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3rd Quarter Results

7 Feb 2006 13:30

Danka Business Systems PLC07 February 2006 Embargoed until 13.30 7 February 2006 DANKA BUSINESS SYSTEMS PLC ("Danka", the "Company" or the "Group") Announcement of results for the nine months and third quarter ended 31st December 2005 Danka Business Systems PLC, a leading independent global provider of officeimaging systems and services, today announced its results for the nine monthsand quarter ended 31st December 2005. In the quarter ended 31st December 2005,revenue was £152.0 million, gross margins were 31.9% and the profit before taxand finance costs was £0.9 million. Distribution costs and administrativeexpenses (operating costs) as a percentage of revenue were 30.3% after thebenefit of certain prior period credits described below. Danka reported a lossfor the period of £1.4 million or 0.6 pence per share which was favourablyaffected by the non-cash resolution of various tax contingencies (principally inthe U.S.) totalling £6.0 million in the quarter (including the release ofinterest accruing on the contingencies of £1.3 million). "Our third-quarter results reflect continued pressure on gross margins,particularly in our service business," said Todd Mavis, Danka's Chief ExecutiveOfficer. "In the quarter, we delayed taking cost reductions and in fact addedtraining and other related costs in our service group because of on-goingcontract negotiations with two of our larger service customers. We are pleasedto have successfully concluded these new contracts with Pitney Bowes and Kodak,as we recently announced. In addition, we experienced a continued decline in ouraverage cost per copy which is being driven by newer technology and a shiftingservices pricing model. To meet our margin challenges, we have continued to takecosts out of the business and execute on our Managed Print Services strategy andwe are pleased with our progress in these areas." For the nine months ended 31st December 2005: • Total revenue was £471.4 million, 7.5% less than the comparative prior year period, with retail equipment and related sales up by 1.5% and retail service revenue declining by 13.6%. • Consolidated gross margins were 32.8% of revenue, compared to 36.9% in the comparative prior year period. • Operating costs were £157.1 million (or 33.3% of sales), 15.0% lower than the comparative prior year period. The Group recovered £1.8 million in prior period overpayments related to a legacy Workers' Compensation insurance policy and the reduction of a £0.9 million reserve related to the same policy. The Group's improvement in internal systems also led to a £3.1 million recovery of sales (indirect) taxes, also relating to prior periods. Operating costs were favourably affected by these items. • There was a loss from continuing operations before tax and finance costs of £10.5 million, compared to a profit of £2.2 million in the comparative prior year period. Danka reported a loss for the period of £29.3 million (11.5 pence per share), compared to £11.2 million (4.4 pence per share); the current period loss was favourably affected by the non-cash resolution of various tax contingencies (principally in the U.S.) totalling £6.0 million (including release of interest accruing on the contingencies of £1.3 million). For the third quarter: • Total revenue was £152.0 million, 9.6% less than the comparative prior year period, with retail equipment and related sales declining by 4.3% and retail service revenue declining by 14.7%. Primary reasons for the decline in retail equipment revenue were softness in certain Europe/Australia geographies offset by favourable foreign currency movements. The decline in retail service revenue was due in large part to the continued decline in click rates and the emergence of a more utility based industry pricing model. Further, the Group continued to experience a slower than anticipated ramp-up in volume from newer, printer manufacturer contracts. • Consolidated gross margins were 31.9% of revenue, compared to 36.1% in the comparative prior year quarter. In the retail equipment segment, the factors in the margin decline included worldwide market pressures on pricing, an unfavourable product mix during the quarter and product gaps in colour. The decline in retail service margins was due in large part to the effect of lower revenue on fixed service costs, continuing investments to meet service-level obligations to our newer, printer manufacturer partners and a decline in click rates. • Operating costs were £46.1 million (or 30.3% of sales), 27.4% lower than the comparative prior year period. Contributing to the decrease were lower overhead and corporate costs as a result of the Group's continued streamlining of operations and efficiencies from its Vision 21 initiative. In addition, the Group recovered £1.8 million in prior period overpayments related to a legacy Workers' Compensation insurance policy and the reduction of a £0.9 million reserve related to the same policy. The Group's improvement in internal systems also led to a £1.0 million recovery of sales (indirect) taxes, also relating to prior periods. Operating costs were favourably affected by these items. • There was a profit from continuing operations before tax and finance costs of £0.9 million, compared to a loss of £3.2 million in the comparative prior year