Putting you in the Picture
for 50 years
Photo-Me International plc
Annual Report 2012
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Photo-Me international plc
Church Road
Bookham
Surrey KT23 3EU
Tel:
Fax:
Web: www.photo-me.co.uk
+44 (0)1372 453399
+44 (0)1372 459064
Photo-Me has two main activities:
operations and sales & servicing.
operations comprises the operation of unattended vending equip-
ment, in particular photobooths, digital printing kiosks, amusement
machines and business service equipment.
sales & servicing comprises the development, manufacture, sale
and after sale servicing of this operations equipment and a range
of photo processing equipment, including photobook makers, kiosks
and minilabs, together with the servicing of other third party equipment.
1962
Mark (age 9)
Business Profile
01 2012 Highlights
02 50 years of Photo-Me
04 Photo-Me at a Glance
the year in review
06 Chairman’s Statement
08 Business and Financial Review
governance
16 Board of Directors and Secretary
18 Report of the Directors
21 Corporate Governance
25 Corporate Responsibility
28 Remuneration Report
Photo-Me International plc
35 Statement of Directors’ Responsibilities
36
Independent Auditor’s Report
financial statements
38 Group Statement of Comprehensive Income
39 Statements of Financial Position
40 Group Statement of Cash Flows
41 Company Statement of Cash Flows
42 Group Statement of Changes in Equity
43 Company Statement of Changes in Equity
44 Notes to the Financial Statements
97 Five year Summary
company information
98 Company Information and Advisors
99 Shareholder Information
2012
Mark (age 59)
Providing ID photos
for 50 years
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2012 HIgHlIgHTs
Revenue
EBITDA
Pre-tax profit
£207.8m
-5.4%
222.5
219.8
210.5
207.8
£44.0m
-7.4%
47.6
44.2
44.0
38.6
£20.1m
+11.9%
20.1
18.0
14.0
09
10
11
12
09
10
11
12
1.6
09
10
11
12
Dividends per share
Net cash/(debt)
2.5p
+25.0%
2.5p
2.0p
1.25p
£51.8m
+27.4%
51.8
40.7
nil
09
10
11
12
09
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8.1
“ We have
continued to
improve our
profitability
thanks to a robust
performance from
our Operations
division”
John lewis
(23.5)
Annual Report for the year ended 30 April 2012
01
50 YEARs of PHoTo-ME
1960’s
1962
Photo-Me International
floats on the London
Stock Exchange
1966
Photo-Me’s black and white
photos are granted approval
for British passports
1980’s
Photo-Me’s
international expansion
continues by the
opening of operations
in new territories and
by acquisition
1 9 7 0 ’s
M o r e p a s s p o r t
a p p r o v a l , t h i s t i m e
f o r P h o t o - M e
c o l o u r p i c t u r e s
02
Photo-Me International plc
1990’s
Photo-Me merges with French
compan y, KIS, which in vented
the world’s first digital
photobooth
The European Pron tophot
Group o f compan ies
a cquired – in creasin g the
Group’s photobooth operations
B
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2000’s
Products such as
digital printing kiosks
and childrens’ rides
lead the Group’s
diversification
programme
2010’s
The new Photo-Me booth
by S+arck® introduces
the ultimate photobooth
solution using state-of-
the-art technology
Unique instant
photobook kiosks
also invented by
Photo-Me
Annual Report for the year ended 30 April 2012
03
PHoTo-ME AT A glANcE
Photobooths
For 50 years, Photo-Me
has been the world’s
largest operator of
photobooths, with market-
leading photographic quality
and innovative technology.
Digital
Printing Kiosks
Benefitting from the photographic
expertise and excellence in
self-service systems, Photo-Me’s
digital printing kiosks offer a
wide range of print formats with
a user-friendly interface.
Mini labs
The new DKS 18
series of professional
digital minilabs uses the
latest image enhancing
technologies and offers
print formats of up to
12”x 36”.
our
Products
Amusement
Photo-Me offers the latest
in interactive character rides,
exciting new simulator rides
and a range of other coin-
operated amusement machines.
Photobooks
The Photobook Maker and
MyPocketbook are the only
self-service kiosks in the world
to produce instant photobooks,
automatically, in a few minutes.
The Photobook Builder links with a minilab,
offering professional photographic
retailers the potential to
sell added value
products.
Business services
Easy to use, coin-operated machines
offering an innovative range of
services, including copiers and
business card machines.
The market leader, with a reputation
for quality equipment supported by
an excellent service operation
04
Photo-Me International plc
B
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UK & Ireland:
United Kingdom
and Ireland
14,950 sites
A s i a :
C h i n a , J a p a n
a n d S i n g a p o r e
8 , 9 5 0 s i t e s
continental Europe:
Austria, Belgium,
France, Germany,
Hungary, Luxembourg,
Netherlands, Portugal,
Switzerland
19,400 sites
2000’s
Awards frequently
received for Best
Photo Printing
Technology and
Innovative Products
Annual Report for the year ended 30 April 2012
05
cHAIRMAN’s sTATEMENT
These are Photo-Me’s 50th set of annual results
since its listing as a public company in 1962. It is my
pleasure therefore to report another year of progress,
in global economic circumstances which are probably
unprecedented in the Group’s history.
Servicing subsidiary and transferred management control
to the CEO of the European activities. This means that
there is now a centralised logistics platform for the
Group and we have made savings by reducing both the
level of stocks and staff numbers.
Results
Despite revenue being 5.4% lower over the year, we
have continued to improve our profitability thanks to
a robust performance from our Operations division in
our key geographic markets. Although we experienced
disappointing trading in Sales & Servicing, where further
restructuring is proving necessary, we have again
witnessed a good improvement in Group pre-tax profit,
from £18.0 million last year to £20.1 million this year
and a further increase in our net cash resources, which
increased by £11 million to nearly £52 million.
strategy
Our strategy is to use the significant cash flow generated
from our long established photobooth business to
develop new and complementary products which will
drive growth in the future. Alongside this, we are keen
to penetrate new geographic markets, which offer the
potential of long-term growth.
We have made good progress over the last two years
implementing this, with the introduction of the new
designer photobooth by Starck, a new minilab and
a range of pocketbook and photobook machines.
However, while the rollout of the new photobooth
has gone according to plan, other product sales have
been adversely affected by weakness in the global
economy, curtailing capital investment both from
large corporations and individual retailers.
In addition, we have introduced new software relating to
both the analysis of machine takings – which will allow
better ongoing management – and accounting, with a
reduction in associated licence costs.
Dividends
We reintroduced dividend payments in 2010. That year
we paid 1.25 pence per share and last year we increased
that by 60% to 2.0 pence per share. This year, we are
pleased to be recommending a final dividend of 1.25
pence to give a total dividend for the year of 2.5 pence,
representing a further increase of 25% over the year.
If approved at the Annual General Meeting on
13 September 2012, the final dividend will be paid on
7 November 2012 to shareholders on the register at
the close of business on 28 September 2012. The ex-
dividend date is 26 September 2012.
Board
In September 2011 the Board was deeply saddened
to lose Dan David, who passed away suddenly. Dan
served on the Board for two periods: from 1968 to 2007
(including periods as Executive Chairman from 1992
to 1998 and as Non-executive Chairman from 1998 to
2005) and from July 2009, as a Non-executive Director. In
2005 Dan was appointed Honorary Life President of the
Company in recognition of his significant contribution to
the development of the Company and its Group.
costs
We have borne down on costs in the recent past but the
continued travails caused by the worldwide recession
have led us to undertake additional changes this year.
We have restructured further the French Sales and
In March 2012 the Board was strengthened by the
appointment of Jean-Marcel Denis and Yitzhak Apeloig
as Non-executive Directors. Due to his strong financial
background, Jean-Marcel has been appointed Chairman
of the Audit Committee.
06
Photo-Me International plc
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The Board once again anticipates further
progress over the coming year
Employees
On behalf of the Board, I would like to thank our
management and employees for all their individual
hard work, dedication and loyalty throughout the year.
outlook
Our balance sheet is strong and we are continuing
to reduce our costs. Despite the difficult trading
background we intend to press ahead with new product
development and we remain keen to add to our current
portfolio of businesses if the right opportunities arise.
Subject to the risks and uncertainties detailed in the
Business and Financial Review, the Board once again
anticipates further progress over the coming year.
John lewis
Non-executive Chairman
2009
Award for the Photobook
Maker as Best Photo Kiosk.
Annual Report for the year ended 30 April 2012
07
07
BUsINEss AND fINANcIAl REvIEw
Business Review
Photo-Me has two principal activities, which the Board monitors in assessing the
Group’s performance:
Operations – which comprises the operation of unattended vending equipment, primarily
photobooths, digital photo kiosks, photobook makers, amusement machines and business
service equipment.
Sales and Servicing – which comprises the development, manufacture, sale and after sale
servicing of the above-mentioned Operations equipment and a range of photo processing
equipment and photo album maker solutions.
Combined
The business is international in its reach and focused on three main geographic areas at
present: Continental Europe, UK & Republic of Ireland and Asia.
The Group continued to improve its overall profitability. Geographically, the Asian business
recovered from the previous year’s earthquake in Japan and the UK and Europe both
improved despite the European business being adversely affected by a weak performance
in its Sales & Servicing division.
Geographical analysis of revenue and profit (by origin)
Year to 30 April
Continental Europe
UK & Republic of Ireland
Asia
Revenue
operating profit
2012
£m
114.0
47.6
46.2
2011
£m
122.9
53.6
43.3
207.8
219.8
Change
%
-7.2
-11.2
+6.7
-5.4
2012
£m
13.6
2.5
3.9
20.0
2011
£m
13.3
2.0
3.1
18.4
Change
%
+2.7
+23.0
+26.2
+8.9
Continental Europe, which includes the largest of the Group’s Operations activities, together
with the great majority of Sales & Servicing revenue, once again comprised the largest
element of reported Group revenue and contributed the majority of Group operating profit.
Substantially all Group overheads are charged against the UK & Republic of Ireland.
Revenue 2012
Continental Europe
£114.0m
UK & Republic of Ireland
£47.6m
Asia
£46.2M
08
Photo-Me International plc
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Operations
Year to 30 April
Revenue
operating profit
2012
£m
178.0
2011
£m
176.8
Change
%
+0.7
2012
£m
25.1
2011
£m
21.2
Change
%
+18.7
Operations contributed 86% (2011: 80%) of revenue. Divisional revenue increased by
0.7%, but operating profit rose by 18.7%, led by a strong French performance, but
there were also improvements in Germany (where management has been strengthened),
Switzerland and Japan.
At the year end, the total number of vending machines sited worldwide was 43,300 (2011:
43,700), the small reduction in the year comprising an increase of over 1,000 in the number
of photobooths, combined with a reduction in the quantity of low value amusement
machines. With 23,500 now sited, photobooths represent more than half of the total estate
of machines. This extensive network of sites, with long-standing site-owner contracts and
relationships, supplemented by an established field service and cash collection infrastructure,
represents one of Photo-Me’s greatest strengths.
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 19,400 (2011: 18,300) sites; the UK & Ireland for 14,950
(2011: 16,850); and Asia for 8,950 (2011: 8,550). Increasing the number of photobooth sites
remains a priority for the Group. Vending units provide good cash flow, supporting corporate
developments, including investment in R&D to prepare for the next generation of products.
In the UK & Ireland, revenue from Operations was down 8.7% and operating profits were
7.9% lower, with the principal reasons for this being the loss of part of the business of
supplying driving licence photographs and an economic climate that remains testing. There
have been some reductions in staff numbers in the UK and this area has now been brought
fully under the control of the CEO of the European activities, who has done an excellent job
in running Continental Europe. Indeed, in Europe, Operations revenues rose by 3.3%, while
operating profits were 28.1% higher, led once again by a strong showing from France, but
with good support from other areas, such as Switzerland and Germany. Asian revenues (up
5.7%) and profits (up 21.9%) reflect the recovery from the adverse effect of the Japanese
earthquake in the previous year.
Annual Report for the year ended 30 April 2012
09
BUsINEss AND fINANcIAl REvIEw CONTINUED
Photobooths
Photobooths are an efficient and competitively-priced provider of ID and fun photographs
and represent a mature cash generative business. Over the year the number of photobooths
increased by over a thousand, bringing to 23,500 the total number of sites, internationally.
The roll-out of the Group’s new designer Photobooth by Starck – is progressing to plan and
results to date have been encouraging. Whilst there were only 370 in operation at year-end,
the target over the next two years is to increase this by 2,000.
Progress in China has been slower than had originally been anticipated, but the Group
now has operating licences in Shanghai, Beijing and Guangzhou. This market needs to
be considered a long-term development prospect.
Digital printing kiosks and Photobook makers
Digital printing kiosks are very much focused in Continental Europe, particularly France
and Switzerland.
The market in France for digital printing kiosks remains positive and the introduction of the
Group’s new “all-in-one” kiosk, which also incorporates a pocketbook maker, has been well
received, and has generated improved revenues. This machine (producing prints or a printed
10x15cm photo album) gives Photo-Me a unique market offering. The range has now also
been augmented by the ability to produce large-format prints.
Amusement and business service equipment
Overall, this activity suffered against a poor general economic backdrop. However, in the UK,
the Group remains a major player and the largest operator of coin-operated children’s rides.
The latest range of simulator-type rides is generating encouraging results.
Sales & Servicing
Year to 30 April
Revenue
operating profit/(loss)
2012
£m
29.8
2011
£m
43.0
Change
%
-30.7
2012
£m
(2.4)
2011
£m
0.5
Change
%
-556.9
Substantially all of Sales & Servicing revenue derives from the sale to third parties of retail
photographic equipment, in the form of machines and related supplies and consumables.
Revenue decreased by 30.7% and a loss of £2.4 million was recorded compared to a profit of
£0.5 million in 2011.
This year’s result from KIS (the R&D and manufacturing unit in France) was very
disappointing, with sales of product constrained by the unwillingness of large companies to
invest in new equipment in the current market, while individual retailers have been unable
to access capital in many cases. Whilst the business has been rationalised and restructured
in the recent past, a far more significant restructuring has been started which has resulted in
both a reduction in staff numbers and the transference of the maintenance and refurbishing
activities of KIS into a new Group company under the management of the CEO of the
European activities. The refurbishing activities in particular are very important for the
Operations division and the new smaller company will be more efficient and focused.
The Group remains in discussions with existing OEM customers regarding further orders for
its pocketbook makers and photobook builders. The prospects for the latter should also be
enhanced by the ability to process inkjet material. Sales of the Group’s new DKS4 minilab
have made a slow start, as the background in the photographic market remains difficult, as
demonstrated by Kodak’s move into Chapter 11 in early 2012.
10
Photo-Me International plc
financial Review
Statement of comprehensive income
The following table summarises the results, analysed between the two Divisions, Operations
and Sales & Servicing:
Year to 30 April
Operations
Sales & Servicing
Group overheads
Revenue
operating profit/(loss)
2012
£m
178.0
29.8
2011
£m
176.8
43.0
Change
%
+0.7
-30.7
207.8
219.8
-5.4
2012
£m
25.1
(2.4)
(2.7)
20.0
2011
£m
21.2
0.5
(3.3)
18.4
Change
%
+18.7
-556.9
+20.0
+8.9
m
0
.
0
2
£
m
4
.
8
1
£
1
1
0
2
2
1
0
2
m
1
.
5
1
£
0
1
0
2
Foreign exchange rate movements had little effect on the revenue and operating profit, both
divisionally and centrally.
Operating Profit
(2010: excluding special items
and discontinued activities)
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Turnover decreased by 5.4% to £207.8 million.
EBITDA was 7.4% lower at £44.0 million (2011: £47.6 million), but the figure remains
substantial, representing 21.2% of revenue.
Operating profit improved by 8.9% from £18.4 million to £20.0 million.
Net finance revenue was £0.1 million, compared to net finance costs of £0.4 million last year.
The pre-tax profit increased by 11.9% to £20.1 million (2011: £18.0 million).
After a tax charge of £5.6 million (2011: £4.3 million), representing a charge of 27.8% (2011:
23.6%) the profit after tax of £14.5 million (2011: £13.8 million) reflected a 5.8% improvement.
The fully diluted earnings per share from continuing operations were 3.95 pence
(2011: 3.74 pence).
Statement of financial position
Shareholders’ equity totalled £95.8 million (2011: £87.8 million), equivalent to 26.4 pence
(2011: 24.3 pence) per share.
Cash generation has remained strong and we finished the year with a net cash balance of
£51.8 million (2011: £40.7 million), leaving the Group well placed for the future. The improvement
in the net cash position has been very substantial over the past three years, with a net change
of £75.3 million from net debt of £23.5 million at 30 April 2009.
Annual Report for the year ended 30 April 2012
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BUsINEss AND fINANcIAl REvIEw CONTINUED
Funding and treasury policy
The £11 million net cash inflow is explained in the following summarised cash flow statement:
opening net cash
cash flow
Operating profit
Depreciation
Working capital
Taxation
Interest paid
All others
Operating cash flow
Use of cash flow
Net capital expenditure
Dividends paid
All others
Net cash inflow
closing net cash
2012
£m
40.7
20.0
24.0
0.5
(5.3)
(0.6)
(2.1)
36.5
(17.5)
(7.2)
(0.7)
(25.4)
11.1
51.8
2011
£m
8.1
18.4
29.2
10.7
(2.3)
(0.8)
0.1
55.3
(19.5)
(4.5)
1.3
(22.7)
32.6
40.7
Capital structure
The Group’s funding policy is to maintain a timely flow of funds to meet anticipated
funding requirements.
The Group manages its capital to sustain the future development of the business and to
maximise long-term shareholder value. In order to maintain or adjust the capital structure,
the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares, sell assets or review the level or type of debt.
The Group’s policy is to use a mixture of long-term and short-term borrowings. At
30 April 2012, the Group’s borrowings were mainly short-term, a situation which is
untypical. The Group is currently evaluating new borrowing sources.
Surplus cash is placed in bank deposits and other investments with high credit ratings
and kept under constant review.
The Group is primarily financed by Ordinary shares, retained profits and borrowings.
Financial instruments
The Group’s principal financial instruments comprise bank loans, finance leases and
overdrafts. These instruments are used to raise finance for the Group’s operations and to
cover capital expenditure and working capital requirements.
The Group takes the view that short-term debtors and creditors are not financial instruments
that play a significant medium to long-term role in the financial risk profile of the Group.
12
Photo-Me International plc
Financial risks
The Group is exposed to the following risks arising from financial instruments: credit risk,
liquidity risk and market risk.
Credit risk
To minimise the credit risk relating to cash at bank in the current uncertain economic times,
the Group regularly reviews its relationships with banks. During the year it has sought to
ensure that cash at bank is spread amongst the leading banks in the countries concerned,
being financial institutions that have a strong credit rating.
Liquidity risk
The Group’s objective is to ensure adequate facilities are available and to maintain a balance
between continuity of funding and flexibility, through use of overdrafts, bank loans and
finance leases. As already stated, at 30 April 2012 the Group had a net cash balance of
£51.8 million. Surplus funds are generally available at short notice.
Market risk
Market risk arises from changes in exchange rates and interest rates. The Group’s overall risk
management programme focuses on the unpredictability of financial markets and seeks to
minimise potential risks for the Group. The Board regularly reviews and agrees policies for
managing risks.
Foreign exchange risk
The Group has a number of overseas subsidiaries whose functional currency is not
Sterling. The principal currencies of the Group are Sterling, Euro, Swiss francs and
Japanese yen. As a result, changes in exchange rates can impact on the net assets of the
Group’s balance sheet. Individual subsidiaries are exposed to exchange rate movements
as a result of selling or purchasing in foreign currencies. Hedges may be taken out to
cover forward foreign exchange contracts to assist in managing the exchange risk from
trading. Any amounts hedged are generally short-term (less than one year) and are
monitored for their effectiveness.
Interest rate risk
The Group’s income and operating cash flows are substantially independent of changes in
interest rates. The Group finances its operations through a mixture of retained profit, cash
balances and bank borrowings. The Group borrows in the desired currencies at both fixed
and floating rates of interest. The Group regularly monitors the possibility of switching from
floating to fixed rate and from fixed to floating. It also monitors the possibility of using
cap and floor arrangements. The Group may also take out derivative contracts to limit
interest rate exposure. At both 30 April 2012 and 30 April 2011 the majority of the Group’s
borrowings were subject to floating rates of interest.
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Annual Report for the year ended 30 April 2012
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Key performance indicators
The Group measures its performance using a mixture of financial and non-financial indicators.
These are aligned to the Group’s long-term strategy of enhancing shareholder value.
vending sites:
Total
Photobooths
Digital printing kiosks & photobook makers
Other vending equipment
Revenue:
Total
Operations
Sales & Servicing
EBITDA
operating profit/(loss):
Total
Operations
Sales & Servicing
Group overhead
Increase in net cash position
gearing ratio
gross capital expenditure
Depreciation and amortisation
Research and development expenditure
(including amounts capitalised)
Research and development expenditure as
a percentage of sales & servicing revenue
(including inter-segment sales)
2012
2011
Change
43,300
23,500
5,100
43,700
22,400
5,050
14,700
16,250
-0.9%
+4.9%
+1.0%
-9.5%
£207.8m £219.8m
£178.0m £176.8m
-5.4%
+0.7%
£29.8m
£43.0m
-30.7%
£44.0m
£47.6m
-7.4%
£20.0m
£18.4m
+£1.6m
£25.1m
£21.2m
+£3.9m
£(2.4)m
£0.5m
-£2.9m
£(2.7)m
£(3.3)m
+£0.6m
£11.1m
£32.6m
-£21.5m
–
–
£19.1m
£20.6m
£24.0m
£29.2m
–
-£1.5m
-£5.2m
£3.6m
£4.1m
-£0.5m
7.1%
6.4%
+0.7%
Financial objective
Photo-Me’s main financial targets for the future are to increase revenue, to maintain
profitability and to provide attractive returns for investors backed by the Group’s strong
cash generation.
14
Photo-Me International plc
…we finished the year with a net cash balance of
£51.8 million, leaving the Group well placed for the future
Risks and Uncertainties
The Group’s operational performance and growth are influenced and impacted by a
number of risks.
