PHTM.L Regulatory News (PHTM)

10 December 2018

Photo-Me International plc

("Photo-Me" or "the Group")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2018

Continued strong Laundry performance

Photo-Me International plc (PHTM.L), the instant-service equipment group, announces its results for the six months ended 31 October 2018.

Results summary

1 For constant currency comparatives, average rates of exchange used were £/€ 1.139 (H1 2018: 1.129), £/Yen 146.057 (H1 2018: 145.173)

2 Refer to the note 8 to the financial statements for the reconciliation of Net Cash to Cash and cash equivalents as per the financial statements

3 The breakdown of profit before tax to adjusted profit before tax is presented in the table on page 4.

Financial summary

· Underlying revenue was up 2.5% to £119.8m, excluding the impact of restructuring Photo-Me Retail in the comparative period.

· Adjusted profit before tax was down 7.9%, when adjusted for one-off items in H1 2018 and H1 2019.

· The Group remains highly cash generative with £36.1 million of cash generated from operations in the period (2017: £39.9m).

· Net cash position of £32.4 million, (2017: £47.1m) following distribution of £28.8 million to shareholders in dividend payments and £33.4 million of investments made in the last 12 months.

· Interim dividend maintained at 3.71 pence per Ordinary share in line with stated dividend policy for 2019

Operational summary

· Operations in Japan have recovered faster than expected, with underlying Asia operating profit up 15%, excluding the cost of restructuring operations in Japan.

· Continued expansion of Laundry operations, with over 30% more Revolution units in operation at the period end and total revenue from Revolution up 28.5%.

· Identification revenue growth increased 2%, reflecting further diversification of services and successful deployment of secure photo ID upload technology.

Innovation update

· After the period end in November 2018, the first banking booths which provide front-end retail banking services to customers were launched in Paris.

Outlook

· The Group maintains its guidance for the FY2019 and expects to report profit before tax of £44 million, net of restructuring costs in Japan and excluding any movement in the value of Max Sight Holdings.

· The Group's ability to meet guidance will be reliant on normalised trading conditions in its key markets.

Serge Crasnianski, CEO, said:

"In the last six months, the expansion of Laundry operations and deployment of photobooth identification solutions continued in line with our plan. Revolution Laundry units in operation and revenue from these machines were up 30.4% and 28.5% respectively in H1 2019. In additional we continue to diversify our identification business offering.

"The Board expects to meet its previously stated guidance for FY 2019, with profit before tax of £44 million, net of restructuring costs in Japan and excluding movements in the value of the Group's investment in Max Sight Holdings. The Group's ability to meet guidance remains subject to the economic environment, foreign exchange movements and consumer sentiment, which could affect performance."

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

Enquiries:

An audio webcast of the analyst and investor conference call will be available to download later today at www.photo-me.com.

NOTES TO EDITORS

Photo-Me International plc (LSE: PHTM) operates, sells and services a wide range of instant-service vending equipment, primarily aimed at the consumer market.

The Group operates approximately 47,000 vending units across 18 countries and its technological innovation is focused on three principal areas:

· Identification: photobooths and integrated biometric identification solutions

· Laundry: unattended laundry services, launderettes, B2B services

· Kiosks: high-quality digital printing

In addition, the Group operates vending equipment such as children's rides, amusement machines and business service equipment.

Whilst the Group both sells and services this equipment, the vast majority of units are operated and maintained by Photo-Me. Photo-Me pays the site owner a commission based on turnover, which varies depending on the country and location of the machine.

The Group has built long-term relationships with major site owners and its equipment is generally sited in prime locations in areas of high footfall such as supermarkets, shopping malls (indoors and outdoors) and public transport venues. The equipment is maintained and serviced by an established network of 700 field engineers.

The Company's shares have been listed on the London Stock Exchange since 1962.

CHAIRMAN'S STATEMENT

Results

During the period, Group profit before tax has been impacted by reduced B2B revenue and machine sales activity, especially in the UK, where we have suffered from large order lags. Due to the extent of our B2B customer relationships, we expect this to recover in the second half of the year.

