Final Results

RNS Number : 7464Y

Photo-Me International PLC

10 July 2008

 



Thursday 10 July 2008 

PHOTO-ME INTERNATIONAL PLC - PRELIMINARY ANNOUNCEMENT

Photo-Me announces its results for the year to 30 April 2008, together with details of a recently concluded Operational Review designed to establish the best ways in which to restore shareholder value over the longer term.

Key-Points- Operational Review

• The Board continues to believe that shareholders would be better served not only by the Group retaining its Vending Division, but also by making incremental, but significant, improvements to its activities, both inside and outside the area of digital imaging

• Photo-Me's objective is to become a leading operator, supplier and servicer of instant service equipment, with a product offering that increasingly extends beyond digital imaging

Key Points - Financial

• Revenue on continuing businesses down 1.5% at £209.7m (2007: £212.8m)

• Adjusted† EBITDA still substantial, at £35.8m (2007: £46.0m)

• Adjusted† pre-tax loss £1.9m (2007: profit of £13.9m)

• Reported pre-tax loss £21.6m (2007: profit of £15.7m) includes £19.8m of additional charges, comprising exceptional items of £14.8m (strategic review costs of £4.3m, restructuring costs of £3.2m, an impairment provision of £7.8m and an investment gain of £0.5m), and accelerated depreciation and amortisation charges of £5.0m. An approximate quantification of the additional charges was announced on 26 June 2008 

• No final dividend is proposed

† Adjusted disregards exceptional items, accelerated depreciation and businesses discontinued in April 2007 and April 2008.

Key Points - Commercial

• Vending, the principal Division, increased its revenue by 4% to £148.8m (2007: £142.9m). Its adjusted† operating profit reduced by 9% to £13.8m (2007: £15.1m). Photobooths benefited from the completion of the upgrading of the photobooth estate, whilst digital media kiosks' takings increased by 18% following increased customer awareness and acceptance

• Manufacturing reduced its revenue by 13% to £60.9m (2007: £69.9m) and reported an adjusted† operating loss of £7.5m (2007: profit of £5.2m). Wholesale photographic equipment made a small loss, but retail photographic equipment (which includes minilabs) incurred a substantial loss

Key Points - Board

• On 3 July 2008, John Lewis OBE, was appointed a non-executive Director as a part of the rebuilding of the Board after a year of substantial Board change

Hugo Swire, Chairman, stated 'It gives me no pleasure to announce such deeply unsatisfactory results. I am delighted, however, to endorse the outcome of the recently concluded Operational Review. The Board is determined that today should mark the end of a disappointing period in the Group's history.'

Thierry Barel, CEO, said 'Although the financial results for the year are disappointing, Photo-Me continues to possess a unique combination of strengths. In particular the Group enjoys an extensive network of vending sites, numerous contracts with major retailers and other key accounts, a substantial field service and cash collection infrastructure, as well as integrated R&D and low-cost production facilities. Building on these strengths, Photo-Me's objective is to become a leading operator, supplier and servicer of instant service equipment, with a product offering that increasingly extends beyond digital imaging. Let's now focus on maximising the potential from our substantial strengths.'

Thierry Barel added 'The Operational Review will have only a gradual effect on the Group's result, but, in the current year, is expected to achieve stability. A significant reduction in net debt is, however, forecast as a result of the expected substantial decrease in the total of capital expenditure, taxation, dividends and share buy-backs'.

Legal Disclaimer:

Certain statements made in this announcement are forward looking statements. Such statements are based on current expectations and are subject to a number of risks and uncertainties that could cause actual events or results to differ materially from these forward looking statements.

Presentation:

A presentation to investors and brokers' analysts will be given from 09.00 to 10.00 today at    1 Cornhill, London EC3V 3DR (near to Bank underground station).  

Enquiries:

Photo-Me International	01372-453 399
Hugo Swire (Chairman)	020-7367 8889 from 10.30 to 12.30 on Thursday 10 July 2008
Thierry Barel (CEO)
Bankside Consultants
Charles Ponsonby	020-7367 8851 / 07789-202 312

CHIEF EXECUTIVE'S STATEMENT

The year to 30 April 2008 was a turbulent one for Photo-Me and its financial result, a loss for the first time in five years, was very disappointing. The pre-tax loss from continuing operations totalled £21.6m, after charging exceptional items of £14.8m and accelerated depreciation and amortisation of £5.0m. The additional charges of £19.8m result from a combination of the Strategic Review completed in September 2007 and the recent Operational Review, whose details are announced below. The Manufacturing result deteriorated into an operational loss. 

Notwithstanding, the result included significant positive aspects. EBITDA (before additional charges) remained considerable and Vending, Photo-Me's principal activity, continued to perform well, increasing its revenue and only slightly reducing its operating profit. Further, Photo-Me continues to possess substantial strengths, in particular in its Vending Division, as is detailed under Strategic and Operational Reviews below.

Photo-Me is now concentrating on maximising the potential from its substantial strengths. Photo-Me's objective is to become a leading operator, supplier and servicer of instant service equipment, with a product offering that increasingly extends beyond digital imaging. 

STRATEGIC AND OPERATIONAL REVIEWS 

During the year, and at the instigation of certain substantial shareholders, the Board and its advisers conducted a detailed examination of options for the possible significant return of capital to shareholders, including the possible sale of the Vending Division. Having studied the firm offers for the business that resulted from this exercise, the Board found none to be acceptable, in part reflecting deteriorating conditions in the debt markets. Consequently, the Board terminated the Vending Division disposal process and decided to retain the Vending Division within the Group.

