DNK.L Regulatory News (DNK)

7 Jun 2006 13:30

Danka Business Systems PLC07 June 2006 Embargoed until 13:30 7th June, 2005 DANKA BUSINESS SYSTEMS PLC ("Danka", the "Company" or the "Group") Announcement of results for the year and fourth quarter ended 31st March, 2006 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, 2006. For the full year ended 31st March, 2006: • Total revenue was £626.1 million, down 6.3% over the prior year. Excluding the impact of the sale of the Group's operations in Canada and Central and South America, total revenue was down 2.7%. Revenue was favourably affected by £12.2 million of foreign currency movement. • Gross margins were 32.0%, down 270 basis points from the prior year. • Operating expenses (distribution costs plus administrative expenses) were £209.2 million, down 17.9% from the prior year. Restructuring charges were £9.3 million for the year. The Group incurred a £1.9 million loss in quarters two and three from the sale of its Canadian and Central and South American operations. The Group reported a loss from operations before tax and finance costs of £20.8 million for the year ended 31st March, 2006, versus a £28.7 million loss for the year ended 31st March, 2005. • Net finance costs were £31.4 million for the year. Based on the above, the Group's loss from operations was £46.9 million for the year compared to a loss from operations of £46.2 million for the year ended 31st March, 2005. • Adjusted losses from operations (excluding restructuring expenses and other items unusual because of their nature, size or incidence) were £49.4 million for the year, versus losses from operations of £51.8 million in the year ended 31st March, 2005. "Notwithstanding this loss, we experienced a number of improvements during thefiscal year in several areas of our business," commented Danka Chief FinancialOfficer Ed Quibell. "For the year, retail equipment and related sales were upover the prior year. This is the first time we have seen an increase in thisarea in seven years. Additionally, our operating costs have declined by £45.5million, or 17.9% over last year, reflecting the success we have had in our costreduction initiatives. Finally, we significantly improved our Sarbanes-Oxleycompliance status. The improvement in our internal controls and discipline hasresulted in the number of material weaknesses being reduced from eleven to oneand we were able to reduce the cost of our compliance programme by over 50% yearon year." For the fourth quarter: • Total revenue was £154.7 million, 2.5% lower than the prior year quarter, but up 1.8% from the quarter ended 31st December, 2005. Retail equipment and related sales were £60.1 million, down 2.0% from the prior year quarter, but up 4.6% from the quarter ended 31st December, 2005. Retail maintenance revenue was £69.8 million for the quarter, down 0.9% from the prior year quarter, but up 0.8% from the quarter ended 31st December, 2005. • Consolidated gross margin for the fourth quarter was 29.4%, which was up from 27.3% in the prior year quarter and down from 31.9% for the quarter ended 31st December, 2005. • Operating expenses were £52.3 million or 33.8% of revenue for the fourth quarter. These expenses were down 25.6%, or £18.0 million, from the prior year quarter. The Group's fourth quarter loss from operations before tax and finance costs was £10.3 million versus a £30.9 million loss from operations before tax and finance costs in the prior year fourth quarter. • Adjusted losses from operations (excluding restructuring expenses and other items unusual because of their nature, size or incidence) were £16.1 million for the quarter, versus losses from operations of £31.0 million in the quarter ended 31st March, 2005. "We will be focusing much more attention on sales, marketing and customerservice in the coming year", said A.D. Frazier, Danka's Chairman and ChiefExecutive Officer. "We have made major progress in the area of cost reductionduring the year and while we have more to do, we will now focus on improving ourmargins and profitability. Danka's economics are fundamentally different now at the start of fiscal 2007 than they were a year ago. Because of this, we intend to rebuild, with emphasis