Final Results
Photo-Me International PLC
28 June 2004
PHOTO-ME INTERNATIONAL PLC - PRELIMINARY ANNOUNCEMENT
Record PBT of £21.1m, net debt of £33.4m extinguished, dividends resumed
PMI, the digital imaging company focused on professional laboratories and
end-consumer vending solutions, announces a very substantial improvement in its
results, with a pre-tax profit of £21.1m - ahead of market expectations, which
themselves were revised substantially upwards at the time of the Interim
Announcement - and considerable cash generation.
Financial Highlights
* Turnover up 17.4% to £219.9m, a record.
* EBITDA up 47.3% to £52.2m.
* Pre-tax profit of £21.1m (after goodwill amortisation of £0.5m), also a
record and a £24.5m turnaround from the £3.4m loss of 2003 (after a
non-operating exceptional profit of £0.4m this year and an exceptional
charge of £1.2m in 2003).
* Basic EPS of 4.01p (2003: loss per share of 1.20p).
* Net cash at 30 April 2004 of £2.9m compares with net debt of £33.4m at 30
April 2003 and £51.4m at 30 April 2002 - improvements of £36.3m in one year
and £54.3m in two years.
* Dividends resumed, with a proposed first and final dividend for the year
of 1p per share.
Operational Highlights
* In the Vending Division (which has an unrivalled network of 26,000 sites
worldwide in high-footfall areas, with the related maintenance and cash
collection infrastructure) operating profit improved substantially, as a
result of tight cost control, although turnover decreased by 5.6% (3.3% due
to volume, 2.3% due to foreign exchange translation). Cash generation
remains strong.
* Manufacturing turnover increased by 109% to £78.6m, 36% (2003: 20%) of
total turnover. From a loss in 2003, Manufacturing contributed significantly
to the improved pre-tax profit, benefiting from the launch of the DKS 1550
(formerly DKS 1500) in December 2002 and the transfer of minilab manufacture
to Poland, starting in January 2004.
* PMI is the only manufacturer globally to offer a complete digital range of
high quality, reasonably priced equipment targeted at each market segment,
from wholesale via professional and retail labs to end-consumer vending
kiosks.
* Continental Europe contributed 59% of Group turnover and 82% of Group
profit before tax, with France the principal country.
* Imaging Solutions' wholesale lab business (formerly the Gretag central lab
business), which was purchased in April 2003, paid back its initial
investment in under one year.
* The launch of Digital Media Kiosks commenced last month and an accelerated
roll-out is scheduled during the remainder of the current financial year.
* Deliveries of the DKS 900 minilab, aimed at in-store operation by general
retailers, are expected to start in the Autumn of 2004.
Serge Crasnianski, CEO, stated 'The year to 30 April 2004 represents a turning
point in PMI's history. I am particularly pleased to report that, not only have
our financial objectives been exceeded, but also our product platform puts PMI
in a unique position to continue to benefit from the digital revolution.'
Mr Crasnianski added 'The Directors remain confident that PMI will make further
significant progress in the current year. Further out, the Directors continue to
believe that the widespread adoption of, and developments in, digital
photography offer huge opportunities to PMI for sustained profitable growth.'
Presentation:
A presentation to investors and broker's analysts will be given from 9.30am to
10.30am today at the London Capital Club, 15 Abchurch Lane, London EC4N 7BW
(just north of Cannon Street, approximately 150 yards from each of Cannon Street
and Monument Stations)
Enquiries:
Photo-Me International plc 01372-453 399
Vernon Sankey (Deputy Chairman)
Serge Crasnianski (Chief Executive Officer)
Bankside Consultants Limited
Charles Ponsonby 020-7444 4166/07789-202 312
CHIEF EXECUTIVE'S STATEMENT
The year to 30 April 2004 represents a turning point in PMI's history. I am
particularly pleased to report that, not only have our financial objectives been
exceeded, but also our product platform puts PMI in a unique position to
continue to benefit from the digital revolution.
Financially, 2004 is indeed a record year and beyond our initial expectations,
with record turnover of £219.9m, record pre-tax profit of £21.1m and net cash of
£2.9m (instead of net debt of £33.4m).
