Interim Results
Photo-Me International PLC
18 December 2006
Monday 18 December 2006
PHOTO-ME INTERNATIONAL PLC - INTERIM ANNOUNCEMENT
PMI, the digital imaging company, announces results for the half year to 31
October 2006 in line with the Company's announcement of 15 November 2006.
Overall, a strong second half is anticipated as a result of a considerable
improvement in minilab manufacturing.
Key Points - Financial
•Revenue up 4.1% to £113.0m
•Reported pre-tax profit (including exceptionals) of £12.1m (2005:
£21.4m), adjusted pre-tax profit (excluding exceptionals) of £11.1m (2005:
£15.9m)
•Adjusted EBITDA of £25.3m (2005: £28.3m)
•Net debt of £14.5m (30 April 2006: £16.7m)
•Unchanged interim dividend per share of 1p
Key Points - Commercial
•As usual, Continental Europe accounted for over half of revenue and
profit
•The Vending Division increased its revenue by 1.0% to £80.3m, but a
reduction in margins saw operating profit decrease to £13.8m (2005: £16.6m),
mainly reflecting an increased depreciation charge
•During the six month period, the total number of Vending sites worldwide
increased by 3,300 (9%) to 38,500, following a 7,200 increase in the
previous year, in accordance with PMI's policy of diversification
•The Manufacturing Division increased its revenue by 12.8% to £32.7m.
Pre-exceptional operating profit reduced to £0.2m (2005: £2.6m), principally
reflecting sales of the last batch of the DKS15xx series minilabs being made
at below-average margins and a delay in deliveries from a sub-contractor of
the new third generation DKS 16xx and DKS 17xx series minilabs. However, the
ramp-up in production of the third generation minilabs is now beginning to
gain momentum
Key Points - Strategy
• The Board's review of the various options for returning a significant
amount of surplus capital to shareholders is progressing well. The return
will probably be on a pro rata basis and of a capital, rather than an
income, nature. The final details are expected to be announced early in the
New Year
• The Board is also pursuing strategic options for the three individual
businesses - Vending, minilab manufacturing and wholesale lab manufacturing
- having regard to their different nature, as highlighted by the Strategic
Review process
Serge Crasnianski, Chief Executive, stated: 'In the second half, Vending, which
continues to trade solidly, is expected to make a significantly smaller profit
than in the first half, due to normal seasonality. Manufacturing is expected to
make a substantial profit, mainly as a result of a considerable increase in the
number of minilabs manufactured and sold. Overall, a strong second half is
anticipated.
Further out, Vending should benefit from the planned substantial replacement of
early digital photobooths by April 2008, from regulatory developments helpful to
its photobooth business, and from the increasing maturity of its digital media
kiosk business. Manufacturing should benefit from the high potential of PMI's
third generation minilabs, in particular in the USA, from the very strong market
position of its wholesale lab business, and from the recent successful launch of
the Photobook Pro (a machine producing photo albums).'
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
Charles Ponsonby 020-7367 8851 / 07789-202 312
CHIEF EXECUTIVE'S STATEMENT
In line with the announcement of 15 November 2006, profit before exceptional
items and tax for the half year to 31 October 2006 is below the 2005 level. This
principally reflects a reduction in Vending margins and, in Manufacturing, a
combination of below-average margins on sales of the last batch of the second
generation minilabs and the delay in deliveries from a sub-contractor of the new
third generation minilabs. However, the second quarter was much stronger than
the first quarter and the ramp-up in production of the third generation minilabs
is now beginning to gain momentum.
In the second half, Manufacturing is expected to make a substantial profit.
Accordingly, overall, a strong second half is anticipated.
On 5 June 2006, in response to press speculation, PMI announced that it was
conducting a Strategic Review which may or may not lead to an offer being made
for the whole of the Company. On 15 November 2006, the Board announced that it
had terminated discussions with potential offerors as it had concluded that
alternative strategies would maximise value for shareholders. The Board also
announced that it had decided to effect a significant return of surplus capital
to shareholders. Further details of the new strategy are set out below.
FINANCIAL REVIEW
On revenue up 4.1% at £113.0m (2005: £108.5m), operating profit reduced to
£12.4m (2005: £16.5m). If an exceptional £1.0m credit in 2006 resulting from a
reduction in the provision for restructuring is excluded, operating profit would
be £11.4m (2005: £16.5m, which, however, included a £3.3m one-off profit on the
insurance recovery for the Bookham warehouse fire). The operating margin, before
exceptionals, was 10.1% (2005: 15.2%).
