DNK.L Regulatory News (DNK)

2 Aug 2007 13:30

Danka Business Systems PLC02 August 2007 DANKA BUSINESS SYSTEMS PLC ("Danka", the "Company" or the "Group") Announcement of results for the quarter ended 30th June, 2007 Danka Business Systems PLC, a leading independent provider of office imagingsystems and services, today announced its results for the quarter ended 30thJune, 2007. Following the disposal of the Group's non U.S. trading operationsover the last two financial years, the Group's results are now presented in U.S.dollars, as described in note 2. The Group reported operating earnings from continuing operations of $2.5 millionin the first quarter of the year ending 31st March, 2008, compared to operatinglosses of $5.7 million in the comparable quarter of the prior year and $10.9million in the quarter ended 31st March, 2007. The Group reported a net loss of$27.5 million in the quarter ended 30th June, 2007 ($26.8 million fromcontinuing operations only), versus a net loss of $15.2 million in the year agoquarter ($20.0 million from continuing operations only) and a net profit of$129.8 million in the quarter ended 31st March, 2007 (a $19.7 million loss fromcontinuing operations only). For the first quarter: • Total revenue from continuing operations was $106.3 million, 12.9% lower than the prior year quarter and down 6.4% sequentially. Retail equipment, supplies and related sales were $46.2 million for the quarter, down 14.6% from the prior year and down 12.5% sequentially. Service revenue was $57.2 million, down 9.1% from the prior year, but down only 0.8% sequentially. • Consolidated gross margin for the quarter was 36.2%, down 90 basis points from the prior year for continuing operations, but up 350 basis points from the priorquarter. • Operating expenses (distribution costs plus administrative expenses) for continuing operations were $36.4 million, down 10.4% from the prior year anddown 21.4% sequentially. Restructuring charges were $0.5 million, other incomewas $0.9 million (mainly in respect of a gain on the disposal of a property) andthe tax expense was $5.0 million. • For the quarter, the Group generated operating earnings from continuing operations of $2.5 million. • Net finance costs were $24.3 million (of which $10.1 million relates to the refinancing, in particular the recognition of the premium on redemption) and the loss from discontinued operations was $0.7 million. • Subsequent to the close of the quarter, the Group redeemed all of itsoutstanding 11% senior notes due 2010 and 10% subordinated notes due 2008 inconnection with the previously announced $145 million financing agreement withGE Corporate Lending which was completed on 25th June, 2007. "The story of the first quarter is the Group's positive operating earnings,"said A.D. Frazier, Danka's Chairman and Chief Executive Officer. "This is afirst step, but an important one on the path to positive net income. We haverestructured our balance sheet in a way that meaningfully lowers the interestburden. Operating expenses continue to trend lower. We have achieved fourconsecutive quarters of stabilised service revenue. While we did not achieve thegrowth we expected in hardware revenue, that business remains fundamentallysound and we expect our investments in people and training to deliver higherequipment sales. "Most important," concluded Mr. Frazier, "is that the marketplace knows Danka isthere. Clients and prospects, business partners and even competitors see thechanges. And that serves to drive us even harder." Conference Call and Webcast A conference call and Webcast to discuss Danka's results has been scheduled fortoday, 2nd August, at 3:00 p.m. UK time. To access the Webcast, please go towww.danka.com. To participate in the conference call, callers in the UnitedStates and Canada (and some United Kingdom callers) can dial (+1)-800-309-1555.Other international callers should dial (+1)-706-643-7754. Reference conferenceID #10126364 when prompted. A recording of the call will be availableapproximately two hours after it is completed until 5:00am on 9th August, 2007.To access this recording, please call either (+1)-800-642-1687 or (+1)-706-645-9291 (conference ID #10126364) or visit Danka's website. - ends - For further information please contact:Danka Business Systems PLCCheley Howes, Danka Investor Relations 001 727 622 2760Louis Kritzinger, Danka London 020 7605 0150 Weber Shandwick FinancialGeorgia Dempsey 020 7067 0700 About Danka Danka delivers value to clients by using its expert technical and professionalservices to implement effective document information solutions. As one of thelargest independent providers of enterprise imaging systems and services, theGroup enables choice, convenience and continuity. Danka's vision is to empowercustomers to benefit fully from the convergence of image and