Operationally, both Vending and Manufacturing Divisions have shown strong
performance and constitute a sound platform for future development. On the
Manufacturing side, PMI is the only manufacturer globally to offer a complete
digital range, covering the entire spectrum of client needs, with an outstanding
and recognised quality at pricing points that are realistic and profitable, for
both customers and us. Our Vending Division continues to be highly cash
generative, and is also a springboard for the roll-out of our exciting new
product - the Digital Media Kiosk.
Looking forward, I am therefore confident that PMI's rare combination of
industrial skills, customer awareness and financial strength will lead to
sustained growth, both organic and external. This is reflected in our resumed
dividend proposal.
PROFIT & LOSS ACCOUNT OVERVIEW
2004 2003 Change %
Turnover (£m) 219.9 187.4 +32.5 +17.4
Operating profit (£m) 22.3 0.1 +22.2 N/A
Depreciation (£m) 29.9 35.3 -5.4 -15.5
EBITDA (£m)* 52.2 35.4 +16.8 +47.3
PBT (£m) 21.1 (3.4) +24.5 N/A
Basic earnings per share (p) 4.01 (1.20) +5.21 N/A
*before non-operating exceptional items
The 2004 pre-tax profit was negatively affected by a goodwill amortisation
charge of £0.5m and a currency translation charge of £0.9m and positively
impacted by a non-operating exceptional gain of £0.4m stemming from the sale of
our interests in a joint-venture. Excluding non-operating exceptionals, our
pre-tax profit was, after rounding, £20.8m, compared to a pre-tax loss of £2.2m
in 2003.
PMI's strong cash generation ability has yet again been confirmed with an
increased EBITDA of £52.2m compared to £35.4m in 2003. With the transition of
our photobooths to the digital format now standing at 77%, the depreciation
charge of £29.9m substantially outpaced the net capital expenditure (including
intangibles) of £21.0m. The decrease in depreciation charge from £35.3m in 2003
to £29.9m in 2004 is a direct consequence of the containment of capital
expenditure over the past few years.
BORROWINGS AND CASH
£m 2004 2003 2002
Net cash/(debt) 2.9 (33.4) (51.4)
The strong cash generation of both Vending and Manufacturing Divisions has
enabled the Group to transform its net debt into a net cash position. Over two
years, the improvement has been £54.3m.
DIVIDENDS
The Preliminary Announcement a year ago stated that dividends would be resumed
when overall trading significantly improved and net debt was further reduced.
Having achieved these objectives, a first and final dividend per share for the
year of 1.0p (2003:nil) is now proposed. If approved at the AGM to be held on 4
November 2004, the dividend will be paid on 22 November 2004 to shareholders on
the register on 22 October 2004, with an ex-dividend date of 20 October 2004.
The Board intends to resume the payment of both interim and final dividends.
BUSINESS REVIEW
-------------- ------ -------- ---------- ------------
Divisional Turnover Breakdown 2004 2003 Variance Variance pre-FX
£m £m % %
Vending 141.4 149.8 -5.6 -3.3
Manufacturing 78.5 37.6 +109.0 +115.1
------ -------- ---------- ------------
219.9 187.4 +17.4 +20.5
-------------- ------ -------- ---------- ------------
Geographic Breakdown Turnover Pre-tax profit
2004 2003 Variance 2004 2003
£m £m % £m £m
Continental Europe 130.8 97.8 +33.7 17.3 0.2
UK & Republic 54.0 51.1 +5.7 3.0 (0.6)
of Ireland
Asia 31.2 33.0 -5.5 1.1 (0.5)
USA 3.9 5.5 -27.6 (0.3) (2.5)
Total 219.9 187.4 +17.4 21.1 (3.4)
The table above shows the combined results from both Vending and Manufacturing
activities.
Continental Europe was again by far PMI's principal region in terms of both
turnover and profit, being the base of PMI's Manufacturing activities as well as
the area with the largest Vending business.
Although there was a further decrease in turnover in the USA, the area benefited
from commission earnings for the sales efforts that it contributed to the
Group's Manufacturing Division.