The following key risks have been identified by the Board:
Risk related to the economic backdrop
• Financing difficulties for the Group’s customers: sales of equipment to retail customers
are dependent upon the ability of the Group’s customers to find capital finance providers
• Consumer spending contraction: the worldwide recession could lead to reductions in
discretionary spending, impacting upon the Group’s Operations revenues
• Volatility in foreign exchange rates: as the large majority of the Group’s revenue and
profits are generated outside of the UK, Group results could be adversely impacted
when those currencies are translated into Sterling
Operational risks
• Reduction in the retail site-owner base: with the possible collapse of additional
established retail chains, which traditionally have provided the base of sites for the
Group’s vending equipment, the Group could lose Operations revenue streams and
the market for equipment in the Sales & Servicing activity could be reduced
• Reliance on OEM sales: the Group’s Sales & Servicing business is heavily dependent on
its ability to secure further material orders for the photobook maker suite of products
Risks related to regulation
• Centralisation of production of ID photos: in many European countries where the Group
operates, if governments were to implement centralised image capture for biometric
passport and other applications, the Group’s Operations revenues and profits could be
seriously affected
Some of these risks are beyond the control of the Group but the Board is continuously
analysing and assessing the risks faced and improving the policies and plans to manage
the risks identified.
serge crasnianski
Chief Executive Officer
françoise coutaz-Replan
Group Finance Director
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Photo-Me continues
to lead the way in
producing high quality
ID photos, using the
latest technology to
provide a vital service
conveniently
Annual Report for the year ended 30 April 2012
Annual Report for the year ended 30 April 2012
15
BoARD of DIREcToRs AND sEcRETARY
1
3
2
1. John lewis oBE
Non-executive Chairman
Joined the Board in July 2008 and appointed Chairman
in May 2010. Chairman of the Nomination Committee
and a member of the Audit and Remuneration
Committees. Currently a consultant to Messrs Eversheds
and a Director of AIM market company, Prime People
plc as well as various private companies. Previously
a practising solicitor and partner in Lewis Lewis and
Co which became part of Eversheds after a series of
mergers. Also previously served as Chairman of Cliveden
Plc and Principal Hotels plc and as Vice Chairman of John
D Wood & Co plc and Pubmaster Group Ltd.
2. serge crasnianski
Chief Executive Officer and Deputy Chairman
Appointed to the Board in May 2009. Previously served
on the Board from 1990 to 2007; until 1994 as a Non-
executive Director, from 1994 as an Executive Director
and as Chief Executive Officer from 1998 to 2007.
Founded KIS in 1963.
3. françoise coutaz-Replan
Group Finance Director
Appointed to the Board in September 2009. Joined KIS
in 1991. Appointed Finance Director of Photo Me France
and KIS in November 2007.
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Photo-Me International plc
4
6
5
7
4. Emmanuel olympitis
Non-executive Director
Appointed to the Board in December 2009. Senior
Independent Non-executive Director, Chairman of
the Remuneration Committee and a member of the
Nomination and Audit Committees. Previous directorships
include China Cablecom Holdings Limited (NASDAQ),
Canoel International Energy Limited (Canada), Matica
plc, Secure Fortress plc, Bulgarian Land Development plc,
Norman 95 plc, Pacific Media plc (Executive Chairman)
and Bella Media plc (Chairman). Early career in merchant
banking and financial services, including as Executive
Director of Bankers Trust International Ltd, Group Chief
Executive of Aitken Hume International plc and Executive
Chairman of Johnson & Higgins Ltd.
5. Jean-Marcel Denis
Non-executive Director
Appointed to the Board on 1 March 2012. Chairman of
the Audit Committee and a member of the Nomination
and Remuneration Committees. Founded his own
auditing firm in 1970 in Paris; Auditeurs & Conseils
Associes (ACA) and sold his interest in ACA in 2005.
Subsequently a consultant in Finance & Conseils
Associes, which specialises in business valuations.
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6. Yitzhak Apeloig
Non-executive Director
Appointed to the Board on 8 March 2012. A qualified
accountant and Managing Partner of ATE Technology
Equipment B.V., a private equity firm active mainly in
Israel. Chairman of Leader Holdings and Investments Ltd,
Polar Communications Ltd and Greenstone Industries Ltd
and Director of Leader Capital Markets Ltd (all quoted
on the Israeli Tel Aviv Stock Exchange). Chairman of
RVB Holdings Ltd (quoted on the OTCBB in the U.S.A)
and also Chairman or Director of a number of other
private companies. Previously Executive Chairman of
Telit Communications plc, having led its flotation on the
London AIM market in 2005.
7. Robert lowes
Company Secretary
Joined the Group in 1981. Served as Company Secretary
from 1994 to April 2008 when appointed as an interim
Director. Resigned as a Director in July 2008, returning
to the position of Company Secretary.
Annual Report for the year ended 30 April 2012
17
REPORT OF THE DIRECTORS
The directors submit to the shareholders their report and the audited financial statements of Photo-Me International
plc for the year ended 30 April 2012. The Chairman’s Statement, Business and Financial Review and Corporate
Governance statement should be read as forming part of this report.
Principal activities
The principal activities of the Group continue to be the operation, sale and servicing of a wide range of instant
service equipment. The Group operates coin-operated automatic photobooths for identification and fun purposes
and a diverse range of vending equipment, including digital photo kiosks, amusement machines and business
service equipment. Sales and servicing comprises the manufacture, sale and after-sale servicing of both the above-
mentioned equipment and a range of photo-processing equipment, including photobook makers and minilabs.
The principal subsidiary and associated undertakings of the Group are shown on page 95.
Results and dividends
The results for the year are set out in the Group statement of comprehensive income on page 38.
The directors recommend a final dividend of 1.25p per Ordinary share which, if approved at the Annual General
Meeting, will be paid on 7 November 2012 to shareholders on the register at 28 September 2012 (ex-dividend date:
26 September 2012). This, together with the interim dividend of 1.25p per share paid on 8 May 2012, makes a total
dividend for the year of 2.5p per Ordinary share.
Review of the business and future developments
The Chairman’s Statement and the Business and Financial Review, which form part of this report, describe the
activities of the business during the financial year, recent events and the outlook for the future. A discussion of the
key risks facing the Group and an analysis of key performance indicators is also provided.
Market value of land and buildings
The directors consider that the market value of the Group’s interest in land and buildings (including investment
property) materially exceeds its aggregate net book value of £4,021,000 that is included in these financial statements.
Research and development
The Group is committed to its research and development programme in order to maintain its introduction to the
market of innovative products.
The expenditure incurred on the development of new vending equipment and photo-processing equipment is shown
in notes 4 and 11 to the financial statements.
Employees
Information on the Group’s employment practices is contained within the Corporate Responsibility statement on
page 25 and 27.
Board of directors and their interests
Details of the current directors of the Company can be found on page 16, together with a brief biography of each
director. John Lewis, Serge Crasnianski, Françoise Coutaz-Replan and Emmanuel Olympitis served on the Board
throughout the year under review. Jean-Marcel Denis was appointed to the Board on 1 March 2012 and Yitzhak
Apeloig was appointed on 8 March 2012.
The other director who served during the year was Dan David, who died on 6 September 2011.
As newly appointed directors, Jean-Marcel Denis and Yitzhak Apeloig will stand for re-appointment at the Annual
General Meeting in accordance with the Company’s Articles of Association. The directors retiring by rotation and
being put forward for re-appointment at the Annual General Meeting this year are Serge Crasnianski and Françoise
Coutaz-Replan.
Details of the directors’ contracts, emoluments and interests in shares and share options are given in the
Remuneration Report on page 28 to 34.
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Photo-Me International plc
Directors’ and officers’ liability insurance
The Company maintained directors’ and officers’ liability insurance cover throughout the financial year. This insurance
cover extends to directors and officers of subsidiary undertakings and remains in force.
Substantial shareholders
As at 27 June 2012, the Company has been notified of the following disclosable interests in the Ordinary shares of
the Company:
Serge Crasnianski (director)
Western Management Overseas Ltd
Dan David Foundation
Schroder Investment Management Limited
Norges Bank
Number of
Ordinary shares
% of total
voting rights
Nature
of holding
79,783,450
65,963,267
45,579,318
42,560,528
14,400,000
22.01
18.20
12.58
11.74
3.97
Direct
Direct
Direct
Indirect
Direct
Except for the above, the Company has not been advised of any shareholders with interests of 3% or more in the
issued Ordinary share capital of the Company.
Philippe Wahl, a former director of the Company, has declared an interest in the shares registered in the name of
Western Management Overseas Limited.
Share capital
The issued share capital of the Company, together with details of the movements in the Company’s issued share
capital during the year, are shown in note 20 to the financial statements. Each Ordinary share of the Company
carries one vote at general meetings of the Company. Following the exercise of share options since 30 April 2012,
the number of shares in issue has increased to 369,980,563, of which 362,475,563 shares carry voting rights (the
7,505,000 treasury shares carry no voting rights).
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Authority to purchase shares
The Company will seek approval at the 2012 Annual General Meeting to renew the authority for the Company to
make market purchases of up to 10% of its own Ordinary shares at a maximum price per share of not more than
5% above the market value. This authority will expire on the earlier of 18 months from the passing of the Resolution
or the conclusion of the next Annual General Meeting. The Company made no repurchases of shares in the year to
30 April 2012. The Company holds 7,505,000 Ordinary shares (2.0% of the issued Ordinary shares) purchased in
previous years, as treasury shares, which may be utilised for the issue of shares under the Company’s employee share
plans or can be resold for cash.
Additional information
Where not provided elsewhere in the Report of the Directors, the following provides the additional information
required to be disclosed in the Report of the Directors.
There are no restrictions on the transfer of Ordinary shares in the capital of the Company other than certain
restrictions which may from time to time be imposed by law (for example, insider trading law). In accordance with the
Listing Rules of the Financial Services Authority, certain employees are required to seek the approval of the Company
to deal in its shares.
The Company is not aware of any agreements between shareholders that may result in restrictions on the transfer of
shares or on voting rights.
The rules governing the appointment of directors is set out in the Corporate Governance report on pages 21 to 24. The
Company’s Articles of Association may only be amended by a special resolution at a general meeting of shareholders.
The Company is a party to a number of agreements with site-owners (such as major supermarket chains) which could
be terminable by the site-owner following a change of control.
Annual Report for the year ended 30 April 2012
19
REPORT OF THE DIRECTORS CONTINUED
There are no agreements between the Company and its directors or employees which provide for compensation for
loss of office or employment (whether through resignation, purported redundancy or otherwise) that occurs because
of a takeover bid.
The Company is not aware of any contractual or other agreements which are essential to its business which ought to
be disclosed in this Report of the Directors.
Related party transactions
Details of related party transactions are set out in note 29 to the financial statements.
Creditor payment policy
The Company does not follow a universal code which deals specifically with payments to suppliers but, where
appropriate, the Company’s practice is to:
• agree the terms of payment at the start of business with the supplier;
• ensure that those suppliers are made aware of the terms of payment; and
• pay in accordance with its contractual and other legal obligations.
United Kingdom subsidiaries follow the same policy and overseas subsidiaries are encouraged to adopt similar
policies, by applying local best practice. The Company’s average creditor payment period at 30 April 2012 was
53 days (2011: 43 days).
Going concern
Having reviewed forecasts, cash flow, financial resources and financing arrangements and after making enquiries,
the directors consider that the Company and the Group have adequate resources to remain in operation for the
foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing the financial
statements.
Financial instruments
Details of the financial risk management objectives and policies of the Group and exposure of the Group to foreign
exchange risk, interest rate risk and liquidity risk are given on pages 12 to 15 and note 15 to the financial statements.
Disclosure of information to auditors
The directors who held office at the date of approval of this Report of the Directors confirm that, so far as they
are each aware, there is no relevant audit information of which the Company’s auditors are unaware; and each
director has taken all the steps that he ought to have taken as a director to make himself aware of any relevant audit
information and to establish that the Company’s auditors are aware of that information.
Auditors
In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of KPMG Audit Plc
as auditor of the Company is to be proposed at the forthcoming Annual General Meeting.
Annual General Meeting
The Notice of the AGM, to be held on 13 September 2012, is sent to all shareholders. The Notice convening the meeting
provides full details of all the resolutions to be proposed, together with explanatory notes for the special business.
Copies of this Annual Report are sent only to shareholders who have requested or request a copy.
By order of the Board
Robert Lowes
Company Secretary
27 June 2012
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Photo-Me International plc
CORPORATE GOVERNANCE
(forming part of the Report of the Directors)
The Financial Services Authority requires listed companies to disclose, in relation to the UK Corporate Governance
Code (the “Code”), how they have applied its main principles and whether they have complied with its provisions
throughout the financial year.
Explanations of how the principles have been applied and the provisions complied with are set out below.
The Board
During the year under review, the Board lost one of its members, Dan David, who died on 6 September 2011. The
Board was strengthened by the appointment of additional non-executive directors, Jean-Marcel Denis on 1 March
2012 and Yitzhak Apeloig on 8 March 2012.
The Chairman has the overall responsibility for managing the Board. The Chief Executive Officer has responsibilities
for strategy, operations and results. Clear division of responsibility exists such that no one individual or group of
individuals can dominate the Board’s decision-making process. Throughout the year under review, John Lewis served
as Chairman and Serge Crasnianski served as Chief Executive Officer.
For the period until 1 March 2012, the Company acknowledges that its Board structure was non-compliant with the
Code provision that, as a ‘smaller company’ (as defined by the Code), the Company did not have two independent
non-executive directors excluding the Chairman. The Company became compliant with the Code on the appointment
of Jean-Marcel Denis, who the Board considers to be an independent non-executive director. The Board believes
that Yitzhak Apeloig is non-independent, due to his existing business relationships with two major shareholders
of the Company. Before his appointment, Yitzhak Apeloig confirmed to the Board that he will not represent these
shareholders, holds no mandate from them, nor will he report to them.
The Company had no Senior Independent Non-executive Director for the period to 1 March 2012, when Emmanuel
Olympitis was appointed to that position.
In the event of the appointment of a new director, the Board would ordinarily appoint someone who, it believes,
has sufficient knowledge and experience to fulfil the duties of a director. If this were not the case, an appropriate
training course would be provided. An appropriate induction programme is undertaken for all newly-appointed
directors. All directors have access to the advice and services of the Company Secretary. Any director, wishing
to do so in furtherance of his duties, may take independent advice at the Company’s expense. All directors are
required to stand for re-appointment at a maximum of every three years and newly appointed directors are subject
to election by shareholders at the first AGM after their appointment.
The Chief Executive Officer and the Chairman review the performance of each executive director. The Chairman
reviews the performance of the Chief Executive and each non-executive director. During the year, the Chairman met
with non-executive directors without the executive directors being present.
An internal process to assess the effectiveness of the Board was undertaken during the year, consisting of a
confidential survey. Areas that were identified in which there was considered to be room for improvement, will be
addressed by the Board during the current year.
The Board is normally scheduled to meet four or five times a year, with ad hoc meetings convened to deal with
urgent matters. The Board has a formal schedule of matters reserved to it for decision. These include approval of the
financial statements, dividend policy, major acquisitions and disposals and other transactions outside delegated limits,
significant changes in accounting policies, the constitution of Board Committees, risk management and corporate
governance policy.
The Board has delegated various matters to Committees, as detailed below. These Committees of the Board meet
regularly (the Nomination Committee meets as required) and deal with specific aspects of the management of the
Company. The Board has delegated authority to the Committees and they have defined terms of reference which
are available on the Company’s website (www.photo-me.co.uk). Decision-making relating to operational matters is
delegated to senior management.
Board and Committee papers are provided at each meeting and are supplemented by reports and presentations to
ensure that Board members are kept fully informed.
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Annual Report for the year ended 30 April 2012
21
CORPORATE GOVERNANCE CONTINUED
The Board continued
The Board had seven meetings during the year under review. The attendance of directors at those meetings and
meetings of Board Committees is set out below.
Number of meetings held
Director
J Lewis
S Crasnianski
Y Apeloig
F Coutaz-Replan
D David
J-M Denis
E Olympitis
Board
meetings
7
Audit
Committee
2
Remuneration
Committee
4
Nomination
Committee
2
Number of meetings attended (maximum possible)
7(7)
*6(6)
1(1)
7(7)
2(2)
1(1)
7(7)
2(2)
n/a
n/a
n/a
n/a
0(0)
2(2)
4(4)
n/a
n/a
n/a
n/a
0(0)
4(4)
2(2)
n/a
n/a
n/a
n/a
1(1)
2(2)
*Serge Crasnianski did not attend one meeting as he had declared an interest in the subject matter under discussion.
Board Committees
The Audit Committee
The Audit Committee consists entirely of non-executive directors. For the whole of the year under review,
Emmanuel Olympitis and John Lewis (Chairman of the Company) served on the Committee, with Emmanuel
Olympitis as Chairman of the Committee until 1 March 2012. Jean-Marcel Denis was appointed to the Committee,
as its Chairman, on 1 March 2012. The Code permits a smaller company’s Chairman to be a member of the Audit
Committee. The Board considers that both Emmanuel Olympitis and Jean-Marcel Denis have suitable recent and
relevant financial experience to satisfy the requirements of the Code. However, for the period to 1 March 2012,
the Company did not comply with the Code due to the Committee not containing at least two independent non-
executive directors excluding the Company’s Chairman.
The Committee’s Terms of Reference are available on the Company’s website.
Meetings are normally held at least twice per year. The Group Finance Director, representatives of the external
auditors and the Group Internal Audit Manager are generally invited to attend meetings. The minutes of the meetings
are circulated to all directors.
The Committee meets with the external auditors, without executive directors present, at least once a year. The
Committee reviews the Group’s accounting and financial reporting practices, the reports of the internal and
external auditors and compliance with policies, procedures and applicable legislation. In addition, the Committee
monitors the effectiveness of both the external and internal audit functions and reviews the Group’s internal
financial control and risk management procedures. The Committee considers the appointment of the external
auditor and recommends the audit fee to the Board; sets a policy for safeguarding the independence of the
external auditors and reviews their work outside of the audit itself, taking into account the nature of the work, the
size of the fees and whether it is appropriate for the external auditors to carry out such work. Details of audit and
non-audit fees are provided in note 4 to the financial statements.
KPMG Audit Plc has been the external auditor of the Group since December 2008. The Audit Committee
is satisfied with the effectiveness, objectivity and independence of the external auditor and they will be
recommended to shareholders for re-appointment at the AGM.
A whistle-blowing procedure, by which staff may raise concerns about possible improprieties in matters of financial
reporting or other matters, was in place throughout the year. The whistle-blowing policy can be found on the
Company’s website.
22
Photo-Me International plc
The Remuneration Committee
During the year under review, the Remuneration Committee initially comprised Emmanuel Olympitis (Committee
Chairman), and John Lewis (Company Chairman). In addition, Jean-Marcel Denis was appointed to the Committee
on 1 March 2012. For the period until 1 March 2012, the composition of the Committee was non-compliant with
the provisions of the Code which requires the Remuneration Committee of a smaller company to comprise at least
two independent non-executive directors with the Company Chairman additionally being permitted to serve as a
member providing that he was considered independent on his appointment as Company Chairman.
The Committee meets at least once per year. Four meetings were held in the year to 30 April 2012.
The Committee makes recommendations to the full Board in respect of the Group’s remuneration policy. The
Committee also keeps under review the remuneration of the Chairman, the Group’s executive directors and senior
executives, to ensure that they are rewarded fairly for their contribution. The Committee also makes awards under
the Executive Share Option Scheme. The Committee’s Terms of Reference are available on the Company’s website.
The Remuneration Report on pages 28 to 34 provides details of how the Committee applies the directors’
remuneration principles of the Code.
The Nomination Committee
During the year under review, the Nomination Committee initially comprised John Lewis (Committee Chairman) and
Emmanuel Olympitis. Jean-Marcel Denis was also appointed to the Committee on 1 March 2012. For the period until
1 March 2012 the composition of the Committee was non-compliant with the provisions of the Code which requires
the Nomination Committee of a smaller company to comprise a majority of independent non-executive directors with
the Company Chairman additionally being permitted to serve on the Committee as a member or as chairman.
The Committee, which meets as required, makes recommendations to the Board on the appointment of new
directors. The Committee met on two occasions during the year to consider the appointment of new directors.
The Committee’s Terms of Reference are available on the Company’s website.
Relations with shareholders
The Chief Executive Officer and Group Finance Director have regular meetings with the Company’s major
institutional shareholders.
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The Chairman also meets with major shareholders and has contact with them, as and when required. The Senior
Independent Non-executive Director and, where appropriate, other non-executive directors, are also made available to
meet with major shareholders, on request. Any pertinent feedback arising from such meetings is reported to the Board
at its regular meetings.
Private investors are encouraged to attend the Annual General Meeting and have the opportunity to question the
Board. All members of the Board usually attend the Annual General Meeting. The notice of the meeting is sent to
shareholders at least 20 days before the meeting. Shareholders are given the opportunity to vote on each separate
issue. The number of proxy votes lodged is announced after the vote on a show of hands for each resolution and is
published on the Company’s website.
Annual Report for the year ended 30 April 2012
23
CORPORATE GOVERNANCE CONTINUED
Internal control
The Board is ultimately responsible for the Group’s systems of internal control and risk management, and for
reviewing its effectiveness. This is effected by receiving reports from the Audit Committee following its review.
The Board confirms that it has reviewed the effectiveness of the systems of internal control. The Board is satisfied
generally that such systems have operated adequately throughout the period.
The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business
objectives. Such a system can, however, provide only reasonable and not absolute assurance against material
misstatement or loss.
The Group has in place processes for identifying, evaluating and managing the significant risks which are applicable
to the business. The Board regularly reviews these processes.
The Chief Executive Officer is ultimately responsible for risk management. Executive managers of individual Group
companies are responsible for the identification, evaluation and management of the key risks applicable to their areas
of responsibility. The risks are assessed on a regular basis.
The managers of Group companies are aware of their responsibility to operate systems of internal control which are
effective and efficient for their businesses, to provide reliable financial information and to ensure compliance with
local laws and regulations.
The Group has a comprehensive budgeting system with an annual budget approved by the Board. Actual results are
reported monthly through the Group’s financial systems, and variances are reviewed.
The Group Internal Audit Manager (who reports to the Audit Committee) has reviewed operations in all material
Group companies during the year under review. The Audit Committee receives reports from the Group Internal Audit
Manager and from the external auditors and reports its conclusions to the Board.
Conflicts of interest
During the year, directors completed questionnaires in respect of their interests. No actual or potential conflicts of
interest were identified. The Board will continue to monitor and review actual or potential conflicts of interest on a
regular basis and will consider whether or not it is appropriate to authorise any such conflicts.
Statement of compliance with the UK Corporate Governance Code
The Company has complied throughout the year with the provisions of the Code with the exception of those matters
which have been identified and explained above, being:
• for the period to 1 March 2012, the structure of the Board was non-compliant as the Board did not contain two
independent non-executives excluding the Chairman, as defined by the Code (Provision B.1.2);
• for the period to 1 March 2012, the Company had no Senior Independent Non-executive Director (Provision A.4.1); and
• for the period to 1 March 2012 the composition of the Audit, Remuneration and Nomination Committees was
non-compliant, (Provisions C.3.1, D.2.1 and B.2.1).
