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NIPSON DIGITAL PRINTING SYSTEMS PLC

RESULTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2008

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

	9 months to 30 Sept 2008 Unaudited £'000	Change  +/-%	9 months to 30 Sept 2007 Unaudited £'000	Full Year to 31 December 2007 Audited £'000
Revenue	21,699	+15.0%	18,873	27,335
Gross profit	3,241	+30.0%	2,494	3,463
Operating (loss)	(3,516)		(3,116)	(4,657)
(Loss) on ordinary activities before tax	(4,605)		(4,035)	(6,209)

• For the first nine months, and compared to the same period of 2007, recurrent revenues increased by 10% and equipment revenues increased by 29%;
  
  
• The first nine months' losses impacted the Group's cash position.  This cash situation worsened such that the French subsidiary, Nipson SAS, had difficulty meeting its on-time payments to creditors.  The company announced on 28 October 2008 its decision for the French subsidiary to go into receivership under protective administration. 

Marc Maes, Nipson's Chairman commented: 'Despite the difficult situation of the French subsidiary, the Group is continuing to produce machines, spare parts and consumables and continuing to provide a maintenance service to customers either directly or via its agreed distributors.'

For further information, please contact:

Nipson Digital Printing Systems PLC

Guillaume Dumarey, Managing Director - Tel: +33 (0)384 545 270

Robert Cahill, Group Finance Director - Tel: +33 (0)384 545 250

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 third quarter was higher than expected due to the costs of technical issues and the continued impact of the weak US Dollar compared to the Euro.  While the pipeline remains good, and the technical issues have now been addressed, certain customers have delayed orders until the long term future of the Group is clearer.

As previously indicated in the half year results announcement published on 15 August 2008, the company has been in discussion with several parties concerning equity and or debt transactions.  On 14 October 2008 the Group announced that the Polar Group, majority shareholder of Nipson, had entered into an agreement with the Belgian company Creacorp NV ('Creacorp'), whereby Polar agreed to:

• assign the benefit of loans and interest of approximately €14.7 million owed to Polar by the Nipson Group, to Creacorp; and

• grant Creacorp a call option to acquire up to 22,992,709 ordinary shares in the capital of Nipson, currently held by the Polar Group subject to the Polar Group maintaining a non-dilutive 10% of the issued share capital of Nipson for 3 years.

Creacorp is privately controlled by the Belgian Dumarey family holding a diversified portfolio of technology, property and entertainment companies, with assets of more than 100 million Euros.  Creacorp holds a 31% shareholding in the listed conglomerate, Punch International NV, of which Guido Dumarey is Executive Chairman.  Punch owns automotive, telematics and property business activities and is a major manufacturer of printing equipment. 

Further announcements were made in October concerning the financial difficulties experienced by the French subsidiary.  The negative result impacted the Group's cash position especially that of its French subsidiary which worsened suddenly, aggravated by tighter credit conditions and positions taken recently by the financial institutions, including rating and credit insurance institutions, such that the French subsidiary had difficulty meeting its on-time payments to creditors. The company announced on 28 October 2008 its decision for the French subsidiary to go into receivership under protective administration for a six month period (see announcements dated 10, 14 and 28 October 2008).  Although the restructuring plan is on line, the directors cannot give any guarantees as to either its outcome or the going concern status of the French company. The other companies in the Group are trading normally.

Revenue and Operating Results

Revenue for the nine months to 30 September 2008 was £21.7m, an increase of 15.0% over the same period last year. The increase came from both new equipment sales and recurring revenues.  Despite the weak dollar relative to the Euro, sales increased across all markets compared to the same period last year. 

Equipment sales, at £6.3m for the nine months, showed an increase of 29% over the comparative period. 

Recurrent revenues for the nine months to 30 September 2008 were £15.4m, an increase of 10.0% as compared to the same period last year. The Group's recurrent revenue continues to grow. 

Gross profit for the nine months to 30 September 2008 was £3.2m, 30% 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 US Dollar which, until recently, remained weak against the Euro. 

The operating result for the nine months to 30 September 2008 showed a loss of £3.5m against a loss of £3.1m for the corresponding period in 2007. Operating costs at £6.8m (2007: £5.6m) were higher due to £300,000 costs for Drupa (the world's 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 2007 the Group also received R&D tax credits, which were not received in 2008. The weakness of the GB Pound to the Euro during the period is also a major reason for the adverse difference. 

The costs of Research & Development for the first nine months of 2008 were £2.9m of which £1.1m was capitalised. For the first nine months of 2008, £0.4m was capitalised net of amortisation of R&D intangible assets (2007: £1.2m).

The net loss for the first nine months was £4.6m (2007: net loss of £4.0m). Other than the cost of Drupa and the additional R&D amortisation, this difference is due to the finance costs which are higher in 2008 and currency movements of both the US Dollar and GB Pound.