on our core business in this fiscal year." As required by Section 404 of the Sarbanes Oxley Act, the Group will bedisclosing that it has a material weakness in internal controls relating to itsrevenue and billing processes. The Group will report that, due to its successfulremediation efforts during the year, it no longer has material weaknesses ininternal controls related to its information technology general controls, thecustody and tracking processes for inventories and equipment on operating leasesto customers, its financial statement close processes and its tax process. Finally, the Group reported that its U.S. President and Chief Operating Officer,Michael Wedge, will be leaving the Company effective the end of June. "Michaelplayed a prominent role in the Group's Vision 21 success and in providing theback office foundation necessary to significantly improve the Group's internalcontrols processes and we wish him all good fortune in the years ahead", saidFrazier. The sales and service functions previously reporting to Mr. Wedge willnow report directly to the Group's Chief Executive Officer. Conference Call and Webcast A conference call and Webcast to discuss Danka's fourth quarter results has beenscheduled for today, 7th June at 3:00 p.m. UK time. To access the Webcast,please go to www.danka.com. To participate in the conference call, callers inthe United States and Canada (and some UK callers) may dial (+1)-800-309-1555;other international callers should dial (+1)-706-643-7754. Reference conferenceID #1108518 when prompted. A recording of the call will be available fromapproximately two hours after the call ends until 5:00 p.m. UK time on 14thJune. To access this recording, please call either (+1)-800-642-1687 or (+1)-706-645-9291 (conference ID #1108518) or visit Danka's website. - ends - For further information please contact: Danka Business Systems PLCCheley Howes, Danka Investor Relations 001 727 622 2760Paul Dumond, Danka London 020 7605 0154 Weber Shandwick Square 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 all periods presented in this preliminaryannouncement is unaudited and does not constitute full accounts within themeaning of Section 240 of the Companies Act 1985. However, the financialinformation for all periods is prepared on the same basis as the financialinformation for the year ended 31st March, 2006. The financial information forthe year ended 31st March, 2005 can be derived from the audited UK GAAP accountsfor the year ended 31st March, 2005 which have been filed with the Registrar ofCompanies. The report of the auditors on those UK GAAP accounts was unqualifiedand did 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,Danka considers these measures to be key operating metrics of the Group. Dankauses these measures in its planning and budgeting processes, to monitor andevaluate the Group's financial and operating results and to measure performanceof its separate divisions. Danka also believes that free cash flow and net debtare useful to investors because they provide an analysis of financial andoperating results using the same measures that Danka uses in evaluating theGroup. Danka expects that such measures provide investors with the means toevaluate the Group's financial and operating results against other companieswithin the industry. Danka believes that these measures are meaningful toinvestors in evaluating the Group's ability to meet its future debt servicerequirements and to fund its capital expenditures and working capitalrequirements. The calculation of free cash flow and net debt may not beconsistent with the calculation of these measures by other companies in theindustry. Free cash flow and net debt are not measurements of financialperformance under IFRS and should not be considered as an alternative to netearnings (loss) as an indicator of the Group's operating performance or cashflows from operating activities as a measure of liquidity or any other measuresof performance derived in accordance with IFRS. Danka is a registered trademark and TechSource is a trademark of Danka BusinessSystems PLC. All other trademarks are the property of their respective owners. Group Income Statement For the Three Months and Year Ended 