Following the various appointments on 1 March 2012, the Company is now in compliance with all Code provisions.
24
Photo-Me International plc
CORPORATE RESPONSIBILITy
Our approach to corporate responsibility
The Group recognises its responsibilities to the environment and believes that health, safety and environmental issues
are integral and important components of best practice in business management. Our management of corporate
responsibility can influence our ability to create long-term financial and non-financial value, and impacts on our
relationship with shareholders and other stakeholders.
We believe that effective management of corporate responsibility can reduce risks and also help us identify
business opportunities.
We prioritise our corporate responsibility activities based on three main drivers:
• legal requirements and future policy trends;
• customer, employee and investor preferences for corporate responsibility; and
• cost savings and business efficiency.
We aim to ensure that our approach is consistent with the directors’ duty to promote the success of the Company,
a legal requirement included in the UK Companies Act 2006. This duty is based on the principle of ‘enlightened
shareholder value’.
How we manage CR
Our Board is ultimately accountable for corporate responsibility. The Chief Executive has specific responsibility for risk
management and health, safety and environmental matters, with delegated authority through line management.
The Group operates in highly differentiated national markets with differing national legislations, preferences and
cultures. As a result, operational direction and management of corporate responsibility lies primarily with national
business managers, who are best placed
to ensure compliance with national legislation and market expectations.
The Group internal audit programme operates on a risk based assessment process, including corporate responsibility
issues. The Board reviews Group-wide performance on corporate responsibility within the assessment and review
process. Where necessary, Group-wide policies are developed or revised to address specific risks and opportunities,
or new information.
Products
The development, use and disposal of our products represent a main area of both risk and opportunity. We ensure
that our products and services are designed to meet existing legislation and customer expectations. Increasingly, this
includes environmental, health & safety and accessibility issues.
To ensure that products manufactured by KIS (the Group’s manufacturing subsidiary, based in France) consistently satisfy
our stringent quality requirements, certification to the ISO 9001 standard has been achieved.
Being conscious of the global issues with the disposal of waste and having regard to increasing metal prices and
landfill costs, we have paid more attention to the re-use and recycling of our retired products. Presently, at the end of
their useful lives more than 90% by weight of the materials used in our photobooths is recycled – most of this being
steel and other metals. In response to our concerns about the increase in energy costs and man-made contributions
to climate change we have also embraced technological advances by investing in energy-saving improvements to our
products, which are explained further under “Environment”, below.
The needs of all our customers are important. This drives a continual review of our products and the development
of solutions to meet these needs. For example, we have improved the service provided to our disabled customers
and at the same time complied with the requirements of the Disability Discrimination Act, by introducing within
our photobooths on screen instructions for the hard-of-hearing and voice instructions as well as carefully selected
screen colours and font sizes to assist those with visual impairments. In addition the development of the Universal
photobooth enables access for users confined to a wheelchair.
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Annual Report for the year ended 30 April 2012
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CORPORATE RESPONSIBILITy CONTINUED
Employees
Our highly skilled and committed workforce gives us a distinct competitive advantage. We recognise that we
must continue to help meet our employees’ needs and expectations.
We have a tradition for in-house training and promoting internal candidates, and have set up several programmes to
support life-long learning. Many of our Group companies work with local schools and universities to attract skilled
young people.
In line with best practice, we also have a Group-wide equal opportunities policy, ensuring non-discrimination
on the basis of age, gender, race and disability. The equal opportunity policy gives full and fair consideration to
applicants for employment who are disabled, for continuing the employment of those who become disabled and
for training and developing disabled employees.
Where appropriate, employees are provided with information on matters of interest and concern to them. We
encourage contact and interaction between all members of staff at all levels.
Health & safety
We are committed to ensuring that customers, site owners and employees are free from risk from any
products operated by the Group. In addition to these moral and ethical considerations we believe that the
effective management of health and safety is an essential ingredient for successful business performance. The
commitment to the safety of our customers and business partners is achieved through a network of trained
service operatives who routinely service installed equipment on customers’ sites as well as conducting periodic
safety inspections and tests. Customers and site owners are able to quickly raise any safety concerns through
our own call centres, which will immediately inform management and direct an operative to the site.
New products from external suppliers are assessed to ensure that they meet the relevant safety standards before being
placed on the market. Where appropriate we will work with our suppliers, sharing the benefit of our many years’
experience to develop products with the greatest level of safety.
Children’s rides manufactured by Jolly Roger (Amusement Rides) Limited, a Group subsidiary company in the UK,
are produced in accordance with the industry guidance issued by BACTA (British Amusement and Catering Trades
Association). This supplements the various British, European and International standards that apply to children’s rides
and ensures a minimum standard of quality and safety. The Company is also a registered inspection body within the
UK of the ADIPS Scheme (Amusement Device Inspection Procedures Scheme) administered by BACTA and enables
our qualified operatives to inspect children’s rides and issue the required safety certification.
Within the UK, the Chief Operating Officer fully supports the Health & Safety Policy and has ensured that there
is provision within the agenda of regular senior executive meetings to address health and safety matters. The
policies and procedures developed over the years continue to be reviewed and adjusted as part of the process of
continual improvement as well as keeping pace with legislative change. We believe that it is important to empower
individuals at all levels and give them the tools and skills they require, through providing relevant training and
information, if we are to achieve the standard of health and safety performance to which Photo-Me aspires.
During the last year nearly 10% of our UK employees, at various levels, received a recognised qualification from
the National Examining Board of Occupational Health and Safety. A further 20% passed the nationally recognised
Construction Skills Health & Safety Test.
Photo-Me continues to maintain its membership with the British Safety Council. As well as demonstrating our
commitment to safety and environmental best practice and continual improvement, this continued partnership
provides us with access to expert advice and quality training resources which assists us in achieving these goals.
In the UK, the Company is accredited under the SAFEcontractor scheme. This accreditation is reviewed annually and
requires that all of our Health & Safety policies and procedures are audited by the scheme.
We recognise that all employees have an important contribution to make in the ongoing development and
implementation of our Health & Safety policies and procedures. This is reflected in the representation from all levels of
the business on the Health & Safety Committee.
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Photo-Me International plc
Environment
As a Company, we recognise our responsibilities towards the environment and the impact of our business activities. The
main risks to the business in this area arise from increasing legislation and the cost of waste disposal. The Company has
mitigated the exposure to these risks by:
• consistently reducing, in previous years, the amount of obligated waste produced. During the current year
the UK operations was able to maintain the gains previously achieved;
• the recovery, refurbishment and resale of electrical equipment such as minilabs and children’s rides which
promotes the principle embodied in recent legislation of reuse before recycling. This not only produces cost
savings but also creates a source of income; and
• where practical, adopting a strategy of upgrading and refurbishing equipment in preference to disposal
and replacement.
Where possible we endeavour to embrace technological advances to reduce the impact of our operations on the
environment. Such initiatives include:
• the ability to automatically shut down (and restart) photobooths during closing hours which saves around 30%
of power consumption on site;
• through remote telemetry systems being able to reduce the number of service visits to a minimum
and reduce wastage of consumables;
• the substitution of old technology lighting with new low energy lamps in all photobooths. The new Photobooth by
Starck uses the latest LED lighting which also eliminates the hazardous waste associated with fluorescent tubes; and
• the replacement of the majority of old CRT monitors with new flat screen technology which is more energy
efficient and also eliminates the associated hazardous waste.
Although we are not presently exposed to material risks related to climate change, we are taking proactive steps
to ensure that our energy use and demand on natural resources are reduced wherever possible. In addition to the
examples highlighted above, Photo-Me operates a green fleet policy which specifies that vehicles are sourced according
to practicality and environmental impact as defined in terms of CO2 emissions. We have achieved a 16% reduction in
vehicle CO2 ratings in four years. Our target, over the next 12 months, is to achieve a further reduction of 2% compared
to the 2008 fleet, which will save 80 tonnes of CO2 from entering the atmosphere each year. This goal is supported by
the Company’s Road Risk Policy which assists in reducing fuel consumed as well as an overall reduction in the number of
miles driven.
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Annual Report for the year ended 30 April 2012
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REMUNERATION REPORT
The Remuneration Committee
In line with the requirements of the UK Corporate Governance Code (the “Code”), the Committee operates within
agreed terms of reference and has responsibility for determining the remuneration of the Chairman, the executive
directors and the Group’s other senior executives. As explained below, with the exception of the constitution of the
Remuneration Committee, the Board confirms that the Company has complied throughout the relevant year with the
provisions of the Code relating to directors’ remuneration.
The directors who served on the Committee during the year were as follows:
Emmanuel Olympitis (Committee Chairman from 5 July 2010)
John Lewis
Jean-Marcel Denis
Date of appointment as Committee Member
7 December 2009
9 July 2008
1 March 2012
For the period until 1 March 2012 the composition of the Committee was non-compliant with the provisions
of the Code which requires the Remuneration Committee of a smaller company to comprise at least two
independent non-executive directors with the Company Chairman additionally being permitted to serve as
a member providing that he was considered independent on his appointment as Company Chairman. The
Committee became compliant with the Code on the appointment of Jean-Marcel Denis as a Committee
member on 1 March 2012.
The Committee is advised by New Bridge Street, an Aon plc company, which has been appointed by the
Committee and which advises it on various matters relating to the remuneration of the Chairman, executive
directors and senior executives. New Bridge Street also provides advice to the executive directors in respect of the
remuneration of non-executive directors. Under long-standing relationships, other Aon plc subsidiaries provided
pension scheme management, actuarial services and general insurance broking services to the Company, during
the year. The Remuneration Committee is satisfied that these additional services received by the Company do not
prejudice the independence of the remuneration advice provided to it by New Bridge Street.
The Committee also receive advice from the Chief Executive Officer in relation to the remuneration of certain senior
executives (but not in relation to his own remuneration).
The Company Secretary is secretary to the Committee.
The terms of reference of the Committee can be found in the investor relations section of the Company’s website.
This report will be submitted to the forthcoming AGM for approval.
Remuneration policy for executive directors
The Committee’s remuneration policy for the executive directors is to have regard to the directors’ experience and
the nature and complexity of their work in order to provide a competitive remuneration package that attracts, retains
and motivates high calibre executives from whom first class performance is expected. The remuneration policy is also
intended to be consistent with the Company’s business objectives, risk profile and shareholder interests.
The Committee also ensures that, when determining the executive directors’ remuneration packages, due account
is taken of pay and general employment conditions elsewhere in the Group, liaising with the Human Resources
department where appropriate.
In order to align the interests of shareholders and executive directors, a significant proportion of the remuneration of
executive directors is performance-related through an annual bonus plan and the grant of share options.
The Committee will ensure that the incentive structures for executive directors and senior managers will not
raise environmental, social or governance (“ESG”) risks by inadvertently motivating irresponsible behaviour.
More generally, with regard to overall remuneration structures, there is no restriction on the Committee which
prevents it from taking into account ESG matters, nor do these remuneration structures encourage inappropriate
operational risk-taking.
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Photo-Me International plc
The remuneration packages of the executive directors can comprise the following main elements:
• Basic salary
• Annual bonus
• Share options
• Pensions
• Other benefits
Basic salary
Since his appointment as Chief Executive Officer in July 2009, Serge Crasnianski has received a basic annual salary of
£121,000 and a third party company supplying Serge Crasnianski’s services to the Company has received annual fees
of £325,000; in aggregate £446,000.
Since her appointment in September 2009, Françoise Coutaz-Replan, Group Finance Director, has received a basic
annual salary of £150,000.
The basic salaries of the executive directors are reviewed annually by the Committee. In conducting this review,
the Committee takes account of the terms of existing service contracts (including the modest pension provision,
compared to the market) and the performance of the individual executive director concerned. The Committee also
has regard to the pay of staff and management generally within the Group and takes into consideration the levels of
basic salary paid by other relevant companies of similar size and standing, and market levels generally.
The basic salaries of all executive directors are reviewed annually on 1 May. No executive directors received increases in
their basic salaries during the year, and the Committee has determined that no increases will be applied on 1 May 2012.
Annual bonus
The executive directors are eligible for annual bonuses based upon the financial performance of the Group and
the attainment of personal objectives. The maximum award level for the year under review and the forthcoming
year for Serge Crasnianski was 100% of basic salary and for Françoise Coutaz-Replan it was 50% of basic salary. In
respect of Serge Crasnianski, the whole of his bonus relates to the Group’s pre-tax profit performance, with 50%
of basic salary being paid as a bonus if pre-tax profit for the year exceeded that of the previous year, a 75% bonus
for exceeding the previous year by 5% and a 100% bonus for exceeding the previous year by more than 10%. The
bonus for Françoise Coutaz-Replan is based on a similar sliding scale, with the relevant percentages being 15%, 25%
and 35% of her basic salary. In addition, a further bonus of up to 15% of her basic salary will be awarded for the
achievement of personal objectives. The contracts of Serge Crasnianski and Françoise Coutaz-Replan provide that if
the Remuneration Committee so decides at its sole option, a maximum of 50% of any bonus awarded may be paid in
the form of shares in the Company which must be held by the director for a minimum period of three years from the
date of issue, whilst remaining in the Company’s employment.
In accordance with the targets set for the year, the Committee has determined that, as the Group’s pre-tax profit
improved by more than 10% for the year to 30 April 2012, a 100% bonus will be paid to Serge Crasnianski and a
35% bonus will be paid to Françoise Coutaz-Replan. The Committee has also decided that a 15% bonus will be paid
to Françoise Coutaz-Replan in respect of the achievement of her personal objectives for the year. Having regard
to the existing substantial share interests of Serge Crasnianski in the Company, and the level of bonus earned by
Françoise Coutaz-Replan, the Committee has decided that the bonuses to both executives should be paid fully in
cash, for the year under review.
The Committee envisages that the bonus opportunity of both executives for the forthcoming year will be structured
in a similar manner to that described above.
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Annual Report for the year ended 30 April 2012
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REMUNERATION REPORT CONTINUED
Share options
In 2004, the Company introduced the Photo-Me Executive Share Option Scheme (the “Scheme”), which operates as the
sole long-term incentive arrangement for the Company’s executive directors and senior employees.
The main features of the Scheme are that options may be granted over shares worth up to 150% of a participant’s
salary, each year. The vesting of options is subject to an earnings per share (“EPS”) based performance condition
relating to the extent to which the Company’s EPS for the third financial year end, following the date of grant,
reaches a sliding scale of challenging EPS targets.
Absolute EPS targets are used as the Committee believes that the Company’s senior executive team should have a
transparent incentive which focuses them on delivering substantial EPS growth over subsequent three year periods.
The extent to which these targets are met will be determined by the Committee, with the assistance of external
consultants to ensure independent verification.
Options will normally be exercisable between three and seven years after grant.
The only options granted to current directors under the Scheme have been to Françoise Coutaz-Replan and are
summarised in Table 3 on page 33. Options were granted in the year under review to Françoise Coutaz-Replan on
4 July 2011 (21.75% of her salary) and 13 December 2011 (89.17% of her salary).
The performance condition that applies to these 2011 awards is based on the extent to which (if at all) the Company’s
adjusted EPS for the financial year ending 30 April 2014 (“EPS 2014”) reaches a sliding scale of challenging EPS targets.
No part of an option will become exercisable unless adjusted EPS 2014 is at least 4.3p, in which case the options will
become exercisable as follows:
EPS 2014
Portion of option that becomes exercisable
4.3p
4.9p
5.5p
6.1p
Up to 25% of salary
Up to 50% of salary
Up to 75% of salary
Up to 100% of salary
Between the above points
On straight-line basis between the above
No other current director, including Serge Crasnianski, had any interests in share options in the year under review.
At present, options over approximately 1.6% of the Company’s issued share capital subsist.
The Committee will keep under review the Company’s share-based long-term incentive policy, to ensure that it
supports the Company’s strategic objectives.
Pensions (Audited information)
The service agreement of Serge Crasnianski makes no provision for pension contributions by the Company. Other
executive directors with salaries paid by the Company in the UK are entitled to join the Company’s Group Stakeholder
Pension Plan, to which the Company contributes 5% of their basic salaries. This only applied to Françoise Coutaz-
Replan, for whom the Company contributions at the rate of 5% of her basic salary were:
Françoise Coutaz-Replan
2012
£
7,500
2011
£
7,500
Other benefits
Executive directors are provided with employment-related benefits which can include a company car, private medical
insurance and an overseas housing allowance for any director whilst working outside his
or her country of normal residence.
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Service agreements
Executive directors have service agreements with the Company. No executive directors are (or were) appointed for a
specified period.
The contractual arrangements with Serge Crasnianski are dated 22 July 2010. The service agreement of Serge
Crasnianski and the consultancy services agreement with a third party company which supplies Serge Crasnianski’s
services to the Company both provide that they are terminable by the Company on giving 12 months’ notice.
Françoise Coutaz-Replan has a service agreement with the Company dated 9 December 2009 which is terminable by
the Company on giving six months’ notice.
The Committee’s policy is that no future executive director’s service agreement shall be of a fixed term nor shall
be terminable on giving more than 12 months’ notice and that such agreement shall contain no provisions for the
payment of liquidated damages on termination, which the Committee considers appropriately reflects market and
best practice.
Within the restrictions imposed by the relevant service agreements, the Committee will apply the principle of
mitigation when determining any payment of compensation on an executive director’s termination.
Remuneration of non-executive directors
The remuneration of the Chairman is determined by the Remuneration Committee and the fees of the non-executive
directors are determined by the Chairman and the executive directors, in both cases taking into account the level of
fees paid by companies of a similar size and standing, together with each non-executive director’s time commitment.
Non-executive directors are not entitled to participate in any Group pension scheme nor will they be granted any
awards under the Company’s share option scheme or annual bonus plan. No non-executive directors received any
benefits-in-kind, apart from Dan David who benefited from private health insurance, in recognition of his position as
Life President.
All non-executive directors are appointed for specified terms subject to re-appointment at the AGM immediately
following their appointment and every three years thereafter. None of the non-executive directors will ordinarily be
entitled to compensation upon termination of their involvement with the Company. However, if a non-executive
director should be removed as a result of a resolution duly proposed and resolved by members of the Company
during the non-executive director’s normal term of appointment, he will be entitled to compensation equal to three
months’ fees, six months in the case of the Chairman.
Date of last appointment
End of period of appointment
Non-executive directors
John Lewis
Yitzhak Apeloig
Dan David
Jean-Marcel Denis
Emmanuel Olympitis
AGM 2011
8 March 2012
AGM 2009
1 March 2012
AGM 2010
AGM 2014
AGM 2012
n/a
AGM 2012
AGM 2013
Appointments outside the Group
It is the Committee’s policy that, in appropriate circumstances, executive directors will be allowed to accept outside
appointments. Whether or not an executive director would be entitled to retain any related fees will be determined
on a case-by-case basis. No such outside appointments currently exist.
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Annual Report for the year ended 30 April 2012
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REMUNERATION REPORT CONTINUED
Directors’ remuneration
Table 1 (Audited information)
Details of the individual directors’ emoluments for the year are as follows:
Executive directors
Serge Crasnianski
Françoise Coutaz-Replan
Non-executive directors
John Lewis
Yitzhak Apeloig
Dan David
Jean-Marcel Denis
Emmanuel Olympitis
Hugo Swire
2012
Salary/
Fees
£
Note
Bonus(1)
£
Benefits(2)
£
Total
£
2011
Total
£
3
446,000
446,000
6,693
898,693
893,312
150,000
75,000
20,414
245,414
230,548
4
5
6
7
8
120,000
5,205
12,415
6,667
45,000
–
–
–
–
–
–
–
–
–
120,000
116,718
5,205
–
6,127
18,542
45,034
–
–
–
6,667
45,000
–
–
44,128
54,615
785,287
521,000
33,234 1,339,521 1,384,355
Notes:
1. Bonuses are those awarded in respect of performance in the financial year.
2. Benefits can include private medical insurance, company cars and overseas housing allowances.
3. The emoluments of Serge Crasnianski shown above, include fees and bonus totalling £650,000 (2011: £650,000) payable to a third party in respect
of making available the services of Serge Crasnianski to the Company.
4. John Lewis, previously a non-executive director, was appointed Chairman on 17 May 2010. The 2012 fee stated above includes an amount of £90,000
(2011: £87,538) paid to a third party in respect of making available the services of John Lewis to the Company.
5. Yitzhak Apeloig was appointed to the Board on 8 March 2012.
6. Dan David died on 6 September 2011.
7. Jean-Marcel Denis was appointed to the Board on 1 March 2012.
8. Hugo Swire resigned from the Board on 14 May 2010.
Directors’ interests
Table 2
Interests in shares
According to the records kept by the Company, the directors had interests in the share capital of the Company as
shown below. All interests shown are beneficial except for 45,579,318 shares of Dan David’s interests which were
considered to be non-beneficial. The interests in Ordinary shares at 27 June 2012 are analysed between those
registered in their own names, and those registered in other names.
Note
1
2
3
Executive directors
Serge Crasnianski
Françoise Coutaz-Replan
Non-executive directors
John Lewis
Yitzhak Apeloig
Dan David
Jean-Marcel Denis
Emmanuel Olympitis
Notes:
1 May 2011
(or date of
appointment
if later)
79,783,450
29,821
30 April 2012
(or date of
27 June 2012
cessation if earlier)
Self
Other
Total
79,783,450
63,750 79,719,700 79,783,450
80,000
80,000
–
–
–
–
47,579,318
45,579,318
–
45,000
–
45,000
–
–
n/a
–
–
–
–
–
n/a
–
80,000
–
–
n/a
–
45,000
45,000
1. Yitzhak Apeloig was appointed to the Board on 8 March 2012.
2. Dan David died on 6 September 2011.
3. Jean-Marcel Denis was appointed to the Board on 1 March 2012.
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Photo-Me International plc
Table 3 (Audited information)
Interests in share options
Françoise
Coutaz-Replan
Number of options
Date of
grant
As at
1 May
2011
Granted
during
year
Exercised
during
year
As at
30 April
2012
Exercise
price
Date from
which
exercisable
Expiry
date
29 Jan 2009
30,000
20 Jan 2010
250,000
–
–
4 Jul 2011
13 Dec 2011
–
–
50,000
250,000
30,000
–
10.92p 29 Jan 2012 28 Jan 2016
–
–
–
250,000
36.67p 20 Jan 2013 19 Jan 2017
50,000
65.25p
4 Jul 2014 3 Jul 2018
250,000
53.50p 13 Dec 2014 12 Dec 2018
No other directors have been granted options over shares of the Company.
