Interim Results

DawMed Systems PLC
28 June 2007


For Immediate release                                               28 JUNE 2007

                               DAWMED SYSTEMS PLC
                                        
                                 INTERIM RESULTS

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 used by NHS Trust hospitals, private
hospitals,  clinics and Primary Care practitioners, today announces Interim
Results for the six months to 31 March 2007.

KEY POINTS

   •Legal proceedings which the Company's operating subsidiary company,
    Dawmed International Limited, instigated against a trade debtor have been
    settled out of Court on a full, final and satisfactory basis after the half
    year end;

   •The Clinic WDD has shown substantial improvement in both sales
    turnover and gross profit generated;

   •A supply agreement was signed during the period with a
    subsidiary of a substantial European organisation for an own-label
    version of the Clinic;

   •New traceability system, known as the Dawmed 'DCTS', has been
    launched to enhance all of the Company's operational products;

   •Awareness of the Opticlens, the WDD system for the
    decontamination of delicate rigid metal instruments used in
    ophthalmic and neurological surgery, is increasing with keen
    interest being shown in the UK and Europe;

   •Despite NHS expenditure restrictions, the re-alignment of
    the business and introduction of new products has allowed
    your Company to maintain a realistic level of activity in
    the period; and

   •The balance of shareholders' funds at 31 March 2007
    was £632,200 compared with £1,160,000 at 31 March 2006,
    reflecting mainly the loss caused by the breach of
    contract by the trade debtor.


Commenting on today's announcement, Kevin Gilmore, Executive Chairman of Dawmed,
said:


'Notwithstanding the distortions to these results caused by the trade debtor's
breach of contract and the NHS's financial restrictions, the emphasis for the
future continues to be the further implementation of the Company's now
established strategy for sales growth and profitability from the higher margin
business elements in the UK, the pursuit of export business to increase turnover
and to reduce the dependence upon the NHS, the expansion of the new arrangements
to provide manufacturing benefits of lower costs, higher margins and greater
competitiveness, and the continuous utilisation of the skills base and
experience of our loyal and contributory staff.'




--ENDS--


Enquiries:

Dawmed Systems Plc                                             Tel: [phone]
Kevin Gilmore, Executive Chairman                           Mobile: [phone]

Beaumont Cornish Limited                                      Tel: [phone]
Roland Cornish

Bishopsgate Communications Limited                            Tel: [phone]
Dominic Barretto
Maxine Barnes

For further information please visit Dawmed International Limited's website at 
www.dawmed.com



Chairman's Statement

for the six month period ended 31 March 2007

I present the unaudited Interim Results for the six months ended 31 March 2007,
which have been achieved in a period of considerable financial constraint on
expenditure on both capital and revenue supplies within the NHS. This scenario
was forecast as a possibility in the 'Outlook and Future Prospects' section of
my Statement in the Company's Annual Report & Accounts 2006.


Post Period Update of Legal Proceedings


I am pleased to report that since the end of the period, the legal proceedings
which the Company's operating subsidiary company, Dawmed International Limited,
instigated against a trade debtor have been settled out of Court on a full,
final and satisfactory basis. Dawmed International Limited has received a
satisfactory compensation payment for the breach of contract. I can also report
that a satisfactory ongoing relationship has been established with the said
trade debtor for an extended period of two years until 2012. This important
achievement was announced on 25 June 2007.


The proceeds of the settlement will be included in the Annual Report & Accounts
for the year ended 30 September 2007, because the compensation payment was
agreed after 31 March 2007.


Financials


In June 2006, the Secretary of State for Health stated 'By the end of March next
year, we will return the NHS as a whole to financial balance, and of course I
will be held to account for that'. This statement, and the subsequent actions to
achieve it, has led to health authorities across the country being unable to
implement their planned levels of expenditure on new and/or replacement
equipment in order to meet the government imposed objectives. Understandably,
these spending restrictions have had a substantial adverse effect on the results
of your Company. However, despite these restrictions, the re-alignment of the
business and introduction of new products has allowed your Company to maintain a
realistic level of activity in the period.


Turnover for the period of £2,288,700 was 12% lower than the same period last
year. However, despite this reduction in turnover, the gross profit margin has
remained reasonably stable at 43.0%, which, in the current market conditions,
compares not unfavourably to the margin of 45.8% that was achieved in the same
period in 2006.