Our strong performance in Japan and the continued positive momentum of our high margin Laundry business gives the Board continued confidence in re-iterating its previously stated profit before tax guidance of £44 million for FY 2019, net of restructuring costs in Japan and any movement on the Group's investment in Max Sight Holdings.

Excluding the impact of the restructuring costs, investments adjustments, exchange gains and a favourable commercial litigation outcome, results for the first half year were down 7.5% compared with the corresponding period in the prior year (H1 2018).

Underlying revenue increased by 2.5% against the comparative period, excluding a £5.3 million reduction in revenue from Photo-Me Retail in H1 2018 due to the restructuring programme. On a reported basis, the restructuring of Photo-Me Retail in H2 2018 had a negative impact on total revenue (2.0% decline) when compared with the comparative period.

Expansion of laundry operations remained a key growth driver, with total revenue from Revolution machines up 28.5%. Revenue from Identification grew by 1% and revenue from Kiosks reduced by 27% to £6.6 million.

Reported EBITDA was £39.1 million, resulting in an EBITDA margin of 32.6% (H1 2018: 36.7%, but was 34.7% when excluding the impact of the one-off items listed below.

Adjusted profit before tax was down 7.9% when adjusted for one-off items in H1 2019 and H1 2018, reflecting the lag in B2B revenue and machines sales activity due which is expected to recover in the second half. A reconciliation of Reported profit before tax to adjusted profit before tax is noted in the below.

Reconciliation of Reported Profit Before Tax to Adjusted Profit Before Tax

In H1 2018, the Group reported two exceptional items - a property gain (£2.3 million) and the associated restructuring costs for Photo-Me Retail (£0.9 million). The Group also benefited from a one off favourable litigation outcome (£1.6 million) and a one-off exchange gain (£0.9 million).

In H1 2019, the Group recorded a gain on the sale of its investment holding in Stilla Holdings (£3.2 million) and a loss on its shareholding in Max Sight Group Holdings Limited (£2.7 million). During the period, the Group was also impacted by the cost of restructuring its Japanese operations (£1.2 million). On a reported basis, in H1 2019 Profit Before Tax declined by 21.0%, with the Group's Adjusted Profit Before Tax declining by 7.9%.

The Group remains highly cash generative, with £36.1 million of cash generated from operations in the period.

The Group's net cash position as at 31 October 2018 was £32.4 million, compared with £47.1 million as at 31 October 2017, following distribution of £28.8 million to shareholders via dividend payments and £33.4 million of investments in the last 12 months. Compared with 30 April 2018, net cash increased by £5.7 million, from £26.7 million. In H1 2019, the Group invested £14.1 million in future growth, made £4.2 million of acquisitions and paid out £14.0 million as dividends to the Group's shareholders.

Strategy update

The Group's strategy remains unchanged, and the Board continues its commitment to further diversifying its operations and developing new technologies with multiple applications, which can be deployed across new and existing geographies, and will be expected to provide a rapid return on investment.

In the last six months, the expansion of Laundry operations and deployment of photobooth identification solutions continued in line with our plan.

In addition, the Board rapidly addressed performance issues in Japan and realigned operations to the more challenging and competitive market conditions in the country. The benefit of the restructuring programme is already evident, and the Group remains confident that this business will return to growth in FY 2019.

Details of strategic progress by business area are set out in the Business Review.

Dividends

The Board is declaring a maintained interim dividend of 3.71 pence per Ordinary Share (H1 2018: 3.71 pence per share).

This is line with the Board's intention to maintain a total dividend of 8.44 pence per ordinary share for the current financial year ending 30 April 2019.

The interim dividend will be paid on 10 May 2019 to shareholders on the register on 5 April 2019. The ex-dividend date will be 4 April 2019.

Outlook

Expansion of the Group's Laundry operations remains a key priority for the Group in the second half of the year, building on the growth in the number of Revolution laundry units in operation and revenue from Revolution machines which were up 30.4% and 28.5% respectively in H1 2019. In line with the Group's strategy, Laundry operations will continue to make up an increasing proportion of the Group's total revenue in the medium term. In addition, diversification of identification solutions will continue to be the driver of revenue growth in this business area

The Board expects to meet its previously stated guidance for the 2019 financial year, with profit before tax of £44 million, net of restructuring costs in Japan and excluding any movement in the value of the Group's investment in Max Sight Holdings, This guidance remains subject to the economic environment, foreign exchange movements and consumer sentiment, which could affect performance.

