IMMEDIATE RELEASE 29 NOVEMBER 2001

PLASMON PLC

2001 INTERIM RESULTS

Plasmon, the Cambridge based data storage solutions company, today announced its Interim Results for the six months to 30 September 2001.

Highlights

• Group sales declined to £29.1m (2000: £32.4m) due largely to the weaker US economy compounded by the tragic events of 11 September in New York and Washington following which several expected sales were deferred. Many of the delayed sales are expected to be realised in the second half.

• Overall US revenues declined by 23%. The US management team has been reorganised and the library manufacturing and the sales & marketing group are to be consolidated in Colorado, the centre of the US storage industry, realising substantial cost savings.

 

European revenues grew 16% with particularly good growth in the core 5.25 inch library business. The improved European performance reflects the success of increased marketing efforts over recent years and more favourable economic conditions than in the US.

• First half development expenditure rose to £5.8m (2000: £3.9m) including the planned spend of £2.5m on UDO development. Despite this high level of investment in Plasmon's future technology base, capital gearing remains strong at 13%.

J. Barrie Morgans, Chairman of Plasmon, said:

"The first half has been a challenging period for Plasmon with difficult market conditions in the US. We continue to grow our core 5.25 inch library business and are positioning Plasmon in the leading market position with our UDO drive and media developments."

Enquiries:

Plasmon Plc (01763 261466) Citigate Dewe Rogerson (020 7638 9571)

Nigel Street (Chief Executive) Martin Jackson

Tim Arthur (Finance Director) Sara Thomas

PLASMON PLC

2001 INTERIM RESULTS

Chairman's Statement

In the six months to 30 September 2001, the Group achieved sales of £29.1m compared to £32.4m the previous year. Operating profit before tax, goodwill amortisation and UDO development costs was £1.0m compared to £2.5m in the comparable period last year. UDO development costs were in line with expectations at £2.5m, resulting in a retained loss for the period of £2.5m against a profit of £1.5m last year. As we indicated in our 17 October trading update, overall sales were negatively impacted by the tragic events of 11 September in New York and Washington. Immediately following these events several expected sales to large financial institutions were deferred, although we expect many of the delayed sales to be realised in the second half. We also incurred a bad debt of £0.6m arising from the bankruptcy of Toolex International NV, a long-standing customer of our media consulting business.

In July 2001 we successfully raised £10.3m net to fund the development of UDO drives and media. The drive development programme is proceeding extremely well with Asahi Pentax delivering the first prototype drive mechanisms on schedule in July. We have now integrated these drive mechanisms with prototype electronics and are reading and writing data on sample media produced at our facility in Melbourn near Cambridge. ASIC and firmware development is well underway and we expect to have in form-factor drives by mid 2002 and be on schedule to deliver the product in mid 2003.

In October we moved into our new office building in Melbourn which also incorporates manufacturing space for UDO media. Production cleanrooms are now under construction and the pilot UDO disk manufacturing line should be installed in early 2002. Development of manufacturing processes for the new UDO type disk construction are progressing well and we believe that the necessary production equipment can be sourced within planned capital expenditure budgets.

Overall the UDO development programme is on schedule and we are confident that the key technological challenges presented by the use of violet lasers and the new phase change disk construction are manageable within our existing resources. We continue to see good growth in our sales of high-end archival storage systems and expect UDO systems to very significantly increase our competitiveness in this market sector in the future.

Our European operations achieved 16% revenue growth in the first half with particularly good growth in the core 5.25 inch library business following the introduction of the new G-Series range of products. In general, European economic conditions remain more favourable than the US, although the improved European performance also reflects the success of increased marketing efforts over the last few years.

The reduction in overall sales reflected more difficult trading conditions in the US, where only 2% growth in Plasmon brand channel sales was achieved. Sales to IBM decreased 55% as Magstar MP tape libraries entered end of life, resulting in an overall reduction of 23% in US revenue. The 12" technology business continues to perform in line with expectations with increased service revenues offsetting lower drive sales. Following the acquisition of LMS Technical Services last year, we continue to make excellent progress in developing our Plasmon Service Direct programme and we now service the majority of 12" optical installations world wide in partnership with Kodak. Sales of 12" drives have returned to more usual levels after the introduction of the new 30GB product last year, although they were also impacted in the first half by some field reliability issues that have now been resolved

Sales of the new LTO tape libraries were below expectations due to slower than expected market penetration of LTO technology and poor execution of our LTO launch plan. Despite the slow start, we remain enthusiastic about the tape business and in September we acquired design and manufacturing rights to the tape autoloaders we currently purchase on an OEM basis from Exabyte. The acquisition will enable us to offer a full range of Plasmon manufactured tape libraries and we will begin production at our Colorado Springs facility in December.

