DNK.L Regulatory News (DNK)

10 Jun 2005 14:41

Danka Business Systems PLC10 June 2005 This announcement replaces the announcement released on 10 June 2005 at 13.34 under RNS number 4323N. In the sixth paragraph, opening with "Recurring operating costs", the increasein bad debt charges related to U.S. trade debtors should read £3.6 million andnot £2.8 million as previously shown. All other details remain unchanged. The full correct version is shown below. DANKA BUSINESS SYSTEMS PLC ("Danka", the "Company" or the "Group") Announcement of results for the year and fourth quarter ended 31st March 2005 Chief Financial Officer Mark Wolfinger to retire with effect from 30th June 2005 Danka Business Systems PLC, a leading independent global provider of officeimaging systems and services, today announced its results for the year andquarter ended 31st March 2005. For the full year, Danka reported turnover of £668.2 million and operatinglosses of £22.8 million excluding exceptional items. Danka's fourth quarterturnover was £158.6 million and operating losses were £27.1 million excludingexceptional items. The results include a £9.4 million provision for U.S. tradedebtors in the fourth quarter. Including the exceptional restructuring chargesof £5.1 million and £4.0 million, the Group reported operating losses of £27.9million for the full year and £31.0 million for the fourth quarter respectively. "I was disappointed by our fourth quarter results," commented Danka's ChiefExecutive Officer, Todd Mavis. "I was encouraged by the progress we made duringthe quarter in executing on several elements of our ongoing Vision 21 programme,including reducing worldwide headcount, facility closures and other initiativeswhich are expected to reduce expenses by £32-£39 million annually when fully realised. We improved aspects of our working capital position in the quarter, including reductions in stocks of 19%, a two day improvement in days' sales outstanding and positive cash generation. In addition, there was an increase in our creditors of 9.8%. We also put into place the foundation to create broader and more profitable relationships with our best customers, upgraded and expandedour sales forces in the U.S. and U.K. and enhanced our products and services matrix in support of our high-value Managed Print Services solution. Overall,the fourth quarter capped a very difficult year for Danka," continued Mavis. "Inthe year ending 31st March 2006, we must move quickly to capitalise on ourmarket opportunities, continue refining our product offerings, ensure a coststructure that works for our business and achieve consistency in our execution."For the full year: • Total turnover was £668.2 million, 15% lower than the comparative prior year. The turnover decrease was largely driven by a 15% year over year decline in retail maintenance turnover, mostly in the U.S. Contributing to the turnover decline were a significant fall in turnover from our analogue machine base and a foreign exchange translation impact. • Consolidated gross margins were 34.7% of turnover, compared to 36.3% in the comparative prior year. Margins were primarily affected by several key factors: the reduction in maintenance turnover related to analogue machine base, softer than expected retail equipment margins in the U.S., the write-down of rental equipment and parts stocks and lower manufacturer purchase incentives. • Recurring operating costs (distribution costs plus administrative expenses) were £254.4 million, compared to £275.2 million in the comparative prior year. The year over year decrease was largely driven by £14.7 million of favourable foreign currency movements. There were cost increases as a result of £7.3 million in external expenses for Sarbanes-Oxley compliance, a £3.6 million increase in bad debt charges related to U.S. trade debtors and £1.2 million for consulting services related to the cost restructuring initiative. • The operating loss was £22.8 million, excluding the £5.1 million exceptional restructuring charge. In the comparative prior year, the Group reported an operating loss of £14.3 million which included a £24.5 million exceptional restructuring charge. • Free cash flow (net cash flow before use of liquid resources and financing less net cash flow from acquisitions and disposals) was a negative £7.7 million, compared to a positive £15.3 million in the comparative prior year. Reasons for the fall in cash flow include the increase in operating losses, £8.7 million additional expenditure in respect of the restructuring