DNK.L Regulatory News (DNK)

5 Feb 2008 13:30

Danka Business Systems PLC05 February 2008 5th February 2008 DANKA BUSINESS SYSTEMS PLC ("Danka", the "Company" or the "Group") Announcement of results for the three month and nine month periods ended 31st December, 2007 Danka Business Systems PLC, a leading independent provider of office imagingsystems and services, today announced its results for the three months and ninemonths periods ended 31st December, 2007. Following the disposal of the Group'snon U.S. trading operations over the last two financial years, the Group'sresults are now presented in U.S. dollars, as described in note 2. The Group today reported operating earnings from continuing operations of $0.4million in the fiscal year 2008 third quarter ended December 31, 2007, comparedwith a loss of $0.3 million in the comparable fiscal year 2007 quarter. For thenine months ended December 31, 2007, the Group reported operating earnings fromcontinuing operations of $3.1 million, compared with a loss of $4.2 million inthe prior year period. For the third quarter: • Total revenue was $108.2 million, 2.4% higher than the prior year quarter and up 2.7% sequentially. Retail equipment, supplies and related sales was $51.3 million for the quarter, up 13.3% from the prior year, and up 8.0% sequentially. Service revenue was $54.1 million, down 5.9% from the prior year, and down 1.0% sequentially. • Consolidated gross margin for the quarter was 32.8%, down 110 basis points from the prior year, and down 210 basis points from the prior quarter. • Operating expenses (distribution costs plus administrative expenses) from continuing operations were $33.3 million, down 7.8% from the prior year and down 10.6% sequentially. Charges in respect of restructuring were $1.8 million. • For the quarter, the Company generated operating earnings from continuing operations of $0.4 million. • Net interest expense was $10.7 million, a tax benefit was recorded of $7.9 million and earnings from discontinued operations were $0.7 million. This resulted in a net loss of $3.0 million for the quarter as compared to net loss of $17.5 million in the prior year quarter, and a $12.0 million loss in the preceding quarter. "Third quarter results again reflect some of the structural changes occurring inthe marketplace. For example, we continue to see conversions from analog todigital that, at least initially, serve to reign in service revenue. However, weposted solid gains in hardware sales, and are beginning to realize the fullbenefits of our financial restructuring and related cost-reduction measures,said A.D. Frazier, Danka's Chairman and Chief Executive Officer. "We have also achieved significant organizational enhancements as a result ofrealigning our business into one unified organization in late 2007. Our focus ontraining and customer satisfaction strategies continues unabated. Vendors, inparticular, have been strong supporters of this effort. Additionally, ourrecently announced strategic relationship with Konica Minolta is progressingfavorably," concluded Frazier. For the first nine months: • Total revenue was $319.7 million, down 5.1% from the prior year. Retail equipment, supplies and related sales was $145.0 million, down 1.6% from the prior year while service revenue was $165.9 million, down 7.0% from the prior year. • Consolidated gross margin was 34.6%, down 60 basis points from the prior year. • Operating expenses from continuing operations were $107.1 million, down $7.2 million or 6.3% from the prior year. • For the first nine months, the Company generated operating earnings from continuing operations of $3.1 million. • Net interest expense was $46.5 million, including costs related to the early extinguishment of debt of $9.7 million, a tax benefit was recorded of $3.0 million, and loss from discontinued operations was $2.1 million. These resulted in a net loss of $42.5 million as compared to a net loss of $34.5 million in the prior year. Conference Call and Webcast A conference call and Webcast to discuss Danka's results has been scheduled fortoday, 5th February, 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 #32895389 when prompted. A recording of the call will be availableapproximately two hours after it is completed until 12:00am on 10th February,2008. To access this recording, please call either (+1)-800-642-1687 or (+1)-706-645-9291 (conference ID #32895389) or visit Danka's website. - ends - For further information please contact:Danka Business Systems PLCCheley Howes, Danka Investor Relations 001 727 622 2760 Weber Shandwick FinancialJames Chandler 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 comply with theGroup's new