31st March 2006 and 2005 Three Months Ended Year Ended 31st March 31st March 2006 2005 2006 2005 Note £000 £000 £000 £000 ------ ---------- --------- -------- -------- Revenue 4 154,695 158,589 626,051 668,216Cost of sales (109,256) (115,264) (425,974) (436,646) ---------- --------- -------- --------Gross profit 4 45,439 43,325 200,077 231,570 Distribution costs (20,763) (25,576) (90,212) (99,986)Administrative expenses (31,493) (44,640) (119,012) (154,739)Other operating expense (47) - (472) (448)Restructuring costs (3,701) (3,976) (9,341) (5,101)Net gain/(loss) on sale of operations 5 268 - (1,883) - ---------- --------- -------- --------Loss from operations before tax and finance costs (10,297) (30,867) (20,843) (28,704) Investment revenue 985 1,192 1,242 1,584Finance costs (9,969) (7,920) (32,641) (31,140) ---------- --------- -------- --------Loss from operations before tax (19,281) (37,595) (52,242) (58,260) Tax - overseas 1,706 2,589 5,361 12,071 ---------- --------- -------- -------- Loss from operations for the period and attributable to equity holders of the parent (17,575) (35,006) (46,881) (46,189) ========== ========= ======== ======== Loss per share: 7 Basic from continuing operations (6.9)p (13.8)p (18.4)p (18.3)p Basic from discontinued operations - - - - (6.9)p (13.8)p (18.4)p (18.3)p ---------- --------- -------- -------- Diluted from continuing operations (6.9)p (13.8)p (18.4)p (18.3)p ---------- --------- -------- -------- Diluted from discontinued operations - - - - ---------- --------- -------- -------- (6.9)p (13.8)p (18.4)p (18.3)p ---------- --------- -------- -------- Average exchange rate £1= $ 1.754 $ 1.890 $1.786 $ 1.845Average exchange rate £1= • 1.458 • 1.445 • 1.466 • 1.467 Danka Business Systems PLC Group Balance Sheet 31st March 31st March 2006 2005 £000 £000 ---------- ---------Non-current assetsIntangible assets and goodwill 2,961 3,121Property, plant and equipment 28,308 39,230Other 6,129 10,029 ---------- --------- 37,398 52,380 ---------- ---------Current assetsInventories 45,977 51,184Prepaid expenses 3,445 6,844Trade and other receivables 108,868 120,977Cash and cash equivalents including restricted cash of £11,803,000 (2005 - £7,918,000) 43,119 51,947 ---------- --------- 201,409 230,952 ---------- --------- ---------- ---------Total assets 238,807 283,332 ---------- --------- Current liabilitiesTrade and other payables (94,917) (91,706)Tax liabilities (12,218) (25,424)Obligations under finance leases (796) (1,036)Current portion of long-term borrowings (6,157) (179)Derivative financial instruments (4,835) (5,294)Deferred revenue (18,989) (21,264)Accrued expenses (48,082) (54,339)Short-term provisions (3,665) (5,546) ---------- --------- (189,659) (204,788) ---------- ---------Non-current liabilitiesBank and other loans (132,488) (120,952)Convertible participating shares (175,264) (148,234)Retirement benefit obligations (16,928) (15,467)Deferred tax liabilities (419) (324)Long-term provisions (4,744) (5,499)Obligations under finance leases (635) (1,482)Other (4,741) (5,459) ---------- --------- (335,219) (297,417) ---------- --------- ---------- ---------Total liabilities (524,878) (502,205) ---------- --------- ---------- ---------Net liabilities (286,071) (218,873) ========== ========= EquityCapital 202,094 201,742Share options 3,577 1,661Translation reserve (17,246) 4,822Retained earnings (474,496) (427,098) ---------- ---------Total equity (286,071) (218,873) ========== ========= Closing exchange rate £1= $ 1.739 $ 1.889 ---------- ---------Closing exchange rate £1= • 1.433 • 1.456 ---------- --------- Danka Business Systems PLC Group Cash Flow Statement For the Year Ended 31st March 2006 and 2005 31st March ----------------- 2006 2005 Note £000 £000 ------ --------- --------- Net cash (outflow)/inflow from operating activities 10 (1,926) 19,268 Cash flows from investing activities Interest received 351 468 Capital expenditure (7,583) (13,389) Proceeds from sale of operations 9,652 114 Purchase of subsidiaries - (1,143) Proceeds from sale of property, plant and equipment and equipment on operating leases 538 2,157 --------- ---------Net cash from investing activities 2,958 (11,793) --------- --------- Cash flows from