quarter. "In addition to our continuing efforts to streamline the business and reducecosts, we're also focused on the effective management of working capital," notedDanka Chief Financial Officer Ed Quibell. "In the third quarter, we saw a £6.5million improvement in net working capital. This improvement included acontinued use of cash in the rationalisation of our payables, which we expectwill favorably impact the operation of our business. The reduction of our cashby £18.8 million was offset by the reduction in our payables and restructuringreserves of £17.7 million. We have continued to experience slight improvement inour liquidity ratios as we have focused on the better management of our workingcapital." Conference Call and Webcast A conference call and Webcast to discuss Danka's third quarter results has beenscheduled for today, Tuesday, 7th February at 3:00 p.m. UK time. To access theWebcast, please go to www.danka.com. To participate in the conference call,callers in the United States and Canada (and some UK callers) may dial (+1)-800-309-1555; other international callers should dial (+1)-706-643-7754. Noconference number is needed. A recording of the call will be available fromapproximately two hours after the call ends until 5:00 a.m. UK time on 14thFebruary. To access this recording, please call either (+1)-800-642-1687 or (+1)-706-645-9291. The conference ID number for the replay is 4831368 or visit Danka's Web site. - ends - For further information please contact: Danka Business Systems PLCCheley Howes, Danka Investor Relations 001 727 622 2760Paul Dumond, Danka London 020 7605 0154 Weber Shandwick Square MileJames Chandler/Helen Thomas 020 7067 0700 About Danka Danka delivers value to clients worldwide by using its expert technical andprofessional services to implement effective document information solutions. Asone of the largest independent providers of enterprise imaging systems andservices, the Group enables choice, convenience and continuity. Danka's visionis to empower customers to benefit fully from the convergence of image anddocument technologies in a connected environment. This approach will strengthenthe Group's client relationships and expand its strategic value. For moreinformation, visit Danka at www.danka.com. Certain statements contained herein, or otherwise made by the Group's officers,including statements related to Danka's future performance and the outlook forthe Group's businesses and respective markets, projections, statements of theGroup's plans or objectives, forecasts of market trends and other matters, areforward-looking statements, and contain information relating to Danka that isbased on management's beliefs as well as assumptions made by, and informationcurrently available to management. The words "goal", "anticipate", "expect","believe" and similar expressions as they relate to Danka are intended toidentify forward-looking statements, although not all forward-looking statementscontain such identifying words. No assurance can be given that the results inany forward-looking statement will be achieved. For the forward-lookingstatements, Danka claims the protection of the safe harbour for forward-lookingstatements provided for in the Private Securities Litigation Reform Act of 1995,Section 27A of the Securities Act of 1933 and Section 21E of the SecuritiesExchange Act of 1934, as amended. Such statements reflect management's currentviews with respect to future events and are subject to certain risks,uncertainties and assumptions that could cause actual results to differmaterially from those reflected in the forward-looking statements. Factors thatmight cause such actual results to differ materially from those reflected in anyforward-looking statements include, but are not limited to, the following: (i)any inability to implement Danka's strategy successfully; (ii) any inability tocomply with the financial or other covenants in the Group's debt instruments;(iii) any material adverse change in financial markets, the economy or in theGroup's financial position; (iv) increased competition in the industry and thediscounting of products by the Group's competitors; (v) new competition as theresult of evolving technology; (vi) any inability by Danka to procure or anyinability by Danka to continue to gain access to and distribute successfully newproducts, including digital products, colour products, multi-function productsand high-volume copiers, or to continue to bring current products to themarketplace at competitive costs and prices; (vii) any inability to arrangefinancing for Danka's customers' purchases of equipment from Danka; (viii) anyinability to enhance and unify the Group's management information systemssuccessfully; (ix) any inability to record and process key data due toineffective implementation of business processes and policies; (x) any negativeimpact from the loss of a key vendor or customer; (xi) any negative impact fromthe loss of any of the Group's senior or key management personnel; (xii) anychange in economic conditions in domestic or international markets where Dankaoperates or has material investments which may affect demand for the Group'sproducts or services; (xiii) any negative impact from the international scope ofthe Group's operations; (xiv) fluctuations in foreign currencies; (xv) anyinability to achieve or maintain cost savings; (xvi) any incurrence of