DNK.L Regulatory News (DNK)

3 Aug 2005 13:45

Danka Business Systems PLC03 August 2005 3 August 2005 DANKA BUSINESS SYSTEMS PLC ("Danka", the "Company" or the "Group") Announcement of results for the quarter ended 30th June 2005 Revenue Performance Highlights Quarter Danka Business Systems PLC, a leading independent global provider of officeimaging systems and services, today announced its results for the quarter ended30th June 2005. Danka reported first-quarter revenue of £166.8 million, grossmargins of 33.7% and a loss from continuing operations before tax and financecosts of £2.3 million, including a cost restructuring charge of £3.0 million.These results, as well as results for prior reporting periods, include Danka's former Canadian subsidiary, which was sold to Pitney Bowes with effect from the end of the quarter. Note 5 to the attached financial information sets out the results of the Canadian operations for the periods presented. "We made good progress to start our new fiscal year," commented Danka ChiefExecutive Officer Todd Mavis. "We achieved balanced performance worldwide, areflection of the work we have done to upgrade our sales teams, selectivelyexpand sales coverage, and improve customer and salesforce retention. We sawmeaningful sequential increases in both revenue and gross margins, reflectingimprovements in our key retail equipment and retail service segments. In thequarter, we made progress on executing against our Managed Print Servicesbusiness plan. In addition, we continued to realise cost savings from our Vision21 cost restructuring programme, with operating costs declining bothyear-over-year and sequentially." For the first quarter: • Total revenue was £166.8 million, which was 2.9% lower than the year-ago quarter and 5.2% higher than the fourth quarter. Retail equipment sales improved by £9.3 million from the comparative prior year period, which was driven by a 50% increase in revenue from the sales of colour equipment. Service revenue decreased by £11.7 million from the comparative prior year period. • Consolidated gross margins were 33.7% of revenue, lower than the 38.4% reported in the comparative prior year quarter but higher than last quarter's 27.3%. • Operating costs (distribution costs plus administrative expenses) were £59.0 million, a 4.5% decline from the year-ago quarter and 16.9% lower than the fourth quarter. The decrease from prior periods is attributable in part to the realisation of cost savings from Danka's Vision 21 cost restructuring programme, lower costs related to Sarbanes-Oxley compliance and reduced bad debt expense. Included in operating costs for the period are an adjustment to long-lived insurance assets, executive separation costs and favourable foreign currency movements totaling £1.5 million. • The loss from continuing operations before tax and finance costs was £2.3 million, including a £3.0 million cost restructuring charge and the £3.6 million gain on the disposal of the Canadian operations. That compares to an operating profit of £3.5 million in the year-ago quarter and an operating loss of £30.9 million in the fourth quarter including cost restructuring charges. • Free cash flow (net cash provided by operating and investing activities excluding cash flows from acquisitions and disposals) was £(2.0) million, compared to £5.7 million in the fourth quarter and £(8.1) million from the same period a year ago. "Our first quarter performance supports our belief that our Managed PrintServices strategy will not only assist us in stabilising service revenue andmargins, but it also will drive equipment sales," said Mavis. "We continue tobalance our targeted growth initiatives against our commitment to take costs outof the business permanently. Additionally, we will continue to evaluate ourgeographic assets to determine the best strategic opportunities for return onour investments." "We were also pleased to announce the appointment of our new Chief FinancialOfficer, Ed Quibell, during the quarter," concluded Mavis. "Ed has extensiveinternational operational and financial experience and will assume the CFOposition next week." Conference Call and Webcast A conference call and Webcast to discuss Danka's first quarter results has beenscheduled for today, Wednesday, 3rd August at 3:00 p.m. UK time. To access theWebcast, please go to www.danka.com. To participate in the conference call,callers in the United States and Canada may dial 800-309-1555; UK and otherinternational callers should dial 001-706-643-7754. No conference number isneeded. A recording of the call will be available from approximately two hoursafter the call ends until 10:00 p.m. UK time on 10th August. To access thisrecording, callers in the United States and Canada may dial 800-642-1687 and UKand other international callers may dial 001-706-645-9291 (the conference IDnumber for replay is 8169953) or visit Danka's Web site. About Danka Danka delivers value to clients worldwide by using its expert technical andprofessional services to implement effective document information solutions. Asone of the largest independent providers of enterprise imaging systems andservices, the Group enables choice, convenience and continuity. Danka's