DNK.L Regulatory News (DNK)

27 May 2005 13:33

Danka Business Systems PLC27 May 2005 Embargoed until 1.30pm 27 May 2005 DANKA BUSINESS SYSTEMS PLC ("Danka" or "the Group") DANKA COMMENTS ON EXPECTED FOURTH QUARTER RESULTS FOR THE YEAR ENDED 31ST MARCH, 2005 Danka Business Systems PLC, a leading independent global provider of officeimaging systems and services, today provided preliminary comments on itsexpected financial year 2005 fourth quarter results for the quarter ended 31stMarch, 2005. These comments are based on the Group's current estimate, but couldvary as the Group concludes its year end audit. The Group expects to release itsfull financial year 2005 and fourth quarter results by 14th June, 2005. The Group expects to report, under U.K. generally accepted accountingprinciples, an operating loss for the quarter, excluding exceptional items, inthe region of £25 million. Contributing to this loss is an adjustment to theGroup's U.S. trade debtors in the region of £8 million. This adjustment is basedon the Group's review, as at 31st March, 2005, of its debtor portfolio and itsdetermination that it should increase estimates of reserves. The charge is notexpected to affect future results, operations or liquidity. Also contributing to the loss are external expenses related to the Group'sSarbanes-Oxley Act (the "Act") compliance programme under U.S. securitieslegislation of approximately £5 million in the fourth quarter as it concludesits first financial year assessment of internal controls as required by Section404 of the Act, and approximately £3 million of adjustments related to rentalequipment, parts and stock, property tax and IT amortisation. The Group'shardware margins were also negatively impacted, in part, by its decision to sellexisting stock and not receive certain supplier incentives it has received forpurchases in prior periods. The Group also reaffirmed, as previously announced, that it will incur anexceptional restructuring charge of approximately £5 million in the fourthquarter as a result of its ongoing Vision 21 reengineering activities which theGroup expects will reduce operating expenses and cost of goods sold by £32 - £39million annually when fully implemented. The Group expects to report turnover for the fourth quarter in the region of£158 million. The Group concluded its fourth quarter with £52 million in cash,an increase of approximately £5 million over its third quarter ended 31stDecember, 2004. Turnover for the year is expected to be in the region of £668million, with operating losses, before restructuring charges, in the region of£21 million. "The size of our expected operating loss is disappointing, though it isexacerbated by a number of significant one-time adjustments and a continuationof high expenditures related to the conclusion of this year's complianceactivities," said Todd Mavis, Danka's Chief Executive Officer. "As we concludedour financial year 2005, while I was disappointed with our operationalperformance in a few areas, and the costs and distractions associated with ourSection 404 compliance obligations, I was encouraged by the progress we madewith several strategic initiatives," continued Mavis. "We are executing on ourstrategy to build closer, more dynamic relationships with customers that aredesigned to capture more of what they spend on print. We are advancing ourmanaged print services offering and gaining traction with the businessdevelopment partnerships we formed this year. In addition, we are on schedule inimplementing Vision 21, our initiative to aggressively reduce costs in allaspects of our business toward our goal of building a lower cost model. Thisprogress in key areas will provide us with the foundation for a much improvedfinancial year 2006" U.S. Financial Statements The Company has substantially completed its review under Statement of FinancialAccounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, whichrequires an annual review of the Company's goodwill for impairment. The Companyhas determined, using the factors required under SFAS No. 142, that the fairvalue of its Europe/Australia unit goodwill is less than its carrying amount andit expects to recognize an impairment loss in the region of £37 million underU.S. generally accepted accounting principles, though its auditors have not yetfinalised their review of this impairment. There is not expected to be anycharge for goodwill impairment in the U.K. financial statements. - 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 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 our officers,including statements related to our future performance and our outlook for ourbusinesses and respective markets, projections, statements of our plans orobjectives, forecasts of market trends and other matters, are forward-lookingstatements, and contain information relating to us that is based on our beliefsas well as assumptions made by, and information currently available to us. Thewords "goal", "anticipate", "expect", "believe", "could", "should", "intend" andsimilar expressions as they relate to us are intended to identifyforward-looking statements, although not all forward looking statements containsuch identifying words. No assurance can be given that the results in anyforward-looking statement will be achieved. For the forward-looking statements,we claim the protection of the safe harbor for forward-looking statementsprovided for in the Private Securities Litigation Reform Act of 1995, Section27A of the Securities Act of 1933, as amended and Section 21E of the SecuritiesExchange Act of 1934, as amended. Such statements reflect our current views withrespect to future events and are subject to certain risks, uncertainties andassumptions that could cause actual results to differ materially from thosereflected in the forward-looking statements. Factors that might cause suchactual results to differ materially from those reflected in any forward-lookingstatements include, but are not limited to, the following: (i) any inability tosuccessfully implement our strategy; (ii) any inability to successfullyimplement our cost restructuring plan to achieve and maintain cost savings;(iii) any material adverse change in financial markets, the economy or in ourfinancial position; (iv) increased competition in our industry and thediscounting of products by our competitors; (v) new competition as the result ofevolving technology; (vi) any inability by us to procure, or any inability by usto continue to gain access to and successfully distribute new products,including digital products, color products, multi-function products andhigh-volume copiers, or to continue to bring current products to the marketplaceat competitive costs and prices; (vii) any inability to arrange financing forour customers' purchases of equipment from us; (viii) any inability tosuccessfully enhance, unify and effectively utilize our management informationsystems; (ix) any inability to record and process key data due to ineffectiveimplementation of business processes and policies; (x) any negative impact fromthe loss of a key vendor or customer; (xi) any negative impact from the loss ofany of our senior or key management personnel; (xii) any change in economicconditions in domestic or international markets where we operate or havematerial investments which may affect demand for our products or services;(xiii) any negative impact from the international scope of our operations; (xiv)fluctuations in foreign currencies; (xv) any incurrence of tax liabilities ortax payments beyond our current expectations, which could adversely affect ourliquidity; (xvi) any inability to comply with the financial or other covenantsin our debt instruments; (xvii) any delayed or lost sales and other impactsrelated to the commercial and economic disruption caused by terrorist attacks,the related war on terrorism, and the fear of additional terrorist attacks; and(xviii) other risks including those risks identified in any of our filings withthe Securities and Exchange Commission. Readers are cautioned not to place unduereliance on these forward-looking statements, which reflect our analysis only asof the date they are made. Except as required by applicable law, we undertake noobligation, and do not intend, to update these forward-looking statements toreflect events or circumstances that arise after the date they are made.Furthermore, as a matter of policy, we do not generally make any specificprojections as to future earnings, nor do we endorse any projections regardingfuture performance, which may be made by others outside our company. This information is provided by RNS The company news service from the London Stock Exchange