financing activities Net borrowings/(repayments) under line of credit agreements 5,424 (543) Capital payments under finance leases (1,290) (953) Interest paid (16,957) (16,181) Proceeds from new shares issued 352 627 --------- ---------Net cash from financing activities (12,471) (17,050) --------- --------- Net decrease in cash and cash equivalents (11,439) (9,575)Cash and cash equivalents at 1st April 51,947 61,298Effect of exchange rate fluctuations on cash held 2,611 224 --------- ---------Cash and cash equivalents at 31st March 43,119 51,947 ========= ========= Danka Business Systems PLC Group Cash Flow Statement For the Three Months Ended 31st March 2006 and 2005 31st March ----------------- 2006 2005 Note £000 £000 ------ --------- --------- Net cash inflow from operating activities 10 10,744 9,850 Cash flows from investing activities Interest received 94 91 Capital expenditure (2,762) (4,488) Proceeds from sale of property, plant and equipment and equipment on operating leases 102 237 --------- ---------Net cash from investing activities (2,566) (4,160) --------- --------- Cash flows from financing activities Net borrowings/(repayments) under line of credit agreements 5,538 (792) Capital payments under finance leases (266) - Interest paid (790) (814) Proceeds from new shares issued 5 146 --------- ---------Net cash from financing activities 4,487 (1,460) --------- --------- Net increase in cash and cash equivalents 12,665 4,230Cash and cash equivalents at 1st January 29,506 46,584Effect of exchange rate fluctuations on cash held 948 1,133 --------- ---------Cash and cash equivalents at 31st March 43,119 51,947 ========= ========= Danka Business Systems PLC Group Statement of Recognised Income and Expense For the Year Ended 31st March 2006 and 2005 31st March --------------------- 2006 2005 £000 £000 --------- --------- Loss for the year (46,881) (46,189)Income and expense taken directly to equity: Exchange translation differences in the year (21,941) 4,822 Exchange translation differences related to disposals (127) - Actuarial losses on defined benefit pension plans (517) (420) Tax on items taken directly to or transferred from equity - - --------- ---------Total of income and expense taken directly to equity (22,585) 4,402 --------- --------- --------- ---------Total recognised income and expense for the year (69,466) (41,787) ========= ========= Danka Business Systems PLC Group Statement of Recognised Income and Expense For the Three Months Ended 31st March 2006 and 2005 31st March --------------------- 2006 2005 £000 £000 --------- --------- Loss for the period (17,575) (35,006)Income and expense taken directly to equity: Exchange translation differences in the period 2,007 (4,783) Actuarial losses on defined benefit pension plans (517) (420) Tax on items taken directly to or transferred from equity - - --------- ---------Total of income and expense taken directly to equity 1,490 (5,203) --------- --------- --------- ---------Total recognised income and expense for the period (16,085) (40,209) ========= ========= Notes to the Financial Information 1. The financial information for all periods presented in this preliminary announcement is unaudited and does not constitute full accounts within the meaning of Section 240 of the Companies Act 1985. However, the financial information for all periods is prepared on the same basis as the financial information for the year ended 31st March, 2006. The financial information for the year ended 31st March, 2005 can be derived from the audited UK GAAP accounts for the year ended 31st March, 2005 which have been filed with the Registrar of Companies. The report of the auditors on those UK GAAP accounts 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. This preliminary announcement contains the consolidated interimfinancial statements of the Company for the three months and years ended 31stMarch, 2006 and 2005, which comprise the Company and its subsidiaries (togetherreferred to as the "Group"). The consolidated preliminary announcement wasauthorised for issuance on 7th June, 2006. These are the Group's first International Financial Reporting Standards ("IFRS")consolidated preliminary announcement for the period covered by the first IFRSannual financial statements and IFRS 1 First-time Adoption of InternationalFinancial Reporting Standards has been applied. Note 12 below containsreconciliations of equity and profit or loss for comparative periods reportedunder UK GAAP (previous GAAP) to those reported for those periods under IFRS. 