DNK.L Regulatory News (DNK)

8 Aug 2006 13:30

Danka Business Systems PLC08 August 2006 08 August 2006 DANKA BUSINESS SYSTEMS PLC ("Danka", the "Company" or the "Group") Announcement of results for the quarter ended 30th June, 2006 Danka Business Systems PLC, a leading independent global provider of officeimaging systems and services, today announced its results for the quarter ended30th June, 2006. For the first quarter: • The Group's first quarter operating loss from operations before tax and finance costs was £1.3 million versus a £2.3 million loss in the prior year first quarter and a £10.3 million loss last quarter. Adjusted operating profits from operations before tax and finance costs (excluding £5.0 million in restructuring charges and a £1.5 million loss on the sale of a subsidiary) were £5.2 million for the quarter, versus a £2.8 million loss for the prior year first quarter and a £6.9 million loss last quarter. • Consolidated gross margin for the first quarter was 33.9%, which was up from 33.7% in the prior year first quarter, and up from 29.4% sequentially. • Operating expenses (distribution costs plus administrative expenses) were £43.2 million or 30.3% of revenue for the first quarter. These expenses were down 26.7%, or £15.7 million, from the prior year first quarter and down £9.1 million, or 17.3%, sequentially. • Total revenue was £142.7 million, 14.4% lower than the prior year first quarter (9.4% excluding the effect of the disposals of the Group's operations in Canada and Central and South America) and down 7.7% sequentially. Retail equipment and related sales were £50.4 million for the quarter, down 21.9% from the prior year first quarter (17.9% excluding the effect of the disposals of the Group's operations in Canada and Central and South America) and down 16.1% sequentially. Retail service revenue was £68.5 million for the quarter, down 9.3% from the prior year first quarter (3.9% excluding the effect of the disposals of the Group's operations in Canada and Central and South America) and down 1.8% sequentially. Due to its continued cost reduction efforts, the Group recorded a £4.4 millionrestructuring charge in the first three months of the year ending 31st March,2007, consisting of £1.0 million in severance charges and £3.4 million infacility costs primarily related to the Group's United States and Corporateheadquarters in St. Petersburg, Florida. In addition, the Group recorded £0.6million in restructuring charges related to prior year restructuring plans. Further restructuring charges in the remainder of the financial year of approximately £5.0 million are expected to be recorded. "I would like to commend all of our employees for their contributions inimproving our operating profit performance this quarter," said A.D. Frazier,Danka's Chairman and Chief Executive Officer. "Their focus on profitabilitygenerated better results than we have experienced in many quarters. Thesubstantial cost reduction actions taken during prior periods have clearlycontributed to the improvement in our financial performance though, as expected,we saw some reduction in our overall revenues. We will now seek to address thisby turning the majority of our attention away from cost reduction andrestructuring activities and toward supplementing our sales and marketingresources, particularly in the area of adding quality salespersons in our keymarkets. Of course, we will continue to be mindful of our costs, as well as theneed to generate profits, as we make these investments. We also plan to continuewith efforts to strengthen our core business, eliminate errors and strengthenour customer relationships across the enterprise as we seek to build on ourprogress this quarter." Conference Call and Webcast A conference call and Webcast to discuss Danka's first quarter results has beenscheduled for today, 8th August at 3:00 p.m. UK time. To access the Webcast,please go to www.danka.com. To participate in the conference call, callers inthe United States and Canada (and some UK callers) may dial (+1)-800-309-1555;other international callers should dial (+1)-706-643-7754. Reference conferenceID #1108518 when prompted. A recording of the call will be available fromapproximately two hours after the call ends until 5:00 a.m. UK time on 15thAugust. To access this recording, please call either (+1)-800-642-1687 or (+1)-706-645-9291 (conference ID #1108518) or visit Danka's website. - ends - For further information please contact: Danka Business Systems PLCCheley Howes, Danka Investor Relations 001 727 622 2760Paul Dumond, Danka London 020 7605 0154 Weber Shandwick Square MileNick Dibden/Lana-Kathryn Pugh 020 7067 0700 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. 