The Board believes that detailed disclosure of the results of the individual
activities could be prejudicial to the Group's best interests; however, certain
trends are commented on below.
Vending
The Vending business comprises the operation of photobooths and other vending
equipment. At the year end, the total number of Vending sites world-wide had
increased by 1,000 since a year previously to 26,000, including some 20,000
photobooths. PMI is a global company, operating in 18 countries, with three main
Vending territories - the UK, France and Japan - in all of which it continues to
enjoy a market leading position.
Globally, the turnover of the Vending Division, which is currently mature,
decreased by 3.3% in volume terms and 2.3% due to unfavourable currency
translation movements. The contribution to profits was, however, substantially
improved as a result of tight cost control.
Vending turnover in the UK and the Republic of Ireland (with 8,300 sites,
including 5,700 photobooths, of which 75% are digital) decreased by 0.8%,
reflecting the full-year impact of the previously-disclosed loss of the Safeway
contract in October 2002. The profit made reflected improvements in the quality
of sites and better cost control.
Vending turnover in France (with 8,500 sites, including 5,900 photobooths, of
which 93% are digital) was maintained in Euro terms but, on translation into
sterling, decreased by 3.6%. During the year, the important contracts with the
Paris Metro and French Railways (SNCF) were renewed.
Vending turnover in Japan (with 4,200 sites, including 4,100 photobooths, of
which 72% are digital) decreased by 5.0% in Yen terms (7.5% in sterling terms)
despite a 9% increase in the number of machines, an increase in the proportion
of digital machines from 52%, and the introduction of a voluntary ID card in
August 2003. This disappointing performance reflected Japan's sustained
recession and competition.
Plans for Digital Media Kiosks, capable of printing from both digital cameras
and digital camera phones whilst offering vending machine convenience, remain on
track. Following successful trials over almost two years involving 265 units,
mainly in Continental Europe, the launch of Digital Media Kiosks commenced last
month, with an accelerated roll-out during the remainder of the current
financial year.
Manufacturing
Manufacturing turnover primarily derives from the sale to third parties of
photo-processing equipment manufactured by PMI or by sub-contractors on its
behalf. PMI has a unique and comprehensive range covering all market segments,
from wholesale, via professional and retail labs, to end-consumer vending
kiosks. In output terms, processing labs range from 250 up to 20,000 prints per
hour. This Division recorded a 109% increase in its turnover for the year under
review as compared to the previous year.
Wholesale Labs
Imaging Solutions' central lab business (formerly the Gretag central lab
business) was purchased in April 2003. Based near Zurich in Switzerland, Imaging
Solutions is involved in the development, manufacture, sale and technical
support of equipment and systems for high volume photo-finishing laboratories,
with a pricing for a complete solution in the region of £400,000. Its CYRA
system, which is capable of processing up to 20,000 prints an hour, remains one
of the most advanced digital solutions on the market. We are extremely pleased
that, in its first year of operations under the PMI control, Imaging Solutions
has delivered a positive contribution to the Group's profits, as evidenced by a
payback of our initial investment in under one year.
Professional Labs
The strong increase in Manufacturing turnover was principally the consequence of
the substantial sales of the DKS range of minilabs through PMI's worldwide
network of distributors and its OEM contract with Kodak. The success of the DKS
1500 range reflects the quality of the products, as evidenced by the award of
the DIMA minilab prize at the PMA Convention and Trade Show in Las Vegas in
February 2004, uniquely for the second successive year. Priced at up to £70,000,
these minilabs have an output of between 800 and 1,500 prints per hour.
The total number of units sold in the year was approximately double that of last
year, with a greater proportion of higher volume machines, these having been
launched in December 2002. This increase in sales, combined with our tradition
of cost control and outsourcing, has directly translated into improved margins
and profits. After a slower than anticipated start in January and February 2004,
production at PMI's sub-contractor in Poland, Flextronics, increased
substantially in March and April 2004.
Retail Labs
At the PMA Show in February 2004, PMI unveiled the world's first thermal (dry
process) digital minilab, the DKS 900.