GE covenants, financial or other representations, warranties, ormaturities in the Group's debt instruments; (xvii) any delayed or lost sales orother impacts related to the commercial and economic disruption caused bynatural disasters, including hurricanes; (xviii) any delayed or lost sales andother impacts related to the commercial and economic disruption caused byterrorist attacks, the related war on terrorism, and the fear of additionalterrorist attacks; (xix) other risks including those risks identified in any ofthe Group's filings with the Securities and Exchange Commission. Readers arecautioned not to place undue reliance on these forward-looking statements, whichreflect the Group's analysis only as of the date they are made. Except asrequired by applicable law, the Group undertakes no obligation, and does notintend, to update these forward-looking statements to reflect events orcircumstances that arise after the date they are made. Furthermore, as a matterof policy, the Group does not generally make any specific projections as tofuture earnings, nor does it endorse any projections regarding futureperformance, which may be made by others outside the Group. The financial information for the three month and nine month periods ended 31stDecember, 2007 is unaudited and not reviewed. The financial information for allperiods presented does not constitute full accounts within the meaning ofSection 240 of the Companies Act 1985. However, the financial information forsuch periods is prepared on the same basis as the financial information for theyear ended 31st March, 2007. The financial information for the year ended 31stMarch, 2007 has been extracted from the audited accounts for the year ended 31stMarch, 2007, as translated into U.S. dollars as described in note 2, which havebeen 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 31st December 2007 and 2006 Three Months Ended 31st December Income Income statement statement Continuing Discontinued 2007 Operations Operations Total 2006 2006 2006 Note $000 $000 $000 $000 _____________________________________________________________ Revenue 4 108,165 105,627 128,771 234,398Cost of sales (72,643) (69,786) (91,567) (161,353) _____________________________________________________Gross profit 4 35,522 35,841 37,204 73,045 Distribution costs (15,798) (14,453) (15,071) (29,524)Administrative expenses (17,551) (21,750) (24,635) (46,385)Other operating income 16 - - -Other operating expense - (14) - (14)Restructuring cost (1,796) 251 325 576(expense)/releaseNet loss on sale of operations 5 - (174) - (174) ______________________________________________________ Profit/(loss) from operations before tax andfinance items 4 393 (299) (2,177) (2,476) Investment revenue 29 27 227 254 _____________________________________________________Recurring finance costs (10,665) (14,973) (600) (15,573)Adjustment to finance costs relating to theearly extinguishment ofdebt 9 (21) - - - ______________________________________________________Total finance costs (10,686) (14,973) (600) (15,573)Loss from operations before tax (10,264) (15,245) (2,550) (17,795) Tax - overseas 7,897 (4,669) 4,990 321 ______________________________________________________(Loss)/profit from operations after tax 4 (2,367) (19,914) 2,440 (17,474) Gain on disposal of discontinued operations 5 - - - --- ______________________________________________________ (Loss)/profit from operations for the period (2,367) (19,914) 2,440 (17,474) =================== Result from discontinued operations 5 (642) 2,440 ________________________Loss from operations for the period andattributable to equityholders of the parent (3,009) (17,474) ========================(Loss)/earnings per 7share: _______________________________________________________Basic from continuing (0.9) (7.7)operationsBasic from discontinued (0.2) 0.9operations ________________________________________________________Basic from total (1.1) (6.8)operations _________________________________________________________Diluted from continuing (0.9) (7.7)operationsDiluted from discontinued (0.2) 0.9operations _________________________________________________________ Diluted from total (1.1) (6.8)operations _________________________________________________________ Average exchange rate $1= £0.489 _______Average exchange rate $1= €0.690 _______ Group Income Statement For the Nine Months Ended 31st December 2007 and 2006 Nine Months Ended 31st December Income Income statement statement Continuing Discontinued 2007 Operations Operations Total 2006 2006 2006 Note $000 $000 $000 $000 ______________________________________________________________ Revenue 4 319,684 336,698 392,153 728,851Cost of