visionis to empower customers to benefit fully from the convergence of image anddocument technologies in a connected environment. This approach will strengthenthe Group's client relationships and expand its strategic value. For moreinformation, visit Danka at www.danka.com. - ends - For further information please contact:Danka Business Systems PLCDonald Thurman, Danka Investor Relations 001 770 280 3990Paul Dumond, Company Secretary 020 7605 0154 Weber Shandwick Square MileNick Dibden 020 7067 0700 Certain statements contained herein, or otherwise made by the Group's officers,including statements related to Danka's future performance and the outlook forthe Group's businesses and respective markets, projections, statements of theGroup's plans or objectives, forecasts of market trends and other matters, areforward-looking statements, and contain information relating to Danka that isbased on management's beliefs as well as assumptions made by, and informationcurrently available to management. The words "goal", "anticipate", "expect","believe" and similar expressions as they relate to Danka are intended toidentify forward-looking statements, although not all forward-looking statementscontain such identifying words. No assurance can be given that the results inany forward-looking statement will be achieved. For the forward-lookingstatements, Danka claims the protection of the safe harbour for forward-lookingstatements provided for in the Private Securities Litigation Reform Act of 1995,Section 27A of the Securities Act of 1933 and Section 21E of the SecuritiesExchange Act of 1934, as amended. Such statements reflect management's currentviews with respect to future events and are subject to certain risks,uncertainties and assumptions that could cause actual results to differmaterially from those reflected in the forward-looking statements. Factors thatmight cause such actual results to differ materially from those reflected in anyforward-looking statements include, but are not limited to, the following: (i)any inability to implement Danka's strategy successfully; (ii) any inability tocomply with the financial or other covenants in the Group's debt instruments;(iii) any material adverse change in financial markets, the economy or in theGroup's financial position; (iv) increased competition in the industry and thediscounting of products by the Group's competitors; (v) new competition as theresult of evolving technology; (vi) any inability by Danka to procure or anyinability by Danka to continue to gain access to and distribute successfully newproducts, including digital products, colour products, multi-function productsand high-volume copiers, or to continue to bring current products to themarketplace at competitive costs and prices; (vii) any inability to arrangefinancing for Danka's customers' purchases of equipment from Danka; (viii) anyinability to enhance and unify the Group's management information systemssuccessfully; (ix) any inability to record and process key data due toineffective implementation of business processes and policies; (x) any negativeimpact from the loss of a key vendor or customer; (xi) any negative impact fromthe loss of any of the Group's senior or key management personnel; (xii) anychange in economic conditions in domestic or international markets where Dankaoperates or has material investments which may affect demand for the Group'sproducts or services; (xiii) any negative impact from the international scope ofthe Group's operations; (xiv) fluctuations in foreign currencies; (xv) anyinability to achieve or maintain cost savings; (xvi) any incurrence of taxliabilities beyond management's current expectations, which could adverselyaffect the Group's liquidity; (xvii) any delayed or lost sales and other impactsrelated to the commercial and economic disruption caused by past or futureterrorist attacks, the related war on terrorism, and the fear of additionalterrorist attacks; and (xviii) other risks including those risks identified inany of the Group's filings with the Securities and Exchange Commission, or theSEC. Readers are cautioned not to place undue reliance on these forward-lookingstatements, which reflect management's analysis only as at the date they aremade. Except as required by applicable law, Danka undertakes no obligation anddoes not intend to update these forward-looking statements to reflect events orcircumstances that arise after the date they are made. Furthermore, as a matterof policy, Danka does not generally make any specific projections as to futureearnings, nor does Danka endorse any projections regarding future performance,which may be made by others outside the Company. The financial information for the quarters ended 30th June, 2005 and 2004 isunaudited and not reviewed and does not constitute full accounts within themeaning of Section 240 of the Companies Act 1985. The financial information forsuch periods is prepared on the basis set out in note 2 to the financialinformation below. The comparative figures for the financial year ended 31stMarch 2005 are not the Company's statutory accounts for that year. Thoseaccounts, which were prepared under UK Generally Accepted Accounting Practices,have been