Business News

Danka Reports Fiscal Year 2008 Third Quarter Operating Results

Tuesday 05. February 2008 - Danka Business Systems PLC (OTCBB: DANKY) today reported operating earnings from continuing operations of $0.6 million in the fiscal year 2008 third quarter ended December 31, 2007, compared with a loss of $1.0 million in the comparable fiscal year 2007 quarter.

For the nine months ended December 31, 2007, the Company reported operating earnings from continuing operations of $3.2 million, compared with a loss of $4.1 million in the prior year period.
For the third quarter:

— Total revenue was $108.2 million, 2.4% higher than the prior year
quarter and up 2.8% sequentially. Retail equipment, supplies and related
sales was $51.3 million for the quarter, up 13.3% from the prior year, and
up 8.0% sequentially. Service revenue was $54.1 million, down 5.9% from
the prior year, and down 1.0% sequentially.

— Consolidated gross margin for the quarter was 32.8%, down 110 basis
points from the prior year, and down 210 basis points from the prior
quarter.

— SG&A expenses were $33.2 million, down 13.8% from the prior year and
down 10.8% sequentially. Restructuring charges were $1.8 million.

— For the quarter, the Company generated operating earnings from
continuing operations of $0.6 million.

— Net interest expense was $3.6 million, a tax benefit was recorded of
$2.2 million and earnings from discontinued operations were $0.1 million.
This resulted in a net loss of $0.8 million for the quarter as compared to
net loss of $5.5 million in the prior year quarter, and a $14.4 million
loss in the preceding quarter.


“Third quarter results again reflect some of the structural changes occurring in the marketplace. For example, we continue to see conversions from analog to digital that, at least initially, serve to reign in service revenue. However, we posted solid gains in hardware sales, and are beginning to realize the full benefits of our financial restructuring and related cost-reduction measures,” said A.D. Frazier, Danka’s Chairman and Chief Executive Officer.

“We have also achieved significant organizational enhancements as a result of realigning our business into one unified organization in late 2007. Our focus on training and customer satisfaction strategies continues unabated. Vendors, in particular, have been strong supporters of this effort. Additionally, our recently announced strategic relationship with Konica Minolta is progressing favorably,” concluded Frazier.

For the first nine months:


— Total revenue was $319.7 million, down 5.1% from the prior year.
Retail equipment, supplies and related sales was $145.0 million, down 1.6%
from the prior year while service revenue was $165.9 million, down 7.0%
from the prior year.

— Consolidated gross margin was 34.6%, down 60 basis points from the
prior year.

— SG&A expenses were $106.7 million, down $8.8 million or 7.7% from the
prior year.

— For the first nine months, the Company generated operating earnings
from continuing operations of $3.2 million.

— Net interest expense was $13.0 million, loss on early extinguishment
of debt was $9.7 million, a tax benefit was recorded of $1.1 million, and
loss from discontinued operations was $1.7 million. These resulted in a
net loss of $20.1 million as compared to a net loss of $12.1 million in the
prior year.