The combination of NHS spending cuts and the delayed release by Wassenburg of
its pass-through washer-disinfector into the UK market resulted in the sales of
Wassenburg equipment falling to a disappointing level. However, I am pleased to
report that this situation has been offset to some extent by growth in other
sections of the Company's business. In particular, there has been a substantial
improvement in the turnover and gross profit generated by the Clinic product.


In spite of its undoubted popularity with end user customers in ENT ('Ear, Nose
and Throat') Departments of hospitals, sales of the AERclens product have been
less than anticipated. This product has become a direct victim of NHS
expenditure cuts, resulting in ENT Departments having to continue to use
unsatisfactory manual and other non-validated methods of attempted cleaning and
disinfection of small flexible and rigid endoscopes.


Moderate growth has been experienced in Support Services and reasonably
substantial growth in the allied areas of Spares and Chemicals supplies have
both been in line with the Board's expectations.


Total operating costs before depreciation and excluding finance charges, have
increased by 22.6% over the same period last year. This increase was as planned
and reflects the costs that are necessary to provide the appropriate
infrastructure for the Company following the re-alignment of its business. The
principal area of this additional expenditure is the employment cost associated
with expanding the direct sales force and Support Services manpower.


Earnings after finance charges, but before interest, taxation, depreciation and
amortisation ('EBITDA') were negative to the extent of a loss of £301,900. The
resulting operating loss of £411,300 and the net loss before and after tax for
the half year of £440,000 were both consequential mainly upon the breach of
contract by the trade debtor (since settled as referred to above) and to a
lesser extent upon the depressed NHS market.


The balance of shareholders' funds at 31 March 2007 was £632,200 compared with
£1,160,000 at the same date last year, reflecting the losses in the period as
described above.


Department of Health


Notwithstanding the past NHS financial constraints, it is encouraging that the
Health Act 2006 introduced a 'Code of Practice for the Prevention and Control of
Health Care Associated Infections' ('Code of Practice') which was issued by the
Department of Health on 1 October 2006. This highlights the growing importance
of efficacious decontamination of reusable surgical and diagnostic devices
within the NHS and private healthcare sectors.


The Code of Practice lays down, inter alia, that each NHS body, eg. a hospital,
must employ a DIPC (Director of Infection Prevention and Control) and/or a
'Decontamination Lead'. The duties of these employees include responsibility for
setting policies on decontamination of reusable medical devices, such as
surgical and diagnostic instruments, as well as the acquisition and maintenance
of decontamination equipment with which to wash, disinfect and/or sterilise
them. It is also their role to carry out risk assessments of all related
procedures to ensure compliance with current guideline standards, which
includes, inter alia, the means to track the decontamination processes in order
to ensure, not only that such processes have been carried out effectively, but
also that the processing equipment employed enables identification of each
patient on whom the reusable medical devices have been used.


The implementation of the Health Act 2006 is policed and monitored by the
Healthcare Commission, a 'healthcare watchdog' which employs commissioners whose
role is to visit NHS establishments and scrutinise existing procedures and
policies, particularly in connection with 'Health Care Associated Infections'.
The Healthcare Commission has the power to issue specific instructions, which in
extreme circumstances may include the cessation of clinical procedures if the
decontamination policies/equipment in place could cause a health risk to
patients or staff.


Your Board welcomes the new Healthcare Act and is confident that the
implementation of its Code of Practice will have a beneficial effect on the
Company's business.


Products and Services


In the Annual Report & Accounts for the year ended 30 September 2006, 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 enjoy the high level of post installation revenue from the Spares
Sales and Support Services departments that form an integral part of the overall
business.


The Clinic WDD, designed for use mainly in the primary care sector,
predominantly dentistry, continues to show good growth in this important market.
In particular, a supply agreement was signed during the period with a subsidiary
of a substantial European organisation for an own-label version of the Clinic.
The Board believes that this represents a significant breakthrough into an
export market with substantial future potential.


The AERclens total system for the decontamination of both small flexible and
small rigid nasendoscopes used in Ear, Nose and Throat ('ENT') Departments of
Hospitals comprises both the AERclens Chemical WD for flexibles and the AERclens
Thermal WDD for rigids. It is a fully automated and compliant total system with
full traceability and validation providing an innovative solution for a
difficult decontamination problem. Each of these two products and the combined
total system have been well received by ENT Departments.