As at 30 September 2008 cash balances were £0.9m (£1.3m at 31 December 2007), under pressure from higher sales and the financing of higher inventory levels (£11.4m compared to £9.7m at 31 December 2007, however lower than the £12.4m at 30 June 2008). The level of trade and other receivables decreased further to £7.3m (£9.5m at 31 December 2007 and £8.3m at 30 June 2008).

Comments on the valuation of the Loan Notes for Roseman and for Polar are detailed in Note 4 to the accounts.  As at 30 September 2008, the total amount owing to the Polar Group for loans, accruing interest and including the 5% Convertible Loan Notes of £2.2m, was £11.8m (31 December 2007: £10m).  As of 14 October 2008 these loans were transferred to Creacorp for 1€, after deduction made of the balance of the Hapoalim loan (£1.8m) which was transferred to the Polar Group (see announcement dated 14 October 2008). 

The new configuration of the Nipson Board of Directors is as follows:

• Marc Maes - Chairman

• Guillaume Dumarey - Managing Director

• Ghislain Segard - Executive Director

• Robert Cahill - Group Finance Director

• David Gestetner - Non-Executive Director

The Board has decided as from 1 January 2009 to report in Euros since the Group trades essentially in Euros. The Group was required to produce quarterly results due to the reporting constraints of the Polar Group quoted on the Tel-Aviv stock exchange.  The Board considers since the Nipson results will no longer be consolidated into the Polar Group results, that the Group should return to standard half yearly AIM reporting.

Despite the difficult situation of the French subsidiary, the Group is continuing to produce machines, spare parts and consumables and continuing to provide a maintenance service to customers either directly or via its agreed distributors. 

Marc Maes, Chairman, Nipson Digital Printing Systems PLC

  NIPSON DIGITAL PRINTING SYSTEMS PLC

Unaudited results for the nine months ended 30 September 2008

CONSOLIDATED INCOME STATEMENT

	9 months to 30 Sept 2008 £'000	9 months to 30 Sept 2007 £'000	Full Year to 31 December 2007 £'000
Continuing Operations Revenue	21,699	18,873	27,335
Cost of Sales	(18,458)	(16,379)	(23,872)
Gross Profit	3,241	2,494	3,463
Administrative Expenses	(6,757)	(5,610)	(7,667)
Other Operating Expenses	-	-	(453)
(Loss) on Continuous Operations before interest	(3,516)	(3,116)	(4,657)
Finance Income Finance Costs	247 (1,336)	141 (1,060)	191 (1,743)
(Loss) from Continuing Operations before taxation	(4,605)	(4,035)	(6,209)
Taxation	-	-	-
(Loss) from Continuing Operations after taxation	(4,605)	(4,035)	(6,209)
(Loss) per Ordinary Share	(8.8p)	(7.7p)	(11.9p)

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE

	9 months to 30 Sept 2008 £'000	9 months to 30 Sept 2007 £'000	Full Year to 31 December 2007 £'000
Exchange Difference on Translation of Foreign Operations	615	115	234
Net Income Recognised Directly in Equity	615	115	234
(Loss) for the Year	(4,605)	(4,035)	(6,209)
Total Recognised Income and Expense for the Period	(3,990)	(3,920)	(5,975)

  NIPSON DIGITAL PRINTING SYSTEMS PLC

Unaudited results for the nine months ended 30 Sept 2008

CONSOLIDATED BALANCE SHEET

	9 months to 30 Sept 2008 £'000	9 months to 30 Sept 2007 £'000	Full Year to 31 December 2007 £'000
Assets Non-Current Assets Goodwill	782	736	755
Other Intangible Assets	4,279	3,218	3,636
Property, Plant & Equipment	3,334	6,862	3,645
Deferred Tax Asset	598	491	597
Other Non-Current Assets	556	525	498
	9,549	11,832	9,131
Current Assets
Inventories	11,394	9,785	9,679
Trade and Other Receivables	7,319	7,781	9,545
Cash and Cash Equivalents	878	2,456	1,348
	19,591	20,022	20,572
Liabilities
Current Liabilities
Trade and Other Payables	(9,086)	(6,653)	(7,696)
Borrowings	(14,779)	(12,273)	(12,870)
	(23,865)	(18,926)	(20,566)
Net Current Assets	(4,274)	1,096	6
Non-Current Liabilities
Borrowings	(2,980)	(5,683)	(3,776)
Deferred Tax Liabilities	(598)	(491)	(597)
Retirement Benefit Liability	(1,026)	(951)	(1,016)
	(4,604)	(7,125)	(5,389)
Net Assets	671	5,803	3,748
Shareholders' 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	781	47	166
Retained Earnings	(18,518)	(11,739)	(13,913)
Total Equity Attributable to Equity Holders	671	5,803	3,748