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. EU law (IAS Regulation EC 1606/2002) requires that the annual consolidatedfinancial statements of the Company, for the year ended 31st March, 2006, beprepared in accordance with IFRS adopted for use in the EU ("adopted IFRS"). 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, 2006, the Group'sfirst annual reporting date at which it is required to use adopted IFRS. Theaccounting policies have been applied consistently throughout the Group for thepurposes of these consolidated interim financial statements. 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 materiality 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 revenue 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 revenue and of gross profit ofthe single business segment, where the sale or rental of equipment normallyincludes a service contract and the purchase of supplies once the contractexpires. These components are not considered different classes of businessbecause of their inter-relation. Three Months Ended 31st March Year Ended 31st March 2006 2005 2006 2005 £000 £000 £000 £000 --------- --------- ---------- ----------RevenueRetail equipment and related sales 60,051 61,252 240,961 239,426Retail maintenance 69,784 70,406 284,741 319,090Retail supplies and rental sales 10,638 13,821 48,001 58,334Wholesale sales 14,222 13,110 52,348 51,366 --------- --------- ---------- ---------- 154,695 158,589 626,051 668,216 ========= ========= ========== ========== Gross profitRetail equipment and related sales 16,488 16,965 72,427 79,357Retail maintenance 23,113 19,871 100,840 120,962Retail supplies and rental sales 3,419 4,147 17,698 22,183Wholesale sales 2,419 2,342 9,112 9,068 --------- --------- ---------- ---------- 45,439 43,325 200,077 231,570 ========= ========= ========== ========== 5. Disposal of Canadian, Central and South American operations 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 £3.0 million was recorded after expenses of £0.5 million. The attributabletax was nil. During the year ended 31st March, 2006, the Canadian operations hadcash inflows from operating activities of £0.3 million (2005 - outflows of £5.0million) and cash outflows from investing activities of £0.1 million (2005 -£0.2 million). During the year ended 31st March, 2006, the Canadian operationsrepaid funding from other Group entities of £0.5 million (2005 - receivedfunding of £3.8 million). The cash inflow on the disposal after deducting cashdisposed 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 (31st March, 2005 - £7.6 million) less liabilities of £5.0million (31st March, 2005 - £3.9 million). The Canadian operations reportedrevenue of £5.1 million in the quarter ended 30th June, 2005 and year ended 31stMarch, 2006 (year ended 31st March, 2005 - £19.4 million) and pre- and post-taxlosses of £0.3 million in the quarter ended 30th June, 2005 and year ended 31stMarch, 2006 (year ended 31st March, 2005 - £4.2 million). With effect from 31st August, 2005, the Group sold its retail operations inCentral and South America to Toshiba America Business Solutions, Inc. for $10million (£5.7 million) cash and a pre-tax loss of £5.1 million was recordedafter expenses of £0.6 million. The attributable tax was nil. During the yearended 31st March, 2006, the Central and South American operations had cashoutflows from operating activities of £0.3 million (2005 - inflows of £2.0million) and cash outflows from investing activities of £0.2 million (2005 -£1.3 million). During the year ended 31st March, 2006, the Central and SouthAmerican operations had cash outflows from financing activities of £3.5 million(2005 - inflows of £0.8 million), principally relating to funding from otherGroup entities. The cash inflow on the disposal after deducting cash disposed ofwas £2.7 million. At 31st August, 2005 prior to disposal, the Central and South Americanoperations comprised assets of £14.3 million (31st March, 2005 - £13.7 million)less liabilities of £3.9 million (31st March, 2005 - £3.7 million). The Centraland South American operations reported revenue of £6.9 million in the six monthsended 30th September, 2005 and year ended 31st March, 2006 (year ended 31stMarch, 2005 - £16.5 million) and pre- and post-tax losses of £0.4 million in theyear ended 31st March, 2006 (2005 - pre-tax profits of £1.0 million, post-taxprofits of £0.2 million). 