Following the ending of this Strategic Review process and after the subsequent appointment of a new CEO, the Board has conducted an Operational Review, designed to establish the best ways in which to restore shareholder value over the longer term. In conclusion, the Board continues to believe that shareholders would be better served, not only by retaining the Vending Division, but also by making incremental, but significant, improvements to its activities, both inside and outside the area of digital imaging. 

The Board believes that Photo-Me has the following demonstrable strengths which result in a unique strategic position in its market and high barriers to entry: 

• its extensive network of vending sites, with related site-owner contracts and relationships;

• its leading market positions in Europe and Japan;

• its established substantial field service and cash-collection infrastructure;

• its integrated R&D and low-cost production facilities; and

• the cash-generative characteristics of its vending activities. 

  Specifically, Photo-Me's potential is reflected in:

• its strong base of around 43,000 vending units, half of which are traditional photobooths, with the other half in the fast growing service and amusement segments; 

• its proven track record of moving into new vending areas, such as digital media kiosks, copiers, kiddie rides and other amusement equipment; and 

• the projected growth in the global kiosk vending and service market of 55% by 2010 (per Summit Research Associates, 2008). 

Drawing increasingly on the innovation of its R&D activities, Photo-Me will aim continually to develop new models of equipment to diversify from, and build on, its core ID photobooth business. Diversification is envisaged via the following channels:

• kiosks that move beyond traditional photo printing, to services which may, in due course, include photo albums, photo-related accessories, internet services, digital media (such as music and ring tones) and mobile office services (such as copiers and business cards);

• non-gambling amusement equipment, including kiddie rides, toy dispensers and games of skill; and

• biometric digital enrolment, which will gradually augment current ID photo production.

Photo-Me is already selling to third parties its field-service and cash collection infrastructure. The Board believes that this activity is one of the Group's core strengths and will seek to increase revenues from this source.

Photo-Me will continue to develop its retail and wholesale photographic equipment manufacturing businesses and extend its range of products to other instant service equipment.  Photo-Me will leverage the synergies between its Manufacturing and Vending Divisions and, as a co-ordinated Group, pursue the three main activities of 'Operate, Sell and Service'. 

Finally, the drive to increase efficiency is being stepped up, with a streamlining of the organisation, in addition to cost and working capital reductions.  

FINANCIAL REVIEW

Figures in the following paragraph are stated before exceptional items of £14.8m and exclude the results of discontinued activities.  In addition, accelerated depreciation and amortisation of £5.0m, arising from a review of the expected economic lives of the Group's operating equipment and investment in research and development, has been added back. This has been done to ensure comparability with the previous year and to provide clarity on the underlying performance of the Group.

On revenue down 1.5% at £209.7m (2007: £212.8m), EBITDA was £35.8m (2007: £46.0m), representing 17.1% (2007: 21.6%) of revenue - still a high percentage. In part reflecting a £4.5m increase in the underlying depreciation charge following a period of significant capital investment, operating profit reduced to £1.7m (2007: £15.8m). After net finance costs of £3.6m (2007: £1.9m), a pre-tax loss of £1.9m was incurred (2007: profit of £13.9m). Exchange rate movements, notably the 5.8% strengthening in the average €: £ exchange rate, increased revenue by £6.9m (acquisitions adding a further £2.1m) and increased the pre-tax loss by £0.1m.

After additional charges, explained more fully below, the reported operating loss was £18.6m (2007: profit of £16.9m), the net finance cost was £3.0m (2007: £1.2m) and the pre-tax loss was £21.6m (2007: profit of £15.7m). The reported loss after tax for the year from continuing operations was £19.1m (2007: profit of £10.5m) and the diluted loss per share on continuing operations was 5.32p (2007: earnings of 2.75p).  Following the Board's decision to sell Photo-Me's Vending business in the USA, the loss from this discontinued operation of £0.7m (2007: loss of £3.1m including the loss from Deith Group Limited) has been presented separately. The total reported loss for the year from continuing and discontinued operations was therefore £19.8m (2007: profit of £7.4m).

For the fourth consecutive year, expenditure on tangible and intangible assets, net of proceeds, was high, totalling £29.4m (2007: £37.2m), as the Vending Division's estate of photobooths was substantially updated to reflect changing technology. This virtually completes the upgrade, and future levels of capex are expected to be significantly lower. The high levels of capex, combined with a share buy-back programme, tax payments and restructuring costs, resulted in an increase in net debt to £45.5m (2007: £27.7m), representing gearing of 57.2% (2007: 27.6%), based on total equity of £79.5m (2007: £100.4m). Capex, tax and dividends are all expected to be substantially lower in the current year and the Vending Division's cash-generative characteristics are expected to reduce Group net debt significantly.

2007/08 ADDITIONAL CHARGES

Additional charges in 2007/08 totalled £19.8m. These comprised exceptional items (being material one-off items) of £14.8m and accelerated depreciation and amortisation (representing the abnormal impact on this year's result arising from an adjustment to the expected useful lives of some operating equipment and of certain research and development projects) of £5.0m. The exceptional items comprise a restructuring charge of £7.5m and an impairment charge of £7.8m, offset by a gain of £0.5m on an investment in an associated company.