CHIEF EXECUTIVE'S BUSINESS AND FINANCIAL REVIEW

BUSINESS REVIEW

The Group has three principal areas of business; Identification, Laundry and Kiosks.

In addition, the Group operates other vending equipment such as children's rides, photocopiers and amusement machines. Whilst this is not one of our three principal business areas, these machines are profitable and benefit from synergies relating to other areas of the business, such as our network of field engineers.

In the first half, the Group remained focused on the expansion of its Laundry operations and deployment of secure photo ID upload technology in its identification business.

Identification

Photobooths and integrated biometric identification solutions

Identification revenue increased by 1%, with a 1% growth in the number of units in operation. This resilient performance gives us confidence for the future and reflects the successful diversification of photobooth services, including the extension of our encrypted photo ID upload for documents such as passports and driving licences.

In total, the Group has more than 10,000 photobooths connected to government organisations for the secure upload of photo ID. The Board anticipates that this number will continue to grow as discussion with governments progress.

New services have been introduced to a small number of photobooths in the UK & Republic of Ireland and France, enabling customers to scan and copy documents. We are monitoring customer response and, if successful, further photobooths will be enabled with these services during the second half.

Capex reduced in the period, following significant capex in H1 2018 as part of the ongoing maintenance and renewal cycle.

Laundry

Unattended Revolution laundry services, launderettes, business-to-business laundry services

\* There were 2,232 full time units in operation during H1 2019 compared with 1,937 in H1 2018.

Laundry operations continue to be the primary growth driver for the Group, with an average of 50 new machines installed each month, mainly in Continental Europe. In the second half, the Group expects that this will increase to an average of 80 machines per month.

Total revenue from Laundry operations increased by 26%. The rollout of Revolution machines continues apace, with the estate increased by 30.4% as at 31 October 2018. Total revenue from Revolution was up by 28.5%, which was achieved against a 15.2% increase in machines in full time operation throughout H1 2019.

Revolution machines have been redesigned to reduce the cost of manufacturer and provide a faster return on investment. The first Batch of the new machines is due to be delivered in December 2018. New functionality has been installed, including fabric softener, which will increase the yield per machine. When tested via existing machines, the softener has increased revenues by 15%.

The level of capex in the period reflects the Group's focus and discipline around identifying high footfall locations where the Revolution units will be highly profitable rather being wholly focused on the number of units deployed.

The UK, Ireland, Portugal, France and Spain remain key geographies for growth and the Group is looking to extend operations into Germany and Austria.

The Group is still on track to deploy its target of 6,000 units (owned and sold) by the end of the Group's 2020 financial year.

Kiosks

High-quality digital printing services

The number of kiosks in operation reduced primarily due to the restructuring of Photo-Me Retail, which resulted in the removal of machines located in shops which were closed. These Speedlab units were transferred to Photomaton in France and have been refurbished prior to being deployed to replace previous generation machines in the country. This explains the decline in revenue and significant increase in capex in the period whilst the machines have improved revenue following relocation in France, there was a period of time when the machines were not operational.

Investment in innovation

After the period end in November 2018, the first banking booth, which provides front-end retail banking services to customers, was launched in partnership with Anytime ("Anytime"), a Belgian Fintech company.

The first ten enabled booths were unveiled in Paris, allowing customers to open a personal or professional bank account and scan in supporting documents. It then takes two days for a new account to be opened once compliance checks have been completed. The new client will receive a credit card by post within two days of the account opening.

Photo-Me has an extensive network of booths throughout Europe. "Anytime" believe that Photo-Me's technology will enable it to address a new market and that in the future the booth will offer further banking services to its clients. In the long-term, customers will be able to deposit cheques and cash in the booths and speak directly to bank specialists through the screen.