documenttechnologies in a connected environment. This approach will strengthen theGroup's client relationships and expand its strategic value. For moreinformation, visit Danka at www.danka.com. Certain statements contained herein, or otherwise made by the Group's officers,including statements related to the Group's future performance and the outlookfor the Group's businesses and respective markets, projections, statements ofthe Group's plans or objectives, forecasts of market trends and other matters,are forward-looking statements, and contain information relating to the Groupthat is based on the Group's beliefs as well as assumptions, made by, andinformation currently available to the Group. The words "goal", "anticipate","expect", "believe", "could", "should", "intend" and similar expressions as theyrelate to the Group are intended to identify forward-looking statements,although not all forward looking statements contain such identifying words. Noassurance can be given that the results in any forward-looking statement will beachieved. For the forward-looking statements, the Group claims the protection ofthe safe harbour for forward-looking statements provided for in the PrivateSecurities Litigation Reform Act of 1995, Section 27A of the Securities Act of1933, as amended, and Section 21E of the Securities Exchange Act of 1934, or theExchange Act. Such statements reflect the Group's current views with respect tofuture events and are subject to certain risks, uncertainties and assumptionsthat could cause actual results to differ materially from those reflected in theforward-looking statements. Factors that might cause such actual results todiffer materially from those reflected in any forward-looking statementsinclude, but are not limited to, the following: (i) any inability to implementthe Group's strategy successfully; (ii) any inability to implement the Group'scost restructuring plans successfully to achieve and maintain cost savings;(iii) any inability to comply with the Sarbanes-Oxley Act of 2002; (iv) anymaterial adverse change in financial markets, the economy or in the Group'sfinancial position; (v) increased competition in the Group's industry and thediscounting of products by competitors; (vi) new competition fromnon-traditional competitors as the result of evolving and converging technology;(vii) any inability by the Group to procure, or any inability by the Group tocontinue to gain access to and distribute successfully current and new products,including digital products, colour products, multi-function products andhigh-volume copiers, or to continue to bring current products to the marketplaceat competitive costs and prices; (viii) any inability to arrange financing forthe Group's customers' purchases of equipment from the Group; (ix) any inabilityto enhance successfully, unify and utilise effectively the Group's managementinformation systems; (x) any inability to access vendor or bank lines of credit,which could adversely affect the Group's liquidity; (xi) any inability to recordand process key data due to ineffective implementation of business processes andpolicies; (xii) any negative impact from the loss of a key vendor or customer;(xiii) any negative impact from the loss of any of the Group's senior or keymanagement personnel; (xiv) any change in economic conditions in markets wherethe Group operates or has material investments which may affect demand for theGroup's products or services; (xv) any incurrence of tax liabilities or taxpayments beyond the Group's current expectations, which could adversely affectthe Group's liquidity and profitability; (xvi) any inability to continue tocomply with the Group's new senior secured credit facility covenants or thefinancial or other representations, warranties, or maturities in the Group'sdebt instruments; (xvii) any delayed or lost sales or other impacts related tothe commercial and economic disruption caused by natural disasters, includinghurricanes; (xviii) any delayed or lost sales and other impacts related to thecommercial and economic disruption caused by terrorist attacks, the related waron terrorism, and the fear of additional terrorist attacks; (xix) any negativeimpact of the accreted value of the Group's preferred stock and its continuedaccretion; (xx) any negative impact from our continued organization as anEngland and Wales Group following the sale of the Group's European businesses;and (xxi) other risks including those risks identified in any of the Group'sfilings with the Securities and Exchange Commission. Readers are cautioned notto place undue reliance on these forward-looking statements, which reflect theGroup's analysis only as of the date they are made. Except as required byapplicable law, the Group undertakes no obligation, and does not intend, toupdate these forward-looking statements to