Final Results

RNS Number : 1573R

Photo-Me International PLC

25 June 2015

 



PHOTO-ME INTERNATIONAL PLC - PRELIMINARY ANNOUNCEMENT

Strong profit growth, confident outlook, dividend raised 30%

Photo-Me International plc ("Photo-Me" or "the Group"), the instant-service equipment group, announces its results for the year ended 30 April 2015. 

Results highlights:

	2015	2014	Change	2015†	Change
Revenue	£177.2m	£186.6m	-5.0%	£188.2m	+0.9%
Underlying EBITDA*	£51.8m	£47.8m	+8.4%	£55.3m	+15.7%
Underlying Pre-tax Profit*	£35.0m	£30.1m	+16.3%	£37.5m	+24.6%
Net Cash **	£60.7m	£63.1m	-3.8%
Underlying EPS (diluted)*	6.70p	5.70p	+17.5%
Ordinary Dividend per share	4.88p	3.75p	+30.1%

† At constant currency (CC)

   Average rates of exchange used: £/€ 1.29 (2014: 1.19)     £/Yen 177.31 (2014:161.26)

* Before profit on sale of land of £3.5m (2014: nil)

* *As defined in note 19 to the accounts

·     For the first time in five years,  Revenue  is  up 0.9% at CC  but 5% lower at £177.2m as reported

·     Underlying EBITDA 8.4% higher (+15.7% at CC) and margin increased to 29.2%

·     Underlying Pre-tax Profit of £35 million, up 16.3% (+24.6% at CC)

·     Net cash generated from operating activities of £40.1m, up 12.3% from £35.7m

·     Net cash position maintained at over £60 million

·     Increase of 30% in the annual dividend to 4.88 pence per share

·     Enhanced dividend programme announced for the next three years

John Lewis, Non-executive Chairman, said:

"The Group has once again delivered a strong performance with a 16% increase in pre-tax profits. This result would have been even stronger, at +25%, were it not for the continued strength of sterling against both the euro and yen.

"Cash generation remained strong and we maintained our net cash balance in excess of £60 million despite capex and dividend payments totalling approximately £40 million during the year. We are recommending a final dividend of 2.54 pence per share to give a total dividend for the year of 4.88 pence per share, an increase of 30% over the previous year and in line with the undertaking that we gave last year.

"We continued to expand our photobooth estate while the roll-out of our Revolution laundry product remains on track. Prospects for both products remain extremely positive; a new Japanese ID card is expected to boost demand for photos significantly in that market from 2016 while the order book for Revolution remains very strong - the Group now plans to have 6,000 units in operation in Europe by 2020 and is looking for opportunities in Asia and the USA.

"Looking ahead, the Group's Treasury function keeps FX under continual review, although the continued strengthening of sterling against the euro and the yen, which may have an adverse effect in the coming year, remains a challenge. Importantly, however, the operational performance of the business remains very good. Subject to the risks and uncertainties detailed in the Strategic Report, the Board anticipates another year of strong underlying progress."

Enquiries:
Photo-Me International
Serge Crasnianski or Françoise Coutaz-Replan	01372 453 399
Media
Madano Partnership	020 7593 4000
Matthew Moth/Julien Cozens
Investors
IR Focus	07909 976 044
Neville Harris

CHAIRMAN'S STATEMENT

Results

At constant currency, Group revenue was 0.9% higher over the year. Group EBITDA increased by 15.7% during the period, with underlying EBITDA margins strengthening to 29.2% from 25.6% in 2014.

Strategy

Our strategy is to use the significant cash flow generated from our long-established photobooth business to develop new and complementary products which will drive our future growth. Alongside this, we are keen to penetrate new geographic markets, which offer the potential for long-term growth. It is also part of our strategy to be financially independent as far as we can be, and to concentrate on increasing our returns to shareholders.

We have made good progress with this strategy. The expansion of our Revolution laundry product is proceeding in line with our plan and is producing strong returns. Our photobooth business continues to enter new markets and our product development pipeline is encouraging. The strength of our cash flows is allowing us both to finance the capital expenditure programme of some £14 million p.a. for the next two years (net of financing) and to raise returns to shareholders by way of dividends. 

Dividends

Reflecting the confidence we had in the outlook for 2014/15, last year we stated that we intended to increase the annual dividend by 30%. We are therefore pleased to confirm that the proposed total annual dividend will rise from 3.75 pence (2013/14) to 4.88 pence in line with our commitment.

The business is well positioned for growth and our net cash position remains healthy. Having raised dividends substantially in recent years - and with the desire to retain a progressive dividend policy - we have now decided to adopt an enhanced dividend policy for the next three years.  We therefore intend to increase the ordinary dividend by 10% p.a. and any net cash on the balance sheet at 30 April 2016 (and the following two years) in excess of £50m will be available to shareholders as a special dividend in line with the new policy.

If approved at the Annual General Meeting on 21 October 2015, the final dividend will be paid on 12 November 2015 to shareholders on the register at the close of business on 9 October 2015. The ex-dividend date will be 8 October 2015.

Current trading and Outlook 

Looking ahead, the Group's Treasury function keeps FX under continual review, although the continued strengthening of sterling against the euro and the yen, which may have an adverse effect in the coming year, remains a challenge. Importantly, however, the operational performance of the business remains very good. Subject to the risks and uncertainties detailed in the Strategic Report, the Board anticipates another year of strong underlying progress.