taxliabilities beyond management's current expectations, which could adverselyaffect the Group's liquidity; (xvii) any delayed or lost sales and other impactsrelated to the commercial and economic disruption caused by past or futureterrorist attacks, the related war on terrorism, and the fear of additionalterrorist attacks; and (xviii) other risks including those risks identified inany of the Group's filings with the Securities and Exchange Commission, or theSEC. Readers are cautioned not to place undue reliance on these forward-lookingstatements, which reflect management's analysis only as at the date they aremade. Except as required by applicable law, Danka undertakes no obligation anddoes not intend to update these forward-looking statements to reflect events orcircumstances that arise after the date they are made. Furthermore, as a matterof policy, Danka does not generally make any specific projections as to futureearnings, nor does Danka endorse any projections regarding future performance,which may be made by others outside the Company. The financial information for the nine months and quarters ended 31st December,2005 and 2004 is unaudited and not reviewed and does not constitute fullaccounts within the meaning of Section 240 of the Companies Act 1985. Thefinancial information for such periods is prepared on the basis set out in note2 to the financial information below. The comparative figures for the financialyear ended 31st March 2005 are not the Company's statutory accounts for thatyear. Those accounts, which were prepared under UK Generally Accepted AccountingPractices, have been reported on by the Company's auditors but not yet deliveredto the Registrar of Companies. The report of the auditors was unqualified anddid not contain statements under section 237(2) or (3) of the Companies Act1985. 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 notes payable pluslong-term debt and notes payable less cash and cash equivalents. These measuresare non-IFRS financial measures, defined as numerical measures of our financialperformance that exclude or include amounts so as to be different than the mostdirectly comparable measure calculated and presented in accordance withInternational Financial Reporting Standards, or IFRS in our statement ofoperations, balance sheet or statement of cash flows. The notes to this pressrelease provide a reconciliation of these non-IFRS financial measures to themost directly comparable IFRS financial measures. Although free cash flow and net debt represent non-IFRS financial measures, weconsider these measures to be key operating metrics of the Group. We use thesemeasures in our planning and budgeting processes, to monitor and evaluate ourfinancial and operating results and to measure performance of our separatedivisions. We also believe that free cash flow and net debt are useful toinvestors because they provide an analysis of financial and operating resultsusing the same measures that we use in evaluating the Group. We expect that suchmeasures provide investors with the means to evaluate our financial andoperating results against other companies within our industry. We believe thatthese measures are meaningful to investors in evaluating our ability to meet ourfuture debt service requirements and to fund our capital expenditures andworking capital requirements. Our calculation of free cash flow and net debt maynot be consistent with the calculation of these measures by other companies inour industry. 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 our operating performance or cash flows fromoperating activities as a measure of liquidity or any other measures ofperformance 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 and Nine Months Ended 31st December 2005 and 2004 Three Months Ended Nine Months Ended 31st December 31st December 2005 2004 2005 2004 Note £000 £000 £000 £000 ----------------------------------------------------Continuing operationsRevenue 4 152,005 168,139 471,356 509,627Cost of sales (103,566) (107,474) (316,718) (321,382) ----------------------------------------------------Gross profit 4 48,439 60,665 154,638 188,245 Other operating income (114) - 89 156Distribution costs (22,072) (25,721) (69,449) (74,410)Administrative expenses (24,010) (37,782) (87,608) (110,255)Other operating expense (144) - (425) (448)Restructuring costs (1,461) (390) (5,640) (1,125)Net gain/(loss) on sale of operations 5 275 - (2,151) - ----------------------------------------------------Profit/(loss) from continuing operations before tax and finance costs 913 (3,228) (10,546) 2,163 Investment income 86 108 257 392Finance costs (7,309) (7,985) (22,672) (23,220) ----------------------------------------------------Loss from continuing operations before tax (6,310) (11,105) (32,961) (20,665) Tax - overseas 4,877 9,482 3,655 9,482 ---------------------------------------------------- Loss from continuing operations for the period and attributable to equity holders of the parent (1,433) (1,623) (29,306) (11,183) ==================================================== Loss per share: 7Basic from continuing operations (0.6)p (0.6)p (11.5)p (4.4)pBasic from discontinued operations - - - - (0.6)p (0.6)p (11.5)p (4.4)p ---------------------------------------------------- Diluted from continuing operations (0.6)p (0.6)p (11.5)p (4.4)p ----------------------------------------------------Diluted