reflect events or circumstances thatarise after the date they are made. Furthermore, as a matter of policy, theGroup does not generally make any specific projections as to future earnings,nor does it endorse any projections regarding future performance, which may bemade by others outside the Group. The financial information for the quarter ended 30th June, 2007 is unaudited andnot reviewed. The financial information for all periods presented does notconstitute full accounts within the meaning of Section 240 of the Companies Act1985. However, the financial information for such periods is prepared on thesame basis as the financial information for the year ended 31st March, 2007. Thefinancial information for the year ended 31st March, 2007 has been extractedfrom the audited accounts for the year ended 31st March, 2007, as translatedinto U.S. dollars as described in note 2, which have yet to be filed with 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 iscomputed as net cash provided by (used in) operating activities less capitalexpenditures plus proceeds from the sale of property and equipment and net debtthat is computed as current maturities of long-term debt and bank loans(included embedded derivatives) plus long-term debt and bank loans less cash andcash equivalents. These measures are non-IFRS financial measures, defined asnumerical measures of the Group's financial performance that exclude or includeamounts so as to be different than the most directly comparable measurecalculated and presented in accordance with International Financial ReportingStandards, or IFRS, in the Group's income statement, balance sheet or cash flowstatement. The notes to this press release provide a reconciliation of thesenon-IFRS financial measures to the most directly comparable IFRS financialmeasures. Although free cash flow and net debt represent non-IFRS financial measures,Danka considers these measures to be key operating metrics of the Group. Dankauses these measures in its planning and budgeting processes, to monitor andevaluate the Group's financial and operating results and to measure performanceof its separate divisions. Danka also believes that free cash flow and net debtare useful to investors because they provide an analysis of financial andoperating results using the same measures that Danka uses in evaluating theGroup. Danka expects that such measures provide investors with the means toevaluate the Group's financial and operating results against other companieswithin the industry. Danka believes that these measures are meaningful toinvestors in evaluating the Group's ability to meet its future debt servicerequirements and to fund its capital expenditures and working capitalrequirements. The calculation of free cash flow and net debt may not beconsistent with the calculation of these measures by other companies in theindustry. Free cash flow and net debt are not measurements of financialperformance under IFRS and should not be considered as an alternative to netearnings (loss) as an indicator of the Group's operating performance or cashflows from operating activities as a measure of liquidity or any other measuresof 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 Income Statement For the Three Months Ended 30th June 2007 and 2006 Three Months Ended 30th June Income Income Discontinued Total statement statement Operations 2006 2007 Continuing 2006 Operations 2006 Note $000 $000 $000 $000 ---- -------- -------- -------- ------- Revenue 4 106,274 122,049 138,681 260,730Cost of sales (67,827) (76,816) (95,498) (172,314) -------- -------- -------- ------- Gross profit 4 38,447 45,233 43,183 88,416 Distributioncosts (18,641) (15,425) (17,620) (33,045)Administrativeexpenses (17,751) (25,205) (20,675) (45,880)Other operating income 946 - - -Other operating expense - (82) - (82)Restructuringcost expense (497) (7,544) (1,498) (9,042)Net loss onsale of operations 5 - (2,704) - (2,704) -------- -------- -------- -------Profit/(loss)from operationsbefore tax andfinance items 4 2,504 (5,727) 3,390 (2,337) Investment revenue 1,849 24 188 212 -------- -------- -------- --------Recurringfinance costs (16,011) (14,203) (462) (14,665)Finance costsrelating to the earlyextinguishment of debt 9 (10,137) - - - -------- -------- -------- -------Total finance costs (26,148) (14,203) (462) (14,665) -------- -------- -------- -------(Loss)/profit fromoperationsbefore tax (21,795) (19,906) 3,116 (16,790) Tax - overseas (4,964) (99) 1,675 1,576 -------- -------- -------- ------- (Loss)/profit fromoperationsafter tax 4 (26,759) (20,005) 4,791 (15,214) ======== =======Result fromdiscontinuedoperations 5 (719) 4,791 -------- --------Loss fromoperations forthe period andattributableto equityholders of theparent (27,478) (15,214) ======== ======== (Loss)/earningsper share: 7 -------- -------- -------- -------Basic