6. Reconciliation of the weighted average number of basic and diluted ordinary shares in issue Three Months Ended Year Ended 31st March 31st March -------------------------- ------------------------ 2006 2005 2006 2005 -------- -------- -------- -------- Shares in issue at 1st January / 1st April 256,502,508 254,002,852 254,188,656 250,812,019Effect of shares issued during the period 16,499 74,154 1,269,861 1,513,563 --------- --------- --------- ---------Average number of ordinary shares in issue - basic 256,519,007 254,077,006 255,458,517 252,325,582Average outstanding share options - - - - --------- --------- --------- ---------Average number of ordinary shares in issue - diluted 256,519,007 254,077,006 255,458,517 252,325,582 ========= ========= ========= ========= 7. The calculations of the loss per share from operations are based on the loss from operations on ordinary activities after taxation and the basic and diluted weighted average number of ordinary shares in issue during the period as per note 6 above. In order to provide a trend measure of underlying performance, Group loss from operations on ordinary activities after taxation has been adjusted to exclude restructuring expenses and other items unusual because of their nature, size or incidence and basic loss per share recalculated. Outstanding share options and convertible participating shares have not been considered in dilutive per share computations since the Group is in a loss position for the periods below and to include them would be anti-dilutive. Three Months Ended 31st March 2006 2005 ---------------------- ------------------ Pence Pence £000 Per Share £000 Per Share ------- -------- ------- -------- Basic loss from operations (17,575) (6.9) (35,006) (13.8) Unusual items arising in respect of: Restructuring of worldwide operations 3,701 3,976 Tax effect - - ------ ----- Net of tax effect 3,701 1.5 3,976 1.6 Disposal of operations (268) - Tax effect - - ------ ----- Net of tax effect (268) (0.1) - - Separately disclosable tax credit (1,970) (0.8) - - ------- -------- ------- --------Adjusted basic loss from operations (16,112) (6.3) (31,030) (12.2) ======= ======== ======= ======== ------- -------- ------- --------Basic and diluted loss from operations (17,575) (6.9) (35,006) (13.8) ======= ======== ======= ======== ------- -------- ------- --------Adjusted basic and diluted loss from operations (before unusual items) (16,112) (6.3) (31,030) (12.2) ======= ======== ======= ======== Year Ended 31st March 2006 2005 ------------------- ------------------- Pence Pence £000 Per Share £000 Per Share ------- -------- ------- -------- Basic loss from operations (46,881) (18.4) (46,189) (18.3)Unusual items arising in respect of: Restructuring of worldwide operations 9,341 5,101 Tax effect - - ------ ----- Net of tax effect 9,341 3.7 5,101 2.0 Disposal of operations 1,883 - Tax effect - - ------ ----- Net of tax effect 1,883 0.8 - - Sales tax credit (3,062) - Tax effect - - ------ ----- Net of tax effect (3,062) (1.2) - - Insurance credit (2,744) - Tax effect - - ------ ----- Net of tax effect (2,744) (1.1) - - Separately disclosable tax credit (6,664) (2.6) (10,710) (4.2) -------- -------- ------- --------Adjusted basic loss from operations (48,127) (18.8) (51,798) (20.5) ======== ======== ======= ======== -------- -------- ------- --------Basic and diluted loss from operations (46,881) (18.4) (46,189) (18.3) ======== ======== ======= ======== -------- -------- ------- --------Adjusted basic and diluted loss from operations (before unusual items) (48,127) (18.8) (51,798) (20.5) ======== ======== ======= ======== 8. The following shows the computation of free cash flow: Three Months Ended Year Ended 31st March 