The £7.5m restructuring charge consists of £4.3m of professional and other costs incurred in connection with the Strategic Review carried out between November 2006 and September 2007, in particular with regard to the possible disposal of the Vending Division and the corporate restructuring of the Group.  The balance of £3.2m relates to employment termination and other restructuring costs. £5.7m of the total was included in the Interim Announcement of 17 December 2007.  

The £7.8m impairment charge includes £4.2m in respect of operating equipment (much of it first generation digital media kiosks) and £2.8m relating to capitalised research and development costs, mainly in relation to silver halide technology, which is increasingly facing competition from dry technologies.

The £5.0m accelerated depreciation and amortisation charge reflects the Board's decision to reduce, with effect from 1 May 2007, the expected economic lives of some of the Group's vending equipment and capitalised research and development. This reduction (from eight years to five) is a result of anticipated changes to the market in favour of dry technologies, with their quicker obsolescence. The additional depreciation charge in both the current year and the year to 30 April 2010 will be significantly lower than that for the year under review. 

The Board's intention to make an impairment charge and an accelerated depreciation and amortisation charge was announced on 10 April 2008, with an approximate quantification being announced on 26 June 2008.

Both the impairment charge and the accelerated depreciation and amortisation charge are non-cash items.

DIVIDENDS

In its Interim Announcement, made on 17 December 2007, the Board declared a maintained interim dividend of 1.0p per share. On 10 April 2008, the Board announced that it had cancelled the interim dividend. This decision reflected uncertainty as to the sufficiency of the distributable reserves in the Company at 30 April 2008, following the Board's decision to reduce substantially the expected useful lives of some of the Company's vending equipment. No final dividend is proposed.  

The Board will consider a resumption of dividends once the Group's financial performance permits.

BUSINESS REVIEW

Divisional Analysis of Revenue and Profit

	External Revenue			Operating (Loss)/Profit †
Year to 30 April	2008	2008*	2007	2008	2008٭	2007
	£m	£m	£m	£m	£m	£m
Vending	148.8	144.7	142.9	13.8	13.5	15.1
Manufacturing	60.9	58.1	69.9	(7.5)	(7.1)	5.2
Group overheads	-	-	-	(4.6)	(4.6)	(4.5)
	209.7	202.8	212.8	1.7	1.8	15.8
٭ at 2007 exchange rates † before additional charges

The 1.5% decrease in reported Group revenue is the net of a 4.1% increase in Vending and a 12.9% decrease in Manufacturing. Vending accounted for 71% (2007: 67%) of Group revenue and (considering Manufacturing's loss) all (2007: 74%) of Group operating profit (excluding Group overheads).

The 4.7% decrease in Group revenue, at constant exchange rates, is the net of a 1.3% increase in Vending and a 16.9% decrease in Manufacturing.

  Geographical Analysis of Revenue and Profit (by origin)

	External Revenue			Operating (Loss)/Profit†
Year to 30 April	2008	2008٭	2007	2008	2008٭	2007
	£m	£m	£m	£m	£m	£m
Continental Europe	121.6	115.0	122.5	(0.7)	(0.6)	12.4
UK & Republic of Ireland	60.4	60.2	62.6	-	-	(0.1)
Asia & Australia	27.7	27.6	27.7	2.4	2.4	3.5
	209.7	202.8	212.8	1.7	1.8	15.8
٭ at 2007 exchange rates † before additional charges

Continental Europe, which includes the great majority of Manufacturing revenue, contributed an unchanged 58% of reported Group revenue, but made a small loss on account of the deterioration in the Manufacturing result. Substantially all Group overheads are charged against the UK & Republic of Ireland.

Vending

Vending comprises the operation of instant service equipment, including photobooths, digital media kiosks and amusement machines. At the year end, the total number of Vending sites worldwide, other than in the USA, was 42,850 (2007: 41,400).

Photo-Me's continuing vending business is global, operating in 16 industrialised countries. However, 86% of sites are located in three territories - the UK & Ireland, France and Japan. By area, Continental Europe accounted for 17,600 (2007: 17,200) sites; the UK and Ireland for 17,450 (2007: 17,400); and Asia and Australia for 7,800 (2007: 6,800). 

In the year, the operating margin (before additional charges) of Vending's continuing business reduced to 9.3% from 10.6%. This reflected, in part, increased depreciation.

The USA has always been a limited market for ID photography and US vending has tended to be loss-making in recent years. Prior to the year-end, the Board decided to sell Photo-Me's Vending business in the USA, which it is actively marketing.  Accordingly, the business has been treated as an asset held for sale at 30 April 2008 and reported within discontinued activities. In the year to 30 April 2008, it made a pre-tax loss of £0.7m on a reduced revenue of £1.2m.

Photobooths

Photobooths are an efficient and competitively priced provider of ID photographs and represent a stable and cash generative business.

At the year end, the total number of photobooths sited was up 4% at 21,400 (2007: 20,600), of which Continental Europe contributed 9,500 (2007: 9,250), the UK & Ireland 5,600 (2007: 5,600) and Asia & Australia 6,300 (2007: 5,750).

Assisted by the upgrading of the photobooth estate, takings increased by 3% (10% in Continental Europe). However, at constant exchange rates, the global increase would have been 1% and that in Continental Europe 3%. In the context of the anticipated slight decline in takings per photobooth, this performance was satisfactory.

Digital Media Kiosks

Digital Media Kiosks generate photographic prints from both digital cameras and digital camera phones. They provide vending machine convenience, do not require third party assistance and can be sited at Photo-Me's installed network of locations worldwide or at third party retail locations.  

