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NIPSON DIGITAL PRINTING SYSTEMS PLC

FOR IMMEDIATE RELEASE                                                                            15 August 2008

RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2008 (UNAUDITED)

Nipson Digital Printing Systems PLC ('Nipson' or 'the Group'), the manufacturer and distributor of digital printing systems and consumables, today announces its results for the six months to 30 June 2008.

 

	6 months to 30 June 2008 Unaudited £'000	Change  +/-% compared to 6 mths 30/06/07	6 months to 30 June 2007 Unaudited £'000	Full Year to 31 December 2007 Audited £'000
Revenue	14,188	+16.1%	12,225	27,335
Gross profit	2,423	+36.6%	1,774	3,463
Operating (loss)	(2,104)		(2,036)	(4,657)
(Loss) on ordinary activities before tax	(3,021)		(2,580)	(6,209)

• For the first six months, and compared to the same period of 2007, recurrent revenues increased by 10.0% and equipment revenues increased by more than 35% with the equipment pipeline remaining strong;
• The first half year's result also impacted the Group's cash position. The company is currently in discussion with several parties with a view to raising additional required funding. 

A copy of this announcement and the interim results will also be available on the Group's web site: www.nipson.com

For further information, please contact:

Nipson Digital Printing Systems PLC

Alfons Buts, Managing Director - Tel: + 32 (0)3 740 02 05

Robert Cahill, Group Finance Director - Tel: +33 (0)384 54 52 50

Beaumont Cornish Ltd (Nomad)

Roland Cornish / Rosalind Hill Abrahams - Tel: +44 (0)20 7628 3396

Keith, Bayley, Rogers & Co Ltd (Broker)

Derek Crowhurst / Brinsley Holman - Tel: +44 (0)20 3100 8300

Bankside Consultants Ltd

Oliver Winters - Tel: +44 (0)20 7367 8874

  CHAIRMAN'S STATEMENT

Overview

The loss incurred in the second quarter of 2008 exceeded expectations due to the lower than expected revenues, the incremental costs of technical issues and the impact of the weak US Dollar.

While the order intake for the third quarter and the pipeline for the second half remain good, and although these technical issues have now been addressed, the first half year's negative result also impacted the Group's cash position. 

The company is currently in discussion with several parties which may entail equity and or debt transactions. There is no certainty of any such new funding being achieved. If no such transaction can be attained the company may have a requirement for additional funding to meet its obligations. 

Revenue and Operating Results

Revenue for the six months to 30 June 2008 was £14.2m, an increase of 16.1% over the same period last year. The increase occurred both in new equipment sales and recurring revenues. Sales increased across virtually all markets compared to the same period last year. 

Equipment sales, at £3.9m for the six months, showed an increase of more than 35% over the comparative period. Sales of a further £1.2m, expected to be delivered in June, were actually made in July due to supply chain issues. The order book and pipeline for the second half of 2008 remain strong. 

Recurrent revenues for the six months to 30 June 2008 were £10.2m, an increase of 10.0% as compared to the same period last year. The Group's recurrent revenue is expected to continue to grow steadily. 

Gross profit for the six months to 30 June 2008 was £2.4m, 36.6% higher than the comparative period last year but significantly lower than anticipated.  The lower than expected equipment sales resulted in a lower contribution to fixed production costs.  Margins on recurrent revenues improved slightly although less than anticipated. Finally, gross margins suffered from the continued weakness of the US Dollar. 

The operating result for the six months to 30 June 2008 showed a loss of £2.1m against a loss of £2.0m for the corresponding period in 2007. Operating costs at £4.5m (2007: £3.8m) were higher due to £300,000 costs for Drupa (the largest print fair held every four years) charged to the accounts in the period and to higher amortisation on previously capitalised R&D projects. In the first half of 2007 the Group also received R&D tax credits, which were not received in the first half of 2008. The relative weakness of the GB Pound to the Euro is also a major reason for the adverse difference. 

