DNK.L Regulatory News (DNK)

6 Feb 2007 13:30

Danka Business Systems PLC06 February 2007 Embargoed until 13:30 6th February 2007 DANKA BUSINESS SYSTEMS PLC ("Danka", the "Company" or the "Group") Announcement of results for the quarter and nine months ended 31st December, 2006 Danka Business Systems PLC, a leading independent provider of office imagingsystems and services, today announced its results for the quarter and ninemonths ended 31st December, 2006. On 31st January, 2007, the Group completed the sale of its European operationsto Ricoh Europe B.V. as described in the Transaction Description dated 12thOctober, 2006 and the press release dated 1st February, 2007 announcing thecompletion of the sale. For the quarter and nine months ended 31st December, 2006, the European operations are disclosed as discontinued operations. On 5 February 2007, Danka's Audit Committee discussed a proposed restatement ofits US filings for fiscal year 2004 onwards. The adjustments related to thespreading back of a credit for workers' compensation recognised previously infiscal year 2006 to previous periods and to the valuation allowance on deferredtax assets. In the light of these facts the company is reviewing whether or not a restatement of the comparative results is required under IFRS. A further announcement will be made if necessary. For the third quarter: • The Group's operating loss from continuing operations was £0.1 million, versus earnings of £1.2 million in the prior year third quarter and earnings of £1.0 million last quarter. Adjusted operating losses from continuing operations were £0.2 million, versus losses of £2.1 million in the prior year third quarter and losses of £25,000 last quarter. The adjusted operating earnings exclude restructuring charges, gains/losses on the sale of operations and, in the prior year, one-off sales tax and insurance credits. Costs incurred to date in respect of the sale of the European operations are included within discontinued operations and will be included in the gain/loss on the sale in the fourth quarter. • Consolidated gross margin from continuing operations was 33.9%, which was down from 34.3% both in the prior year quarter and sequentially. • Operating expenses (distribution costs plus administrative expenses) for continuing operations were £18.8 million, or 34.3% of revenue. These expenses were down 19.2%, or £4.5 million, from the prior year quarter and down £1.1 million, or 5.6%, sequentially. • Total revenue from continuing operations was £54.9 million, which was 23.9% lower than the prior year quarter and 5.4% lower sequentially. Retail equipment and related sales were £22.2 million, down 30.4% from the prior year quarter and down 9.2% sequentially. Retail service revenue was £29.9 million, down 15.8% from the prior year quarter and down 2.3% sequentially. "Although we are disappointed with the final results for the quarter, they dogive credence to our initiatives and our execution. Our retail equipment andrelated sales revenue did not stabilise in the quarter as we expected, but weanticipate this will occur in future quarters based on the focus we are placingin this area. We know from survey results that our service is one of the best inthe industry and we are working hard to get our billing accuracy consistent withthat high standard. With the divestiture of our European operations to Ricoh, weare now able to focus all of our resources and efforts on growing the USbusiness", said A.D. Frazier, Danka's Chairman and Chief Executive Officer. For the nine months: • The Group's operating loss from continuing operations was £2.3 million, versus a £9.2 million loss in the first nine months of the prior year. Adjusted operating earnings from continuing operations were £2.2 million, versus a £11.1 million loss in the first nine months of the prior year. The adjusted operating earnings exclude restructuring charges, gains/losses on the sale of operations and, in the prior year, one-off sales tax and insurance credits. • Consolidated gross margin from continuing operations was 35.2%, which is consistent with 35.3% in the first nine months of the prior year (and 35.3% excluding the results of the Canadian and Central and Latin American operations disposed of in the first half of