Interim Results
Photo-Me International PLC
10 December 2002
PHOTO-ME INTERNATIONAL plc - INTERIM ANNOUNCEMENT
PMI, the world's leading operator of photobooths and a significant manufacturer
of photoprocessing minilabs, announces its results for the half year ended 31
October 2002.
• As expected, pre-tax profit was much reduced, to £1.3 m (2001: £8.2m) on a
turnover of £95.6 m (2001: £106.5 m).
• Most of the reduction in profit and turnover was by Manufacturing, with
Operations showing signs of recovery from the previous half year.
• EBITDA remained substantial at £19.7m (2001: £26.6m), and depreciation of
£17.1m compared with gross capex of £7.9m.
• Net debt reduced substantially, by £14.6m to £36.9m, due to strong cash
generation from the Operations business and reduction in capex.
• Following signature of an OEM contract with Kodak and the receipt of
Kodak's final technical approval, volume production of the DKS 1500 and the
System 89 (the DKS 1500 variant for Kodak) minilab commenced in December.
• Serge Crasnianski, CEO, stated 'In line with expectations, the current
year will be loss making, but 2003/4 should register a material improvement'.
Presentation to brokers' analysts and investors:
A presentation will be made to brokers' analysts and investors today between
09.30 and 10.30 at Regus, No1 Poultry, London EC2R 8JR.
Enquiries:
Photo-Me International plc 01372-453399
Vernon Sankey (Deputy Chairman) )
Serge Crasnianski (Chief Executive Officer) ) on 10 December 020-7444 4166
Jean-Luc Peurois (Group Finance Director) )
Bankside Consultants Limited
Charles Ponsonby 020-7444 4166
CHIEF EXECUTIVE'S STATEMENT
Whilst, as expected, the results for the half year ended 31 October 2002 are not
good, I am able to report some significant positive elements. In particular,
PMI again achieved strong cash flow, resulting in a substantial reduction in net
debt, and its Operations business showed encouraging signs of recovery.
Furthermore, an OEM contract has been signed with Kodak for the System 89
minilab. This contract has been validated following the recent receipt of final
technical approval which enables orders to be placed by Kodak. This is an
important achievement which will auger well for future years.
PROFIT & LOSS ACCOUNT OVERVIEW
On turnover down 10.3% at £95.6m (2001: £106.5m), profit before interest and tax
totalled £2.6m (2001: £10.0m) and profit before tax amounted to £1.3m (2001:
£8.2m). After a tax charge of £0.5m (2001: £3.6m) and minority interests, the
profit attributable to shareholders was £0.8m (2001: £4.5m). The basic earnings
per share totalled 0.22p (2001: 1.24p).
EBITDA remained substantial at £19.7m (2001: £26.6m), and the depreciation
charge of £17.1m (2001: £16.7m) compared with gross capital expenditure
(including on intangible assets) of £7.9m (2001: £14.7m).
Operating turnover decreased by 2.5% to £79.2m (83% of total turnover) from
£81.3m (76% of total turnover). Manufacturing turnover decreased by 35.3% to
£16.4m from £25.3m.
As in the last two years, Continental Europe, which is the area with the largest
Operating business as well as being home to PMI's Manufacturing activities, was
the principal contributor to both turnover and pre-tax profit, with £48.3m and
£1.7m, respectively, the latter figure being materially reduced by the current
loss-making nature of Manufacturing. Two of PMI's other areas - the UK & the
Republic of Ireland and Asia - were, however, profitable, whilst the fourth, the
USA, more than halved its loss.
BORROWINGS, CASH FLOW AND INTEREST
During the half year, net debt decreased by £14.6m to £36.9m, reflecting reduced
gross capital expenditure of £7.9m, of which £5.3m relates to Operations
equipment. With net assets before deducting minority interests increased in the
half year by £1.3m to £62.6m, gearing decreased to 58.8% from 83.8% at 30 April
2002 (and 62.2% at 31 October 2001).
Net cash inflow from operating activities totalled £24.0m (2001: £29.7m), helped
by a net reduction in working capital of £4.4m (2001: £2.5m).
Net interest payable reduced to £1.2m from £1.7m, covered 2.1x (2001: 5.8x) by
profit before interest and tax and 16.2x (2001: 15.5x) by EBITDA.
DIVIDEND
No final dividend was proposed in respect of the year ended 30 April 2002 and no
interim dividend is now being declared (2001: 0.3p per share). The payment of
dividends will only be resumed once overall trading significantly improves and
net debt is further reduced.