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 quarter ended 30th June, 2006 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, 2006. Thefinancial information for the year ended 31st March, 2006 has been extractedfrom the audited accounts for the year ended 31st March, 2006 which have yet tobe filed with the Registrar of Companies. The report of the auditors wasunqualified and did not contain statements under section 237(2) or (3) of theCompanies 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 2006 and 2005 Three Months Ended 30th June 2006 2005 Note £000 £000 ------ -------- -------- Revenue 4 142,733 166,786Cost of sales (94,331) (110,525) -------- --------Gross profit 4 48,402 56,261 Distribution costs (18,090) (24,234)Administrative expenses (25,116) (34,712)Other operating expense (45) (136)Restructuring costs (4,950) (3,009)Net (loss)/gain on sale of operations 5 (1,480) 3,567 -------- --------Loss from operations before tax and finance 4 (1,279) (2,263)costs Investment revenue 116 81Finance costs (8,028) (7,656) -------- --------Loss from operations before tax (9,191) (9,838) Tax - overseas 863 (685) -------- -------- Loss from operations for the period andattributable to equity holders of the parent (8,328) (10,523) ======== ======== Loss per share: 7 -------- --------Basic from continuing operations (3.2)p (4.1)pBasic from discontinued operations - - -------- -------- (3.2)p (4.1)p -------- -------- -------- --------Diluted from continuing operations (3.2)p (4.1)p -------- --------Diluted from discontinued operations - - -------- -------- (3.2)p (4.1)p -------- -------- Average exchange rate £1= $1.827 $ 1.857 -------- --------Average exchange rate £1= • 1.454 • 1.474 -------- -------- Danka Business Systems PLC Group Balance Sheet 30th June 30th June 31st March 2006 2005 2006 £000 £000 £000 --------- ---------- ---------Non-current assetsIntangible assets and goodwill 921 3,185 2,961Property, plant and equipment 25,390 37,445 28,308Other 6,053 8,650 6,129 --------- ---------- --------- 32,364 49,280 37,398 --------- ---------- ---------Current assetsInventories 46,906 60,476 45,977Prepaid expenses 4,638 8,020 3,445Trade and other receivables 102,361 115,222 108,868Cash and cash equivalents includingrestricted cash of £11,511,000 (June 2005- £8,097,000; March 2006 - £11,803,000) 33,395 50,077 43,119 --------- ---------- --------- 187,300 233,795 201,409 --------- ---------- --------- --------- ---------- ---------Total assets 219,664 283,075 238,807 --------- ---------- --------- Current liabilitiesTrade and other payables (92,091) (113,862) (94,917)Tax liabilities (12,695) (17,035) (12,218)Obligations under finance leases (622) (995) (796)Current portion of long-term borrowings (6,734) (598) (6,157)Derivative financial instruments (4,548) (5,580) (4,835)Deferred revenue (18,024) (21,155) (18,989)Accrued expenses (37,783) (46,363) (48,082)Short-term provisions (5,769) (5,535) (3,665) --------- ---------- --------- (178,266) (211,123) (189,659) --------- ---------- ---------Non-current liabilitiesBank and other loans (124,910) (127,744) (132,488)Convertible participating shares (168,332) (159,647) (175,264)Retirement benefit obligations (15,941) (15,360) (16,928)Deferred tax liabilities - (434) (419)Long-term provisions (5,273) (3,983) (4,744)Obligations under finance leases (500) (1,159) (635)Other (3,085) (5,642) (4,741) --------- ---------- --------- (318,041) (313,969) (335,219) --------- ---------- --------- --------- ---------- ---------Total liabilities (496,307) (525,092) (524,878) --------- ---------- --------- --------- ---------- ---------Net liabilities (276,643) (242,017) (286,071) ========= ========== ========= EquityCapital 202,094 201,750 202,094Share options 3,577 1,882 3,577Translation reserve 510 (8,028) (17,246)Retained earnings (482,824) (437,621) (474,496) --------- ---------- ---------Total equity (276,643) (242,017) (286,071) ========= ========== ========= Closing exchange rate £1= $ 1.849 $ 1.792 $ 1.739 --------- ---------- ---------Closing exchange rate £1= • 1.447 • 1.484 • 1.433 --------- ---------- --------- Danka Business Systems PLC Group Cash Flow Statement For the Three Months Ended 30th June 2006 and 2005 30th June ----------------- 2006 2005 Note £000 £000 ------ --------- --------- Net cash inflow/(outflow) from operating 10 67 (165)activities Cash flows from investing activities Interest received 116 81 Capital expenditure (1,744) (1,970) Proceeds from sale of operations - 6,680 Proceeds from sale of property, plant and equipment and equipment on operating leases 118 