Danka Reports Fiscal Year 2008 Second Quarter Operating Results

Market Wire, November, 2007

Danka Business Systems PLC (NASDAQ: DANKY) today reported operating earnings from continuing operations of $0.8 million in the fiscal year 2008 second quarter ended September 30, 2007, level with the comparable fiscal year 2007 quarter. For the six months ended September 30, 2007, the Company reported operating earnings from continuing operations of $2.6 million, compared with a loss of $3.1 million in the prior year period.

As previously reported, on June 22, 2007, the Company completed its new financing arrangement for $145 million in term and revolver debt. On July 23, 2007, these funds were combined with the proceeds from the sale in January of 2007 of the Company's European operations to repay the existing debt. In the second quarter, the Company recognized a one-time prepayment charge of $9.7 million in connection with the early extinguishment of the prior debt.

For the second quarter:

--  Total revenue was $105.2 million, 3.5% lower than the prior year
    quarter and down 1.0% sequentially.  Retail equipment, supplies and related
    sales was $47.5 million for the quarter, down 1.1% from the prior year, but
    up 3.0% sequentially.  Service revenue was $54.6 million, down 5.8% from
    the prior year, and down only 4.6% sequentially.
--  Consolidated gross margin for the quarter was 34.9%, up 50 basis
    points from the prior year, but down 130 basis points from the prior
    quarter.
--  SG&A expenses were $37.2 million, up 1.0% from the prior year and up
    2.6% sequentially.  Restructuring charges was a credit of $1.0 million, and
    other income was $0.2 million.
--  For the quarter, the Company generated operating earnings from
    continuing operations of $0.8 million.
--  Net interest expense was $4.4 million, tax expense was $0.4 million,
    and loss from discontinued operations was $0.8 million.  These, combined
    with the $9.7 million loss on early extinguishment of debt, resulted in a
    net loss of $14.4 million for the quarter as compared to net income of $5.6
    million in the prior year quarter, and a $5.0 million loss in the preceding
    quarter.
--  The adjusted net loss for the quarter, excluding the one-time debt
    prepayment charge and the gain or loss on the sales of discontinued
    operations, was $3.9 million, compared to an adjusted net loss of $7.1
    million last year.
    

"Despite a disappointing quarter, notably in our services business, the Company maintained positive operating earnings. We also began to derive the expected benefits from the recently completed financial restructuring and related cost-reduction measures," said A.D. Frazier, Danka's Chairman and Chief Executive Officer.

"Now we can focus squarely on growing our lines of business efficiently and profitably. We expect to complete in the weeks ahead, two significant strategic relationship agreements that could begin to favorably impact the financial performance of both our hardware and service lines of business as soon as the fourth quarter of fiscal year 2008. Internally, over the weeks ahead we will begin the process of realigning our existing business units into one unified organization under the leadership of our President of Operations Bill Troxil, who has led our East Regional Business Unit since April 2006. And we will continue to refine our go-to-market strategies -- in conjunction with strong support from our vendors -- as we increase our already strong presence in the highly desirable small and medium-sized enterprise market," concluded Frazier.

For the first six months:

--  Total revenue was $211.5 million, down 8.5% from the prior year.
    Retail equipment, supplies and related sales was $93.7 million, down 8.2%
    from the prior year while service revenue was $111.8 million, down 7.5%
    from the prior year.
--  Consolidated gross margin was 35.6%, down 20 basis points from the
    prior year.
--  SG&A expenses were $73.5 million, down $3.5 million or 4.6% from the
    prior year.
--  For the first six months, the Company generated operating earnings
    from continuing operations of $2.6 million.
--  Net interest expense was $9.4 million, loss on early extinguishment of
    debt was $9.7 million, tax expense was $1.1 million, and loss from
    discontinued operations was $1.8 million.  These resulted in a net loss of
    $19.3 million as compared to a net loss of $6.6 million in the prior year.
    

Conference Call and Webcast

A conference call and Webcast to discuss Danka's second quarter results has been scheduled for today, November 6, 2007, at 10:00a.m. ET. To access the Webcast, please go to www.danka.com . To participate in the conference call, callers in the United States and Canada (and some United Kingdom callers) can dial 800-309-1555. Other international callers should dial 706-643-7754. Reference conference ID #21210684 when prompted. A recording of the call will be available approximately two hours after it's completed through 12:00a.m. ET on November 11, 2007. To access this recording, please call either 800-642-1687 or 706-645-9291 (conference ID #21210684), or visit Danka's website.