from continuingoperations (10.3) (7.8)Basic from discontinuedoperations (0.3) 1.9 -------- -------- -------- -------Basic fromtotal operations (10.6) (5.9) -------- -------- -------- ------- -------- -------- -------- -------Diluted fromcontinuingoperations (10.3) (7.8) -------- -------- -------- -------Diluted fromdiscontinued (0.3) 1.9operations -------- -------- -------- -------Diluted fromtotaloperations (10.6) (5.9) -------- -------- -------- ------- Average exchange rate $1= £0.547 --------Average exchange rate $1= €0.688 -------- Danka Business Systems PLC Group Balance Sheet 30th June 31st March 2007 2007 $000 $000 --------- ----------Non-current assetsIntangible assets and goodwill 484 484Property, plant and equipment and equipment onoperating leases 29,517 31,880Other 9,060 8,014 --------- ---------- 39,061 40,378 --------- ----------Current assetsInventories 32,851 31,681Prepaid expenses 2,816 1,474Trade and other receivables 46,337 60,842Cash and cash equivalents including restricted cash of$271,586,000 (March 2007 - $168,979,000) - note 9 279,698 186,573 --------- ---------- 361,702 280,570 --------- ---------- --------- ----------Total assets 400,763 320,948 --------- ---------- Current liabilitiesTrade and other payables (62,227) (68,384)Tax liabilities (9,607) (6,317)Obligations under finance leases (612) (602)Current portion of long-term borrowings - note 9 (264,355) (183,009)Derivative financial instruments (2,242) (2,242)Deferred revenue (4,967) (5,875)Accrued expenses (29,676) (42,179)Short-term provisions (2,961) (3,691) --------- ---------- (376,647) (312,299) --------- ----------Non-current liabilitiesBank and other loans (99,943) (63,941)Convertible participating shares (337,910) (331,104)Deferred tax liabilities - -Long-term provisions (2,034) (1,768)Obligations under finance leases (267) (423)Other (3,180) (3,328) --------- ---------- (443,334) (400,564) --------- ---------- --------- ----------Total liabilities (819,981) (712,863) --------- ---------- --------- ----------Net liabilities (419,218) (391,915) ========= ========== EquityCapital 319,238 319,238Share options 6,939 6,764Translation reserve - -Retained earnings (745,395) (717,917) --------- ----------Total equity (419,218) (391,915) ========= ========== Danka Business Systems PLC Group Cash Flow Statement For the Three Months Ended 30th June 2007 and 2006 30th June --------------------- 2007 2006 Note $000 $000 ----- -------- --------- Net cash (outflow)/inflow from operatingactivities 10 (13,105) 122 Cash flows from investing activitiesInterest received 1,849 212Capital expenditure (1,724) (3,186)Net proceeds from sale of operations 11,781 -Proceeds from sale of property, plant andequipment and equipment on operating leases 1,537 216 -------- ---------Net cash from investing activities 13,443 (2,758) -------- --------- Cash flows from financing activitiesNet borrowings under line of credit agreements 4,544 994Proceeds from issue of long-term loans 105,000 -Payment of debt issue costs (3,333) -Capital payments under finance leases (146) (429)Interest paid (13,278) (13,912)Proceeds from new shares issued - - -------- ---------Net cash from financing activities 92,787 (13,347) -------- --------- Net increase/(decrease) in cash and cashequivalents 93,125 (15,983)Cash and cash equivalents at 1st April 186,573 74,997Effect of exchange rate fluctuations on cash held - 2,737 -------- ---------Cash and cash equivalents at 30th June 279,698 61,751 ======== ========= Included above in respect of discontinuedoperations:Net cash inflow from operating activities - 4,667Net cash from investing activities 11,781 (1,324)Net cash from financing activities - (548) ======== ========= Danka Business Systems PLC Group Statement of Recognised Income and Expense For the Three Months Ended 30th June 2007 and 2006 and Year Ended 31st March 2007 30th June 31st March ----------------------- 2007 2006 2007 $000 $000 $000 -------- -------- --------- (Loss)/income for the period/year (27,478) (15,214) 95,249 --------- -------- ---------Income and expense taken directly to equity:Exchange translation differencesin the period/year - 1,236 9,081Exchange translation differencesrelated to disposals recycled tothe income statement - - (3,861)Actuarial gains on defined benefitpension plans - - 4,270Tax on items taken directly to or transferred from - - -equity --------- --------- ---------Total of income and expense takendirectly to equity - 1,236 9,490 --------- --------- --------- --------- --------- ---------Total recognised income andexpense for the period/year (27,478) (13,978) 104,739 ========= ========= ========= Notes to the Financial Information 1. The financial information for the quarter ended 30th June, 2007 isunaudited and not reviewed. The financial information for all periods presenteddoes not constitute full accounts within the meaning of Section 240 of theCompanies Act 1985. However, the financial information for such periods isprepared on the same basis as the financial information for the year ended 31stMarch, 2007. The financial information for the year ended 31st March, 2007 hasbeen extracted from the audited accounts for the year ended 31st March, 2007, astranslated into U.S. dollars as described in note 2, which have yet to be filedwith the Registrar of Companies. The report of the auditors was unqualified anddid not contain statements under section 237(2) or (3) of the Companies Act1985. 