Preliminary Announcement

RNS Number : 9659U

Photo-Me International PLC

02 July 2009

 



2 July 2009

PHOTO-ME INTERNATIONAL PLC - PRELIMINARY ANNOUNCEMENT

A Year of Considerable Progress, Excellent Cash Generation

Photo-Me (PHTM.L), the instant service equipment group, announces its results for the year to 30 April 2009. 

KEY POINTS - FINANCIAL

• Net cash generated from operating activities up £14.9m (65%) to £38.1m (2008: £23.2m)
• EBITDA† up £5.6m (17%) to £38.6m (2008: £33.0m)
• Net debt almost halved to £23.5m (2008: £45.6m)
• Revenue† up £17.0m (9%) to £210.5m (2008: £193.5m)
• Operating profit† improved by £7.6m to £5.0m (2008: loss of £2.6m)
• Pre-tax profit† improved by £7.9m to £1.6m (2008: loss of £6.3m)
• Reported pre-tax loss on continuing operations, post-exceptionals, £5.1m (2008: £20.9m)
• Total loss from continuing and discontinued operations £17.7m (2008: £19.8m) 

† on continuing operations, pre-exceptionals

KEY POINTS - COMMERCIAL

Operations business

• Global economic impact felt first in the UK, later in Continental Europe
• Operating profit† increased to £12.1m (2008: £9.1m) or, at 2008 exchange rates, £10.3m
• Revenue increased by 12% to £166.1m, benefiting from the weakening of Sterling; at 2008 exchange rates, it reduced by 3% to £144.4m
• Digital media kiosks, a key element of the Group's diversification strategy, performed well, especially as credit card payment facilities were increasingly installed

Sales & Servicing business 

• Sales of retail photographic equipment severely impacted by the credit crunch
• Operating loss† reduced to £5.2m (2008: £7.1m) or, at 2008 exchange rates, £4.4m
• Revenue was virtually unchanged, at £44.4m, also benefiting from the weakening of Sterling; at 2008 exchange rates, it reduced by 12% to £39.1m 
• The award-winning Photobook Maker®, the first self-service kiosk able to produce a photobook in minutes, is currently being introduced to the world's largest retail chains, with excellent results 

Discontinued activities

• Imaging Solutions, the wholesale lab business, is treated as discontinued, reporting a £6.9m trading loss and further £8.1m non-cash write down of assets to their expected realisable amounts. 

KEY POINTS - BOARD

• Thierry Barel (CEO) departure date agreed as 3 July 2009
• Search for new CEO well advanced
• Serge Crasnianski, a non-executive Director since 6 May 2009, becomes Deputy Chairman and is to act as interim CEO
• John Lewis becomes Senior Independent Non-executive Director
• Dan David returns to the Board in a non-executive capacity

Hugo Swire, Chairman, stated 'The year to 30 April 2009 saw some considerable achievements, in line with the strategy presented in July 2008, despite the worst economic conditions for many years. In particular, EBITDA and operating cash flow both improved strongly, and net debt almost halved. On continuing operations excluding exceptionals, last year's loss was transformed into profit.  

In the absence of a further material deterioration in market conditions, the Board's objective is a further improvement in the outcome for the year, on continuing operations before exceptionals. It also confidently predicts a further material reduction in indebtedness.'

Legal Disclaimer:

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

Presentation:

A presentation to investors and brokers' analysts will be given from 09.00 to 10.00 today at the offices of Bankside Consultants, 1 Frederick's Place, London EC2R 8AE.  

Enquiries:

Photo-Me International	01372-453 399
Hugo Swire (Chairman)	020-7367 8889 from 10.15 to 12.30 on 2 July 2009
Thierry Barel (CEO)
Robert Lowes (Company Secretary)
Bankside Consultants
Charles Ponsonby	020-7367 8851 / 07789-202 312

CHAIRMAN'S STATEMENT

The year to 30 April 2009 saw some considerable achievements, in line with the strategy presented in July 2008, despite the worst economic conditions for many years. EBITDA and operating cash flow both improved strongly; net debt almost halved. On continuing operations excluding exceptionals, last year's loss was transformed into profit, as both Divisions, Operations (previously termed Vending) and Sales & Servicing (previously termed Manufacturing), improved their result. In addition, the award-winning self-service Photobook Maker® - a world first - was introduced to some of the world's largest retailers, with excellent results. Furthermore, a decision was taken to seek a buyer for Imaging Solutions, the Swiss-based wholesale lab business, on account of its business being non-core and having little potential for synergies with the rest of the Group.  

FINANCIAL REVIEW

The following table summarises the results, excluding exceptional items and discontinued activities, analysed between the two Divisions, Operations and Sales & Servicing:

	Revenue			Operating profit
Year to 30 April	2009	2009†	2008	2009	2009†	2008
	£m	£m	£m	£m	£m	£m
Operations	166.1	144.4	148.8	12.1	10.3	9.1
Sales & Servicing	44.4	39.1	44.7	(5.2)	(4.4)	(7.1)
Group overheads:   Underlying	-	-	-	(4.0)	(4.0)	(4.6)
Foreign exchange gain on inter-company balances	-	-	-	2.1	2.1	-
	210.5	183.5	193.5	5.0	4.0	(2.6)
† trading results of overseas subsidiaries converted at 2008 exchange rates

Foreign exchange rate movements, notably the appreciation against Sterling of 14% in the Euro and 27% in the Japanese Yen, had a material effect on the year's revenue and operating profit, both divisionally and centrally. Although revenue on continuing activities increased by 9% to £210.5m, when the results of overseas subsidiaries are converted at 2008 exchange rates, revenue reduced by 5%. In these circumstances, the substantial improvement in the operating result at constant exchange rates is all the more creditable. Group overheads also benefited from net foreign exchange gains arising on intercompany balances, primarily with the Company's Japanese subsidiary. To facilitate comparison of Group overheads, this benefit has been separately identified in the above table. The impact in 2008 was not significant.