After a net finance cost of £0.3m (2005: £0.6m), reported profit before tax
reduced to £12.1m (2005: £21.4m). However, if the exceptional restructuring
credit in 2006 and a £5.4m exceptional non-operating profit on the insurance
recovery in 2005 are excluded, the adjusted pre-tax profit is £11.1m (2005:
£15.9m), the quantum of the reduction being almost halved.
Reflecting an increased effective tax rate of 36.5% (2005: 30.6%, benefiting
from the limited tax impact of the non-operating exceptional credit), basic
earnings per share reduced to 2.13p (2005: 3.99p). Adjusted basic earnings per
share, calculated by reference to earnings before exceptional items, were 1.94p
(2005: 2.66p).
Adjusted EBITDA totalled £25.3m (2005: £28.3m).
Total shareholders' equity of £98.7m was lower than the 30 April 2006 figure of
£104.6m as a result of £5.0m negative exchange differences (principally arising
from the strengthening of Sterling against the Euro, the Japanese Yen and the
Swiss Franc), the payment of the previous year's £3.6m interim dividend and the
provision for the previous year's final dividend of £5.1m. The reduction in
trade and other receivables to £34.7m from £53.4m at 30 April 2006 reflected
mainly the settlement in the period of a substantial receivable from a large US
customer for minilabs supplied towards the year end. Net debt of £14.5m compared
with £16.7m at 30 April 2006 and £9.3m at 31 October 2005. Consequently, gearing
(defined as net debt as a percentage of total equity) was 14% (30 April 2006:
16%; 31 October 2005: 9%).
Cash generated from operations totalled £26.3m (2005: £19.3m), including a £0.3m
positive change in working capital (2005: £14.3m negative, £7.7m of it an
insurance debtor for the Bookham fire, paid shortly after the period end). Net
cash generated from operating activities amounted to £24.5m (2005: £7.8m),
reflecting additionally taxation paid of £0.4m (2005: £10.7m, an unusually high
figure occasioned by the substantial minilab profit made in the year to 30 April
2005). Capital expenditure marginally reduced to £20.5m (2005: £21.2m), being
incurred principally in the areas of photobooths, for siting mainly in the UK,
France and Japan, and digital media kiosks, for deployment mainly in France.
INTERIM DIVIDEND
An unchanged interim dividend per share of 1.0p has been declared. The dividend
will be paid on 3 May 2007 to shareholders on the register on 2 March 2007, with
an ex-dividend date of 28 February 2007.
BUSINESS REVIEW
Geographical Analysis of Revenue and Operating Profit (by origin)
Revenue Operating Profit *
Half year to 31 Oct 2006 2005 2006 2005
£m £m £m £m
Continental Europe 62.0 56.5 8.8 10.2
UK & Republic of Ireland 35.6 34.9 1.1 4.4
Asia & Australia 14.1 15.7 1.8 2.1
USA 1.3 1.4 (0.3) (0.2)
TOTAL 113.0 108.5 11.4 16.5
* pre-exceptional items
Continental Europe, which includes the great majority of Manufacturing revenue,
contributed 55% (2005: 52%) of Group revenue and 78% (2005: 62%) of Group
operating profit.
Divisional Analysis of Revenue and Operating Profit
Revenue Operating Profit *
Half year to 31 Oct 2006 2005 2006 2005
£m £m £m £m
Vending 80.3 79.5 13.8 16.6
Manufacturing 32.7 29.0 0.2 2.6
Group overheads - - (2.6) (2.7)
113.0 108.5 11.4 16.5
* pre-exceptional items
Vending accounted for 71% (2005: 73%) of Group revenue and 98% (2005: 86%) of
Group operating profit (excluding Group overheads).
Vending
Vending principally comprises the operation of photobooths, kiddie rides,
digital media kiosks and amusement machines. During the period, in accordance
with PMI's policy of diversification, the total number of Vending sites
worldwide increased by 3,300 (9%) to 38,500 (30 April 2006: 35,200), following a
7,200 increase in the previous year.
PMI's Vending business is global, operating in some 20 industrialised countries.
However, 85% of sites are located in three territories - the UK & Ireland,
France, and Japan. By area, Continental Europe accounted for 16,100 (2005:
14,400) sites; the UK & Ireland for 15,500 (2005: 13,100) sites; Asia &
Australia for 6,400 (2005: 5,000) sites; and the USA for 500 (2005: 700) sites.