the prior year). • Operating expenses for continuing operations were £61.0 million, or 33.9% of revenue, and down from £87.3 million, or 37.7% of revenue, in the first nine months of the prior year, representing a 30.1% decrease. • Total revenue from continuing operations was £179.8 million, which was 22.5% lower than the same period prior year (18.1% excluding the Canadian and Central and Latin American operations sold in the prior year). Retail equipment and related sales were £73.9 million, down 25.7% from the prior year period (22.5% excluding the Canadian and Central and Latin American operations sold in the prior year). Retail service revenue was £95.2 million, down 17.2% from the prior year period (13.2% excluding the Canadian and Central and Latin American operations sold in the prior year). Conference Call and Webcast A conference call and Webcast to discuss Danka's third quarter results has beenscheduled for today, 6th February, 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 #9560343 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 12thFebruary. To access this recording, please call either (+1)-800-642-1687 or (+1)-706-645-9291 (conference ID #9560343) 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 0154 Weber Shandwick FinancialHelen Thomas 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 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 and nine months ended 31st December,2006 is unaudited and not reviewed. The financial information for all periodspresented does not constitute full accounts within the meaning of Section 240 ofthe Companies 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 been 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. 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. Embargoed until 13:30 6th February 2007 Group Income Statement For the Three Months Ended 31st December 2006 and 2005 Three Months Ended 31st December Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total 2006 2006 2006 2005 2005 2005 Note £000 £000 £000 £000 £000 £000 _______________________________________________________________________Revenue 4 54,917 67,067 121,984 72,181 79,824 152,005Cost of sales (36,310) (47,730) (84,040) (47,459) (56,107) (103,566) _______________________________________________________________Gross profit 4 18,607 19,337 37,944 24,722 23,717 48,439 Distribution costs (7,524) (7,832) (15,356) (11,528) (10,544) (22,072)Administrative expenses (11,306) (12,958) (24,264) (11,771) (12,353) (24,124)Other operating expense (7) - (7) 184 (328) (144)Restructuring cost release/(expense) 172 196 368 (711) (750) (1,461)Net (loss)/gain on sale of operations 5 (76) - (76) 275 - 275 _______________________________________________________________(Loss)/profit fromoperations before tax and finance costs 4 (134) (1,257) (1,391) 1,171 (258) 913 Investment revenue 14 119 133 13 73 86Finance costs (7,812) (313) (8,125) (5,695) (1,614) (7,309) _______________________________________________________________Loss fromoperations before tax (7,932) (1,451) (9,383) (4,511) (1,799) (6,310) Tax - overseas (2,492) 2,653 161 5,768 (891) 4,877 _______________________________________________________________(Loss)/profit fromoperations after tax (10,424) 1,202 (9,222) 1,257 (2,690) (1,433) Gain on sale of discontinuedoperations 5 - - - - - - _______________________________________________________________(Loss)/profit from operations for theperiod andattributable toequity holders ofthe parent (10,424) 1,202 (9,222) 1,257 (2,690) (1,433) ===============================================================(Loss)/earnings per 7share:Basic from continuingoperations (4.0)p 0.5pBasic from discontinuedoperations 0.4p (1.0)pBasic from total operations (3.6)p (0.5)p Diluted from continuingoperations (4.0)p 0.5pDiluted from discontinuedoperations 0.4p (1.0)pDiluted from total operations (3.6)p (0.5)p Average exchange rate £1= $ 1.917 $ 1.749 _______ _______Average exchange rate £1= • 1.486 • 1.470 _______ _______ Group Income Statement For the Nine Months Ended 31st December 2006 and 2005 Nine Months Ended 31st December Continuing Discontinued Continuing Discontinued Operations Operations Total Operations Operations Total 2006 2006 2006 2005 2005 2005 Note £000 £000 £000 £000 £000 £000 ______________________________________________________________________Revenue 4 179,793 209,405 389,198 231,891 239,465 471,356Cost of sales (116,491) (145,653) (262,144) (149,951) (166,767)(316,718) ______________________________________________________________Gross profit 4 63,302 63,752 127,054 81,940 72,698 154,638 Distribution costs (23,792) (25,926) (49,718) (37,361) (32,088) (69,449)Administrative expenses (37,231) (34,058) (71,289) (49,959) (37,560) (87,519)Other operating expense (59) - (59) 62 (487) (425)Restructuring costs (2,980) (1,690) (4,670) (1,749) (3,891) (5,640)Net loss on sale of operations 5 (1,493) - (1,493) (2,151) - (2,151) _______________________________________________________________(Loss)/profit fromoperations before tax and financecosts 4 (2,253) 2,078 (175) (9,218) (1,328) (10,546) Investment revenue 34 303 337 53 204 257Finance costs (23,210) (944) (24,154) (20,332) (2,340) (22,672) _______________________________________________________________(Loss)/profit fromoperations before tax (25,429) 1,437 (23,992) (29,497) (3,464) (32,961) Tax - overseas (2,599) 3,617 1,018 5,304 (1,649) 3,655 _______________________________________________________________(Loss)/profit fromoperations after tax (28,028) 5,054 (22,974) (24,193) (5,113) (29,306) Gain on sale of discontinuedoperations 5 - 4,551 4,551 - - - _______________________________________________________________(Loss)/profit from operations for theperiod andattributable toequity holders ofthe parent (28,028) 9,605 (18,423) (24,193) (5,113) (29,306) ================================================================(Loss)/earnings 7per share:Basic from continuingoperations (10.9)p (9.5)pBasic from discontinuedoperations 3.7p (2.0)pBasic from total operations (7.2)p (11.5)p Diluted from continuingoperations (10.9)p (9.5)pDiluted from discontinuedoperations 3.7p (2.0)pDiluted from total operations (7.2)p (11.5)p Average exchange $ 1.873 $ 1.796rate £1= _______ _______Average exchange • 1.470 • 1.469rate £1= _______ _______ Danka Business Systems PLC Group Balance Sheet 31st December 31st December 31st March 2006 2005 2006 £000 £000 £000 __________________________________________Non-current assetsIntangible assets and goodwill 247 3,044 2,961Property, plant and equipment 17,411 30,288 28,308Other 4,428 6,206 6,129 __________________________________________ 22,086 39,538 37,398 __________________________________________Current assetsInventories 19,395 52,676 45,977Prepaid expenses 506 5,874 3,445Trade and other receivables 26,621 111,496 108,868Cash and cash equivalentsincluding restricted cash of £1,158,000 (December 2005 -£7,069,000; March 2006 -£11,803,000) 4,333 29,506 43,119Assets classified as held for sale (note 12) 118,233 - - __________________________________________ 169,088 199,552 201,409 __________________________________________ __________________________________________Total assets 191,174 239,090 238,807 __________________________________________ Current liabilitiesTrade and other payables (40,203) (94,630) (94,917)Tax liabilities - (11,853) (12,218)Obligations under finance leases (341) (921) (796)Current portion of long-term borrowings (8,777) (836) (6,157)Derivative financial instruments (4,293) (5,818) (4,835)Deferred revenue (4,946) (19,752) (18,989)Accrued expenses (15,502) (40,905) (48,082)Short-term provisions (1,566) (3,470) (3,665)Liabilities classified as held forsale (note 12) (94,199) - - __________________________________________ (169,827) (178,185) (189,659) __________________________________________ Non-current liabilitiesBank and other loans (115,669) (133,767) (132,488)Convertible participating shares (165,625) (173,667) (175,264)Retirement benefit obligations - (15,090) (16,928)Deferred tax liabilities (1,983) (328) (419)Long-term provisions (1,667) (3,373) (4,744)Obligations under finance leases (295) (791) (635)Other (1,687) (4,987) (4,741) __________________________________________ (286,926) (332,003) (335,219) __________________________________________ __________________________________________Total liabilities (456,753) (510,188) (524,878) __________________________________________ __________________________________________Net liabilities (265,579) (271,098) (286,071) ==========================================EquityCapital 