Pre-exceptional EBITDA from continuing operations was up 17% to £38.6m (2008: £33.0m), representing 18.3% (2008: 17.1%) of revenue - a high percentage. Last year's operating loss of £2.6m (after accelerated depreciation of £5.0m following a reassessment of the expected economic lives of some of the Group's vending equipment) was transformed into an operating profit of £5.0m. After reduced net finance costs of £3.4m (2008: £3.7m), the pre-tax profit was £1.6m - a £7.9m improvement on 2008's loss of £6.3m. After a tax charge of £0.7m (2008: £0.2m), the post-tax profit for the year was £0.8m. (2008: loss of £6.5m). The improved result reflected substantial savings achieved through streamlining the organisation and scrutinising external costs. 

Exceptional items of £6.7m (2008: £14.6m) represent £5.5m impairment charges and £1.2m restructuring costs. £5.0m of the impairment charges are in respect of capitalised R&D expenses, primarily necessitated by a continuing decline in the market for minilabs, whilst the other £0.5m relates to old silver halide digital media kiosks. £0.7m of the restructuring was for redundancies and £0.5m for the write down of stocks of spare parts relating to impaired operating equipment. 

After exceptional items, the reported result for continuing operations shows substantial improvements, with an operating loss of £1.7m (2008: £17.8m), a pre-tax loss of £5.1m (2008: £20.9m) and a loss for the year of £3.6m (2008: £18.4m). These results include sizeable depreciation and impairment charges, totalling £39.1m (2008: £43.3m), which converts the losses into substantial positive cash flow. 

A loss for the year from discontinued operations of £14.2m (2008: £1.4m) was reported. A loss of £15.0m relates to Imaging Solutions, whose proposed disposal was announced on 4 June 2009; it comprised a £6.9m trading loss and a £8.1m non-cash write-down of assets to their expected realisable amounts. The balancing figure was the £0.8m profit on sale of the US vending business, which was sold in July 2008, subsequent to the release of the 2008 Preliminary Announcement.  

The total reported loss for the year from continuing and discontinued operations was therefore £17.7m (2008: £19.8m).

Before exceptional items, fully-diluted earnings per share from continuing operations were 0.19p (2008: a loss per share of 1.85p). The reported fully diluted loss per share from continuing operations was 1.03p (2008: 5.14p).

Shareholders' equity at 30 April 2009 totalled £72.9m (2008: £76.9m), equivalent to 20.3p (2008: 21.3p) per share. 

A significant reduction in net debt was both the Board's principal financial objective for the year and predicted in the 2008 Preliminary Announcement. It is therefore satisfying to report that, in the year, net debt almost halved, to £23.5m (2008: £45.6m), reducing gearing to 32% from 57%, based on total equity. This £22.1m reduction in net debt, which reflects the strongly cash generative nature of the Group's Operations business, was achieved through reduced but still significant capital expenditure of £15.9m (2008: £29.4m), primarily on digital media kiosks, and reflected a positive working capital movement of £9.2m (2008: £6.4m). The Group had in excess of £21m of unused banking facilities at 30 April 2009. With broadly similar capital expenditure budgeted, a further substantial reduction in net debt is predicted for the current year.  

BUSINESS REVIEW

Geographical analysis of revenue and profit (by origin)

	Revenue			Operating profit
Year to 30 April	2009	2009†	2008	2009	2009†	2008
	£m	£m	£m	£m	£m	£m
Continental Europe	115.8	99.4	105.4	0.4	0.4	(3.4)
UK & Republic of Ireland:   Underlying   Foreign exchange gain	57.2	56.7	60.4	(1.3) 2.1	(1.3) 2.1	(1.6) -
Asia	37.5	27.4	27.7	3.8	2.8	2.4
	210.5	183.5	193.5	5.0	4.0	(2.6)
† trading results of overseas subsidiaries converted at 2008 exchange rates  Continuing operations only and before exceptional items

Continental Europe, which includes the great majority of Sales & Servicing revenue, contributed 55% (2008: 54%) of reported Group revenue - 54% on a constant currency basis - but made only a modest profit on account of the large Sales & Servicing loss. Substantially all Group overheads are charged against the UK & Republic of Ireland.

Operations

	Revenue			Operating profit
	2009	2009†	2008	2009	2009†	2008
	£m	£m	£m	£m	£m	£m
Year to 30 April	166.1	144.4	148.8	12.1	10.3	9.1
† trading results of overseas subsidiaries converted at 2008 exchange rates Continuing operations only and before exceptional items

Operations contributed 79% (2008: 77%) of revenue and all the Group's operating profit. 