BUSINESS REVIEW
Operations
The Operations business comprises the operation of photobooths and other vending
equipment. At the half year end, the total number of Operations sites worldwide
was similar to that a year previously at around 25,000, including some 20,000
photobooths.
PMI is a global company with three main Operations countries - the UK, France
and Japan - in all of which it continues to enjoy the market leading position.
All three benefited from further reductions in controllable overheads in the
period.
Operations turnover in the UK and the Republic of Ireland (with 7,400 sites,
including 5,600 photobooths) decreased by 3%. Profitability was again affected
by predatory competitor activity. Significant management changes have been
effected and good progress has already been made, in particular with regard to
commercial activities and the management of costs.
Operations turnover in France (with 8,300 sites, including 5,700 photobooths)
increased by 6% and improved profits were made.
Operations turnover in Japan (with 3,800 sites, including 3,700 photobooths)
decreased by 10%, reflecting sustained recession and the weakness of the Yen
(without which the turnover decrease would have been 3%).
Manufacturing
Manufacturing turnover primarily derives from the manufacture of photoprocessing
equipment (mainly minilabs) for operation by third parties.
Manufacturing sales would have been greater were customers not awaiting the
launch of the DKS 1500 (which can make up to 1,500 prints an hour) and its OEM
variant for Kodak, the System 89. With regard to the latter, an OEM agreement
has been signed with Kodak. Final technical approval has also now been confirmed
by Kodak after exhaustive quality tests, and the first units will be despatched
to Kodak later this month. At Photokina in Cologne, the imaging industry's
principal exhibition, PMI's range of minilabs was well received.
The DKS range, which also includes the DKS 550 and DKS 750 models (which can
produce up to 550 and 750 prints an hour, respectively), now addresses
requirements for approximately 95% of the market as against 40% previously.
STRATEGY
Following the closing of the last financial year, the Board agreed on the
following strategy.
In the short term, PMI will:
• materially reduce indebtedness through substantial reductions in capital
expenditure and by not declaring a dividend;
• review all major cost areas;
• stabilise UK Operations; and
• establish a volume manufacturing capability.
In the longer term, PMI will:
• maintain or increase the high level of cash flow generation by
Operations and extend the services on offer, into related areas; and
• obtain for Manufacturing a substantial share of the world market for
the manufacture of digital photoprocessing equipment.
The Board believes that good progress has been made in implementing the short
term strategy and remains committed to its longer term objectives.
PROSPECTS
Operations
At PMI's AGM on 1 November 2002, it was reported that the Operations business
was performing ahead of expectations, with Continental Europe trading well and
the UK and Japan recovering from, respectively, the effects of predatory
competition and prolonged recession. This remains the case. The second half of
the year is, however, traditionally the weaker of the two (other than in Japan).
Manufacturing
The statement at the AGM that the DKS 1500 and its variant for Kodak, the System
89, are unlikely to contribute materially to sales and profits in the current
financial year ending 30 April 2003 also remains true. Whilst volume
production of both machines has commenced in December, output is expected to
reach substantial levels only in the third quarter of the 2003 calendar year.
Consequently in 2003/04, there are promising prospects for a materially positive
contribution to results.
Overall
The Board continues to believe that the current financial year will be
loss-making. However, this is precisely in line with expectations at the time
of our preliminary announcement in July, and we are therefore increasingly
confident that 2003/04 should register a material improvement.