At the year end, the total number of digital media kiosks sited was 4,600 (2007: 4,700). Continental Europe accounted for 3,800 (2007: 3,900) of these. France was by far the principal territory with 2,900 (2007: 2,900), followed by the UK with 700 (2007: 700) and Switzerland with 400 (2007: 500).  

In the year, takings increased by 18% (11% at constant exchange rates), despite the 2% decrease in machines sited. Substantially all the increase was in Continental Europe, mostly in France, following increased customer awareness and acceptance.

Amusement and Other Vending Equipment

At the year end, the total number of units of amusement and other vending equipment sited was up 5% at 16,900 (2007: 16,100), of which 14,200 (2007: 13,500) were amusement machines, notably kiddie rides and small toy vending equipment. The balance principally comprised photocopiers and express business card machines. In the year, takings increased by 2% (decrease of 1% at constant exchange rates).

Manufacturing

Manufacturing revenue primarily derives, directly or indirectly, from the sale to third parties of photo-processing equipment manufactured by Photo-Me or by sub-contractors on its behalf, normally in low cost territories. Photo-Me has a unique and comprehensive range covering all market segments, from wholesale, to attended and self-service retail, with printing outputs of between 20,000 and 500 prints per hour.  Photo-Me has recently successfully extended its product range into photo album machines for the wholesale and attended retail segments.

Wholesale Photographic Equipment

The Group's wholesale labs business, Imaging Solutions, based near Zurich in Switzerland, is involved in the development, manufacture, sale and technical support of equipment and systems for high volume photo finishing laboratories (up to 20,000 prints per hour).

Revenue reduced by 6% (9% at constant exchange rates) and, in difficult market circumstances, the result deteriorated from a profit to a small loss. These circumstances included: a slight reduction in the worldwide wholesale lab population, increasing competition from new technologies which are cheaper but of lower quality, and an increasing customer focus on photo-books at a time when the launch of Imaging Solutions' excellent FastBook photo album model was delayed until December 2007.  With the launch of FastBook, the second half of the year was better than the first half. 

In the current year, Imaging Solutions will benefit from its enhanced product range, from initial orders from its new markets of India, China and South America, and from a reduced cost base. An improved result is expected. 

Retail Photographic Equipment

A substantial majority of Manufacturing revenue derives from the sale of retail photographic equipment, together with the related spare parts, consumables and services. The equipment includes silver halide and dry technology minilabs (machines with an output of 800-2,000 prints per hour), photo album machines and digital media kiosks. Spare parts, consumables and services together contribute substantially to the results of this business.

For the sixth successive year, Photo-Me's minilabs received the leading global trade show award for print quality - the DIMA (Digital Imaging Marketing Association) digital printing award. Importantly in the context of Photo-Me's expertise in silver halide technology, this year's award was for the exceptional printing quality of the new DKS 9xx Series thermal technology minilab.

In the year, Photo-Me had to endure exceptionally difficult market circumstances. These comprised tough times for specialist photographic retailers, a declining worldwide population of minilabs, heightened price competition, the move away from silver halide technology, and the unsought prominence of the Group's corporate matters.

As a result, revenue decreased by 15% (19% at constant exchange rates). These reductions reflected principally a decrease in units sold and the reduced average selling price because of the substantial proportion of unit sales being in satisfaction of a competitively priced large order denominated in US dollars. Sales of consumables and spares increased, whilst the sale of services reduced by a lower percentage than equipment. The result was also affected by a sizeable bad debt provision, leading to a substantial loss for the year. 

Photo-Me retains the benefits of its low cost manufacturing by sub-contractors and its innovative research and development facilities. Although trading remains exceptionally difficult, Photo-Me retains the ability to win one or more large orders for which it is currently tendering. 

BOARD

The year, and subsequently, has been a time of substantial change in the composition of the Board. The following changes, all of which have previously been announced, are additional to those reported in the Interim Announcement of 17 December 2007.

On 31 December 2007, Dan David resigned as a non-executive Director. Dan David was elected to the Board in 1968 and was executive Chairman from 1992 to 1998 and non-executive Chairman from 1998 to 2005. Dan David retains the honorary title of Life President, in recognition of his contribution to the growth of the Group.

On 31 March 2008, David Young (interim non-executive Chairman), Roger Partington (non-executive Director) and Martin Reavley (non-executive Director) all resigned from the Board. 

On 1 April 2008, following the resignations of 31 March 2008, two appointments were made. Hugo Swire, a non-executive Director since June 2005, was appointed interim Chairman, whilst Robert Lowes, then Company Secretary, joined the Board as an interim Director. 

On 3 July 2008, John Lewis OBE, was appointed a non-executive Director. John Lewis' career includes years of serving on the Boards of public companies, as well as numerous senior roles at substantial private businesses. His appointment represents a significant part of the rebuilding of the Board. At the same time, Robert Lowes resigned as an interim Director, reverting to his position as Company Secretary. 

From 2 July 2007 until the resignation of the three Directors on 31 March 2008, the constitution of the Board and its committees was fully compliant with best corporate governance standards.  The Board remains fully committed to the Principles of Good Governance and intends to be fully compliant with all provisions of the 2006 Combined Code on Corporate Governance as soon as this is practicable.

OUTLOOK 

Looking forward, Photo-Me is focusing on three activities: Operations, Sales and Servicing.  