from discontinued operations - - - - ---------------------------------------------------- (0.6)p (0.6)p (11.5)p (4.4)p ---------------------------------------------------- Average exchange rate £1= $ 1.749 $ 1.866 $ 1.796 $ 1.830Average exchange rate £1= • 1.470 • 1.438 • 1.469 • 1.474 Danka Business Systems PLC Group Balance Sheet 31st December 31st December 31st March 2005 2004 2005 £000 £000 £000 ----------- ---------- ----------Non-current assetsIntangible assets 749 1,201 1,084Goodwill 2,295 2,008 2,037Property and equipment 22,679 28,612 26,818Equipment on operating leases 7,609 12,632 12,412Other 6,206 7,902 10,029 ----------- ---------- ---------- 39,538 52,355 52,380 ----------- ---------- ----------Current assetsInventories 52,676 61,963 51,184Prepaid expenses 5,874 8,000 6,844Trade and other receivables 111,496 131,312 120,977Cash and cash equivalents 29,506 46,584 51,947 ----------- ---------- ---------- 199,552 247,859 230,952 ----------- ---------- ---------- ----------- ---------- ----------Total assets 239,090 300,214 283,332 ----------- ---------- ---------- Current liabilitiesTrade and other payables (87,029) (87,978) (91,706)Tax liabilities (19,454) (26,723) (25,424)Obligations under finance leases (921) (1,072) (1,036)Current portion of long-term borrowings (836) (1,060) (179)Deferred revenue (19,752) (23,007) (21,264)Short-term provisions (44,375) (45,991) (59,885) ----------- ---------- ---------- (172,367) (185,831) (199,494) ----------- ---------- ----------Non-current liabilitiesBank loans (133,767) (118,996) (120,952)Convertible loan notes (179,485) (149,271) (153,528)Retirement benefit obligations (12,956) (14,722) (13,341)Deferred tax liabilities (328) (351) (324)Long-term provisions (3,373) (5,597) (5,499)Obligations under finance leases (791) (1,695) (1,482)Other (4,987) (2,847) (5,459) ----------- ---------- ---------- (335,687) (293,479) (300,585) ----------- ---------- ---------- ----------- ---------- ----------Total liabilities (508,054) (479,310) (500,079) ----------- ---------- ---------- ----------- ---------- ----------Net liabilities (268,964) (179,096) (216,747) =========== ========== ========== EquityShare capital 3,206 3,175 3,177Share premium account 198,883 198,524 198,565Share options 2,478 1,272 1,661Translation reserve (21,128) 9,605 2,947Retained earnings (452,403) (391,672) (423,097) ----------- ---------- ----------Total equity (268,964) (179,096) (216,747) =========== ========== ========== Closing exchange rate £1= $ 1.719 $ 1.916 $ 1.889 =========== ========== ==========Closing exchange rate £1= • 1.451 • 1.415 • 1.456 =========== ========== ========== Danka Business Systems PLC Group Cash Flow Statement For the Nine Months Ended 31st December 2005 and 2004 31st December ----------------- 2005 2004 Note £000 £000 ------ --------- --------- Net cash (outflow)/inflow from operating activities 10 (12,670) 9,418 Cash flows from investing activitiesInterest received 257 377Capital expenditure (4,821) (8,901)Proceeds from sale of operations 9,652 114Purchase of subsidiary undertakings - (1,143)Proceeds from sale of fixed assets 436 1,920 --------- ---------Net cash from investing activities 5,524 (7,633) --------- --------- Cash flows from financing activities(Payments)/borrowings under line of credit agreements (114) 249Payments under finance leases (1,024) (953)Interest paid (16,167) (15,368)Proceeds from share options exercised 347 482 --------- ---------Net cash from financing activities (16,958) (15,590) --------- --------- Net decrease in cash and cash equivalents (24,104) (13,805)Cash and cash equivalents at 1st April 51,947 61,298Effect of exchange rate fluctuations on cash held 1,663 (909) --------- ---------Cash and cash equivalents at 31st December 29,506 46,584 ========= ========= Included within the balance of cash and cash equivalents as at 31st December2005 is £7,069,000 of restricted cash (2004 - £7,954,000; 31st March 2005 -£7,918,000). The restricted cash is used as collateral for various borrowings ofthe group. Danka Business Systems PLC Group Cash Flow Statement For the Three Months Ended 31st December 2005 and 2004 31st December ----------------- 2005 2004 Note £000 £000 ------ --------- --------- Net cash (outflow)/inflow from operating activities 10 (9,846) 1,381 Cash flows from investing activitiesInterest received 86 80Capital expenditure (1,186) (3,186)Proceeds from sale of operations 118 114Purchase of subsidiary undertakings - (1,143)Proceeds from sale of fixed assets 210 212 --------- ---------Net cash from investing activities (772) (3,923) --------- --------- Cash flows from financing activitiesPayments under line of credit agreements (88) (61)Payments under finance leases (260) (550)Interest paid (7,801) (7,533)Proceeds from share options exercised 35 255 --------- ---------Net cash from financing activities (8,114) (7,889) --------- --------- Net decrease in cash and cash equivalents (18,732) (10,431)Cash and cash equivalents at 1st October 48,323 58,940Effect of exchange rate fluctuations on cash held (85) (1,925) --------- ---------Cash and cash equivalents at 31st December 29,506 46,584 ========= ========= Included within the balance of cash and cash equivalents as at 31st December2005 is £7,069,000 of restricted cash (2004 - £7,954,000). The restricted cashis used as collateral for various borrowings of the group. Danka