Proposed Disposal

RNS Number : 9479U

Photo-Me International PLC

01 July 2009

 



Wednesday 1 July 2009

PHOTO-ME INTERNATIONAL PLC 

Proposed disposal

The Board of Photo-Me (PHTM.L), the instant service equipment group, announces that the Company has today agreed, subject to shareholder approval, the sale of its 86% interest in its Swiss-based subsidiary, Imaging Solutions AG ('ISAG'), together with ISAG's subsidiaries, ('ISAG Group') to RB Imaging Holding GmbH ('RB Imaging'), a company incorporated in the Canton of Zurich, Switzerland, and wholly-owned by Rainer Bauer, the sole director of RB Imaging and also a director of ISAG. Rainer Bauer owns the remaining 14% of ISAG, which is involved mainly in the manufacture of wholesale photo-processing labs.  

The consideration for the proposed disposal is €200,000 (£170,340) plus a contribution of £136,000 towards the Company's costs of the proposed disposal, all payable in cash on completion. In addition, Photo-Me will be entitled to an amount of approximately CHF 633,605 (£353,552) in respect of a patent licence agreement to be entered into, such sum to be satisfied by set-off against a loan of the same amount owed by Photo-Me to ISAG.

The agreement further provides that, if the shares of ISAG or ISAG's business, or material parts thereof, are sold to a third party within one year of the date of completion, any profit derived from such sale (being the sale proceeds less (i) €200,000 (£170,340), (ii) related costs and (iii) the amount of any further capital investment by RB Imaging) will be shared with the Company on a 50/50 basis, the Company's share being limited to a maximum amount of €4.5 million (£3.8 million).

For the year ended 30 April 2008, the most recent year for which Photo-Me's audited consolidated accounts are available, the ISAG Group generated a loss before taxation, included within Photo-Me's consolidated accounts, of £0.9 million, such result comprising a pre-exceptional items loss of £0.8 million together with exceptional charges of £0.1 million. These figures for the ISAG Group are derived from the individual financial statements of the ISAG Group companies and are adjusted on consolidation into Photo-Me's group accounts for consistency with Photo-Me's accounting policies.  Trading in ISAG has deteriorated since then.    

For the six months to 31 October 2008, the ISAG Group generated a loss before taxation, included within Photo-Me's unaudited consolidated interim accounts, of £1.3 million. At 31 October 2008, the net assets and gross assets of the ISAG Group totalled £14.1 million and £21.8 million respectively.

On 4 June 2009, the Company announced that it had initiated discussions with interested parties with a view to a possible sale.  This decision reflected the Board's conclusion that ISAG's activities were neither a core element of Photo-Me's strategy nor capable of further integration within the Photo-Me 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, ISAG's current technology. 

RB Imaging's offer was considered by the Board to be the best solution for Photo-Me shareholders. Given the level of trading losses and of the potential loss on disposal, the Board also evaluated the potential for closure of the ISAG Group. This exercise demonstrated the likelihood that, due to the lower expected realisable values of certain assets in the event of a forced sale, closure would result in a shortfall which may need to be met by Photo-Me.  In the event that the proposed disposal does not complete, Photo-Me would still be exposed to any further trading losses from the ISAG Group and may have to fund any closure liability.

The Company will issue its preliminary announcement of annual results for the year ended 30 April 2009 tomorrow, 2 July 2009. Because of the Board's decision, taken prior to the year end, to consider offers for the sale of the ISAG Group, the ISAG Group will be accounted for as a discontinued business in the results for the year ended 30 April 2009 and as assets and liabilities held for sale at 30 April 2009.  In these results, the proposed disposal is expected to result in a write-down, totalling approximately £8 million, of ISAG Group assets to their anticipated realisable values.  No taxation payable or receivable is expected to arise on the proposed disposal.

The proceeds of the proposed disposal will be used to reduce Photo-Me's borrowings.

The proposed disposal is classified under the Listing Rules of the Financial Services Authority as a related party transaction as Rainer Bauer is a director of ISAG. Consequently, the proposed disposal is subject to, and conditional upon, the approval of the Company's shareholders. A circular is expected to be posted to Photo-Me shareholders by 10 July 2009 to convene a general meeting.  The circular will also be available on the Company's web site: www.photo-me.com 

Enquiries: 

Photo-Me International                                                                                01372-453 399 

Hugo Swire (Chairman) 

Thierry Barel (CEO)

Bankside Consultants 

Charles Ponsonby                                                                                      020-7367 8851 / 07789-202 312

Notes for Editors: 

Photo-Me pursues two principal activities: Operations (previously termed Vending) and Sales & Servicing (previously termed Manufacturing).  

Within Operations, which contributes approximately three-quarters of Group revenue, Photo-Me has approximately 44,000 vending locations in 15 countries (principally in Europe and Asia).  It is the world's leading operator of photobooths, with approximately 21,500 sited. Photo-Me also operates a diverse range of vending equipment, including digital printing kiosks, amusement machines and business service equipment. 

Sales & Servicing comprises the manufacture, sale and after-sale servicing of both the above-mentioned vending equipment and a complete range of photo-processing equipment, including photobook makers, digital printing kiosks, minilabs and wholesale labs. Sales are achieved using the Group's own network and its distributors and agents throughout the world, including the USA.

 

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