Vending Operations is historically a stable business, but may begin in the second half to feel the impact on passport photography of the trend towards centralisation of biometric data. Sales starts from a lower base and is expected to continue to experience difficult market conditions. It could, however, benefit from one or more large orders for retail photographic equipment, any one of which could have a material impact on the Group's result. Servicing currently supports the Group's existing Operations and Sales customers, but is now approaching other operators of urban vending equipment.

Further out, Operations will vigorously expand its number of units sited and its offering beyond digital imaging so as to compensate for any potential decline in ID photography. The Sales business will also broaden its offering with equipment manufactured both by the Group (or by sub-contractors on its behalf) and by third parties.  In support of this, the Group's research and development activities will create a constant stream of innovation, and aim to introduce a series of proven new concepts each year. 

The Operational Review recently concluded will have only a gradual effect on the Group's result but, in the current year, is expected to achieve stability. A significant reduction in net debt is, however, forecast as a result of the expected substantial decrease in the total of capital expenditure, taxation, dividends and share buy-backs.  

Thierry Barel

Chief Executive Officer                                    10 July 2008

  GROUP INCOME STATEMENT

for the year ended 30 April 2008

		2008
		Before  exceptional items	Exceptional items (Note 3)	Total
	Notes	£'000	£'000	£'000
Revenue	2	209,684	-	209,684
Cost of sales		(191,815)	(10,908)	(202,723)
Gross profit		17,869	(10,908)	6,961
Other operating income		1,110	-	1,110
Administrative expenses		(22,260)	(4,433)	(26,693)
Share of post-tax losses from associates		(1)	-	(1)
Operating loss		(3,282)	(15,341)	(18,623)
Finance revenue		893	571	1,464
Finance cost		(4,491)	-	(4,491)
Loss before tax		(6,880)	(14,770)	(21,650)
Total tax (charge)/credit	4	(221)	2,805	2,584
Loss for year- from continuing operations		(7,101)	(11,965)	(19,066)
Loss for year- from discontinued operations		(747)	-	(747)
Loss for year- from continuing and discontinued operations		(7,848)	(11,965)	(19,813)

Attributable to:
- Equity shareholders of the Parent		(7,958)	(11,950)	(19,908)
- Minority interests		110	(15)	95
		(7,848)	(11,965)	(19,813)

Dividends
Paid in year (£'000)	6			8,690
Paid in year per share	6			2.40p
Loss per share (total)
Basic loss per share	5	(2.20p)	(3.32p)	(5.52p)
Diluted loss per share	5	(2.20p)	(3.32p)	(5.52p)
Loss per share (continuing operations)
Basic loss per share	5	(2.00p)	(3.32p)	(5.32p)
Diluted loss per share	5	(2.00p)	(3.32p)	(5.32p)

  GROUP INCOME STATEMENT

for the year ended 30 April 2007

		2007
		Before  exceptional items	Exceptional items (Note 3)	Total
	Notes	£'000	£'000	£'000
Revenue	2	212,781	-	212,781
Cost of sales		(175,189)	1,109	(174,080)
Gross profit		37,592	1,109	38,701
Other operating income		1,096	-	1,096
Administrative expenses		(22,916)	-	(22,916)
Share of post-tax profits from associates		41	-	41
Operating profit		15,813	1,109	16,922
Finance revenue		1,198	650	1,848
Finance cost		(3,077)	-	(3,077)
Profit before tax		13,934	1,759	15,693
Total tax charge	4	(4,793)	(381)	(5,174)
Profit for year- from continuing operations		9,141	1,378	10,519
Loss for year- from discontinued operations		(3,118)	-	(3,118)
Profit for year- from continuing and discontinued operations		6,023	1,378	7,401

Attributable to:
- Equity shareholders of the Parent		6,426	1,378	7,804
- Minority interests		(403)		(403)
		6,023	1,378	7,401

Dividends
Paid in year (£'000)	6			8,751
Paid in year per share	6			2.40p
Earnings per share (total)
Basic earnings per share	5	1.76p	0.38p	2.14p
Diluted earnings per share	5	1.75p	0.37p	2.12p
Earnings per share  (continuing operations)
Basic earnings per share	5	2.40p	0.38p	2.78p
Diluted earnings per share	5	2.38p	0.37p	2.75p

  GROUP BALANCE SHEET

as at 30 April 2008

	Notes	2008	2007
		£'000	£'000
Assets
Non-current assets
Goodwill	7	10,840	9,347
Other intangible assets	7	19,621	22,565
Property, plant and equipment	7	79,850	84,243
Investment property	7	3,105	3,192
Investments in associates		595	99
Other financial assets - held to maturity		445	327
- available-for-sale		123	109
Deferred tax assets		142	382
Trade and other receivables		1,359	1,266
		116,080	121,530
Current assets
Inventories		34,935	32,387
Trade and other receivables		32,372	41,574
Other financial assets - held to maturity		13	64
- available-for-sale		333	307
Derivative financial asset		32	-
Current tax		3,672	160
Cash and cash equivalents		30,371	31,340
		101,728	105,832
Assets held for sale		469	-
Total assets		218,277	227,362
Equity
Share capital		2,037	2,035
Share premium	8	5,436	5,372
Treasury shares	8	(5,802)	(1,967)
Other reserves	8	9,242	(2,282)
Retained earnings	8	66,019	95,143
Total shareholders' equity		76,932	98,301
Minority interests		2,589	2,135
Total equity		79,521	100,436
Liabilities
Non-current liabilities
Financial liabilities		32,365	17,868
Post-employment benefit obligations		4,245	2,736
Provisions		3	6
Deferred tax liabilities		7,806	12,083
Trade and other payables		784	963
		45,203	33,656
Current liabilities
Financial liabilities		44,036	42,174
Derivative financial liability		62	-
Provisions		2,098	2,380
Current tax		2,969	4,284
Trade and other payables		43,104	44,432
		92,269	93,270
Liabilities held for sale		1,284	-
Total equity and liabilities		218,277	227,362