202,409 202,089 202,094Share options 3,644 2,478 3,577Translation reserve (note 12) 16,577 (19,261) (17,246)Retained earnings (488,209) (456,404) (474,496) __________________________________________ Total equity (265,579) (271,098) (286,071) ==========================================Closing exchange rate £1= $ 1.959 $ 1.719 $ 1.739 __________________________________________Closing exchange rate £1= • 1.484 • 1.451 • 1.433 __________________________________________ Danka Business Systems PLC Group Cash Flow Statement For the Three Months Ended 31st December 2006 and 2005 31st December _____________________ 2006 2005 Note £000 £000 ______________ ________Net cash inflow/(outflow) from operating activities 10 3,540 (9,846) Cash flows from investing activitiesInterest received 133 86Capital expenditure (3,408) (1,186)Proceeds from sale of operations - 118Held for sale cash and cash equivalents (1,275) -Proceeds from sale of property, plant and equipment and equipment on operatingleases 262 210 __________ _________Net cash from investing activities (4,288) (772) __________ _________Cash flows from financing activitiesNet borrowings/(repayments) under line of credit agreements 2,739 (88)Capital payments under finance leases (153) (260)Interest paid (7,575) (7,801)Proceeds from new shares issued 315 35 __________ _________Net cash from financing activities (4,674) (8,114) __________ _________Net decrease in cash and cash equivalents (5,422) (18,732)Cash and cash equivalents at 1st October 10,016 48,323Effect of exchange rate fluctuations on cash held (261) (85) __________ _________Cash and cash equivalents at 31st December 4,333 29,506 ========== =========Included above in respect of discontinuedoperations:Net cash inflow from operating activities 7,634 3,369Net cash from investing activities (1,957) (636)Net cash from financing activities (8,747) (11)Net cash from financing activities includes intragroup financing of (8,721) 1,758 ========== ========= Danka Business Systems PLC Group Cash Flow Statement For the Nine Months Ended 31st December 2006 and 2005 31st December ___________________ 2006 2005 Note £000 £000 ______________ ________Net cash outflow from operating activities 10 (1,466) (12,670) Cash flows from investing activitiesInterest received 337 257Capital expenditure (7,630) (4,821)Proceeds from sale of operations 6,249 9,652Held for sale cash and cash equivalents 12 (22,000) -Proceeds from sale of property, plant and equipment and equipment on operatingleases 646 436 __________ _________Net cash from investing activities (22,398) 5,524 __________ _________Cash flows from financing activitiesNet borrowings/(repayments) under line of credit agreements 3,272 (114)Capital payments under finance leases (616) (1,024)Interest paid (15,856) (16,167)Proceeds from new shares issued 315 347 __________ _________Net cash from financing activities (12,885) (16,958) __________ _________Net decrease in cash and cash equivalents (36,749) (24,104)Cash and cash equivalents at 1st April 43,119 51,947Effect of exchange rate fluctuations on cash held (2,037) 1,663 __________ _________Cash and cash equivalents at 31st December 4,333 29,506 ========== =========Included above in respect of discontinuedoperations:Net cash inflow/(outflow) from operating 5,468 (4,867)activitiesNet cash from investing activities (17,653) (2,363)Net cash from financing activities (15,739) 9,466Net cash from financing activities includes intragroup financing of (14,988) 12,357 ========== ========= Danka Business Systems PLC Group Statement of Recognised Income and Expense For the Three Months Ended 31st December 2006 and 2005 31st December ___________________ 2006 2005 £000 £000 ___________________Loss for the period (9,222) (1,433)Income and expense taken directly toequity:Exchange translation differences in the period 12,794 (7,851)Exchange translation differences related to disposals - -Actuarial gains on defined benefit pension plans 1,883 -Tax on items taken directly to or transferred from equity - - ___________________Total of income and expense taken directly to equity 14,677 (7,851) ___________________Total recognised income and expense for the period 5,455 (9,284) =================== Danka Business Systems PLC Group Statement