Preliminary Announcement

Photo-Me International PLC 02 July 2007 Monday 2 July 2007 PHOTO-ME INTERNATIONAL PLC Preliminary Announcement, Strategy, Board and EGM Requisition Update . Key Points - Financial * Revenue for the year to 30 April 2007 at £214.9m (2006: £224.9m) down 4.4%, mainly in the Manufacturing Division * Adjusted EBITDA (excluding exceptionals) of £45.1m (2006: £52.8m), 21.0% (2006: 23.5%) of revenue * Reflecting a £4.7m increase in depreciation and a £1.4m reduction in profit as a result of the strengthening of Sterling, reported pre-tax profit (including exceptionals) of £14.8m (2006: £28.0m), adjusted pre-tax profit (excluding exceptionals) of £13.0m (2006: £25.7m), in line with current market expectations. * Reported profit after tax from continuing and discontinued operations of £7.4m (2006: £21.0m) * Gross capital expenditure of £40.5m, mainly on substantial roll-out of next generation digital photobooths • Unchanged final dividend per share of 1.4p proposed, making an unchanged 2.4p for the year. • Continuation , but on a more aggressive basis, of the share buy-back programme as part of the Strategic Review process Key Points - Commercial •Continental Europe continued to account for over half of revenue and profit. •Vending Division revenue reduced by 1.0% to £145.0m (2006: £146.5m) and adjusted operating profit decreased by 24.7% to £14.2m (2006: £18.9m), reflecting the temporary impact of the change in international passport photo regulations and an increased depreciation charge •Manufacturing Division revenue reduced by 10.9% to £69.9m (2006: £78.4m) and adjusted operating profit decreased by 61.1% to £5.1m (2006: £13.3m), primarily reflecting the continuing weak market for minilabs Key Points - Strategy •The Board has asked Lazard to explore whether an acceptable offer might be achievable for PMI's Vending Division. Whilst the process is in its early stages, with potential bidders having recently been contacted, there appears to be strong interest in PMI's Vending Division, given its leading position in key territories, technical strength, attractive market outlook and cash generative financial profile •In addition to the share buy-back programme, it remains PMI's intention to return to shareholders a significant amount of surplus cash arising from a successful outcome of the Strategic Review Key Points - Board •So as further to improve Corporate Governance, Messrs Riccardo Costi and Francois Giuntini, executive Directors, and Francis Wahl, a non-executive Director, have tendered their immediate resignations from the Board. •For the same reason, Mr Dan David, a non-executive Director (and the Company's Life President), has indicated his intention to resign at the conclusion of the Strategic Review and certainly by no later than 31 December 2007. •The Board now comprises the independent Chairman, four independent non-executive Directors, two executive Directors, and the above non-executive Director who has intimated his forthcoming resignation. Key Points - EGM Requisition •Given the resignations referred to above, Resolutions 1-4, as proposed, should no longer be necessary. •The Board believes that shareholders representing a majority of PMI's issued share capital continue to support the Strategic Review process and, in particular, would like the Board to continue to explore whether an acceptable offer might be achievable for PMI's Vending Division. •The Board hopes that Principle Capital will be persuaded to withdraw its proposed Resolution calling for the immediate cessation of any talks with regard to the sale of any of PMI's businesses or business divisions and, if this is not the case, the Board would propose unanimously to recommend its rejection to shareholders. Vernon Sankey, Chairman, said 'The Board is unanimous in its belief that the strategy it is pursuing on a number of fronts is the right one to maximise value for shareholders. On behalf of the PMI Board, I would like to pay tribute to the selfless decision of Riccardo, Francois and Francis to step down at this time, each of them having made a very considerable contribution to the Board over many years'. Serge Crasnianski, Chief Executive Officer, stated 'In the current year, Vending should benefit substantially from the £32m of capital expenditure on photobooths in the last two years and attendant reduced maintenance costs as well as from the improvement in international passport photo sales, following the introduction of the International Civil Aviation Organisation ('ICAO') standards, which encourage the early renewal of passports. From the second half of the year, the national health card in France and the tobacco card in Japan should generate substantial additional revenue. Overall, Manufacturing is expected to trade at broadly similar levels to the year under review, including in terms of the number of minilabs sold, and will benefit from a full year of sales of the PhotoBook Pro album-making machine. Beyond FY 2008, Vending should benefit from the increasing requirement for ID photos and from the extension of its estate. In market conditions which remain difficult, Manufacturing (which is less predictable than Vending) is difficult to assess but should show improving results, given PMI's excellent range of products, low cost manufacturing base and particularly strong market position in wholesale labs'. Legal Disclaimer: This announcement contains statements that are or may be forward-looking statements