PHTM.L Regulatory News (PHTM)

PHOTO-ME INTERNATIONAL PLC - INTERIM RESULTS ANNOUNCEMENT FOR THE PERIOD ENDED 31 OCTOBER 2015

STRONG FIRST HALF PERFORMANCE

Photo-Me International plc ('Photo-Me" or "the Group"), the instant service equipment group, announces its results for the six-month period ended 31 October 2015. 

Results highlights:

† At constant currency (CC)

Average rates of exchange used: £/€ 1.38 (2014: 1.25) £/Yen 189 (2014: 173)

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

* *As defined in note 8 to the accounts

Financial Highlights

· Solid revenue growth of +2.4% at constant currency

· Underlying pre-tax profits up to record £25.8m; up +9.3% in constant currency

· Cash position remains very strong and £7.1m higher than at year-end

· Dividend increased by 10%, in line with guidance

Operational Highlights

· Photobooth estate increased by 2.2%

· Solid growth across Continental Europe and Japan

· Promising launch of the Philippe Starck designed new photo printing kiosks

· Continued strong progress in laundry, with a 90% increase in turnover

· Strong entry into the wider UK laundry industry through the acquisition of Fowler(UK), a laundry equipment distributor

· Formal trialing of the new carwash product in France, supported by the strategic partnership with Kärcher

John Lewis, Non-executive Chairman, said:

"Photo-Me has struggled to grow its revenue in recent years and the 2.4% increase in constant currency revenue this half-year represents a real step change. While we are continuing to see a good trading performance in Japan, more importantly - and as we had anticipated - our growing laundry business is increasingly having a positive impact.

Our new product pipeline - including the next generation of Revolution - is very promising and our cash flow and net cash position both remain extremely strong. In addition, our purchase of Fowler(UK) is expected to substantially improve our prospects in the UK laundry market going forward.

The Board remains confident for the outlook of the business over the rest of the year and remains optimistic about future prospects."

Enquiries:

Photo-Me International 01372 453 399

Serge Crasnianski or Gabriel Pirona

Media

Madano Partnership

Julien Cozens 020 7593 4000

Investors:

IR Focus

Neville Harris 07909 976044

CHAIRMAN'S STATEMENT

Results

Turnover at constant rates of exchange rose by +2.4% driven by solid growth in Continental Europe, supported by an increased contribution from laundry, and by the continued strength of the Japanese business. Headline turnover contracted by 3.7%, due to the adverse impact of exchange rates.

Underlying pre-tax profits at constant rate of exchange increased strongly to £27.7m.

The cash performance of the business remained strong and at the half-year stage the net cash position was £67.8m, an increase of £7.1m since April 30, 2015.

Strategy

Our strategy is focused on the development of new complementary products that build upon the strength of the ID photobooth business and offer diversified revenue and profit streams for the future. This has produced the Philippe Starck-designed photobooth and the Revolution laundry units in the recent past. This year the Group signed a five-year agreement with Moneygram which would see Moneygram roll out money transfer services at Photo-Me's photo printing kiosks worldwide. The Group is developing a specific version of its kiosks enabling the new service to be launched on a trial basis in France in 2016.

Photo-Me began the roll-out of a new car wash system in November 2014. Satisfied with the early results, Photo-Me has agreed with Kärcher, the world market leader in cleaning technology, a three-year period of exclusivity in the retail market in France, in order to support possible larger scale expansion after the trial period.

Having made strong progress in reducing our manufacturing costs, we are now focusing on rolling out our laundry product line aggressively and will increasingly focus on developing new markets for the photo printing lines and the photobooths, through 3D and extensive technological enhancements to anticipate the new standards in 3D face recognition.

Dividends

In line with the commitment that we made at the time of our preliminary results in June 2015, the Board is declaring an interim dividend of 2.575 pence per share, an increase of 10% over the interim dividend of 2.34 pence per share paid last year.

The interim dividend will be paid on 12 May 2016 to shareholders on the register on 8 April 2016, with an ex-dividend date of 7 April 2016.

Outlook 

 The Board remains confident for the outlook of the business over the rest of the year and remains optimistic about future prospects.