reported on by the Company's auditors but not yet delivered to theRegistrar of Companies. The report of the auditors was unqualified and did notcontain statements under section 237(2) or (3) of the Companies Act 1985. This press release contains information regarding free cash flow that is computed as net cash provided by (used in) operating activities less capital expenditures plus proceeds from the sale of property and equipment and net debt that is computed as current maturities of long-term debt and notes payable plus long-term debt and notes payable less cash and cash equivalents. These measures are non-IFRS financial measures, defined as numerical measures of our financial performance that exclude or include amounts so as to be different than the most directly comparable measure calculated and presented in accordance with International Financial Reporting Standards, or IFRS in our statement of operations, balance sheet or statement of cash flows. The notes to this press release provide a reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measures. Although free cash flow and net debt represent non-IFRS financial measures, we consider these measures to be key operating metrics of the Group. We use these measures in our planning and budgeting processes, to monitor and evaluate our financial and operating results and to measure performance of our separate divisions. We also believe that free cash flow and net debt are useful to investors because they provide an analysis of financial and operating results using the same measures that we use in evaluating the Group. We expect that such measures provide investors with the means to evaluate our financial and operating results against other companies within our industry. We believe that these measures are meaningful to investors in evaluating our ability to meet our future debt service requirements and to fund our capital expenditures and working capital requirements. Our calculation of free cash flow and net debt may not be consistent with the calculation of these measures by other companies in our industry. Free cash flow and net debt are not measurements of financial performance under IFRS and should not be considered as an alternative to net earnings (loss) as an indicator of our operating performance or cash flows from operating activities as a measure of liquidity or any other measures of performance derived in accordance with IFRS. Danka is a registered trademark and TechSource is a trademark of Danka BusinessSystems PLC. All other trademarks are the property of their respective owners. Group Profit and Loss Account For the Quarters Ended 30th June 2005 and 2004 30th June ----------------------- 2005 2004 Note £000 £000 -------------------- -----------Continuing operationsRevenue 4 166,786 171,836Cost of sales (110,525) (105,771) ------------- -----------Gross profit 4 56,261 66,065 Other operating income 5 3,634 54Distribution costs (24,234) (24,965)Administrative expenses (34,779) (36,861)Other operating expense (136) (119)Restructuring costs (3,009) (643) ------------- -----------(Loss)/profit from continuing operations before tax and finance costs (2,263) 3,531 Investment income 81 104Finance costs (7,656) (7,395) ------------- -----------Loss from continuing operations before tax (9,838) (3,760) Tax (685) (100) ------------- ----------- Loss from continuing operations for the period and attributable to equity holders of the parent (10,523) (3,860) ============= =========== Loss per share: 7 ------------- ----------- Basic from continuing operations (4.1)p (1.5) p Basic from discontinued operations - - ------------- ----------- (4.1)p (1.5) p ------------- ----------- Diluted from continuing operations (4.1)p (1.5) p Diluted from discontinued operations - - ------------- ----------- (4.1)p (1.5) p ------------- ----------- ------------- -----------Average exchange rate £1= $ 1.857 $ 1.806Average exchange rate £1= • 1.474 • 1.499 ------------- ----------- Danka Business Systems PLC Group Balance Sheets 30th June 30th June 31st March 2005 2004 2005 £000 £000 £000 ----------- ----------- ----------Non-current assetsIntangible assets 1,001 636 1,084Goodwill 2,184 1,202 2,037Property and equipment 25,709 34,444 26,818Equipment on operating leases 11,736 14,841 12,412Other 8,650 7,985 10,029 ----------- ----------- ---------- 49,280 59,108 52,380 ----------- ----------- ----------Current assetsInventories 60,476 54,833 51,184Prepaid expenses 8,020 10,972 6,844Trade and other receivables 115,222 132,400 120,978Cash and cash equivalents 50,077 47,404 51,946 ----------- ----------- ---------- 233,795 245,609 230,952 ----------- ----------- ---------- ----------- ----------- ----------Total assets 283,075 304,717 283,332 ----------- ----------- ---------- Current liabilitiesTrade and other payables (104,144) (73,435) (91,706)Tax liabilities (26,753) (24,552) (25,424)Obligations under finance leases (995) (1,063) (1,036)Current portion of long-term borrowings (598) (1,731) (179)Deferred revenue (21,155) (22,055) (21,264)Short-term provisions (51,898) (50,513) (59,885) ----------- ----------- ---------- (205,543) (173,349) (199,494) ----------- ----------- ----------Non-current liabilitiesBank