sales (208,950) (218,153) (272,764) (490,917) ______________________________________________________Gross profit 4 110,734 118,545 119,389 237,934 Distribution costs (53,120) (44,555) (48,552) (93,107)Administrative expenses (53,948) (69,722) (63,909) (133,631)Other operating income 1,218 - - -Other operating expense - (110) - (110)Restructuring cost (1,737) (5,581) (3,165) (8,746)expenseNet loss on sale of 5 - (2,796) - (2,796)operations ______________________________________________________ Profit/(loss) from 4 3,147 (4,219) 3,763 (456)operations before tax andfinance items Investment revenue 3,077 64 567 631 ______________________________________________________Recurring finance costs (39,890) (43,465) (1,768) (45,233)Finance costs relating to 9 (9,711) - - -the early extinguishmentof debt ______________________________________________________Total finance costs (49,601) (43,465) (1,768) (45,233) ______________________________________________________(Loss)/profit from (43,377) (47,620) 2,562 (45,058)operations before tax Tax - overseas 2,990 (4,867) 6,774 1,907 (Loss)/profit from 4 (40,387) (52,487) 9,336 (43,151)operations after tax Gain on disposal of 5 - - 8,652 8,652discontinued operations _______________________________________________________ (Loss)/profit from (40,387) (52,487) 17,988 (34,499)operations for the period ======================Result from discontinued 5 (2,071) 17,988operations _________________________ Loss from operations for (42,458) (34,499)the period andattributable to equityholders of the parent ========================== (Loss)/earnings per 7share: _________________________________________________________Basic from continuing (15.5) (20.4)operationsBasic from discontinued (0.8) 7.0operations Basic from total (16.3) (13.4)operations __________________________________________________________ __________________________________________________________Diluted from continuing (15.5) (20.4)operationsDiluted from discontinued (0.8) 7.0 _________________________________________________________operationsDiluted from total (16.3) (13.4)operations ________________________________________________________ Average exchange rate $1= £0.495 _______Average exchange rate $1= €0.718 _______ Danka Business Systems PLC Group Balance Sheet 31st December 31st March 2007 2007 $000 $000 _____________ ___________Non-current assetsIntangible assets and goodwill 484 484Property, plant and equipment and equipment onoperating leases 26,009 31,880Other 9,710 8,014 _____________ ___________ 36,203 40,378 _____________ ___________Current assetsInventories 30,320 31,681Prepaid expenses 1,995 1,474Trade and other receivables 40,833 60,842Cash and cash equivalents including restricted 24,327 186,573cash of $7,341,000 (March 2007 - $168,979,000) -note 9 _____________ ___________ 97,475 280,570 _____________ ___________ _____________ ___________Total assets 133,678 320,948 _____________ ___________ Current liabilitiesTrade and other payables (54,695) (68,384)Tax liabilities (3,982) (6,317)Obligations under finance leases (578) (602)Current portion of long-term borrowings - note 9 (21,760) (183,009)Derivative financial instruments (2,242) (2,242)Deferred revenue (5,483) (5,875)Accrued expenses (20,598) (42,179)Short-term provisions (4,000) (3,691) _____________ ____________ (113,338) (312,299) _____________ ____________Non-current liabilitiesBank and other loans (99,988) (63,941)Convertible participating shares (351,818) (331,104)Deferred tax liabilities - -Long-term provisions - (1,768)Obligations under finance leases - (423)Other (2,334) (3,328) _____________ ____________ (454,140) (400,564) _____________ ____________ _____________ ____________Total liabilities (567,478) (712,863) _____________ ____________ _____________ ____________Net liabilities (433,800) (391,915) ============= =========== EquityCapital 319,340 319,238Share options 7,235 6,764Translation reserve - -Retained earnings (760,375) (717,917) _____________ ____________Total equity (433,800) (391,915) ============== ============ Danka Business Systems PLC Group Cash Flow Statement For the Three Months Ended 31st December 2007 and 2006 31st December _________________ 2007 2006 Note $000 $000 _____ ______ _________ Net cash inflow from operating activities 10 6,336 6,657 Cash flows from investing activitiesInterest received 29 254Capital expenditure (1,145) (6,477)Net payments related to sale of operations (642) -Held for sale cash and cash equivalents - (2,849)Proceeds from sale of property, plant andequipment 68 499and equipment on operating leases _________ _________Net cash from investing activities (1,690) (8,573) _________ _________ Cash flows from financing