John Lewis

Non-executive Chairman

CHIEF EXECUTIVE'S BUSINESS AND FINANCIAL REVIEW

BUSINESS REVIEW

Photo-Me's principal activity is the operation of unattended vending equipment, primarily photo booths and laundry units, and also digital printing kiosks, photobook makers and amusement machines.

At the end of October 2015 the Group's estate comprised 45,241 units (2014: 44,306) of which photobooths comprised 60%. Growth in the overall estate was 2.1% with growth in the photobooth estate of 2.2%

The business is focused on three main geographic regions at present: Continental Europe, UK & Republic of Ireland, and Asia & Rest of World. 

Geographical analysis of revenue and profit (by origin)

CONTINENTAL EUROPE

The Group now operates in ten countries, with the very recent launch of our laundry range in Spain. Continental Europe contributed 55% (2014: 56%) of Group revenue and 69% (2014:73%) of the underlying operating profit.

Revenue (at CC) increased strongly by 4.0%. Whilst the photobooth turnover grew by 2.7% (CC), the takings of the laundry machines operated by the Group more than doubled (CC). Operating profits rose by 3.8% on a constant currency basis.

The European photobooth estate increased by 1.4% year-on-year with the main areas for growth being France, Germany and Switzerland, where - in spite of the challenging conditions of the mature ID photo market - the performance benefits from the continued rollout of higher-margin Starck booths. Across Europe, 3,263 Starck booths have now been deployed.

The roll-out of the Group's laundry product - branded Revolution - predominantly utilizing the same sites as the photobooth estate, continues to progress well. At the end of the half-year, cumulatively (across the Group) the Group had sold 497 of these units and operated 1,200. Going forward, it remains the Group's intention to keep the operating/sale ratio towards 80/20.

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

The results from the units in operation in France, Ireland and Portugal remain extremely encouraging with monthly takings averaging €1,400 during the period across the more established machines in the operating estate. In the six-month period ended 31 October 2015, the turnover of the laundry business increased by 90% to £5.5m (2014: £2.9m).

The Group now has laundry units in ten countries. The most recent launch has been in Spain - a new territory for the Group -where there are now a handful of units with supermarkets and petrol stations being the initially-targeted sites. The Group continues to be encouraged by the potential in other locations where there is natural demand for heavy-duty laundry and is also considering additional country launches. The performance of the product since launch in Portugal and Ireland demonstrates the strong potential. While the countries are small in overall Group terms, laundry revenues now exceeds almost 40% of total revenues in these countries having been launched only in the middle of 2014.

The manufacturing facilities for the laundry business are in Hungary and the gradual planned expansion of capacity is proceeding according to plan with a current production capacity of approximately 80 units per month. The Group has recently finalised the design of "Revolution 2", expected to be launched in 2016, which again comprises three machines but with a footprint of only 5sqm2 compared with 10sqm2 for the current model. This is expected to increase the potential market for the product overall and is likely to be more attractive in Far Eastern markets.

The Group continues to operate over 4,700 digital printing kiosks - primarily in France and Switzerland which are being progressively upgraded to accept all models of memory cards and other media. The new Starck-designed kiosk has also recently been introduced into a number of locations in France. This new generation of kiosk has no real comparator in terms of design and performance. The new kiosks are fully integrated to major social media networks and enable easy photo printing from smartphones, tapping into the growing demand from consumers. The initial results of that new product range are extremely promising, and trialing will continue in France in coming months.

Europe remains the centre of the Group's R&D efforts and new product development. Aside from the new digital printing kiosk (see above) and new versions of the Starck photobooth, work continues on the 3D technology, a compact version of the automated Revolution laundry, as well as the optimization of the energy consumption in photolights.

The Group has also begun trialing its carwash concept in earnest and as previously announced will be progressively introducing them in France over the next twelve months before more formally assessing the rollout potential.

UK & IRELAND

This division contributed 25% (2014: 24%) of Group revenue and 21% (2014: 20%) of operating profit.