The costs of Research & Development in the first quarter of 2008 were £1.9m of which £0.8m was capitalised. For the first six months of 2008, £0.4m was capitalised net of amortisation of R&D intangible assets (2007: £1.2m).

The net loss was £3.0m (2007: net loss of £2.6m). Other than the cost of Drupa and the additional R&D amortisation, this difference is due to the finance costs which were higher in the first half of 2008 caused mainly by currency movements of the US Dollar and GB Pound.

As at 30 June 2008 cash balances were £1.1m (£1.3m as at 31 December 2007). With higher equipment sales and recurrent sales, and the financing of the machines used at Drupa, the inventory levels increased to £12.4m at the end of the period (£9.7m as at 31 December 2007). The level of trade and other receivables decreased to £8.3m (£9.5m as at 31 December 2007).

As of 30 June 2008, the total amount owing to the Polar Group for loans, accruing interest and including the 5% Convertible Loan Notes of nearly £2.1m, was approx £11.6m (31 December 2007: £10m); £0.8m of this increase is due singularly to reporting requirements being the currency translation effect of converting the loans established in Euros into the reporting currency of GB Pounds.  The comments on the valuation of the Convertible Loan Notes both for Roseman and for Polar are detailed in Note 4.

Rimon Ben-Shaoul, Chairman, Nipson Digital Printing Systems PLC

NIPSON DIGITAL PRINTING SYSTEMS PLC

Unaudited results for the six months ended 30 June 2008

CONSOLIDATED INCOME STATEMENT

	6 months to 30 June 2008 £'000	6 months to 30 June 2007 £'000	Full Year to 31 December 2007 £'000
Continuing Operations Revenue	14,188	12,225	27,335
Cost of Sales	(11,765)	(10,451)	(23,872)
Gross Profit	2,423	1,774	3,463
Administrative Expenses	(4,527)	(3,810)	(7,667)
Other Operating Income	-	-	(453)
(Loss) on Continuous Operations before interest	(2,104)	(2,036)	(4,657)
Finance Income Finance Costs	154 (1,071)	111 (655)	191 (1,743)
(Loss) from Continuing Operations before taxation	(3,021)	(2,580)	(6,209)
Taxation	-	-	-
(Loss) from Continuing Operations after taxation	(3,021)	(2,580)	(6,209)
(Loss) per Ordinary Share	(5.8p)	(4.9p)	(11.9p)

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

	6 months to 30 June 2008 £'000	6 months to 30 June 2007 £'000	Full Year to 31 December 2007 £'000
Exchange Difference on Translation of Foreign Operations	517	22	234
Net Income Recognised Directly in Equity	517	22	234
(Loss) for the Year	(3,021)	(2,580)	(6,209)
Total Recognised Income and Expense for the Year	(2,504)	(2,558)	(5,975)

NIPSON DIGITAL PRINTING SYSTEMS PLC

Unaudited results for the six months ended 30 June 2008

CONSOLIDATED BALANCE SHEET

	6 months to 30 June 2008 £'000	6 months to 30 June 2007 £'000	Full Year to 31 December 2007 £'000
Assets Non-Current Assets Goodwill	783	723	755
Other Intangible Assets	4,235	2,849	3,636
Property, Plant & Equipment	3,556	6,826	3,645
Deferred Tax Asset	634	487	597
Other Non-Current Assets	556	610	498
	9,764	11,495	9,131
Current Assets
Inventories	12,375	10,068	9,679
Trade and Other Receivables	8,263	7,981	9,545
Cash and Cash Equivalents	1,094	2,395	1,348
	21,732	20,444	20,572
Liabilities
Current Liabilities
Trade and Other Payables	(8,524)	(6,943)	(7,696)
Borrowings	(15,648)	(12,229)	(12,870)
	(24,172)	(19,172)	(20,566)
Net Current Assets	(2,440)	1,272	6
Non-Current Liabilities
Borrowings	(3,483)	(4,187)	(3,776)
Deferred Tax Liabilities	(634)	(496)	(597)
Retirement Benefit Liability	(1,050)	(919)	(1,016)
	(5,167)	(5,602)	(5,389)
Net Assets	2,157	7,165	3,748
Shareholder's Equity
Ordinary Share Capital	523	523	523
Share Premium	13,915	13,915	13,915
Equity Portion of Convertible Loan Notes	913	-	-
Reverse Acquisition Merger Reserve	3,057	3,057	3,057
Translation Reserve	683	(46)	166
Retained Earnings	(16,934)	(10,284)	(13,913)
Total Equity Attributable to Equity Holders	2,157	7,165	3,748