Business Systems PLC Group Statement of Recognised Income and Expense For the Nine Months Ended 31st December 2005 and 2004 and the Year Ended 31st March 2005 31st December 31st March ------------------------------------ 2005 2004 2005 £000 £000 £000 ------------------------------------ Loss for the period (29,306) (11,183) (46,189)Exchange translation differences in the period (23,948) 9,605 2,947Exchange translation differences related to disposals (127) - -Pension scheme actuarial variations - - 3,581 ------------------------------------Total recognised income and expense for the period (53,381) (1,578) (39,661) ==================================== Danka Business Systems PLC Group Statement of Recognised Income and Expense For the Three Months Ended 31st December 2005 and 2004 31st December ----------------- 2005 2004 £000 £000 --------- --------- Loss for the period (1,433) (1,623)Exchange translation differences in the period (7,831) 12,101Exchange translation differences related to disposals - -Pension scheme actuarial variations - - --------- ---------Total recognised income and expense for the period (9,264) 10,478 ========= ========= Notes to the Financial Information 1. The consolidated interim financial statements for the three and nine months ended 31st December, 2005 and 2004 are unaudited and unreviewed and do not constitute full accounts within the meaning of Section 240 of the Companies Act 1985. The financial information for such periods is prepared on the basis set out in note 2 below. The comparative figures for the financial year ended 31st March 2005 are not the Company's statutory accounts for that year. Those accounts, which were prepared under UK Generally Accepted Accounting Practices, have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain statements under section 237(2) or (3) of the Companies Act 1985. 2. Significant accounting policies Danka Business Systems PLC ("the Company") is a company domiciled in the UnitedKingdom. The consolidated interim financial statements of the Company for thethree and nine months ended 31st December, 2005 and 2004 comprise the Companyand its subsidiaries (together referred to as the "Group"). The consolidatedinterim financial statements were authorised for issuance on 7th February, 2006. These are the Group's third International Financial Reporting Standards ("IFRS")consolidated interim financial statements for part of the period covered by thefirst IFRS annual financial statements and IFRS 1 First-time Adoption ofInternational Financial Reporting Standards has been applied. An explanation ofhow the transition to IFRS has affected the reported financial position,financial performance and cash flows of the group is provided on the Company'swebsite via the Investor Relations page at www.danka.com/IFRS.asp. The websitealso contains line-by-line reconciliations of equity and profit or loss forcomparative periods reported under UK GAAP (previous GAAP) to those reported forthose periods under IFRS; note 12 below contains abridged reconciliations. Basis of preparation The financial statements are presented in Sterling, rounded to the nearestthousand. They are prepared on the historical cost basis, as modified byrequirements to revalue certain financial assets and liabilities, includingderivatives. EU law (IAS Regulation EC 1606/2002) requires that the next annual consolidatedfinancial statements of the Company, for the year ending 31st March 2006, beprepared in accordance with IFRS adopted for use in the EU ("adopted IFRS"). This interim financial information has been prepared on the basis of therecognition and measurement requirements of IFRS in issue that are eitherendorsed by the EU and effective (or available for early adoption at 31st March2006) or are expected to be endorsed and effective (or available for earlyadoption) at 31st March 2006, the Group's first annual reporting date at whichit is required to use adopted IFRS. Based on those adopted and unadopted IFRS,the directors have made assumptions about the accounting policies expected to beapplied, which are set out on the Company's website as detailed above, when thefirst annual IFRS financial statements are prepared for the year ending 31stMarch 2006. In addition, the adopted IFRS that will be effective (or available for earlyadoption) in the annual financial statements for the year ending 31st March 2006are still subject to change and to additional interpretations and thereforecannot be determined with certainty. Accordingly, the accounting policies forthat annual period will be determined finally only when the annual financialstatements are prepared for the year ending 31st March 2006. Accounting policies The accounting policies have been applied consistently throughout the Group forpurposes of these consolidated interim financial statements. These are set outin full on the Company's website at the address set out above. Restructuring costs and the net loss on sale of operations have been separatelydisclosed on the face of the income statement in accordance with IAS 1 in orderto assist the assessment of financial performance owing to their material andinfrequent 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 and Canadian residents during Julyand August and lower levels of retail maintenance revenue from United Statesgovernmental agencies. This has historically resulted in reduced