GROUP CASH FLOW STATEMENT

for the year ended 30 April 2008

		2008  £'000	2007 £'000
Cash flows from operating activities
(Loss)/profit before tax		(21,650)	15,693
Finance cost		4,491	3,077
Finance revenue		(1,464)	(1,848)
Operating (loss)/profit		(18,623)	16,922
Exceptional item provision reversed		-	(1,109)
Operating (loss)/profit from continuing operations		(18,623)	15,813
Operating loss from discontinued operations		(710)	(3,359)
Share of post-tax losses/(profits) from associates		1	(41)
Amortisation of intangible assets		8,217	8,477
Depreciation of property, plant and equipment		30,905	21,688
Loss/(profit) on sale of property, plant and equipment		410	(125)
Impairment		7,827	-
Exchange differences		2,092	(251)
Decrease in inventories		1,045	2,212
Decrease in trade and other receivables		12,870	8,545
Decrease in trade and other payables		(7,474)	(10,722)
Movement in provisions		(631)	(2,533)
Other items		35	531
Cash generated from operations		35,964	40,235
Interest paid		(4,501)	(3,219)
Taxation paid		(8,286)	(2,639)
Net cash generated from operating activities		23,177	34,377
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired		338	(152)
Proceeds from disposal of subsidiaries		-	1,300
Investment in intangible assets		(5,571)	(6,843)
Proceeds from sale of intangible assets		-	199
Purchase of property, plant and equipment		(25,396)	(33,668)
Proceeds from sale of property, plant and equipment		1,540	3,162
Proceeds from sale of available-for-sale investments		90	-
Interest received		803	998
Dividends received from associate		108	37
Net cash utilised in investing activities		(28,088)	(34,967)
Cash flows from financing activities
Issue of Ordinary shares to equity shareholders		66	516
Purchase of treasury shares		(3,835)	(1,089)
Repayment of capital element of finance leases		(136)	(387)
Proceeds from borrowings		22,238	33,196
Repayment of borrowings		(9,446)	(24,579)
Decrease/(increase) in monetary funds		24	(67)
Dividends paid to equity shareholders		(8,690)	(8,751)
Dividends paid to minority interests		-	(4)
Net cash generated from/(utilised in) financing activities		221	(1,165)
Net decrease in cash and cash equivalents		(4,690)	(1,755)
Cash and cash equivalents at beginning of year		11,573	14,143
Exchange gain/(loss) on cash and cash equivalents		1,434	(815)
Cash and cash equivalents at end of year		8,317	11,573

The discontinued operations in 2008 relate to the American Vending business, which is classified as held for sale in the balance sheet. The American business contributed an inflow of £122,000 from operating activities (2007: inflow of £61,000), an outflow of £92,000 from investing activities (2007: £49,000 outflow) and an outflow from financing activities of £13,000 (2007: inflow of £32,000). In 2007, an additional discontinued Manufacturing operation contributed an outflow of £227,000 from operating activities, an outflow of £1,348,000 from investing activities and an outflow of £596,000 from financing activities.

Group Statement of Recognised Income and Expense

for the year ended 30 April 2008

	2008	2007
	£'000	£'000
Income and expense recognised directly in equity
Actuarial loss on defined benefit pension scheme and other post-employment benefit obligations*	(571)	(50)
Exchange differences	11,799	(5,516)
	11,228	(5,566)
Taxation on items taken directly to or transferred from equity
Tax on actuarial loss on defined benefit pension scheme and other   post-employment benefit obligations	151	12
Net income/(expense) recognised directly in equity	11,379	(5,554)
(Loss)/profit for year	(19,813)	7,401
Total recognised income and expense for year	(8,434)	1,847
Attributable to:
- Equity shareholders of the Parent	(8,888)	2,359
- Minority interests	454	(512)
	(8,434)	1,847

* Included in the movement of £(571,000) is £(478,000) being the recognition of the minimum funding requirement as at 1 May 2007 in respect of the defined benefit scheme.

NOTES

1 Basis of preparation and accounting policies

The preliminary results for the year ended 30 April 2008 have been prepared on the same basis as the 30 April 2007 statutory accounts, with the exception of new accounting standards adopted during the year as detailed below, and have been extracted from the audited consolidated financial statements, which were approved by the Board of Directors on 9 July 2008. The audited consolidated financial statements have not yet been delivered to the Registrar of Companies but are expected to be published by 8 August 2008.  

The financial information set out in this announcement does not constitute statutory accounts for the years ended 30 April 2008 or 30 April 2007. The financial information for the year ended 30 April 2007 is derived from the statutory accounts for that year. The report of the auditors on the statutory accounts for the year ended 30 April 2007 was unqualified and did not contain a statement under section 237 of the Companies Act 1985.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') and the International Financial Reporting Interpretations Committee ('IFRIC') interpretations as adopted for use in the European Union, and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS.