initiatives, net of a £23.9 million improvement in working capital. Capital expenditures were £11.2 million, compared to £20.5 million a year ago, primarily due to lower expenditure on property and equipment. For the fourth quarter: • Total turnover was £158.6 million, 14% lower than the comparative prior year quarter. The turnover decrease was largely driven by a 19% year over year decline in retail maintenance turnover, mostly in the U.S. Contributing to the turnover decline was a significant fall in turnover from our analogue machine base. • Consolidated gross margins were 27.3% of turnover, compared to 34.8% in the comparative prior year quarter. Margins were primarily affected by several key factors: the reduction in maintenance turnover related to the analogue machine base, softer than expected retail equipment margins in the U.S., the write-down of rental equipment and parts stocks and lower manufacturer purchase incentives. • Recurring operating costs were £70.4 million, compared to £63.5 million in the comparative prior year quarter. The year over year increase was largely driven by £4.9 million in external expenses for Sarbanes-Oxley compliance, a £3.5 million bad debt adjustment related to U.S. trade debtors and £1.2 million for consulting services related to the cost restructuring initiative, net of a £0.7 million year on year decrease due to currency exchange. • The operating loss was £27.1 million, excluding the £4.0 million exceptional restructuring charge. In the comparative prior year quarter, the group reported an operating loss of £12.3 million, which included a £13.4 million exceptional restructuring charge. • Free cash flow was £4.9 million, compared to a negative £9.0 million in the third quarter. Reasons for the sequential improvement include a £12.1 million reduction in stocks, a two day decrease in days' sales outstanding and a £19.0 million increase in creditors. Capital expenditures were £4.3 million, compared to £3.0 million in the third quarter, primarily due to investments in rental equipment. Danka intends to timely file its Form 10-K filing for the year ended 31st March2005 as required under U.S. securities legislation. As required by Section 404of the Sarbanes-Oxley Act, the Group will be disclosing that it has materialweaknesses in its internal controls relating to its information technologygeneral controls, revenue and billing processes, stock and rental assets custodyand tracking processes, its financial statement close process and income taxprocess. "We conducted an exhaustive management assessment of internal controls asrequired by Sarbanes-Oxley," said Mavis. "This assessment has identified severalareas in which the Group's processes require improvement. The Group implementedimportant improvements within the year ended 31st March 2005 and will continueaggressive remediation activities throughout the year ending 31st March 2006." Danka also announced that Chief Financial Officer, Mark Wolfinger, will retirefrom the Group with effect from the end of June. Mr. Wolfinger has been thegroup's CFO since 1998 and has played an integral role in guiding the groupthrough a series of financial transactions and restructuring. "We thank Markdeeply for his many significant contributions to Danka and wish him the best inhis retirement." said Mavis. Conference Call and Webcast A conference call and Webcast to discuss Danka's fourth quarter results has beenscheduled for today, Friday, 10th June, at 3:00 p.m. UK time. To access theWebcast, please go to www.danka.com. To participate in the conference call,callers should dial in 5-10 minutes before the start and follow the operator'sinstructions. Callers in the United States and Canada may dial 800-309-1555; UKand other international callers may dial 001-706-643-7754. No conference numberis needed. A recording of the call will be available from approximately twohours after the call ends until 10:00 p.m. UK time on Friday 17th June, 2005. Toaccess this recording, callers in the United States and Canada may dial800-642-1687 and UK and International callers may dial 001-706-645-9291 or visitDanka's Web site. 