activitiesNet borrowings under line of credit agreements 1,033 5,141Proceeds from issue of long-term loans - -Repayment of long-term notes (150) -Payment of debt issue costs (3,310) -Capital payments under finance leases (153) (297)Interest paid (2,760) (14,371)Proceeds from new shares issued - 590 _________ _________Net cash from financing activities (5,340) (8,937) _________ _________ Net decrease in cash and cash equivalents (694) (10,853)Cash and cash equivalents at 1st October 25,021 18,746Effect of exchange rate fluctuations on cash held - 594 _________ _________Cash and cash equivalents at 31st December 24,327 8,487 ========== ========= Included above in respect of discontinuedoperations:Net cash inflow from operating activities - 14,248Net cash from investing activities (642) (4,015)Net cash from financing activities - (64) ======== ========= Group Cash Flow Statement For the Nine Months Ended 31st December 2007 and 2006 31st December __________________ 2007 2006 Note $000 $000 _____ __________ _________ Net cash outflow from operating activities 10 (8,962) (2,636) Cash flows from investing activitiesInterest received 3,077 631Capital expenditure (5,053) (14,289)Net proceeds from sale of operations 10,429 11,594Held for sale cash and cash equivalents - (41,199)Proceeds from sale of property, plant andequipment and equipment on operating leases 1,774 1,210 __________ _________Net cash from investing activities 10,227 (42,053) __________ _________ Cash flows from financing activitiesNet borrowings under line of credit agreements 10,435 6,127Proceeds from issue of long-term loans 105,000 -Repayment of senior and subordinated notes (249,208) -Payment of debt issue costs (6,899) -Capital payments under finance leases (449) (1,154)Interest paid (22,390) (29,694)Proceeds from new shares issued - 590 __________ _________Net cash from financing activities (163,511) (24,131) __________ _________ Net decrease in cash and cash equivalents (162,246) (68,820)Cash and cash equivalents at 1st April 186,573 74,997Effect of exchange rate fluctuations on cashheld - 2,310 __________ _________Cash and cash equivalents at 31st December 24,327 8,487 ========== ========= Included above in respect of discontinuedoperations:Net cash inflow from operating activities - 10,240Net cash from investing activities 10,429 (33,059)Net cash from financing activities - (1,406) ========= ========= Danka Business Systems PLC Group Statement of Recognised Income and Expense For the Three Months Ended 31st December 2007 and 2006 31st December ______________________ 2007 2006 $000 $000 __________ _________ Loss for the period (3,009) (17,474) __________ _________Income and expense taken directly to equity:Exchange translation differences in the period - 801Exchange translation differences related to disposals - -recycled to the income statementActuarial gains on defined benefit pension plans - 3,524Tax on items taken directly to or transferred from - -equity __________ _________Total of income and expense taken directly to equity - 4,325 __________ _________ Total recognised income and expense for theperiod (3,009) (13,149) __________ _________ Danka Business Systems PLC Group Statement of Recognised Income and Expense For the Nine Months Ended 31st December 2007 and 2006 and Year Ended 31st March 2007 31st December 31st March ___________________________ 2007 2006 2007 $000 $000 $000 ___________________________ (Loss)/income for the period/year (42,458) (34,499) 95,249 ____________________________Income and expense taken directly to equity:Exchange translation differences inthe period/year - 2,116 9,081Exchange translation differencesrelated to disposals recycled to theincome statement - - (3,861)Actuarial gains on defined benefitpension plans - 3,524 4,270Tax on items taken directly to or transferred from - - -equity ____________________________Total of income and expense takendirectly to equity - 5,640 9,490 ____________________________ ____________________________Total recognised income and expensefor the period/year (42,458) (28,859) 104,739 ======== ======== ======== Notes to the Financial Information 1. The financial information for the three month and nine month periods ended31st December, 2007 is unaudited and not reviewed. The financial information forall periods presented does not constitute full accounts within the meaning ofSection 240 of the Companies Act 1985. However, the financial information forsuch periods is prepared on the same basis as the financial information for theyear ended 31st March, 2007. The financial information for the year ended 31stMarch, 2007 has been extracted from the audited accounts for the year ended 31stMarch, 2007, as translated into U.S. dollars as described in note 2, which havebeen 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. 