Operations comprises the operation of unattended instant service equipment, in particular photobooths, digital media kiosks, amusement machines and business service equipment. At the year end, the total number of Operations sites worldwide was 42,600 (2008: 42,850). This extensive network of vending sites, with related site-owner contracts and relationships, supplemented by an established field service and cash collection infrastructure, represents one of Photo-Me's great strengths. One of the Group's principal strategic objectives is to reduce the reliance of Operations on ID photography.

Photo-Me's Operations business is global, trading in 15 industrialised countries. However, 86% of sites are located in three territories - the UK & Ireland, France and Japan. By area, Continental Europe accounted for 17,900 (2008: 17,600) sites; the UK and Ireland for 16,950 (2008: 17,450); and Asia for 7,750 (2008: 7,800). The reduced number of sites in the UK & Ireland reflected the collapse in December 2008 of Woolworths, which had accounted for approximately 2,700 vending units, most of which have subsequently been re-sited in other retail locations.

As was the case at the half year, the onset of the global economic crisis was felt primarily in the UK, where takings fell by 10%. To the credit of divisional personnel, who successfully found new locations for the displaced equipment, only a small proportion of this decline was contributed by the demise of Woolworths, which in 2008 had contributed 8% of divisional takings. As at the half year, the effects of the revenue decrease in the UK & Ireland was mitigated by cost reductions. In local currency, revenue increased by 1% in France, where the impact of the global economic crisis was felt later in the year, but declined by 2% in Japan.  Belgium, Germany and Switzerland all did well, with revenue increases in local currency of 3%, 3% and 2%, respectively. 

Photobooths

Photobooths are an efficient and competitively-priced provider of ID photographs and represent a mature cash generative business. A strategic challenge for Photo-Me is to increase its non-ID 'fun' photobooth business. 

At the year end, the total number of photobooths sited was down 2% at 21,050 (2008: 21,400), of which Continental Europe accounted for 9,350 (2008: 9,500), the UK & Ireland 5,400 (2008: 5,600) and Asia 6,300 (2008: 6,300). Photobooths therefore comprised 49% (2008: 50%) of all Operations equipment units. 

Photobooth takings increased by 9% (+16% in Continental Europe, -11% in the UK & Ireland, +37% in Asia). However, at constant exchange rates, there would have been a decrease of 5% (-1% Continental Europe, -12% in the UK & Ireland, 0% in Asia). In the context of the longstanding slow decline in takings per photobooth, this performance was encouraging in Continental Europe and Asia and understandable in the UK & Ireland. Takings from photobooths accounted for 81% (2008: 82%) of Operations revenue. 

With effect from 29 June 2009, new EU passports will contain biometric data. How this is to be achieved will vary by country. In France, the decision as to whether photography is to be effected on-site is being left to the individual town halls. To date, following intensive lobbying by the French photography industry, almost 750 town halls, representing around 20% of the market, have rejected on-site photography and many are yet to decide. Further, the introduction of a law is proposed, assigning delivery of passport photography to the private sector. This will be debated in September, but there is strong opposition from certain quarters within the French government. Elsewhere, the UK and German governments intend to allow the private sector to provide the biometric data enrolment service, whereas in Switzerland, the government is proposing on-site photography, subject to agreement by individual Cantons. The impact of these varying approaches is difficult to predict with any certainty, but Photo-Me will continue to monitor the situation and lobby against the effective nationalisation of ID photography, while developing new products and services to meet the new market opportunity.

Digital Media Kiosks

Digital media kiosks allow consumers to print photos from a range of digital media on a self-service basis.   

At the year end, the total number of digital media kiosks sited was up 8% at 4,950 (2008: 4,600), consistent with the Group's diversification strategy. France was by far the principal territory with 2,900 (2008: 2,900), followed by the UK & Ireland with 900 (2008: 800), including 100 sited in the year at Tesco, and Switzerland with 600 (2008: 400), including 180 sited in the year at Migros, Switzerland's largest supermarket chain.  

In the year, takings increased by 25% (8% at constant exchange rates). The effective increase was spread between the three principal territories, reflecting increased units and greater customer awareness and acceptance, especially as credit card payment facilities increasingly became available.

Amusement and Business Service Equipment

At the year end, the total number of units of amusement and business service equipment sited was down 2% at 16,600 (2008: 16,850), of which 13,850 (2008: 14,200) were amusement machines, notably kiddie rides and small toy vending equipment. The balance principally comprised photocopiers and express business card machines.  The decline in units reflected the demise of Woolworths, in whose stores had been sited 1,950 machines. In the year, takings increased by 3% (decrease of 4% at constant exchange rates).

Sales & Servicing 

	Revenue			Operating profit
	2009	2009†	2008	2009	2009†	2008
	£m	£m	£m	£m	£m	£m
Year to 30 April	44.4	39.1	44.7	(5.2)	(4.4)	(7.1)
† trading results of overseas subsidiaries converted at 2008 exchange rates Continuing operations only and before exceptional items

Substantially all of Sales & Servicing revenue from continuing operations derives, directly or indirectly, from the sale to third parties of retail photographic equipment.  

Retail Photographic Equipment

Retail photographic equipment principally comprises digital media kiosks (with an output of 250-500 prints per hour), minilabs (with an output of 800-2,000 prints per hour), and photo album machines as well as biometric enrolment stations and operations equipment. Consumables, servicing and spare parts together contribute substantially to the results of this business.