REVIEW OF PERFORMANCE BY GEOGRAPHY

Commentary on the Group's financial performance are set out below in line with the segments as operated by the Board and the management of Photo-Me. These segmental breakdowns are consistent with the information prepared to support the Board decision process. Although the Group is not managed around product lines, some commentary below relates to the performance of specific products in the relevant geographies.

Key financials

The Group reports its financial performance based on three geographic areas of operation: (i) Continental Europe; (ii) UK & Ireland; and (iii) Asia.

Whilst reported revenue declined by 2.0%, primarily due to restructuring in the UK, underlying revenue grew by 2.5%.

5 For constant currency comparatives, average rates of exchange used were £/€ 1.139 (H1 2018: 1.129), £/Yen 146.057 (H1 2018: 145.173)

Excluding the French commercial litigation outcome (H1 2018), the operating profit for Continental Europe is stable.

Excluding an exchange gain in H1 2018 (£0.9 million), the UK operating profit is down (-28%), due to large order lags in B2B and third-part sales activities which will be widely recovered in the second half.

Underlying Asian operating profit before restructuring is up 14.5% (H1 2019: £2.7 million compared with H1 2018: £2.4 million up 15%).

Vending units in operation 

As at 31 October 2018, the Group's estate comprised 46,733 units, broadly flat compared with the same period last year due to several factors.

In Continental Europe, units in operation increased by 2%, reflecting continued Laundry expansion and the installation of photobooths.

In the UK & Republic of Ireland, the number of Revolution machines increased significantly whilst the overall number of units in operation decreased due to the removal of Speedlab kiosks related to the restructuring of Photo-Me Retail in H2 2018. These machines will be relocated to other geographies, and unprofitable photobooths and children's rides have also been removed and sold to third parties. This decline in units was partially offset by an increase in the installation of Revolution machines at highly profitable sites.

In Asia, operated units declined slightly compared with same period last year, due to the removal of certain unprofitable machines during the restructuring programme in Japan.

Continental Europe

Continental Europe remains our main revenue growth territory, up 7% compared with the same period last year, driven by the expansion of Laundry services. Excluding the favourable litigation outcome in H1 2018, operating profit was stable at £20.7 million in H1 2019 compared with £20.9 million in H1 2018. EBITDA was up 1%.

The Group remains in discussions with the French government regarding the extension of its secure photo ID transfer technology to include photo ID for new passports and identification cards. Advanced discussions continued with the Dutch government regarding deployment of this technology for use in driving licences in the Netherlands.

The Laundry business continued to perform well, including a first-time contribution from La Wash Group, which was acquired in May 2018 for a consideration of £4.75 million. Expansion of Revolution laundry operations in Portugal, France and Spain has continued and the Group continues to assess the German market.

At 31 October 2018, 53% of the Group's total units in operation were situated in Continental Europe (H1 2018: 51%).

UK & Republic of Ireland (including Corporate)

As expected, the restructuring of Photo-Me Retail in H2 2018 had a negative impact on revenue in this geography, which declined by £5.3 million. In addition, there was some impact on revenue from the removal of unprofitable children's rides in H1 2018.

Excluding the one-off operations (£3.3 million), operating profit was up 8.2%.

In this geography, the Group has successfully diversified its photobooth services with the roll out of secure digital upload technology for Irish Online Passport renewal and British Passport renewals. In total, 2,950 photobooths are now enabled for UK passport renewals with a target of 4,000 enabled photobooths by the end of December 2018.

The Group continues to increase its Laundry presence in the Republic of Ireland, with Laundry revenues now accounting for 75% of the country's total revenue (H1 2018: 70%). In the UK, the group continue to install Revolutions on very profitable sites (187 units).

At 31 October 2018, 26% of the Group's total units in operation were situated in the UK & Republic of Ireland (H1 2018: 27%).

Asia

Revenue in Asia reduced by 3%, which was a good performance given that the extent of the challenges in the Japanese market was not evident until H2 2018. The Board took swift action in H2 2018 to address the highly competitive market conditions. In line with the previously announced restructuring plan, administrative functions were streamlined, low revenue machines were relocated, and unprofitable units removed. The business has recovered faster than initially expected and is now performing well. Trading in the other countries in Asia remains strong.