loans (127,744) (125,299) (120,952)Convertible loan notes (165,227) (151,327) (153,528)Retirement benefit obligations (13,273) (16,993) (13,341)Deferred tax liabilities (434) (1,093) (324)Long-term provisions (3,983) (3,916) (5,499)Obligations under finance leases (1,159) (2,339) (1,482)Other (5,642) (15,286) (5,459) ----------- ----------- ---------- (317,462) (316,253) (300,585) ----------- ----------- ---------- ----------- ----------- ----------Total liabilities (523,005) (489,602) (500,079) ----------- ----------- ---------- ----------- ----------- ----------Net liabilities (239,930) (184,885) (216,747) =========== =========== ========== EquityShare capital 3,178 3,141 3,177Share premium account 198,572 198,136 198,565Share options 1,882 780 1,661Translation reserve (9,942) (2,593) 2,947Retained earnings (433,620) (384,349) (423,097) ----------- ----------- ----------Total equity (239,930) (184,885) (216,747) =========== =========== ========== Closing exchange rate £1= $ 1.792 $ 1.813 $ 1.889 =========== =========== ==========Closing exchange rate £1= • 1.484 • 1.488 • 1.456 =========== =========== ========== Danka Business Systems PLC Group Cash Flow Statement For the Quarters Ended 30th June 2005 and 2004 30th June ----------------- 2005 2004 Note £000 £000 ------------------- --------- Net cash outflow from operating activities 10 (165) (5,794) Cash flows from investing activities Interest received 81 104 Capital expenditure (1,970) (3,575) Proceeds from sale of Canadian operations 6,680 - Proceeds from sale of fixed assets 47 1,131 --------- ---------Net cash from investing activities 4,838 (2,340) --------- --------- Cash flows from financing activities Proceeds from new borrowings 412 1,091 Payments under finance leases (450) (221) Interest paid (7,488) (7,438) Proceeds from share options exercised 8 162 --------- ---------Net cash from financing activities (7,518) (6,406) --------- --------- Net decrease in cash and cash equivalents (2,845) (14,540)Cash and cash equivalents at 1st April 51,946 61,298Effect of exchange rate fluctuations on cash held 976 646 --------- ---------Cash and cash equivalents at 30th June 50,077 47,404 ========= ========= Danka Business Systems PLC Group Statement of Changes in EquityFor the Quarters Ended 30th June 2005 and 2004 and the Year Ended 31st March 2005 30th June 31st March ------------------------ 2005 2004 2005 £000 £000 £000 ------------------------------- Balance at 1st April (216,747) (178,774) (178,774)Loss for the period (10,523) (3,860) (46,189)Shares issued 8 162 627Share option expense in the period 221 180 1,061Exchange translation differences in the period (12,802) (2,593) 2,947Exchange translation differences related to disposals (87) - -Pension scheme actuarial variations - - 3,581 --------- --------- ---------Balance at 30th June/30th June/31st March (239,930) (184,885) (216,747) ========= ========= ========= Notes to the Financial Information 1. The consolidated interim financial statements for the quarters ended 30th June, 2005 and 2004 are unaudited and unreviewed and do not constitute full accounts within the meaning of Section 240 of the Companies Act 1985. The financial information for such periods is prepared on the basis set out in note 2 below. The comparative figures for the financial year ended 31st March 2005 are not the Company's statutory accounts for that year. Those accounts, which were prepared under UK Generally Accepted Accounting Practices, have been reported on by the Company's auditors but not yet delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. 2. Significant accounting policies Danka Business Systems PLC ("the Company") is a company domiciled in the UnitedKingdom. The consolidated interim financial statements of the Company for thequarters ended 30th June, 2005 and 30th June, 2004 comprise the Company and itssubsidiaries (together referred to as the "Group"). The consolidated interimfinancial statements were authorised for issuance on 3rd August, 2005. Statement of compliance The consolidated interim financial statements have been prepared in accordancewith International Financial Reporting Standards ("IFRSs"). These are theGroup's first IFRS consolidated interim financial statements for part of theperiod covered by the first IFRS annual financial statements and IFRS 1First-time Adoption of International Financial Reporting Standards has beenapplied. An explanation of how the transition to IFRSs has affected the reportedfinancial position, financial performance and cash flows of the group isprovided on the Company's website via the Investor Relations page atwww.danka.com/IFRS.asp. The website also contains line-by-line reconciliations of equity and profit or loss for comparative periods reported under UK GAAP (previous GAAP) to those reported for those periods under IFRSs; note 11 below contains abridged reconciliations. Basis of preparation The financial statements are presented in Sterling, rounded to the nearestthousand. They are prepared on the historical cost basis, as modified by requirements to revalue certain financial assets and liabilites, including derivatives. EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidatedfinancial statements