31st March ----------------------- ------------------------ 2006 2005 2006 2005 £000 £000 £000 £000 -------- ------- ------- ------ Cash inflow/ (outflow) from operating activities 10,744 9,850 (1,926) 19,268Cash (outflow)/ inflow from investing activities (2,566) (4,160) 2,958 (11,793)Less: cash flow from acquisitions and disposals - - (9,652) 1,029 -------- ------- ------- ------Free cash flow 8,178 5,690 (8,620) 8,504 ======== ======= ======= ====== 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 March, As at 31st March, 2006 2005 £000 £000 ---------- ---------- Current portion of long-term borrowings 6,157 179Non-current bank loans 132,488 120,952Convertible participating shares including derivative financial instruments 180,099 153,528Finance leases 1,431 2,518Less: cash and cash equivalents (43,119) (51,947) ---------- ----------Net debt 277,056 225,230 ========== ========== 10. Net cash flow from operating activities Three Months Ended Year Ended 31st March 31st March ------------------------ -------------------------- 2006 2005 2006 2005 £000 £000 £000 £000 --------- --------- --------- ---------Loss before tax (19,281) (37,595) (52,242) (58,260)Restructuring charges 3,701 3,976 9,341 5,101Cash paid in respect of restructuring charges (2,228) (4,343) (11,308) (14,006)Depreciation and amortisation 3,639 6,818 16,720 23,075Loss on sale of property, plant and equipment and equipment on operating leases 835 1,557 1,421 795(Gain)/loss on sale of operations (268) - 1,883 -Share-based payments 1,099 389 1,916 1,061Net finance costs 8,984 6,728 31,399 29,556Decrease/(increase) in inventories 5,919 12,059 5,636 (1,688)Decrease in receivables 4,026 7,266 20,039 7,676Increase/(decrease) in payables and retirement benefit obligations 10,842 13,225 (19,548) 28,199Tax paid (6,524) (230) (7,183) (2,241) --------- --------- --------- ----------Net cash flow from operating activities 10,744 9,850 (1,926) 19,268 ========= ========= ========= ========== 11. Group Statement of Changes in Equity for the Year Ended 31st March, 2006 and 2005 31st March ------------------------- 2006 2005 £000 £000 ---------- --------- Balance at 1st April (218,873) (178,774)Loss for the year (46,881) (46,189)Shares issued 352 627Share option expense in the year 1,916 1,061Exchange translation differences in the year (21,941) 4,822Exchange translation differences related to disposals (127) -Actuarial losses on defined benefit pension plans (517) (420) ---------- ---------Balance at 31st March (286,071) (218,873) ========== ========= Group Statement of Changes in Equity for the Three Months Ended 31st March, 2006and 2005 31st March ----------------------------- 2006 2005 £000 £000 --------- ---------- Balance at 1st January (271,090) (179,096)Loss for the period (17,575) (35,006)Shares issued 5 43Share option expense in the period 1,099 389Exchange translation differences in the period 2,007 (4,783)Actuarial losses on defined benefit pension plans (517) (420) --------- ----------Balance at 31st March (286,071) (218,873) ========= ========== 12. The following are reconciliations of the balance sheet as at 31st March, 2005 and the income statement for the three months and year ended 31st March, 2005 under UK GAAP as originally reported and under IFRS as restated earlier in this release. Balance sheet As at 31st March, 2005 £000 ---------- Net liabilities under UK GAAP as originally reported (57,443)Classification of non-equity shares under UK GAAP as liabilities under IFRS (148,234)Derivative financial instruments (5,294)Recognition of pension scheme deficits (7,950)Other 48 ----------Net liabilities under IFRS (218,873) ========== Income statement Three Months Ended Year Ended 31st March, 31st March, 2005 2005 £000 £000 ---------- ---------- Loss for the period under UK GAAP as originally reported (35,321) (44,455)Additional finance costs due to: Accretion of the participating shares under IFRS Less mark-to-market gain in the market value of the derivative financial (418) (1,692) instruments 1,084 1,084Share option expense (389) (1,061)Other 38 (65) ---------- ----------Loss for the period under IFRS (35,006) (46,189) ========== ========== 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