with respect to the financial condition, operations and businesses of PMI. All statements other than statements of historical facts included in this announcement may be forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual performance or achievements of PMI, or industry results, to be materially different from any performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on numerous assumptions regarding the present and future business strategies of PMI and the environment in which it will operate in the future which are not necessarily indicative of future outcomes or the financial performance of PMI and should not be considered in isolation. Presentation: A presentation to investors and brokers' analysts will be given from 09.00 to 10.00 today at Regus, CityPoint, 1 Ropemaker Street, London EC2 (approximately 200 yards from Moorgate Station). Enquiries: Photo-Me International 01372-453 399 Vernon Sankey (Chairman) Serge Crasnianski (CEO) Jean-Luc Peurois (GFD) Bankside Consultants (analysts) Charles Ponsonby 020-7367 8851 / 07789-202 312 Tulchan Communications (press) 020-7353 4200 Andrew Grant David Allchurch CHIEF EXECUTIVE'S STATEMENT The results for the year to 30 April 2007 are in line with current market expectations, albeit well short of the previous year's actual, which was PMI's second best ever. Most of the shortfall derives from the Manufacturing Division. Since November 2006, PMI has been exploring strategic options for its three individual businesses - Vending, Minilab Manufacturing and Wholesale Lab Manufacturing - with a view to returning a significant amount of surplus cash to shareholders. FINANCIAL REVIEW Figures in this paragraph disregard exceptional items, and the 2006 comparatives have been re-stated to exclude the results of a discontinued operation. On revenue down 4.4% at £214.9m (2006: £224.9m), EBITDA was £45.1m (2006: £52.8m), representing 21.0% (2006: 23.5%) of revenue. Reflecting a £4.7m increase in the depreciation charge and a £1.4m reduction in profit as a result of the strengthening of Sterling, operating profit reduced to £14.9m (2006: £27.4m), pre-tax profit amounted to £13.0m (2006: £25.7m) and diluted earnings per share on continuing activities were 2.12p (2006: 4.65p). In the year to 30 April 2007, an exceptional £1.1m credit resulted from the write-back of part of a provision for restructuring. In addition, exceptional finance revenue of £0.7m arose as a result of the revaluation of a put option liability. Exceptionals in the previous year comprised a £3.2m charge for restructuring costs and a £5.4m non-operating profit on an insurance recovery (supplementing a £3.3m non-exceptional operating profit thereon). Including exceptional items, operating profit totalled £16.0m (2006: £24.2m) and the pre-tax profit was £14.8m (2006: £28.0m). With an effective tax rate of 35.2% (2006: an unusually low 26.5%, on account of the minimal tax charge on the exceptional non-operating profit), the profit for the year from continuing operations was £9.6m (2006: £20.6m). Deducting a post-tax £2.2m loss for the year from discontinued operations, namely Deith Group, the profit for the year from continuing and discontinued operations was £7.4m (2006: £21.0m). The reported diluted earnings per share on continuing operations were 2.49p (2006: 5.40p). Total shareholders' equity amounted to £98.3m (2006: £104.6m) and net debt to £27.7m (2006: £16.7m), representing gearing of 27.6% (2006: 15.6%) based on total equity of £100.4m (2006: £107.3m). The £11.0m cash outflow reflected net capital expenditure of £37.2m (substantially ahead of the £30.2m depreciation and amortisation charge), a much reduced working capital outflow of £2.4m and £1.1m of share buy-backs. More than half the gross capital expenditure of £40.5m - a record - was on the replacement of first generation digital photobooths with second generation models so as better to comply with new ICAO (International Civil Aviation Organisation) passport standards. Excluding the exceptional finance revenue, the net finance cost of £1.9m (2006: £1.7m) was covered 7.8 x (2006: 16.1 x) by pre-exceptional operating profit. DIVIDENDS An unchanged final dividend per share of 1.4p is proposed. Together with the unchanged interim dividend per share of 1.0p, dividends per share total an unchanged 2.4p. If approved at the AGM on 17 October 2007, the final dividend will be paid on 2 November 2007 to shareholders on the register at close of business on 5 October 2007. The ex-dividend date is 3 October 2007. BUSINESS REVIEW Geographical Analysis of Revenue and Profit (by origin) Revenue Operating Profit + Year to 30 April 2007 2006 2007 2006 £m £m £m £m Continental Europe 122.5 127.1 12.4 16.7 UK & Republic of Ireland 62.6 64.2 (0.1) 4.9 Asia & Australia 27.7 30.9 3.5 4.9 USA 2.1 2.7 (0.9) 0.9 214.9 224.9 14.9 27.4 + pre-exceptionals Continental Europe, which includes the great majority of Manufacturing revenue, contributed 57% (2006: 57%) of Group revenue and 83% (2006: 61%) of total pre-exceptional operating profits. Substantially all Group overheads are charged against the UK & Republic of Ireland, the reduction in whose operating profit reflected additional depreciation and reduced profit from minilab sales. Divisional Analysis of Revenue and Profit Revenue Operating Profit + Year to 30 April 2007 2006 2007 2006 £m £m £m £m Vending 145.0 146.5 14.2 18.9 Manufacturing 69.9 78.4 5.1 13.3 Group overheads - - (4.4) (4.8) 214.9 224.9 14.9 27.4 + pre-exceptionals Vending accounted for 67% (2006: 65%) of Group revenue and 73% (2006: 59%) of Group pre-exceptional operating profit (excluding Group overheads). Vending Vending comprises the operation of photobooths, digital media kiosks and other vending equipment, notably amusement machines. During the year, in accordance with PMI's policy of diversification, the total of Vending sites worldwide increased by 6,600 (primarily, amusement machines) to 41,800. PMI's vending business is global, operating in 17 industrialised countries. However, 86% of sites are located in three territories - the UK & Ireland, France and Japan. By area, Continental Europe accounted for 17,200 (2006: 15,200) sites; the UK & Ireland for 17,400 (2006: 13,700); Asia and Australia for 6,800 (2006: 5,700); and the USA for 400 (2006: 600). Photobooths Photobooths are an efficient and competitively-priced provider of ID photographs and represent a stable and cash generative business. The number of photobooths sited increased to 21,000 (2006: 20,600), of which Continental Europe constitutes 9,300 (2006: 9,400), the UK & Ireland 5,600 (2006: 5,400), Asia & Australia 5,700 (2006: 5,200) and the USA 400 (2006: 600). In the year under review, photobooths lost revenue, mainly due to rigorous application of the new ICAO passport standards by some national issuing authorities; these problems are being addressed by continuing the programme of siting the next generation of photobooths and installing ICAO-compatible software on second generation machines. In the current year, photobooths are expected to benefit from the introduction of a national health card in France (potentially requiring 50m photos) and of a tobacco card in Japan (potentially requiring 25m photos), whilst a pension card in Japan (potentially requiring 75m photos) is scheduled for late calendar 2008. 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 PMI's installed network of locations worldwide or at third party retail locations. The percentage of revenue payable in site owner commission is much lower than for photobooths. The number of digital media kiosks sited increased to 4,700 (2006: 3,500). Continental Europe accounted for 3,900 (2006: 2,900) of these, with France by far the principal territory with 2,900 (2006: 2,300), followed by Switzerland with 500 (2006: 200). In the year, digital media kiosks increased their revenue by a substantial percentage, also reflecting the development of this market place, which remains in its early stages. Other Vending Equipment Units of other vending equipment sited increased to 16,100 (2006: 11,000), of which 13,500 (2006: 8,000) were amusement machines (notably, kiddie rides), the balance principally comprising photocopiers and express card machines. The vast majority of kiddie rides is sited in the UK & Ireland, although the number sited in Continental Europe increased to 1,700 (2006: 400). It is planned to extend the siting of rides outside the UK & Ireland, utilising product from PMI's UK kiddie ride manufacturing activity. Manufacturing Manufacturing revenue primarily derives from the sale to third parties of photo-processing equipment manufactured by PMI or by sub-contractors on its behalf, normally in low cost territories. PMI has a unique and comprehensive range covering all market segments, from wholesale labs, to minilabs and end-consumer vending kiosks, with outputs of between 500 and 20,000 prints per hour. Wholesale Labs The Group's Wholesale Lab 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-finish laboratories (up to 20,000 prints per hour). In the year, revenue was similar to the prior year, but profits declined substantially, mainly due to the first year's depreciation of intangible assets acquired from the Administrator of AgfaPhoto, yet a significant contribution was still made to the Manufacturing result. In the current year, Imaging Solutions should benefit from the launch of two new machines - a wider format printer and the FastBook 100, which can print 100 photo albums per hour. Subsequent to the year end, Imaging Solutions agreed to acquire, for a small consideration, Albin Spitzke KG (GmbH & Co), based in Hamburg, a manufacturer of specialist cutting and packaging systems for photographic products. Minilabs A substantial majority of Manufacturing revenue is represented by the sale of minilabs, machines with an output ranging from 800 to 2,000 prints per hour. Typically, minilabs are sited in specialist photographic outlets, supermarkets and pharmacies. Again this year, for the fifth successive year, PMI's minilabs have received the leading global trade show award for quality - the DIMA (Digital Imaging Marketing Association) Digital Printer Award. During the year, the minilab market remained weak. In addition, in the first half, PMI was in transition between the DKS15 series, manufactured by a sub-contractor in Poland, and the third generation DKS16/17 series, manufactured by a sub-contractor in Singapore. In this context, first half unit sales were less than they might have been, with sales in the last batch of the DKS15 series being made at below average margins, primarily to fulfil a large contract. In the second half, unit sales, most of them of the DKS16/17 series , substantially increased (although not to the extent of the second half of the previous year), but margins were again constrained by a substantial proportion being in satisfaction of a large contract. In the year, with reduced