Serge Crasnianski 10 December 2002
Chief Executive Officer
GROUP PROFIT AND LOSS ACCOUNT
for the six months ended 31 October 2002
Audited
Unaudited Unaudited year to 30 April 2002
6 months to 6 months to Before After
31 October 31 October exceptional Exceptional exceptional
2002 2001 items items items
Note £'000 £'000 £'000 £'000 £'000
Turnover - continuing operations 95,692 106,541 187,284 - 187,284
Less: share of turnover of joint (115) - (393) - (393)
venture
______ ______ ______ ______ ______
Turnover 2 95,577 106,541 186,891 - 186,891
Cost of sales (80,505) (83,541) (158,522) (10,479) (169,001)
______ _______ ______ ______ ______
Gross profit/(loss) 15,072 23,000 28,369 (10,479) 17,890
Administrative expenses (12,803) (13,075) (23,832) - (23,832)
Other operating income 447 523 957 - 957
______ ______ ______ ______ _____
Operating profit/(loss)
- continuing operations 2,716 10,448 5,494 (10,479) (4,985)
Share of operating loss of joint (184) (534) (44) (1,476) (1,520)
venture
Share of operating profit of 35 52 90 - 90
associates
______ ______ ______ ______ ______
Total operating profit/(loss) 2,567 9,966 5,540 (11,955) (6,415)
Loss on termination/disposal of
group undertakings - - - (570) (570)
______ ______ ______ ______ ______
Profit/(loss) on ordinary
activities before interest 2,567 9,966 5,540 (12,525) (6,985)
Interest receivable 193 157 343 - 343
Interest payable (1,411) (1,874) (3,390) - (3,390)
______ ______ ______ ______ ______
Profit/(loss) on ordinary
activities before taxation 3 1,349 8,249 2,493 (12,525) (10,032)
Tax (charge)/credit on profit/
(loss) on ordinary activities 4 (455) (3,629) (2,176) 2,750 574
______ _______ ______ _____ ______
Profit/(loss) on ordinary
activities after taxation 894 4,620 317 (9,775) (9,458)
Minority interests
- equity interests (72) (109) (183) 52 (131)
- non-equity interests (11) (12) (23) - (23)
______ ______ ______ _____ ______
Profit/(loss) attributable to
members of the holding company
811 4,499 111 (9,723) (9,612)
Dividends
- equity interests 5 - (1,089) (1,089) - (1,089)
______ ______ ______ ______ ______
Retained profit/(loss) for period 811 3,410 (978) (9,723) 10,701
______ ______ ______ ______ ______
Basic earnings per share
- before exceptionals 6 0.22p 1.24p 0.03p - -
- exceptional items 6 - - - (2.68p) -
Basic earnings per share 6 0.22p 1.24p - - (2.65p)
Diluted earnings per share
- before exceptionals 6 0.22p 1.23p 0.03p - -
- exceptional items 6 - - - (2.68p) -
Diluted earnings per share 6 0.22p 1.23p - - (2.65p)
Dividends per share 5 - 0.30p 0.30p 0.30p
______ ______ ______ ______ _____
GROUP BALANCE SHEET
as at 31 October 2002
Unaudited Unaudited Audited
31 October 31 October 30 April
2002 2001 2002
Note £000 £000 £000
Fixed assets
Intangible assets
- goodwill 7 8,591 8,945 8,806
- development costs 7 7,542 7,103 6,789
Tangible assets 7 80,595 101,574 90,152
Investments 1,416 690 1,393
Investment in joint venture (322) 898 (148)
______ ______ ______
97,822 119,210 106,992
______ ______ ______
Current assets
Stocks 19,430 25,285 22,454
Debtors 26,784 34,673 31,926
Investments and short-term deposits 2,906 1,678 2,157
Cash at bank and in hand 9,227 13,330 8,484
______ ______ ______
58,347 74,966 65,021
Creditors
Amounts falling due within one year 55,043 72,592 69,605
______ ______ ______
Net current asssets/ (liabilities) 3,304 2,374 (4,584)
______ ______ ______
Total assets less current liabilities 101,126 121,584 102,408
Creditors
Amounts falling due after more than one year 27,441 32,924 29,456
______ ______ ______
73,685 88,660 72,952
Provisions for liabilities and charges
Provisions 5,542 5,655 5,041
Deferred taxation 5,507 7,505 6,573
______ ______ ______
62,636 75,500 61,338
Minority interests
- equity interests 1,038 1,055 1,068
- non-equity interests 878 922 931
______ ______ ______
60,720 73,523 59,339
______ ______ _______
Capital and reserves
Called-up share capital 2,016 2,013 2,016
Reserves:
Share premium account 8 2,729 2,584 2,729
Other reserves 8 2,471 10,910 2,371
Profit and loss account 8 53,504 58,016 52,223
______ ______ ______
60,720 73,523 59,339
______ ______ ______
Shareholders' funds are attributable to:
Equity interests 60,519 73,322 59,138
Non-equity interests 201 201 201
______ ______ ______
60,720 73,523 59,339