The underlying Operating Profit in the UK and Ireland grew by 7.6% driven by operational costs optimization, despite a slight contraction in turnover (-2.7% at CC).

Growth in photobooth numbers was 1.6% year-on-year while there was a 20% reduction on bouly/amusement machines which generate little revenue and perform below the Group profitability standards due to increasing maintenance costs.

In early November, the Group completed the acquisition of Fowler (UK), a leading distributor and lessor of laundry and catering equipment. The Group expects the distribution of the Group laundry equipment range, branded Kiswash, to be facilitated by using Fowler, which also has an established network of service engineers. Fowler also has good expansion opportunities in the wider laundry business under Photo-Me's ownership.

ASIA & R.O.W.

Asia and R.O.W contributed 20% (2014: 20%) of Group revenue and 14% (2014: 14%) of operating profit.

Revenues in Asia and R.O.W increased by 4.1% (at CC) over the period. The largest territory by far is Japan where performance was strong in the first half. Revenues were up by 2.8% (at CC) with profits (at CC) over 10% higher. The medium-term outlook for Japan is good with the Government introducing new My Number Cards (with facial photo) for every resident in Japan from 2016 to be used primarily for tax and social security purposes.

Asia is seen as a promising market for the laundry product in the medium-term and the Group is intending to start trials in Japan and China.

Gradual progress continues to be made in China and Korea where turnover rose respectively by 23% and 123%, albeit from a low base.

STATEMENT OF FINANCIAL POSITION

Shareholders' equity as at 31 October 2015 totaled £102.2 million (30 April 2015: £103.5 million), equivalent to 27.3 pence (30 April 2015: 27.7 pence) per share.

The Group's net financial position continued to improve, reporting a net cash balance of £67.8 million at the end of the period (30 April 2015: £60.7million).

RISKS AND UNCERTAINTIES

Like all businesses, the Group faces risks and uncertainties that could impact on the Group's strategy. The Board recognizes that the nature and scope of these risks can change and regularly reviews the risks faced by the Group and the systems and processes to mitigate such risks.

The principal risks and uncertainties which may affect the continuing business activities of the Group were listed in the Strategic Report within the Annual Report for the year ended 30 April 2015, in the section headed 'Principal risks' on pages 18 and 19 (together with their impact and actions taken to mitigate them).

These risks, which remain relevant to the remaining six months of the present financial year, plus a new 'technological' risk, can be summarised as follows.

In preparing this interim report for the six months ended 31 October 2015, the Board has reviewed these risks and uncertainties and added the category of 'Technological' as above. The Group mitigates this risk by continual focus on R&D. Apart from this addition, the Board considers that there have been no changes since the publication of the 2015 Annual Report.

Serge Crasnianski

Chief Executive Officer

GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 31 October 2015

GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME (continued)

for the six months ended 31 October 2015

The accompanying notes form an integral part of these condensed consolidated financial statements.

GROUP CONDENSED STATEMENT OF FINANCIAL POSITION

as at 31 October 2015

The accompanying notes form an integral part of these condensed consolidated financial statements.

GROUP CONDENSED STATEMENT OF CASH FLOWS

for the six months ended 31 October 2015

GROUP CONDENSED STATEMENT OF CASH FLOWS (continued)

for the six months ended 31 October 2015

The accompanying notes form an integral part of these condensed consolidated financial statements.

GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY

for the six months ended 31 October 2015

GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY

for the six months ended 31 October 2015 continued

The accompanying notes form an integral part of these condensed consolidated financial statements.

1 Corporate information

The condensed consolidated interim financial statements of Photo-Me International plc (the "Company") for the six months ended 31 October 2015 ("the Interim Report") were approved and authorised for issue by the Board of Directors on 9 December 2015. These condensed consolidated interim financial statements comprise the Company and its subsidiaries (together the "Group") and are presented in pounds sterling, rounded to the nearest thousand.

The Company is a public limited company, incorporated and domiciled in England, whose shares are quoted on the London Stock Exchange, under symbol PHTM. Its registered number is 735438 and its registered office is at Church Road, Bookham, Surrey KT23 3EU.