unit sales and a slightly lower average unit price, both revenue and profit decreased. A feature of the year was the successful launch of the Photobook Pro album-making machine at the Photokina Exhibition in Cologne in October 2006; 350 units were sold in the second half, and the machine is believed to have considerable potential. Importantly for the future, the DKS16/17 minilabs are outstanding in terms of maximum productivity (2,000 prints per hour), maximum format (12' x 18') and minimum footprint (10.8 sq ft), as well as quality of output. Market estimates are that the current worldwide population of minilabs is some 150,000, evenly split between analogue and digital. Many of these machines, especially the analogue ones, should require replacement in the coming years. In May 2007, new management was recruited to lead and drive the future of the minilab business. Digital Media Kiosk Manufacturing Digital media kiosks, which have an output of 500 prints per hour, are manufactured for PMI by a sub-contractor in China. Whilst most digital media kiosks are destined for operation by PMI, some are sold to third parties. DISPOSAL In January 2006, PMI acquired a 60% interest in Deith Group Limited, a distributor and developer of coin-operated amusement gaming machines, for £1.5m (mainly in new PMI shares). This investment was seen as a major diversification by the Group. Following the acquisition, the industry in which Deith operated suffered adverse developments, and Deith's performance fell substantially short of the Group's expectations. As a result of the Strategic Review, it was decided to dispose of the business. Its sale, for £0.85m in cash, was completed in April 2007. The total loss for the year from this discontinued operation was £2.2m. BOARD Subsequent to the year end, on 17 May 2007, two additional independent non-executive Directors, Roger Partington and David Young, were appointed. Roger Partington (51) was Executive Vice President and President, Retail, responsible for UK Sales and Marketing, of TXU Europe Group, an energy company, from 1999 to 2002; at Safeway from 1994 to 1999, latterly as Group Marketing Director on the main Board; and at Nestle-Rowntree from 1986 to 1994, ultimately as Marketing Director. David Young, 56, was Chief Executive of Perkins Foods Holdings, an international food manufacturer, from 2003 to 2005, and, from 1976 to 2001, he was with Duracell, the battery manufacturer acquired by Gillette in 1997. Roger and David bring to PMI valuable experience in its two businesses - retailing and manufacturing - as well as considerable strengths in marketing. Following the new appointments and effective from 30 May 2007, the membership of the Audit, Remuneration and Nomination Committees was revised so as to become fully compliant with the Combined Code. The Audit Committee now comprises Martin Reavley (Chairman), Hugo Swire and David Young, all of whom are independent non-executive Directors, with Mr Reavley having 'recent and relevant financial experience'. The Remuneration Committee now comprises Hugo Swire (Chairman), Martin Reavley and Roger Partington, all of whom are independent non-executive Directors. The Nomination Committee now comprises Vernon Sankey (Chairman), Serge Crasnianski, Roger Partington, Martin Reavley, Hugo Swire and David Young. Additionally, Martin Reavley was appointed Senior Independent non-executive Director. So as further to improve Corporate Governance, Messrs Riccardo Costi and Francois Giuntini, executive Directors, and Francis Wahl, a non-executive Director, have today tendered their immediate resignations from the Board. For the same reason, Mr Dan David, a non-executive Director (and the Company's Life President), has also indicated his intention to resign at the conclusion of the Strategic Review and certainly by no later than 31 December 2007. The Board now comprises the independent Chairman, four independent non-executive Directors, two executive Directors, and the non-executive Director who has intimated his forthcoming resignation. STRATEGIC REVIEW On 5 June 2006, PMI announced that it was conducting a Strategic Review which may or may not lead to an offer being made for the Company. On 15 November 2006, the Board announced that, having regard to the different nature of the individual businesses within PMI, as highlighted by the Strategic Review implementation process, it had concluded that shareholder value would be maximised by the pursuit of strategic options for the individual businesses rather than an offer for the Company as a whole. The Board also announced that, having assessed PMI's existing capital structure, future capital requirements and anticipated cash flows, it would seek to effect a significant return of surplus capital to shareholders. To this effect, PMI has retained leading financial, accounting, tax and legal advisers, given the complexities and time needed to resolve the technicalities involved. On 14 March 2007, PMI announced that it proposed to commence a buy-back of its own shares. Following the transfer of sufficient distributable reserves into the Company, in the period from 30 March 2007 to 27 April 2007, PMI bought in a total of 1.6 million of its own shares (0.4% of its issued share capital at the outset of the exercise). It is intended that this buy-back process will continue, on a more aggressive basis. In addition, it remains intended that a further substantial return of capital to shareholders will result