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. - ends - For further information please contact: Danka Business Systems PLCDonald Thurman, Danka Investor Relations 001 770 280 3990Paul Dumond, Company Secretary 020 7605 0154 Weber Shandwick Square MileMike Kirk/Helen Thomas 020 7067 0700 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 quarters ended 31st March, 2005 and 2004 isunaudited and does not constitute full accounts within the meaning of Section240 of the Companies Act 1985. However, the financial information for suchperiods is prepared on the same basis as the financial information for the yearsended 31st March, 2004 and 31st March, 2005 respectively. The financialinformation for the year ended 31st March, 2004 has been extracted from theaudited accounts for that year which have been filed with the Registrar ofCompanies. The financial information for the year ended 31st March, 2005 isunaudited and does not constitute full accounts within the meaning of Section240 of the Companies Act 1985. The full accounts for the year ended 31st March,2004 has been given an unqualified audit report, which did not contain astatement under Section 237(2) or (3) of the Companies Act 1985. This press release contains information regarding adjusted operating profit/(loss) which is computed as operating profit/(loss) before exceptional items,adjusted net profit/(loss) that is computed as net profit/(loss) beforeexceptional items and free cash flow that is computed as net cash flow beforeuse of resources and financing less net cash flow from acquisitions anddisposals. These measures are non-GAAP financial measures, defined as numericalmeasures of the Group's financial performance that exclude or include amounts soas to be different than the most directly comparable measure calculated andpresented in accordance with generally accepted accounting principles or GAAP inthe profit and loss account, balance sheet or cash flow statement. The notes tothis press release provide reconciliations of these non-GAAP financial measuresto the most directly comparable GAAP financial measures. Although adjusted operating profit/(loss), adjusted net profit/(loss) and freecash flow represent non-GAAP financial measures, we consider these measures tobe key operating metrics of the Group. We use these measures in our planning andbudgeting processes, to monitor and evaluate our financial and operating resultsand to measure performance of our separate divisions. We also believe thatadjusted operating profit/(loss), adjusted net profit/(loss) and free cash floware useful to investors because they provide an analysis of financial andoperating results using the same measures that we use in evaluating the Group.We expect that such measures provide investors with the means to evaluate theGroup's financial and operating results against other companies within theindustry. We believe that these measures are meaningful to investors inevaluating the Group's ability to meet future debt service requirements and tofund capital expenditures and working capital requirements. The calculation ofadjusted operating profit/(loss), adjusted net profit/(loss) and free cash flowmay not be consistent with the calculation of these measures by other companiesin the industry. Adjusted operating profit/(loss), adjusted net profit/(loss)and free cash flow are not measurements of financial performance under GAAP andshould not be considered as an alternative to the profit/(loss) for the periodas an indicator of operating performance or cash flows from operating activitiesas a measure of liquidity or any other measures of performance derived inaccordance with GAAP. Danka is a registered trademark and Danka @ the Desktop and TechSource aretrademarks of Danka Business Systems PLC. All other trademarks are the propertyof their respective owners. Group Profit and Loss Account For the Years Ended 31st March, 2005 and 2004 31st March ----------------------- 2005 2004 ------ ------------- ----------- Note £000 £000 (Unaudited) (Audited) ------ ------------- ----------- Turnover 2 668,216 786,788Cost of sales (436,646) (501,397) ------------- -----------Gross profit 2 231,570 285,391 Distribution costs (99,986) (103,184)Administrative expenses Recurring (154,418) (172,050) Exceptional (5,101) (24,472) (159,519) (196,522) ------------- ----------- Operating loss on ordinary activities beforeinterest (27,935) (14,315) Interest receivable and similar income 857 566Interest payable and similar charges (18,448) (20,651)Exceptional loss on refinancing of debt - (12,808) ------------- -----------Loss on ordinary activities before taxation (45,526) (47,208) Tax credit on loss on ordinary activities 1,361 2,592 Exceptional tax credit/(charge) 10,710 (19,574) Total tax credit/(charge) on loss on ordinaryactivities 12,071 (16,982) ------------- ----------- Loss for the financial year (33,455) (64,190)Additional financial costs of non-equity shares (11,000) (13,236) ------------- ----------- Retained loss for the financial year (44,455) (77,426) ============= =========== Loss per share: 4 Basic (17.6)p (30.9)p Diluted (17.6)p (30.9)p Adjusted basic (before exceptional items) (19.8)p (10.3)p Adjusted diluted (before exceptional items) (19.8)p (10.3)p Average exchange rate £1= $ 1.845 $ 1.692Average exchange rate £1= • 1.467 • 1.439 Group Profit and Loss Account For the Quarters Ended 31st March, 2005 and 2004 31st March ----------------------- 2005 2004 ------ ------------- ----------- Note £000 £000 (Unaudited) (Unaudited) ------ ------------- ----------- Turnover 2 158,589 185,480Cost of sales (115,264) (120,914) ------------- -----------Gross profit 2 43,325 64,566 Distribution costs (25,576) (24,573)Administrative expenses Recurring (44,802) (38,912) Exceptional (3,976) (13,365) (48,778) (52,277) ------------- ----------- Operating loss on ordinary activities before interest (31,029) (12,284) Interest receivable and similar income 621 -Interest payable and similar charges (4,756) (4,602) ------------- -----------Loss on ordinary activities before taxation (35,164) (16,886) Tax credit/(charge) on loss on ordinary activities 2,589 (6,444) Exceptional tax charge - (19,574) Total tax credit/(charge) on loss on ordinary activities 2,589 (26,018) ------------- ----------- Loss for the financial period (32,575) (42,904)Additional financial costs of non-equityshares (2,746) (3,510) ------------- ----------- Retained loss for the financial period (35,321) (46,414) ============= =========== Loss per share: 4 Basic (13.9)p (18.5)p Diluted (13.9)p (18.5)p Adjusted basic (before exceptional items) (12.3)p (4.8)p Adjusted diluted (before exceptional items) (12.3)p (4.8)p Average exchange rate £1= $ 1.890 $ 1.840Average exchange rate £1= • 1.445 • 1.466 Danka Business Systems PLC Group Balance Sheet 31st March 31st March 2005 2004 £000 £000 (Unaudited) (Audited) ----------- ---------- Fixed assetsIntangible assets 3,073 1,911Tangible assets 39,230 51,829 ----------- ---------- 42,303 53,740 Current assets ----------- ----------Stocks - finished goods and goods for resale 51,184 50,704Debtors (of which £12,556,000 (March 2004 - £10,537,000) fall due after more than one year) 140,378 152,233Investments 485 355Cash at bank and in hand 51,461 60,943 ----------- ---------- 243,508 264,235 Creditors: amounts falling due within one year Bank and other loans (179) (630)Other creditors (196,296) (175,924) (196,475) (176,554) Net current assets 47,033 87,681------------------------------------------------------------------- ----------Total assets less current liabilities 89,336 141,421 Creditors: amounts falling due after more than oneyear Bank and other loans (120,952) (122,564)Other creditors (6,941) (18,104) (127,893) (140,668)Provisions for liabilities and charges (18,886) (28,257)------------------------------------------------------------------- ----------Net liabilities (57,443) (27,504)------------------------------------------------------------------- ---------- Capital and reservesCalled up share capital 3,340 3,291Share premium account 310,308 312,066Profit and loss account (371,091) (342,861)------------------------------------------------------------------- ----------Shareholders' deficit (57,443) (27,504)------------------------------------------------------------------- ---------- Equity shareholders' deficit (225,095) (186,492)Non-equity shareholders' funds 167,652 158,988 ------------------------------------------------------------------- ---------- Closing exchange rate £1= $ 1.889 $ 1.840 ----------- ----------Closing exchange rate £1= • 1.456 • 1.497 ----------- ---------- Danka Business Systems PLC Group Cash Flow Statement For the Years Ended 31st March, 2005 and 2004 31st March ------------------------ 2005 2004 £000 £000 Note (Unaudited) (Audited) --------- --------- Net cash inflow from operating activities 7 21,509 50,914 Net cash outflow from returns on investments and servicing of finance (15,714) (14,815) Total taxes paid (2,241) (341) Net cash outflow for capital expenditure (11,232) (20,465) Cash outflow from acquisitions and disposals (1,029) (270) --------- ---------Net cash (outflow)/inflow before use of liquid resources and financing (8,707) 15,023 Management of liquid resources (142) 3,357 Net cash outflow from financing (868) (1,438) --------- --------- (Decrease)/increase in cash (9,717) 16,942 ========= ========= Danka Business Systems PLC Group Cash Flow Statement For the Quarters Ended 31st March, 2005 and 2004 31st