Approved by the Board of Directors on Wednesday 13 August 2008

Alfons Buts                     Robert Cahill            

NIPSON DIGITAL PRINTING SYSTEMS PLC

Unaudited results for the six months ended 30 June 2008

CONSOLIDATED CASH FLOW STATEMENT

	6 months to 30 June 2008 £'000	6 months to 30 June 2007 £'000	Full Year to 31 December 2007 £'000
Net Cash (Decrease) from Operating Activities	(1,386)	(235)	(1,444)
Cash Flows from Investing Activities
Purchase of Intangible Assets	(790)	(1,020)	(2,480)
Purchase of Property, Plant & Equipment	(46)	(140)	(188)
Disposal of fixed assets	169	-	2,100
Interest Received	-	15	75
Net Cash Used in Investing Activities	(667)	(1,145)	(493)
Cash Flows from Financing Activities
Interest Paid	(187)	(587)	(541)
Capital Repayments on Finance Leases	(121)	(352)	(2,388)
Borrowings Raised - from Third Party	1,574	342	215
from Parent Undertaking	586	2,142	5,203
Borrowings Repaid	(53)	(362)	(1,796)
Net Cash Raised in Financing Activities	1,799	1,183	693
Net (Decrease) in Cash & Cash Equivalents	(254)	(197)	(1,244)
Cash & Cash Equivalents at 1 January	1,348	2,592	2,592
Cash & Cash Equivalents at end of period	1,094	2,395	1,348

NIPSON DIGITAL PRINTING SYSTEMS PLC

Unaudited results for the six months ended 30 June 2008

CASH FLOWS FROM OPERATING ACTIVITIES

Cash Generated from Operations	6 months to 30 June 2008 £'000	6 months to 30 June 2007 £'000	Full Year to 31 December 2007 £'000
Continuing Operations Loss before Taxation	(3,021)	(2,580)	(6,209)
Adjustments for:
Depreciation and Amortisation	1,138	536	1,619
Disposal of fixed assets	-	-	542
Finance Income	(154)	(111)	(191)
Finance Expense	1,071	655	1,743
Increase in Retirement Benefit Obligation	34	-	97
Share Based Payment Charge	-	-	-
Other gains and losses	190	-	-
Changes in Working Capital
(Increase) in Inventories	(2,696)	(902)	(513)
Decrease in Trade & Other Receivables	1,224	2,028	576
Increase in Payables	828	139	892
Cash (Used in) Continuing Operations	(1,386)	(235)	(1,444)
Corporation Tax Paid	-	-	-
Net Cash (Decrease) from Continuing Operations	(1,386)	(235)	(1,444)

NOTES

1. Nature of Financial Information

The financial information contained within this interim report is unaudited. It does not constitute statutory accounts with in the meaning of section 240 of the Companies Act 1985. The auditor's report on the accounts for the year ended 31 December 2007 was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985.

2. Loss per Share

The Loss per Ordinary Share is calculated on the weighted average number of ordinary shares in issue during the period of 52,303,581 (2007: 52,303,581).  Due to the loss in the period the basic and diluted EPS are the same.