from a successful outcome of the Strategic Review. As a part of the Strategic Review process, the Board has asked Lazard to explore whether an acceptable offer might be achievable for PMI's Vending Division. While this process is in its early stages, with potential bidders having recently been contacted, there appears to be strong interest in the Vending Division, given its leading positions in key territories, technical strength, attractive market outlook and cash generative financial profile. An announcement regarding a possible sale transaction for the Vending Division is envisaged in the Autumn. An additional period of two to three months will be required in order to carry out a corporate restructuring through which to return the proceeds to shareholders. Further details will be provided in due course. EGM REQUISITION On 25 June 2007, Principle Capital Holdings S.A. made an announcement on behalf of its subsidiary company, Principle Capital Fund Managers Ltd ('Principle Capital'). The announcement stated that Principle Capital, on behalf of Principle Capital Investment Trust plc, Principle Capital L.P. and QVT Financial LP, holding between them 36,643,213 shares, representing 10% of PMI's outstanding share capital, had delivered a requisition to the PMI Board to call an Extraordinary General Meeting. The first four Resolutions proposed were for the immediate removal of Messrs Dan David, Francis Wahl, Riccardo Costi and Francois Giuntini as Directors of the Company. The fifth Resolution was for 'the immediate cessation of the Strategic Review announced by the Company on 5 June 2006 save in respect of any corporate reorganisation required in order to effect a substantial return of capital to shareholders as set out in the Company's announcement of 2 March 2007 and the immediate cessation of any talks the Company may be holding with regard to the sale of any of its businesses or business divisions'. Given the immediate and future resignations referred to above, Resolutions 1-4, as proposed, should no longer be necessary. The Board believes that shareholders representing a majority of PMI's issued share capital continue to support the Strategic Review process and, in particular, would like the Board to continue to explore whether an acceptable offer might be achievable for PMI's Vending Division. The Board hopes that Principle Capital will be persuaded to withdraw its proposed fifth Resolution and, if this is not the case, the Board would propose unanimously to recommend its rejection to shareholders. OUTLOOK In the current year, Vending should benefit substantially from the £32m of capital expenditure on photobooths in the last two years and attendant reduced maintenance costs as well as from the improvement in international passport photo sales, following the introduction of the International Civil Aviation Organisation ('ICAO') standards, which encourage the early renewal of passports. From the second half of the year, the national health card in France and the tobacco card in Japan should generate substantial additional revenue. Overall, Manufacturing is expected to trade at broadly similar levels to the year under review, including in terms of the number of minilabs sold, and will benefit from a full year of sales of the PhotoBook Pro album-making machine. Beyond FY 2008, Vending should benefit from the increasing requirement for ID photos and from the extension of its estate. In market conditions which remain difficult, Manufacturing (which is less predictable than Vending) is difficult to assess but should show improving results, given PMI's excellent range of products, low cost manufacturing base and particularly strong market position in wholesale labs Serge Crasnianski Chief Executive Officer 2 July 2007 GROUP INCOME STATEMENT for the year ended 30 April 2007 2007 2006 Notes £'000 £'000 -------------------------------- ------ ---------- ---------- Revenue 2 214,919 224,884 Cost of sales (177,659) (177,449) -------------------------------- ------ ---------- ---------- Gross profit 37,260 47,435 Other operating income 1,096 1,268 Profit on insurance recovery - 3,331 Administrative expenses (23,490) (24,812) Share of post-tax profits from associates 41 151 -------------------------------- ------ ---------- ---------- Operating profit before exceptional items 14,907 27,373 Restructuring costs 3 1,109 (3,158) -------------------------------- ------ ---------- ---------- Operating profit after exceptional items 16,016 24,215 Non-operating profit - insurance recovery 3 - 5,441 -------------------------------- ------ ---------- ---------- Profit before finance items and tax 16,016 29,656 Finance revenue 3 1,848 592 Finance cost (3,101) (2,288) -------------------------------- ------ ---------- ---------- Profit before tax 2 14,763 27,960 -------------------------------- ------ ---------- ---------- Taxation expense - UK 4 (1,063) (2,208) Taxation expense - overseas 4 (4,134) (5,198) -------------------------------- ------ ---------- ---------- Total tax charge 4 (5,197) (7,406) -------------------------------- ------ ---------- ---------- Profit for year - from continuing operations 9,566 20,554 (Loss) / profit for year - from discontinued operations (2,165) 423 -------------------------------- ------ ---------- ---------- Profit for year - from continuing and discontinued operations 7,401 20,977 --------------------------------- ----- ---------- ---------- Attributable to: - Equity shareholders of