Awareness of the Opticlens, the WDD system for the decontamination of delicate
rigid metal instruments used in ophthalmic and neurological surgery, is
increasing with keen interest being shown in the UK and Europe.


Business in the secondary care Endoscopy Departments of Hospitals using large
flexible endoscope WDs is benefiting from your Company's introduction of the
Wassenburg Dry 300 sterile drying/storage cabinet. This equipment complements
the range of Wassenburg space-saving and 'pass-through' WDs.


A new traceability system, known as the Dawmed 'DCTS', has been launched to
enhance all of the Company's operational products. This addition to the
Company's product portfolio is viewed by the Board as a significant development
for the future.


Remainder of the Year and Future Prospects


The new export department has been formed and became operational on 1 April
2007. The Board considers this to be a particularly important aspect for the
future growth of your Company, which will exploit the overseas potential for the
Company's products whilst at the same time reducing the reliance upon the NHS in
the domestic market. Following the initial export penetration announced last
year, discussions are ongoing for further distributorship arrangements, which
your Board is hopeful of concluding in the foreseeable future.


I am pleased to report that the Company has now put in place, through signed
agreements, the specific arrangements to reduce manufacturing costs in the first
half of next year. These arrangements will provide your Company with the
opportunity to achieve higher margins and to benefit both domestic and
international sales efforts.


I am also pleased to report that the penetration into the market place of the
Clinic, WDD continues to expand and is beginning to achieve the momentum that
your Board previously anticipated. Sales of this product in the domestic market
are growing and, as mentioned above, the export potential is being actively
pursued with some success already in place and further potential in the medium
term.


In the UK, the Directors understand that the Department of Health is due to
release its final requirements for the decontamination of dentistry instruments
through a Health Technical Memorandum ('HTM') later this year or early next
year. The HTM is expected to highlight the use of automatic washer
-disinfector-dryers such as the Clinic WDD for the effective cleaning,
disinfection and drying of dental instruments prior to sterilisation to be the
preferred, if not an essential part of the infection control process. Such a
requirement would bring the decontamination of dentistry instruments into line
with the HTM 2030 standards that are already practised in the successful
decontamination of surgical instruments in secondary care hospitals. It is
widely recognised that the use of automatic washer-disinfector-dryers (such as
the Clinic WDD) is the most efficient method to achieve pre-sterilisation
cleaning and disinfection. Your Company is therefore well positioned to benefit
from the anticipated guideline that the Directors understand is to be given to
all dental practices.


Whilst sales of the AERclens system in the UK have suffered from the past NHS
financial cuts, the level of interest from ENT Departments of hospitals has been
such that your Board is confident that significant UK sales will result from the
initial high level of interest. In addition, discussions are ongoing with a
number of international companies with the intention of developing sales of
these products in the international market.


The level of business in the large WDD Division is improving in the second half
of the year with interest and more importantly, orders, for the Wassenburg
pass-through flexible endoscope washer-disinfector and the Dry 300 sterile
storage/dryer cabinet.


The Board is confident that the range of products and services that is offered
by your Company will allow the second half of the year to show an improvement
over the less than anticipated performance in the first half, but is unlikely to
achieve an improvement over last year's results.


Notwithstanding the distortions caused by the trade debtor's breach of contract
and the NHS financial restrictions, the emphasis for the future continues to be
the further implementation of the Company's now established strategy for sales
growth and profitability from the higher margin business elements in the UK, the
pursuit of export business to increase turnover and to reduce the dependence
upon the NHS, the expansion of the new arrangements to provide manufacturing
benefits of lower costs, higher margins and greater competitiveness, and the
continuous utilisation of the skills base and experience of our loyal and
contributory staff.



Kevin M Gilmore

Executive Chairman


28 June 2007







INDEPENDENT REVIEW REPORT TO DAWMED SYSTEMS PLC


Introduction

We have been instructed by the company to review the consolidated profit and
loss account for the six months to 31 March 2007, the consolidated balance sheet
at 31 March 2007, the consolidated cashflow statement for the six months ended
31 March 2007 and the notes to the interim statement for the six months ended 31
March 2007 and we have read the other information in the interim statement and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.


This report, including the conclusion, has been prepared for and only for the
company for the purpose of their interim statement and for no other purpose. We
do not, therefore, in producing this report, accept or assume responsibility for
any other purpose or to any other person to whom this report is shown or into
whose hands it may come save where expressly agreed by our prior consent in
writing.