2. Significant accounting policies Danka Business Systems PLC ("the Company") is a company domiciled in the UnitedKingdom. This preliminary announcement consists of the consolidated interimfinancial statements of the Company for the three months ended 30th June, 2007and 2006, which comprise the Company and its subsidiaries (together referred toas the "Group"). The preliminary announcement was authorised for issuance on 2ndAugust, 2007. Basis of preparation The financial statements have been prepared in conformity with currentapplicable IFRS accounting standards as more fully described below. The financial statements are presented in U.S. dollars and all values in tablesare rounded to the nearest thousand dollars ($000) except where otherwiseindicated as substantially all of the group's subsidiaries functional currencyis the U.S. dollar. This represents a change, the impact of which has been torecalculate the translation reserve and related accounting entries, as well asto convert amounts previously presented at the appropriate year end or averageexchange rates. Accounting policies This financial information has been prepared on the basis of the recognition andmeasurement requirements of IFRS in issue that are endorsed by the EU andeffective (or available for early adoption) at 31st March, 2008. The accountingpolicies have been applied consistently throughout the Group for the purposes ofthese consolidated interim financial statements. The income statement comprises the loss for the period/year from continuingoperations plus the loss/profit for the period/year from discontinued operationsattributable to the equity holders of the parent. Restructuring costs, the netloss/gain on sale of operations and the finance costs attributable to the earlyextinguishment of debt have been separately disclosed on the face of the incomestatement in accordance with IAS 1 in order to assist the assessment offinancial performance owing to their materiality and infrequent nature. 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 residents during July and August(affecting discontinued operations in the prior year) and lower levels of retailmaintenance revenue from United States governmental agencies (affectingcontinuing operations). 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 revenue and gross profit and segmental information -continuing operations only The Group operates in one business segment, being the supply and servicing ofoffice equipment and the provision of related services. The following tableprovides for continuing operations only additional analysis of the components ofrevenue and of gross profit of the single business segment, where the sale orrental of equipment normally includes a service contract and the purchase ofsupplies once the contract expires. These components are not considereddifferent classes of business because of their inter-relation. Three Months Ended 30th June --------------------------- 2007 2006 $000 $000 --------- ----------RevenueRetail equipment, supplies and related sales 46,162 54,079Retail maintenance 57,229 62,940Retail rental sales 2,883 5,030 --------- ---------- 106,274 122,049 ========= ========== Gross profitRetail equipment, supplies and related sales 13,955 15,690Retail maintenance 22,928 25,697Retail rental sales 1,564 3,846 --------- ---------- 38,447 45,233 ========= ========== The Group's primary segment reporting format is determined to be geographical asthe Group's risks and rates of return are affected predominantly by the factthat it has operated in different geographical areas. Following thereclassification of Europe/Australia to discontinued operations (note 5), theUnited States is the only primary reportable segment. The Group is managedthrough its administrative centres in the U.S. and the U.K., identified asCorporate below. The Corporate costs comprise salaries and direct costs incurredin maintaining the administrative centres. In the prior year, it was notappropriate to allocate these costs between the primary segment and thediscontinued operations. For the three months ended 30th June, 2007: Three Months Ended 30th June -------------------- 2007 2006 $000 $000 -------- --------RevenueUnited States 106,27 