John Lewis

Non-executive Chairman

OVERVIEW OF THE YEAR

	Revenue					Underlying Operating profit*
Year to 30 April	2015	2015 †	2014	Change †	2015		2015 †	2014	Change †
	£m	£m	£m	%	£m		£m	£m	%
Continental Europe	94.3	101.7	102.9	-1.2	22.0		23.8	21.3	+11.7
UK & Republic of Ireland	44.7	44.8	44.9	-0.2	8.4		8.4	7.4	+13.5
Asia & ROW	38.2	41.7	38.8	+7.5	6.9		7.5	5.7	+31.6
	177.2	188.2	186.6	+0.9	37.3		39.7	34.4	+15.4
Corporate					(2.5)		(2.4)	(4.1)
					34.8		37.3	30.3	+23.1
† 2015 trading results of overseas subsidiaries converted at 2014 exchange rates. *excluding profit on sale of land (£3.5m in 2015)

	Vending units
	2015	2014	Change
Continental Europe	22,400	21,250	+5.4%
UK & Republic of Ireland	12,400	13,000	-4.6%
Asia & ROW	9,800	9,600	+2.1%
Total	44,600	43,850	+1.7%

CONTINENTAL EUROPE

This division contributed 53% of Group revenue (2014: 55%) and 59% of operating profit (2014: 62%). At the end of April 2015, 50% (2014: 48%) of the Group's estate was sited in Continental Europe. There were 22,373 (2014: 21,226) units in total of which 12,406 (2014: 11,869) were photobooths. The Group operates in nine countries in Continental Europe.

Reported revenue was 8.4% lower than last year, but on a constant currency basis declined by 1.2% only. Stripping out the effects of the continuing decline in the minilab business (previously reported under "Sales and Servicing"), underlying revenue at constant currency grew by 1.6%. Operating profits increased by 3.3% on a reported basis and by 11.7% on a constant currency basis.

The European photobooth estate increased by 4.5% year-on-year with the main areas for growth being France and Switzerland. The Group continues its roll-out of higher-margin Starck booths and there are now 3,213 deployed across Europe, an increase of 883 over the year.

The roll-out of the Group's laundry product, predominantly using the same sites as the photobooth estate, continues to progress well.

Total (including UK & Ireland)	2015	2014	2013	Change
Owned (total)	644	202	48	+219%
Sold (cumulative total at year end)	440	317	236	+39%
Ave. revenue per owned unit (€)†	14,396	13,887	12,276	+4%

 († Average calculated only on machines in France with at least one full month's takings)

The results from the units in operation in France and Belgium remain extremely encouraging with takings averaging €1,200 per unit per month during the period across the operating estate and the more established machines seeing takings increase by some 12% year-on-year. For the full year, the turnover of the laundry business units was £6.3m (2014: £3.3m) and represented 9% of total turnover in France and 11% in Belgium.

The Group now has laundry units in nine countries, with the most significant coverage being in France and Belgium. Besides traditional launderette locations, the Group continues to be encouraged by potential demand in sites like equestrian centres, campsites, universities and military barracks, all of which have demand for heavy-duty laundry capability. Prospects for the product are particularly encouraging in Portugal and Ireland. For example, since introducing the product in Portugal in May 2014, the number of machines has grown to 37 and laundry revenues have grown rapidly from nil to represent 28% of total Portuguese revenues in the month of April 2015. While the country is small in overall terms for Photo-Me, it demonstrates the transforming potential of the product.

Following the relocation of the outsourced manufacturing capability to Hungary in 2014, the Group now plans to have deployed 6,000 laundry units in Europe by 2020. As the business grows, it is expected that the majority of these will be owned/operated. The Group remains focused on ensuring that only the best locations are targeted for the machines, given the investment and logistics involved. The achievement of the roll-out targets in the short and medium term represents an opportunity for a material increase in Group revenue and with an attractive cash generation and EBIT profile the Board believes will enhance returns to shareholders in future years. The Group continues to look for opportunities in Asia and the US.

The Group continues to operate over 5,000 digital printing kiosks, primarily in France and Switzerland, and is currently upgrading the estate to the latest technology to accept all models of memory cards and smart phones. A brand new and very modern Starck-designed kiosk was unveiled at the photo fair in Paris in November 2014. This is a new generation of kiosk with no real comparator, and the Group considers the potential worldwide to be very promising; the Group's target is to launch this product in the next few months.

Europe remains the centre of the Group's R&D efforts and new product development. Aside from the new digital printing kiosk (see above), and other models of photobooths, the group is equally focusing on new technologies, such as 3D digital photos and Photolight. Aiming at becoming a leader in the field, the Group works in partnership with official government bodies to develop enhanced ID security standards through the 3D technology. As a first offspring of the 3D technology, the Group has started to introduce 3D-figurine photobooths. Photolight is a solar-powered streetlight that has been under development over the last couple of years and the Group is now beginning to market the concept more widely.

The Group is still trialling a carwash concept, which would have some overlap in terms of location as the stand-alone Revolution laundry units and use the same network of engineers. Results from those first units are encouraging and Photo-Me will report further on its plans for this concept in 2016, based on progressively scaled-up trials.

ASIA & R.O.W.

This division contributed 22% of Group revenue (2014: 21%) and 18% of operating profit (2014: 17%). At the end of April 2015, 22% (2014: 22%) of the Group's estate was sited in Asia & ROW. There were 9,814 (2014: 9,606) units in total of which 8,223 (2014: 7,911) were photobooths. The Group operates in five countries, with the latest addition being the USA.

The largest territory by far by reference to size of the machines estate and revenue is Japan where performance was strong. Revenues were up by 6.4% (at CC) with profits (at CC) 18.6% higher.

The Group is deploying an additional 1,000 booths into Japan to take advantage of the new ID card regulation which is scheduled to come into force in January 2016. Under this legislation all Japanese citizens will need a new photo ID card and with a population aged 18+ of some 87 million this is expected to lead to a substantial increase in demand over the next two to three years. While some of this increased demand will be met by independent photographers, the photobooth market will be a clear beneficiary and the Group is expecting a significant boost to revenue and profitability once the new legislation is in force.

Gradual progress continues to be made in China where turnover rose by 25% (at CC). Operational efficiencies and better siting of machines have resulted in these operations reaching a satisfactory level of profitability compared with losses last year.