Photo-Me's principal activity is the operation of non-food unattended vending equipment aimed primarily at the consumer market. The largest part of the estate comprises photobooths and digital printing kiosks, with the remainder including laundry units, amusement machines and business service equipment. The Group manages these on a geographical basis with the principal operations of the Group in the United Kingdom and Ireland, Continental Europe, and Asia.

2 Basis of preparation and accounting policies

The condensed consolidated interim financial statements for the six months ended 31 October 2015 have been prepared in accordance with IAS 34 Interim Financial Reporting and International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and in accordance with the Disclosure and Transparency Rules of the UK Financial Conduct Authority. The condensed consolidated interim financial statements comprise the unaudited financial information for the six months ended 31 October 2015 and 30 April 2014, together with the audited results to 30 April 2015. They do not include all of the information and disclosures required for full annual financial statements, and should be read in conjunction with the Group's financial statements for the year ended 30 April 2015. The condensed financial statements do not constitute statutory accounts within the meaning of section 434 of the UK Companies Act 2006.

The consolidated financial statements of the Group as at and for the year ended 30 April 2015 are available at www.photo-me.com or upon request from the Company's registered office at Church Road, Bookham, Surrey KT23 3EU.

The Interim Report is unaudited but has been reviewed by the auditors and their report to the Company is included in the Interim Report. The comparative figures for the financial year ended 30 April 2015 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors (i) was unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 of the Companies Act 2006.

Accounting policies and estimates

The accounting policies applied by the Group in this Interim Report are the same as those applied in the Group's financial statements for the year ended 30 April 2015, except as indicated below.

Presentation of specific items

The Group's income statement and segmental analysis show operating profit before and after specific items. The presentation and use of specific items is a non-GAAP measure and the use of this measure may not be comparable to similarly titled measures used by other companies. Specific items are those that in management's judgement need to be disclosed separately by virtue of their size, nature or incidence. Management determines whether an item is specific and warrants separate disclosure by considering both qualitative and quantitative factors, such as the frequency or predictability of occurrence. This is consistent with the way operating performance is presented and reported to management.

The directors believe that the presentation of the Group's results in this way is relevant to an understanding of the Group's performance, as specific items are identified by their size, nature and or incidence.

New standards adopted in the period:

There are a number of new and revised standards and interpretations, not all of which are applicable to the Group, which have been issued and are effective for the year 2015 and future reporting periods. The most significant standards and interpretations which are likely to have a more material impact on the Group's financial statements were listed in the Group's 2015 Annual Report. The effect of adopting new standards for the 2016 year end has not had a material impact on this Interim Report.

Estimates and significant judgements

The preparation of the condensed consolidated financial information requires management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial information. Such estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable in the circumstances and constitute management's best judgement at the date of the financial statements. In future, actual experience may deviate from these estimates and assumptions, which could affect the financial statements as the original estimates and assumptions are modified, as appropriate, in the period in which the circumstances change.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were in the same areas as those that applied in the consolidated financial statements as at and for the year ended 30 April 2015.

Use of non-GAAP profit measures

The Group measures performance using earnings before interest, tax, depreciation and amortisation ("EBITDA"). EBITDA is a common measure used by a number of companies, but is not defined in IFRS.

The Group measures cash on a net cash basis as explained in note 8.

The presentation of specific items, as described above is also a non-GAAP measure.

Risks and uncertainties and cautionary statement regarding forward looking statements

The principal risks and uncertainties affecting the business activities of the Group are set out in the "Risks and Uncertainties" section of the Interim Management Report, contained within this Interim Report. The cautionary statement regarding forward looking statements is shown below.

Going Concern

The Annual Report for the year ended 30 April 2015 provided a full description of the Group's business activities, its financial position, cash flows, funding position and available facilities together with the factors likely to affect its future development, performance and position. It also detailed risks associated with the Group's business. This interim report provides updated information on these subjects for the six months to 31 October 2015.

The Group has at the date of this Interim Report, sufficient financing available for its estimated requirements for at least the next twelve months. Together with the proven ability to generate cash from its trading performance, this provides the Directors with confidence that the Group is well placed to manage its business risks successfully in the context of the current financial conditions and the general outlook in the global economy.