122,049 ======== ======== Three Months Ended 30th June ---------------- 2007 2006 $000 $000 -------- --------Segment resultUnited States 3,899 (1,043)Corporate (1,395) (4,684) -------- --------Profit/(loss) before tax and finance costs 2,504 (5,727)Investment revenue 1,849 24Finance costs (26,148) (14,203)Tax (4,964) (99) -------- --------Total loss from continuing operations (26,759) (20,005) ======== ======== 5. Disposal of operations Year ended 31st March, 2007 With effect from 30th June, 2006, the Group sold its Image One subsidiary fornil and a pre-tax loss of $2.4 million was recorded. The attributable tax wasnil. The trading results and cashflows of Image One had been integrated withinthe financial information for the United States segment as a whole and cannot beseparately identified; however, the results and cashflows were not material tothe financial information for the United States segment. At 30th June, 2006prior to disposal, Image One comprised assets of $4.4 million less liabilitiesof $2.0 million. During the quarter ended 30th June, 2006, additional expenses were recorded inrespect of the Group's prior year disposals in the amount of $0.3 million. Thenet loss in respect of those disposals was reduced in the quarter ended 30thSeptember, 2006 by $0.2 million, but increased in the quarter ended 31stDecember, 2006 by $0.3 million. In the quarter ended 31st March, 2007,additional expenses and various write-offs were recorded in respect of thesedisposals in the amount of $1.4 million. With effect from 31st August, 2006, the Group sold its Australian operations toOnesource Group Limited for $12.8 million cash and a pre-tax gain of $8.4million was recorded in the three months ended 30th September, 2006 afterexpenses of $0.3 million. The attributable tax was nil. The Australianoperations are disclosed as discontinued operations. During the year ended 31stMarch, 2007, the Australian operations had cash inflows from operatingactivities of $1.5 million and cash inflows from investing activities of $11.0million (including $11.4 million net cash proceeds on the sale). During the yearended 31st March, 2007, the Australian operations had cash outflows fromfinancing activities of $12.7 million, relating to funding from other Groupentities. The cash inflow on the disposal after deducting cash disposed of andthe costs of the disposal was $11.4 million, which was recorded in the quarterended 30th September, 2006. At 31st August, 2006 prior to disposal, the Australian operations comprisedassets of $15.1 million less liabilities of $11.0 million. The Australianoperations reported revenue of $22.5 million and pre- and post-tax profits of$0.6 million (excluding the gain on sale) in the year ended 31st March, 2007. With effect from 31st January, 2007, the Group sold its European operations toRicoh for $215.0 million of which $210 million had been received in cash(subject to a $7.5 million holdback) and a further $5 million, being a workingcapital adjustment, was due for receipt after 31st March, 2007. A pre-tax gainof $143.9 million was recorded in the three months ended 31st March, 2007 afterexpenses of $13.7 million and the recycling of foreign exchange gains of $3.8million. The attributable tax was nil. The European operations are disclosed asdiscontinued operations. During the year ended 31st March, 2007, the Europeanoperations had cash inflows from operating activities and investing activitiesof $7.4 million and $148.4 million (including $151.7 million net cash proceedson the sale) respectively. During the year ended 31st March, 2007, the Europeanoperations had cash outflows from financing activities of $203.5 million,principally relating to funding to other Group entities (external financing cashoutflows were $2.8 million in the year ended 31st March, 2007). The cash inflowon the disposal after deducting the $5.0 million due in respect of the workingcapital adjustment, the holdback, cash disposed of and the costs of the disposalwas $151.7 million, which was recorded in the quarter ended 31st March, 2007. At 31st January, 2007 prior to disposal, the European operations comprisedassets of $236.5 million less liabilities of $179.9 million. The Europeanoperations reported revenue of $410.7 million and pre- and post-tax profits of$6.7 million and $14.5 million respectively in the year ended 31st March, 2007(excluding the gain on sale). Year ending 31st March, 2008 During the quarter ended 30th June, 2007, the Group incurred a further $0.7million of costs relating to the disposal of prior year discontinued operations.The holdback and working capital adjustment totalling $12.5 million referred toabove were received in the quarter ended 30th June, 2007. 