New standards

IFRS 7

The Group has adopted IFRS 7, Financial Instruments Disclosures, in these financial statements and the complementary amendment to IAS 1, Presentation of Financial Statements - Capital Disclosures. IFRS 7 applies to accounting periods beginning on or after 1 January 2007 and introduces new disclosures relating to financial instruments. It does not have any impact on the classification and valuation of the Group's financial instruments.

IFRIC 11

The Group has adopted IFRIC 11, Group and Treasury Share Transactions, which provides guidance on whether share-based transactions should be accounted for as equity-settled or cash-settled share-based payment transactions in the stand-alone financial statements of the Parent and Group companies. The interpretation has no impact on the Group's financial statements but does have an impact on the Parent's financial statements.

IFRIC 14

The Group has adopted IFRIC 14, IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction. This has resulted in a reduction in net assets of £246,000.

Exceptional items

The Group's Income Statement and segmental analysis separately identify trading results before exceptional items. This is the term management use to describe those items that are material items of income and expenditure which, in their opinion, due to their size or nature, require separate disclosure in the financial statements to allow a better understanding of the financial performance of the year and in comparison to prior periods and have little predictive value. This is a non-GAAP classification and items listed may not be comparable with similar headed classifications used by other companies. Management intend to adopt this presentation in future as it is consistent with the way performance is measured and reported internally. Management also believe this form of presenting the Group's results improves clarity and assists shareholders in understanding the Group's financial performance.  

2 Segment analysis

The Group operated two main business segments during the year: Vending and Manufacturing. These segments have been identified as the primary segments, reflecting the way in which the Group has organised and managed its businesses. Vending comprises the operation of photobooths and other vending equipment, including digital media kiosks, photocopiers, express printing machines and children's rides. Manufacturing comprises the manufacture and sale of photo-processing equipment and vending equipment. The equipment is manufactured by subsidiaries of Photo-Me or, increasingly, by sub-contractors located in low cost territories. 

Geographical location has been identified as the secondary segment. 

Analysis by business activity (continuing operations)

Revenue	Year to  30 April 2008	Year to  30 April 2007
	£'000	£'000
Vending	148,821	142,895
Manufacturing
-Total	86,156	99,124
-Inter-segment eliminations	(25,293)	(29,238)
	60,863	69,886
	209,684	212,781

Result
	Year to 30 April 2008
	Before  Exceptional Items £'000	Exceptional Items £'000	After  Exceptional Items £'000
Vending*	9,072	(5,748)	3,324
Manufacturing**	(7,782)	(5,160)	(12,942)
Group overheads	(4,572)	(4,433)	(9,005)
Group operating loss after exceptional items	(3,282)	(15,341)	(18,623)
Net finance cost			(3,027)
Loss before taxation			(21,650)
Taxation			2,584
Loss for year			(19,066)

* Included in the result before exceptional items is accelerated depreciation of £4,704,000.

** Included in the result before exceptional items is accelerated amortisation of £314,000.

	Year to 30 April 2007
	Before  Exceptional Items £'000	Exceptional Items £'000	After  Exceptional Items £'000
Vending	15,112	-	15,112
Manufacturing	5,175	1,109	6,284
Group overheads	(4,474)	-	(4,474)
Group operating profit after exceptional items	15,813	1,109	16,922
Net finance cost			(1,229)
Profit before taxation			15,693
Taxation			(5,174)
Profit for year			10,519

Analysis by geographic area (continuing operations)

Revenue	Year to  30 April 2008	Year to  30 April 2007
	£'000	£'000
Continental Europe	121,556	122,543
United Kingdom & Republic of Ireland	60,399	62,579
Asia & Australia	27,729	27,659
	209,684	212,781

Result
	Year to 30 April 2008
	Before  Exceptional Items £'000	Exceptional Items £'000	After  Exceptional Items £'000
Continental Europe*	(4,485)	(8,612)	(13,097)
United Kingdom & Republic of Ireland**	(4,141)	(5,922)	(10,063)
Asia & Australia	1,746	(236)	1,510
Loss before tax	(6,880)	(14,770)	(21,650)

* Included in the result before tax and exceptional items is accelerated depreciation and amortisation of £3,408,000.

** Included in the result before tax and exceptional items is accelerated depreciation of £1,610,000.

	Year to 30 April 2007
	Before  Exceptional Items £'000	Exceptional Items £'000	After  Exceptional Items £'000
Continental Europe	11,950	1,109	13,059
United Kingdom & Republic of Ireland	(441)	-	(441)
Asia & Australia	3,075	-	3,075
Profit before tax	14,584	1,109	15,693

3 Exceptional items
	2008	2007
	£'000	£'000
Cost of sales
Impairment of intangible assets	2,804	-
Impairment of property, plant and equipment	4,230	-
Impairment of stocks	666	-
Employment termination and other restructuring costs/(income)	3,208	(1,109)
	10,908	(1,109)
Administrative expense
Impairment of property, plant and equipment	127	-
Strategic Review costs	4,306	-
	4,433	-
Finance revenue	(571)	(650)
Total exceptional costs/(income)	14,770	(1,759)

Year ended 30 April 2008

Following the recent Operational Review and in the light of current market conditions, certain assets (mainly capitalised research and development expenditure, photobooths and other vending machines) were impaired to a total value of £7,827,000, with an associated tax credit of £1,846,000.

Costs arising from the earlier Strategic Review totalled £4,306,000 (mainly accounting, commercial, investment banking, legal and tax advice) incurred in the proposed disposal of the Vending Division, with a tax credit of £nil.

