25 March 2002

Plasmon Plc (the "Company")

Update on current trading, UDO development programme and US reorganisation

Current Trading

In the first half to 30^th September 2001, the Group reported sales revenues some 10% below the previous year as a result of the general downturn in IT spending and in particular by some £2-3m of contracts deferred in the US following the events of 11^th September. As financial institutions, in particular, recovered from the atrocities, we expected much of the deferred deliveries to be made in the second half and to recoup some, but not all, of the first half sales shortfall.

In the second half our core optical storage business has continued to perform well in Europe and the Group now has a record order book substantially ahead of last year. However, many of our key customers in the US financial sector have been undertaking significant restructuring programmes and contracts we expected to close in the second half are still subject to tight budgetary constraints. As a result, we will be unable to recover the first half shortfall and full year revenues will also remain some 10% below last year with a consequent impact on profitability.

Despite continuing difficulties in closing business in the current climate, the outlook for the coming year is very positive. In addition to the strong order backlog, we have a record number of large library projects under quotation and we are already seeing a general improvement in the storage market after the severe downturn of the past 12 months. We are also beginning to make progress in our new tape business and expect it to make a material contribution to Plasmon channel sales in the coming year. We are also in discussions with three potential OEM customers for our tape products that could result in a significant increase in our future tape automation revenues.

UDO Development Programme

Our UDO development programme is progressing extremely well and we remain on schedule to deliver our first generation 30GB product in August 2003. We now have six prototype drives reading and writing data at the 30GB capacity and first turn ASICs are due for delivery between April and July 2002 as planned. Coupled with second generation drive mechanisms from Asahi Pentax, these ASICs will enable us to complete 'form factor' prototype drives by late summer 2002 and we plan to ship beta-level units in Spring 2003. UDO media development is also progressing on schedule and we are currently specifying the equipment for volume manufacturing. As part of this process, we are investigating ways to reduce capital expenditures and minimise the risks of integrating a new manufacturing line.

At the recent AIIM and Cebit trade shows we launched our UDO product roadmap to key customers, industry analysts and press with a very favourable response. UDO is now being recognised as the future standard in professional 5.25 inch optical technology and we are gaining good support from potential major OEM customers. Our UDO programme has received an excellent boost from the recent announcement by several major Japanese electronics companies of 'Blu-ray' technology. Blu-ray is the planned successor to DVD and uses the same fundamental technologies of violet lasers and phase change recording as UDO but is aimed at the consumer market for video recording. Sony, our original partner in UDO development, is also focusing on Blu-ray products and Plasmon will now be the sole manufacturer of UDO drive technology.

US Reorganisation

The US reorganisation is now largely complete and all library manufacturing lines have been relocated from Minneapolis to Colorado Springs. Initial production of libraries in Colorado has restarted and we expect to make first customer shipments on schedule from 1^st April. Over the past two weeks we have successfully completed IBM's manufacturing readiness review and we anticipate first shipments to OEM customers also from 1^st April, some two weeks ahead of schedule.

To cover the transition period we built a buffer inventory of finished libraries that will continue to be shipped from Minneapolis in the short term to avoid any disruption to deliveries. All Minneapolis operations will be closed by the end of April except for our library engineering team who will continue to operate as planned from their separate facility.

The new Denver sales and marketing office is now fully staffed and will go live from 1^st April. As expected, the Denver location in the heart of the US storage industry has enabled us to attract a high calibre team with excellent experience of storage and particularly tape. The Denver sales office is only 50 miles from our main Colorado Springs manufacturing facility and this will greatly increase our communications and operational efficiency as we move forward.

Conclusions

Overall, our US reorganisation has proceeded extremely smoothly and we have emerged not only with significant cost savings, but with greater capability in our operations and sales and marketing teams. Despite the cost of the reorganisation and associated inventory build, our financial position remains strong with gearing of some 28%. The UDO development programme is proceeding to plan and Plasmon is well positioned to be the leading provider of future professional optical storage solutions. Although trading conditions remained difficult in the second half, clear signs are emerging of an improvement in the storage market and we see considerable opportunities in the coming year.