6. Reconciliation of the weighted average number of basic and diluted ordinary shares in issue Three Months Ended 30th June ---------------- 2007 2006 -------- -------- Shares in issue at 1st April 258,899,852 256,529,024Effect of shares issued during the period - - --------- ---------Average number of ordinary shares in issue -basic 258,899,852 256,529,024Average outstanding share options - -Convertible participating shares - - --------- ---------Average number of ordinary shares in issue -diluted 258,899,852 256,529,024 ========= ========= 7. The calculations of the loss/earnings per share from continuing and discontinued operations respectively are based on the loss/profit from continuing/discontinued operations respectively 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 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 and convertible participating shares have only been considered in dilutive per share computations when the Group has reported a profit from continuing operations, in accordance with IAS 33. The Group has reported losses from continuing operations for all periods presented in this announcement. Three Months Ended 30th June 2007 2006 -------------- -------------- Cents Cents $000 Per Share $000 Per Share ------- -------- ------- -------- Basic loss fromcontinuing (26,579) (10.3) (20,005) (7.8)operationsUnusual items arising inrespect of:Restructuring ofworldwide 497 7,544operationsTax effect - - ------ ------Net of tax effect 497 0.2 7,544 2.9Gain on sale of property (923) -Tax effect - - ------ ------Net of tax effect (923) (0.3) - -Disposal of operations - 2,704Tax effect - - ------ ------Net of tax effect - - 2,704 1.1Early extinguishment ofdebt 10,137 -Tax effect - - ------ ------Net of tax effect 10,137 3.9 - - ------- -------- ------- --------Adjusted basic loss fromcontinuing operations (16,868) (6.5) (9,757) (3.8) ======= ======== ======= ======== ------- -------- ------- --------Diluted loss fromcontinuing operations (26,579) (10.3) (20,005) (7.8) ======= ======== ======= ======== ------- -------- ------- --------Adjusted diluted loss fromcontinuing (16,868) (6.5) (9,757) (3.8)operations (before unusual items) ======= ======== ======= ======== ------- -------- ------- --------Basic and diluted(loss)/earnings fromdiscontinued operations (719) (0.3) 4,791 1.9 ======= ======== ======= ======== ------- -------- ------- --------Basic and diluted loss fromtotal operations (27,478) (10.6) (15,214) (5.9) ======= ======== ======= ======== 8. The following shows the computation of free cash flow: Three Months Ended 30th June -------------- 2007 2006 $000 $000 -------- ------- Cash (outflow)/inflow from operating activities (13,105) 122Cash inflow/(outflow) from investing activities 13,443 (2,758)Less: cash flow from acquisitions and disposals (11,781) -Less: cash inflow from operating activities ofdiscontinued operations - (4,667)Less: cash (inflow)/outflow from investing activities of discontinued operations (11,781) 1,324Add back: cash flow from acquisitions anddisposals of discontinued operations 11,781 - -------- -------Free cash flow - continuing operations (11,443) (5,979) ======== ======= 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 31st March 2007 2007 $000 $000 ---------- ----------- Current portion of long-term borrowings 264,355 183,009Non-current bank loans 99,943 63,941Convertible participating sharesincluding derivative financialinstruments 340,152 333,346Finance leases 879 1,025Less: cash and cash equivalents (279,698) (186,573) ---------- -----------Net debt 425,631 394,748 ========== =========== Restricted cash for the Group at 30th June, 2007 totalled $271,586,000 (31stMarch 2007 - $168,979,000) and comprises the following: $164.2 million (31stMarch, 2007 - $151.8 million) of the net proceeds of the sale of the Europeanbusinesses which can be used in repaying the 11% senior notes as describedbelow; $15.8 million cash (31st March, 2007 - $15.8 million) of the Europeansale proceeds is required to be kept in an escrow account by the Group's creditfacility with Bank of America; $89.5 million cash (31st March, 2007 - $nil) ofthe proceeds from the refinancing which can be used in repaying the balance ofthe 11% senior notes and the 10% subordinated notes, as described below; andcollateralisation of the Group's letters of credit held by other financialinstitutions totalling $2.1 million and $1.4 million as at 30th June, 2007 and31st March, 2007 respectively. $184.4 million of the current portion of long-term borrowings at 30th June, 2007in the table above relates to the Group's 11% senior notes. The indenturegoverning the 11% senior notes restricts the use of the net proceeds (as definedin the indenture) from the sale of the European businesses. Per the terms of theindenture, the use of these net proceeds is restricted to the following: • repayment of indebtedness under the Group's credit facility with a corresponding reduction in the amount