Employment termination and other restructuring costs in the UK and Continental Europe totalled £3,208,000, with a tax credit of £959,000.

The finance revenue gain of £571,000 relates to a profit arising on the deemed disposal of part of the Group's interest in Photo-Me Australia.  The associated tax charge was £nil.

Year ended 30 April 2007

A provision made at 30 April 2006 for restructuring in Continental Europe was settled and resulted in a write-back of £1,109,000, with a tax charge of £381,000.  The finance revenue gain of £650,000 relates to the reduction in value of the put option over the minority shares in Deith Group Ltd.

4 Taxation

		2008			2007
		UK £'000	Overseas £'000	Total £'000	UK £'000	Overseas £'000	Total £'000
Current taxation		21	2,647	2,668	1,150	4,741	5,891
Deferred taxation		396	(5,648)	(5,252)	(87)	(630)	(717)
Total tax charge/(credit)		417	(3,001)	(2,584)	1,063	4,111	5,174

The Group effective tax rate has decreased from that arising in the previous year as a result of expenditure which is not allowable for tax and also the creation of deferred tax assets which have not been recognised because of uncertainty over when they will be used in future.

5 (Loss)/earnings per share
						Year to  30 April 2008		Year to  30 April 2007
Basic (loss)/earnings per share
Total						(5.52p)		2.14p
Continuing						(5.32p)		2.78p
Discontinued						(0.20p)		(0.64p)
Diluted basic (loss)/earnings per share
Total						(5.52p)		2.12p
Continuing						(5.32p)		2.75p
Discontinued						(0.20p)		(0. 63p)
Alternative (loss)/earnings per share
Total						(2.20p)		1.76p
Continuing						(2.00p)		2.40p
Discontinued						(0.20p)		(0.64p)
Diluted alternative (loss)/earnings per share
Total						(2.20p)		1.75p
Continuing						(2.00p)		2.38p
Discontinued						(0.20p)		(0.63p)
The calculation of (loss)/earnings per share is based on the following:
(Loss)/earnings attributable to ordinary  shareholders (£'000)
Total						(19,908)		7,804
Continuing						(19,161)		10,120
Discontinued						(747)		(2,316)
Adjusted (loss)/earnings attributable to ordinary shareholders (£'000)
Total						(7,958)		6,426
Continuing						(7,211)		8,742
Discontinued						(747)		(2,316)
Weighted average number of shares in issue in the period:
- basic ('000)						360,425		364,815
- including dilutive share options ('000)						360,425		367,877
Adjusted basic and diluted (loss)/earnings per share are calculated on the basis of (loss)/earnings before exceptional items. The Directors believe that disclosure of this measure allows shareholders to understand better the elements of financial performance during the year and to facilitate comparison with prior periods.

6 Dividends
			2008	2007
			£'000	£'000
Dividends declared and paid during the year
Interim dividend for the year ended 30 April 2006			-	3,646
Final dividend for the year ended 30 April 2006			-	5,105
Interim dividend for the year ended 30 April 2007			3,659	-
Final dividend for the year ended 30 April 2007			5,031	-
			8,690	8,751
Dividends proposed for approval (not recognised as a liability at the year end)
Interim dividend for the year ended 30 April 2007			-	3,646
Final dividend for the year ended 30 April 2007			-	5,100
			-	8,746
The interim dividend for the year ended 30 April 2007 was paid on 3 May 2007 to shareholders on the register on 3 March 2007. The final dividend for the year ended 30 April 2007 was paid on 2 November 2007 to shareholders on the register on 6 October 2007. The interim dividend for the year ended 30 April 2008, announced by the Directors in the Interim Report for the six months ended 31 October 2007 on 17 December 2007, was cancelled on 10 April 2008. The Directors do not propose a final dividend for the year ended 30 April 2008.

  7 Non-current assets 

	Goodwill	Intangible assets	Property, plant & equipment	Investment property
	£'000	£'000	£'000	£'000
Net book value at 1 May 2007	9,347	22,565	84,243	3,192
Exchange difference and other movements	245	2,491	6,956	435
Additions - photobooths and vending equipment	-	-	23,228	-
Additions - other assets	1,248	5,571	2,168	-
Transfer	-	37	(117)	-
New subsidiaries	-	-	264	-
Amortisation	-	(8,217)	-	-
Depreciation	-	-	(30,383)	(522)
Impairment	-	(2,804)	(4,357)	-
Disposals at net book value	-	(22)	(1,994)	-
Transfer available for sale	-	-	(158)	-
Net book value at 30 April 2008	10,840	19,621	79,850	3,105

8 Reserves

	Share Premium	Treasury Shares	Other Reserves	Retained Earnings
	£'000	£'000	£'000	£'000
At 1 May 2007	5,372	(1,967)	(2,282)	95,143
Exchange difference	-	-	11,434	-
Loss for year	-	-	-	(19,908)
Shares issued	64	-	-	-
Purchase of Treasury shares	-	(3,835)	-	-
Other reserve movements	-	-	90	(526)
Dividends	-	-	-	(8,690)
At 30 April 2008	5,436	(5,802)	9,242	66,019

9 Publication of the audited financial statements

Copies of the Report and Accounts for the year ended 30 April 2008 will be mailed to shareholders by 8 August 2008 and will be available from the Company's registered office at Church Road, Bookham, Surrey KT23 3EU (telephone: [phone], fax: [phone], email: [e-mail]) and the Company's website (www.photo-me.co.uk) after that date.

 

END

 

 

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