3. Accounting Policies

The interim results have been prepared in accordance with IFRS accounting rules.  The Accounting Policies used in the preparation of these results were the accounting policies used in the preparation of the results for the year ended 31 December 2007 and detailed in the notes to those results (see Annual Report 2007 issued 13 May 2008).

4.a  Evaluation of Convertible Loan Notes

The theoretical equity portion of the Roseman and Polar convertible loan notes was estimated, as  required under the IAS 32 and IAS 39, by comparing the face value of the loan notes to their fair value after discounting the future stream of liabilities at a rate of 20%. 

NIPSON DIGITAL PRINTING SYSTEMS PLC

Unaudited results for the six months ended 30 June 2008

Note 4.b : Evaluation of Convertible Loan Notes

	Roseman £'000s	Polar £'000s	Total £'000s
Face Value of Convertible Loan Notes	1,506	2,067	3,573
Issue Costs	(71)	(99)	(170)
Net	1,435	1,968	3,403
Analysed as follows:
Equity Portion of Convertible Loan Notes	385	528	913
Loan Portion of Convertible Loan Notes	1,050	1,440	2,490

Note 5 : STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

	Share Capital £'000	Share Premium £'000	Equity Portion of Convertible Loans £'000	Reverse Acquisition Reserve £'000	Translation Reserve £'000	Retained Earnings £'000	Total £'000
At 1 January 2007	523	13,915	-	3,057	(68)	(7,704)	9,723
Loss for the Period	-	-	-	-	-	(2,580)	(2,580)
Exchange Differences on Translation of Foreign Operations	-	-	-	-	22	-	22
At 30 June 2007	523	13,915	-	3,057	(46)	(10,284)	7,165
At 1 January 2008	523	13,915	-	3,057	166	(13,913)	3,748
Loss for the Period	-	-	-	-	-	(3,021)	(3,021)
Equity Portion of Convertible Loans	-	-	913	-	-	-	913
Exchange Differences on Translation of Foreign Operations	-	-	-	-	517	-	517
At 30 June 2008	523	13,915	913	3,057	683	(16,934)	2,157

NOTE 6 (A) : GEOGRAPHICAL ANALYSIS OF SALES

Country / Region	6 months to 30 June 2008 £'000s	6 months to 30 June 2007 £'000s	Full Year to 31 December 2007 £'000s
France	2,653	2,164	5,331
Rest of Europe	4,722	4,003	8,786
USA and Canada	3,098	2,930	5,685
Asia	1,567	1,436	3,255
Latin America	1,435	890	1,828
Other	713	802	2,450
Total	14,188	12,225	27,335

NOTE 6 (B) : SEGMENTAL ANALYSIS

		France			Rest of			USA			PLC			Total
					Europe
6m = 6 months FY = Full Year	6m to 30 June  2008 £'000s	6m to 30 June 2007 £'000s	FY to 31 Dec 2007 £'000s	6m to 30 June  2008 £'000s	6m to 30 June 2007 £'000s	FY to 31 Dec 2007 £'000s	6m to 30 June  2008 £'000s	6m to 30 June 2007 £'000s	FY to 31 Dec 2007 £'000s	6m to 30 June  2008 £'000s	6m to 30 June 2007 £'000s	FY to 31 Dec 2007 £'000s	6m to 30 June  2008 £'000s	6m to 30 June 2007 £'000s	FY to 31 Dec 2007 £'000s
Revenue	12,034	9,906	23,126	1,186	951	2,805	967	1,368	1,404	-	-	-	14,188	12,225	27,335
Assets	16,691	18,039	17,399	3,151	2,921	3,468	2,128	2,365	2,568	9,527	8,614	6,268	31,496	31,939	29,703
Capital Expenditure	423	1,445	2,486	1	4	9	1	10	17	2	-	-	427	1,458	2,512

ENDIR EZLFFVVBEBBZ