______ _______ ______
GROUP CASH FLOW STATEMENT
for the six months ended 31 October 2002
Unaudited Unaudited Audited
6 months to 6 months to year to
31 October 31 October 30 April
2002 2001 2002
Note £000 £000 £000
Net cash inflow from operating activities a 24,030 29,672 43,625
Dividends from associated undertakings - - 73
Returns on investments and servicing of finance (1,253) (1,779) (3,123)
Taxation (131) (2,985) (5,643)
Capital expenditure and financial investment (7,324) (14,358) (21,856)
Acquisitions and disposals (144) (1,580) (2,322)
Dividends paid - equity shareholders - - (6,155)
______ ______ ______
Cash inflow before use of liquid resources and financing 15,178 8,970 4,599
Management of liquid resources (701) 2 (802)
Financing
- decrease in debt (4,138) (4,381) (8,976)
- shares issued - 144 292
______ ______ ______
Increase/(decrease) in cash in the period 10,339 4,735 (4,887)
______ ______ ______
Reconciliation of net cash flow to movement in net b
debt
Increase/(decrease) in cash in the period 10,339 4,735 (4,887)
Repayment of capital element of finance leases 1,152 1,091 1,815
Cash flow from decrease in debt 2,986 3,290 7,161
Cash flow from increase/(decrease) in liquid resources 701 (2) 802
______ ______ ______
Change in net debt resulting from cash flows 15,178 9,114 4,891
Foreign exchange translation differences (628) 75 (110)
______ ______ ______
Movement in net debt in the period 14,550 9,189 4,781
Opening net debt (51,404) (56,185) (56,185)
______ ______ ______
Closing net debt (36,854) (46,996) (51,404)
______ ______ ______
NOTES TO THE CASH FLOW STATEMENT
for the six months ended 31 October 2002
(a) Reconciliation of operating profit to operating cash
flow
Unaudited Unaudited Audited
6 months to 6 months to year to
31 October 31 October 30 April
2002 2001 2002
£000 £000 £000
Operating profit/(loss) 2,716 10,448 (4,985)
Depreciation and amortisation charges 17,129 16,684 34,630
Non-cash charge relating to exceptional items - - 6,636
(Profit)/loss on sale of assets (118) - 451
Other non-cash movements (138) (4) (151)
_______ _______ ______
Gross cash inflow 19,589 27,128 36,581
Net movement in working capital 4,441 2,544 7,044
______ ______ ______
Net cash inflow from operating activities 24,030 29,672 43,625
______ ______ ______
(b) Analysis of net debt
At Other At At
1 May Cash non-cash Exchange 31 Oct 31 Oct
2002 flow changes movement 2002 2001
£000 £000 £000 £000 £000 £000
Cash at bank and in hand 8,484 749 - (6) 9,227 13,330
Overdrafts (13,192) 9,590 - (198) (3,800) (8,443)
10,339
Debt due after one year (26,896) (4,762) 5,882 (228) (26,004) (29,191)
Debt due within one year (17,548) 7,748 (5,882) (139) (15,821) (19,227)
Finance leases (4,409) 1,152 - (105) (3,362) (5,143)
4,138
Current asset investments
and short-term deposits 2,157 701 - 48 2,906 1,678
______ ______ ______ ______ ______ ______
Total (51,404) 15,178 - (628) (36,854) (46,996)
______ ______ ______ ______ ______ ______
GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the six months ended 31 October 2002
Unaudited Unaudited Audited
6 months to 6 months to year to
31 October 31 October 30 April
2002 2001 2002
£000 £000 £000
Profit/(loss) attributable to shareholders 811 4,499 (9,612)
Exchange adjustments 570 (145) (936)
______ ______ ______
Total recognised gains and losses for the period 1,381 4,354 (10,548)
______ ______ ______
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 31 October 2002
Unaudited Unaudited Audited
6 months to 6 months to year to
31 October 31 October 30 April
2002 2001 2002
£000 £000 £000
Profit/(loss) for the period before dividends 811 4,499 (9,612)
Dividends - (1,089) (1,089)
Exchange adjustments 570 (145) (936)
Shares issued - 144 292
Goodwill written-back on disposal of subsidiary - - 570
undertakings
______ ______ ______
Net movement in shareholders' funds 1,381 3,409 (10,775)
Opening shareholders' funds 59,339 70,114 70,114
______ ______ ______
Closing shareholders' funds 60,720 73,523 59,339
______ ______ ______
NOTES ON THE ACCOUNTS
for the six months ended 31 October 2002
1 Basis of preparation of the interim accounts
The interim accounts have been prepared on the basis of accounting policies
set out in the Group's 2002 Report & Accounts.