Given the poor trading in the US, we reorganised our senior US management team in August through the appointment of Dr Christopher Harris as President of Plasmon Inc, with responsibility for engineering and operations at both of our US facilities. We also appointed Robert Clark, who has extensive experience of the tape library market, as Senior VP of US Sales and Marketing.

Since August we have conducted a thorough review of our US business to determine the optimal organisation structure to maximise revenues and operational efficiency. Following completion of the review, we now plan to transfer our library manufacturing operations from Minneapolis to Colorado Springs where we have a larger production facility. The transfer should be complete by the fiscal year end when the main Minneapolis facility will close. Our library engineering team, which is located in a small facility independent of the main factory, will remain in Minneapolis and continue the development of our automation products.

In addition to relocating library production, we are also moving the headquarters of our US Sales and Marketing group from Minneapolis to Denver, Colorado. Denver is at the centre of the storage industry in the US and offers a large pool of appropriate sales and marketing talent, particularly in the area of tape technology. We are currently finalising the lease on office space near the Denver Technology Centre and expect to have the new office operational early in the New Year.

The decision to consolidate our two US facilities has been driven by economic factors and the need to create revenue growth in difficult market conditions. Over the years we have built a strong team in Minneapolis which has done an excellent job in building our library business. We will seek to transfer as many people as possible to Colorado but unfortunately many people may not be able to make the move. However, we believe we have the commitment and resources within Plasmon to manage a smooth transition and expect to realise substantial cost savings from the combined manufacturing operations.

In the first half our development expenditure rose 49% to £5.8m from £3.9m the previous year. The increase reflected our planned expenditure of £2.5m on full scale UDO development offset by reduced expenditure on 12" drive development. Despite the high level of investment in our future, our financial position remains strong with 13% capital gearing.

The first half of 2001/2 has been a challenging period for Plasmon with difficult market conditions in the US and slowing sales to IBM holding back overall revenue growth. We continue to grow our core 5.25 inch library business and are positioning Plasmon in the leading market position with our UDO drive and media developments. While our initial entry to the tape library business has been disappointing, we expect our increased investment in sales and marketing coupled with the Exabyte autoloader acquisition to drive sales revenues and profitability in the second half.

J. Barrie Morgans, Chairman

29 November 2001

Consolidated profit & loss account

Statement of total recognised gains and losses

Consolidated balance sheet

Consolidated cash flow statement

Reconciliation of net cash flow to movement in net debt

Reconciliation of operating (loss)/profit to net cash (outflow)/inflow from operating activities

Notes

1. The interim results have been prepared under the historical cost convention and in accordance with applicable Accounting Standards using accounting policies which have been consistently applied.
2. Turnover and operating profit relate to continuing operations, there being no discontinued operations in the periods as defined by FRS3.
3. Basic earnings per share have been calculated on the basis of profit on ordinary activities after tax and 42,761,569 Ordinary Shares (30 September 2000: 35,226,132 - 31 March 2001: 36,531,094), being the weighted average number of Ordinary Shares deemed to have been in issue in the period. Basic earnings per share excluding goodwill amortisation have been calculated on the basis of profit on ordinary activities after tax adjusted for goodwill amortisation of £601,000 (30 September 2000: £479,000 - 31 March 2001: £1,067,000). Basic earnings per share excluding UDO development costs and goodwill amortisation have been calculated on the basis of profit on ordinary activities after tax adjusted for UDO development costs of £2,529,000 and goodwill amortisation of £601,000.

There is no dilution of earnings per share in the six months ended 30 September 2001. Diluted earnings per share have been calculated on the basis of profit on ordinary activities after tax and on 35,503,535 Ordinary Shares at 30 September 2000 and 36,819,948 at 31 March 2001 being the diluted weighted average number of Ordinary Share deemed to have been in issue in the period.

 

4. The interim results for the two half years have not been audited. The financial information contained in the interim report does not constitute statutory accounts as defined in Section 240 of the Companies Act 1985. The information relating to the full year figures has been extracted from the 2000/1 Annual Report which received an unqualified auditors' report and has been delivered to the Registrar of Companies.
5. The interim report will be mailed to shareholders and copies will be available at the registered office: Plasmon Plc, Whiting Way, Melbourn, Hertfordshire SG8 6EN.

Independent review report to Plasmon Plc

Introduction

We have been instructed by the company to review the financial information which comprises a summarised profit and loss account, statement of total recognised gains and losses, consolidated balance sheet information as at 30 September 2001, summarised consolidated cash flow statement, comparative figures and associated notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

Directors' responsibilities

The interim report, 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 report in accordance with the Listing Rules of the Financial services Authority which require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.

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. 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 accounting policies and presentation 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 performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. 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 30 September 2001.

PricewaterhouseCoopers

Chartered Accountants

London

29 November 2001