the Parent 7,804 20,158 - Minority interests (403) 819 -------------------------------- ------ ---------- ---------- 7,401 20,977 -------------------------------- ------ ---------- ---------- Dividends paid in year (£000) 6 8,751 4,373 paid in year per share 6 2.40p 1.20p Earnings per share (total) Basic earnings per share 5 2.14p 5.53p Alternative basic earnings per share* 5 1.76p 4.77p Diluted earnings per share 5 2.12p 5.47p Alternative diluted earnings per share* 5 1.75p 4.72p Earnings per share (continuing operations) Basic earnings per share 5 2.51p 5.46p Alternative basic earnings per share* 5 2.13p 4.70p Diluted earnings per share 5 2.49p 5.40p Alternative diluted earnings per share* 5 2.12p 4.65p *The alternative measure of earnings per share is provided to reflect the Group's underlying trading performance, excluding the effects of exceptional items. GROUP BALANCE SHEET as at 30 April 2007 Notes 2007 2006 £'000 £'000 -------------------------- ------ --------- --------- Assets Non-current assets Goodwill 7 9,347 10,677 Other intangible assets 7 22,565 20,485 Property, plant and equipment 7 84,243 77,334 Investment property 7 3,192 3,745 Investments in associates 99 335 Financial assets - held to maturity 327 - - available-for-sale 109 113 Deferred tax asset 382 277 Trade and other receivables 1,266 1,398 -------------------------- ------ --------- --------- 121,530 114,364 -------------------------- ------ --------- --------- Current assets Inventories 32,387 41,113 Trade and other receivables 41,574 53,374 Financial assets - held to maturity 64 356 - available-for-sale 307 7 Current tax 160 3,034 Cash and cash equivalents 31,340 25,838 -------------------------- ------ --------- --------- 105,832 123,722 -------------------------- ------ --------- --------- Total assets 227,362 238,086 -------------------------- ------ --------- --------- Equity Share capital 2,035 2,029 Share premium 8 5,372 4,862 Treasury shares 8 (1,967) (878) Other reserves 8 (2,282) 832 Retained earnings 8 95,143 97,732 -------------------------- ------ --------- --------- Total shareholders' equity 98,301 104,577 Minority interest 2,135 2,734 -------------------------- ------ --------- --------- Total equity 100,436 107,311 -------------------------- ------ --------- --------- Liabilities Non-current liabilities Financial liabilities 17,868 17,932 Post-employment benefit obligations 2,736 2,994 Provisions 6 33 Deferred tax liability 12,083 13,379 Derivative financial liabilities - 1,300 Trade and other payables 963 2,694 -------------------------- ------ --------- --------- 33,656 38,332 -------------------------- ------ --------- --------- Current liabilities Financial liabilities 42,174 25,597 Provisions 2,380 5,985 Current tax 4,284 3,980 Trade and other payables 44,432 56,881 -------------------------- ------ --------- --------- 93,270 92,443 -------------------------- ------ --------- --------- Total equity and liabilities 227,362 238,086 -------------------------- ------ --------- --------- GROUP CASH FLOW STATEMENT for the year ended 30 April 2007 2007 2006 £'000 £'000 -------------------------- ------ --------- --------- Cash flows from operating activities Operating profit before exceptional items - Operating profit from continuing operations 14,907 27,373 - Operating (loss)/profit from discontinued operations (2,453) 538 Non-operating exceptional item - 5,441 Share of post-tax profits from associates (41) (151) Amortisation of intangible assets 8,477 6,686 Impairment of goodwill - 298 Depreciation of property, plant and equipment 21,688 18,434 Profit on sale of property, plant and equipment (125) (189) Exchange differences (251) 131 Other items 411 352 Decrease/(increase) in inventories 2,212 (16,403) Decrease/(increase) in trade and other receivables 8,545 (8,051) (Decrease)/increase in trade and other payables (10,722) 1,537 Movement in provisions (2,413) 656 ------------------------------- --------- --------- Cash generated from operations 40,235 36,652 Interest paid (3,219) (1,935) Taxation paid (2,639) (11,810) ------------------------------- --------- --------- Net cash generated from operating activities 34,377 22,907 ------------------------------- --------- --------- Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired (152) (1,354) Proceeds from disposal of subsidiaries 1,300 - Purchase of intangible assets (6,843) (9,525) Proceeds from sale of intangible assets 199 - Purchase of property, plant and equipment (33,668) (28,297) Proceeds from sale of property, plant and equipment 3,162 989 Purchase of associate undertakings - (35) Purchase of available-for-sale investments - (56) Proceeds from sale of available-for-sale investments - 3 Interest received 998 551 Dividends received from associate 37 47 ------------------------------- --------- --------- Net cash utilised in investing activities (34,967) (37,677) ------------------------------- --------- --------- Cash flows from financing activities Issue of ordinary shares to equity shareholders 516 182 Purchase of treasury shares (1,089) (878) Repayment of capital element of finance leases (387) (48) Proceeds from borrowings 33,196 15,369 Repayment of borrowings (24,579) (12,639) (Increase) / decrease in monetary funds (67) 8,978 Dividends paid to equity shareholders (8,751) (4,373) Dividends paid to minority interests (4) (7) ------------------------------- --------- --------- Net cash (utilised in) / generated from financing activities (1,165) 