Photobooths
The number of photobooths sited increased to 21,400 (2005: 20,400), of which
Continental Europe 9,400 (2005: 9,300), the UK & Ireland 5,800 (2005: 5,600),
Asia & Australia 5,700 (2005: 4,900) and the USA 500 (2005: 600).
Photobooths are an efficient and competitively-priced provider of ID photographs
and represent a stable and cash generative business. In the UK, operating
margins reduced but PMI reinforced its strong market position by the winning
back in February 2006 of the Post Office(R) contract. France performed less well
than usual as a result of higher depreciation charges and problems encountered
in its older digital photobooths meeting ICAO (International Civil Aviation
Organization) standards for biometric passports; this will be resolved by their
replacement with new generation dry process Easybooths (which additionally offer
a digital media photographic printing facility). Japan benefited, on the one
hand, from its recent reduction in the workforce and related investment in
modern digital photobooths; on the other hand, it suffered from a weaker Yen and
higher depreciation charges.
Digital Media Kiosks
The number of digital media kiosks sited increased to 4,500 (2005: 2,300). Of
these, Continental Europe accounted for 3,700 (2005: 1,800), with France by far
the principal territory with 2,800 (2005: 1,600), followed by Switzerland with
400 (2005: 100).
Digital media kiosks generate photographic prints from most digital cameras and
cameras 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. In the period, digital media
kiosks continued to progress, albeit new sitings in France are increasingly in
secondary locations.
Other Vending Equipment
Units of other vending equipment sited increased to 12,600 (2005: 10,500), of
which 5,700 (2005: 5,900) were kiddie rides, the balance comprising mainly
amusement machines, copiers and card machines. The vast majority of kiddie rides
are sited in the UK & Ireland, where many benefit from being located alongside
photobooths and serviced by the same personnel, resulting in operational
efficiencies; accordingly, a useful contribution was made to the Vending result
in that area.
Manufacturing
Manufacturing revenue primarily derives from the sale to third parties of
photo-processing equipment manufactured by PMI or by sub-contactors in low cost
territories on its behalf. PMI has a unique and comprehensive range covering all
market segments, from wholesale labs, to minilabs, to end-consumer kiosks. In
outputting terms, processing equipment ranged from 250 to 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 November 2005, Imaging Solutions acquired the
AgfaPhoto wholesale lab business, thereby extending its customer base.
Imaging Solutions generated a similar profit to the first half of last year,
again making a meaningful contribution to the Manufacturing result.
Minilabs
During the period, PMI experienced the transition from the second generation DKS
15xx series, manufactured by the sub-contractor Flextronics in Poland, to the
third generation DKS 16xx and DKS 17xx series, manufactured by the
sub-contractor Solectron in Singapore. Manufacture of the second generation
minilabs ended in June, with sales of the last batch of the DKS 15xx series
being made at below-average margins, primarily to fulfil a large contract. The
first third generation models were manufactured in August (behind schedule),
with numbers increasing only gradually by the period end. As a consequence,
significantly fewer units were manufactured in the period than might have been
sold.
In the year to 30 April 2006, the minilab market was experiencing a period of
transition, as a result of certain major photographic brands exiting the market
and Fuji announcing its intention to do so, other than in association with
Noritsu. As such, it was particularly weak. During the period, a small
improvement in the state of the market was perceived.
Importantly for the future, PMI has established a high reputation for the
quality of its minilabs; the third generation series offers attractive features
in terms of maximum productivity, maximum format and minimum footprint;
production is in the low cost territory of Singapore; and the substantial
competition is limited to the Noritsu/Fuji association.
Digital Media Kiosks
Digital media kiosks 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, at a useful profit.
STRATEGY
On 15 November 2006, the Board announced its intention, following the Strategic
Review which it had conducted, to return a significant amount of surplus capital
to shareholders. The Board also indicated that it was reviewing, with its
advisors, the various options for returning capital.
This process is progressing well.
The Company is in dialogue with banks to secure the necessary facilities to
refinance the business and enable the return of capital.
The Board considers that a pro rata method of return is likely. Whilst the Group
has substantial balance sheet reserves, the shortage of distributable reserves
within the Company limits the options available with regard to the method of
return, which will probably be of a capital, rather than an income, nature. The
present intention is to return a significant amount to shareholders by way of a
Court approved corporate restructuring, the final details of which are expected
to be announced early in the New Year, whereupon a circular will be dispatched
to shareholders.
