Danka loses $1.2-million despite rosy predictions

The St. Petersburg photocopier distributor, in a multiyear turnaround, now has reported two consecutive quarters of losses totaling $16.7-million.

By ROBERT TRIGAUX

© St. Petersburg Times, published July 27, 2000

ST. PETERSBURG -- Despite promises in May of an imminent rebound, Danka Business Systems PLC said Wednesday it lost money in its first fiscal quarter ended June 30.

In apparent anticipation of the earnings release after the markets closed, Danka's stock slipped 13 cents to a 52-week low of $3.38. Since January, Danka shares have declined more than 70 percent.

Danka was not the only copier service company abused by investors Wednesday. Slow sales led giant Xerox Corp. to a 68 percent decline in second-quarter profit, prompting Wall Street to drive the company's stock to a five-year low.

Danka lost $1.2-million or 9 cents per share in the latest quarter, compared with net income of $12.2-million or 21 cents per share in the same quarter last year. Danka, in a multiyear turnaround, now has reported two consecutive quarters of losses totaling $16.7-million after three straight quarters of profits in 1999.

In a sign of waning sales, Danka also said revenues fell 16 percent in the quarter to $540.2-million, down from $645.7-million in the comparable quarter last year. Sequentially, Danka revenues dropped 12 percent from the quarter ended March 31, largely from fewer sales of the company's higher-end copiers.

Danka executives were not available for comment. In May, when Danka shocked analysts and investors with a deep quarterly loss, chief executive Larry Switzer said he expected the company to snap back and earn 80 to 85 cents a share in the current fiscal year that began April 1.

Danka attributed the latest quarterly loss to a series of special charges, including a $2.5-million severance charge for layoffs in Danka's U.S. service employees and a $5.5-million write-off of rental equipment. In the quarter, Danka also posted an $8.2-million credit for the reversal of fiscal year 1999 restructuring charges. The company did not elaborate.

One analyst, Ben Reitzes of PaineWebber Inc., suggested companies like Xerox and Danka were caught up in a downward spiral of intense competition.

"The No. 1 issue is that the industry is slowing and the high-end printing and publishing business is deteriorating," he said.

- Information from Times wires was used in this report.

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