The Investment Column: Danka

DANKA BUSINESS Systems, the troubled photocopier group, has dropped off the radar screens of many fund managers.

They say the former giant is now a small company, following the disaster it made of its integration of businesses acquired from Kodak in 1997. Capitalised at around pounds 300m, it is indeed no longer a giant. And Danka is shrinking further. After a stream of bad news, including a 1,400 cut in headcount, this year, the City marked its shares down 10 per cent yet again yesterday as annual results revealed a whopping pounds 268m restructuring and write-off charge. The group made a net loss of almost pounds 60m on sales down 13 per cent at pounds 1.8bn. Danka is struggling to provide the fancy digital copiers that the world now demands.

Investors may be tempted to pile into Danka, thinking all the bad news is out. Danka has hinted it is returning to profitability and expects to post encouraging first quarter figures next month. Meanwhile, it has secured debt financing until the middle of next year. Optimists may speculate Danka will soon be able to sort out its debt problem through its own cash flows.

But with a class action hanging over Danka, investors should wait for just a little more certainty on these issues, and be willing to miss out on the bottom, before buying.