of the Company, for the year ending 31st March 2006, beprepared in accordance with IFRSs adopted for use in the EU ("adopted IFRSs"). This interim financial information has been prepared on the basis of therecognition and measurement requirements of IFRSs in issue that are eitherendorsed by the EU and effective (or available for early adoption at 31st March2006) or are expected to be endorsed and effective (or available for earlyadoption) at 31st March 2006, the Group's first annual reporting date at whichit is required to use adopted IFRSs. Based on those adopted and unadopted IFRSs,the directors have made assumptions about the accounting policies expected to beapplied, which are set out on the Company's website as detailed above, when thefirst annual IFRS financial statements are prepared for the year ending 31stMarch 2006. In particular, the directors have assumed that the amended IAS 19 issued by theInternational Accounting Standards Board will be adopted by the EU in sufficienttime that it will be available for use in the annual IFRS financial statementsfor the year ending 31st March 2006. In addition, the adopted IFRSs that will be effective (or available for earlyadoption) in the annual financial statements for the year ending 31st March 2006are still subject to change and to additional interpretations and thereforecannot be determined with certainty. Accordingly, the accounting policies forthat annual period will be determined finally only when the annual financialstatements are prepared for the year ending 31st March 2006. Accounting policies The accounting policies have been applied consistently throughout the Group forpurposes of these consolidated interim financial statements. These are set outin full on the Company's website at the address set out above. 3. Seasonality of operations The Group's operations have historically experienced lower revenue during thesecond quarter (ending 30th September) of the financial year. This is primarilydue to increased holiday taken by European and Canadian residents during Julyand August and lower levels of retail service revenue from United Statesgovernmental agencies. This has historically resulted in reduced sales activityand reduced usage of photocopiers, facsimiles and other office imaging equipmentduring the second quarter. Accordingly, the results of operations for theinterim periods are not necessarily indicative of the results which may beexpected for the entire financial year. 4. Analysis of turnover and gross profit The Group operates in one business segment, being the supply and servicing ofoffice equipment and the provision of related services. The following tableprovides additional analysis of the components of turnover and of gross profitof the single business segment, where the sale or rental of equipment normallyincludes a service contract and the purchase of supplies once the contractexpires. These components are not considered different classes of businessbecause of their inter-relation. Quarters Ended 30th June ---------------- 2005 2004 £000 £000 ------- ---------TurnoverRetail equipment and related sales 64,569 55,238Retail maintenance 75,511 87,177Retail supplies and rental sales 13,794 16,186Wholesale sales 12,912 13,235 -------- --------- 166,786 171,836 ======== ========= Gross profitRetail equipment and related sales 20,582 19,853Retail maintenance 27,774 37,126Retail supplies and rental sales 5,554 6,518Wholesale sales 2,351 2,568 -------- --------- 56,261 66,065 ======== ========= 5. Disposal of Canadian operations On 30th June 2005, the Group sold its retail operations in Canada to PitneyBowes of Canada Limited for $14 million (£7.8 million) cash and a pre-tax gainof £3.6 million was recorded within other operating income after expenses of£0.2 million. The attributable tax was nil. During the quarter ended 30th June2005, the Canadian operations had cash inflows from operating activities of £0.7million (quarter ended 30th June 2004: £0.1 million; year ended 31st March 2005:outflows of £4.8 million) and cash outflows from investing activities of £0.1million (2004: £0.1 million; 2005: £0.2 million). During the quarter ended 30thJune 2005, the Canadian operations repaid funding from other Group entities of£0.8 million (quarter ended 30th June 2004: received funding of £0.1 million;year ended 31st March 2005: received funding of £3.8 million). The cash inflowon the disposal after deducting cash disposed of was £6.7 million in thequarter; expenses and any purchase price adjustment will be settled in thequarter ending 30th September. At 30th June 2005 prior to disposal, the Canadian operations comprised assets of£7.9 million (31st March 2005: £7.6 million) less liabilities of £3.9 million(31st March 2005: £3.9 million). The Canadian operations reported revenue of£5.1 million in the quarter ended 30th June 2005 (year ended 31st March 2005 andquarter ended 30th June 2004: £19.4 million and £5.2 million respectively) andpre- and post-tax losses of £0.4 million in the quarter ended 30th June 2005(year ended 31st March 2005 and quarter ended 30th June 2004: £4.2 million and£0.5 million respectively). 