The Board is also pursuing strategic options for the three individual businesses
- Vending, minilab manufacturing and wholesale lab manufacturing - having regard
to their different nature, as highlighted by the Strategic Review process.
OUTLOOK
In the second half, Vending, which continues to trade solidly, is expected to
make a significantly smaller profit than in the first half, due to normal
seasonality. Manufacturing is expected to make a substantial profit, mainly as a
result of a considerable increase in the number of minilabs manufactured and
sold, a high proportion of them being repeat business with a large US customer,
as announced on 15 November 2006. Overall, a strong second half is anticipated.
Further out, Vending should benefit from the planned substantial replacement of
early digital photobooths by April 2008, from regulatory developments helpful to
its photobooth business (notably the introduction of biometric passports and,
from 2008, tobacco cards and pension cards in Japan; and of biometric passports
and, from autumn 2007, National Health cards in France) and from the increasing
maturity of its digital media kiosk business. Manufacturing should benefit from
the high potential of PMI's third generation minilabs, in particular in the USA
(where negotiations are in progress with several major chains), from the very
strong market position of its wholesale lab business, and from the recent
successful launch of the Photobook Pro (a machine producing photo albums).
Serge Crasnianski
Chief Executive Officer 18 December 2006
GROUP INCOME STATEMENT (unaudited)
for the six months ended 31 October 2006
6 months to 6 months to Year to
31 October 31 October 30 April
2006 2005 2006
Notes £'000 £'000 £'000
Revenue 2 112,957 108,470 230,031
Cost of sales (90,511) (84,640) (182,037)
Gross profit 22,446 23,830 47,994
Other operating income 480 567 1,268
Profit on insurance recovery 3 - 3,331 3,331
Administrative expenses (11,594) (11,219) (24,833)
Share of post-tax profits from 59 14 151
associates
Operating profit before 2 11,391 16,523 27,911
exceptional items
Restructuring costs 3 1,019 - (3,158)
Operating profit after 12,410 16,523 24,753
exceptional items
Non-operating profit - insurance 3 - 5,441 5,441
recovery
Profit before finance items and 12,410 21,964 30,194
tax
Finance revenue 4 1,099 298 592
Finance cost 4 (1,401) (879) (2,325)
Profit before tax 12,108 21,383 28,461
Taxation expense - UK (1,671) (2,033) (2,286)
Taxation expense - overseas (2,749) (4,518) (5,198)
Total tax charge 5 (4,420) (6,551) (7,484)
Profit for the period - from
continuing operations 7,688 14,832 20,977
Attributable to:
- Equity shareholders of the 10 7,763 14,531 20,158
Parent
- Minority interests 10 (75) 301 819
7,688 14,832 20,977
Dividends
Proposed dividend (£'000) 6 3,646 3,644 8,751
Proposed dividend per share 6 1.00p 1.00p 2.40p
Paid in the period (£'000) 6 3,646 - 4,373
Paid in the period per share 6 1.00p - 1.20p
Earnings per share (total and continuing operations)
Basic earnings per share 7 2.13p 3.99p 5.53p
Adjusted basic earnings per 7 1.94p 2.66p 4.77p
share
Diluted earnings per share 7 2.11p 3.93p 5.47p
Adjusted diluted earnings per 7 1.93p 2.63p 4.72p
share
GROUP BALANCE SHEET (unaudited)
as at 31 October 2006
31 October 31 October 30 April
2006 2005 2006
Notes £'000 £'000 £'000
Assets
Non-current assets
Goodwill 8 9,673 9,583 10,677
Other intangible assets 8 24,015 17,953 20,485
Property, plant and equipment 8 80,784 74,612 77,334
Investment property 8 3,373 3,903 3,745
Investments in associates 343 192 335
Financial assets - held to - 346 -
maturity
- available for sale 109 58 113
Deferred tax asset 351 455 277
Trade and other receivables 1,723 1,382 1,398
120,371 108,484 114,364
Current assets
Inventories 35,718 26,768 41,113
Trade and other receivables 34,650 42,958 53,374
Financial assets - held to 344 6 356
maturity
- derivative financial assets - 15 -
- available for sale 7 7 7
Current tax 650 907 3,034
Cash and cash equivalents 9 31,059 26,615 25,838
102,428 97,276 123,722
Total assets 222,799 205,760 238,086