No options lapsed during the year to 30 April 2012. The gain on the exercise of share options by Françoise Coutaz-
Replan during the year to 30 April 2012, calculated on the difference between the exercise price (10.92p) and the
closing market price (46.25p) on the day of exercise, was £10,599 (2011: nil).
Options granted under the terms of the Photo-Me Executive Share Option Scheme were issued at nil cost to the
option holder.
The performance condition that applied to the 29 January 2009 grants was based on the extent to which (if at
all) the Company’s adjusted EPS for the financial year ending 30 April 2011 (“EPS 2011”) reached a sliding scale of
challenging EPS targets. No part of an option would become exercisable unless adjusted EPS 2011 was at least 1.0p,
in which case an option will become exercisable as follows:
EPS 2011
1.00p
1.75p
2.50p
Portion of option that becomes exercisable
Up to 25% of salary
Up to 50% of salary
Up to 75% of salary
Between the above points
On straight-line basis between the above
None of the options awarded in January 2009 exceeded 75% of an individual’s salary. As the EPS actually achieved
for the year to 30 April 2011 at 3.77p exceeded 2.50p, all outstanding options granted in January 2009 were capable
of being exercised from 29 January 2012.
The performance condition that applies to the January 2010 grants is based on the extent to which (if at all)
the Company’s adjusted EPS for the financial year ending 30 April 2012 (“EPS 2012”) reaches a sliding scale of
challenging EPS targets. No part of an option will become exercisable unless adjusted EPS 2012 is at least 2.4p, in
which case the options will become exercisable as follows:
EPS 2012
2.4p
3.0p
3.6p
Portion of option that becomes exercisable
Up to 25% of salary
Up to 50% of salary
Up to 75% of salary
Between the above points
On straight-line basis between the above
The options awarded in January 2010 to Françoise Coutaz-Replan did not exceed 75% of salary. As the EPS actually
achieved for the year to 30 April 2012 exceeds 3.6p, all outstanding options granted in January 2010 will be capable
of being exercised from 20 January 2013.
Details of the performance condition attached to the 2011 options are set out in the Share options section earlier in
this report.
The middle market price of an Ordinary share at the end of the financial year was 45.25p (2011: 45.875p). The
highest and lowest middle market prices of an Ordinary share during the year to 30 April 2012 were 67.00p and
42.25p respectively.
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Annual Report for the year ended 30 April 2012
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REMUNERATION REPORT CONTINUED
Performance graph
The graph below shows the Company’s performance, measured by total shareholder return, compared with the
performance of the FTSE SmallCap Index over the past five years. As the Company has been a constituent of the FTSE
SmallCap Index for the whole of the relevant period, this index is considered an appropriate form of ‘broad equity
market index’ against which the Company’s performance should be compared. Performance is measured by Total
Shareholder Return (share price growth plus dividends reinvested).
Total shareholder return
100
80
60
40
20
0
30 April 2007
30 April 2008
30 April 2009
30 April 2010
30 April 2011
30 April 2012
Photo-Me International
FTSE SmallCap Index
Source: Thomson Reuters (Datastream)
This graph shows the value, by 30 April 2012, of £100 invested in Photo-Me International on 30 April 2007 compared with the value
of £100 invested in the FTSE SmallCap Index.
The other points plotted are the values at intervening financial year-ends.
Pension contributions, tables 1 and 3 and related footnotes and paragraphs are audited information.
By order of the Board
Emmanuel Olympitis
Chairman of the Remuneration Committee
27 June 2012
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Photo-Me International plc
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
in respect of the Annual Report and financial statements
The directors are responsible for preparing the Annual Report and the Group and Parent Company financial
statements in accordance with applicable law and regulations.
Company law requires the directors to prepare Group and Parent Company financial statements for each financial
year. Under that law they are required to prepare the Group financial statements in accordance with IFRSs as adopted
by the European Union and applicable law and have elected to prepare the Parent Company financial statements on
the same basis.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period.
In preparing each of the Group and Parent Company financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether they have been prepared in accordance with IFRSs as adopted by the European Union; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Group and the Parent Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Parent
Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have
general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and
to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Report of the Directors,
Remuneration Report and Corporate Governance statement that complies with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included
on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
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Responsibility statement of the directors in respect of the annual financial report
We confirm that to the best of our knowledge:
• the financial statements, prepared in accordance with IFRSs as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
• the Business and Financial Review, which is incorporated into the Report of the Directors, includes a fair review
of the development and performance of the business and the position of the Company and the undertakings
included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties
that they face.
By order of the Board
John Lewis
Chairman
27 June 2012
Serge Crasnianski
Chief Executive Officer
Annual Report for the year ended 30 April 2012
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INDEPENDENT AUDITOR’S REPORT
to the members of Photo-Me International plc
We have audited the financial statements of Photo-Me International plc for the year ended 30 April 2012 set out on
pages 38 to 96. The financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the EU and, as regards the Parent Company financial
statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members
those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s
members, as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 35, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law
and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at
www.frc.org.uk/apb/scope/private.cfm
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs
as at 30 April 2012 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
• the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by
the EU and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006
and, as regards the Group financial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with
the Companies Act 2006; and
• the information given in the Report of the Directors for the financial year for which the financial statements
are prepared is consistent with the financial statements.
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Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns adequate for
our audit have not been received from branches not visited by us; or
• the Parent Company financial statements and the part of the Directors’ Remuneration Report to be
audited are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Under the Listing Rules we are required to review:
• the directors’ statement, set out on page 35, in relation to going concern;
• the part of the Corporate Governance statement on pages 21 to 24 relating to the Company’s compliance
with the nine provisions of the UK Corporate Governance Code specified for our review; and
• certain elements of the report to shareholders by the Board on directors’ remuneration.
Mark Sheppard
(Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
1 Forest Gate
Brighton Road
Crawley RH11 9PT
27 June 2012
G
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Annual Report for the year ended 30 April 2012
37
Group statement of comprehensive income
for the year ended 30 April 2012
revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses
Share of post-tax profits from associates
operating profit
Finance revenue
Finance cost
profit before tax
total tax charge
profit for year
other comprehensive income
Exchange differences arising on translation of foreign operations
Translation reserve taken to income statement on disposal
Actuarial movements in defined benefit obligations
and other post-employment benefit obligations
Deferred tax on actuarial movements
other comprehensive (expense)/income (net of tax)
total comprehensive income for the year
profit for the year attributable to:
Owners of the Parent
Non-controlling interests
Total comprehensive income attributable to:
Owners of the Parent
Non-controlling interests
earnings per share
Basic earnings per share
Diluted earnings per share
Notes
3
4
14
3
6
6
7
4
10
10
2012
£’000
207,841
(169,340)
38,501
1,194
(19,765)
89
20,019
844
(723)
20,140
(5,594)
14,546
(2,841)
(12)
(531)
118
(3,266)
11,280
14,349
197
14,546
11,175
105
11,280
3.97p
3.95p
2011
£’000
219,820
(183,142)
36,678
1,916
(20,295)
89
18,388
476
(861)
18,003
(4,252)
13,751
3,686
(10)
(235)
38
3,479
17,230
13,608
143
13,751
17,061
169
17,230
3.77p
3.74p
The notes on pages 44 to 96 are an integral part of these consolidated financial statements.
38
Photo-Me International plc
statements of financial position
as at 30 April 2012
assets
non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investment property
Investments – in associates
Investments – in subsidiaries
Other financial assets – held to maturity
Other financial assets – available-for-sale
Deferred tax assets
Trade and other receivables
current assets
Inventories
Trade and other receivables
Other financial assets – held to maturity
Other financial assets – available-for-sale
Current tax
Cash and cash equivalents
total assets
equity
Share capital
Share premium
Treasury shares
Other reserves
Retained earnings
equity attributable to owners of the parent
Non-controlling interests
total equity
liabilities
non-current liabilities
Financial liabilities
Post-employment benefit obligations
Provisions
Deferred tax liabilities
Trade and other payables
current liabilities
Financial liabilities
Derivative financial liability
Provisions
Current tax
Trade and other payables
total equity and liabilities
Group
company
Notes
2012
£’000
2011
£’000
2012
£’000
2011
£’000
11
11
12
13
14
14
24
16
17
16
18
20
21
22
23
24
25
21
23
25
9,895
8,958
46,128
1,147
592
–
2,176
80
3,148
1,473
73,597
16,931
14,302
213
5
19
54,605
86,075
159,672
10,093
10,368
50,847
1,749
598
–
1,857
80
3,038
1,947
80,577
20,858
20,398
14
23
34
56,212
97,539
178,116
1,850
5,873
(5,802)
18,925
74,994
95,840
1,001
96,841
1,844
5,718
(5,802)
21,686
64,374
87,820
935
88,755
776
4,285
77
2,508
5,646
13,292
4,386
–
4,957
5,368
34,828
49,539
159,672
5,704
4,061
85
3,307
7,438
20,595
11,700
217
4,428
5,136
47,285
68,766
178,116
–
29
6,687
–
258
41,269
604
–
2,784
–
51,631
1,157
5,460
–
5
–
10,862
17,484
69,115
1,850
5,873
(5,802)
885
46,758
49,564
–
49,564
–
182
3
–
–
185
–
–
15
356
18,995
19,366
69,115
–
22
7,777
–
258
41,500
–
–
2,893
–
52,450
1,733
4,715
–
23
–
13,738
20,209
72,659
1,844
5,718
(5,802)
652
37,206
39,618
–
39,618
–
494
3
–
–
497
6,000
–
38
1
26,505
32,544
72,659
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The notes on pages 44 to 96 are an integral part of these consolidated financial statements.
The accounts were approved by the Board on 27 June 2012.
serge crasnianski
Chief Executive Officer Group Finance Director
françoise coutaz-replan
Photo-Me International plc
Registered number 735438
Annual Report for the year ended 30 April 2012
39
Group statement of cash flows
for the year ended 30 April 2012
cash flows from operating activities
Profit before tax
Finance cost
Finance revenue
Operating profit
Share of post-tax profit from associates
Amortisation of intangible assets
Depreciation of property, plant and equipment
(Profit)/loss on sale of property, plant and equipment
Exchange differences
Other items
Changes in working capital:
Inventories
Trade and other receivables
Trade and other payables
Increase in trade and other payables – arising from sale of rental income
Provisions
Cash generated from operations
Interest paid
Taxation paid
net cash generated from operating activities
cash flows from investing activities
Outflow from disposal of subsidiaries
Investment in associates
Investment in intangible assets
Proceeds from sale of intangible assets
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchase of available-for-sale investments
Proceeds from sale of available-for-sale investments
Interest received
Dividends received from associate
net cash utilised in investing activities
cash flows from financing activities
Issue of Ordinary shares to equity shareholders
Repayment of capital element of finance leases
Proceeds from borrowings
Repayment of borrowings
Increase in assets held to maturity
Dividends paid to owners of the Parent
Dividends paid to non-controlling interests
net cash utilised in financing activities
net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Exchange (loss)/gain on cash and cash equivalents
cash and cash equivalents at end of year
Notes
2012
£’000
2011
£’000
20,140
18,003
723
(844)
861
(476)
20,019
18,388
(89)
(89)
3,277
20,737
(69)
(905)
(1,010)
2,650
5,540
(8,894)
–
1,170
42,426
3,217
25,963
21
697
(517)
2,438
(134)
442
8,164
(206)
58,384
(649)
(760)
(5,314)
(2,279)
36,463
55,345
–
(62)
(77)
–
(2,477)
(3,646)
–
2
(15,865)
(16,999)
866
(387)
528
434
101
1,134
–
–
148
65
(16,862)
(19,373)
161
(643)
–
232
(483)
391
(11,148)
(15,281)
(433)
9
(7,232)
(39)
(1,224)
(4,512)
(26)
(19,334)
(20,903)
267
56,212
(1,874)
18
54,605
15,069
39,796
1,347
56,212
The notes on pages 44 to 96 are an integral part of these consolidated financial statements.
40
Photo-Me International plc
company statement of cash flows
for the year ended 30 April 2012
cash flows from operating activities
Profit before tax
Finance cost
Finance revenue
Dividends and other items
Operating profit
Amortisation of intangible assets
Depreciation of property, plant and equipment
Profit on sale of property, plant and equipment
Movements in investment provisions and other items
Changes in working capital:
Inventories
Trade and other receivables
Trade and other payables
Provisions
Cash generated from operations
Interest paid
Taxation paid
net cash generated from operating activities
cash flows from investing activities
Cash acquired on transfer of business from a subsidiary
Purchase of investment in subsidiaries
Proceeds from disposal of subsidiaries
Purchase of intangible assets
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Repayments of loans advanced to subsidiaries
Interest received
Dividends received from associate and subsidiaries
net cash generated from investing activities
cash flows from financing activities
Issue of Ordinary shares to equity shareholders
Repayment of borrowings
Repayment of borrowings from subsidiaries
Increase in assets held to maturity
Dividends paid to owners of the Parent
net cash utilised in financing activities
net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
cash and cash equivalents at end of year
Notes
2012
£’000
2011
£’000
14,100
16,837
15
(290)
404
(69)
(10,634)
(14,936)
3,191
2,236
21
3,636
(114)
15
576
(780)
(3,197)
(334)
3,014
(64)
(380)
29
5,577
(79)
(520)
697
(853)
(773)
422
6,736
(224)
(157)
2,570
6,355
–
–
15
(28)
233
(163)
–
–
(2,596)
(2,883)
164
35
63
145
179
69
10,634
8,287
14,936
12,516
161
232
(6,000)
(8,000)
(58)
(604)
–
–
9
(7,232)
(4,512)
(13,733)
(12,280)
(2,876)
13,738
10,862
6,591
7,147
13,738
18
F
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Annual Report for the year ended 30 April 2012
41
Group statement of chanGes in equity
for the year ended 30 April 2012
share
capital
£’000
share
premium
£’000
treasury
shares
£’000
other
reserves
£’000
translation
reserve
£’000
retained
earnings
£’000
2,039
5,492
(5,802)
2,229
15,606
57,996
At 1 May 2010
Profit for year
Other comprehensive income/(expense)
Exchange differences
Translation reserve taken to income
statement on disposal of subsidiaries
Actuarial movement in defined benefit
pension scheme and other post-
employment benefit obligations
Deferred tax on actuarial movements
Total other comprehensive income/(expense)
Total comprehensive income for the year
Transactions with owners of the Parent
Shares issued in period
Share options
Redemption of Deferred shares
Dividends
–
–
–
–
–
–
–
6
–
(201)
–
Total transactions with owners of the Parent
(195)
At 30 April 2011
at 1 may 2011
profit for year
other comprehensive (expense)/income
Exchange differences
Translation reserve taken to income
statement on disposal of subsidiaries
Actuarial movement in defined benefit
pension scheme and other post-employment
benefit obligations
Deferred tax on actuarial movements
total other comprehensive expense
total comprehensive
(expense)/income for the year
transactions with owners of the parent
Shares issued in period
Share options
Dividends
total transactions with owners of
the parent
1,844
1,844
–
–
–
–
–
–
–
6
–
–
6
–
–
–
–
–
–
–
226
–
–
–
226
5,718
5,718
–
–
–
–
–
–
–
155
–
–
155
–
–
–
–
–
–
–
–
–
–
–
–
(5,802)
(5,802)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
201
–
201
2,430
2,430
–
–
–
–
–
–
–
–
–
–
–
attributable
to owners of
the parent
£’000
non-
controlling
interests
£’000
total
£’000
77,560
13,608
792
143
78,352
13,751
3,660
26
3,686
(10)
(235)
38
3,453
17,061
232
193
–
(7,226)
(6,801)
87,820
87,820
14,349
–
–
–
(10)
(235)
38
26
3,479
169
17,230
–
–
–
(26)
(26)
935
935
197
232
193
–
(7,252)
(6,827)
88,755
88,755
14,546
(2,749)
(92)
(2,841)
(12)
(531)
118
–
–
–
(12)
(531)
118
(3,174)
(92)
(3,266)
–
13,608
3,660
(10)
–
–
3,650
3,650
–
–
–
–
–
–
–
(235)
38
(197)
13,411
–
193
–
(7,226)
(7,033)
19,256
64,374
19,256
64,374
–
14,349
(2,749)
(12)
–
–
(2,761)
–
–
(531)
118
(413)
(2,761)
13,936
11,175
105
11,280
–
–
–
–
–
302
161
302
–
–
161
302
(3,618)
(3,618)
(39)
(3,657)
(3,316)
(3,155)
95,840
(39)
(3,194)
1,001
96,841
at 30 april 2012
1,850
5,873
(5,802)
2,430
16,495
74,994
The notes on pages 44 to 96 are an integral part of these consolidated financial statements.
Details of share capital and reserves are given in note 20.
On 31 August 2010 the Company redeemed all of the 8,040,000 issued Deferred shares of 2.5p each for a total
consideration of 1p.
42
Photo-Me International plc
company statement of chanGes in equity
for the year ended 30 April 2012
share
capital
£’000
share
premium
£’000
treasury
shares
£’000
other
reserves
£’000
retained
earnings
£’000
2,039
5,492
(5,802)
380
–
26,538
18,301
total
£’000
28,647
18,301
At 1 May 2010
Profit for year
Other comprehensive (expense)/income
Actuarial movement in defined benefit
pension scheme and other post-employment
benefit obligations
Deferred tax on actuarial movements
Total other comprehensive expense
Total comprehensive income for the year
Transactions with owners of the Parent
Shares issued in period
Share options
Capital contribution relating to
share-based payments (net of disposals)
Redemption of Deferred shares
Dividends
Total transactions with owners of the Parent
At 30 April 2011
at 1 may 2011
profit for year
other comprehensive (expense)/income
Actuarial movement in defined benefit
pension scheme and other post-employment
benefit obligations
Deferred tax on actuarial movements
total other comprehensive expense
total comprehensive income for the year
transactions with owners of the parent
Shares issued in period
Share options
Capital contribution relating to share-based
payments (net of disposals)
Dividends
total transactions with owners of the parent
–
–
–
–
–
6
–
–
(201)
–
(195)
1,844
1,844
–
–
–
–
–
6
–
–
–
6
at 30 april 2012
1,850
Details of share capital and reserves are given in note 20.
–
–
–
–
–
226
–
–
–
–
226
5,718
5,718
–
–
–
–
–
155
–
–
–
155
5,873
–
–
–
–
–
–
–
–
–
–
–
(5,802)
(5,802)
–
–
–
–
–
–
–
–
–
–
(5,802)
–
–
–
–
–
–
71
201
–
272
652
652
–
–
–
–
–
–
–
233
–
233
885
(579)
141
(438)
(579)
141
(438)
17,863
17,863
–
31
–
–
(7,226)
(7,195)
37,206
37,206
13,162
232
31
71
–
(7,226)
(6,892)
39,618
39,618
13,162
(53)
(8)
(61)
(53)
(8)
(61)
13,101
13,101
–
69
–
161
69
233
(3,618)
(3,549)
(3,618)
(3,155)
46,758
49,564
F
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On 31 August 2010 the Company redeemed all of the 8,040,000 issued Deferred shares of 2.5p each for a total
consideration of 1p.
Annual Report for the year ended 30 April 2012
43
notes to the financial statements
authorisation of the financial statements and statement of compliance with ifrss
The Group and the Company financial statements of Photo-Me International plc (the “Company”) for the year ended
30 April 2012 were authorised for issue by the directors on 27 June 2012 and the statements of financial position
were signed by S Crasnianski, Chief Executive Officer and F Coutaz-Replan, Group Finance Director.
The Company is a public limited company incorporated and registered in England and Wales and whose shares are
quoted on the London Stock Exchange, under symbol PHTM. The registered number of the Company is 735438 and
its registered office is at Church Road, Bookham, Surrey KT23 3EU. The principal activities of the Group are shown on
page 18.
The Group’s and the Company’s financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRSs”), as adopted by the European Union (“EU”), International Financial Reporting
Interpretations Committee (“IFRIC”) interpretations and in accordance with the provisions of the Companies Act
2006 applicable to companies reporting under IFRS. The principal accounting policies adopted by the Group and the
Company are shown below.
The Company has taken advantage of the exemption provided under Section 408 of the Companies Act 2006 not to
publish its individual income statement and related notes.
1 accounting policies
The principal accounting policies adopted in the preparation of the Group’s consolidated financial statements and the
Company’s individual financial statements are set out below. The policies have been consistently applied to all of the
statements presented. The Group has complied with the requirements of IFRS 3 (revised) 2009 relating to acquisitions
made in the current year; in prior years there were no acquisitions. New standards adopted for this financial year are
shown in note 2 below.
1.1 Basis of preparation
The consolidated financial statements have been prepared under the historical cost convention except for certain
derivative financial instruments and available-for-sale financial assets that are measured at fair value.
Going concern
The financial statements of the Group and the Company have been prepared on the going concern basis.
In reaching this conclusion management has reviewed detailed budgets, which reflect, where applicable, the
current economic conditions, with regard to the level of demand for the Group’s manufactured products, the level
of consumer confidence and the uncertainty of the Euro, and cash flow forecasts for the next financial year and
high level projections thereafter. The cash flow projections indicate that the Group and the Company will remain
comfortably within their available banking facilities. Additional information on these facilities is provided in note 15.
A review of the business activity, future prospects and financial position of the Group are covered in the Chairman’s
Statement and the Business and Financial Review.
Critical accounting estimates and key judgements
The preparation of the financial statements in accordance with IFRS requires the use of estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at
the year end and the reported amounts of revenues and expenses during the reported period. Although these
estimates are based on the directors’ best knowledge of current events and actions, actual results may ultimately
differ from those estimates.
The critical accounting policies, which the directors consider are of greater complexity and/or particularly subject to
the exercise of judgement, are included in the following notes.
Group
1) Goodwill and other intangible assets – notes 1.4, 1.8 and 11.
2) Development costs – notes 1.4 and 11.
3) Depreciation and impairment of property, plant and equipment – notes 1.5, 12 and 13.
4) Taxation – notes 1.17, 7 and 24.
44
Photo-Me International plc
Company
Critical assumptions and estimates for the preparation of the Company’s financial statements, in addition to 3 and 4
above, include:
Investments in subsidiaries
Management makes decisions on the carrying value of investments in subsidiaries and whether an impairment is
required, as detailed in note 1.8 below.
1.2 Basis of consolidation
The Group consolidates the financial statements of the Company and all of its subsidiaries, and includes associates
under the equity method, as at 30 April each year.