6. Reconciliation of the weighted average number of basic and diluted ordinary shares in issue Quarters Ended 30th June ---------------- 2005 2004 -------- -------- Shares in issue at 1st April 254,188,656 250,812,019Effect of shares issued during the period 34,144 211,688 --------- ---------Average number of ordinary shares in issue - basic 254,222,800 251,023,707Average outstanding share options - - --------- ---------Average number of ordinary shares in issue - diluted 254,222,800 251,023,707 ========= ========= 7. The calculations of the loss per share from continuing operations are based on the loss from continuing operations on ordinary activities after taxation and the basic and diluted weighted average number of ordinary shares in issue during the period as per note 6 above. In order to provide a trend measure of underlying performance, Group loss from continuing operations on ordinary activities after taxation has been adjusted to exclude restructuring expenses and other items unusual because of their nature, size or incidence and basic loss per share recalculated. Outstanding share options have not been considered in dilutive per share computations since the Group is in a loss position for the periods below and to include them would be anti-dilutive. Quarters Ended 30th June 2005 2004 ------------------- ------------------- Pence Pence £000 Per Share £000 Per Share ------- ------- ------- -------- Basic loss from continuing operations (10,523) (4.1) (3,860) (1.5)Unusual items arising in respect of: Restructuring of worldwide operations 3,009 643 Tax effect - - ------ ------- Net of tax effect 3,009 1.2 643 0.2 Disposal of Canada (3,567) - Tax effect - - ------ ------- Net of tax effect (3,567) (1.4) - - ------- ------- ------- --------Adjusted basic loss from continuing operations (11,081) (4.3) (3,217) (1.3) ======= ======= ======= ======== ------- ------- ------- --------Basic and diluted loss from continuing operations (10,523) (4.1) (3,860) (1.5) ======= ======= ======= ======== ------- ------- ------- -------- Adjusted basic and diluted from continuing operations (before unusual items) (11,081) (4.3) (3,217) (1.3) ======= ======= ======= ======== 8. The following shows the computation of free cash flow: Quarters Ended 30th June -------------------------- 2005 2004 £000 £000 --------- --------- Cash outflow from operating activities (165) (5,794)Cash inflow/(outflow) from investing activities 4,838 (2,340)Less: cash flow from acquisitions and disposals (6,680) - --------- ---------Free cash flow (2,007) (8,134) ========= ========= 9. The following is an analysis of net debt (current and non-current bank and other loans including finance leases less cash and cash equivalents): As at 30th June As at 30th June As at 31st March 2005 2004 2005 £000 £000 £000 ---------------------------------------------------- Current portion of long-term borrowings 598 1,731 179Bank loans 127,744 125,299 120,952Convertible loan notes 165,227 151,327 153,528Finance leases 2,154 3,402 2,518Less: cash and cash equivalents (50,077) (47,404) (51,946) ----------------------------------------------------Net debt 245,646 234,355 225,231 ==================================================== 10. Net cash flow from operating activities Quarters Ended 30th June ---------------------- 2005 2004 £000 £000 --------- ---------Loss before tax (9,838) (3,760)Restructuring charges 3,009 643Cash paid in respect of restructuring charges (3,765) (4,620)Depreciation and amortisation 4,700 5,521Loss on sale of property and equipment 125 141Gain on sale of Canadian operation (3,567) -Share-based payments 221 180Net finance costs 7,575 7,291Increase in inventories (8,341) (3,375) Decrease in receivables 10,278 3,323 Decrease in payables (421) (11,031)Tax paid (141) (107) --------- ---------Net cash flow from operating activities (165) (5,794) ========= ========= 11. The following are reconciliations of the balance sheets as at 30th June 2004 and 31st March 2005 and the profit and loss account for the quarter ended 30th June 2005 under UK GAAP as originally reported and under IFRS as restated earlier in this release. Full details of the reconciling items and the Group's IFRS accounting policies are on the Company's website via the Investor Relations page at www.danka.com. Balance sheet As at 30th June As at 31st March 2004 2005 £000 £000 ------------- ------------- Net liabilities under UK GAAP as originally reported (28,179) (57,443)Classification of non-equity shares under UK GAAP as liabilities under IFRS (151,327) (153,528)Recognition of pension scheme deficits (5,374) (5,824)Other (5) 48 ------------- -------------Net liabilities under IFRS (184,885) (216,747) ============= ============= Profit and loss account Quarter Ended 30th June 2005 £000 ---------- Loss for the period under UK GAAP as originally reported (3,248)Additional finance costs due to: Accretion of the equity conversion feature of the participating shares (428) Share option expense (180)Other (4) ----------Loss for the period under IFRS (3,860) ========== 12. Copies of this report will be available from the Company's registered office at Masters House, 107 Hammersmith Road, London W14 0QH. This information is provided by RNS The company news service from the London Stock Exchange