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 and nine months ended31st December, 2007 and 2006, which comprise the Company and its subsidiaries(together referred to as the "Group"). The preliminary announcement wasauthorised for issuance on Xth February, 2008. 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 the functional currency of substantially all of the Group'scompanies is the U.S. dollar. This represents a change, the impact of which hasbeen to recalculate the translation reserve and related accounting entries, aswell as to convert amounts previously presented at the appropriate year-end oraverage exchange rates. Accounting policies This financial information has been prepared on the basis of the recognition andmeasurement requirements of IFRS accounting standards in issue that are endorsedby the EU and effective (or available for early adoption) at 31st March, 2008.The accounting policies have been applied consistently throughout the Group forthe purposes of these 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 historically experienced lower revenue during the secondquarter (ending 30th September) of the financial year. This was primarily due toincreased holiday taken by European residents during July and August (affectingdiscontinued operations in the prior year) and lower levels of retailmaintenance revenue from United States governmental agencies (affectingcontinuing operations). This historically resulted in reduced sales activity andreduced usage of photocopiers, facsimiles and other office imaging equipmentduring the second quarter. Accordingly, the results of operations for theinterim periods were not necessarily indicative of the results which could havebeen expected 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 Nine Months Ended 31st December 31st December _______________________________________________________________ 2007 2006 2007 2006 $000 $000 $000 $000 _______________________________________________________________RevenueRetail equipment,supplies and 51,321 45,293 145,010 147,402related salesRetail maintenance 54,078 57,460 165,892 178,363Retail rental sales 2,766 2,874 8,782 10,933 _______________________________________________________________ 108,165 105,627 319,684 336,698 =============================================================== Gross profitRetail equipment,supplies and related 13,345 12,754 41,412 41,921salesRetail maintenance 20,635 21,494 64,616 68,805Retail rental sales 1,542 1,593 4,706 7,819 _______________________________________________________________ 35,522 35,841 110,734 118,545 =============================================================== 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, until recently, the U.K.,identified as Corporate below. The Corporate costs comprise salaries and directcosts incurred in maintaining the administrative centres. In the prior year, itwas not appropriate to allocate these costs between the primary segment and thediscontinued operations. For the three months and nine months ended 31st December, 2007: Three Months Ended Nine Months Ended 31st December 31st December _________________________ ________________________ 2007 2006 2007 2006 $000 $000 $000 $000 _________ ________ _________ _________RevenueUnited States 108,165 105,627 319,684 336,698 ========= ========= ========== ========= Three Months Ended Nine Months Ended 31st December 31st December ____________________ _____________________ 2007 2006 2007 2006 $000 $000 $000 $000 ______ ______ ______ _______Segment resultUnited States 3,233 2,920 10,178 7,661Corporate (2,840) (3,219) (7,031) (11,880) ______ ______ _______ ________Profit/(loss) before taxand finance items 393 (299) 3,147 (4,219)Investment revenue 29 27 3,077 64Finance costs (10,686) (14,973) (49,601) (43,465)Tax 7,897 (4,669) 2,990 (4,867) _______ _______ _______ ________Total loss from continuingoperations (2,367) (19,914) (40,387) (52,487) ======== ======== ======== ======== 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 $0.1 million, but increased in the quarter ended 31stDecember, 2006 by $0.2 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 $8.7million 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 $11.6 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 $11.6 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 $143.7 million was recorded in the three months ended 31st March, 2007 afterexpenses of $13.8 million and the recycling of foreign exchange gains of $3.6million. 