Excluding the £1.2 million one-off restructuring cost incurred in H1 2019, operating profit increased by 14.5% to £2.7 million. In the second half, the Group will see the full benefit of this restructuring programme. In FY 2019, the total restructuring cost for Japan is expected to be between £1.5 to £2.0 million.

Whilst the photo identification market in Japan remains highly competitive, the Board continues to believe there are growth opportunities given Photo-Me's dominant market position in the country. As a result, the Group intends to commence the deployment of its new units which have a significantly lower production cost than the units deployed previously and will offer a 35% faster return on investment.

At 31 October 2018, 21% of the Group's total units in operation were situated in Asia (H1 2018: 22%).

Statement of Financial Position

Shareholders' equity as at 31 October 2018 totalled £133.2 million (30 April 2018: £143.3 million), equivalent to 35.3 pence (30 April 2018: 37.9 pence) per share.

The Group's net financial position remains strong, with a net cash balance of £32.4 million as at the 31 October 2018 (31 October 2017: £47.1 million, 30 April 2018: £26.7 million).

PRINCIPAL RISKS

Similar to any business, the Group faces risks and uncertainties that could impact the achievement of the Group's strategy. These risks are accepted as inherent to the Group's business. The Board recognises that the nature and scope of these risks can change and so regularly reviews the risks faced by the Group as well as the systems and processes to mitigate them.

The table below sets out what the Board believes to be the principal risks and uncertainties, their impact, and actions taken to mitigate them.

GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 31 October 2018 

GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME (continued)

for the six months ended 31 October 2018

All results derive from continuing operations.

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

GROUP CONDENSED STATEMENT OF FINANCIAL POSITION

as at 31 October 2018

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 2018

GROUP CONDENSED STATEMENT OF CASH FLOWS (continued)

for the six months ended 31 October 2018

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 2018

GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY (continued)

for the six months ended 31 October 2018

GROUP CONDENSED STATEMENT OF CHANGES IN EQUITY (continued)

for the six months ended 31 October 2018 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 2018 ("the Interim Report") were approved and authorised for issue by the Board of Directors on 7 December 2018. 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 Unit 3B, Blenheim Rd, Epsom, KT19 9AP, Surrey.

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

This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 30 April 2018. The condensed consolidated interim financial statements comprise the unaudited financial information for the six months ended 31 October 2018 and 31 October 2017, together with the audited results to 30 April 2018. 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 2018. 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 2018 are available at www.photo-me.com or upon request from the Company's registered office at Unit 3B, Blenheim Rd, Epsom, KT19 9AP, Surrey.

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 2018 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 (2) or (3) 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 2018, except as indicated below.

New standards adopted in the period:

The Group has implemented, for the first time IFRS 9: Financial Instruments and IFRS 15: Revenue from Contracts with Customers for the financial year beginning on 1 May 2018. Neither standard had a material impact on the Group's financial position or performance, therefore no restatement of the comparative figures has been required.

IFRS 9 - Financial Instruments

IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting. 

Changes to the classification of financial assets on transition is shown in note 12.

Changes in accounting policies resulting from the adoption of IFRS 9 will generally be applied retrospectively, except as described below:

The Group has taken advantage of the exemption allowing it not to restate comparative information for prior periods with respect to classification and measurement (including impairment) changes. Differences in the carrying amounts of financial assets and financial liabilities resulting from the adoption of IFRS 9 will generally be recognised in retained earnings and reserves as at 1 May 2018.

The following assessments have to be made on the basis of the facts and circumstances that exist at the date of initial application.

· The determination of the business model within which a financial asset is held.

· The designation and revocation of previous designations of certain financial assets and financial liabilities as measured at FVTPL.

· The designation of certain investments in equity instruments not held for trading as at FVOCI. 

IFRS 15 Revenue from contracts with Customers

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes.

The Group has adopted IFRS 15 using the cumulative effect method, with the effect of initially applying this standard recognised at the date of initial application (i.e. 1 May 2018). As a result, the Group will not apply the requirements of IFRS 15 to the comparative period presented.

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 2019 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 2018 Annual Report. The effect of adopting new standards for the 2019 year end has not had a material impact on this Interim Report. Accordingly, not transition note is included.