In the year, Photo-Me suffered even more difficult market circumstances than in the previous year.  This resulted from the global recession and credit crunch (affecting both users and distributors), the declining market for minilabs and the move away from silver halide technology, Photo-Me's historic specialism. With the principal customer of recent years placing a reduced, if still very large, order, as its photo-processing re-equipment programme neared completion, and other customers decreased their business by an even higher proportion, minilab revenue reduced substantially. Whilst sales of the digital media kiosk progressed well, the photo album machine for the attended retail market, the Photobook Pro, failed to maintain its level of sales. Revenue from sales of consumables, spare parts and servicing also reduced. As a result, revenue decreased by 12% at constant exchange rates and another substantial, if reduced, loss was made.

In these challenging circumstances, considerable efficiencies and cost reductions were achieved and further restructuring is proposed for the current year. 

Discontinued Activities

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 finishing laboratories (up to 20,000 prints per hour). 

In the year under review, market conditions deteriorated sharply, mainly because the global credit crisis made the obtaining by customers of finance for high value equipment exceedingly difficult to obtain but also because of increased competition from other technologies. As a result, revenue (at constant exchange rates) fell by 33% and a substantial loss was made.

On 4 June 2009, the Board announced that discussions had been initiated with interested parties with a view to a possible sale of Imaging Solutions. This decision reflected the Board's conclusion that Imaging Solutions activities were neither a core element of the Group's strategy nor capable of further integration within the Group. Further, the Board was keen to avoid exposure to further substantial losses and a requirement to fund a capital expenditure programme to develop photo processing equipment which uses different printing technology from silver halide, Imaging Solutions' current technology. As announced yesterday, the Board reached conditional agreement on 1 July 2009 for the sale of Imaging Solutions, which is treated as a discontinued activity in these financial statements. 

STRATEGIC REVIEW IMPLEMENTATION

In the 2008 Preliminary Announcement, the Board announced the Group's strategy: to become a leading operator, supplier and servicer of instant service equipment, with a product offering that builds on, but diversifies away from, Photo-Me's core ID photobooth business.  

In this connection, in the year, good progress was made in new product development and the generation of operational and structural efficiencies.

During the year, Photo-Me launched the Photobook Maker®, the first self-service kiosk able to produce a photobook in minutes. The Photobook Maker® will be aimed globally at retail outlets, especially the major retail chains, and tourist locations. The machine, which in April 2009 received the prestigious 'Best Photo Kiosk 2009' accolade from TIPA (The Technical Image Press Association), offers a service currently not available elsewhere, is compact (occupying less than three square feet) and easy to maintain, and has the potential to generate high margins for the operator. It is currently being introduced to some of the world's largest retail chains, with excellent results.

Photo-Me has also been developing biometric enrolment stations. Shortly after the year end, in May 2009, Photo-Me obtained a contract from Siemens AG for 440 biometric enrolment stations for the production of the applicant's electronic portrait photograph and two finger prints, for the newly approved Swiss biometric passport. The enrolment stations represent a logical extension of photobooths and the contract is expected to be worth Euro 4m over the next two years. 

Photo-Me has also launched a business, Power-Me, to supply, install and maintain alternative energy equipment, starting with small wind turbines. This development leverages off Photo-Me's extensive network of operating sites and substantial field service infrastructure in Europe and Japan, its global sales network and its technical competence in mechatronics. 

In conjunction with a leading manufacturer of cameras for the movie industry, Photo-Me has developed a machine which converts digital images into celluloid film of the highest quality. Marketing will shortly commence, using a totally different sales network. 

In the year, considerable structural and operational efficiencies were achieved, together materially reducing the cost base. Inventories across Europe were rationalised, the number of premises occupied was reduced, and Central Europe Operations were consolidated within the German organisation.  Supplier contracts were extensively renegotiated and services outsourced when critical mass was lacking. Furthermore, the sales forces of the Group's two Divisions are increasingly being merged. Internally, headcount decreased by 7% (excluding the loss-making US business, which was sold in July 2008), salaries were frozen and no bonuses were paid. Financially, the Group's debt maturity profile was lengthened and cost of debt reduced. 

BOARD

On 10 March 2009, as announced in the Interim Management Statement of 11 March 2009, Thierry Barel gave notice of his resignation as CEO, a position he had held since December 2007, having joined the Group in April 2007. Thierry had been headhunted to be Chief Operations Officer of Faiveley SA, a substantial publicly listed French-based international industrial group. The Board is sorry to lose Thierry, but congratulates him on his appointment. Thierry leaves the Group tomorrow, 3 July 2009. 

The search for a new CEO is well advanced; meanwhile Serge Crasnianski has agreed to act as interim CEO. Serge returned to the Board in a non-executive capacity subsequent to the year end, on 6 May 2009, and was yesterday appointed Deputy Chairman. He is the Company's largest shareholder, with a 22.2% holding, and for almost 45 years was a key executive of what is now the Group, including almost 10 years as CEO. His knowledge of the business will be most useful to the new CEO. 

The appointment of John Lewis as an independent non-executive Director on 3 July 2008 was reported in the 2008 Preliminary Announcement. He was yesterday appointed Senior Independent Non-executive Director. Also on 3 July 2008, Robert Lowes stood down as an interim Director, reverting to his position as Company Secretary.

The return to the Board yesterday, in a non-executive capacity, of Dan David is announced. He has beneficial and non-beneficial interest totalling 13.2% of the Company's shares. He was on the Board from 1968 until 2007, for the first 30 years in an executive capacity and from 1992 until 2005 as Chairman. He is particularly knowledgeable about the Group's Operations business and marketplace. 