UK & IRELAND

This division contributed 25% of Group revenue (2014: 24%) and 23% of operating profit (2014: 22%). At the end of April 2015, 28% (2014: 30%) of the Group's estate was sited in UK & Ireland. There were 12,412 (2014: 13,023) units in total of which 6,414 (2014: 6,347) were photobooths. Growth in photobooth numbers was 1% year-on-year while there was a 30% reduction on bouly / amusement machines which are not material to the Group's business in the UK & Ireland.

With the market background remaining difficult, turnover in the UK and Ireland was flat while profit expanded following continued focus on cost reduction through operational efficiencies and site costs optimization as well as product diversification.

The Group rolled out 32 laundry units in Ireland, where results to date have been very promising. The units in Ireland, which have been carefully sited in areas of high demand, are currently the highest revenue-earning machines in the portfolio and further expansion is envisaged.

STRATEGIC OVERVIEW

What we do

Photo-Me's principal activity is the operation of unattended vending equipment aimed primarily at the consumer market. The largest part of this estate currently comprises photobooths and digital printing kiosks, with the balance comprising laundry units, amusement machines (including kiddie rides) and business service equipment.

Photo-Me owns these units and pays the site owner a commission based on turnover. This commission varies by country and location. Photo-Me is responsible for collecting the takings from, and the service and maintenance of, the units, and employs a network of engineers to perform these tasks.

Where we operate

Photo-Me has three principal areas of operation geographically - UK & Ireland, Europe and Asia. Its most important territory in Europe is France, and in Asia it is Japan.

With photobooths historically being its core business, Photo-Me has chosen to operate in areas offering a strong and consistent demand for identity photos, in particular passports and driving licences. It has also chosen areas where it is able to establish a strong market share and where business practices maintain a high ethical standard. The Group does not operate (although for differing reasons) in South America, Africa or Australasia.

Units are generally sited in areas of high footfall and/or where there may be ambient demand for identity photos. Thus supermarkets, shopping malls (indoors and outdoors) and public transport venues are prime locations.

Key performance indicators

The Group measures its performance using a mixture of financial and non-financial indicators. The main objective of these KPIs is to ensure that the Group remains highly cash generative, delivers sustained long-term profitability, preserves the value of its assets and provides high returns to shareholders.

Description	Relevance	Performance
		Apr-13	Apr-14	Apr-15
Total revenue at actual rate of exchange		£195.6m	£186.6m	£177.2m
Total revenue excluding minilab at constant rate of exchange	The turnover at constant rate of exchange excluding minilabs translates the underlying growth of the core business	£181.3m	£182.8m	£187.7m
Profit before tax		£24.3m	£30.1m	£38.5m
Underlying profit before tax		£24.3m	£30.1m	£35.0m
EBITDA margin		23.0%	25.6%	31.2%
Underlying EBITDA margin	The underlying EBITDA margin is a good indicator of our improvements in profitability excluding major one-off items	23.0%	25.6%	29.2%
Increase in gross takings (Revenue incl. VAT)	Gross takings are an important indicator of the trend in our core vending business	+1.2%	+1.9%	+2.5%
Increase in number of photobooths	The increase in number of photobooths is always a priority and a main driver for growth	+1,399	+1,261	+916
Increase in number of laundry units (operated or sold)	The increase in number of laundry units measures our penetration in this market where there is a huge potential for growth and large profits	NR	+235	+565

Our business model

Customers

The majority of our business is consumer-oriented and our units must therefore have certain characteristics. These are: good location, attractiveness, ease of use, reliability, quality of product and value for money.

·     Location

We maintain strong relationships with site owners and try to ensure optimum positioning of our machines.

·     Attractiveness

The Group has a strong history of innovation and is constantly looking for ways to update and modernize its estate, while introducing new products to the marketplace. The Starck photobooth and the Revolution laundry units are recent examples of this.

·     Ease of Use

Traditionally, units have been coin-operated in simple denominations (e.g. £5, €5) but the Group is intensifying its contactless payment systems deployment programme to improve the customer offering and to enhance customer opportunity.

·     Reliability

Combined with the Telemetry connected technology, we employ an extensive network of experienced engineers to minimize downtime and maintain appearance.

·     Quality of Product

Photobooths produce ICAO-compliant photos and constant investment in technology ensures the estate in general offers the consumer a satisfying experience.

·     Value for money

Historically, the Group has been cautious in raising its prices and believes it offers a competitively priced range of products. Machine usage statistics support this view.

From an operational perspective, the Group has three main aims:

1.    To increase the number of units in operation

2.    To increase takings per unit

3.    To minimize production and operational costs

1. Unit expansion

The Group's estate can be grown in the following ways:

a.    Adding further units within existing territories

b.    Introducing new products within existing territories

c.     Entering new markets

a. Adding further units

The Group has strong market positions in the established countries in which it operates, therefore adding further units within these territories is generally quite difficult to achieve. However, the Group managed a 3.5% increase of the photobooth estate over the year and will be expanding its estate in Japan significantly to take advantage of new photo ID card legislation which comes into force in 2016.

b. Introducing new products

With its history of innovation, the Group has been very successful at introducing new products and modernizing its portfolio.  The last three years have seen the introduction of the Philippe Starck- designed photobooth range as well as the launch of the brand-new Revolution laundry units.

The modern and elegant design of the Starck booths is intended to appeal to the consumer and to attract more of them to the booths. This is clearly also attractive to the site owner as well. This dynamic enables Photo-Me to attract interest from non-traditional site owners. Besides, nearly all new sitings or replacements of booths in established territories are now Starck models.

The launch of the Revolution laundry units occurred in the second half of 2012. These machines offer an attractively priced product and the initially targeted sites were the immediate outside surroundings of supermarkets in France and Belgium where Photo-Me already has long-standing relationships given the existence of the photobooth estate.