47 --------- ---------Net cash from investing activities (1,510) 4,838 --------- --------- Cash flows from financing activities Net borrowings under line of credit agreements 544 412 Capital payments under finance leases (235) (450) Interest paid (7,616) (7,488) Proceeds from new shares issued - 8 --------- ---------Net cash from financing activities (7,307) (7,518) --------- --------- Net decrease in cash and cash equivalents (8,750) (2,845)Cash and cash equivalents at 1st April 43,119 51,947Effect of exchange rate fluctuations on cash held (974) 975 --------- ---------Cash and cash equivalents at 30th June 33,395 50,077 ========= ========= Danka Business Systems PLC Group Statement of Recognised Income and Expense For the Three Months Ended 30th June 2006 and 2005 30th June ----------------------- 2006 2005 £000 £000 --------- --------- Loss for the period (8,328) (10,523)Income and expense taken directly to equity: Exchange translation differences in the period 17,756 (12,763) Exchange translation differences related to disposals - (87) Actuarial losses on defined benefit pension plans - - Tax on items taken directly to or transferred from - - equity --------- --------- Total of income and expense taken directly to equity 17,756 (12,850) --------- --------- --------- ---------Total recognised income and expense for the period 9,428 (23,373) ========= ========= Notes to the Financial Information 1. The financial information for the quarter ended 30th June, 2006 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, 2006. The financial information for the year ended 31st March, 2006 hasbeen extracted from the audited accounts for the year ended 31st March, 2006which have yet to be filed with the Registrar of Companies. The report of theauditors 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 thethree months ended 30th June, 2006 and 2005 comprise the Company and itssubsidiaries (together referred to as the "Group"). The consolidated interimfinancial statements were authorised for issuance on 8th August, 2006. 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 sterling and all values in tables arerounded to the nearest thousand pounds (£000) except where otherwise indicated. 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, 2007. The accountingpolicies have been applied consistently throughout the Group for the purposes ofthese consolidated interim financial statements. Restructuring costs and the net loss/gain on sale of operations have beenseparately disclosed on the face of the income statement in accordance with IAS1 in order to assist the assessment of financial performance owing to theirmateriality 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 andlower levels of retail maintenance revenue from United States governmentalagencies. This has historically resulted in reduced sales activity and reducedusage of photocopiers, facsimiles and other office imaging equipment during thesecond quarter. Accordingly, the results of operations for the interim periodsare not necessarily indicative of the results which may be expected for theentire financial year. 4. Analysis of revenue and gross profit and segmental information 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 revenue and of gross profit ofthe 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. Three Months Ended 30th June 2006 2005 £000 £000 ---------- ----------RevenueRetail equipment and related sales 50,408 64,569Retail maintenance 68,504 75,511Retail supplies and rental sales 10,868 13,794Wholesale sales 12,953 12,912 ---------- ---------- 142,733 166,786 ========== ========== Gross profitRetail equipment and related sales 15,839 20,582Retail maintenance 25,612 27,774Retail supplies and rental sales 4,676 5,554Wholesale sales 2,275 2,351 ---------- ---------- 48,402 56,261 ========== ========== 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 operates in different geographical areas. The primary reportablesegments consist of two segments: the Americas and Europe/Australia. TheAmericas segment includes the United States and, in the comparative period up totheir respective disposals as disclosed in note 5, Canada, Central America andSouth America. The Europe/Australia segment includes operations in Europe andAustralia. There are no significant transactions occurring between the primarysegments. The Group is managed through its administrative centres in the U.S.and Europe, identified as Corporate below. The Corporate costs comprise salariesand direct costs incurred in maintaining the administrative centres plus thefinancing costs relating to the principal lines of credit used by the Group tofinance