Subsidiaries
Subsidiaries are those entities in which the Group has an interest of more than 50% of the voting rights or otherwise
has the power to govern the financial and operating policies of that entity so as to obtain benefits from its activities.
Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer
consolidated from the date control ceases.
The Group uses the acquisition method of accounting to account for business combinations. Acquisition costs for
business combinations are expensed as incurred. On an acquisition by acquisition basis the Group recognises any
non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of
the acquiree’s net assets. Assets and liabilities, including any contingent consideration arrangements of the acquired
business, and contingent liabilities are valued at fair value as is the equity interest issued by the Group.
The difference between the consideration transferred less the amount of any non-controlling interests in the acquiree
and the acquisition date fair value of net assets acquired is recorded as goodwill. In the case of a bargain purchase,
when the consideration transferred is less than the net assets of the subsidiary acquired, the difference is recognised
as a profit in the statement of comprehensive income.
For acquisitions made before 1 May 2010, goodwill represents the excess of the cost of the acquisition over the Group’s
interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of
the acquiree. Transaction costs, other than those associated with the issue of debt or equity securities, that the Group
incurred in connection with business combinations were capitalised as part of the cost of the acquisition.
In respect of acquisitions made prior to IFRS transition, goodwill was included at transition date on the basis of deemed
cost, which represented the amount recoded under UK Generally Accepted Accounting Principles (UK GAAP).
Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies
are eliminated. Where necessary, subsidiaries’ accounting policies have been changed to ensure consistency with the
Group’s policies.
Associates
Associates are those entities in which the Group generally has an interest of between 20% and 50% of the voting
rights and has significant influence, but not control (or joint control) over the financial and operating policies of the
entity. The Group uses the equity method of accounting for associates.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does
not recognise further losses unless it has incurred obligations or made payments on behalf of the associate. If the
associate subsequently reports profits, the Group resumes recognition of its share of those profits only after its share
of the profits equals the share of the losses not recognised.
Non-controlling interests
Non-controlling interests represent the portion of results for the period and net assets not held by the Group and
are presented separately within the statement of comprehensive income and the statement of financial position.
Transactions with non-controlling interests are treated as transactions with equity owners of the Group. For purchases
of non-controlling interests, the difference between any consideration paid and the relevant share of net assets acquired
is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
F
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Annual Report for the year ended 30 April 2012
45
notes to the financial statements CONTINUED
1 accounting policies continued
1.3 Foreign currency translation
The consolidated financial statements and the Company’s own financial statements are presented in Sterling, the
functional and presentational currency of the Parent Company and all values are shown in £’000 except where indicated.
Transactions in foreign currencies are translated into the respective functional currencies of the Group’s subsidiaries
at the exchange rate ruling on the date the transaction is recorded. Monetary assets and liabilities denominated in
foreign currencies are translated using the exchange rates ruling at 30 April. Exchange gains and losses resulting from
the above translation are reflected in the income statement, except where they qualify as cash flow hedges and are
reflected in equity.
Income statements of overseas entities are translated into Sterling, at weighted average rates of exchange, as a
reasonable approximation to actual exchange rates at the date of the transaction and their balance sheets are
translated at the exchange rate ruling at 30 April. Exchange differences arising on the translation of opening net
assets are taken to equity, as is the exchange difference on the translation of the income statement between average
and closing exchange rates. Such cumulative exchange differences are released to the income statement on disposal.
Goodwill arising on the acquisition of subsidiaries and associates post 1 May 2004 is treated as a foreign currency
asset and translated at the rate ruling at 30 April. Goodwill arising on acquisitions before 1 May 2004 was treated
as a Sterling amount and for practical reasons cannot be restated as a currency amount.
1.4 Intangible assets
Goodwill
Goodwill represents the excess of cost of an acquisition of a subsidiary or associate over the fair value of the
Group’s share of net identifiable assets at the date of acquisition. Goodwill on acquisition of associates is included
in investment in associates.
Goodwill is not amortised but is tested annually for impairment or more frequently if events or changes in
circumstances indicate that the carrying amounts may be impaired; and is carried at cost less any impairment. On
disposals goodwill is included in the calculation of gains or losses on the sale of the previously acquired entity.
Goodwill relating to previous acquisitions (pre-1999) was charged under UK GAAP to equity and is not included in
the gain or loss on sale of the previously acquired entity to which it relates.
For the purposes of impairment testing, goodwill is allocated to cash-generating units. Each of these cash-generating
units represents the Group’s investment in each region of operation.
Research and development expenditure
Research expenditure is expensed as incurred. Costs incurred in developing projects are capitalised as intangible assets
when it is considered that the commercial viability of the project will be a success based on discounted expected cash
flows, and the costs can be reliably measured. Other development costs are expensed and are not recognised as assets.
46
Photo-Me International plc
Other intangible assets
Intangible assets (including research and development) acquired as part of a business combination are capitalised at
fair value at the date of acquisition. Other intangibles are capitalised at cost.
The policies applied to the Group’s intangible assets are summarised as follows:
Useful lives
Amortisation
research and
development
costs
Finite
Straight-line
basis, with a
maximum life of
four years from
commencement
of commercial
production, with
no residual value
software
Finite
Straight-line basis,
with a maximum
life of three years,
with no residual
value
Internally generated
or acquired
Internally
generated
Acquired
customer
related
Finite
Straight-line basis,
with a maximum
life of 20 years,
with no residual
value.
The majority of
customer related
intangible assets
are depreciated
over their useful
lives of between
three and five
years
Acquired
other
Indefinite
Not amortised,
but subject to
impairment
testing
patents
and licences
Finite
Straight-line
basis, with a
maximum life of
20 years, with no
residual value.
Most patents are
depreciated over a
period of 10 years
or less
Acquired
Acquired
1.5 Property, plant and equipment
Property, plant and equipment is shown at cost, less accumulated depreciation and any impairment.
Subsequent expenditure on property, plant and equipment is capitalised, either as a separate asset, or included in
the cost of the asset, as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Group and the cost can be measured reliably. The carrying amount of any parts of the assets that are
replaced are derecognised. All other costs are recognised in the income statement as an expense as incurred.
Freehold land is not depreciated. Other assets are depreciated on a straight-line basis, or occasionally on a reducing
balance basis, to reduce cost to their estimated residual value over the estimated useful life of the assets at the
following rates:
Freehold buildings
Leasehold improvements
2% – 5% straight-line
over the life of the lease on a straight-line basis
Photobooths and vending machines
10% – 33.33% straight-line
Plant, machinery, furniture, fixtures and motor vehicles
12.5% – 33.33% straight-line or reducing balance
Capitalised finance lease assets
over the shorter of the life of the asset or the life of the lease
The assets’ residual values and useful lives are reviewed at each year end and adjusted, if appropriate.
1.6 Investment property
Certain of the Group’s properties are classified as investment properties; being held for long-term investment and to
earn rental income. Investment properties are stated at cost and the building element is depreciated to reduce cost to
its estimated residual value at rates between 3.33% and 8.33% on a straight-line basis.
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Annual Report for the year ended 30 April 2012
47
notes to the financial statements CONTINUED
1 accounting policies continued
1.7 Leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership,
are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair
value of the leased asset and the present value of lease payments discounted at the interest rate implicit in the lease.
The interest element in the lease payment is expensed at a constant interest rate, whereas the obligation net of the
interest element is included in other payables.
All other leases are classified as operating leases and rentals are expensed over the period of the lease on a
straight-line basis.
Where the Group is lessor
Amounts due from lessees under finance lease arrangements are recorded as receivables at the amount of the
Group’s net investment in the leases. Finance lease income is allocated to future periods so as to reflect a constant
rate of return on the Group’s net investment outstanding in respect of the lease.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.
1.8 Impairment
For goodwill and intangible assets with indefinite lives, the carrying value is reviewed annually for impairment or
more frequently if events or changes in circumstances indicate that the carrying amounts may be impaired.
Other intangible assets and property, plant and equipment are reviewed for impairment losses whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable. If the carrying value of the asset
is higher than the recoverable amount of the asset an impairment loss is recognised. In carrying out such impairment
evaluations the recoverable amount is the higher of the asset’s value in use or its fair value less costs to sell. Assets
that do not generate largely independent cash inflows are grouped at the lowest level for which separate identifiable
cash flows exist (cash-generating units) and the recoverable amount is determined for the cash-generating unit. If
necessary, the carrying value is reduced by charging an impairment loss in the income statement.
Reversal of impairment
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised
estimate of its recoverable amount, but so that it does not exceed the carrying amount that would have been
determined had no impairment loss been recognised. No impairment loss is reversed for goodwill.
1.9 Financial assets
Group
The Group classifies its financial assets on initial recognition in the following categories. The classification depends on
the purpose for which the financial assets were acquired.
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market.
Such financial assets arise when the Group provides money, goods or services directly to a debtor with no intention
of trading the receivable. They are included in trade and other receivables in the statement of financial position.
These assets are held at amortised cost using the effective interest rate method.
(ii) Held to maturity financial assets
These financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities
that the Group has the positive intention and ability to hold to maturity. These assets are held at amortised costs
using the effective interest rate method.
Included within these amounts are cash deposits that are subject to restrictions and are not freely available for use by
the Group until a future date.
(iii) Financial assets at fair value through profit or loss
A financial asset is classified in this category if acquired principally for the purpose of trading or if so designated by
management. Assets held in this category are classified as current assets if expected to be settled within one year;
otherwise they are classified as non-current. Financial assets in this category are initially recorded and subsequently
valued at fair value, with changes in fair value recognised in the income statement.
48
Photo-Me International plc
(iv) Available-for-sale financial assets
Financial assets not classified in any of the above categories are shown as available-for-sale financial assets and are
shown as non-current assets, unless management intends to sell the financial assets within 12 months of the end of
the financial year. These assets are initially recognised at cost and are subsequently carried at fair value.
(v) Recognition and measurement
For investments designated as financial assets at fair value through profit or loss or available-for-sale financial assets
the fair values of quoted investments are based on current bid prices. For unlisted investments the Group uses various
valuation techniques to determine fair values, including at cost less any provision for impairment, where appropriate.
At each year end date the Group assesses whether there is objective evidence that a financial asset, or group of
financial assets, has become impaired. Any impairment loss so recognised is reflected in the income statement.
Company
In the Company statement of financial position, investments in subsidiaries and associates are stated at cost
less impairment. The Company reviews, at least annually, the carrying value of investments and performs an
impairment exercise.
An impairment charge is made where there is evidence that the carrying value exceeds the future cash flows of the
investment or where its carrying amount will not be recovered from sale.
1.10 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes costs incurred in bringing inventories
to their present location and condition. The cost of work-in-progress and finished goods includes an appropriate
proportion of production overheads.
Raw materials and consumables are valued on a first-in first-out basis or on an average cost basis where average cost
is not significantly different to first-in first-out due to the fast turnaround of consumables. The Group uses standard
costs to value inventory and these standard costs are regularly updated to reflect current prices.
1.11 Trade receivables
Trade receivables are stated at fair value and subsequently measured at amortised cost using the effective interest
method net of impairment provisions. An impairment provision is reflected in the income statement if there is
objective evidence that the Group will not be able to recover the full amount of the receivable. The impairment is
calculated as the difference between the carrying value of the receivable and the present value of the expected
future cash flows, discounted at the original interest rate. Such factors as the debtor experiencing significant financial
difficulties, bankruptcy, financial reorganisation or default on payments are indicators that the receivable is impaired.
1.12 Cash and cash equivalents
Cash and cash equivalents are carried in the statements of financial position at cost. Bank overdrafts are included within
borrowings in current liabilities in the statements of financial position. For the purposes of the statements of cash flows,
cash and cash equivalents comprises cash on hand, unrestricted deposits held at banks with less than three months’
notice and other highly liquid investments with an original maturity of three months or less, less bank overdrafts.
1.13 Share capital
Ordinary shares of the Company are classified as equity.
Where the Company acquires its own equity share capital (treasury shares), the consideration paid, including any
directly attributable incremental costs (net of tax relief), is deducted from equity attributable to the Company’s equity
shareholders until the shares are either cancelled or subsequently reissued. The amount is shown in equity as treasury
shares. Where such Ordinary shares (the treasury shares) are subsequently reissued, any consideration received, net
of any directly attributable incremental transaction costs and the related income tax effects, is included in equity
attributable to the Company’s equity holders.
1.14 Borrowings
Borrowings are recorded initially at the fair value of the consideration received net of directly attributable
transaction costs.
After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest rate method.
This method includes any initial issue costs and discounts or premiums on settlement. Finance costs on the borrowings are
charged to the income statement under the effective interest rate method.
Financial liabilities are derecognised when the obligation under the liability is cancelled, discharged or has expired.
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Annual Report for the year ended 30 April 2012
49
notes to the financial statements CONTINUED
1 accounting policies continued
1.15 Employee benefits
Pension obligations
Group companies have various pension schemes in accordance with local conditions and practices in the countries in
which they operate.
The Company operates a defined benefit pension scheme, which is closed to new entrants, with contributions made
by employees and the Company. The defined benefits are based upon the employee’s length of service and final
pensionable salary. The Company also operates a defined contribution pension scheme for senior employees only.
The Group also has defined benefit pension schemes as noted in note 22.
The liability in respect of defined benefit pension schemes is the present value of the defined benefit obligation at the
end of the financial year minus the fair value of the plan assets, measured under the projected unit credit actuarial
valuation method. Independent qualified actuaries calculate the obligation for defined benefit pension plans.
Independent qualified actuaries formally value the pension fund every three years and these valuations are updated
as at each year end.
The Group has adopted the provisions of IAS 19, Employee Benefits and where applicable IFRIC 14 and shows
actuarial gains and losses in the period in which they arise, in other comprehensive income.
When the calculation results in a benefit to the Group, the recognised asset is limited to the total of any
unrecognised past service costs and the present value of benefits available in the form of any future refunds from the
plan, reductions in future contributions to the plan or on settlement of the plan and takes into account the adverse
effect of any minimum funding requirements.
Other post-employment benefits
In addition to the pension schemes noted above, certain Group companies are required to make provisions for
employee retirements. These provisions are based on local circumstances, length of service and salaries of the
employees concerned. They are included in post-employment benefit obligations, and shown in note 22 as other
retirement provisions.
Equity compensation benefits
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date of grant,
determined using the Black-Scholes model. The cost of equity-settled transactions is recognised, together with a
corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the
date on which the relevant employees become fully entitled to the award (“vesting date”). The cumulative expense
recognised at each reporting date until the vesting date, reflects the extent to which the vesting period has expired and
the number of awards that, in the opinion of the directors of the Group and based on the best available estimate, at
that date, of the number of equity instruments that will ultimately vest. The income statement charge or credit for the
period represents the movement in the cumulative expense recognised as at the beginning and end of the period. No
expense is recognised for awards that do not ultimately vest. The Group does not have options with market conditions.
On exercise of the option the proceeds received are allocated to share capital (nominal value of shares) and share premium.
The grant by the Company of options over its equity instruments (Ordinary shares) to the employees of subsidiary
undertakings in the Group is treated as a capital contribution. The fair value of the employee services received,
measured by reference to the grant date fair value, is recognised over the investing period as an increase to the
investment in subsidiary undertakings with a corresponding credit to other reserves in equity.
Termination benefits
Termination benefits are recognised in the income statement in the period when the Group is demonstrably
committed to the termination of employment or to provide termination benefits as a result of an offer made to
encourage voluntary redundancy.
1.16 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it
is probable that an outflow of resources will be required to settle the obligation and a reliable estimate can be made.
Provisions are discounted where the effect of the time value of money is material.
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Photo-Me International plc
1.17 Taxation
Tax expense for the current period comprises current and deferred tax and is recognised in the income statement,
except to the extent that it relates to items recognised in other comprehensive income or equity. The current tax
charge is calculated on the basis of the laws enacted or substantively enacted at the balance sheet date in the
countries where the Group operates.
Deferred tax is provided in full on temporary differences arising between the tax base of assets and liabilities and
their carrying value in the accounts.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in future periods in which
the temporary difference will reverse, based on tax rates and laws enacted or substantively enacted at the year end.
Deferred tax assets are recognised to the extent that it is probable that the future taxable profit, against which the
deductible temporary differences can be utilised, will be available.
Deferred tax is provided, or an asset recognised, on taxable temporary differences arising on investments in
subsidiaries and associates, except where the timing of the reversal of the temporary difference can be controlled and
it is probable that the temporary difference will not reverse in the foreseeable future.
Current tax assets and liabilities are measured at the amounts expected to be recovered from or paid to the taxation
authorities, based on tax rates and laws that are enacted or substantively enacted at the year end.
1.18 Trade and other payables
Trade payables are initially recorded at fair value and subsequently recorded at amortised cost using the effective
interest rate method.
1.19 Segment reporting
Operating segments are reported in a manner consistent with internal reporting provided to the Chief Operating
Decision Maker as required by IFRS 8 Operating Segments. Details of the segments are shown in note 3.
1.20 Revenue recognition
Revenue from the operation of photobooths and other operating equipment is the cash received, net of value added
tax and refunds.
Revenue from the sale of goods is recognised upon delivery of products and acceptance, if applicable, by the
customer. Revenue is stated net of value added tax and discounts.
Revenue from the sale of services, including maintenance contracts and royalty income, is recognised evenly over
the period in which the service/licence is provided to the customer.
Rental income from investment property and other assets under operating lease contracts is accounted for on a
straight-line basis over the lease term and is included in other operating income.
Dividend income is recognised when the right to receive payment is established. Dividends received from pre-
acquisition profits are shown as dividend income.
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1.21 Own work capitalised
Some of the Group’s subsidiaries manufacture vending equipment, which is then sold to the Group’s Operations
companies and capitalised by them as fixed assets. The amount capitalised includes direct costs associated with the
manufacture of such items together with applicable overheads, but excluding general overheads and administration
costs. Profits made by the selling company are eliminated on consolidation.
1.22 Dividends
Dividends to the Company’s shareholders are recognised as a liability and deducted from shareholders’ equity in
the period in which the shareholders’ right to receive payment is established.
1.23 Discontinued operations
The Group classifies operations as discontinued where they represent a separate major business activity or geographic
area of operations, and have separate risk profiles to other business segments. The income stated for the comparative
period is adjusted to disclose the discontinued operations separately from continuing operations.
Annual Report for the year ended 30 April 2012
51
notes to the financial statements CONTINUED
1 accounting policies continued
1.24 Non-current assets (or disposal groups) held for sale
Non-current assets (or disposal groups) are classified as held for sale when their carrying amount is to be recovered
principally through a sale transaction, rather than through existing use, and the sale is considered highly probable.
Such assets are stated at the lower of carrying amount and fair value less costs to sell. For the sale to be highly
probable the Board is committed to the sale, with a potential buyer identified and completion expected within the
next financial year.
1.25 Financial guarantee contracts
Where the Company enters into financial guarantee contracts to warranty the indebtedness of one company within
the Group, the Company considers these to be insurance arrangements and accounts for them as such. In this
respect, the Company treats the guarantee contract as a contingent liability until such time as it becomes probable
that the Company will be required to make a payment under the guarantee (note 28).
2 new standards, amendments and interpretations
From 1 May 2011, the Group has changed its accounting policies in the following areas:
The Group has applied the Improvements to IFRSs (issued May 2010) which includes Amendment to IFRS 7 – Financial
Instruments Disclosures. The Group also applied Amendments to IFRS 7 – Disclosures: Transfers of Financial Assets.
The impact of both these changes has been minor and has improved qualitative and quantitative disclosures relating
to the Group’s financial instrument risk exposures and partially derecognised financial assets.
The Group has adopted the changes to IFRS 3 Business Combinations and IFRS 7 – Financial Instruments Disclosures
in terms of collateral obligations arising from the 2010 Improvements to IFRS. The amendments to IAS 34 Interim
Reporting will be reflected in the next interim results.
Future changes to accounting policies
There are a number of revised standards and interpretations not all of which are applicable to the Group, which
have been issued and are effective for 2013 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 are listed below:
• Amendments to IAS 1 – Presentation of items of Other Comprehensive Income, effective for the 2014 reporting period.
The amendment requires that the Group presents separately the items of the Other Comprehensive Income that may be
reclassified to profit and loss in the future from those items that would never be classified to profit and loss.
• Amendments to IAS 19 – Defined Benefit Pension Schemes, effective for the 2014 reporting period. The principal
amendment is the requirement to calculate net interest income or expense using the discount rate used to
measure the defined benefit asset or liability.
• IFRS 9 (2009 & 2010) – Financial Instruments, has been issued and is effective for accounting periods beginning on
or after January 2015. The standard in its current form contains two primary measurement categories for financial
assets, amortised cost and fair value. Assets that do not meet the conditions for amortised cost, are measured at
fair value. Guidance on financial liabilities is still to be finalised. This standard has not yet been endorsed by the EU.
• Disclosures – Transfer of Financial Assets (Amendments to IFRS 7) has been issued and is effective for the 2013
reporting period. This will lead to additional disclosure requirements in terms of part and fully de-recognised
financial assets.
• The IASB has issued new standards during the year; IFRS 10 – Consolidated Financial Statements, IFRS 11 – Joint
Arrangements, IFRS 12 – Disclosure of Interests in Other Entities and IFRS 13 – Fair Value Measurement. These
standards may apply in 2013/14 and are subject to EU endorsement. IFRS 10, IFRS 11 and IFRS 12 are part of a
new suite of standards on consolidation and related standards, replacing existing standards on accounting for
subsidiaries and joint ventures (now joint arrangements) and making limited amendments in relation to associates.
IFRS 13 will replace existing guidance on fair value measurement in different IFRSs with a single definition of fair
value, a fair value framework and fair value disclosures. The impact of these standards is being evaluated but the
Group currently does not expect adoption of these standards will have a significant impact on the Group’s results
or financial position.
3 segmental analysis
IFRS 8 requires operating segments to be identified, based on information presented to the Chief Operating Decision
Maker in order to allocate resources to the segments and monitor performance. The Group has identified two
segments as set out below:
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Photo-Me International plc
(i) Operations: comprises the operation of unattended vending equipment, in particular photobooths, digital printing
kiosks, amusement machines and business service equipment.
(ii) Sales & Servicing: comprises the development, manufacture, sale and after-sale servicing of this operations
equipment and a range of photo-processing equipment, together with the servicing of other third party equipment.
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.