The Group is identifying demand for the product in additional markets at differing locations, for example campsites, military barracks and student accommodation, and has now launched the product in all its European countries, in particular Ireland and Portugal.

c. Entering new markets

The Group takes an opportunistic approach to investments in new markets, and constantly assesses new potential markets.

In the last twelve months, very positive progress has been made in South Korea, where some 100 photobooths have been sited. Small operations have been launched in Poland.

2. Increase takings per unit

Clearly the most obvious route for the Group is to raise prices but over the last few years the Group has chosen not to do this in the light of both the generally difficult economic background globally as well as a desire to ensure that the offering remains very competitive. However, in the past two years, a price rise has been effected in the Japan booths to offset VAT increases and the prices on kiddie rides and amusement machines have risen from low levels. Elsewhere the Group does experiment with targeted price increases in specific territories when relevant to gauge its effect on revenue and demand.

Besides price initiatives, the introduction of attractive new offerings on the existing estate as well as active re-siting of machines to more attractive locations are also strategies to increase takings.

3. Minimizing production and operational costs

The principal operating cost - other than depreciation - is the commission paid to site owners. The Group manages commissions carefully, and has, for example, achieved some success with the introduction of its Starck booths and the Revolution laundry units.

Thanks to sophisticated telemetry, the Group suffers virtually no fraud and the costs of operating its network of engineers are also low as a percentage of the total cost base.

Over the last two years, the Group has transferred its production of photobooths to China and the production of the laundry units to Hungary. The facility in each country is operated by a large, listed European manufacturer with very high production standards and capability. In both cases this has significantly reduced production costs.

The Group reviews regularly its supply chain and endeavours to maintain low production costs.

FINANCIAL REVIEW

Financial Performance

The Group delivered solid financial performance, as illustrated by the strong increase in profits.

Reported revenue declined by 5% to £177.2m due to the continued decline in the sales of the restructured minilab business, compounded by an adverse effect of conversion exchange rates (mainly the euro and the yen).

	Apr 15 £m	Apr 14 £m
Revenue	177.2	186.6
Underlying EBITDA (*)	51.8	47.8
Underlying Operating Profit (*)	34.8	30.3
Underlying Profit before tax (*)	35.0	30.1
Profit after tax	28.0	21.6

(*) Excludes the profit on sale of land of £3.5m

The movements in turnover are outlined in the following table:

	£m	£m
Apr 14 Turnover		186.6
Change in core business revenue
UK & Ireland	-0.1
Continental Europe	+1.5
Asia	+2.9
		+4.3
Decline in the minilab business		-2.7
Impact of exchange rates		-11.0
Apr 15 Turnover		177.2

The decrease in the total reported turnover was largely compensated by savings in operational costs, and the Group reported an increase of 16.3% in underlying profit before tax.

The increase in the profit before tax can be explained as follows:

	£m
Apr 14 - PBT	30.1
Changes in Revenue	-9.4
Changes in Costs	+13.6
Decrease in depreciation and amortization	+0.7
Apr 15 - Underlying PBT	35.0
Profit on disposal of land	3.5
Apr 15 - PBT	38.5

Review of operating costs

Operating costs amounted to £138.8m (2014: £156.3m).

	Apr 15 £m	Apr 14 £m
Staff costs	40.3	43.8
Cost of materials	12.6	17.3
Other operating costs	69.0	77.5
	121.9	138.6
Depreciation and Amortization	16.9	17.5
Profit / (loss) on disposal of fixed assets (*)	-	0.2
Operating costs	138.8	156.3

(*) Excluding a profit of £3.5m on the disposal of land

Staff costs amounting to £40.3m decreased by 8.0% compared with the previous year and represented 22.7% of percentage of sales (2014: 23.5%). The decrease results from the full year benefit of the savings generated by the restructuring of the former sales and servicing division, strengthened by the leveraging of the existing maintenance network through the growth of the laundry business.

The reduction in inventory costs is the direct result of both the winding down of the parts and consumable intensive minilab division as well as the cost reductions achieved through enhanced efficiencies in the supply chain.

Taxation

The Group tax charge of £10.5m corresponds to an effective tax rate of 27.2% (2014: 28.3%).

The Group undertakes business in over 15 countries worldwide, with most of the tax charge arising in France, Japan and the United Kingdom. In each jurisdiction in which the Group operates, operations are organised so that the Group pays the correct and appropriate amount of tax at the right time according to the local regulations and ensures compliance with the Group's tax policy and guidelines.

Dividends

During the year, the Group paid dividends totalling £21.4m in respect of the ordinary and special dividend for the year ended 30 April 2014.

The interim dividend for the year ended 30 April 2015 (2.34p per share) declared in December 2014 was paid in May 2015 and amounted to £8.7m.

Statement of Financial position

The Group balance sheet can be summarised as follows:

	Apr 15 £m	Apr 14 £m
Non-current assets (excl deposits)	71.5	69.5
Current assets (excl cash and deposits)	23.9	25.6
Non-current liabilities (excl. borrowings)	-7.5	-8.4
Current liabilities (excl. borrowings)	-44.2	-45.6
Net Cash	60.7	63.1
Total Equity	104.4	104.2
Minority interests	-0.9	-1.1
Total Shareholders' funds	103.5	103.1

Following the payment of dividends of £21.4m, the Shareholders funds at 30 April 2015 amounting to £103.5m remained stable compared with the previous year end.

The non-current assets detail is outlined in the following table:

	Apr 15 £m	Apr 14 £m
Goodwill	10.2	9.9
R&D costs	2.6	2.2
Other intangible assets	3.9	3.6
Operating equipment	43.1	41.7
Plant and machinery	3.8	3.3
Land and buildings	1.3	1.5
Investment property	0.5	0.5
	65.4	62.7
Investments	0.9	0.7
Deferred tax asset	3.5	4.2
Trade and other receivables	1.7	1.9
Total non-current assets	71.5	69.5

The goodwill mainly relates to the Japanese subsidiary. The addition corresponds to the acquisition of operations in Switzerland.