It remains the Board's intention to appoint a further independent non-executive Director. 

RISKS AND UNCERTAINTIES

The principal risks and uncertainties affecting the continuing business activities of the Group, in the opinion of the Board, are: 

• reduced demand for ID photographs as governments introduce a requirement for on-site photography in connection with the centralisation of biometric data in support of passport and other ID applications, reducing, perhaps substantially, Operations revenue; 

• a further contraction of consumer spending, reducing the level of Operations revenue;

• a further reduction in the retail site-owner base, impacting on Operations revenue and reducing the market for Sales & Servicing;

• the impact on costs of consumables and equipment of a sustained appreciation of the Japanese Yen, in which currency a significant amount of the Group's supplies is denominated, affecting both Operations and Sales & Servicing; 

• a continuing lack of available finance for customers, affecting the level of equipment sales and reducing margins; 

• reduced demand for photographic prints by digital camera users, resulting in lower equipment sales; 

• increased competition from major multi-national companies as photo-printing shifts from silver halide to dye-sublimation and ink-jet technologies, reducing equipment sales and profit margins; and

• further volatility in foreign exchange rates.

OUTLOOK 

The outcome for the current year will be broadly driven by two factors: the state of the general economy and therefore the availability of credit for customers and the demand for ID photos, and the progress of biometric passport implementation in some countries. 

In the important French Operations business, the introduction with effect from 29 June 2009 of biometric data for passports, with on-site photography in operation in perhaps the majority of town halls, could reduce passport ID-related revenue in that territory by an appreciable amount. The UK and Japanese Operations businesses are not similarly threatened and their Operations revenues are expected to hold up well in the year. In all three principal Operations territories, the Photobook Maker® is expected to generate useful revenue. 

Whilst minilab sales are expected to continue their decline, the impact is expected to be largely mitigated through increased diversification within the Sales & Servicing business, in particular the Photobook Maker®, and a substantial reduction in the cost base.

Overall, in the absence of a further material deterioration in market conditions, the Board's objective is a further improvement in the outcome for the year, on continuing operations before exeptionals. It also confidently predicts a further material reduction in indebtedness.

DIVIDENDS 

No dividend is proposed in respect of the year to 30 April 2009. 

Whilst the Board's focus is principally on strengthening the Group's business in the face of adverse market conditions, the Board will consider a resumption of dividends once net debt is further substantially reduced or eliminated and the financial result from continuing operations significantly improves.

Hugo Swire
Chairman                                                                                                                               2 July 2009

  GROUP INCOME STATEMENT

for the year ended 30 April 2009

		2009
		Before  exceptional items	Exceptional items (Note 3)	Total
	Notes	£'000	£'000	£'000
Revenue	2	210,538	-	210,538
Cost of sales		(188,087)	(6,727)	(194,814)
Gross profit		22,451	(6,727)	15,724
Other operating income		1,436	-	1,436
Administrative expenses		(18,883)	-	(18,883)
Share of post-tax losses from associates		(5)	-	(5)
Operating profit/(loss)		4,999	(6,727)	(1,728)
Finance revenue		394	-	394
Finance cost		(3,810)	-	(3,810)
Profit/(loss) before tax		1,583	(6,727)	(5,144)
Total tax (charge)/credit	4	(735)	2,316	1,581
Profit/(loss) for year- from continuing operations		848	(4,411)	(3,563)
Loss for year- from discontinued operations	5			(14,174)
Loss for year- from continuing and discontinued operations				(17,737)

Attributable to:
- Equity shareholders of the Parent				(15,622)
- Minority interests				(2,115)
				(17,737)

Loss per share (total)
Basic loss per share	6			(4.34p)
Diluted loss per share	6			(4.34p)
Earnings/(loss) per share (continuing operations)
Basic earnings/(loss) per share	6			(1.03p)
Diluted earnings/(loss) per share	6			(1.03p)

  GROUP INCOME STATEMENT

for the year ended 30 April 2008

		2008
		Before  exceptional items	Exceptional items (Note 3)	Total
	Notes	£'000	£'000	£'000
Revenue	2	193,510	-	193,510
Cost of sales		(176,995)	(10,765)	(187,760)
Gross profit		16,515	(10,765)	5,750
Other operating income		1,110	-	1,110
Administrative expenses		(20,230)	(4,433)	(24,663)
Share of post-tax losses from associates		(1)	-	(1)
Operating loss		(2,606)	(15,198)	(17,804)
Finance revenue		793	571	1,364
Finance cost		(4,482)	-	(4,482)
Loss before tax		(6,295)	(14,627)	(20,922)
Total tax (charge)/credit	4	(244)	2,769	2,525
Loss for year- from continuing  operations		(6,539)	(11,858)	(18,397)
Loss for year- from discontinued operations	5			(1,416)
Loss for year- from continuing and discontinued operations				(19,813)

Attributable to:
- Equity shareholders of the Parent				(19,908)
- Minority interests				95
				(19,813)

Dividends
Paid in year (£'000)	7			8,690
Paid in year per share	7			2.40p
Loss per share (total)
Basic loss per share	6			(5.52p)
Diluted loss per share	6			(5.52p)
Loss per share  (continuing operations)
Basic loss per share	6			(5.14p)
Diluted loss per share	6			(5.14p)