March ---------------------- 2005 2004 £000 £000 Note (Unaudited) (Unaudited) --------- --------- Net cash inflow from operating activities 7 10,080 13,621 Net cash outflow from returns on investments and servicing of finance (723) (29) Total taxes (paid)/received (230) 47 Net cash outflow for capital expenditure (4,261) (757) Cash inflow/(outflow) from acquisitions and disposals 10 (270) --------- ---------Net cash inflow before use of liquid resources and financing 4,876 12,612 Management of liquid resources 10 - Net cash outflow from financing (645) (3,264) --------- --------- Increase in cash 4,241 9,348 ========= ========= Notes to the Financial Information 1. The financial information for the quarters ended 31st March, 2005 and 2004 is unaudited and does not constitute full accounts within the meaning of Section 240 of the Companies Act 1985. However, the financial information for such periods is prepared on the same basis as the financial information for the years ended 31st March, 2005 and 31st March, 2004 respectively. The financial information for the year ended 31st March, 2004 has been extracted from the audited accounts for that year which have been filed with the R Registrar ofCompanies, as adjusted for the reclassification of £4,918,000 of liabilities from provisions for liabilities and charges to creditors due within one year to conform to the current year presentation. The financial information for the year ended 31st March, 2005 is unaudited and does not constitute full accounts within the meaning of Section 240 of the Companies Act 1985. The full accounts for the year ended 31st March, 2004 have been given an unqualified audit report, which did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. 2. Analysis of turnover and gross profit Quarters Ended 31st March ------------------------------------ 2005 2004 £000 £000 (Unaudited) (Unaudited) -------- ---------TurnoverRetail equipment and related sales 61,252 67,969Retail maintenance 70,406 86,559Retail supplies and rental sales 13,821 16,265Wholesale sales 13,110 14,687 -------- --------- 158,589 185,480 -------- --------- Gross profit Retail equipment and related sales 16,965 23,136Retail maintenance 19,871 33,820Retail supplies and rental sales 4,147 4,567Wholesale sales 2,342 3,043 -------- --------- 43,325 64,566 -------- --------- Notes to the Financial Information Years Ended 31st March ----------------------------------- 2005 2004 £000 £000 (Unaudited) (Audited) -------- ---------TurnoverRetail equipment and related sales 239,426 276,520Retail maintenance 319,090 377,353Retail supplies and rental sales 58,334 75,418Wholesale sales 51,366 57,497 -------- --------- 668,216 786,788 -------- --------- Gross profitRetail equipment and related sales 79,357 93,959Retail maintenance 120,962 151,528Retail supplies and rental sales 22,183 28,646Wholesale sales 9,068 11,258 -------- --------- 231,570 285,391 -------- --------- 3. Reconciliation of the weighted average number of basic and diluted ordinary shares in issue Quarters Ended Years Ended 31st March 31st March --------------------------- --------------------------- 2005 2004 2005 2004 ----------- ----------- ----------- ----------- Average number of ordinary shares in issue - basic 254,077,006 250,633,030 252,325,582 250,157,563Average outstanding share - - - -options ----------- ----------- ----------- ----------- Average number of ordinary shares in issue - diluted 254,077,006 250,633,030 252,325,582 250,157,563 =========== =========== =========== =========== 4. The calculations of the loss per share are based on the loss on ordinary activities after taxation and the finance costs on non-equity shares and the basic and diluted weighted average number of ordinary shares in issue during the period. In order to provide a trend measure of underlying performance, Group loss on ordinary activities after taxation and the finance costs on non-equity shares has been adjusted to exclude exceptional items 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. Quarters Ended 31st March 2005 2004 --------------------------- --------------------------- Pence Pence £000 Per Share £000 Per Share ------- ------- ------- -------- Basic loss (35,321) (13.9) (46,414) (18.5)Exceptional items arising in respect of: Restructuring ofworldwide operations 3,976 13,365 Tax effect - 1,431 ------- -------Net of tax effect 3,976 1.6 14,796 5.9Exceptional tax charge - - 19,574 7.8 ------- ------- ------- --------Adjusted basic loss (31,345) (12.3) (12,044) (4.8) ------- ------- ------- -------- ------- ------- ------- --------Basic