With a net book value of £43.1m, the operating equipment is the main component of the Group's total non-current assets. The Group owns some 44,600 machines operated worldwide. The change in the net book value reflects the Group's capital expenditure of £21.6m net of depreciation and exchange differences.

Cash flow and net cash position

	Apr 15 £m	Apr 14 £m
Opening net cash	63.1	61.4
Cash generated from operations	49.2	45.6
Taxation	-9.1	-9.9
Net cash generated from operations	40.1	35.7
Net cash used in investing activities	-18.2	-20.3
Dividends paid and other financing activities	-21.1	-11.3
Net cash generated	0.8	4.1
Impact of exchange	-3.2	-2.4
Net cash inflow	-2.4	1.7
Closing net cash	60.7	63.1

The increase in the EBITDA, coupled with optimised working capital as well as lower tax paid, led to the increase in Net cash generated from operations by £4.4m.

The cash generation was still substantial and enabled the Group to finance its capital expenditure program as well as to pay out to shareholders increased dividends from £11.3m (2014) to £ 21.1m (2015).

At the end of April 2015, the Group's net financial position amounting to £60.7m could be split as follows:

	Cash and deposits £m	Borrowings £m	Net Financial Position £m
Balance at 30 April 2014	63.4	-0.3	63.1
Cash flow	0.7	0.2	0.9
Non-cash movements	-3.2	-0.1	-3.3
Balance at 30 April 2015	60.9	-0.2	60.7

Principal risks

Like all businesses, the Group faces risks and uncertainties that could impact the achievement of the Group's strategy. These risks are accepted as being part of doing business and the Board recognises that the nature and scope of these risks can change and so regularly reviews the risks faced by the Group as well as the systems and processes to mitigate them.

The table below sets out what the Board believes to be the principal risks and uncertainties, their impact, and actions taken to mitigate them.

Nature of the risk	Description and impact	Mitigation
Economic
• Global economic conditions	Economic growth is a major influence on consumer spending. A sustained period of economic recession could lead to a decrease in consumer expenditure in discretionary areas.	The Group focuses on maintaining the characteristics and affordability of its needs-driven products.
• Volatility of foreign exchange rates	The majority of the Group's revenue and profit is generated outside of the UK, and the Group results could be adversely impacted by an increase in the value of sterling relative to those currencies.	The Group hedges its exposure to currency fluctuations on transactions, as relevant. However, by its nature, in the Board's opinion, it is very difficult to hedge against currency fluctuation arising from translation in consolidation in a cost-effective manner.
Regulations
• Centralisation of production of ID photos	In many European countries where the Group operates, if governments were to implement centralised image capture for biometric passport and other applications, the Group's revenues and profits could be seriously affected.	The Group is developing new systems that could respond to this situation, including the introduction of 3D technology in ID security standards, as well as trialling booths connected to the central government systems (ANTS in France). The Group also ensures that its ID product remains affordable and of high quality. The Group is also conducting lobbying actions.
Strategic
• Identification of new business opportunities	Failure to identify new business areas may impact the ability of the Group to grow in the long term.	The management teams constantly review demand in existing markets and potential new opportunities. The Group continues to invest in research for new products and technologies.
• Inability to deliver anticipated benefits from the launch of new products	The realisation of long-term anticipated benefits depends upon the successful launch of the "Revolution" laundry unit.	The Group regularly monitors the performance of newly installed machines, which are heavily trialled before launch.
Market
• Commercial relationships	The Group has well-established long-term relationships with a number of site-owners. The deterioration in the relationship with, or ultimately the loss of, a key account or tender process would have an adverse albeit contained impact on the Group's results, considering how the Group's turnover is spread over a large client base.	The Group's major key relationships are supported by medium-term contracts. We actively manage our site-owner relationships at all levels to ensure a high quality of service.
Operational
• Reliance on foreign manufacturers	The Group sources most of its products from outside the UK. Consequently, the Group is subject to risks associated with international trade.	Extensive research is conducted into quality and ethics before the Group procures products from any new country or supplier. The Group also maintains very close relationships with both its suppliers and shippers to ensure that disruption to production and supply are managed appropriately.
• Reliance on one single supplier of consumables	The Group currently buys all its paper for photobooths from one single supplier. The failure of this supplier could have a dramatic effect.	The Board has decided to hold a strategic stock of paper, allowing for 6 to 12 months' worth of paper consumption, to give enough time to put in place alternative solutions.
• Reputation	The Group's brand is a key asset of the business. Failure to protect the Group's reputation and brand could lead to a loss of trust and confidence. This could result in a decline in the customer base.	The protection of the Group's brand in its core markets is sustained by products with certain unique features and offerings as well as regular maintenance to maintain appearance.
• Product and service quality	The Board recognises that the quality and safety of both its products and services is of critical importance and that any major failure will affect consumer confidence.	The Group continues to invest in both its existing estate, to ensure that it remains contemporary, and in constant product innovation to meet customer needs. The Group also has a programme to regularly train its technicians.