The DKS 900 is based on a unique proprietary PMI technology capable of printing
from 250 to 1,000 prints per hour with a high quality comparable to that of
traditional silver halide prints. It accepts all current digital inputs,
including mobile telephones, Bluetooth and memory chips, as well as analogue
sources (negatives). Its compactness, reliability and ease of operation make it
particularly suited for a retail store environment.
Operated in-store, the DKS 900 is expected to generate substantial revenues for
retailers and retail chains which are currently suffering from declining
revenues from film-roll collections as digital replaces analogue technology.
With the retail price likely to start at around £10,000, the DKS 900's
introduction is expected to open up the lower end of the digital minilab market.
Deliveries are expected to start in the autumn of 2004.
Consumer Labs
Digital Media Kiosks provide vending machine convenience to digital camera
customers, and can be sited at PMI's unrivalled network of locations worldwide
or at retail locations, which in turn benefit from PMI's established, and
unique, maintenance and cash collection infrastructure.
BOARD
During the year, two non-executive Directors (who were considered
non-independent) retired, Philippe Wahl and Peter Ogborne. The Board currently
numbers nine, of whom four are executive and five non-executive.
As a result of share dealings by Directors in October and January, the Board's
aggregate interests have reduced from 52.1% to 20.3% of the shares in issue,
substantially increasing both liquidity and the institutional register.
OBJECTIVES
In the year, PMI achieved its short term financial objective to materially
reduce indebtedness and made good progress on securing a continued recovery of
its UK Vending activities as well as improving its volume Manufacturing
capability (by use of sub-contractors).
PMI's long term objectives are to:
* improve materially the Vending Division performance, in particular in the
UK, Japan and Germany, and extend the services on offer into related areas,
in particular by the roll out of Digital Media Kiosks;
* obtain for Manufacturing a substantial share of the world market for the
manufacture of digital photo-processing equipment; and
* create sustainable shareholder value through organic or external growth:
• organically, by
- developing its presence in existing and new territories
- launching new services, such as the Digital Media Kiosk
• externally, by making acquisitions of businesses or by entering into
joint ventures
- synergistic acquisitions
- networks or products
PROSPECTS
Market opportunity
With the market displacement induced by the digital revolution, resulting in
both customer printing habits being changed and profitability of traditional
photographic outlets being affected, combined with the expected exponential
growth of digital photography in the next few years, PMI is uniquely placed to
satisfy the increased needs of digital picture printing by offering a complete
range of high quality, reasonably priced equipment targeted at each market
segment.
Vending
France is expected to continue to trade well. The UK is expected to continue its
recovery. Although the Japanese market is expected to remain difficult, the
Board is confident that its continuing restructuring efforts in this country
will lead in the medium term to satisfactory profitability. As the pace of their
roll-out intensifies, it is expected that Digital Media Kiosks will be a
significant profit contributor to this Division in the coming years.
Manufacturing
Demand for minilabs remains strong. In the current year, production is expected
to increase and, with DKS 1500-range minilab manufacture entirely transferred to
the sub-contractor Flextronics in Poland since January 2004, profitability
should improve. A useful and increasing contribution from Imaging Solutions is
also anticipated.
Overall
The Directors remain confident that PMI will make further significant progress
in the current year. Further out, the Directors continue to believe that the
widespread adoption of, and developments in, digital photography offer huge
opportunities to PMI for sustained profitable growth.