GROUP BALANCE SHEET

as at 30 April 2009

	Notes	2009	2008
		£'000	£'000
Assets
Non-current assets
Goodwill	8	10,106	10,840
Other intangible assets	8	8,932	19,621
Property, plant and equipment	8	74,644	79,850
Investment property	8	2,882	3,105
Investments in associates		716	595
Other financial assets - held to maturity	9	543	445
- available-for-sale		165	123
Deferred tax assets		352	142
Trade and other receivables		1,443	1,359
		99,783	116,080
Current assets
Inventories		24,488	34,935
Trade and other receivables		21,456	32,372
Other financial assets - held to maturity	9	15	13
- available-for-sale		347	333
Derivative financial asset		-	32
Current tax		4,138	3,672
Cash and cash equivalents	9	19,285	30,371
		69,729	101,728
Assets held for sale		8,008	469
Total assets		177,520	218,277
Equity
Share capital		2,037	2,037
Share premium	10	5,436	5,436
Treasury shares	10	(5,802)	(5,802)
Other reserves	10	21,944	9,242
Retained earnings	10	49,238	66,019
Total shareholders' equity		72,853	76,932
Minority interests		781	2,589
Total equity		73,634	79,521
Liabilities
Non-current liabilities
Financial liabilities	9	29,611	32,365
Post-employment benefit obligations		4,310	4,245
Provisions		15	3
Deferred tax liabilities		3,892	7,806
Trade and other payables		194	784
		38,022	45,203
Current liabilities
Financial liabilities	9	16,284	44,036
Derivative financial liability		260	62
Provisions		2,837	2,098
Current tax		3,244	2,969
Trade and other payables		35,438	43,104
		58,063	92,269
Liabilities held for sale		7,801	1,284
Total equity and liabilities		177,520	218,277

GROUP CASH FLOW STATEMENT

for the year ended 30 April 2009

		2009  £'000	2008  £'000
Cash flows from operating activities
Operating loss from continuing operations		(1,728)	(17,804)
Operating loss from discontinued operations		(7,667)	(1,529)
Share of post-tax losses from associates		5	1
Amortisation of intangible assets		7,482	8,217
Depreciation of property, plant and equipment		28,949	30,905
Loss on sale of property, plant and equipment		66	410
Impairment		9,178	7,827
Exchange differences		(2,357)	2,092
Decrease in working capital		9,233	6,441
Movement in provisions		196	(631)
Other items		(1,373)	35
Cash generated from operations		41,984	35,964
Interest paid		(3,577)	(4,501)
Taxation paid		(267)	(8,286)
Net cash generated from operating activities		38,140	23,177
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired		-	338
Proceeds from disposal of subsidiaries		70	-
Investment in intangible assets		(2,998)	(5,571)
Proceeds from sale of intangible assets		187	-
Purchase of property, plant and equipment		(13,589)	(25,396)
Proceeds from sale of property, plant and equipment		512	1,540
Purchase of other investment		(111)	-
Proceeds from sale of available-for-sale investments		-	90
Interest received		352	803
Dividends received from associate		72	108
Net cash utilised in investing activities		(15,505)	(28,088)
Cash flows from financing activities
Issue of Ordinary shares to equity shareholders		-	66
Purchase of treasury shares		-	(3,835)
Repayment of capital element of finance leases		(551)	(136)
Proceeds from borrowings		9,729	22,238
Repayment of borrowings		(24,418)	(9,446)
Increase in monetary funds		36	24
Dividends paid to equity shareholders		-	(8,690)
Net cash (utilised in)/generated from financing activities		(15,204)	221
Net increase/(decrease) in cash and cash equivalents		7,431	(4,690)
Cash and cash equivalents at beginning of year		8,317	11,573
Exchange gain on cash and cash equivalents		2,868	1,434
Cash and cash equivalents at end of year		18,616	8,317

Group Statement of Recognised Income and Expense

for the year ended 30 April 2009

	2009	2008
	£'000	£'000
Income and expense recognised directly in equity
Actuarial loss on defined benefit pension scheme and other post-employment benefit obligations	(1,366)	(571)
Exchange differences	13,040	11,799
	11,674	11,228
Taxation on items taken directly to or transferred from equity
Tax on actuarial loss on defined benefit pension scheme and other   post-employment benefit obligations	290	151
Net income recognised directly in equity	11,964	11,379
Loss for year	(17,737)	(19,813)
Total recognised income and expense for year	(5,773)	(8,434)
Attributable to:
- Equity shareholders of the Parent	(3,965)	(8,888)
- Minority interests	(1,808)	454
	(5,773)	(8,434)

NOTES

1 Basis of preparation and accounting policies

The preliminary results for the year ended 30 April 2009 have been prepared on the same basis as the 30 April 2008 statutory accounts, with no new accounting standards having been adopted during the year, and have been extracted from the audited consolidated financial statements, which were approved by the Board of Directors on 2 July 2009. The audited consolidated financial statements have not yet been delivered to the Registrar of Companies but are expected to be published by early August.  