Group Statement of Comprehensive Income

for the year ended  30 April 2015

		2015	2014
		£ '000	£ '000
Revenue		177,202	186,598
Cost of Sales		(129,638)	(139,400)
Gross Profit		47,564	47,198
Other Operating Income		1,166	1,420
Administrative Expenses		(10,524)	(18,513)
Share of Post-Tax Profits from Associates		164	161
Operating Profit		38,370	30,266
Analysed as:
Operating profit before special items		34,886	30,266
Profit on sale of land		3,484	-
Operating profit after special items		38,370	30,266
Finance Revenue		191	227
Finance Cost		(65)	(400)
Profit before Tax		38,496	30,093
Total Tax Charge		(10,452)	(8,514)
Profit for Year		28,044	21,579
Other Comprehensive Income
Items that are or may subsequently be classified to Profit and Loss:
Exchange Differences Arising on Translation of Foreign Operations		(6,779)	(4,803)
Total Items that are or may subsequently be classified to profit and loss		(6,779)	(4,803)
Items that will not be classified to profit and loss:
Remeasurement (losses)/gains in defined benefit obligations and other post-employment benefit obligations		(860)	(67)
Deferred tax on remeasurement  (losses)/gains		221	(11)
Total Items that will not be classified to Profit and Loss		(639)	(78)
Other Comprehensive Expense (Net of Tax)		(7,418)	(4,881)
Total Comprehensive Income for the Year		20,626	16,698
Profit for the Year Attributable to:
Owners of the Parent		27,900	21,422
Non-controlling interests		144	157
		28,044	21,579
Total comprehensive income attributable to:
Owners of the Parent		20,605	16,579
Non-controlling interests		21	119
		20,626	16,698
Earnings per Share
Basic Earnings per Share		7.49p	5.77p
Diluted Earnings per Share		7.43p	5.70p

All results derive from continuing operations.

Group Statement of Financial Position

for the year ended 30 April 2015

		Group
		2015	2014
	Notes	£'000	£'000
Assets
Non-current assets
Goodwill		10,180	9,911
Other intangible assets		6,507	5,776
Property,plant & equipment		48,263	46,529
Investment property		458	516
Investment in - associates		848	620
Investment in subsidiaries		-	-
Other financial assets - held to maturity		2,220	2,334
Other financial assets - available for sale		70	78
Deferred tax assets		3,512	4,231
Trade and other receivables		1,684	1,831
		73,742	71,826
Current assets
Inventories		12,099	11,196
Trade and other receivables		10,874	14,345
Other financial assets - available for sale		-	86
Current tax		869	57
Cash and cash equivalents		58,632	60,996
		82,474	86,680
Assets held for sale		-	705
Total assets		156,216	159,211
Equity
Share capital		1,866	1,859
Share premium		7,131	6,521
Translation and other reserves		4,766	11,402
Retained earnings		89,744	83,332
Equity attributable to owners of the Parent		103,507	103,114
Non-controlling interests		904	1,119
Total equity		104,411	104,233
Liabilities
Non-current liabilities
Financial liabilities		124	64
Post-employment benefit obligations		4,291	3,418
Provisions		17	10
Deferred tax liabilities		1,067	1,381
Trade and other payables		2,050	3,840
		7,549	8,713
Current liabilities
Financial liabilities		59	240
Provisions		5,540	8,256
Current tax		5,981	5,457
Trade and other payables		32,676	32,312
		44,256	46,265
Total equity and liabilities		156,216	159,211

Group Statement of Cash Flows

for the year ended 30 April 2015

		Notes	2015	2014
			£'000	£'000
Cash flow from operating activities
Profit before tax			38,496	30,093
Finance cost			65	400
Finance revenue			(191)	(227)
Operating profit			38,370	30,266
Share of post tax profit from associates			(164)	(161)
Amortisation of intangible assets			2,092	3,034
Depreciation of property,plant and  equipment			14,789	14,503
Profit/(loss) on sale of property,plant and equipment			(3,510)	198
Exchange differences			(1,996)	(1,546)
Other items			(876)	(46)
Changes in working capital:
Inventories			(1,910)	1,485
Trade and other receivables			2,587	(2,310)
Trade and other payables			451	32
Provisions			(671)	143
Cash generated from operations			49,162	45,598
Interest paid			(64)	(95)
Taxation paid			(9,124)	(9,916)
Net cash generated from operating activities			39,974	35,587
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired			(422)	-
Investment in associates			(146)	(121)
Investment in  intangible assets			(3,641)	(2,007)
Proceeds from sale of intangible assets			1	3
Purchase of property,plant and equipment			(19,833)	(19,153)
Proceeds from sale of property,plant and equipment			5,623	781
Proceeds of sale of subsidiaries net of cash sold			32	-
Interest received			189	227
Dividends received from  associates			96	63
Net cash generated from investing activities			(18,101)	(20,207)
Cash flows from financing activities
Issue of Ordinary shares to equity shareholders			617	237
Repayment of capital element of finance leases			(78)	(90)
Repayment of borrowings			(158)	(449)
Decrease in assets held to maturity			76	83
Dividends paid to owners of the Parent			(21,381)	(11,140)
Dividends paid to non-controlling interests			(158)	(197)
Net cash utilised in financing activities			(21,082)	(11,556)
Net increase in cash and cash equivalents			791	3,824
Cash and cash equivalents at beginning of year			60,996	59,651
Exchange loss on cash and cash equivalents			(3,155)	(2,479)
Cash and cash equivalents at end of year			58,632	60,996