The segment results are as follows:
2012
Total revenue
Inter-segment revenue
revenue from external customers
EBITDA
Depreciation and amortisation
Operating profit excluding associates
Share of post-tax profit from associates
Corporate costs excluding depreciation and amortisation
Corporate depreciation and amortisation
operations
£’000
sales & servicing
£’000
178,063
–
178,063
44,994
(19,890)
25,104
51,546
(21,768)
29,778
997
(3,511)
(2,514)
operating profit
Finance revenue
Finance costs
profit before tax
tax
profit for year
Capital expenditure
Corporate capital expenditure
total capital expenditure
2011
Total revenue
Inter-segment revenue
Revenue from external customers
EBITDA
Depreciation and amortisation
Operating profit excluding associates
Share of post-tax profit from associates
Corporate costs excluding depreciation and amortisation
Corporate depreciation and amortisation
Operating profit
Finance revenue
Finance costs
Profit before tax
Tax
Profit for year
Capital expenditure
Corporate capital expenditure
Total capital expenditure
15,943
2,337
176,852
–
176,852
46,080
(24,947)
21,133
64,283
(21,315)
42,968
4,086
(3,595)
491
17,067
3,612
total
£’000
229,609
(21,768)
207,841
45,991
(23,401)
22,590
89
(2,047)
(613)
20,019
844
(723)
20,140
(5,594)
14,546
18,280
71
18,351
241,135
(21,315)
219,820
50,166
(28,542)
21,624
89
(2,687)
(638)
18,388
476
(861)
18,003
(4,252)
13,751
20,679
9
20,688
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Inter segment revenue relates to the sale of equipment, spare parts and servicing by the Sales & Servicing segment to
the Operations segment.
Annual Report for the year ended 30 April 2012
53
notes to the financial statements CONTINUED
3 segmental analysis continued
The Parent Company is domiciled in the UK. The total revenue from external customers in the UK is £44,807,000
(2011: £50,441,000) and the total revenue from other countries is £163,034,000 (2011: £169,379,000), comprising
Asia £46,172,000 (2011: £43,277,000) and Continental Europe and Ireland £116,862,000 (2011: £126,102,000).
Operations revenue is generated from sited operating equipment, with the three main countries being France, Japan
and the United Kingdom. Sales & Servicing revenue mainly originates in France with customers worldwide.
4 profit for the year
Costs and overhead items charged/(credited) in arriving at profit for the year, include the following:
amortisation, depreciation and impairment
Amortisation of previously capitalised research and development expenditure
Amortisation of intangible assets other than research and development
Depreciation of property, plant and equipment
– owned
– leased
2012
£’000
3,112
165
3,277
20,370
367
20,737
2011
£’000
2,970
247
3,217
25,574
389
25,963
Amortisation of intangible assets (excluding capitalised research and development expenditure) is reflected in the
income statement within cost of sales £88,000 (2011: £65,000) and administrative expenses £77,000 (2011: £182,000).
Amortisation and impairment of capitalised research and development expenditure is reflected in cost of sales.
operating lease rentals
– property
– plant and equipment
inventory cost
Cost of inventories recognised as an expense
Inventory provision reversed
Inventory provision reversed relates to provisions which have been utilised during the year.
Other items
Research and development current year expenditure, not capitalised
Own work capitalised
Trade receivables impairment (note 15)
Net foreign exchange (gains)/losses
(Gains)/losses on sale of property, plant and equipment
Direct expenses for investment properties generating rental income
2012
£’000
11,134
1,081
12,215
26,064
(466)
25,598
2012
£’000
1,478
(2,507)
771
(370)
(69)
65
2011
£’000
11,719
1,050
12,769
35,189
(133)
35,056
2011
£’000
763
(2,299)
988
1,087
21
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Photo-Me International plc
Audit and non-audit services
The following fees for audit and non-audit services were paid or are payable to the Company’s auditor, KPMG Audit
Plc and its associates.
Audit services
Audit of these financial statements
Fees payable to the Company’s auditor and its associates for other services
– audit of the Company’s subsidiaries pursuant to legislation
– other services
2012
£’000
153
159
57
369
2011
£’000
179
142
25
346
The audit fee of the Company was £55,000 (2011: £55,000).
Other services – represents fees payable for all non-audit services not covered above, and mainly covers review of the
interim financial statements and accounting advice.
In order to maintain the independence of the external auditors, the Board has determined policies as to what non-
audit services can be provided by the Company’s external auditors and the approval processes related thereto. This
function is performed by the Audit Committee. Such services will only be approved if there are clear efficiencies and
added value benefits to the Company. Fees paid to KPMG Audit Plc and its associates for non-audit services to the
Company itself are not disclosed individually, as they are included above.
In addition to the audit fees payable to KPMG and its associates, certain Group subsidiaries are audited by other
firms. The following shows the fees payable to those firms:
Audit fees
Other services
2012
£’000
94
4
98
2011
£’000
115
44
159
Summary
Total fees paid or payable to all of the Group’s auditors for audit and other services were £467,000 (2011: £505,000).
Other operating income
Other operating income of £1,194,000 (2011: £1,916,000) principally includes rental income from investment
property (note 13).
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notes to the financial statements CONTINUED
5 employees
Staff costs during the year amounted to:
Wages and salaries
Social security costs
Share options granted to directors and employees
Other pension costs
– defined benefit schemes
– defined contribution schemes
Other post-retirement costs
Staff costs of employees and executive directors
Non-executive directors including social security costs
2012
£’000
40,651
9,320
302
116
206
382
50,977
200
51,177
2011
£’000
40,512
9,259
193
91
223
282
50,560
264
50,824
Included above are the following costs relating to the Group’s key management personnel who comprise the
directors of the Parent Company.
Directors’ emoluments
Full details of directors’ remuneration and share options are given in the Remuneration Report on pages 28 to 34
and are summarised as follows:
Directors’ emoluments
– excluding termination payments
– ex-gratia and termination payments
Number of directors accruing benefits under defined contribution schemes
2012
£’000
1,340
–
1,340
1
2011
£’000
1,334
50
1,384
1
Included in the directors’ emoluments costs are bonuses totalling £521,000 (2011: £506,000).
56
Photo-Me International plc
The average number of employees during the year (including executive directors) comprised:
Full-time
Part-time
Operations
Sales & Servicing
Corporate
6 finance revenue and costs
finance revenue
Bank interest
Other assets at amortised cost
Interest income from financial assets not at fair value through profit or loss
Fair value movements on derivatives
Interest received
Other financial income
Profit on sale investments
Profit on sale of Group undertakings
total finance revenue
finance costs
Bank loans and overdrafts at amortised cost
Other loans at amortised cost
Finance leases
Other finance charges
total finance costs
2012
981
147
1,128
958
158
12
1,128
2012
£’000
362
72
434
210
644
18
155
27
844
621
24
5
73
723
2011
1,098
167
1,265
988
264
13
1,265
2011
£’000
141
48
189
91
280
–
–
196
476
721
22
18
100
861
The profits on sale of Group undertakings have arisen due to the recycling of accumulated exchange differences
through the income statement.
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notes to the financial statements CONTINUED
7 taxation expense
Tax charges/(credits) in the statement of comprehensive income
2012
£’000
2011
£’000
taxation
current taxation
UK corporation tax
– current tax
– prior years
– double taxation relief
Overseas taxation
– current year
– prior years
total current taxation
Deferred taxation
Origination and reversal of temporary differences
– current year – UK
– overseas
Adjustments to estimated recoverable amounts
of deferred tax assets arising in previous years
– UK
– Overseas
Impact of change in rate
total deferred tax
tax charge in the statement of comprehensive income
Tax relating to items credited to other components of comprehensive income
Deferred tax
Actuarial gains and losses on pension schemes
tax credit in other comprehensive income
742
25
–
767
5,834
(236)
5,598
6,365
106
(382)
(221)
(271)
(3)
(771)
5,594
2012
£’000
(118)
(118)
659
294
(68)
885
5,535
(1)
5,534
6,419
418
(436)
(2,421)
255
17
(2,167)
4,252
2011
£’000
(38)
(38)
58
Photo-Me International plc
Reconciliation of the total tax charge
The difference between the Group tax charge and the standard UK corporation tax rate of 25.8% (2011: 27.8%) is
explained below:
Profit before tax
Tax using the UK corporation tax rate of 25.8% (2011: 27.8%)
Effect of:
– non-taxable items
– overseas tax rates
– relieved losses on which deferred tax had not previously been recognised
– adjustments to tax in respect of prior years
total tax charge
effective tax rate
2012
£’000
20,140
5,204
(91)
1,218
(34)
(703)
5,594
27.8%
2011
£’000
18,003
5,010
(2)
1,032
85
(1,873)
4,252
23.6%
8 profits attributable to members of the parent company
The profit for the year, after tax, dealt with in the financial statements of the Parent Company is £13,162,000
(2011: £18,301,000), including dividends received from subsidiaries.
9 Dividends paid and proposed
2012
2011
pence per share
£’000
Pence per share
£’000
interim
2011 paid 6 May 2011
2010 paid 4 May 2010
final
2011 paid 7 November 2011
2010 paid 5 November 2010
1.00
3,614
1.00
3,618
2.00
7,232
0.25
900
1.00
1.25
3,612
4,512
Year ended 30 April 2012 – Proposed dividends not yet paid
The Board declared an interim dividend of 1.25p per share for the year ending 30 April 2012, amounting to
£4,529,000, which was paid on 8 May 2012. The Board propose a final dividend for the year ended 30 April 2012
of 1.25p per share, which is subject to shareholder approval at the Annual General Meeting to be held on
13 September 2012. If approved, the dividend will be paid on 7 November 2012.
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59
notes to the financial statements CONTINUED
10 earnings per share
Basic earnings per share amounts are calculated by dividing net earnings attributable to Ordinary shareholders of the
Parent of £14,349,000 (2011: £13,608,000) by the weighted average number of Ordinary shares in issue during the
year, excluding those held as treasury shares.
Diluted earnings per share amounts are calculated by dividing the net earnings attributable to Ordinary shareholders
of the Parent by the weighted average number of Ordinary shares outstanding during the year plus the weighted
average number of Ordinary shares that would be issued on conversion of all the dilutive potential Ordinary shares
into Ordinary shares. The Group has only one category of dilutive potential Ordinary shares: the share options
granted to senior staff, including directors, as detailed in note 20.
The earnings and weighted average number of shares used in the calculation are set out in the table below:
2012
weighted
average
number
of shares
’000
earnings
£’000
earnings
per share
pence
Earnings
£’000
2011
Weighted
average
number
of shares
’000
Basic earnings per share
14,349
361,840
Effect of dilutive securities: options
–
1,920
Diluted earnings per share
14,349
363,760
3.97
(0.02)
3.95
13,608
361,078
–
2,465
13,608
363,543
Earnings
per share
pence
3.77
(0.03)
3.74
Potential Ordinary shares are treated as dilutive when and only when their conversion to Ordinary shares would
decrease basic earnings per share or increase loss per share from continuing operations.
11 Goodwill and other intangible assets
Goodwill
Group
£’000
10,338
56
10,394
(199)
10,195
300
1
301
(1)
300
9,895
10,093
10,038
cost:
At 1 May 2010
Exchange differences
At 30 April 2011
Exchange differences
at 30 april 2012
impairment charges:
At 1 May 2010
Exchange differences
At 30 April 2011
Exchange differences
at 30 april 2012
net book value:
at 30 april 2012
At 30 April 2011
At 1 May 2010
Company
The Company has no goodwill.
60
Photo-Me International plc
Impairment of goodwill
Goodwill acquired through business combinations has been allocated between the two reportable segments:
– Operations activity
– Sales & Servicing activity
carrying amount
Goodwill
operations
sales & servicing
total
2012
£’000
9,578
2011
£’000
9,776
2012
£’000
317
2011
£’000
317
2012
£’000
9,895
2011
£’000
10,093
Goodwill has been allocated for impairment testing purposes to six (2011: six) cash-generating units (CGUs):
carrying amount
uK and ireland
Operations 1
Operations 2
Sales & Servicing 1
total uK and ireland
continental europe
Operations 1
Operations 2
total continental europe
asia
Operations 1
total asia
total
operations
sales & servicing
total
2012
£’000
2011
£’000
2012
£’000
2011
£’000
2012
£’000
2011
£’000
154
14
–
168
1,873
292
2,165
7,245
7,245
9,578
154
14
–
168
2,044
319
2,363
7,245
7,245
9,776
–
–
317
317
–
–
–
–
–
–
–
317
317
–
–
–
–
–
317
317
154
14
317
485
1,873
292
2,165
7,245
7,245
9,895
154
14
317
485
2,044
319
2,363
7,245
7,245
10,093
The Group tests annually, for impairment, or more frequently if there are indications that goodwill might be impaired.
The recoverable amount of all CGUs has been determined on a value in use basis.
Value in use was determined by discounting the future cash flows of the CGU, for a finite period of five years, based
on actual operating results, budgets and economic market research.
Key assumptions
Growth rate 3% (2011: 3%)
The growth rate has been determined based on expected annual growth in EBITDA for each CGU and takes into
account revenue, volumes, selling prices and operating costs. It is based on past experience and expected future
developments in markets and operations.
Discount rate 7–12% (2011: 7–10%)
The pre-tax discount rates applied to the cash flow forecasts for the CGUs are derived from the pre-tax weighted
average cost of capital for the Group adjusted for economic and political risks for the specific country concerned.
The rates used are France 11% (2011: 10%), Japan 9% (2011: 7%), Germany 9% (2011: 9%) and Ireland 12%
(2011: 9%). The Board is confident, overall, that these discount rates reflect the circumstances in each region,
and are in accordance with IAS 36.
Sensitivity to changes in assumptions
There is significant headroom for each CGU and management believes that no reasonable possible change in any
of the above assumptions would cause the carrying value of those CGUs to exceed their recoverable amount.
Consequently there were no impairment losses recognised in 2012 (2011: none).
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61
notes to the financial statements CONTINUED
11 Goodwill and other intangible assets continued
Other intangible assets
Group
research and
development
costs
£’000
customer
licences and
patents
£’000
other
intangible
assets
£’000
software
£’000
cost:
At 1 May 2010
Exchange differences
Additions
– internally generated
– external
Disposals
At 30 April 2011
Exchange differences
Additions
– internally generated
– external
Disposals
at 30 april 2012
amortisation:
At 1 May 2010
Exchange differences
Disposals
Provided during year
At 30 April 2011
Exchange differences
Disposals
Provided during year
at 30 april 2012
net book value:
at 30 april 2012
At 30 April 2011
At 1 May 2010
21,863
567
3,358
–
(570)
25,218
(1,954)
2,169
–
(853)
24,580
14,446
443
(570)
2,970
17,289
(1,531)
(853)
3,112
18,017
6,563
7,929
7,417
1,618
31
–
154
(22)
1,781
343
–
219
(101)
2,242
1,473
4
(22)
120
1,575
343
(100)
152
1,970
272
206
145
1,431
147
–
44
(3)
1,619
(111)
–
14
–
1,964
47
–
90
–
2,101
(135)
–
75
–
1,522
2,041
1,222
139
(1)
127
1,487
(60)
–
13
1,440
82
132
209
–
–
–
–
–
–
–
–
–
2,041
2,101
1,964
total
£’000
26,876
792
3,358
288
(595)
30,719
(1,857)
2,169
308
(954)
30,385
17,141
586
(593)
3,217
20,351
(1,248)
(953)
3,277
21,427
8,958
10,368
9,735
Capitalised research and development expenditure is amortised over a maximum of four years, with no residual value.
The average remaining life in years for research and development costs is 1.92 years (2011: 2.17 years).
Other intangible assets are payments made for the right to occupy a space to site vending equipment and are allocated
to the Operations segment. The Group has control over the use of these rights and has classified them as having an
indefinite life. Although the Group has no intention of selling these rights, there is a value attached to them. These
assets are based on cost, being the payments made for the right to occupy the space. In determining fair values of such
assets for the purpose of impairment testing, the Group has based its assumptions on current prices paid for such assets
(using actual amounts paid by the Company and/or management estimates for amounts paid by third parties) and,
where the right has been held for a number of years, the expected sales price, less costs to sell. The carrying amount of
these intangible assets has been reviewed on an individual basis for impairment testing. Management believes that no
reasonable possible change in the basis of this assessment would cause the carrying value of these rights to exceed their
recoverable value.
62
Photo-Me International plc
Company
cost:
At 1 May 2010
Disposals
At 30 April 2011
Additions
Disposals
at 30 april 2012
amortisation:
At 1 May 2010
Provided during year
Disposals
At 30 April 2011
Provided during year
Disposals
at 30 april 2012
net book value:
at 30 april 2012
At 30 April 2011
At 1 May 2010
The Company’s only intangible asset is software.
£’000
955
(22)
933
28
(7)
954
904
29
(22)
911
21
(7)
925
29
22
51
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notes to the financial statements CONTINUED
12 property, plant and equipment
Group
land and buildings
£’000
photobooths and
vending machines
£’000
plant, machinery,
furniture, fixtures
and motor vehicles
£’000
cost:
At 1 May 2010
Exchange differences
Additions
– internal
– external
Disposals
At 30 April 2011
Exchange differences
Additions
– internal
– external
– subsidiaries acquired
Disposals
at 30 april 2012
Depreciation:
At 1 May 2010
Exchange differences
Provided during year
Disposals
At 30 April 2011
Exchange differences
Provided during year
Disposals
at 30 april 2012
net book value:
at 30 april 2012
At 30 April 2011
At 1 May 2010
10,957
245
–
62
(155)
11,109
(423)
–
33
–
(19)
10,700
7,566
195
254
(58)
7,957
(346)
233
(18)
7,826
2,874
3,152
3,391
179,176
5,717
2,299
13,554
(17,231)
183,515
(4,213)
2,507
12,525
760
(20,268)
174,826
127,640
4,379
23,469
(16,304)
139,184
(4,128)
18,892
(19,590)
134,358
40,468
44,331
51,536
26,306
633
–
1,127
(2,229)
25,837
(1,871)
–
809
–
(1,111)
23,664
22,236
598
1,737
(2,098)
22,473
(1,735)
1,131
(991)
20,878
2,786
3,364
4,070
total
£’000
216,439
6,595
2,299
14,743
(19,615)
220,461
(6,507)
2,507
13,367
760
(21,398)
209,190
157,442
5,172
25,460
(18,460)
169,614
(6,209)
20,256
(20,599)
163,062
46,128
50,847
58,997
Internal additions for photobooths and vending machines of £2,507,000 (2011: £2,299,000) relate to own work
capitalised, being equipment manufactured by the Group’s Sales & Servicing division and capitalised by the Group’s
Operations division.
Included in the above are assets held under finance leases, as follows:
2012
2011
photobooths and
vending machines
£’000
plant, machinery,
furniture, fixtures
and motor vehicles
£’000
Photobooths and
vending machines
£’000
Plant, machinery,
furniture, fixtures and
motor vehicles
£’000
Net book value
Additions/reclassifications
Depreciation charge
26
–
248
199
–
119
643
–
279
307
43
110
The Group has loans of £6,000 (2011: £24,000), which are secured on certain property, photobooths and motor vehicles.
64
Photo-Me International plc
Company
cost:
At 1 May 2010
Additions
– internal
– external
Disposals
– internal
– external
Transfer of subsidiary’s
trade and assets
At 30 April 2011
Additions
– internal
– external
Disposals
– internal
– external
at 30 april 2012
Depreciation:
At 1 May 2010
Provided during year
Disposals
– internal
– external
Transfer of subsidiary’s
trade and assets
At 30 April 2011
Provided during year
Disposals
– internal
– external
at 30 april 2012
net book value:
at 30 april 2012
At 30 April 2011
At 1 May 2010
land and buildings
£’000
photobooths and
vending machines
£’000
plant, machinery,
furniture, fixtures
and motor vehicles
£’000
total
£’000
2,484
46,508
2,980
51,972
–
–
–
(4)
–
2,480
–
24
–
–
2,504
1,428
59
–
(4)
–
1,483
59
–
–
1,542
962
997
1,056
2,765
105
(173)
(5,152)
865
44,918
2,433
116
(602)
(6,308)
40,557
37,907
5,045
(151)
(5,111)
745
38,435
3,425
(586)
(6,280)
34,994
5,563
6,483
8,601
–
13
–
(1,605)
13
1,401
–
23
(3)
(62)
1,359
2,225
473
–
(1,602)
8
1,104
152
(2)
(57)
1,197
162
297
755
2,765
118
(173)
(6,761)
878
48,799
2,433
163
(605)
(6,370)
44,420
41,560
5,577
(151)
(6,717)
753
41,022
3,636
(588)
(6,337)
37,733
6,687
7,777
10,412
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Internal additions for photobooths and vending machines of £2,433,000 (2011: £2,765,000) relates to new
equipment manufactured by the Group’s Sales & Servicing division and equipment previously capitalised by the
Group’s subsidiaries. Internal disposals relates to disposals to subsidiary companies.
Annual Report for the year ended 30 April 2012
65
notes to the financial statements CONTINUED
13 investment property
Group
cost:
At 1 May 2010
Exchange differences
At 30 April 2011
Exchange differences
at 30 april 2012
Depreciation:
At 1 May 2010
Exchange differences
Depreciation provided during year
At 30 April 2011
Exchange differences
Depreciation provided during year
at 30 april 2012
net book value:
at 30 april 2012
At 30 April 2011
At 1 May 2010
£’000
13,027
312
13,339
(1,115)
12,224
10,805
282
503
11,590
(994)
481
11,077
1,147
1,749
2,222
The investment property is freehold and is stated at cost.
The property was valued by an independent professional valuer in October 2010, with a value of €12.2m based on
a market value for similar properties, and on a rental stream valuation of €12.6m.
Since this valuation was performed, the Group has sold the rights to the future rental stream on the property for the
period up to April 2019. Funds received in the year ended 30 April 2011 on the original rental stream sale amounted
to €9.2m (£8.2m). The associated liability is reflected in accruals and deferred income, note 25.
The sale of the future rental income has impacted the value of the property. The Board believes at 30 April 2012,
that net of the remaining deferred rental income creditor of €8.0m, the property continues to be worth more than
its £1.1m net book value (2011: £1.7m). The valuations for future years are expected to increase due to the passage
of time and the unwinding of the related deferred rental income creditor.
Rental income from the investment property was £1,019,000 (2011: £963,000) (note 4) and finance costs were
£185,000 (2011: £45,000).
The Group will continue to act as a cash collection agent for the underlying lease agreement.
The non-cancellable future minimum rentals receivable on this basis are as follows:
2012
£’000
1,074
4,295
2,148
7,517
2011
£’000
1,013
4,056
3,042
8,111
No later than one year
After one year but no more than five years
After five years
Company
The Company has no investment property.