sales activityand reduced usage of photocopiers, facsimiles and other office imaging equipmentduring the second quarter. Accordingly, the results of operations for theinterim periods are not necessarily indicative of the results which may beexpected for the entire financial year. 4. Analysis of turnover and gross profit The Group operates in one business segment, being the supply and servicing ofoffice equipment and the provision of related services. The following tableprovides additional analysis of the components of turnover and of gross profitof the single business segment, where the sale or rental of equipment normallyincludes a service contract and the purchase of supplies once the contractexpires. These components are not considered different classes of businessbecause of their inter-relation. Three Months Ended Nine Months Ended 31st December 31st December 2005 2004 2005 2004 £000 £000 £000 £000 ----------------------------------------------------Turnover Retail equipment and related sales 57,397 59,958 180,910 178,174Retail maintenance 69,236 81,128 214,957 248,684Retail supplies and rental sales 11,121 13,439 37,363 44,513Wholesale sales 14,251 13,614 38,126 38,256 ---------------------------------------------------- 152,005 168,139 471,356 509,627 ==================================================== Gross profitRetail equipment and related sales 18,132 21,352 55,939 62,392Retail maintenance 23,718 31,417 77,727 101,091Retail supplies and rental sales 4,285 5,795 14,279 18,036Wholesale sales 2,304 2,101 6,693 6,726 ---------------------------------------------------- 48,439 60,665 154,638 188,245 ==================================================== 5. Disposal of Canadian, Central and South American operations and an Italian entity 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 £3.1 million was recorded after expenses of £0.4 million. The attributabletax was nil. During the nine months ended 31st December 2005, the Canadianoperations had cash inflows from operating activities of £1.1 million (ninemonths ended 31st December 2004 - outflows of £2.4 million; year ended 31stMarch 2005 - outflows of £4.8 million) and cash outflows from investingactivities of £0.1 million (nine months ended 31st December 2004 - £0.1 million;year ended 31st March 2005 - £0.2 million). During the nine months ended 31stDecember 2005, the Canadian operations repaid funding from other Group entitiesof £0.8 million (nine months ended 31st December 2004 - received funding of lessthan £0.1 million; year ended 31st March 2005 - received funding of £3.8million). The cash inflow on the disposal after deducting cash disposed of was £6.7 million in the nine month period. At 30th June 2005 prior to disposal, the Canadian operations comprised assets of£7.9 million (31st March 2005 - £7.6 million) less liabilities of £3.9 million(31st March 2005 - £3.9 million). The Canadian operations reported revenue of£5.1 million in the quarter ended 30th June 2005 and nine months ended 31stDecember 2005 (year ended 31st March 2005 and nine months ended 31st December2004 - £19.4 million and £14.6 million respectively) and pre- and post-taxlosses of £0.4 million in the quarter ended 30th June 2005 and nine months ended31st December 2005 (year ended 31st March 2005 and nine months ended 31stDecember 2004: £4.2 million and £1.9 million respectively). 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 recordedafter expenses of £0.6 million. The attributable tax was nil. During the ninemonths ended 31st December 2005, the Central and South America operations hadcash outflows from operating activities of £0.9 million (nine months ended 31stDecember 2004 - cash inflows of £2.0 million; year ended 31st March 2005 -inflows of £1.4 million) and cash outflows from investing activities of £0.5million (2004 - £1.4 million; 2005 - £1.3 million). The cash inflow on thedisposal after deducting cash disposed of was £2.7 million. At 31st August 2005 prior to disposal, the Central and South America operationscomprised assets of £16.1 million (31st March 2005 - £15.2 million) lessliabilities of £3.6 million (31st March 2005 - £3.5 million). The Central andSouth America operations reported revenue of £7.1 million in the six monthsended 30th September 2005 and nine months ended 31st December 2005 (year ended31st March 2005 and nine months ended 31st December 2004 - £16.1 million and£12.8 million respectively) and pre- and post-tax earnings of £0.4 million inthe nine months ended 31st December 2005 (year ended 31st March 2005 and ninemonths ended 31st December 2004 - pre-tax £0.8 million and £1.1 millionrespectively, post-tax £0.1 million and £0.7 million respectively). 