Group Statement of Changes in Equity

for the year ended 30 April 2015

	Share capital £'000	Share premium £'000	Other reserves £'000	Translation reserve £'000	Retained earnings £'000	Attributable to owners of the Parent £'000	Non-controlling interests £'000	Total  £'000
At 1 May 2013	1,856	6,287	2,430	14,293	72,295	97,161	1,197	98,358
Profit for year	-	-	-	-	21,422	21,422	157	21,579
Other comprehensive (expense)/income
Exchange differences	-	-	-	(4,765)	-	(4,765)	(38)	(4,803)
Transfers between reserves	-	-	(556)	-	556	-	-	-
Remeasurement losses in defined benefit pension scheme and other post-employment benefit obligations	-	-	-	-	(67)	(67)	-	(67)
Deferred tax on remeasurement gains	-	-	-	-	(11)	(11)	-	(11)
Total other comprehensive (expense)/income	-	-	(556)	(4,765)	478	(4,843)	(38)	(4,881)
Total comprehensive (expense)/income	-	-	(556)	(4,765)	21,900	16,579	119	16,698
Transactions with owners of the Parent
Shares issued in the period	3	234	-	-	-	237	-	237
Share options	-	-	-	-	277	277	-	277
Dividends	-	-	-	-	(11,140)	(11,140)	(197)	(11,337)
Total transactions with owners of the Parent	3	234	-	-	(10,863)	(10,626)	(197)	(10,823)
At 30 April 2014	1,859	6,521	1,874	9,528	83,332	103,114	1,119	104,233
At 1 May 2014	1,859	6,521	1,874	9,528	83,332	103,114	1,119	104,233
Profit for year	-	-	-	-	27,900	27,900	144	28,044
Other comprehensive (expense)/income
Exchange differences	-	-	-	(6,656)	-	(6,656)	(123)	(6,779)
Translation reserve taken to income statement on disposal of subsidiaries	-	-	-	20	(20)	-	-	-
Remeasurement losses in defined benefit pension scheme and other post-employment benefit obligations	-	-	-	-	(860)	(860)	-	(860)
Deferred tax on remeasurement gains	-	-	-	-	221	221	-	221
Total other comprehensive (expense)/income	-	-	-	(6,636)	(659)	(7,295)	(123)	(7,418)
Total comprehensive (expense)/income	-	-	-	(6,636)	27,241	20,605	21	20,626
Transactions with owners of the Parent
Shares issued in the period	7	610	-	-	-	617	-	617
Share options	-	-	-	-	371	371	-	371
Deferred tax on share options	-	-	-	-	181	181	-	181
Dividends	-	-	-	-	(21,381)	(21,381)	(158)	(21,539)
Disposal of minority	-	-	-	-	-	-	(78)	(78)
Total transactions with owners of the Parent	7	610	-	-	(20,829)	(20,212)	(236)	(20,448)
At 30 April 2015	1,866	7,131	1,874	2,892	89,744	103,507	904	104,411

NOTES

1 Basis of preparation and accounting policies

The preliminary results for the year ended 30 April 2015 have been extracted from the audited consolidated financial statements, which were approved by the Board of Directors on 24 June 2015. The audited consolidated financial statements have not yet been delivered to the Registrar of Companies but are expected to be published by the end of July.   

Abridged financial information

The financial information in this announcement which was approved by the Board of Directors does not constitute the Company's statutory accounts for the years ended 30 April 2014 or 2015 but is derived from those accounts. Statutory accounts for 2014 have been delivered to the Registrar of Companies. The auditors have reported on those accounts; their reports were unqualified and did not contain statements under s498(2) or (3) Companies Act 2006.

This preliminary announcement has been prepared in accordance with the accounting policies under IFRS as adopted by the EU.

Whilst the financial information included in this preliminary announcement has been prepared in accordance with IFRS, this announcement does not itself contain sufficient information to comply with IFRS. This preliminary announcement constitutes a dissemination announcement in accordance with Section 6.3 of the Disclosures and Transparency Rules (DTR).

2 Segmental analysis

IFRS 8 requires operating segments to be identified, based on information presented to the Chief Operating Decision Maker (CODM) in order to allocate resources to the segments and monitor performance. The Directors have decided to change how segmental analysis is reported to the CODM. Comparative information has been restated to reflect the new geographical presentation of segmental information.

The Group monitors performance at the adjusted operating profit level before special items, interest and taxation.

In accordance with IFRS 8, no segment information is provided for assets and liabilities in the disclosures below, as this information is not regularly provided to the Chief Operating Decision Maker.

The segment results are as follows:

	Asia	Europe	United Kingdom & Ireland	Total
	£'000	£'000	£'000	£'000
2015
Total revenue	38,925	100,127	44,867	183,919
Inter segment sales	(720)	(5,782)	(215)	(6,717)
Revenue from external customers	38,205	94,345	44,652	177,202
EBITDA	10,232	32,013	11,810	54,055
Depreciation and amortisation	(3,465)	(9,967)	(3,359)	(16,791)
Operating profit excluding associates	6,767	22,046	8,451	37,264
Share of post-tax profits from associates				164
Corporate costs excluding depreciation and amortisation				1,032
Corporate depreciation and amortisation				(90)
Operating profit				38,370
Finance Revenue				191
Finance costs				(65)
Profit before tax				38,496
Tax				(10,452)
Profit for year				28,044

Included in corporate costs for April 2015 is the profit on sale of vacant land at the Bookham site of £3,484,000.

Reconciliation of operating profit
	Asia	Europe	United Kingdom & Ireland	Total
	£'000	£'000	£'000	£'000
Operating profit before associates	6,768	22,045	8,453	37,266
Share of post tax profits from associates	164	-	-	164
Corporate operating profit	-	1,012	(72)	940
Total operating profit	6,932	23,057	8,381	38,370

	Asia	Europe	United Kingdom & Ireland	Total
	£'000	£'000	£'000	£'000
2014  Restated
Total revenue	39,558	108,623	45,453	193,634
Inter segment sales	(819)	(5,691)	(526)	(7,036)
Revenue from external customers	38,739	102,932	44,927	186,598
EBITDA	10,060	31,016	10,313	51,389
Depreciation and amortisation	(4,525)	(9,838)	(2,826)	(17,189)
Operating profit excluding associates	5,535	21,178	7,487	34,200
Share of post-tax profits from associates				161
Corporate costs excluding depreciation and amortisation				(3,747)
Corporate depreciation and amortisation				(348)
Operating profit				30,266
Finance Revenue				227
Finance costs				(400)
Profit before tax				30,093
Tax				(8,514)
Profit for year				21,579
Restated -  as per above
Reconciliation of operating profit
	Asia	Europe	United Kingdom & Ireland	Total
	£'000	£'000	£'000	£'000
Operating profit before associates	5,535	21,178	7,487	34,200
Share of post tax profits from associates	161	-	-	161
Corporate operating profit	-	747	(4,842)	(4,095)
Total operating profit	5,696	21,925	2,645	30,266

Inter-segment revenue mainly relates to sales of equipment.