66
Photo-Me International plc
14 investments in associates and subsidiaries
Investment in associates
Group
cost:
At 1 May 2010
Exchange differences
Share of profits
Dividends
At 30 April 2011
Exchange differences
Additions
Share of profits
Other movements
Dividends
at 30 april 2012
£’000
583
(9)
89
(65)
598
(1)
62
89
(55)
(101)
592
Other movements in 2012 relates to the change in the percentage interest in Photo Direct Pty Ltd.
The summarised financial information of the principal associates, relating to the Group’s share, is set out below.
All companies are unlisted.
name
At 30 April 2011
country of
incorporation
assets
£’000
liabilities
£’000
revenue
£’000
profit/(loss)
£’000
% interest
Max Sight Ltd
Hong Kong
Photo Direct Pty Ltd
Australia
Other associates
at 30 april 2012
Max Sight Ltd
Hong Kong
Photo Direct Pty Ltd
Australia
Other associates
286
1,060
102
1,448
232
796
160
1,188
22
765
63
850
41
498
57
596
376
3,506
156
4,038
402
2,786
311
3,499
33.33
33.33
33.33
26.95
46
45
(2)
89
21
66
2
89
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67
notes to the financial statements CONTINUED
14 investments in associates and subsidiaries continued
Investment in associates continued
Company
cost:
At 1 May 2010
Additions
Capital increase relating to share-based payment (net)
At 30 April 2011
Capital increase relating to share-based payment (net)
Disposals
At 30 April 2012
provision:
At 1 May 2010
Increase
At 30 April 2011
Decrease
at 30 april 2012
net book value:
at 30 april 2012
At 30 April 2011
At 1 May 2010
associated
undertakings
£’000
subsidiary
undertakings
£’000
total
£’000
408
–
–
408
–
–
408
150
–
150
–
150
258
258
258
43,272
43,680
163
70
43,505
233
(1,126)
42,612
1,843
162
2,005
(662)
1,343
41,269
41,500
41,429
163
70
43,913
233
(1,126)
43,020
1,993
162
2,155
(662)
1,493
41,527
41,758
41,687
The net capital increase relating to share-based payments relates to share options granted to the employees of
subsidiary undertakings of the Group. Refer to note 20 for further details on the Group’s share option schemes.
The details of the Group’s principal subsidiaries and associates are given in note 30.
15 financial instruments
15 (a) Fair values of financial instruments by class
There is no difference between the fair values and the carrying values of financial assets and financial liabilities held
in the Group’s or the Company’s statement of financial position.
Held to maturity, available-for-sale financial assets and derivatives
The fair value is based on quoted prices at the balance sheet date for quoted investments and other valuation
methods for unquoted investments. For restricted deposit accounts held to maturity, fair value is estimated at the
present value of future cash flows, discounted at the market rate of interest at the balance sheet date. Derivatives
are valued at fair value using exchange rates and market interest rates at the balance sheet date.
Trade and other receivables
The fair value of trade and other receivables, is estimated as the present value of future cash flows, discounted at
the market rate of interest at the balance sheet date if the effect is material.
Cash and cash equivalents
The fair value of cash and cash equivalents is estimated as its carrying value where cash is repayable on demand. For
short-term cash deposits and other items not repayable on demand, fair value is estimated at the present value of
future cash flows, discounted at the market rate of interest at the balance sheet date.
68
Photo-Me International plc
Interest-bearing borrowings
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the
market rate of interest at the balance sheet date. For finance leases the market rate of interest is determined by
reference to similar lease agreements.
Trade and other payables
The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the
market rate of interest at the balance sheet date if the effect is material.
15 (b) Financial statement risk management
Financial risk factors and financial risk management
Overview
The Group and the Company are exposed to the following risks arising from financial instruments:
(i) Credit risk
(ii) Liquidity risk
(iii) Market risk
Credit risk is the risk of financial loss to the Group and the Company if a customer or counterparty to a financial
instrument fails to meet its contractual obligations. It mainly arises on trade and other receivables and bank balances.
Liquidity risk arises from the Group and the Company having insufficient cash resources to meet its obligations as and
when they fall due for payment.
Market risk arises from changes in market prices, such as exchange rates, interest rates and equity prices that will
impact on the Group’s and the Company’s income statement or the value of its holding of financial instruments.
Listed below are details of these risks, the Group’s objectives, policies and processes for measuring and monitoring
risks and the Group’s management of capital.
Risk Management Framework
The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to
minimise potential risks for the Group. Information has been disclosed relating to the Parent Company only where
material risk exists.
There is a continuous process for identifying, evaluating and managing the key financial risks faced by the Group in
line with changing market conditions and the Group’s strategy. If necessary, the Group’s internal audit function may
assist in monitoring and assessing the effectiveness of controls and procedures. The Board retains responsibility for
ensuring the adequacy of systems for identifying and assessing significant risks, that appropriate control systems
and other mitigating actions are in place and that residual exposures are consistent with the Group’s strategy and
objectives. Assessments are conducted for all material entities.
The Group may use derivatives to manage exchange or interest rate risk. Approval for their use is given by the Board
and the position is monitored constantly. The derivatives outstanding at 30 April 2011 were settled during the year
resulting in no derivates recorded in the statement of financial position at 30 April 2012.
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With regard to management of interest rate risk, the objectives are to lessen the impact of adverse interest rate
movements on earnings and shareholders’ funds and to ensure no breach of covenants. This is mainly achieved by
reviewing the mix of fixed and floating rate borrowings.
The Group’s liquidity risk management involves maintaining sufficient cash and cash equivalents and the availability
of funding through an adequate amount of committed credit facilities.
(i) Credit risk
The Group has no significant concentrations of credit risk. Credit risk arises from cash and cash equivalents and
deposits with banks and financial institutions, and on outstanding trade and other receivables. Cash deposits are
limited to high credit quality financial institutions. The Group has policies in place to ensure that sales of products and
services are made to customers with an approved credit history.
Annual Report for the year ended 30 April 2012
69
notes to the financial statements CONTINUED
15 financial instruments continued
15 (b) Financial statement risk management continued
Financial risk factors and financial risk management continued
(i) Credit risk continued
Credit quality of financial assets
Individual Group companies have banking relationships with leading banks in the country in which the Group
company operates. Surplus cash is placed in bank deposit accounts, for varying periods, depending on the cash
requirements of the Group. These deposits are placed with leading banks in the country in which the Group
company operates. The Group has procedures in place to ensure that cash is placed with sound financial institutions.
The Group and the Company trade with a large number of customers, ranging from quoted companies and state
organisations to individual traders. Individual Group companies have credit control procedures in place before making
sales to new customers and levels of credit are reviewed in light of trading experience. The normal terms of trade are
in the range 30–90 days. The collection of outstanding receivables is monitored at both the Group and subsidiary level.
The Group and the Company make provisions against trade and other receivables, such provisions being based
on the previous credit history of the debtor and if the debtor is in receivership or liquidation.
The maximum credit risk for financial assets is the carrying value.
Trade receivables, related parties and amounts due from associated undertakings are normally interest free. The
normal terms of settlement are between 30 and 90 days. Other receivables and prepayments and accrued income
are interest free.
The movements in provisions are as follows:
At 1 May
Exchange differences
Charged/(credited) to income statement
Utilised
Transfer from subsidiary
at 30 april
Group
company
2012
£’000
6,809
(543)
771
(969)
–
6,068
2011
£’000
7,866
145
988
(2,190)
–
6,809
2012
£’000
1,184
–
(9)
(1,150)
–
25
2011
£’000
2,073
–
(17)
(916)
44
1,184
At 30 April 2012, trade receivables of £1,746,000 (2011: £4,339,000) were past due and relate to a number of
individual customers for whom there is no recent evidence of default and therefore are not impaired.
The ageing of net trade current receivables is as follows:
Current
Past due
– overdue 1–30 days
– overdue 31–60 days
– overdue 61 days
Total past due
Total trade receivables
Group
company
2012
£’000
8,044
712
488
546
1,746
9,790
2011
£’000
8,087
2,445
1,409
485
4,339
12,426
2012
£’000
692
131
32
19
182
874
2011
£’000
675
245
99
81
425
1,100
The credit quality of trade receivables that are neither past due nor impaired is assessed on an individual basis, based
on credit ratings and experience. Management believes adequate provision has been made for trade receivables.
Amounts due from subsidiaries of £3,990,000 (2011: £2,051,000) are all current.
70
Photo-Me International plc
(ii) Liquidity risk
The Group’s liquidity risk management involves maintaining sufficient cash and cash equivalents and the availability
of funding through an adequate amount of committed credit facilities. Trading forecasts indicate that the current
facilities provide more than sufficient liquidity headroom to support the business for the foreseeable future. The net
cash position at 30 April 2012 and 30 April 2011 has reduced liquidity risk for the Group.
At 30 April 2012 the Group has undrawn facilities of £13,471,000 (2011: £14,371,000). Having regard to the Group’s
cash flow, it is considered that these facilities provide adequate headroom for the Group’s needs. The facilities are
generally reaffirmed by the banks annually. These undrawn facilities, if used, will be subject to floating rates of interest.
The Group has secured loans amounting to £6,000 (2011: £24,000) on property, plant and equipment.
Certain lending banks have imposed loan covenants on borrowings, which are normal for these type of borrowings,
and, during the years to 30 April 2012 and 30 April 2011, the Group and the Company have comfortably complied
with these requirements.
The table below summarises the maturity profile of the Group’s financial liabilities (including trade and other
payables) at 30 April 2012 and 30 April 2011 based on contractual undiscounted payments.
at 30 april 2012
Interest bearing loans and
borrowings and interest free loans
Finance leases
Trade and other payables
At 30 April 2011
Interest bearing loans and
borrowings and interest free loans
Finance leases
Trade and other payables
contractual cash flows
within
one year
£’000
year 2
£’000
year 3
£’000
year 4
£’000
year 5
£’000
over
5 years
£’000
total
£’000
4,305
131
30,433
34,869
458
64
130
652
11,407
4,869
457
43,716
55,580
103
365
5,337
210
25
–
235
487
64
–
551
18
2
–
20
192
26
–
218
–
–
–
–
44
2
–
46
–
–
–
–
–
–
–
–
4,991
222
30,563
35,776
16,999
652
44,081
61,732
The table below summarises the maturity profile of the Company’s financial liabilities (including trade and other
payables) at 30 April 2012 and 30 April 2011, based on contractual undiscounted payments.
at 30 april 2012
Trade and other payables
At 30 April 2011
Interest bearing loans and borrowings
Trade and other payables
contractual cash flows
within
one year
£’000
over
one year
£’000
16,039
16,039
6,005
23,197
29,202
–
–
–
–
–
total
£’000
16,039
16,039
6,005
23,197
29,202
Held to maturity financial assets
These largely comprise restricted bank deposit accounts where the cash is held by the bank as security against
certain contingent liabilities. The most significant of which relates to the agreed interest on the sale of the Grenoble
investment property rental income.
Annual Report for the year ended 30 April 2012
71
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notes to the financial statements CONTINUED
15 financial instruments continued
15 (b) Financial statement risk management continued
Financial risk factors and financial risk management continued
(iii) Market risk
Foreign exchange risk
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than
the local functional currency. In addition, the Group faces currency risks arising from monetary financial instruments
held in non-functional currencies. The income statement reflects the impact of realised and unrealised exchange
differences on trading items and monetary financial instruments (note 4).
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency
translation risk. This risk is reduced by having borrowings in the foreign operation in the functional currency of the
foreign operation. The main currency translation risk relates to foreign operations whose functional currency is the
Euro, Swiss franc or Japanese yen. The investments are not hedged. The translation reserve reflects the exchange
differences arising on translation of the opening net assets and results of the foreign operation (note 20).
Operational foreign exchange exposure
Where possible, the Group tries to invoice in the local currency of the respective entity. If this is not possible, then
to mitigate exposure, the Group endeavours to buy from suppliers and sell to customers in the same currency.
The exposure relating to receivables and payables denominated in the non-functional currency is normally less than
3 months as this is the normal settlement period for these items.
Where possible, the Group tries to hold the majority of its cash and cash equivalent balances in the local currency
of the respective entity.
Monetary assets/liabilities
The Group continues to monitor exchange rates and buy or sell currencies in order to minimise the open exposure
to foreign exchange risk.
The Group uses derivative financial instruments mainly to reduce the risk of foreign exchange exposure on trading
items (sales or purchases in currencies other than the domestic currency of the company concerned) and interest rate
movements. The Group does not hold or issue derivative financial instruments for financial trading purposes.
IFRS 7 sensitivity analysis
The following table shows the impact on profit and equity of a change of 10% in exchange rates, excluding
translation risk, assuming all other variables held constant. This analysis is for illustrative purposes only.
2012
profit for the year
total equity
2011
Profit for the year
Total equity
reported
£’000
10% increase
£’000
10% decrease
£’000
14,546
96,841
13,751
88,755
15,344
97,626
14,094
89,089
13,572
95,881
13,332
88,346
72
Photo-Me International plc
The table below shows trade and other receivables that are not in the domestic currency of the individual Group
company they are held by.
Group
company
amount shown as current receivables
Euro
US dollar
Other
2012
£’000
1,860
228
–
2,088
2011
£’000
1,801
287
9
2,097
The majority of these amounts arise from inter-group trading.
Included in the Company amounts due from subsidiaries are short-term loans as follows:
Floating rate Euro loans
2012
£’000
1,855
–
–
1,855
2012
£’000
632
632
2011
£’000
1,766
42
–
1,808
2011
£’000
739
739
Borrowings
At 30 April 2012 and 30 April 2011 the Group had no borrowings which were not denominated in the functional
currency of the Group company concerned.
In addition to the external borrowings, the Company has borrowings from Group companies in Swiss francs of
£2,031,000 (2011: £2,124,000).
The table below shows trade and other payables that are not in the domestic currency of the individual Group
company they are held by.
amounts shown as current liabilities
Sterling
Euro
Swiss franc
US dollar
Japanese yen
Other currencies
Group
2012
£’000
1,808
8,475
3,186
222
1,008
9
2011
£’000
367
11,550
3,211
313
775
–
company
2012
£’000
–
7,853
2,123
–
–
–
2011
£’000
–
11,064
2,216
–
–
–
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14,708
16,216
9,976
13,280
The majority of these amounts arise from inter-group trading.
Annual Report for the year ended 30 April 2012
73
notes to the financial statements CONTINUED
15 financial instruments continued
15 (b) Financial statement risk management continued
Analysis of net debt by currency
Bank
£’000
financial assets
£’000
2012
Sterling
Euro
Swiss franc
US dollar
Yen
Other
2011
Sterling
Euro
Swiss franc
US dollar
Yen
Other
10,559
25,828
6,767
146
10,289
1,016
54,605
8,525
27,863
4,662
4,322
9,736
1,104
56,212
loans
£’000
–
(4,935)
–
–
–
(6)
804
963
622
–
–
–
2,389
(4,941)
–
1,238
633
–
–
–
(6,000)
(10,760)
–
–
–
(8)
1,871
(16,768)
leases
£’000
–
(36)
–
–
(185)
–
(221)
–
(215)
–
–
(297)
(124)
(636)
total
£’000
11,363
21,820
7,389
146
10,104
1,010
51,832
2,525
18,126
5,295
4,322
9,439
972
40,679
Interest rate risk
The main interest rate risk for the Group and the Company derives from the interest rate charged on borrowings.
Fixed rate borrowings are mainly on finance leases; bank loans and other borrowings are generally subject to floating
interest rates. Generally, borrowings are in the domestic currency of the company having the borrowing.
At 30 April 2012 the Group had net cash of £51,832,000 (2011: £40,679,000). Included in these amounts are
£21,259,000 in bank deposit accounts (2011: £11,055,000) and £2,389,000 (2011: £1,871,000) in restricted deposit
accounts, not all of which are interest bearing. With the current low rates of interest on bank deposits, a change in
interest rates will not have a significant impact for the Group.
The Group uses derivative financial instruments mainly to reduce the risk of foreign exchange exposure on trading
items (sales or purchases in currencies other than the domestic currency of the company concerned) and interest rate
movements. The Group does not hold or issue derivative financial instruments for financial trading purposes. There were
no derivatives reflected in the statement of financial position at 30 April 2012; derivatives outstanding at 30 April 2011
were settled in the current year.
74
Photo-Me International plc
IFRS 7 sensitivity analysis
The following table shows the impact on total interest payable of a change of 100 basis points (1%) on borrowings
subject to floating rates of interest.
2012
total interest payable
2011
Total interest payable
reported
£’000
1% increase
£’000
1% decrease
£’000
723
861
794
1,098
652
624
Terms and debt repayment schedule
The Group and the Company have a number of individual bank loans with varying maturity dates. Interest rates on
these loans are based on LIBOR, EURIBOR or equivalent rates plus a margin. The interest rates shown below indicate
the range of interest rates ruling on the loans at 30 April 2012, with the latest maturity date shown.
Group
Finance leases
Finance leases
Loans
Loans
Loans
Loans
Loans
status
currency
interest
rate
year of
maturity
Fixed rate Other currencies
0%–7.20%
Fixed rate
Fixed rate
Euro
Euro
Fixed rate Other currencies
Interest free
Euro
1.00%
4.75%
3.5%
0.0%
Floating
Floating
Sterling 1.37%–1.62%
Euro
1.37%–1.7%
2016
2015
2013
2015
2016
2012
2013
company
Loans
status
Floating
currency
interest
rate
Sterling 1.37%–1.62%
year of
maturity
2012
2012
carrying
amount
£’000
2011
Carrying
amount
£’000
185
36
20
6
644
–
4,271
5,162
2012
carrying
amount
£’000
–
–
421
215
114
8
952
6,000
9,694
17,404
2011
Carrying
amount
£’000
6,000
6,000
Floating rate interest borrowings (loans and overdrafts) are based on LIBOR, EURIBOR or equivalent rates in other
countries plus a margin (generally between 0.45% and 1.0%). The Group had an interest rate swap which at
30 April 2011 resulted in a derivative liability.
Included in the Company receivables – amounts due from subsidiaries, are loans amounting to £632,000
(2011: £739,000) which are subject to floating rates of interest based on EURIBOR plus a margin between
0.5% and 1.0%.
Price risk
The Group and the Company are exposed to changes in prices on raw materials, consumables and finished goods
purchased from suppliers. Wherever possible, price rises are passed on to customers via sales price increases to help
manage this risk. The Group does not have material amounts invested in equity securities and thus does not have any
significant exposure to price risk on equity investments.
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Annual Report for the year ended 30 April 2012
75
notes to the financial statements CONTINUED
15 financial instruments continued
15 (c) Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern
and to enhance long-term shareholder value, by investing in the business so as to improve the return on investment
(by increasing profits available for dividends) and by managing the capital gearing ratio (mixture of equity and debt).
The Group manages, and makes adjustments to, its capital structure in light of the prevailing risks and economic
conditions affecting its business activities. This may involve adjusting the rate of dividends, purchasing the Company’s
own shares, the issue of new shares and reviewing the level and type of debt. The Group manages its borrowings
by appraising the mix of fixed and floating rate borrowings and the mix of long-term and short-term borrowings.
The Group is primarily financed by Ordinary shares, retained profits and borrowings. There were no changes to the
Group’s approach to capital management during the year.
The capital structure of the Group is presented below.
Cash and cash equivalents
Borrowings
Net cash (excluding restricted deposits)
Equity
2012
£’000
54,605
(5,162)
49,443
96,841
2011
£’000
56,212
(17,404)
38,808
88,755
The Group has various borrowings and available facilities that contain certain external capital requirements
(covenants) that are considered normal for these type of arrangements. The Group remains comfortably within all
such covenants.
16 trade and other receivables
non-current assets
Other receivables
Prepayments and accrued income
current assets
Group
2012
£’000
1,431
42
1,473
2011
£’000
1,905
42
1,947
Trade receivables – external
9,790
12,426
– related parties
Amounts due from – subsidiaries
– associated undertakings
Other receivables
Prepayments and accrued income
–
–
37
2,841
1,634
14,302
45
–
59
4,447
3,421
20,398
company
2012
£’000
–
–
–
874
–
3,990
–
172
424
5,460
2011
£’000
–
–
–
1,100
–
2,051
–
237
1,327
4,715
Non-current other receivables include deposits relating to operating sites and properties. Current other receivables
include deposits relating to operating sites and properties, indirect and other taxation and other receivables.
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Photo-Me International plc
17 inventories
Raw materials and consumables
Work-in-progress
Finished goods
Group
company
2012
£’000
2011
£’000
13,971
17,412
2
72
2,958
3,374
2012
£’000
1,010
–
147
2011
£’000
1,577
–
156
16,931
20,858
1,157
1,733
The replacement value of inventories is not materially different from that stated above.
The cost of inventories recognised as an expense included in cost of sales amounted to £25,598,000 (2011: £35,056,000)
from continuing operations.
18 cash and cash equivalents
Cash at bank and in hand
Deposit accounts (excluding restricted deposits)
Cash and cash equivalents per statement of financial position
Cash and cash equivalents per cash flow
Group
company
2012
£’000
33,346
21,259
54,605
54,605
2011
£’000
45,157
11,055
56,212
56,212
2012
£’000
5,811
5,051
10,862
10,862
2011
£’000
11,118
2,620
13,738
13,738
Cash and cash equivalents per cash flow comprise cash at bank and in hand and short-term deposit accounts with an
original maturity of less than three months, less bank overdrafts. The amounts placed in short-term deposit accounts
depend on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit
rate. Cash at bank is generally interest free, but may earn interest at the applicable daily bank floating deposit rate.
19 net cash
Group
company
Notes
2012
£’000
2011
£’000
2012
£’000
2011
£’000
Cash and cash equivalents per statement of financial position
18
54,605
56,212
10,862
13,738
Financial assets – held to maturity
Non-current instalments due on bank loans
Current instalments due on bank loans
Non-current finance leases
Current finance leases
Net cash
2,389
1,871
604
21
21
21
21
(685)
(5,509)
(4,256)
(11,259)
(91)
(130)
(195)
(441)
–
–
–
–
–
–
(6,000)
–
–
51,832
40,679
11,466
7,738
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At 30 April 2012, £2,389,000 of the total net cash (2011: £1,871,000) comprised bank deposit accounts that are
subject to restrictions and are not freely for use by the Group.
Net cash 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 financial position strength. The inclusion of items in net
cash as defined by the Group may not be comparable with other companies’ measurement of net cash/debt. The
Group includes in net cash, cash and cash equivalents and certain financial assets, mainly deposits, less loan and
other borrowings.
In calculating the gearing ratio, the Group excludes certain deposit balances that are subject to restrictions and are
not freely available for use by the Group. These financial assets are shown as held to maturity in the statement of
financial position.