and diluted loss (35,321) (13.9) (46,414) (18.5) ------- ------- ------- -------- Adjusted basic and diluted ------- ------- ------- -------- (before exceptional items) (31,345) (12.3) (12,044) (4.8) ------- ------- ------- -------- Years Ended 31st March 2005 2004 --------------------------- --------------------------- Pence Pence £000 Per Share £000 Per Share ------- ------- ------- -------- Basic loss (44,455) (17.6) (77,426) (30.9)Exceptional itemsarising in respect of: Restructuring of worldwide operations 5,101 24,472 Tax effect - (1,346) ------- ------- Net of tax effect 5,101 2.0 23,126 9.2 Refinancing of debt - 12,808 Tax effect - (3,843) ------- ------- Net of tax effect - - 8,965 3.6 Exceptional tax (credit)/charge (10,710) (4.2) 19,574 7.8 ------- ------- ------- --------Adjusted basic loss (50,064) (19.8) (25,761) (10.3) ------- -------- ------- -------- ------- ------- ------- --------Basic and diluted loss (44,455) (17.6) (77,426) (30.9) ------- ------- ------- -------- ------- ------- ------- --------Adjusted basic and diluted(before exceptional items) (50,064) (19.8) (25,761) (10.3) ------- ------- ------- -------- 5. The following is a reconciliation of net cash flow before use of liquid resources and financing to free cash flow (net cash flow before use of liquid resources and financing less net cash flow from acquisitions and disposals): Quarters Ended 31st March Years Ended 31st March --------------------------- --------------------------- 2005 2004 2005 2004 £000 £000 £000 £000 (Unaudited) (Unaudited) (Unaudited) (Audited) ----------- ------------ ------------ ----------- Net cash inflow/(outflow) before use of liquid resources and financing 4,876 12,612 (8,707) 15,023Add back: Net cash (inflow)/outflow from acquisitions and disposals (10) 270 1,029 270 --------- --------- --------- ---------Free cash flow 4,866 12,882 (7,678) 15,293 ========= ========= ========= ========= 6. The following is a reconciliation of net debt (bank and other loans falling due within one year and falling due after more than one year including finance leases less cash at bank and in hand and current asset investments): As at 31st March As at 31st March 2005 2004 £000 £000 (Unaudited) (Audited) ------------- ---------- Bank and other loans falling due within one year 179 630Bank and other loans falling due after more than one year 120,952 122,564Finance leases 2,518 3,483Less: cash at bank and in hand (51,461) (60,943) current asset investments (485) (355) ------------- ----------Net debt 71,703 65,379 ============= ========== 7. Net cash inflow from operating activities Quarters Ended Years Ended 31st March 31st March -------------------------- --------------------------- 2005 2004 2005 2004 £000 £000 £000 £000 (Unaudited) (Unaudited) (Unaudited) (Audited) ----------- ------------ ------------ ----------- Operating loss (31,029) (12,284) (27,935) (14,315) Exceptional charges 3,976 13,365 5,101 24,472 Cash paid in respect of prior year exceptional charges (4,071) (24) (12,608) (75) Cash paid in respect of current year exceptional charges (273) (5,279) (1,398) (5,279)Depreciation and amortisation 7,019 9,239 23,135 32,895 Loss on sale of fixed assets 1,557 1,546 795 2,738 Decrease/(increase) in stocks 12,059 7,787 (1,688) 10,769 Decrease/(increase) in debtors 1,832 (13,961) 9,802 (1,725) Increase increditors 19,010 13,232 26,305 1,434 --------- --------- --------- --------- 10,080 13,621 21,509 50,914 ========= ========= ========= ========= 8. Under EU law, the Group will be required to report its consolidated financial position and performance under International Financial Reporting Standards ("IFRS") for the year ending 31st March, 2006 onwards. This will require the restatement of the Group's balance sheets as at 31st March, 2004 and 31st March, 2005 and its financial results for the year ended 31st March, 2005 under consistent accounting policies which comply with IFRS. The most significant change at 31st March, 2004 is expected to be the convertible participating preference shares, currently treated as non-equity shareholders' funds under UK GAAP, a significant part of which will be reclassified as debt under IFRS, thereby increasing net liabilities under IFRS. Full details of the reconciling items and the Group's IFRS accounting policies will be given in the press release announcing the results for the quarter ending 30th June, 2005 which will be released during August 2005. 9. 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