of Recognised Income and Expense For the Nine Months Ended 31st December 2006 and 2005 and the Year Ended 31st March 2006 31st December 31st March __________________________________ 2006 2005 2006 £000 £000 £000 __________________________________Loss for the period/year (18,423) (29,306) (46,881)Income and expense taken directly toequity:Exchange translation differences in the period/year 33,858 (23,956) (21,941)Exchange translation differences related to disposals (35) (127) (127)Actuarial gains/(losses) on defined benefit pension plans 1,883 - (517)Tax on items taken directly to or transferred from equity - - - __________________________________Total of income and expense taken directly to equity 35,706 (24,083) (22,585) __________________________________Total recognised income and expense for the period/year 17,283 (53,389) (69,466) ================================== Notes to the Financial Information 1. The financial information for the quarter and nine months ended 31stDecember, 2006 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, 2006. The financial information for the year ended 31stMarch, 2006 has been extracted from the audited accounts for the year ended 31stMarch, 2006 which have been filed with the Registrar of Companies. The report ofthe auditors was unqualified and did not contain statements under section 237(2)or (3) of the Companies Act 1985. 2. Significant accounting policies Danka Business Systems PLC ("the Company") is a company domiciled in the UnitedKingdom. The consolidated interim financial statements of the Company for thethree months and nine months ended 31st December, 2006 and 2005 comprise theCompany and its subsidiaries (together referred to as the "Group"). Theconsolidated interim financial statements were authorised for issuance on 6thFebruary, 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 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(affecting discontinued operations) and lower levels of retail maintenancerevenue from United States governmental agencies (affecting continuingoperations). This has 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 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 31st Nine Months Ended 31st December December _____________________________________________ 2006 2005 2006 2005 £000 £000 £000 £000 _____________________________________________RevenueRetail equipment and related sales 22,187 31,872 73,889 99,393Retail maintenance 29,905 35,497 95,244 115,073Retail supplies and rental sales 2,825 4,812 10,660 17,425 _____________________________________________ 54,917 72,181 179,793 231,891 =============================================Gross profitRetail equipment and related sales 6,460 10,156 22,025 31,040Retail maintenance 11,173 12,693 36,741 44,009Retail supplies and rental sales 974 1,873 4,536 6,891 _____________________________________________ 18,607 24,722 63,302 81,940 ============================================= 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 (notes 5 and12), the Americas is the only primary reportable segment. The Americas segmentincludes the United States and, in the comparative period up to their respectivedisposals as disclosed in note 5, Canada, Central America and South America. TheGroup is managed through its administrative centres in the U.S. and the U.K.,identified as Corporate below. The Corporate costs comprise salaries and directcosts incurred in maintaining the administrative centres plus the financingcosts relating to the principal lines of credit used by the Group to finance itsactivities. It is not appropriate to allocate these costs between the primarysegment and the discontinued operations. For the three months and nine months ended 31st December, 2006: Three Months Ended Nine Months Ended 31st December 31st December ______________________________________________ 2006 2005 2006 2005 £000 £000 £000 £000 ______ ______ _______ _______RevenueAmericas 54,917 72,181 179,793 231,891 ====== ====== ======= ======= Three Months Ended Nine Months Ended 31st December 31st December ______________________________________________ 2006 2005 2006 2005 £000 £000 £000 £000 ______ ______ _______ _______Segment resultAmericas 1,529 4,242 4,091 2,024Corporate (1,663) (3,071) (6,344) (11,242) ______ ______ _______ _______(Loss)/profit before tax and finance costs (134) 1,171 (2,253) (9,218)Investment revenue 14 13 34 53Finance costs (7,812) (5,695) (23,210) (20,332)Tax (2,492) 5,768 (2,599) 5,304 ______ ______ _______ _______Total (loss)/profit from operations (10,424) 1,257 (28,028) (24,193) ====== ====== ======= ======= 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 £3.0 million) was recorded after expenses of £0.2 million (later adjusted to £0.5 million). The attributable tax was nil. During the nine months ended 31st December, 2005 and year ended 31st March, 2006, the Canadian operations had cash inflows from operating activities of £0.3 million and cash outflows from investing activities of £0.1 million. During the nine months ended 31st December, 2005 and year ended 31st March, 2006, the Canadian operations repaid funding from other Group entities of £0.5 million. The cash inflow on the disposal after deducting cash 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 the ninemonths ended 31st December, 2005 and year ended 31st March, 2006 and pre- andpost-tax losses of £0.3 million in the nine months ended 31st December, 2005 andyear ended 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 £5.5 million was recorded inthe three months ended 30th September, 2005 (later adjusted to £5.1 million)after expenses of £0.6 million. The attributable tax was nil. During the ninemonths ended 31st December, 2005 and the year ended 31st March, 2006, theCentral and South American operations had cash outflows from operatingactivities of £0.3 million and cash outflows from investing activities of £0.2million. During the nine months ended 31st December, 2005 and the year ended31st March, 2006, the Central and South American operations had cash outflowsfrom financing activities of £3.5 million, principally relating to funding fromother Group entities. The cash inflow on the disposal after deducting cashdisposed of was £2.7 million, which was recorded in the quarter ended 30thSeptember, 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 nine months ended 31st December, 2005 and year ended 31st March, 2006 andpre- and post-tax losses of £0.4 million in the nine months ended 31st December,2005 and 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. 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 £0.1 million. With effect from 31st August, 2006, the Group sold its Australian operations toOnesource Group Limited for $12.8 million (£6.7 million) cash and a pre-tax gainof £4.6 million was recorded in the three months ended 30th September, 2006after expenses of £0.2 million. The attributable tax was nil. During the ninemonths ended 31st December, 2006 and the year ended 31st March, 2006, theAustralian operations had cash inflows from operating activities of £0.2 millionand £0.6 million respectively and cash outflows from investing activities of£0.1 million and £0.1 million respectively. During the nine months ended 31stDecember, 2006 and the year ended 31st March, 2006, the Australian operationshad cash outflows from financing activities of £0.5 million and £0.9 millionrespectively, relating to funding from other Group entities. The cash inflow onthe disposal after deducting cash disposed of was £6.2 million, which wasrecorded in the quarter ended 30th September, 2006. At 31st August, 2006 prior to disposal, the Australian operations comprisedassets of £8.0 million less liabilities of £5.9 million. The Australianoperations reported revenue of £11.9 million and £27.9 million in the ninemonths ended 31st December, 2006 and year ended 31st March, 2006 respectivelyand pre- and post-tax profits of £0.3 million and £0.4 million in the ninemonths ended 31st December, 2006 and the year ended 31st March, 2006respectively. 