Equity
Total shareholders' equity 10 98,706 97,792 104,577
Minority interests 10 2,570 1,482 2,734
Total equity 101,276 99,274 107,311
Liabilities
Non-current liabilities
Financial liabilities 11 22,017 14,806 17,932
Post-employment benefit 2,752 3,368 2,994
obligations
Provisions 25 67 33
Deferred tax liability 11,163 9,425 13,379
Derivative financial 650 - 1,300
liabilities
Trade and other payables 1,701 2,665 2,694
38,308 30,331 38,332
Current liabilities
Financial liabilities 11 24,538 22,146 25,597
Provisions 2,590 1,102 5,985
Current tax 7,257 5,499 3,980
Trade and other payables 48,830 47,408 56,881
83,215 76,155 92,443
Total equity and liabilities 222,799 205,760 238,086
GROUP CASH FLOW STATEMENT (unaudited)
for the six months ended 31 October 2006
6 months to 6 months to Year to
31 October 31 October 30 April
2006 2005 2006
Notes £'000 £'000 £'000
Cash flows from operating
activities
Operating profit 12,410 16,523 24,753
Non-operating exceptional item - 5,441 5,441
Share of post-tax profits from (59) (14) (151)
associates
Amortisation, impairment and
depreciation 13,917 11,799 25,418
Profit on sale of property, plant and
equipment (22) (241) (189)
Exchange differences (434) (220) 131
Other items 158 312 352
Changes in working capital 345 (14,266) (19,103)
Cash generated from operations 26,315 19,334 36,652
Interest paid (1,401) (856) (1,935)
Taxation paid (429) (10,707) (11,810)
Net cash generated from operating
activities 24,485 7,771 22,907
Cash flows from investing
activities
Acquisition of subsidiaries, net of
cash acquired - (613) (1,354)
Purchase of intangible assets (3,295) (3,613) (9,525)
Purchase of property, plant and (17,251) (17,591) (28,297)
equipment
Proceeds from sale of property, plant
and equipment 1,607 640 989
Purchase of associated
undertakings - - (35)
Purchase of available for sale
investments - - (56)
Proceeds from sale of available for
sale investments - - 3
Interest received 449 247 551
Dividends received from
associate 37 47 47
Net cash utilised in investing
activities (18,453) (20,883) (37,677)
Cash flows from financing
activities
Issue of Ordinary shares to equity
shareholders 1 115 182
Purchase of treasury shares - - (878)
Repayment of capital element of
finance leases (86) - (48)
Proceeds from borrowings 23,856 2,731 15,369
Repayment of borrowings (17,473) (5,604) (12,639)
(Increase)/decrease in monetary
funds (5) 8,806 8,978
Dividends paid to equity
shareholders (3,646) - (4,373)
Dividends paid to minority
interests - - (7)
Net cash generated from financing
activities 2,647 6,048 6,584
Net increase/(decrease) in cash and
cash equivalents 8,679 (7,064) (8,186)
Cash and cash equivalents at
beginning of the period 14,143 22,022 22,022
Exchange (loss)/gain on cash and
cash equivalents (679) (99) 307
Cash and cash equivalents at end
of the period 9 22,143 14,859 14,143
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE (unaudited)
for the six months ended 31 October 2006
6 months to 6 months Year to
31 October to 30 April
2006 31 October 2006
£'000 2005 £'000
£'000
Income and expense recognised
directly in equity
Actuarial gain on defined benefit
pension scheme - - 362
Exchange differences (5,128) (684) 1,026
(5,128) (684) 1,388
Transfers to the income statement
Cash flow hedge - (41) (56)
Taxation on items taken directly to or
transferred from equity
Tax on actuarial loss on defined
benefit scheme - - (109)
Tax on cash flow hedge - 15 20
Net (expense)/income recognised
directly in equity (5,128) (710) 1,243
Profit for the period 7,688 14,832 20,977
Total recognised income and expense
for the period 2,560 14,122 22,220
Attributable to:
- Equity shareholders of the Parent 2,724 13,828 21,390
- Minority interests (164) 294 830
2,560 14,122 22,220
NOTES TO THE INTERIM REPORT
1 Basis of preparation
The Group's interim report as at 31 October 2006 was approved and authorised for
issue by the Board of directors on 15 December 2006.
The interim report has been prepared in accordance with International Financial
Reporting Standards ('IFRSs') as adopted for use in the European Union ('EU').
