p 0.14p The operating loss for the period all arises from continuing operations. No separate Statement of Total Recognised Gains and Losses has been presented asall such gains and losses have been dealt with in the Profit and Loss Account. Dawmed Systems plcCONSOLIDATED BALANCE SHEET30 September 2006 2006 2005 £ £FIXED ASSETSIntangible assets 338,217 485,501Tangible assets 83,040 65,907 421,257 551,408 CURRENT ASSETSStocks 719,827 506,164Debtors 869,434 1,387,702Cash at bank and in hand 514,781 601,071 2,104,042 2,494,937 CREDITORS: Amounts falling due within one year (1,434,671) (1,845,703) NET CURRENT ASSETS 669,371 649,234 TOTAL ASSETS LESS CURRENT LIABILITIES 1,090,628 1,200,642 CREDITORS: Amounts falling due after more thanone year (27,451) (66,554) NET ASSETS 1,063,177 1,134,088 Called up share capital 1,023,165 1,023,165Share premium account 1,872,239 1,872,239Merger reserve (350,520) (350,520)Profit and loss account (1,481,707) (1,410,796) SHAREHOLDERS' FUNDS 1,063,177 1,134,088 Dawmed Systems plcCONSOLIDATED CASHFLOW STATEMENTfor the year ended 30 September 2006 2006 2005 £ £ Net cash inflow from operating activities 52,588 396,157 Returns on investments and servicing of financeInterest received 16,745 10,292Interest paid (40,658) (58,619) (23,913) (48,327) Capital expenditure and financial investmentPurchase of fixed assets (98,302) (69,413)Receipts from sale of fixed assets 83,336 600 (14,966) (68,813) FinancingIssue of ordinary shares - 262,527Factoring and stock advances (94,393) (254,929)Finance leases (5,606) (12,172) (99,999) (4,574) (Decrease)/increase in cash (86,290) 274,443 Reconciliation of operating (loss)/profit to net cashflow from operating activities Operating (loss)/profit (112,443) 75,555Depreciation and amortisation charges 210,560 225,795Movement in stocks (213,663) 7,872Movement in debtors 518,268 (32,319)Movement in creditors (350,134) 119,254 Net cash inflow from operating activities 52,588 396,157 Notes 1. The calculation of earnings per share is based upon theloss after taxation of £70,911 (2005 profit: £27,228) and on 20,463,292 shares(2005: 19,909,867 shares) being the weighted average number of ordinary sharesin issue during the year. Since the exercise price of the 2,396,676 (2005: 2,236,676) share options isabove the average fair price for the year and the prior year, the dilutedearnings per share is equivalent to the basic earnings per share. 2. The Consolidated Profit and Loss Account and Balance Sheetinformation for the years ended 30 September 2006 and 30 September 2005 shownabove has been extracted from the Statutory Accounts for those years on whichthe auditors gave an unqualified opinion. Statutory Accounts for the year ended30 September 2005 have been delivered to the Registrar of Companies. TheStatutory Accounts for the year ended 30 September 2006 are due to be deliveredto the Registrar following conclusion of the forthcoming Annual General Meeting. A copy of this statement is available from the offices of Beaumont Cornish Limited, 5th Floor, 10-12 Copthall Avenue, London, EC21 7DE This information is provided by RNS The company news service from the London Stock Exchange