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 __________________________ _________________________ 2006 2005 2006 2005 ____________ ___________ ___________ ___________Shares in issue at 1st October/ April 256,529,024 256,412,912 256,529,024 254,188,656Effect of shares issued during the period 1,357,044 73,927 453,993 922,791 ____________ ___________ ___________ ___________Average number of ordinary shares in issue - basic 257,886,068 256,486,839 256,983,017 255,111,447Average outstanding share options 297,296 3,359,136 45,897 - ____________ ___________ ___________ ___________Average number of ordinary shares in issue - diluted 258,183,364 259,845,975 257,028,914 255,111,447 ____________ ___________ ___________ ___________ 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/profit 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 in respect of continuing operations in the three months ended 31st December, 2005 and of discontinued operations in the three and nine months ended 31st December, 2006 since the Group was in a loss position for the other periods reported herein and to include them would be anti-dilutive. Three Months Ended 31st December 2006 2005 __________________ ___________________ Pence Pence £000 Per Share £000 Per Share ________ _________ _______ ________ Basic (loss)/earnings from continuing operations (10,424) (4.0) 1,257 0.5Unusual items arising inrespect of:Restructuring of worldwide operations (172) 711Tax effect - - _____ ____Net of tax effect (172) (0.1) 711 0.3Disposal of operations 76 (275)Tax effect - - _____ ____Net of tax effect 76 - (275) (0.1)Sales tax credit - (962)Tax effect - - _____ ____Net of tax effect - - (962) (0.4)Insurance credit - (2,728)Tax effect - - _____ ____Net of tax credit - - (2,728) (1.1)Exceptional tax credit - - (5,979) (2.3) ________ _________ _______ ________ Adjusted basic loss from continuing operations (10,520) (4.1) (7,976) (3.1) ======== ========= ======= ======== ________ _________ _______ ________Basic and diluted (loss)/ earnings from continuingoperations (10,424) (4.0) 1,257 0.5 ======== ========= ======= ======== ________ _________ _______ ________ Adjusted basic and diluted loss from continuingoperations (before unusual items) (10,520) (4.1) (7,976) (3.1) ======== ========= ======= ======== ________ _________ _______ ________Basic earnings/(loss) from discontinued operations 1,202 0.4 (2,690) (1.0) ======== ========= ======= ======== ________ _________ _______ ________Diluted earnings/(loss) from discontinued operations 1,202 0.4 (2,690) (1.0) ======== ========= ======= ======== Nine Months Ended 31st December 2006 2005 __________________ ___________________ Pence Pence Per Per £000 Share £000 Share ________ _________ _______ ________ Basic loss from continuing operations (28,028) (10.9) (24,193) (9.5)Unusual items arising inrespect of:Restructuring of worldwide operations 2,980 1,749Tax effect - - _____ ____Net of tax effect 2,980 1.1 1,749 0.7Disposal of operations 1,493 2,151Tax effect - - _____ ____Net of tax effect 1,493 0.6 2,151 0.8Sales tax credit - (3,062)Tax effect - - _____ ____Net of tax effect - - (3,062) (1.2)Insurance credit - (2,728)Tax effect - - _____ ____Net of tax credit - - (2,728) (1.1)Exceptional tax credit - - (5,979) (2.3) ________ _________ _______ ________ Adjusted basic loss from continuing operations (23,555) (9.2) (32,062) (12.6) ======== ========= ======= ======== ________ _________ _______ ________ Basic and diluted loss from continuing operations (28,028) (10.9) (24,193) (9.5) ======== ========= ======= ======== ________ _________ _______ ________ Adjusted basic and diluted loss from continuing operations (before unusual items) (23,555) (9.2) (32,062) (12.6) ======== ========= ======= ======== ________ _________ _______ ________ Basic earnings/(loss) from discontinued operations 9,605 3.7 (5,113) (2.0) ======== ========= ======= ======== ________ _________ _______ ________ Diluted earnings/(loss) from discontinued operations 9,605 3.7 (5,113) (2.0) ======== ========= ======= ======== 8. The following shows the computation of free cash flow: Three Months Ended Nine Months Ended 31st December 31st December ___________________ __________________ 2006 2005 2006 2005 £000 £000 £000 £000 ______ ______ ______ _______ Cash inflow/(outflow) from operating activities 3,540 (9,846) (1,466) (12,670)Cash (outflow)/inflow from investing activities (4,288) (772) (22,398) 5,524Less: cash flow from acquisitions and disposals - (118) (6,249) (9,652)Less: cash (inflow)/outflow from operating activities of discontinuedoperations (7,634) (3,369) (5,468) 4,867Less: cash outflow from investing activities of discontinuedoperations 1,957 636 17,653 2,363Add back: cash flow from acquisitions and disposals