The interim report has been prepared in accordance with accounting policies that
are consistent with those followed in the preparation of the Group's annual
financial statements for the year ended 30 April 2006.
The interim report is unaudited but has been reviewed by the auditors; it does
not comprise statutory financial statements within the meaning of Section 240 of
the Companies Act 1985 (as amended). The comparative figures for the year ended
30 April 2006 have been extracted from the 2006 annual financial statements,
which have been filed with the Registrar of Companies. The auditor's report on
those financial statements was unqualified and did not contain an emphasis of
matter paragraph or a statement under Section 237 (2) or (3) of the Companies
Act 1985.
Accounting policies
Certain figures reflected in the October 2005 interim report have been
re-classified to comply with the accounting treatment and presentation adopted
in the April 2006 financial statements.
The Group will be adopting in its April 2007 financial statements those new
standards which are effective for accounting periods beginning on or after 1
January 2006 and which have been endorsed by the EU. The Group does not expect
these to have a material effect on the Group's results and equity.
2 Segmental analysis
The Group's primary reporting segments are business divisions comprising
Manufacturing and Vending, 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 Group subsidiaries or,
increasingly, by sub-contractors located in low cost territories. Vending
comprises the operation of photobooths and other vending equipment including
digital media kiosks, children's rides and amusement machines.
The segment results are as follows:
Group
Manufacturing Vending overheads Total
£'000 £'000 £'000 £'000
Six months to 31 October 2006
Total revenue 47,190 80,269 - 127,459
Inter-segment sales (14,502) - - (14,502)
Revenue 32,688 80,269 - 112,957
Operating profit before
associates and
exceptional items 212 13,778 (2,658) 11,332
Share of post-tax profits from
associates 35 24 - 59
Operating profit before 247 13,802 (2,658) 11,391
exceptional items
Exceptional items 1,019 - - 1,019
Operating profit after
exceptional items 1,266 13,802 (2,658) 12,410
Non-operating exceptional items - - - -
Profit before finance items and
taxation 1,266 13,802 (2,658) 12,410
Finance costs - net (302)
Profit before tax 12,108
Taxation expense (4,420)
Profit for the period 7,688
2 Segmental analysis (continued)
Group
Manufacturing Vending overheads Total
£'000 £'000 £'000 £'000
Six months to 31 October 2005
Total revenue 40,427 79,534 - 119,961
Inter-segment sales (11,491) - - (11,491)
Revenue 28,936 79,534 - 108,470
Operating profit before
associates and exceptional items 2,620 16,551 (2,662) 16,509
Share of post-tax profits from
associates - 14 - 14
Operating profit before 2,620 16,565 (2,662) 16,523
exceptional items
Exceptional items - - - -
Operating profit after 2,620 16,565 (2,662) 16,523
exceptional items
Non-operating profit - insurance
recovery - - 5,441 5,441
Profit before finance items and
taxation 2,620 16,565 2,779 21,964
Finance costs - net (581)
Profit before tax 21,383
Taxation expense (6,551)
Profit for the period 14,832
Group
Manufacturing Vending overheads Total
£'000 £'000 £'000 £'000
Year to 30 April 2006
Total revenue 102,428 146,455 - 248,883
Inter-segment sales (18,852) - - (18,852)
Revenue 83,576 146,455 - 230,031
Operating profit before
associates and exceptional
items 13,681 18,853 (4,774) 27,760
Share of post-tax profits from
associates 115 36 - 151
Operating profit before 13,796 18,889 (4,774) 27,911
exceptional items
Exceptional items (2,879) (279) - (3,158)
Operating profit after
exceptional items 10,917 18,610 (4,774) 24,753
Non-operating profit -
insurance recovery - - 5,441 5,441
Profit before finance items and
taxation 10,917 18,610 667 30,194
Finance costs - net (1,733)
Profit before tax 28,461
Taxation expense (7,484)
Profit for the period 20,977
3 Exceptional items
Profits from insurance recoveries at 30 April 2006 and 31 October 2005.
Following the destruction by fire of the Bookham warehouse and workshop in
December 2004, agreement was reached on the resulting insurance claims in
October 2005. 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, was included in operating profit.
The Group's insurers had paid £10,000,000 on account of the claims by April
2005. The final settlement of £7,700,000 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, which was included in operating profit, a tax charge
of £999,000 arose, comprising deferred tax of £835,000 and current tax of
£164,000.