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 $7.5 million and $148.5 million (including $157.0 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 $2.9 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 $157.0 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,$0.7 million in the quarter ended 30th September, 2007 and a further $0.7million in the quarter ended 31st December, 2007. The holdback and workingcapital adjustment totalling $12.5 million referred to above were received inthe quarter ended 30th June, 2007. 6. Reconciliation of the weighted average number of basic and diluted ordinary shares in issue Three Months Ended Nine Months Ended 31st December 31st December ___________________________ ________________________ 2007 2006 2007 2006 _____________ ___________ ___________ _____________ Shares inissue at 1stOctober/April 259,133,748 256,529,024 258,899,852 256,529,024Effect ofshares issuedduring theperiod 8,478 1,357,044 213,125 453,993 _____________ ___________ ___________ _____________Average numberof ordinaryshares inissue - basic 259,142,226 257,886,068 259,112,977 256,983,017Average - - - -outstandingshare optionsConvertible - - - -participating _____________ ___________ ___________ _____________sharesAverage numberof ordinaryshares inissue -diluted 259,142,226 257,886,068 259,112,977 256,983,017 ============== =========== =========== =========== 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 31st December 2007 2006 ______________________ ______________________ Cents Cents $000 Per Share $000 Per Share ________ _________ ________ _________ Basic loss from continuingoperations (2,367) (0.9) (19,914) (7.7)Unusual items arising inrespect of:Restructuring of worldwideoperations 1,796 (251)Tax effect - - ______ ______Net of tax effect 1,796 0.7 (251) (0.1)Disposal of operations - 174Tax effect - - ______ ______Net of tax effect - - 174 -Early extinguishment of 21 -debtTax effect - - ______ ______Net of tax effect 21 - - - ________ _________ ________ _________ Adjusted basicearnings/(loss) fromcontinuing operations (550) (0.2) (19,991) (7.8) ======== ========= ======== ========= ________ _________ ________ _________ Diluted loss fromcontinuing operations (2,367) (0.9) (19,914) (7.7) ======== ========= ======== =========Adjusted dilutedearnings/(loss) fromcontinuing operations (before unusual items) (550) (0.2) (19,991) (7.8) ======== ========= ======== ========= ________ _________ ________ _________ Basic and diluted(loss)/earnings fromdiscontinued operations (642) (0.2) 2,440 0.9 ======== ========= ======== ========= ________ _________ ________ _________ Basic and diluted loss fromtotal operations (3,009) (1.1) (17,474) (6.8) ======== ========= ======== ========= Nine Months Ended 31st December 2007 2006 ______________________ ______________________ Cents Cents $000 Per Share $000 Per Share ________ _________ ________ _________ Basic loss fromcontinuing operations (40,387) (15.6) (52,487) (20.4)Unusual items arising inrespect of:Restructuring ofworldwide operations 1,737 5,581Tax effect - - ______ ______Net of tax effect 1,737 0.7 5,581 2.1Gain on sale of property (923) -Tax effect - - ______ ______Net of tax effect (923) (0.3) - -Disposal of operations - 2,796Tax effect - - ______ ______Net of tax effect - - 2,796 1.1Early extinguishment ofdebt 9,711 -Tax effect - - ______ ______Net of tax effect 9,711 3.7 - - ________ _________ ________ _________ Adjusted basic loss fromcontinuing operations (29,862) (11.5) (44,110) (17.2) ======== ========= ======== ========= ________ _________ ________ _________ Diluted loss fromcontinuing operations (40,387) (15.6) (52,487) (20.4) ======== ========= ======== ========= ________ _________ ________ _________ Adjusted diluted loss fromcontinuing operations (before unusual items) (29,862) (11.5) (44,110) (17.2) ======== ========= ======== ========= ________ _________ ________ _________ Basic and diluted(loss)/earnings fromdiscontinued operations (2,071) (0.8) 17,988 7.0 ======== ========= ======== ========= ________ _________ ________ _________ Basic and diluted lossfrom total operations (42,458) (16.3) (34,499) (13.4) ======== ========= ======== ========= 8. The following shows the computation of free cash flow: Three Months Ended 31st December Nine Months Ended 31st December ________________________________ _______________________________ 2007 2006 2007 2006 $000 $000 $000 $000 ______ ______ ______ ______Cash inflow/(outflow) from operating activities 6,336 6,657 (8,962) (2,636)Cash (outflow)/inflow from investing activities (1,690) (8,573) 10,227 (42,053)Less: cash flow from acquisitions and disposals 642 2,849 (10,429) 29,605Less: cash outflow fromoperating activities ofdiscontinued operations - (14,248) - (10,240)Less: cash outflow/(inflow) from investingactivities of discontinued operations 642 4,015 (10,429) 33,059Add back: cash flow fromacquisitions and disposalsof discontinued operations (642) (2,849) 10,429 (29,605) ______ ______ ______ ______Free cash flow - continuing operations 5,288 (12,149) (9,164) (21,870) ====== ======= ======= ======= 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 31st As at 31st December March 2007 2007 $000 $000 ___________ ____________Current portion of long-termborrowings 21,760 183,009Non-current bank loans 99,988 63,941Convertible participating sharesincluding derivative financialinstruments 354,060 333,346Finance leases 578 1,025Less: cash and cash equivalents (24,327) (186,573) ___________ ____________Net debt 452,059 394,748 ========== =========== Restricted cash for the Group at 31st December, 2007 totalled $7,341,000 (31stMarch, 2007 - $168,979,000) and comprises the following: $nil (31st March, 2007- $151.8 million) of the net proceeds of the sale of the European businessesused in repaying the 11% senior notes as described below; $5.2 million cash(31st March, 2007 - $15.8 million) of the European sale proceeds required to bekept in an escrow account by the Group's credit facility; and collateralisationof the Group's letters of credit held by other financial institutions totalling$2.1 million and $1.4 million as at 31st December, 2007 and 31st March, 2007respectively. On 25th June, 2007, the Group completed a new financing arrangement with GECapital Corporation for $145 million. The Credit Facility includes a $40 millionsenior secured revolving credit facility. Proceeds from this financing were usedin conjunction with the proceeds of the Group's previously completed sale of itsEuropean businesses to reduce and refinance the Group's existing debt andenhance working capital. On 27th July, 2007, the Group's 11% senior notes and 10% subordinated notes("the Notes") were redeemed and paid. During the period in the financial yearprior to redemption, the Group accrued the $9.4 million call premium on theredemption of the senior notes. The charge relating to the accrual of the callpremium and sundry costs relating to the refinanced debt are disclosedseparately on the face of the income statement. 10. Net cash flow from operating activities Three Months Ended Nine Months Ended 31st December 31st December _______________________ ________________________ 2007 2006 2007 2006 $000 $000 $000 $000 _________ _________ _________ _________Loss before tax (10,264) (17,795) (43,377) (45,058)Restructuring costexpense/(release) 1,796 (576) 1,737 8,746Cash paid in respect ofrestructuring charges (1,187) (3,097) (3,194) (10,558)Depreciation andamortisation 3,216 4,001 9,911 15,294Gain on sale of property,plant and equipment andequipment on operatingleases (42) (40) (762) (371)Loss on sale ofoperations - 174 - 2,796Share-based payments andshares issued for nilconsideration asremuneration 123 125 573 125Net finance costs 10,657 15,319 46,524 44,602Decrease/(increase) ininventories 731 (4,844) 1,361 (15,017)(Increase)/decrease inreceivables 4,080 9,632 1,316 14,147Increase/(decrease) inpayables and retirementbenefit obligations (1,875) 4,493 (20,452) (15,491)Tax recovered/(paid) (899) (735) (2,599) (1,851) _________ _________ _________ _________Net cash flow fromoperating activities 6,336 6,657 (8,962) (2,636) ========= ========= ========== ========== 11. Group Statement of Changes in Equity for the Three Months and Nine Months Ended 31st December, 2007 and the Year Ended 31st March, 2007 31st December _____________________ 2007 2006 $000 $000 _________ _________Balance at 1st October (430,914) (513,273)Loss for the period (3,009) (17,474)Shares issued 3 597Share option expense in the period 120 125Exchange translation differences in theperiod - 801Exchange translation differences related to - -disposalsActuarial gains on defined benefitpension plans - 3,524 _________ _________Balance at 31st December (433,800) (525,700) ========= ========= 31st December 31st March __________________________________________________ 2007 2006 2007 $000 $000 $000 _________ _________ _________Balance at 1st April (391,915) (497,563) (497,563)(Loss)/profit for theperiod/year (42,458) (34,499) 95,249Shares issued 102 597 612Share option expense in theperiod/year 471 125 297Exchange translationdifferences in theperiod/year - 2,116 9,081Exchange translationdifferences related todisposals - - (3,861)Actuarial gains on definedbenefit pension plans - 3,524 4,270 _________ _________ _________Balance at 31st Dec/31stDec/31st March (433,800) (525,700) (391,915) ========= ========= ========= 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