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 ----------------------------- ---------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Shares in issue at 1st October / 1st April 256,412,912 251,491,275 254,188,656 250,812,019Effect of shares issued during the period 73,927 1,249,671 922,791 940,370 ------------ ------------ ------------ ------------Average number of ordinary shares in issue - basic 256,486,839 252,740,946 255,111,447 251,752,389Average outstanding share options - - - - ------------ ------------ ------------ ------------Average number of ordinary shares in issue - diluted 256,486,839 252,740,946 255,111,447 251,752,389 ============ ============ ============ ============ 7. The calculations of the loss per share from continuing operations are based on the loss from continuing operations on ordinary activities after taxation and the basic and diluted weighted average number of ordinary shares in issue during the period as per note 6 above. In order to provide a trend measure of underlying performance, Group loss from continuing operations on ordinary activities after taxation has been adjusted to exclude restructuring expenses and other items unusual because of their nature, size or incidence and basic loss per share recalculated. Outstanding share options have not been considered in dilutive per share computations since the Group is in a loss position for the periods below and to include them would be anti-dilutive. Three Months Ended 31st December 2005 2004 --------------------- -------------------- Pence Pence £000 Per Share £000 Per Share --------- --------- --------- --------- Basic loss from continuing operations (1,433) (0.6) (1,623) (0.6)Unusual items arising in respect of: Restructuring of worldwide operations 1,461 390 Tax effect - - ------ ----- Net of tax effect 1,461 0.6 390 0.1 Disposal of operations 275 - Tax effect - - ------ ----- Net of tax effect 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 effect (2,728) (1.1) - - Exceptional tax credit (4,694) (1.8) (10,710) (4.2) Release of interest accruing (1,285) (0.5) - - --------- --------- --------- ---------Adjusted basic loss from continuing operations (9,366) (3.7) (11,943) (4.7) ========= ========= ========= ========= --------- --------- --------- ---------Basic and diluted loss from (1,433) (0.6) (1,623) (0.6) ========= ========= ========= ========= --------- --------- --------- ---------Adjusted basic and diluted loss from continuing operations (before unusual items) (9,366) (3.7) (11,943) (4.7) ========= ========= ========= ========= Three Months Ended 31st December 2005 2004 --------------------- -------------------- Pence Pence £000 Per Share £000 Per Share --------- --------- --------- --------- Basic loss from continuing operations (29,306) (11.5) (11,183) (4.4)Unusual items arising in respect of: Restructuring of worldwide operations 5,640 1,125 Tax effect - - ------ ----- Net of tax effect 5,640 2.2 1,125 0.4 Disposal of operations 2,151 - Tax effect - - ------ ----- Net of tax effect 2,151 0.9 - - Sales tax credit (3,062) - Tax effect - - ------ ----- Net of tax effect (3,062) (1.2) - - Insurance credit (2,728) - Tax effect - - ------ ----- Net of tax effect (2,728) (1.1) - - Exceptional tax credit (4,694) (1.8) (10,710) (4.2) Release of interest accruing thereon (1,285) (0.5) - - --------- --------- --------- ---------Adjusted basic loss from (33,284) (13.0) (20,768) (8.2) ========= ========= ========= ========= --------- --------- --------- ---------Basic and diluted loss from continuing operations (29,306) (11.5) (11,183) (4.4) ========= ========= ========= ========= --------- --------- --------- ---------Adjusted basic and diluted loss from continuing operations (before unusual items) (33,284) (13.0) (20,768) (8.2) ========= ========= ========= ========= 8. The following shows the computation of free cash flow: Three Months Ended Nine Months Ended 31st December 31st December ----------------------------- ---------------------------- 2005 2004 2005 2004 £000 £000 £000 £000 ------------ ------------ ------------ ------------Cash (outflow)/inflow from operating activities (9,846) 1,381 (12,670) 9,418Cash (outflow)/inflow from investing activities (772) (3,923) 5,524 (7,633)Less: cash flow from acquisitions and disposals (118) 1,029 (9,652) 1,029 ------------ ------------ ------------ ------------Free cash flow (10,736) (1,513) (16,798) 2,814 ============ ============ ============ ============ 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 As at 31st December 31st March -------------------------------------- 2005 2004 2005 £000 £000 £000 -------------------------------------- Current portion of long-term borrowings 836 1,060 179Bank loans 133,767 118,996 120,952Convertible loan notes 179,485 149,271 153,528Finance leases 1,712 2,767 2,518Less: cash and cash equivalents (29,506) (46,584) (51,947) --------------------------------------Net debt 286,294 225,510 225,230 ====================================== 10. Net cash flow from operating activities Three Months Ended Nine Months Ended 31st December 31st December ----------------------------- ---------------------------- 2005 2004 2005 2004 £000 £000 £000 £000 ------------ ------------ ------------ ------------Loss before tax (6,310) (11,105) (32,961) (20,665)Restructuring charges 1,461 390 5,640 1,125Cash paid in respect of restructuring charges (2,692) (974) (9,080) (9,663)Depreciation and amortisation 3,963 5,391 13,081 16,257Loss/(gain) on sale of property and equipment 147 (401) 586 (762)(Gain)/loss on sale of operations (275) - 2,151 -Share-based payments 267 296 817 672Net finance costs 7,223 7,877 22,415 22,828Decrease/(increase) in inventories 3,109 (7,126) (283) (13,747)(Increase)/decrease in receivables (1,624) (2,347) 16,013 (247)Increase/(decrease) in payables (15,054) 11,284 (30,390) 15,631Tax paid (61) (1,904) (659) (2,011) ------------ ------------ ------------ ------------Net cash flow from operating activities (9,846) 1,381 (12,670) 9,418 ============ ============ ============ ============ 11. Group Statement of Changes in