Directors' responsibilities

The interim statement, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Interim Statement in accordance with the AIM
Market Rules which require that the accounting policies and presentation applied
to the interim figures must be consistent with those that will be adopted in the
company's annual accounts.


Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom, as if that
Bulletin applied. A review consists principally of making enquiries of group
management and applying analytical procedures to the financial information and
underlying financial data and based thereon, assessing whether the disclosed
accounting policies have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit and therefore provides a lower level of assurance. Accordingly, we do not
express an audit opinion on the financial information


Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 March 2007.


BAKER TILLY UK AUDIT LLP
Chartered Accountants
City Plaza
Temple Row
Birmingham
B2 5AF

28 June 2007


Unaudited Consolidated Profit and Loss Account

for the half year ended 31 March 2007



                                                       Unaudited      Restated
                                                     6 months to     Unaudited
                                                        31 March   6 months to
                                                            2007      31 March
                                                           £'000          2006
                                                                         £'000
-----------------------------                          ----------    ----------

TURNOVER                                                 2,288.7       2,611.7
Cost of sales                                           (1,304.9)     (1,414.8)
-----------------------------                           ----------    ----------
Gross profit                                               983.8       1,196.9
Administrative expenses                                 (1,395.1)     (1,157.0)
-----------------------------                           ----------    ----------
OPERATING (LOSS)/PROFIT                                   (411.3)         39.9
Interest receivable and similar income                       4.3           9.0
Interest payable and similar charges                       (33.0)        (23.2)
-----------------------------                           ----------    ----------
(LOSS)/PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION      (440.0)         25.7
-----------------------------                           ----------    ----------
Taxation                                                       -          (7.6)
(LOSS)/PROFIT FOR THE HALF YEAR                           (440.0)         18.1
-----------------------------                           ----------    ----------
BASIC (LOSS)/EARNINGS PER SHARE (see Note 1)               (2.15p)        0.09p
-----------------------------                           ----------    ----------
DILUTED (LOSS)/EARNINGS PER SHARE (see Note 1)             (2.15p)        0.09p
-----------------------------                           ----------    ----------



Notes to the unaudited Interim Statement


1.                  The calculation of basic (loss)/earnings per share is based
upon the loss of £440,030 (2006: profit £18,036) and on 20,463,292 shares (2006:
20,463,292 shares), being the weighted average number of shares in issue during
the period.


Since the exercise price of the 2,396,676 share options is above the average
fair price for the six months ended 31 March 2007, the diluted loss per share is
equivalent to the basic loss per share.


For the six months ended 31 March 2006 the diluted earnings per share is based
upon the profit of £18,036 and on 20,469,100 shares. The 160,000 options issued
on 8 February 2006 are dilutive since the exercise price is below the average
fair price for the period. The remaining 2,236,676 share options have exercise
prices above the average fair price for the period and are therefore not
dilutive.


2.                  Earnings before interest, tax, depreciation and amortisation
('EBITDA') amount to a loss of £301,900 and consist of the Operating Loss of
£411,300 (2006: profit £39,900) less depreciation and amortisation charges of
£109,400 (2006: £108,200).


3.                  The accounting information presented does not constitute
statutory accounts and has not been audited.


4.                  Copies of the interim report and accounts will be available
for 30 days at the offices of Beaumont Cornish Limited, 5th Floor, 10-12
Copthall Avenue, London, EC2R 7DE.



Unaudited Group Balance Sheet

as at 31 March 2007



                                                       Unaudited     Unaudited
                                                        31 March      31 March
                                                            2007          2006
                                                           £'000         £'000
-----------------------------                           ----------    ----------