Serge Crasnianski
Chief Executive Officer 28 June 2004
GROUP PROFIT AND LOSS ACCOUNT
for the year ended 30 April 2004
Notes Audited Audited
2004 2003
£'000 £'000
Turnover - continuing operations 219,949 187,731
Less: share of turnover of joint venture - (343)
_______ ______
Turnover 1 219,949 187,388
Cost of sales (177,826) (164,390)
______ ______
Gross profit 42,123 22,998
Administrative expenses (20,847) (23,891)
Other operating income 983 1,350
______ ______
Operating profit - continuing operations 22,259 457
Share of operating loss of joint venture - (394)
Share of operating profit of associates 32 23
______ ______
Total operating profit 22,291 86
Provision against fixed asset investments - (1,163)
Profit on the sale of the joint venture 358 -
______ ______
Profit/(loss) on ordinary activities before 22,649 (1,077)
interest
Interest receivable 195 285
Interest payable (1,714) (2,616)
______ ______
Profit/(loss) on ordinary activities before 2 21,130 (3,408)
taxation
______ ______
Tax charge on profit/loss on ordinary activities (6,018) (1,221)
Tax credit on exceptional items - 369
______ ______
Total tax charge 3 (6,018) (852)
______ ______
Profit/(loss) on ordinary activities after 15,112 (4,260)
taxation
Minority interests
- equity interests (535) (58)
- non-equity interests (19) (21)
______ ______
Profit/(loss) attributable to members of the
holding 14,558 (4,339)
company
Dividends
- equity interests 4 (3,643) -
______ ______
Retained profit/(loss) for year 10,915 (4,339)
______ ______
Basic earnings/(loss) per share 5 4.01p (1.20p)
Diluted earnings/(loss) per share 5 3.97p (1.20p)
Dividend per share 1.00p -
GROUP BALANCE SHEET
as at 30 April 2004
Notes Audited Audited
2004 2003
£'000 £'000
Fixed assets
Intangible assets 6 21,395 18,273
Tangible assets 6 63,971 78,669
Investments 282 307
______ ______
85,648 97,249
______ ______
Current assets
Stocks 23,018 20,189
Debtors 32,345 25,216
Investments and short-term deposits 13,983 1,153
Cash at bank and in hand 18,026 10,122
______ ______
87,372 56,680
______ ______
Creditors
Amounts falling due within one year 68,649 55,027
______ ______
Net current assets 18,723 1,653
______ ______
Total assets less current liabilities 104,371 98,902
Creditors
Amounts falling due after more than one year 17,651 24,959
_______ ______
86,720 73,943
Provisions for liabilities and charges
Provisions 6,323 5,198
Deferred taxation 8,747 6,309
Investment in joint venture - 529
______ ______
15,070 12,036
______ ______
71,650 61,907
Minority interests
- equity interests 1,713 1,106
- non-equity interests 803 870
______ ______
69,134 59,931
______ ______
Capital and reserves
Called-up share capital 2,022 2,016
Reserves:
Share premium account 7 3,487 2,729
Other reserves 7 2,765 2,920
Profit and loss account 7 60,860 52,266
______ ______
69,134 59,931
______ ______
Shareholders' funds are attributable to:
Equity interests 68,933 59,730
Non-equity interests 201 201
_______ ______
69,134 59,931
______ ______
GROUP CASH FLOW STATEMENT
for the year ended 30 April 2004
Note Audited Audited
2004 2003
£'000 £'000
Net cash inflow from operating activities (a) 58,743 42,206
Dividends from associated undertakings 26 -
Returns on investments and servicing of finance (1,553) (2,384)
Taxation (1,102) (1,483)
Capital expenditure and financial investment (20,979) (16,971)
Acquisitions and disposals (154) (141)
______ ______
Cash inflow before use of liquid resources and
financing 34,981 21,227
Management of liquid resources (12,876) 1,222
Financing (15,103) (11,416)
______ ______
Increase in cash in the year 7,002 11,033
______ ______
Reconciliation of net cash flow to movement in net
debt
Increase in cash in the year 7,002 11,033
Repayment of capital element of finance leases 2,151 2,137
Cash flow from decrease in debt 13,942 9,279
Cash flow from increase/(decrease) in liquid
resources 12,876 (1,222)
______ ______
Change in net debt resulting from cash flows 35,971 21,227
Foreign exchange translation differences 355 (3,198)
Other non-cash movements - (26)
______ ______
Movement in net debt in the year 36,326 18,003
Opening net debt (33,401) (51,404)
______ ______
Closing net cash/(debt) (b) 2,925 (33,401)
______ ______
NOTES TO THE CASH FLOW STATEMENT