The financial information set out in this announcement does not constitute statutory accounts for the years ended 30 April 2009 or 30 April 2008. The financial information for the year ended 30 April 2008 is derived from the statutory accounts for that year. The report of the auditors on the statutory accounts for the year ended 30 April 2008 was unqualified and did not contain a statement under section 237 of the Companies Act 1985.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') and the International Financial Reporting Interpretations Committee ('IFRIC') interpretations as adopted for use in the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

Exceptional items

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

2 Segment analysis

The Group operated two main business segments during the year: Operations (previously termed Vending) and Sales & Servicing (previously termed Manufacturing). These segments have been identified as the primary segments, reflecting the way in which the Group has organised and managed its businesses. Operations comprises the operation of unattended vending equipment, in particular photobooths, digital media kiosks, amusement machines and business service equipment. Sales & Servicing comprises the manufacture, sale and after-sale servicing of this vending equipment and a complete range of photo-processing equipment, including photobook makers, minilabs and wholesale labs, together with the servicing of other third party equipment. 

Analysis by business activity (continuing operations)

Revenue	Year to  30 April 2009	Year to  30 April 2008
	£'000	£'000
Operations	166,144	148,821
Sales & Servicing
-Total	62,525	69,982
-Inter-segment eliminations	(18,131)	(25,293)
	44,394	44,689
	210,538	193,510

Result
	Year to 30 April 2009
	Before  Exceptional Items £'000	Exceptional Items £'000	After  Exceptional Items £'000
Operations	12,090	(1,299)	10,791
Sales & Servicing	(5,139)	(5,428)	(10,567)
Group overheads	(1,952)	-	(1,952)
Group operating profit/(loss)	4,999	(6,727)	(1,728)
Net finance cost			(3,416)
Loss before taxation			(5,144)
Taxation			1,581
Loss for year			(3,563)

	Year to 30 April 2008
	Before  Exceptional Items £'000	Exceptional Items £'000	After  Exceptional Items £'000
Operations	9,072	(5,748)	3,324
Sales & Servicing	(7,105)	(5,017)	(12,122)
Group overheads	(4,573)	(4,433)	(9,006)
Group operating loss	(2,606)	(15,198)	(17,804)
Net finance cost			(3,118)
Loss before taxation			(20,922)
Taxation			2,525
Loss for year			(18,397)

3 Exceptional items
	2009	2008
	£'000	£'000
Cost of sales
Impairment of intangible assets	5,005	2,661
Impairment of property, plant and equipment	486	4,230
Impairment of stocks	-	666
Employment termination and other restructuring costs	1,236	3,208
	6,727	10,765
Administrative expense
Impairment of property, plant and equipment	-	127
Strategic review costs	-	4,306
	-	4,433
Finance revenue	-	(571)
Total exceptional costs	6,727	14,627

Year ended 30 April 2009

Exceptional items in 2009 primarily relate to the impairment of previously capitalised research and development costs for minilab photo-processing equipment, reflecting the significantly reduced prospects for sales. In addition, a number of old silver halide digital printing kiosks have been impaired and certain spare parts connected with operating equipment previously impaired have also been written off as an exceptional item. There have also been a number of redundancies within the Group's Sales & Servicing Division and an adjustment to costs relating to a termination effected in the prior year. There is a tax credit of £2,316,000 associated with the exceptional costs.

Year ended 30 April 2008

Following the review performed by the Chief Executive Officer and in the light of market conditions, certain assets (mainly capitalised research and development expenditure, photobooths and other vending machines) were impaired to a total value of £7,827,000, with an associated tax credit of £1,846,000.  Strategic review costs totalled £4,306,000 (mainly accounting, commercial, investment banking, legal and tax advice) incurred in the proposed disposal of the Vending Division, with a tax credit of £nil.  Employment termination and other restructuring costs in the UK and Continental Europe totalled £3,208,000, with a tax credit of £959,000.  Finance revenue represents the profit from the deemed disposal arising on the change of interest in the associated undertaking, Photo-Me Australia. The associated tax charge was £nil.

4 Taxation on continuing operations

	2009			2008
			£'000			£'000
Current taxation
UK			309			-
Overseas			1,846			1,826
Prior year adjustments			(47)			493
			2,108			2,319
Deferred taxation
Temporary differences			(3,079)			(5,237)
Prior year adjustments			(610)			393
			(3,689)			(4,844)
Total tax credit			(1,581)			(2,525)

5 Discontinued operations

The discontinued operations in 2009 relate to the Group's wholesale lab business and in 2008 relate to the Group's US vending business which were classified as held for sale in the respective balance sheets at 30 April 2009 and 30 April 2008.  The results of the discontinued operations are as follows:

	2009
	Wholesale lab £'000	US vending £'000	Total  £'000
Revenue	14,753	-	14,753
Cost of sales	(20,420)	-	(20,420)
Gross loss	(5,667)	-	(5,667)
Administrative expenses	(2,000)	-	(2,000)
Loss before finance items and tax	(7,667)	-	(7,667)
Net finance income	15	-	15
Loss before taxation	(7,652)	-	(7,652)
Taxation	770	-	770
Loss from discontinued operations	(6,882)	-	(6,882)
Valuation adjustment/profit on sale	(8,107)	815	(7,292)
Tax on valuation adjustment/profit on sale	-	-	-
Valuation adjustment/profit on sale after taxation	(8,107)	815	(7,292)
(Loss)/profit from discontinued operations	(14,989)	815	(14,174)
Attributable to:
- Equity shareholders of the Parent	(12,714)	815	(11,899)
- Minority shareholders	(2,275)	-	(2,275)
	(14,989)	815	(14,174)