FIXED ASSETS                                               347.2         462.9
CURRENT ASSETS
Stock                                                      661.4         352.0
Debtors                                                  1,112.6       1,651.8
Cash at bank and in hand                                    64.7         608.3
-----------------------------                           ----------    ----------
                                                         1,838.7       2,612.1
CREDITORS Amounts falling due within one year           (1,544.3)     (1,861.8)
-----------------------------                           ----------    ----------
NET CURRENT ASSETS                                         294.4         750.3
-----------------------------                           ----------    ----------
TOTAL ASSETS LESS CURRENT LIABILITIES                      641.6       1,213.2
-----------------------------                           ----------    ----------
CREDITORS: Amounts falling due after more than one
year                                                        (9.4)        (53.2)
-----------------------------                           ----------    ----------
NET ASSETS                                                 632.2       1,160.0
-----------------------------                           ----------    ----------
Called up share capital                                  1,023.2       1,023.2
Share premium account                                    1,872.2       1,872.2
Merger reserve                                            (350.5)       (350.5)
Profit and loss account                                 (1,912.7)     (1,384.9)
-----------------------------                           ----------    ----------
SHAREHOLDERS' FUNDS                                        632.2       1,160.0
-----------------------------                           ----------    ----------





Unaudited Consolidated Cashflow Statement

for the half year ended 31 March 2007


                                                         Unaudited   Restated
                                                         31 March    Unaudited
                                                              2007   31 March
                                                             £'000        2006
                                                                         £'000
-----------------------------                             ----------  ----------

Net cash (outflow)/inflow from operating activities         (450.6)      162.4
-----------------------------                             ----------  ----------
Returns on investments and servicing of finance
Interest received                                              4.3         9.0
Interest paid                                                (33.0)      (23.2)
-----------------------------                             ----------  ----------
                                                             (28.7)      (14.2)
-----------------------------                             ----------  ----------
Capital expenditure and financial investment
Purchase of fixed assets                                     (35.3)      (54.7)
Disposal of fixed assets                                         -        34.8
-----------------------------                             ----------  ----------
                                                             (35.3)      (19.9)
-----------------------------                             ----------  ----------
Financing
Factoring and stock advances                                 (83.0)     (126.3)
Finance leases                                                (7.4)        5.2
Other loans                                                  154.9           -
-----------------------------                             ----------  ----------
                                                              64.5      (121.1)
-----------------------------                             ----------  ----------
(Decrease)/increase in cash                                 (450.1)        7.2
-----------------------------                             ----------  ----------
Reconciliation of operating (loss)/profit to net cash
(outflow)/inflow from operating activities
Operating (loss)/profit                                     (411.3)       39.9
Depreciation and amortisation charges                        109.4       108.2
Share based payment expense                                    9.0         8.0
Decrease in stocks                                            58.4       154.1
Increase in debtors                                         (243.2)     (264.1)
Increase in creditors                                         27.1       116.3
-----------------------------                             ----------  ----------
Net cash (outflow)/inflow from operating activities         (450.6)      162.4
-----------------------------                             ----------  ----------


Notes to the unaudited Interim Results



1.     Accounting policies


The accounting policies adopted by the Group are consistent with those disclosed
in the Group's financial statements for the year ended 30 September 2006 except
for the adoption and impact of FRS 20.


FRS 20: Share based payment


The cost of equity settled transactions with employees is measured by reference
to the fair value at the date at which they are granted and is recognised as an
expense over the vesting period. In valuing equity settled transactions, no
account is taken of any non-market based vesting conditions and no expense is
recognised for awards that do not ultimately vest as a result of a failure to
satisfy a non-market based vesting condition. None of the Group's equity settled
transactions have any market based performance conditions.


Fair value for equity settled share based payments is estimated by use of the
Black Scholes pricing model.


At each balance sheet date before vesting, the cumulative expense is calculated
based on management's best estimate of the number of equity instruments that
will ultimately vest taking into consideration the likelihood of achieving
non-market based vesting conditions. The movement in this cumulative expense is
recognised in the income statement with a corresponding entry in reserves. The
Group has taken advantage of the transitional provisions of FRS 20 in respect of
the fair value of equity settled awards so as to apply FRS 20 only to those
equity settled awards granted after 7 November 2002 that had not vested before 1
January 2006.


2.     Reconciliation of movement in shareholders' funds

                                                                     Restated
                                                          Unaudited  Unaudited
                                                          31 March   31 March
                                                              2007        2006
                                                             £'000       £'000

(Loss)/profit for the period                                (440.0)       18.1
Reserve movement arising from share based payment reserve      9.0         8.0
------------------------------                             ---------  ----------
                                                            (431.0)       26.1
Opening shareholders' funds                                1,063.2     1,133.9
------------------------------                             ---------  ----------
Closing shareholders' funds                                  632.2     1,160.0
------------------------------                             ---------  ----------






                      This information is provided by RNS
            The company news service from the London Stock Exchange