(a) Reconciliation of operating profit to operating cash flow
2004 2003
£'000 £'000
Operating profit 22,259 457
Depreciation and amortisation charges 29,863 35,332
Loss on sale of assets 467 69
Other non-cash movements 200 (507)
_____ ______
Gross cash inflow 52,789 35,351
(Increase)/decrease in stocks (3,422) 1,542
(Increase)/decrease in debtors (7,058) 12,166
Increase/(decrease) in creditors 15,162 (6,736)
Increase/(decrease) in provisions 1,272 (117)
______ ______
Net cash inflow from operating activities 58,743 42,206
______ ______
(b) Net cash/(debt)
30 April 30 April
2004 2003
£'000 £'000
Overdrafts (5,674) (4,477)
Debt due within one year (8,436) (13,028)
Debt due after one year (14,342) (24,296)
Finance leases (632) (2,875)
______ ______
(29,084) (44,676)
Cash at bank and in hand 18,026 10,122
Current asset investments and short-term deposits 13,983 1,153
______ ______
2,925 (33,401)
______ ______
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
2004 2003
£'000 £'000
=== ===
Profit/(loss) attributable to shareholders 14,558 (4,339)
Exchange and other adjustments (2,476) 4,931
______ ______
Total recognised gains and losses for the year 12,082 592
______ ______
NOTES
1 Turnover
2004 2003
£'000 £'000
Area of activity
Manufacturing:
Total sales 82,448 40,477
Sales of capital equipment to Group undertakings for own use (3,889) (2,879)
______ ______
78,559 37,598
Vending 141,390 149,790
_______ ______
219,949 187,388
_______ ______
Geographical analysis by origin
UK and Republic of Ireland 54,035 51,112
Overseas - Continental Europe 130,765 97,812
- Asia 31,210 33,022
- USA 3,939 5,442
______ ______
219,949 187,388
______ ______
2 Profit/(loss) before tax
Geographical area
UK and Republic of Ireland 3,016 (571)
Overseas - Continental Europe 17,344 164
- Asia 1,096 (455)
- USA (326) (2,546)
______ ______
21,130 (3,408)
______ ______
3 Taxation
United Kingdom 368 (178)
Overseas 5,650 1,030
______ ______
6,018 852
______ ______
4 Dividends
The Directors are proposing a first and final dividend for the year of 1.0p
(2003: nil) per Ordinary Share. If approved at the AGM of 4 November 2004, the
dividend will be paid on 22 November 2004 to shareholders on the register at the
close of business on 22 October 2004.
5 Earnings per share
2004 2003
The calculation of earnings per share is
based on the following:
Earnings attributable to
shareholders (£'000) 14,558 (4,339)
Weighted average number of shares in issue in
the period
- basic ('000) 363,387 363,008
- including dilutive share
options ('000) 367,000 365,244
______ ______
6 Fixed assets
Negative Other
Goodwill goodwill intangible Tangible
£'000 £'000 £'000 £'000
Net book value at 1 May 2003 8,331 - 9,942 78,669
Exchange adjustment (5) - (316) (1,740)
Reclassification - - 537 (537)
Additions
- Operating equipment - - - 11,496
- Other 228 (25) 7,550 2,399
Depreciation provided in the
year (570) 25 (4,302) (25,016)
Disposals at net book value - - - (1,300)
______ ______ ______ ______
Net book value at 30 April 2004 7,984 - 13,411 63,971
______ ______ ______ ______
7 Reserves Share Other Revenue
premium reserves reserves
account £'000 £'000
£'000
Balance at 1 May 2003 2,729 2,920 52,266
Exchange and other adjustments - (155) (2,321)
Arising on shares issued in year 758 - -
Profit for year - - 14,558
Dividend - - (3,643)
______ ______ ______
Balance at 30 April 2004 3,487 2,765 60,860
______ ______ ______
9 Publication of non-statutory accounts
The financial information contained in this preliminary announcement does not
constitute statutory accounts as defined in Section 240 of the Companies Act
1985. The financial information for the preceding year is based on the statutory
accounts for the year ended 30 April 2003. Those accounts, upon which the
auditors issued an unqualified opinion, have been delivered to the Registrar of
Companies.
Copies of the Report and Accounts, for the year ended 30 April 2004, will be
mailed to shareholders by 23 July 2004 and will be available from the Company's
registered office at Church Road, Bookham, Surrey KT23 3EU (telephone:
01372-453399, fax: 01372-459064, e-mail: ir@photo-me.co.uk) after that date.
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