After reviewing the Group's annual budgets, plans and financing arrangements, the Directors consider that the Group has adequate resources to continue operating for the foreseeable future and that it is therefore appropriate to continue to adopt the going concern basis in preparing this Interim Report.

3 Segmental analysis

IFRS8 requires operating segments to be identified based on information presented to the Chief Operating Decision Maker (CODM), in order to allocate resources to the segments and monitor performance.The Group monitors performance at the adjusted operating profit level before special items, interest and taxation.

In accordance with IFRS8, no segment information is provided for assets and liabilities in the disclosures below, as this information is not regularly provided to the Chief Operating Decision Maker.

Seasonality of operations

Historically, the first half of the financial year is seasonally the stronger for the Group in terms of profits, and this is expected to be the case again for the current year ending 30 April 2016.

Included in Corporate profit for the six months to 31 October 2014 and the year ended 30 April 2015 is £3,484,000 profit on sale of vacant land at Bookham.

4 Taxation

The tax charge in the Group Income Statement is based on management's best estimate of the full year effective tax rate based on expected full year profits to 30 April 2016. The full year effective tax rate includes the impact to the Group Income Statement of calculating UK deferred tax balances at the reduced UK tax rate of 19%.

The Chancellor announced in the 2015 July budget, a reduction on the rate of UK Corporation tax from 20% to 19% for the year ended 31 March 2018 and 18% for the year ended 31 March 2021. This was substantially enacted at the balance sheet date 31 October 2015.

5 Dividends

Year ending 30 April 2016

The Board has declared an interim dividend of 2.575p per share for the year ending 30 April 2016, to be paid on 12 May 2016 to shareholders on the register at 8 April 2016.The ex-dividend date is 7 April 2016. These consolidated financial statements do not reflect this proposed dividend.

Six months to 31 October 2015

The final dividend for 2015 of 2.54p per share amounting to £9,484,000 was approved by the shareholders at the Annual General Meeting on 21 October 2015. It is included in the amount shown as dividend in transactions with owners of the parent in the Group Statement of Changes in Equity and in current liabilities - trade and other payables in the Group Statement of Financial Position. This dividend was paid on 12 November 2015.

Six months to 31 October 2014

The final dividend for 2014 of 1.95p per share amounting to £7,257,000 was approved by the shareholders at the Annual General Meeting on 23 October 2014. It is included in the amount shown as dividend in transactions with owners of the parent in the Group Statement of Changes in Equity and in current liabilities -trade and other payables in the Group Statement of Financial Position. This dividend was paid on 7 November 2014.

6 Earnings per share

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

Alternative earnings per share

Management assess the performance of the Group using a variety of performance measures. Internally management discuss the Group's performance on an "adjusted basis", that is to say taking into accounts "specific items". The Group's income statement and segmental analysis show operating profit before and after specific items. The presentation and use of specific items are a non-GAAP measure and the use of this measure may not be comparable to similarly titled measures used by other companies. Specific items are those that in management's judgement need to be disclosed separately by virtue of their size, nature and or incidence. Management determines whether an item is specific and warrants separate disclosure by considering both qualitative and quantitative factors, such as the frequency or predictability of occurrence. This is consistent with the way operating performance is presented and reported to management.

The directors believe that the presentation of the Group's results in this way is relevant to an understanding of the Group's performance, as specific items are identified by their size, nature or incidence.

The impact of specific items on operating profit is detailed in note 3 , segment analysis.

Consistent with the above, management also calculate earnings per share (EPS) and diluted earnings per share (DPS). Management uses this as one factor in determining dividend policy.

The tables below reconcile EPS and DPS before and after specific items. There were no specific items in the six months ended 31 October 2015; specific items for the six months to 31 October 2014 and the year ended 30 April 2015 relate to the sale of vacant land at the Bookham head office site.

7 Non-current assets - intangibles, property, plant and equipment and investment property

Included in additions for property, plant & equipment are the following amounts under finance leases.

8 Net Cash