ofdiscontinued operations - - 6,249 - ______ ______ ______ _______ Free cash flow - continuingoperations (6,425) (13,469) (11,679) (9,568) ====== ====== ====== ======= 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 December As at 31st March 2006 2005 2006 £000 £000 £000 ___________________________________Current portion of long-term borrowings 8,777 836 6,157Non-current bank loans 115,669 133,767 132,488Convertible participating sharesincluding derivative financial instruments 169,918 179,485 180,099Finance leases 636 1,712 1,431Less: cash and cash equivalents (4,333) (29,506) (43,119) ___________________________________Net debt 290,667 286,294 277,056 =================================== 10. Net cash flow from operating activities Three Months Ended Nine Months Ended 31st December 31st December _____________________ ______________________ 2006 2005 2006 2005 £000 £000 £000 £000 _______ ______ _______ _______Loss before tax (9,383) (6,310) (23,992) (32,961)Restructuring cost (release)/expense (368) 1,461 4,670 5,640Cash paid in respect of restructuring charges (1,606) (2,692) (5,638) (9,080)Depreciation and amortisation 2,064 3,963 8,167 13,081(Gain)/loss on sale of property, plant andequipment and equipment onoperating leases (19) 147 (198) 586Loss/(gain) on sale of operations 76 (275) 1,493 2,151 Share-based payments 67 267 67 817Net finance costs 7,992 7,223 23,817 22,415(Increase)/decrease in inventories (2,521) 3,109 (8,019) (283)Decrease/(increase) in receivables 5,095 (1,624) 7,427 16,013Increase/(decrease) in payables and retirementbenefit obligations 2,528 (15,054) (8,272) (30,390)Tax paid (385) (61) (988) (659) _______ ______ _______ _______Net cash flow from operating activities 3,540 (9,846) (1,466) (12,670) ======= ====== ======= ======= 11. Group Statement of Changes in Equity for the Three Months and Nine Months Ended 31st December, 2006 and 2005 and the Year Ended 31st March, 2006 31st December _____________________ 2006 2005 £000 £000 _____________________Balance at 1st October (274,243) (262,225)Loss for the period (9,222) (1,433)Shares issued 315 144Share option expense in the period 67 267Exchange translation differences in the period 12,794 (7,851)Exchange translation differences related to disposals - -Actuarial gains on defined benefit pension plans 1,883 - _____________________Balance at 31st December (268,406) (271,098) ===================== 31st December 31st March __________________________________ 2006 2005 2006 £000 £000 £000 __________________________________Balance at 1st April (286,071) (218,873) (218,873)Loss for the period/year (18,423) (29,306) (46,881)Shares issued 315 347 352Share option expense in the period/year 67 817 1,916Exchange translation differences in the period/year 33,858 (23,956) (21,941)Exchange translation differences related to disposals (35) (127) (127)Actuarial gains/(losses) on defined benefit pension plans 1,883 - (517) __________________________________Balance at 31st Dec/31st Dec/31st March (268,406) (271,098) (286,071) ================================== 12. Post balance sheet event On 12th October, 2006, the Group announced the sale of all the shares of itsbusiness units in Europe for a purchase price of $210.0 million (£107.2 million)in cash, subject to upward or downward net asset adjustments of a maximum of$5.0 million (£2.6 million). The table below shows the European business unit'scarrying amounts of the major classes of assets and liabilities at 31stDecember, 2006, which have been classified as held for sale. Of the Group'stranslation reserve of £16.6 million (credit) as at 31st December, 2006, £1.1million (debit) relates to the European business unit. 31st December, 2006 carrying values ____________________________AssetsIntangible assets and goodwill 482Property, plant and equipment 6,925Other non-current assets 2,509Inventories 25,857Prepaid expenses and other current assets 4,390Trade and other receivables 56,070Cash and cash equivalents 22,000 ________ 118,233 ________LiabilitiesTrade and other payables 43,030Tax liabilities 9,374Obligations under finance leases 57Deferred revenue 6,324Accrued expenses and short-term provisions 18,965Non-current liabilities 16,449 ________ 94,199 ________ 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