Restructuring costs
The restructuring costs for the year to 30 April 2006 related to provisions made
for restructuring in Continental Europe. Due to the introduction of new digital
photobooths requiring less maintenance, and the use of sub-contractors to
manufacture equipment, the workforce was to be reduced. The provision at 30
April 2006 gave rise to a tax credit of £1,097,000.
Implementation of the reduction in the workforce planned at April 2006 has
substantially been completed, resulting in a release of provision of £1,019,000
in the period to 31 October 2006, giving rise to a tax charge of £340,000.
4 Finance revenue and costs
6 months to 6 months to Year to
31 October 31 October 30 April
2006 2005 2006
£'000 £'000 £'000
Finance revenue
Bank interest 426 51 111
Interest from available for sale and
other investments 6 226 432
Other finance revenue 17 21 49
Revaluation of put option over
minority interest 650 - -
1,099 298 592
Finance costs
Bank loan and overdraft interest 1,351 833 1,843
Other loan interest 24 25 47
Finance lease interest 17 12 26
Preference share dividend 9 9 19
Other finance charges - - 390
1,401 879 2,325
5 Taxation
Income tax expense is recognised based on management's best estimate of the tax
rate expected for the full financial year. The effective tax rate was as
follows: October 2006 36.5%, October 2005 30.6%, April 2006 26.3%. The change in
rates is mainly due to the minimal tax charge on the non-operating exceptional
credit relating to the insurance claim, in the six months to 31 October 2005 and
the full year to 30 April 2006.
6 Dividends
6 months to 6 months to Year to
31 October 31 October 30 April
2006 2005 2006
£'000 £'000 £'000
Dividends declared and paid during 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 - -
3,646 - 4,373
Dividends declared but not approved -
not recognised as a liability
Interim dividend for the year ended 30
April 2006 of 1.0p per share - 3,644 3,646
Interim dividend for the year ending
30 April 2007 of 1.0p per share 3,646 - -
3,646 3,644 3,646
Dividends approved - recognised as a
liability
Final dividend for the year ended 30
April 2005 of 1.0p per share - 4,371 -
Final dividend for the year ended 30
April 2006 of 1.4p per share 5,105 - 5,105
5,105 4,371 5,105
The final dividends for the years ended 30 April 2006 and 30 April 2005
were approved by shareholders at the Annual General Meetings held in
September and as such are liabilities at 31 October, each year. These
amounts are included in current liabilities - trade and other payables in
the balance sheet.
The directors have declared an interim dividend of 1.0p per share for the year
ended 30 April 2007 to be paid on 3 May 2007 to shareholders on the register on
2 March 2007.
The proposed final dividend for the year ended 30 April 2006 was approved at the
Annual General Meeting held on 20 September 2006 and was paid on 2 November
2006.
The interim dividend for the year to 30 April 2006 was paid on 3 May 2006 to
shareholders on the register on 3 March 2006. Between 1 November 2005 and 3
March 2006, the Company issued further shares and thus the amount paid
(£3,646,000) was higher than the amount proposed at 31 October 2005.
The final dividend for the year ended 30 April 2005 was approved at the Annual
General Meeting held on 28 September 2005 and was paid on 2 November 2005.
Between 1 May and 7 October 2005, the Company issued further shares and thus the
amount paid (£4,373,000) was higher than the amount proposed at 30 April 2005.
7 Earnings per share
Basic earnings per share are calculated by dividing net profit attributable to
Ordinary shareholders of the Parent by the weighted average number of Ordinary
shares in issue during the period excluding those held as treasury shares, which
are excluded from the calculation of earnings per share.
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to Ordinary shareholders of the Parent by the weighted average
number of Ordinary shares outstanding during the period plus the weighted
average number of Ordinary shares that would be issued on conversion of all the
dilutive potential Ordinary shares into Ordinary shares. The Group has only one
category of dilutive potential Ordinary shares: the share options granted to
senior staff, including directors, where the exercise price is less than the
average market price of the Parent's Ordinary shares during the period.