	2008
	Wholesale lab £'000	US vending £'000	Total  £'000
Revenue	16,174	1,156	17,330
Cost of sales	(14,963)	(1,551)	(16,514)
Gross profit/(loss)	1,211	(395)	816
Other operating income	-	119	119
Administrative expenses	(2,030)	(434)	(2,464)
Loss before finance items and tax	(819)	(710)	(1,529)
Net finance income/(cost)	91	(37)	54
Loss before taxation	(728)	(747)	(1,475)
Taxation	59	-	59
Loss from discontinued operations	(669)	(747)	(1,416)
Attributable to:
- Equity shareholders of the Parent	(618)	(747)	(1,365)
- Minority shareholders	(51)	-	(51)
	(669)	(747)	(1,416)

6 (Loss)/earnings per share
						Year to  30 April 2009		Year to  30 April 2008
Basic loss per share
Total						(4.34p)		(5.52p)
Continuing						(1.03p)		(5.14p)
Discontinued						(3.31p)		(0.38p)
Diluted basic loss per share
Total						(4.34p)		(5.52p)
Continuing						(1.03p)		(5.14p)
Discontinued						(3.31p)		(0.38p)
Alternative (loss)/earnings per share
Total						(3.12p)		(2.23p)
Continuing						0.19p		(1.85p)
Discontinued						(3.31p)		(0.38p)
Diluted alternative (loss)/earnings per share
Total						(3.12p)		(2.23p)
Continuing						0.19p		(1.85p)
Discontinued						(3.31p)		(0.38p)
The calculation of (loss)/earnings per share is based on the following:
Loss attributable to ordinary  shareholders (£'000)
Total						(15,622)		(19,908)
Continuing						(3,723)		(18,543)
Discontinued						(11,899)		(1,365)
Adjusted (loss)/earnings attributable to ordinary shareholders (£'000)
Total						(11,211)		(8,050)
Continuing						688		(6,685)
Discontinued						(11,899)		(1,365)
Weighted average number of shares in issue in the period:
- basic ('000)						359,724		360,425
- including dilutive share options ('000)						359,724		360,425
Adjusted basic and diluted (loss)/earnings per share are calculated on the basis of (loss)/earnings before exceptional items. The Directors believe that disclosure of this measure allows shareholders to understand better the elements of financial performance during the year and to facilitate comparison with prior periods.

7 Dividends
			2009	2008
			£'000	£'000
Dividends declared and paid during the year
Interim dividend for the year ended 30 April 2007			-	3,659
Final dividend for the year ended 30 April 2007			-	5,031
			-	8,690
The interim dividend for the year ended 30 April 2007 was paid on 3 May 2007 to shareholders on the register on 3 March 2007.  The final dividend for that year was paid on 2 November 2007 to shareholders on the register on 6 October 2007.  No dividends were paid in respect of the year ended 30 April 2008 and the Directors do not propose a final dividend for the year ended 30 April 2009.

8 Non-current assets 

	Goodwill	Intangible assets	Property, plant & equipment	Investment property
	£'000	£'000	£'000	£'000
Net book value at 1 May 2008	10,840	19,621	79,850	3,105
Exchange difference and other movements	387	1,909	11,210	383
Additions - photobooths and vending equipment	-	-	11,480	-
Additions - other assets	742	2,998	2,109	-
Transfer	-	5	(5)	-
Amortisation	-	(7,482)	-	-
Depreciation	-	-	(28,343)	(606)
Impairment	(585)	(8,107)	(486)	-
Disposals at net book value	-	-	(791)	-
Transfer available for sale	(1,278)	(12)	(380)	-
Net book value at 30 April 2009	10,106	8,932	74,644	2,882

9 Net debt

	2009 £'000	2008 £'000
Cash and cash equivalents per balance sheet	19,285	30,371
Financial assets - held to maturity	558	458
Deposits - available-for-sale	-	24
Bank overdrafts	(3,222)	(22,070)
Non-current instalments due on bank loans	(29,237)	(31,906)
Current instalments due on bank loans	(12,817)	(21,513)
Non-current finance leases	(374)	(459)
Current finance leases	(245)	(453)
Net debt from continuing operations	(26,052)	(45,548)
Net cash/(debt) from discontinued operations	2,553	(15)
Net debt from continuing and discontinued operations	(23,499)	(45,563)

Net debt 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 balance sheet strength. The inclusion of items in net debt as defined by the Group may not be comparable with other companies' measurement of net debt. The Group includes in net debt loan and other borrowings less cash and cash equivalents and certain financial assets, mainly deposits. 

10 Reserves

	Share Premium	Treasury Shares	Other Reserves	Retained Earnings
	£'000	£'000	£'000	£'000
At 1 May 2008	5,436	(5,802)	9,242	66,019
Exchange difference	-	-	12,606	-
Loss for year	-	-	-	(15,622)
Other reserve movements	-	-	96	(1,159)
At 30 April 2009	5,436	(5,802)	21,944	49,238

11 Publication of the audited financial statements

Copies of the Report and Accounts for the year ended 30 April 2009 will be mailed to shareholders by early August and will be available from the Company's registered office at Church Road, Bookham, Surrey KT23 3EU (telephone: [phone], fax: [phone], email: [e-mail]) and the Company's website (www.photo-me.co.uk) after that date.

 

END

 

 

FR EADXFEDENEAE