its activities. It is not appropriate to allocate these costs to theprimary segments. For the three months ended 30th June, 2006: Three Months Ended 30th June ---------------- 2006 2005 -------- --------RevenueAmericas 66,814 83,704Europe/Australia 75,919 83,082 -------- -------- 142,733 166,786 ======== ======== Three Months Ended 30th June ---------------- 2006 2005 -------- --------Segment resultAmericas (571) 3,653Europe/Australia 1,752 (1,151)Corporate (2,460) (4,765) -------- --------Loss before tax and finance costs (1,279) (2,263)Investment revenue 116 81Finance costs (8,028) (7,656)Tax 863 (685) -------- --------Total loss from operations (8,328) (10,523) ======== ======== 5. Disposal of operations Year ended 31st March, 2006 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 in the quarter ended 30th June, 2005 (later adjusted to £3.0million) was recorded after expenses of £0.2 million (later adjusted to £0.5million). The attributable tax was nil. During the three months ended 30th June,2005 and year ended 31st March, 2006, the Canadian operations had cash inflowsfrom operating activities of £0.3 million and cash outflows from investingactivities of £0.1 million. During the three months ended 30th June, 2005 andyear ended 31st March, 2006, the Canadian operations repaid funding from otherGroup entities of £0.5 million. The cash inflow on the disposal after deductingcash disposed of and a working capital adjustment of $2.6 million (£1.3 million)was £6.7 million. At 30th June, 2005 prior to disposal, the Canadian operations comprised assetsof £7.9 million less liabilities of £5.0 million following a working capitaladjustment. The Canadian operations reported revenue of £5.1 million in thethree months ended 30th June, 2005 and year ended 31st March, 2006 and pre- andpost-tax losses of £0.3 million in the quarter ended 30th June, 2005 and yearended 31st March, 2006. With effect from 31st August, 2005, the Group sold its retail operations inCentral and South America to Toshiba America Business Solutions, Inc. for $10million (£5.7 million) cash and a pre-tax loss of £5.1 million was recorded inthe nine months after 30th June, 2005 after expenses of £0.6 million. Theattributable tax was nil. During the year ended 31st March, 2006, the Centraland South American operations had cash outflows from operating activities of£0.3 million and cash outflows from investing activities of £0.2 million. Duringthe year ended 31st March, 2006, the Central and South American operations hadcash outflows from financing activities of £3.5 million, principally relating tofunding from other Group entities. The cash inflow on the disposal afterdeducting cash disposed of was £2.7 million, which was recorded in the quarterended 30th September, 2005. At 31st August, 2005 prior to disposal, the Central and South Americanoperations comprised assets of £14.3 million less liabilities of £3.9 million.The Central and South American operations reported revenue of £6.9 million inthe six months ended 30th September, 2005 and year ended 31st March, 2006 andpre- and post-tax losses of £0.4 million in the year ended 31st March, 2006.In December 2005, the Group sold an entity in Italy for £0.3 million in cash.The entity did not trade. The gain on disposal and the cash inflow on thedisposal after deducting expenses were £0.3 million, which were recorded in thequarter ended 31st December, 2005. Year ending 31st March, 2007 With effect from 30th June, 2006, the Group sold its Image One subsidiary fornil and a pre-tax loss of £1.3 million was recorded. The attributable tax wasnil. The trading results and cashflows of Image One had been integrated withinthe financial information for the Americas segment as a whole and cannot beseparately identified; however, the results and cashflows were not material tothe financial information for the Americas segment. At 30th June, 2006 prior todisposal, Image One comprised assets of £2.4 million less liabilities of £1.1million. During the quarter ended 30th June, 2006, additional expenses were recorded inrespect of the Group's prior year disposals in the amount of £0.2 million. 