Equity for the Nine Months Ended 31st December 2005 and 2004 and the Year Ended 31st March 2005 31st December 31st March ------------------------------------ 2005 2004 2005 £000 £000 £000 ------------------------------------ Balance at 1st April (216,747) (178,774) (178,774)Loss for the period (29,306) (11,183) (46,189)Shares issued 347 584 627Share option expense in the period 817 672 1,061Exchange translation differences in the period (23,948) 9,605 2,947Exchange translation differences related to disposals (127) - -Pension scheme actuarial variations - - 3,581 ------------------------------------Balance at 31st December/31st December/31st March (268,964) (179,096) (216,747) ==================================== Group Statement of Changes in Equity for the Three Months Ended 31st December2005 and 2004 31st December ----------------- 2005 2004 £000 £000 --------- --------- Balance at 1st October (260,111) (190,205)Loss for the period (1,433) (1,623)Shares issued 144 335Share option expense in the period 267 296Exchange translation differences in the period (7,831) 12,101Exchange translation differences related to disposals - -Pension scheme actuarial variations - - --------- ---------Balance at 31st December (268,964) (179,096) ========= ========= 12. The following are reconciliations of the balance sheets as at 31st December 2004 and 31st March 2005 and the income statement for the three and nine months ended 31st December 2004 under UK GAAP as originally reported and under IFRS as restated earlier in this release. Full details of the reconciling items and the Group's IFRS accounting policies are on the Company's website via the Investor Relations page at www.danka.com. Balance sheet As at 31st December As at 31st March 2004 2005 £000 £000 ------------- ------------- Net liabilities under UK GAAP as originally reported (24,443) (57,443)Classification of non-equity shares under UK GAAP as liabilities under IFRS (149,271) (153,528)Recognition of pension scheme deficits (5,236) (5,824)Other (146) 48 ------------- -------------Net liabilities under IFRS (179,096) (216,747) ============= ============= Income statement Three Months Ended Nine Months Ended 31st December 2004 31st December 2004 £000 £000 --------- ---------- Loss for the period under UK GAAP as originally reported (875) (9,134)Additional finance costs due to: Accretion of the equity conversion feature of the participating shares (420) (1,274)Share option expense (296) (672)Other (32) (103) ---------- ----------Loss for the period under IFRS (1,623) (11,183) =========== ========== 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
Date   Source Headline
10th Sep 20217:00 amRNSIssue of unlisted option & PDMR/PCA notifications
1st Sep 20217:02 amRNSTotal Voting Rights and Capital
1st Sep 20217:01 amRNSHalf-year Report
1st Sep 20217:00 amRNSChange to Board of Directors
11th Aug 20217:00 amRNSProposed Cancellation of London Listing
6th Aug 20217:56 amRNSIssue of Shares and Unlisted Options
2nd Aug 20217:00 amRNSTotal Voting Rights and Capital
30th Jul 20217:00 amRNSAmended Constitution
30th Jul 20217:00 amRNSResult of AGM
29th Jul 20217:00 amRNSQuarterly Activities Report and Appendix 5B
5th Jul 20217:00 amRNSCompany Presentation and Video
1st Jul 202111:06 amRNSNotice of AGM
1st Jul 20217:00 amRNSTotal Voting Rights
25th Jun 20219:31 amRNSNotification of PDMR transaction
25th Jun 20217:26 amRNSProposed issue of unlisted options
17th Jun 20217:00 amRNSColluli Project Update
11th Jun 20217:17 amRNSReport on Payments to Governments
1st Jun 20217:00 amRNSTotal Voting Rights and Capital
27th May 20217:00 amRNSColluli Project Update
21st May 20217:52 amRNSAppendix 3Y
21st May 20217:48 amRNSDirector/PDMR Shareholding
19th May 20217:00 amRNSColluli Project - RO Plant Manufacturing Underway
12th May 20217:01 amRNSA$20.3M Placement Endorses Danakali's SOP Project
12th May 20217:00 amRNSCorrection of Announcement - Issue of Shares
6th May 20219:12 amRNSIssue of shares
6th May 20217:00 amRNSNotification of PDMR and PCA transactions
30th Apr 20219:53 amRNSAnnual Report to Shareholders
30th Apr 20217:00 amRNSQuarterly Activities Report and Appendix 5B
29th Apr 20217:05 amRNSCompany Presentation
29th Apr 20217:00 amRNSA$20.3M Placement to Advance Colluli
27th Apr 20217:00 amRNSASX Trading Halt and Proposed Fundraise
19th Apr 202110:15 amRNSAdviser Appointment
13th Apr 20217:00 amRNSResignation of CFO
6th Apr 20217:00 amRNSTotal Voting Rights and Capital
6th Apr 20217:00 amRNSCorrection to Corporate Presentation
31st Mar 20217:26 amRNSRelease of 2020 Financial Report
26th Mar 20217:00 amRNSExecutive Chairman remuneration
24th Mar 20219:31 amRNSIssue of unlisted options
24th Mar 20219:29 amRNSProposed issue of unlisted options
22nd Mar 20217:34 amRNSCompany Presentation
10th Mar 20217:00 amRNSClean energy zero carbon SOP
2nd Mar 20218:36 amRNSTotal Voting Rights and Capital
26th Feb 20217:00 amRNSAppointment of Executive Chairman and restructure
23rd Feb 20219:13 amRNSResponse to ASX price and volume query
15th Feb 20219:01 amRNSIssue of shares & options, PDMR/PCA transactions
11th Feb 20217:00 amRNSCompany Presentation
1st Feb 20217:53 amRNSTotal Voting Rights
29th Jan 20217:54 amRNSIssue of unlisted options
29th Jan 20217:50 amRNSProposed issue of securities
28th Jan 20217:37 amRNSQuarterly Report and Appendix 5B

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