The earnings and weighted average number of shares used in the calculation are
set out in the table below:
6 months 6 months Year to
to to 30 April
31 October 31 October 2006
2006 2005
Basic earnings per share 2.13p 3.99p 5.53p
Diluted earnings per share 2.11p 3.93p 5.47p
Earnings available to ordinary 7,763 14,531 20,158
shareholders (£'000)
Weighted average number of shares in
issue in the period
- basic ('000) 364,630 364,326 364,711
- including dilutive share options 367,982 369,724 368,229
('000)
The Group has decided to show on the face of the income statement those material
one-off items of income and expense which, because of their nature and expected
infrequency of the event giving rise to them, merit separate disclosure to allow
shareholders to understand better the elements of financial performance during
the year and to facilitate comparison with prior periods. As a result, the Group
also shows basic and diluted earnings per share on this adjusted basis.
Adjusted earnings per share calculations
6 months to 6 months to Year to
31 October 31 October 30 April
2006 2005 2006
Adjusted basic earnings per share 1.94p 2.66p 4.77p
Adjusted diluted earnings per share 1.93p 2.63p 4.72p
Unadjusted earnings (£'000) 7,763 14,531 20,158
Profit on insurance recovery (£'000) - (5,441) (5,441)
Tax on insurance recovery (£'000) - 616 616
Restructuring costs (£'000) (1,019) - 3,158
Tax on restructuring costs (£'000) 340 - (1,097)
Adjusted earnings (£'000) 7,084 9,706 17,394
8 Non-current assets - intangibles, property, plant and equipment and
investment property
Other Property,
intangible plant and Investment
Goodwill assets equipment property
£'000 £'000 £'000 £'000
Net book value at 1 May 2006 10,677 20,485 77,334 3,745
Exchange adjustment (54) (682) (2,462) (125)
Additions
- photobooths and vending machines - - 16,093 -
- other external additions - 3,295 1,489 -
- transfers - 4,510 - -
Depreciation provided in the period - (3,593) (10,077) (247)
Adjustments to prior year (950) - - -
acquisitions
Disposals at net book value - - (1,593) -
Net book value at 31 October 2006 9,673 24,015 80,784 3,373
The adjustment to goodwill on prior year acquisitions relates to a decrease in
deferred consideration payable.
Photobooths and vending additions include finance leased assets of £324,000.
9 Cash and cash equivalents
6 months to 6 months to Year to
31 October 31 October 30 April
2006 2005 2006
£'000 £'000 £'000
Cash at bank and in hand 27,475 25,652 23,815
Deposit accounts 3,584 963 2,023
Cash and cash equivalents per the 31,059 26,615 25,838
balance sheet
Bank overdrafts (8,916) (11,756) (11,695)
Cash and cash equivalents per the
cash flow statement 22,143 14,859 14,143
10 Equity
Share Share Treasury Other Retained
capital premium shares reserves earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 May 2006 2,029 4,862 (878) 832 97,732 104,577
Exchange differences - - - (5,039) - (5,039)
Shares issued in the
period - 1 - - - 1
Profit for the period - - - - 7,763 7,763
Share options - - - - 155 155
Transfers - - - 650 (650) -
Dividends - - - - (8,751) (8,751)
Balance at 31 October 2,029 4,863 (878) (3,557) 96,249 98,706
2006
Share Share Treasury Other Retained
capital premium shares reserves earnings Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 May 2005 2,022 3,487 - 2,536 80,028 88,073
Exchange differences - - - (677) - (677)
Shares issued in the 1 114 - - - 115
period
Profit for the period - - - - 14,531 14,531
Share options - - - - 163 163
Transfers - - - (1,486) 1,446 (40)
Dividends - - - - (4,373) (4,373)
Balance at 31 October 2,023 3,601 - 373 91,795 97,792
2005
Minority interests
6 months to 6 months to
31 October 31 October
2006 2005
£'000 £'000
At 1 May 2,734 1,188
Exchange differences (89) (7)
Profit for the period (75) 301
At 31 October 2,570 1,482
11 Financial liabilities
31 October 31 October 30 April
2006 2005 2006
£'000 £'000 £'000
Non-current liabilities
Non-current instalments due on bank
loans 21,075 13,877 17,147
Finance lease creditors 351 292 165
Preference shares 591 637 620
22,017 14,806 17,932
Current liabilities
Bank overdrafts 8,916 11,756 11,695
Current instalments due on bank loans 15,419 10,320 13,738
Finance lease creditors 203 70 164
24,538 22,146 25,597
12 Copies of the interim report
Copies of the interim report will be mailed to shareholders by 10 January 2007
and from that date will be available from the Company's Registered Office at
Church Road, Bookham, Surrey KT23 3EU (Tel: 01372-453 399).
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