Significant new standards not yet effective

In January 2016 the IASB issued IFRS16 Leases which is effective for annual reporting periods beginning on or after 1 January 2019. Under this standard all leases, both finance and operating will be included on the balance sheet. The Group is currently studying the impact of IFRS 16 on its operating leases, implementing software systems and examining the extent to which commission arrangements meet the definition of a lease under IFRS 16.

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 2018.

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 directors consider it necessary to present certain large and unusual items (Specific items) separately in the income statement in order to show the long-term performance trend of the group more clearly. The presentation of Specific items, as described above is also a non-GAAP measure.

For those years where Specific items are shown in the Group statement of Comprehensive Income an alternative earnings per share is shown in the earnings per share note. Alternative earnings per share and alternative diluted earning per share are shown and are calculated on earnings available to Ordinary shareholders excluding Specific items.

Underlying results are reported results adjusted to exclude the effect of Specific items.

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 2018 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 2018.

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 IFRS 8, 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 strongest for the Group in terms of profits, and this is expected to be the case again for the current year ending 30 April 2019.

Specific items

Operating profit UK & Ireland Segment in the period to 31 October 2018 includes restructuring costs of £1,207,000 relating to the Group's Japanese operations.

Other net gains of £560,000 in the period to 31 October 2018 includes the gain of £3,223,000 on the disposal of Stilla Technologies SA, previously accounted for as an associate, and the mark to market loss of £2,663,000 arising on the fair valuation of Max Sight Holdings Limited at reporting date.

Specific items

Operating profit UK & Ireland Segment in the period to 31 October 2017 includes restructuring costs of £921,000 relating to the Photo-Me Retail Limited business unit and in Corporate, a profit of £2,320,000 arising on the disposal of the former head office building in Bookham.

Specific items

Operating profit UK & Ireland Segment in the period to 30 April 2018 includes restructuring costs of £2,630,000 relating to the Photo-Me Retail Limited business unit and in Corporate, a profit of £2,320,000 arising on the disposal of the former head office building in Bookham.

Other net gains of £3,708,000 in the year to 30 April 2018 includes the gain on the deemed disposal of the Group's interest in Max Sight Limited and Fullwise Limited.

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 2019.

The UK 2016 Finance Act was enacted in September 2016 and confirmed the basic rate of UK Corporation tax at 19% for the financial years 2018 and 2019 and 17% for the financial year 2020.

5. Dividends

Period ending 31 October 2018

The Board declared an interim dividend of 3.71p per share for the year ending 30 April 2018, paid on 11 May 2018 to shareholders on the register on 6 April 2018. The Board proposed a final dividend of 4.73p per share for the year ending 30 April 2018 which was approved by shareholders at the Annual General Meeting held on 24 October 2018 and paid on 9 November 2018.

Period ending 31 October 2017

The Board declared an interim dividend of 3.09p per share for the six months ended 31 October 2017, which was paid to shareholders on 11 May 2018.

The Board proposed a final dividend of 3.94p per share for the year ended 30 April 2018 which was approved by shareholders at the Annual General Meeting held on 25 October 2017. Accordingly the amount is included in dividends 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. The final dividend was paid on 10 November 2017.

Financial year ended 30 April 2018

The Board declared an interim dividend of 3.09p per share for the six months ended 31 October 2017, which was paid to shareholders on 11 May 2018.

The Board proposed a final dividend of 3.94p per share for the year ended 30 April 2018 which was approved by shareholders at the Annual General Meeting held on 25 October 2017 and paid on 10 November 2017.

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 reviews the Group's performance on an "adjusted basis", that is to say taking into accounts "other items". The Group's income statement and segmental analysis show operating profit before and after other items. The presentation and use of other items are a non-GAAP measure and the use of this measure may not be comparable to similarly titled measures used by other companies. Other 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 classified as other and warrants separate disclosure by considering both qualitative and quantitative factors, such as the nature, frequency and 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 other items are identified by their size, nature or incidence.

6. Earnings per share (continued)

The impact of other 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 other items. Details of Specific items are shown in note 3.

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