3 Taxation

Tax charges/(credits) in the statement of comprehensive income

			2015	2014
			£'000	£'000
Current taxation
UK Corporation tax
- current year			2,164	1,229
- prior years			(144)	4
			2,020	1,233
Overseas taxation
- current year			7,491	8,675
- prior years			(62)	58
			7,429	8,733
Total current taxation			9,449	9,966
Deferred taxation
Origination and reversal of temporary differences
- current -year - UK			1,103	(1,550)
- current -year - overseas			(123)	29
Adjustments to estimated recoverable amounts of deferred tax assets arising in previous years
- UK			(56)	(26)
- Overseas			79	58
Impact of change in rate			-	37
Total deferred tax			1,003	(1,452)
Tax charge in the statement of comprehensive income			10,452	8,514

4 Earnings per share

Basic earnings per share amounts are calculated by dividing net earnings attributable to shareholders of the Parent of £27,900,000 (2014: £21,422,000) by the weighted average number of shares in issue during the year, excluding those held, where applicable, as treasury shares.

Diluted earnings per share amounts are calculated by dividing the net earnings attributable to shareholders of the Parent by the weighted average number of shares outstanding during the year plus the weighted average number of shares that would be issued on conversion of all the dilutive potential shares into shares. The Group has only one category of dilutive potential shares: the share options granted to senior staff, including directors.

The earnings and weighted average number of shares used in the calculation are set out in the table below:

		2015			2014
	Earnings £'000	Weighted average number of shares £'000	Earnings per share pence	Earnings £'000	Weighted average number of shares £'000	Earnings per share pence
Basic earnings per share	27,900	372,381	7.49	21,422	371,506	5.77
Effect of dilutive share options		3,314	(0.06)		4,330	(0.07)
Diluted earnings per share	27,900	375,695	7.43	21,422	375,836	5.70

Potential shares (for example, arising from exercising share options) are treated as dilutive only when their conversion to shares would decrease basic earnings per share or increase loss per share from continuing operations.

Alternative earnings per share

The table below reconciles earnings per share (EPS) and diluted earnings per share (DPS) before and after specific items. There were no specific items in the year ended 30 April 2014.

Alternative earnings per share		2015			2014
	£'000	EPS	DPS	£'000	EPS	DPS
Earnings available to shareholders	27,900	7.49	7.43	21,422	5.77	5.70
Special items net of tax	(2,752)	(0.74)	(0.73)	-	-	-
Earnings after special items	25,148	6.75	6.70	21,422	5.77	5.70
Weighted average number of shares in issue in period- basic ('000)	372,381			371,506
- including dilutive share options ('000)	375,695			375,836

Specific items for the year ended 30 April 2015 relate to the sale of vacant land at the Bookham site. The contract for £4,200,000 was exchanged on 5 June 2014 with cash settlement on completion one month later.

5 Dividends paid and proposed

Year ended 30 April 2015 - Proposed dividends not yet paid

The Board declared an interim dividend of 2.34p per share for the year ended 30 April 2015, amounting to £8,734,000 which was paid on 14 May 2015. The Board proposes a final dividend for the year ended 30 April 2015 of 2.54 per share, which is subject to shareholders approval at the Annual General Meeting to be held on 21 October 2015.

Year ended 30 April 2014 - Paid after 30 April 2014

The Board declared an interim dividend of 1.80 per share for the year ended 30 April 2014, amounting to £6,690,000 which was paid on 6 May 2014. The Board proposed a final dividend for the year ended 30 April 2014 of 1.95 per share, amounting to £7,257,000 which was paid on 7 November 2014.The Board proposed a special dividend of 2.00 per share amounting to £7,434,000, which was paid on 15 May 2014.

6 Non-Current assets

	Goodwill	Intangible assets	Property, plant & equipment	Investment property
	£'000	£'000	£'000	£'000
Net book value at 1 May 2014	9,911	5,776	46,529	516
Exchange difference and other movements	(244)	(457)	(2,637)	(58)
Additions - photobooths and vending equipment	-	-	18,287	-
Additions - other assets	-	3,641	1,688	-
Additions - new subsidiaries	513	-	233
Amortisation	-	(2,092	-	-
Depreciation	-	-	(14,789)	-
Reclassifications	-	-	-	-
Transfer to assets held for sale	-	-	-	-
Disposals at net book value	-	(361)	(1,048)	-
Net book value at 30 April 2015	10,180	6,507	48,263	458

7 Net cash

	2015	2014
	£'000	£'000
Cash and cash equivalents per statement of financial position	58,632	60,996
Financial assets - held to maturity	2,220	2,334
Financial assets - available-for-sale	-	85
Current instalments  due on bank loans	-	(177)
Non-current finance leases	(124)	(64)
Current finance leases	(59)	(63)
Net cash	60,669	63,111

Net cash is a non-GAAP measure since it is not defined in accordance with IFRS but is a key indicator used by management in assessing operational performance and financial position strength. The inclusion of items in net cash as defined by the Group may not be comparable with other companies' measurement of net cash/debt. The Group includes in net cash, cash and cash equivalents and certain financial assets, mainly deposits, less loan and other borrowings.

At 30 April 2015, £2,220,000 of the total net cash (2014: £2,334,000 ) comprised bank deposit accounts that are subject to restrictions and are not freely available for use by the Group and Company. These amounts are shown under financial assets held to maturity.

By order of the Board

John Lewis                                                                          Serge Crasnianski

Chairman                                                                            Chief Executive Officer

24 June 2015

8 Publication of the audited financial statements

Copies of the Report and Accounts for the year ended 30 April 2015 will be mailed to those shareholders who have opted to receive them, by the end of July 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 (http://investor.photo-me.com/financial- -reports) after that date.

 

END

 

 

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