6,584 ------------------------------- --------- --------- Net decrease in cash and cash equivalents (1,755) (8,186) Cash and cash equivalents at beginning of year 14,143 22,022 Exchange (loss)/gain on cash and cash equivalents (815) 307 ------------------------------- --------- --------- Cash and cash equivalents at end of year 11,573 14,143 ------------------------------- --------- --------- GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE for the year ended 30 April 2007 2007 2006 £'000 £'000 ----------------------------------- ---------- ---------- Income and expense recognised directly in equity Actuarial (loss)/gain on defined benefit pension scheme and other post-employment benefit obligations (50) 362 Exchange differences (5,516) 1,026 ----------------------------------- ---------- ---------- (5,566) 1,388 Transfers to the income statement Cash flow hedge - (56) Taxation on items taken directly to or transferred from equity Tax on actuarial gain/loss on defined benefit pension scheme and other Post-employment benefit obligations 12 (109) Tax on cash flow hedge - 20 ----------------------------------- ---------- ---------- Net (expense)/ income recognised directly in equity (5,554) 1,243 Profit for period 7,401 20,977 ----------------------------------- ---------- ---------- Total recognised income and expense for the period 1,847 22,220 ----------------------------------- ---------- ---------- Attributable to - Equity shareholders of the parent 2,359 21,390 - Minority interests (512) 830 ----------------------------------- ---------- ---------- 1,847 22,220 ----------------------------------- ---------- ---------- NOTES 1 Basis of preparation and accounting policies The preliminary results for the year ended 30 April 2007 have been prepared on the same basis as the 30 April 2006 statutory accounts, and have been extracted from the audited consolidated financial statements, which were approved by the Board of Directors on 29 June 2007. The audited consolidated financial statements have not yet been delivered to the Registrar of Companies but are expected to be published on 27 July 2007. The financial information set out in this announcement does not constitute statutory accounts for the years ended 30 April 2007 or 30 April 2006. The financial information for the year ended 30 April 2006 is derived from the statutory accounts for that year. The report of the auditors on the statutory accounts for the year ended 30 April 2006 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's interpretations as adopted for use in the European Union ('EU'), and with those parts of the Companies Act 1985 applicable to companies reporting under IFRS. 2 Segment analysis The Group has two main business segments: Manufacturing and Vending. These segments have been identified as the primary segments, as the Group organises and manages its businesses in accordance with these activities. Manufacturing comprises the manufacture and sale of photo-processing equipment and vending equipment. The equipment is manufactured by PMI subsidiaries or, increasingly, by sub-contractors located in low cost territories. Vending comprises the operation of photobooths and other vending equipment including kiddie rides, digital media kiosks, photocopiers and express printing machines. Geographical location has been identified as the secondary segment. Analysis by business activity (continuing operations) Year to Year to 30 30 April 2007 April 2006 --------------- ------------- Revenue Profit Revenue Profit £'000 £'000 £'000 £'000 Results per activity (exc.finance cost) - Manufacturing -Total revenue 99,124 6,257 97,281 10,379 -Inter-segment eliminations (29,238) - (18,852) - --------- ------- -------- ------- 69,886 6,257 78,429 10,379 - Vending 145,033 14,233 146,455 18,610 - Group overheads - (4,474) - (4,774) --------- ------- -------- ------- 214,919 224,884 --------- -------- Group operating profit after exceptional items 16,016 24,215 Non-operating profit on insurance recovery - 5,441 Net finance cost (1,253) (1,696) ------- ------- Profit before tax 14,763 27,960 Taxation (5,197) (7,406) ------- ------- Profit for the period 9,566 20,554 ------- ------- Analysis by geographic area (continuing operations) Year to Year to 30 30 April 2007 April 2006 --------------- ------------- Revenue by Profit Revenue by Profit origin origin £'000 £'000 £'000 £'000 Results per area (inc. finance cost) - Continental Europe 122,543 13,161 127,168 13,435 - United Kingdom & Republic of Ireland 62,579 -1,105 64,163 8,734 - Asia & Australia 27,659 3,637 30,880 4,931 - United States of America 2,138 -930 2,673 860 --------- ------- ------- -------- 214,919 14,763 224,884 27,960 --------- ------- Taxation (5,197) (7,406) ------- -------- Profit for the period 9,566 20,554 ------- -------- 3 Exceptional items 2007 2006 £'000 £'000 ---------------------------------- ---------- ----------- Restructuring costs 1,109 (3,158) Profit on insurance recovery - 5,441 ---------------------------------- ---------- ----------- Total exceptional income 1,109 2,283 ---------------------------------- ---------- ----------- The provision for restructuring made at 30 April 2006 in Continental Europe has been settled and has resulted in a write back in the current financial year of £1,109,000, resulting in a tax charge of £381,000 (2006: provision £3,158,000, tax credit £1,097,000). The provision made in 2006 to reduce the workforce was due to the introduction of new