available under the facility;• acquisitions of other companies;• capital expenditures;• acquisitions of other long-term assets deemed useful by the Group. Within 365 days from the date of sale, the Group was obliged to make a tenderoffer at par for the outstanding 11% senior notes using the balance of the netproceeds that had not been used for the permitted expenditures listed above. Asa result of this obligation, the 11% senior notes were classified as currentdebt in the Group balance sheet. In compliance with this requirement, the Groupinitiated a tender offer at par to the holders of the senior notes on 25th June,2007 which expired on 24th July, 2007. Notices of Redemption were initiated by the Group on 25th June, 2007 to theholders of the 11% senior notes and the 10% subordinated notes (the "Notes") at105.5% of par plus accrued and unpaid interest and at par plus accrued andunpaid interest respectively. On 27th July, 2007, the Notes were redeemed andpaid. During the quarter ended 30th June, 2007, the Group began to accrue prorata the $9.6 million call premium on the redemption of the senior notes. Thecharge relating to the accrual of the call premium recognized in the quarterended 30th June, 2007 and the acceleration of the recognition of finance costsdue to the early redemption are disclosed separately on the face of the incomestatement. Also on 18th June, 2007, Danka Office Imaging Company ("DOIC"), a subsidiary ofthe Group entered into a new financing agreement with General Electric CapitalCorporation ("GECC") for $145.0 million. The Credit Facility includes a $40million senior secured revolving credit facility (the "Revolver"). Proceeds fromthis financing were used in conjunction with the proceeds of the Group'spreviously completed sale of its European businesses to redeem the senior notesand the subordinated notes, to reduce and refinance the Group's existing debt,to pay fees and expenses in connection therewith and for working capital andgeneral corporate purposes after 30th June, 2007, as described in note 12. 10. Net cash flow from operating activities Three Months Ended 30th June ------------------- 2007 2006 $000 $000 ---------- ----------Loss before tax (21,795) (16,790)Restructuring cost expense 497 9,042Cash paid in respect of restructuring charges (957) (3,624)Depreciation and amortisation 3,464 5,997Gain on sale of property, plant and equipment andequipment on operating leases (916) (100)Loss on sale of operations - 2,704Share-based payments 175 -Net finance costs 24,299 14,453Increase in inventories (1,170) (7,002)Decrease/(increase) in receivables 5,832 (4,715)(Decrease)/increase in payables (20,830) 491Tax paid (1,704) (334) ---------- ----------Net cash flow from operating activities (13,105) 122 ========== ========== 11. Group Statement of Changes in Equity for the Three Months Ended 30th June, 2007 and the Year Ended 31st March, 2007 30th June 31st March ------------------------------------------------- 2007 2006 2007 $000 $000 $000 ---------- ---------- ---------- Balance at 1stApril (391,915) (497,563) (497,563)(Loss)/profit forthe period/year (27,478) (15,214) 95,249Shares issued - - 612Share optionexpense in theperiod/year 175 - 297Exchangetranslationdifferences inthe period/year - 1,236 9,081Exchangetranslationdifferencesrelated todisposals - - (3,861)Actuarial gainson definedbenefit pensionplans - - 4,270 ---------- ---------- ----------Balance at 30thJune/30thJune/31st March (419,218) (511,541) (391,915) ========== ========== ========== 12. Post balance sheet events Pursuant to the tender offer described in note 9 above, two holders of thesenior notes accepted the tender offer and the Group redeemed and paid $4.4million, which included an aggregate principal amount of $4.3 million plusaccrued and unpaid interest, to the holders of the senior notes that acceptedthe tender. A Notice of Redemption was initiated by the Group on 25th June, 2007 to theholders of the senior notes due 2010 at 105.5% of par plus accrued and unpaidinterest. On 27th July, 2007, the Group redeemed and paid $182.3 million, whichincluded an aggregate principal amount of $170.7 million plus a 5.5% callpremium and accrued and unpaid interest, to the holders of the remaining seniornotes not redeemed pursuant to the tender offer noted above. A Notice of Redemption was initiated by the Group on 25th June, 2007 to theholders of the 10% subordinated notes due 2008 at par. On 27th July, 2007, theGroup redeemed and paid $66.6 million, which included an aggregate principalamount of $64.5 million plus accrued and unpaid interest, to the holders of thesubordinated notes. Issue costs and discount to be written off in the second quarter relating toindebtedness that was refinanced on 27th July, 2007 total up to $0.3 million. 13. 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