Approved by the Board of Directors on 4 November 2008

Guillaume Dumarey                    Robert Cahill            

  NIPSON DIGITAL PRINTING SYSTEMS PLC

Unaudited results for the nine months ended 30 Sept 2008

CONSOLIDATED CASH FLOW STATEMENT

	9 months to 30 Sept 2008 £'000	9 months to 30 Sept 2007 £'000	Full Year to 31 December 2007 £'000
Net Cash Increase/(Decrease) from Operating Activities	217	(868)	(1,444)
Cash Flows from Investing Activities
Purchase of Intangible Assets	(1,127)	(1,820)	(2,480)
Purchase of Property, Plant & Equipment	(64)	(245)	(188)
Disposal of fixed assets	244	-	2,100
Interest Received	-	21	75
Net Cash Used in Investing Activities	(947)	(2,044)	(493)
Cash Flows from Financing Activities
Interest Paid	(307)	(547)	(541)
Capital Repayments on Finance Leases	(184)	(329)	(2,388)
Borrowings Raised - from Third Party	1,575	135	215
from Parent Undertaking	591	4,406	5,203
Borrowings Repaid	(1,415)	(889)	(1,796)
Net Cash Raised in Financing Activities	260	2,776	693
Net (Decrease) in Cash & Cash Equivalents	(470)	(136)	(1,244)
Cash & Cash Equivalents at 1 January	1,348	2,592	2,592
Cash & Cash Equivalents at end of period	878	2,456	1,348

  NIPSON DIGITAL PRINTING SYSTEMS PLC

Unaudited results for the nine months ended 30 Sept 2008

CASH FLOWS FROM OPERATING ACTIVITIES

Cash Generated from Operations	9 months to 30 Sept 2008 £'000	9 months to 30 Sept 2007 £'000	Full Year to 31 December 2007 £'000
Continuing Operations Loss before Taxation	(4,605)	(4,035)	(6,209)
Adjustments for:
Depreciation and Amortisation	1,609	673	1,619
Disposal of fixed assets	-	-	542
Finance Income	(247)	(141)	(191)
Finance Expense	1,336	1,060	1,743
Increase in Retirement Benefit Obligation	10	32	97
Other gains and losses	271	-	-
Changes in Working Capital
(Increase) in Inventories	(1,715)	(619)	(513)
Decrease in Trade & Other Receivables	2,168	2,313	576
Increase/(Decrease) in Payables	1,390	(151)	892
Cash from/(Used in) Continuing Operations	217	(868)	(1,444)
Corporation Tax Paid	-	-	-
Net Cash Increase/(Decrease) from Continuing Operations	217	(868)	(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.  Equity Portion of Convertible Loan Notes

The theoretical equity portion of the Roseman and Polar convertible loan notes, required under the IAS 32 and IAS 39, was estimated 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 nine months ended 30 Sept 2008

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	-	-	-	-	-	(4,035)	(4,035)
Exchange Differences on Translation of Foreign Operations	-	-	-	-	115	-	115
At 30 September 2007	523	13,915	-	3,057	47	(11,739)	5,803
At 1 January 2008	523	13,915	-	3,057	166	(13,913)	3,748
Loss for the Period	-	-	-	-	-	(4,605)	(4,605)
Equity Portion of Convertible Loans	-	-	913	-	-	-	913
Exchange Differences on Translation of Foreign Operations	-	-	-	-	615	-	615
At 30 September 2008	523	13,915	913	3,057	781	(18,518)	671

NOTE 6 (A) : GEOGRAPHICAL ANALYSIS OF SALES

Country / Region	9 months to 30 Sept 2008 £'000s	9 months to 30 Sept 2007 £'000s	Full Year to 31 December 2007 £'000s
France	3,832	3,619	5,331
Rest of Europe	7,013	6,395	8,786
USA and Canada	4,997	4,398	5,685
Asia	2,249	2,138	3,255
Latin America	1,861	1,108	1,828
Other	1,747	1,215	2,450
Total	21,699	18,873	27,335

NOTE 6 (B) : SEGMENTAL ANALYSIS

		France			Rest of			USA			PLC			Total
					Europe
9m = 9 months FY = Full Year	9m to 30 Sept  2008 £'000s	9m to 30 Sept 2007 £'000s	FY to 31 Dec 2007 £'000s	9m to 30 Sept  2008 £'000s	9m to 30 Sept 2007 £'000s	FY to 31 Dec 2007 £'000s	9m to 30 Sept  2008 £'000s	9m to 30 Sept 2007 £'000s	FY to 31 Dec 2007 £'000s	9m to 30 Sept  2008 £'000s	9m to 30 Sept 2007 £'000s	FY to 31 Dec 2007 £'000s	9m to 30 Sept  2008 £'000s	9m to 30 Sept 2007 £'000s	FY to 31 Dec 2007 £'000s
Revenue	18,011	15,001	23,126	1,686	1,805	2,805	2,002	2,067	1,404	-	-	-	21,699	18,873	27,335
Assets	13,938	17,619	17,399	3,218	3,259	3,468	2,509	2,362	2,568	9,476	8,614	6,268	29,140	31,854	29,703
Capital Expenditure	1,158	1,856	2,486	1	8	9	29	10	17	2	-	-	1,190	1,874	2,512

ENDQRTEALFLFEAPFFE