6. Reconciliation of the weighted average number of basic and diluted ordinary shares in issue Three Months Ended 30th June ---------------- 2006 2005 -------- -------- Shares in issue at 1st April 256,529,024 254,188,656Effect of shares issued during theperiod - 34,144 --------- ---------Average number of ordinary sharesin issue - basic 256,529,024 254,222,800Average outstanding share options - - --------- ---------Average number of ordinary sharesin issue - diluted 256,529,024 254,222,800 ========= ========= 7. The calculations of the loss per share from operations are based on the loss from 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 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 and convertible participating shares 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. Three Months Ended 30th June 2006 2005 ------------- ------------- Pence Pence £000 Per Share £000 Per Share ------- ------- ------- -------- Basic loss from operations (8,328) (3.2) (10,523) (4.1)Unusual items arising in respect of: Restructuring of worldwide operations 4,950 3,009 Tax effect - - ------ ----- Net of tax effect 4,950 1.9 3,009 1.2 Disposal of operations 1,480 (3,567) Tax effect - - ------ ----- Net of tax effect 1,480 0.6 (3,567) (1.4) ------- ------- ------- --------Adjusted basic loss fromoperations (1,898) (0.7) (11,081) (4.3) ======= ======= ======= ======== ------- ------- ------- --------Basic and diluted loss from (8,328) (3.2) (10,523) (4.1)operations ======= ======= ======= ========Adjusted basic and diluted loss from operations (before unusual items) (1,898) (0.7) (11,081) (4.3) ======= ======= ======= ======== 8. The following shows the computation of free cash flow: Three Months Ended 30th June ------------- 2006 2005 £000 £000 ------- ------Cash inflow/(outflow) from operatingactivities 67 (165)Cash (outflow)/inflow from investingactivities (1,510) 4,838Less: cash flow from acquisitions anddisposals - (6,680) ------- ------Free cash flow (1,443) (2,007) ======= ====== 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 2006 2005 2006 £000 £000 £000 ---------- ---------- ---------- Current portion of long-term borrowings 6,734 598 6,157Non-current bank loans 124,910 127,744 132,488Convertible participating sharesincluding derivative financialinstruments 172,880 165,227 180,099Finance leases 1,122 2,154 1,431Less: cash and cash equivalents (33,395) (50,077) (43,119) ---------- ---------- ----------Net debt 272,251 245,646 277,056 ========== ========== ========== 10. Net cash flow from operating activities Three Months Ended 30th June ------------------ 2006 2005 £000 £000 --------- ---------Loss before tax (9,191) (9,838)Restructuring charges 4,950 3,009Cash paid in respect of restructuringcharges (1,984) (3,765)Depreciation and amortisation 3,283 4,700(Gain)/loss on sale of property, plant andequipment and equipment on operating leases (55) 125Loss/(gain) on sale of operations 1,480 (3,567)Share-based payments - 221Net finance costs 7,912 7,575Increase in inventories (3,833) (8,341)(Increase)/decrease in receivables (2,581) 10,278Increase/(decrease) in payables andretirement benefit obligations 269 (421)Tax paid (183) (141) --------- ----------Net cash flow from operating activities 67 (165) ========= ========== 11. Group Statement of Changes in Equity for the Three Months Ended 30th June, 2006 and 2005 and the Year Ended 31st March, 2005 30th June 31st March --------------------------------------- 2006 2005 2006 £000 £000 £000 --------- ---------- --------- Balance at 1st April (286,071) (218,873) (218,873)Loss for the period/year (8,328) (10,523) (46,881)Shares issued - 8 352Share option expense in theperiod/year - 221 1,916Exchange translation differences inthe period/year 17,756 (12,763) (21,941)Exchange translation differencesrelated to disposals - (87) (127)Actuarial losses on defined benefitpension plans - - (517) --------- ---------- ---------Balance at 30th June/30th June/31stMarch (276,643) (242,017) (286,071) ========= ========== ========= 12. Post balance sheet event In July 2006, the Group agreed to sell the shares of its business unit in Australiafor a purchase price of $12.6 million (£6.8 million) in cash. The table belowshows the Australian business unit's carrying amounts of the major classes ofassets and liabilities at 30th June, 2006. In addition, cumulative foreignexchange losses of less than £0.1 million had arisen in respect of theAustralian business unit subsequent to 31st March, 2004 (the date of transitionto IFRS). 30th June, 2006 carrying values ---------------------------Assets Intangible assets and goodwill 135 Property, plant and equipment 420 Inventories 2,246 Prepaid expenses and other assets 89 Trade and other receivables 3,360 Cash and cash equivalents 1,358 --------- 7,608 ---------Liabilities Trade and other payables 2,753 Tax liabilities 71 Deferred revenue 913 Accrued expenses and short-term provisions 1,746 Non-current liabilities 219 --------- 5,702 --------- 13. Copies of this report will be available from the Company's registered office at Masters House, 107 Hammersmith Road, London W14 0QH. 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