digital photobooths requiring less maintenance and the use of sub-contractors to manufacture equipment. In addition to the above, finance revenue in the year to 30 April 2007 includes £650,000 in relation to the revaluation of the Deith minority put option liability. Profits from insurance recoveries (year to 30 April 2006) Following destruction by fire of the Bookham warehouse and workshop in December 2004, agreement was reached on the resulting insurance claims. The total settlement was for an amount of £17,700,000. The insurance policy was on a replacement cost basis for non-current assets and gave rise to a non-operating exceptional profit before tax of £5,441,000. A further profit before tax of £3,331,000, relating to insurance settlement for the loss of inventory held to fulfil a major contract and for business interruption, is included in operating profit. The Group's insurers had paid £10,000,000 on account of claims by 30 April 2005; the final settlement was received in November 2005. A deferred tax charge of £616,000 arose on the exceptional profit of £ 5,441,000. On the £3,331,000 profit included in operating profit, a tax charge of £999,000 arose, comprising deferred tax of £835,000 and current tax of £164,000. 4 Taxation 2007 2006 ------------ -------- -------- -------- -------- -------- --------- UK Overseas Total UK Overseas Total £'000 £'000 £'000 £'000 £'000 £'000 ------------ -------- -------- -------- -------- -------- --------- Current taxation 1,150 4,764 5,914 1,500 1,069 2,569 Deferred taxation (87) (630) (717) 708 4,129 4,837 ------------ -------- -------- -------- -------- -------- --------- Total tax charge 1,063 4,134 5,197 2,208 5,198 7,406 ------------ -------- -------- -------- -------- -------- --------- 5 Earnings per share Year to Year to 30 30 April 2007 April 2006 Basic earnings per share Total 2.14p 5.53p Continuing 2.51p 5.46p Discontinued -0.37p 0.07p Diluted earnings per share Total 2.12p 5.47p Continuing 2.49p 5.40p Discontinued -0.37p 0.07p Alternative basic earnings per share Total 1.76p 4.77p Continuing 2.13p 4.70p Discontinued -0.37p 0.07p Alternative diluted earnings per share Total 1.75p 4.72p Continuing 2.12p 4.65p Discontinued -0.37p 0.07p The calculation of earnings per share is based on the following: Earnings available to ordinary shareholders (£'000) Total 7,804 20,158 Continuing 9,167 19,904 Discontinued (1,363) 254 Adjusted earnings available to ordinary shareholders (£'000) Total 6,426 17,394 Continuing 7,789 17,140 Discontinued (1,363) 254 Weighted average number of shares in issue in the period: - basic ('000) 364,815 364,711 - including dilutive share options ('000) 367,877 368,229 Adjusted basic and diluted earnings per share are calculated on the basis of 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 comprehension with prior periods. 6 Dividends Year to Year to 30 30 April 2007 April 2006 £'000 £'000 Dividends charged in the period Final dividend for the year ended 30 April 2005 of 1.2p per share 4,373 Interim dividend for the year ended 30 April 2006 of 1.0p per share 3,646 Final dividend for the year ended 30 April 2006 of 1.4p per share 5,105 - --------- ------- 8,751 4,373 --------- ------- Dividends proposed for approval (not recognised as a liability at year end) Interim dividend for the year ended 30 April 2006 of 1.0p per share 3,646 Final dividend for the year ended 30 April 2006 of 1.4p per share - 5,105 Interim dividend for the year ended 30 April 2007 of 1.0p per share 3,646 - Final dividend for the year ended 30 April 2007 of 1.4p per share 5,100 - --------- ------- 8,746 8,751 --------- ------- The interim dividend for the year to 30 April 2007 was paid on 3 May 2007 to shareholders on the register on 2 March 2007. The Directors propose a final dividend for the year ended 30 April 2007 of 1.40p per share, which, if approved at the Annual General Meeting on 17 October 2007, will be paid on 2 November 2007 to shareholders on the register on 5 October 2007. 7 Non-current assets Goodwill Intangible Property, plant Investment assets & equipment property £000 £000 £000 £000 Net book value at 1 May 2006 10,677 20,485 77,334 3,745 Exchange difference and other movements (23) (473) (3,055) (61) Additions - photobooths and vending equipment - - 30,885 - Additions - other assets 47 6,843 3,501 - Transfer - 4,304 (119) - New subsidiaries - - 253 - Amortisation - (8,477) - - Depreciation - - (21,196) (492) Disposals at net book value (1,354) (117) (3,360) - -------- ----------- ----------- -------- Net book value at 30 April 2007 9,347 22,565 84,243 3,192 -------- ----------- ----------- -------- 8 Reserves Share Premium Treasury Shares Other Reserves Retained Earnings £'000 £'000 £'000 £'000 At 1 May 2006 4,862 (878) 832 97,732 Exchange difference - - (5,407) - Profit for year - - - 7,804 Shares issued 510 - - - Purchase of Treasury shares - (1,089) - - Other reserve movements - - 2,293 (1,642) Dividends - - - (8,751) ------------ ------------ ------------ ------------ At 30 April 2007 5,372 (1,967) (2,282) 95,143 ------------ ------------ ------------ ------------ 9 Publication of the audited financial statements Copies of the Report and Accounts, for the year ended 30 April 2007, will be mailed to shareholders by 27 July 2007 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. This information is provided by RNS The company news service from the London Stock Exchange EDPXEFE

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