For the preparation of the interim accounts, the results of overseas
undertakings have been translated at exchange rates ruling on 31 October
2002.
Turnover and operating profit are derived from continuing operations.
There have been no acquisitions nor discontinued operations in the six
months to 31 October 2002.
The financial information set out in this document in respect of the year
ended 30 April 2002 does not constitute the Group's statutory accounts for
that period but has been extracted from the statutory accounts, which have
been filed with the Registrar of Companies. The auditors' report on those
accounts was unqualified and did not contain a statement under Section
237(2) or (3) of the Companies Act 1985.
2 Turnover
Turnover was contributed as follows:
6 months to 6 months to Year to
31 October 31 October 30 April
2002 2001 2002
£000 £000 £000
Analysis by activity
Manufacturing:
Total sales 18,442 30,347 52,968
Sales of capital equipment to Group undertakings for own use (2,090) (5,077) (13,198)
______ _______ _______
Sales to third parties 16,352 25,270 39,770
Operations 79,225 81,271 147,121
______ ______ ______
Total sales to third parties 95,577 106,541 186,891
______ ______ ______
Geographical analysis by origin
United Kingdom and Republic of Ireland 27,841 29,360 53,931
Overseas
- Continental Europe 48,294 55,394 90,770
- Asia 16,245 17,845 34,952
- United States of America 3,197 3,942 7,238
______ ______ ______
95,577 106,541 186,891
______ ______ ______
Sales of capital equipment to Group undertakings originates from Continental
Europe and has been excluded from the geographical analysis by origin.
Minor adjustments have been made to certain of the comparative figures for the
6 months to 31 October 2001 to ensure consistency between accounting periods.
3 Profit on ordinary activities before taxation
Year to 30 April 2002
6 months to 6 months to Before After
31 October 31 October exceptional exceptional
2002 2001 items items
£000 £000 £000 £000
Geographical area
United Kingdom and Republic of Ireland 140 1,446 (799) (5,855)
Overseas
- Continental Europe 1,686 7,541 3,417 (2,229)
- Asia 121 702 1,571 1,466
- United States of America (598) (1,440) (1,696) (3,414)
______ ______ ______ ______
1,349 8,249 2,493 (10,032)
______ ______ ______ ______
4 Taxation
6 months to 6 months to Year to
31 October 31 October 30 April
2002 2001 2002
£000 £000 £000
United Kingdom 88 264 (1,049)
Overseas 367 3,365 475
______ ______ ______
455 3,629 (574)
______ ______ ______
The charges for taxation for the six months ended 31 October 2002 have been
computed by applying the estimated effective tax rates for the full financial
year.
5 Dividends
6 months to 6 months to Year to
31 October 31 October 30 April
2002 2001
2002
£000 £000 £000
Interim - 0.0p per share (2001: 0.3p) - 1,089 1,089
______ ______ ______
The directors have decided not to declare an interim dividend this year (2001: 0.3p per Ordinary
share).
6 Earnings per share
The calculation of earnings per share is based on the following:
6 months to 6 months to Year to
31 October 31 October 30 April
2002 2001 2002
Earnings attributable to shareholders
- before exceptional items (£000) 811 4,499 111
- exceptional items (£000) - - (9,723)
- after exceptional items (£000) 811 4,499 (9,612)
Weighted average number of shares in issue in the period
- basic (000) 362,994 361,924 362,401
- including dilutive share options (000) 362,994 365,137 364,724
______ ______ ______
7 Fixed assets
Development
Goodwill costs Tangible
£000 £000 £000
Net book value at 1 May 2002 8,806 6,789 90,152
Exchange adjustment 3 152 472
Additions - operating equipment - - 5,258
- other 54 1,428 1,232
Depreciation provided in the period (272) (827) (16,030)
Disposals at net book value - - (489)
______ ______ ______
Net book value at 31 October 2002 8,591 7,542 80,595
______ ______ ______
8 Reserves
Share Profit
premium Other and loss
account reserves account
£000 £000 £000
Balance at 1 May 2002 2,729 2,371 52,223
Exchange adjustment - 100 470
Profit for the period - - 811
______ _____ _____
Balance at 31 October 2002 2,729 2,471 53,504
______ ______ ______
9 Copies of the Interim Report
Copies of the Interim Report will be mailed to shareholders on 20 December 2002
and from that date will be available from the Company's Registered Office at
Church Road, Bookham, Surrey KT23 3EU (tel: 01372-453399).
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