Danka Announces Cost Reduction Plan of $40-45 Million
Press release from the issuing company
ST. PETERSBURG, Fla.--Dec. 12, 2003-- Danka Business Systems PLC today provided more details regarding the cost restructuring plan which it previously announced on November 4, 2003. The restructuring plan is expected to result in total annual savings of approximately $40 to $45 Million which exceeds the company's previous estimate of $30 Million.
The plan includes the consolidation and elimination of surplus real estate facilities, primarily in the U.S. and United Kingdom, and the elimination of approximately 675 jobs in the U.S., United Kingdom, Italy, Spain, Germany, Canada, Mexico, Puerto Rico and Brazil.
As a result of the employee severance and related costs, and the costs associated with the real estate changes, the Company expects to take a charge of $25 to $35 Million, primarily over the two fiscal quarters ending December 31, 2003 and March 31, 2004. The Company expects that most of the charge will be classified as Restructuring in the Company's income statement with the balance to flow through normal operations.
"In recent years Danka has had a high cost structure, partly due to our acquisition legacy and the resulting, extensive analog machine population. Now, because of the improvements we have made in our U.S. IT system, the completion of the U.S. Headquarters consolidation and other actions, we can attack and reduce our high cost structure. This restructuring plan will help us reduce costs as we endeavor to drive improved operating margins in Fiscal 2005. It is also a major first step toward our reaching an SG&A goal of 30% of revenue. We will continue to aggressively pursue other cost savings as well," said Lang Lowrey, Danka's Chairman and Chief Executive Officer.
The Company expects that the charge will result in approximately $10 to $15 Million in cash requirements over the next year.
"For the past few years we have been focused largely on improving our balance sheet and back office operations, and we are pleased with our progress," continued Lowrey. "We have also incubated high value growth initiatives that are being well accepted in the marketplace. Moving forward, it is incumbent upon us to get these cost structure improvements behind us so we can focus on growth. Our equipment population is now approximately 50% digital, which means that we are approaching the point where we should begin to see growth and reverse the revenue declines we have been experiencing these past five years."
The Company will discuss this cost reduction plan and its further cost reduction efforts in its third quarter earnings conference call which is expected to take place in early February.
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