Annual Report for the year ended 30 April 2012
77
notes to the financial statements CONTINUED
19 net cash continued
The tables below, which are not currently required by IFRS, reconcile the Group’s net cash to the Group’s statement
of cash flows. Management believes the presentation of the tables will be of assistance to shareholders.
2011/12
Cash and cash equivalents per statement
of financial position and cash flow
Financial assets – held to maturity
Loans
Leases
Net cash
2010/11
Cash and cash equivalents per statement
of financial position
Bank overdrafts
Cash and cash equivalents per cash flow
Financial assets – held to maturity
Loans
Leases
Net cash
20 share capital and reserves
Share capital
Company
allotted, issued and fully paid:
Ordinary shares of 0.5p each
At 1 May
Issued in year
– share options
At 30 April
Deferred shares of 2.5p each
At 1 May
Redeemed in year
At 30 April
1 may
£’000
exchange
differences
£’000
other
movements
£’000
cash flow
£’000
30 april
£’000
56,212
1,871
(16,768)
(636)
40,679
41,916
(2,120)
39,796
570
(31,244)
(1,045)
8,077
(1,874)
(115)
900
(3)
(1,092)
1,397
(50)
1,347
77
(414)
(17)
993
–
200
(221)
(225)
(246)
267
433
54,605
2,389
11,148
(4,941)
643
(221)
12,491
51,832
–
–
–
–
–
(57)
(57)
12,899
56,212
2,170
–
15,069
56,212
1,224
1,871
14,890
(16,768)
483
(636)
31,666
40,679
2012
number
2011
Number
2012
£’000
368,829,099
367,539,331
1,116,464
1,289,768
369,945,563
368,829,099
–
–
–
8,040,000
(8,040,000)
–
1,844
6
1,850
–
–
–
369,945,563
368,829,099
1,850
2011
£’000
1,838
6
1,844
201
(201)
–
1,844
The holders of Ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one
vote per share at meetings of the Company.
On 31 August 2010 the Company redeemed all of the Deferred shares for 1.0p. The Deferred shares carried no
dividend rights and no voting rights.
78
Photo-Me International plc
Share options, which have been granted to senior staff, including directors, to purchase Ordinary shares of 0.5p each,
are as follows:
Date options
granted
13 Dec 2002
13 Feb 2004
29 Jan 2009
20 Jan 2010
12 Jul 2010
4 Jul 2011
13 Dec 2011
at
30 april
2011
555,792
135,000
1,170,800
1,750,000
2,080,000
–
–
Granted
during
year
lapsed or
forfeited
during
year
exercised
during
year
at
30 april
2012
exercise
price
Date from
which
exercisable
last date
on which
exercisable
–
–
–
–
–
(30,000)
(525,792)
–
18.33p 13 Dec 2007 12 Dec 2011
–
–
135,000
138.50p 13 Feb 2009 12 Feb 2013
(96,050)
(590,672)
484,078
10.92p 29 Jan 2012 28 Jan 2016
–
– 1,750,000
36.67p 20 Jan 2013 19 Jan 2017
(15,000)
– 2,065,000
36.33p 12 July 2013 11 July 2017
1,255,000
(30,000)
– 1,225,000
65.25p
4 July 2014
3 July 2018
250,000
–
–
250,000
53.50p 13 Dec 2014 12 Dec 2018
5,691,592
1,505,000
(171,050) (1,116,464) 5,909,078
Date options
granted
At
30 April
2010
Granted
during
year
Lapsed or
forfeited
during
year
Exercised
during
year
At
30 April
2011
Exercise
price
Date from
which
exercisable
Last date
on which
exercisable
13 Dec 2002
1,950,000
13 Feb 2004
29 Jan 2009
20 Jan 2010
12 Jul 2010
215,000
1,340,000
1,750,000
–
2,080,000
–
–
–
–
(150,000)
(1,244,208)
555,792
18.33p 13 Dec 2007 12 Dec 2011
(80,000)
–
135,000
138.50p 13 Feb 2009 12 Feb 2013
(123,640)
(45,560) 1,170,800
10.92p 29 Jan 2012 28 Jan 2016
–
–
– 1,750,000
36.67p 20 Jan 2013 19 Jan 2017
– 2,080,000
36.33p 12 July 2013 11 July 2017
5,255,000
2,080,000
(353,640)
(1,289,768) 5,691,592
Full details of directors’ share options are given in the Remuneration report on page 33.
All options can be exercised, in normal circumstances, within a period of four years from the exercise of option date,
providing that the performance criterion or performance condition has been achieved. The subscription price for all
options is based upon the average market price on the three days prior to the date of grant. Options are restricted, or
may lapse, if the grantee leaves the employment of the Group before the first exercise date.
All options are equity settled options.
The performance criterion applying to the options granted between 13 December 2002 and 13 February 2004 is
that, over a three year period, the Company achieves real EPS growth averaging 3% a year, or more.
Options granted after 2005 are covered by the new Photo-Me Executive Share Option Scheme. The vesting of
options is subject to an EPS-based performance condition relating to the extent to which the Company’s basic EPS
for the third financial year, following the date of grant, reaches a sliding scale of challenging EPS targets.
Options are normally granted over shares worth up to 150% of a participant’s salary each year. In exceptional cases
as part of the terms of attracting senior management, options in excess of that number may be granted.
The weighted average exercise price of all options outstanding at 30 April 2012 is 41.4p (2011: 31.9p) and the
weighted average exercise price of options exercisable at 30 April 2012 is 38.7p (2011: 41.7p).
The weighted average share price for options exercised during the year ended 30 April 2012 was 54.8p
(30 April 2011: 39.9p).
The weighted average remaining years for options outstanding at the year end date is 4.9 years (2011: 5.1 years).
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79
notes to the financial statements CONTINUED
20 share capital and reserves continued
Share capital continued
Share-based payments
In accordance with IFRS 2 Share-based Payments, share options granted to senior management including directors
after November 2002 have been fair-valued and the Company has used the Black-Scholes option pricing model. This
model takes into account the terms and conditions under which the options were granted.
The following table lists the inputs to the model used for the years ended 30 April 2012 and 30 April 2011:
Date of grant
Vesting period
Share price volatility
Share price on date of grant
Option price
Expected term
Dividend yield
Risk free interest rate
Fair value
Date of grant
Vesting period
Share price volatility
Share price on date of grant
Option price
Expected term
Dividend yield
Risk free interest rate
Fair value
13 December 2002
13 february 2004
29 January 2009
20 January 2010
3 years
69.1%
£0.355
£0.3667
3.25 years
0.7%
2.27%
£0.1636
5 years
76.5%
£0.1875
£0.183
5 years
78.2%
£1.3975
£1.385
3 years
52.8%
£0.1075
£0.109
5.25 years
5.25 years
3.25 years
1.6%
4.3%
£0.112
0.0%
4.6%
£0.943
0.0%
2.52%
£0.04693
12 July 2010
4 July 2011 13 December 2011
3 years
70.1%
£0.38
£0.3633
3.25 years
3.29%
1.27%
£0.1595
3 years
65.4%
£0.64
£0.6525
3.25 years
3.13%
1.32%
£0.2446
3 years
63.2%
£0.5025
£0.535
3.25 years
4.48%
0.50%
£0.1638
The charge for share-based payments is £302,000 (2011: £193,000).
Share price volatility is based on historical volatility.
Reserves
Group
Treasury shares (Group and Company)
In accordance with shareholders’ resolutions passed at Annual General Meetings, the Company may purchase its own
shares up to a maximum of 10% of the Ordinary shares in issue. At 30 April 2012 the number of shares held in Treasury
was 7,505,000, representing 2.03% of the Ordinary issued share capital (2011: 7,505,000). The treasury shares have
no voting or dividend rights until the Company reissues them, which can be at any time. The Company may cancel
the treasury shares, but currently has no intention of so doing. Under Companies Act legislation the amount has to be
deducted from reserves available for distribution before the Company can make dividend distributions.
Other reserves
Other reserves mainly arise in subsidiaries, are generally not distributable, and arise as a result of local legislation
regarding capital maintenance.
Translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the
financial statements of foreign subsidiaries and associates. In accordance with the options allowed under IFRS 1, only
exchange rate differences arising on translation after the date of transition, 1 May 2004, are shown in this reserve.
When an overseas subsidiary or associate is disposed, the cumulative exchange difference relating to the entity
disposed is recycled through the income statement as part of the profit or loss on sale in finance revenue/cost and is
shown as a movement in other comprehensive income.
80
Photo-Me International plc
Company
Other reserves
The Company’s other reserves include £201,000 (2011: £201,000) arising on the redemption of the deferred shares and
£684,000 (2011: £451,000) relating to the fair value of options granted to employees of Group undertakings (note 14).
21 financial liabilities
non-current liabilities
Non-current instalments due on bank loans
Finance lease creditors
current liabilities
Current instalments due on bank loans
Finance lease creditors
Group
2012
£’000
685
91
776
4,256
130
4,386
2011
£’000
5,509
195
5,704
11,259
441
11,700
company
2012
£’000
–
–
–
–
–
–
2011
£’000
–
–
–
6,000
–
6,000
Bank loans are denominated in a number of currencies and bear interest rates based on LIBOR or foreign equivalent
rates appropriate to the country in which the borrowing is incurred. Further details are provided in note 15 and in the
tables below. Margins are generally between 0.40% and 1.0%.
The maturity of non-current bank loans is as follows:
Between one and two years
Between two and three years
Between three and four years
Between four and five years
Group
2012
£’000
457
210
18
–
685
2011
£’000
4,787
486
192
44
5,509
company
2012
£’000
2011
£’000
–
–
–
–
–
–
–
–
–
–
Obligations under finance leases
The Group has entered into finance lease arrangements for certain items of property, plant and equipment, mainly
photobooths, for periods of up to four (2011: four) years (note 12). The Company has no finance leases (2011: none).
minimum lease payments
Within one year
Within two to five years
finance charges
Within one year
present value of minimum lease payments
Within one year
Within two to five years
Group
2012
£’000
2011
£’000
131
91
222
1
130
91
221
457
195
652
16
441
195
636
Annual Report for the year ended 30 April 2012
81
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22 post-employment benefit obligations
The Company and its principal subsidiaries operate pension and other retirement and post-employment schemes
including both funded defined benefit schemes, whereby retirement benefits are based on the employee’s final
remuneration and length of service, and defined contribution schemes, whereby retirement benefits reflect the
accumulated value of agreed contributions.
Defined contribution schemes are held independent of the Group and no liability arises save to pay over the agreed
level of contributions. The charge for the year for these schemes was £206,000 (2011: £223,000).
The Group’s and Company’s defined benefit pension schemes are included in the statement of financial position
under employment benefit obligations, as are other overseas retirement provisions.
The amount shown in the statement of financial position is detailed as follows:
Company defined benefit scheme
Overseas employment benefit obligations
Overseas defined benefit scheme
Amount shown as non-current liability
Group
company
2012
£’000
182
3,552
551
4,285
2011
£’000
494
3,379
188
4,061
2012
£’000
182
–
–
182
2011
£’000
494
–
–
494
Photo-Me International plc defined benefit pension scheme
The Group’s and the Company’s policy is to recognise actuarial gains and losses immediately each year in the
statement of changes in equity, under other comprehensive income.
The Company operates a final salary defined benefit scheme in the UK for some long-serving employees, which is
funded by contributions from the Company and by members of the scheme. This pension scheme (the Photo-Me
International plc Pension and Life Assurance Fund) is closed to new entrants. The defined benefits are based upon an
employee’s years of service and final pensionable salary. Actuarial valuations are undertaken triennially by a qualified
independent actuary, the most recent completed valuation being at 1 June 2009.
Reconciliation of the movement in the present value of the defined benefit obligation
Present value of defined benefit obligation at beginning of year
Current service cost
Interest cost
Contributions by members
Actuarial loss on plan liabilities
Benefits paid
Present value of defined benefit obligation at end of year
Reconciliation of the movement in the fair value of plan assets
Fair value of plan assets at beginning of year
Expected return on plan assets
Actuarial (loss)/gain on plan assets
Contributions by the Company
Contributions by members
Benefits paid
Fair value of plan assets at end of year
82
Photo-Me International plc
2012
£’000
5,450
37
284
4
316
(226)
5,865
2012
£’000
5,624
336
(165)
350
4
(226)
5,923
2011
£’000
5,307
38
282
4
42
(223)
5,450
2011
£’000
5,228
317
131
167
4
(223)
5,624
Amount to be recognised in the statement of financial position
Present value of funded obligations
Fair value of scheme assets
Net assets
Effect of limit of recognition of an asset
Recognition of minimum funding requirement
Net liability recognised in the statement of financial position
2012
£’000
5,865
(5,923)
(58)
58
182
182
2011
£’000
5,450
(5,624)
(174)
174
494
494
The cumulative amount of actuarial gains and losses recognised since 1 May 2004 in the Group and Company
statements of comprehensive income, within other comprehensive income, is a loss of £1,102,000 (2011: loss
of £1,049,000) in respect of the Company’s defined benefit scheme.
Amount to be recognised in the statement of comprehensive income
Current service cost
Interest on obligation
Expected return on plan assets
Total charge
2012
£’000
37
284
(336)
(15)
The amounts shown above are included in staff costs (note 5) and in administrative expenses.
Total amount recognised in other comprehensive income
Actuarial (loss)/gain
Effect of the limit of recognition of an asset
Recognition of minimum funding requirement
Total amount recognised in other comprehensive income
An analysis of the assets of the plan is as follows:
Plan assets
2012
£’000
(481)
116
312
(53)
Equities
Gilts and bonds
Other
Total plan assets
Expected return on plan assets
2012
2011
2010
£’000
1,540
3,981
402
5,923
£’000
1,904
3,332
388
5,624
%
26
67
7
100
5.1
£’000
1,854
3,285
89
5,228
%
34
59
7
100
5.9
2011
£’000
38
282
(317)
3
2011
£’000
89
(174)
(494)
(579)
%
35
63
2
100
6.1
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There were no financial instruments of the Company included in the plan assets (2011: none) and there were no
property assets occupied by the Company (2011: none).
The overall expected return on assets is calculated as the weighted average of the expected return on each
individual asset class. The expected return on equities is the sum of inflation, the dividend yield, economic growth
and investment expenses. The return on gilts and bonds is the current market yield on long-term gilts and bonds.
The expected return on other assets has been set equal to the assumed inflation rate.
Annual Report for the year ended 30 April 2012
83
notes to the financial statements CONTINUED
22 post-employment benefit obligations continued
Actual return on plan assets
Actual return on plan assets
Principal actuarial assumptions
Discount rate
Expected return on plan assets at end of year
Rate of increase in salaries
Price inflation
Pension increases
– pension accrued before 6 April 1997
– pension accrued from 6 April 1997
2012
£’000
171
2011
£’000
448
30 april 2012
%
30 April 2011
%
4.60
5.10
4.00
3.00
3.00
3.00
5.30
5.90
4.40
3.40
3.00
3.40
The mortality tables used in 2012,2011,2010, 2009 and 2008 are the PxA00, medium cohort tables projected by
year of birth with an underpin to future improvements of 1% p.a. The life expectancy from age 65 underlying these
mortality tables is as follows:
Male currently aged 65
Female currently aged 65
Male currently aged 45
Female currently aged 45
2012
22.59 years (age 87.59)
25.03 years (age 90.03)
24.52 years (age 89.52)
26.88 years (age 91.88)
2011
22.49 years (age 87.49)
24.93 years (age 89.93)
24.43 years (age 89.43)
26.79 years (age 91.79)
History of assets, liabilities and actuarial gains and losses
Present value of defined
benefit obligation
Fair value of assets
Surplus/(deficit)
Experience (losses)/gains
on plan liabilities (£’000)
– as a percentage of
the present value of
plan liabilities
Difference between
expected and actual return
on plan assets (£’000)
– as a percentage of
the present value of
plan assets
2012
£’000
5,865
5,923
58
2012
2011
£’000
5,450
5,624
174
2011
(316)
(42)
2010
£’000
5,307
5,228
(79)
2010
(900)
2009
£’000
4,405
4,399
(6)
2009
230
2008
£’000
4,566
5,179
613
2008
455
(5%)
(1%)
(17%)
5%
10%
(165)
(3%)
131
2%
830
(1,135)
(128)
16%
(26%)
(3%)
The Company’s best estimate of contributions to be paid by the Company next year is £225,000 (2011: £350,000).
84
Photo-Me International plc
Overseas post-employment benefit obligations
Provisions for obligations to make termination payments on retirement, to staff who are not members of the pension
and retirement schemes, are as follows:
• the Group’s Japanese subsidiary undertaking, Nippon Auto-Photo K.K., has an unfunded post-employment
retirement provision based on an employee’s length of service with the company and their current salary. The
allowance is paid to an employee when they leave the company. This has been provided for in full within the
accounts. During the year ended 30 April 2010, Nippon Auto-Photo K.K. agreed with employees that 50% of the
liability for the retirement provision will be paid in cash into an independently controlled defined contribution scheme
over the following three years. At 30 April 2012, an amount of £364,000 remains outstanding (2011: £731,000).
• to meet the legal obligations within France, the Group’s subsidiary undertakings have unfunded retirement provisions,
which were valued by an independent actuary using the Projected Unit Credit Method at 30 April 2012 and
30 April 2011. This actuarial valuation incorporated the following principal assumptions in arriving at the present
value of the obligations:
– discount rate
3.75% (2011: 5.0%)
–
rate of increase in salaries
2.5% (2011: 2.5% – 3.0%)
–
retirement age
65 years (2011: 61 – 64 years)
–
inflation rate
0.0% (2011: 2.0%)
Management believes that the book value for retirement obligations in France fairly states the position at 30 April 2012
and 30 April 2011.
The amount charged to the income statement (cost of sales and administration costs) in respect of these obligations
is £382,000 (2011: £282,000). The movement in the provisions is as follows:
At 1 May
Exchange differences
Utilised and other movements
Charged/(credited) to other comprehensive income
At 30 April
2012
£’000
3,379
(62)
123
112
3,552
2011
£’000
3,295
153
139
(208)
3,379
Overseas pension schemes
The Group’s Swiss subsidiary, Prontophot (Schweiz) A.G. participates in funded multi-employer pension schemes. The
Swiss state mandates a guaranteed return to which such employees’ schemes are entitled. An actuarial valuation was
performed at 30 April 2012 by independent actuaries.
Reconciliation of the movement in the present value of the defined benefit obligation
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Exchange difference
Contributions by members
Current service cost
Past service cost
Interest cost
Actuarial loss on plan liabilities
Benefits paid
Present value of defined benefit obligation at 30 April
2012
£’000
3,217
(30)
50
97
53
90
593
(773)
3,297
2011
£’000
3,004
397
41
100
–
90
71
(486)
3,217
Annual Report for the year ended 30 April 2012
85
notes to the financial statements CONTINUED
22 post-employment benefit obligations continued
Reconciliation of the movement in the fair value of plan assets
Fair value of plan assets at 1 May
Exchange difference
Contributions by company and members
Expected return on plan assets
Actuarial gain on plan assets
Benefits paid
Fair value of plan assets at 30 April
The movements in the fund are as follows:
Net liability at 1 May
Exchange difference
Increase/(decrease) in liability
Net liability at 30 April
Amount to be recognised in the statement of comprehensive income
Current service cost
Past service cost
Interest on obligation
Expected return on plan assets
Total charge
Amount to be recognised in the statement of financial position
2012
£’000
3,029
(30)
249
109
162
(773)
2,746
2012
£’000
188
–
363
551
2012
£’000
97
53
90
(109)
131
2012
£’000
3,297
(2,746)
551
2011
£’000
2,719
359
144
102
191
(486)
3,029
2011
£’000
285
38
(135)
188
2011
£’000
100
–
90
(102)
88
2011
£’000
3,217
(3,029)
188
%
15
61
24
100
3.8
2012
2011
2010
£’000
30
1,861
855
2,746
£’000
23
1,884
1,122
3,029
%
1
68
31
100
3.8
£’000
408
1,669
642
2,719
%
1
62
37
100
3.8
Present value of funded obligations
Fair value of scheme assets
Net liability in statement of financial position
Plan assets
Cash
Equities & debt instruments
Other
Total plan assets
Expected return on plan assets
86
Photo-Me International plc
Principal actuarial assumptions
Discount rate
Expected return on plan assets at end of year
Rate of increase in salaries
Price inflation
Pension increase
Expected average remaining working life in years
The mortality tables used in 2012 and 2011 were the BVG2005 tables.
History of assets, liabilities and actuarial gains and losses
Present value of defined benefit obligation
Fair value of assets
Deficit
Experience losses on plan liabilities (£’000)
– as a percentage of the present value of plan liabilities
Difference between expected and actual return on
plan assets (£’000)
– as a percentage of the present value of plan assets
30 april 2012
%
30 April 2011
%
3.00
3.80
2.00
1.00
0.00
10.1
2011
£’000
3,217
3,029
(188)
2011
(71)
(2%)
191
7%
3.00
3.80
2.00
1.00
0.00
9.9
2010
£’000
3,004
2,719
(285)
2010
(112)
(4%)
127
5%
2012
£’000
3,297
2,746
(551)
2012
(372)
(13%)
162
6%
The Group’s best estimate for contributions to be paid by the company next year to the scheme is £189,000
(2011: £111,000).
The amount recognised in the income statement for this scheme was £132,000: £106,000 included in cost of
sales and £26,000 included in administrative expenses (2011: £88,000: £69,000 included in cost of sales and
£19,000 included in administrative expenses).
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87
notes to the financial statements CONTINUED
23 provisions
Group
At 30 April 2010
Exchange differences
Utilised and other movements
Charged to income statement
At 30 April 2011
Amount shown as non-current liability
Amount shown as current liability
At 30 April 2011
Exchange differences
Utilised and other movements
Charged to income statement
at 30 april 2012
Amount shown as non-current liability
Amount shown as current liability
Company
At 30 April 2010
Utilised
Charged to income statement
At 30 April 2011
Amount shown as non-current liability
Amount shown as current liability
At 30 April 2011
Utilised
Charged to income statement
at 30 april 2012
Amount shown as non-current liability
Amount shown as current liability
employee
related claims
£’000
product
warranties
£’000
1,179
14
(300)
–
893
–
893
893
893
(104)
(543)
1,110
1,356
–
1,356
1,356
2,843
65
(1,227)
1,161
2,842
13
2,829
2,842
2,842
(246)
(95)
324
2,825
6
2,819
2,825
product
warranties
£’000
32
(183)
189
38
–
38
38
38
(80)
57
15
–
15
15
other
£’000
1,169
19
(755)
345
778
72
706
778
778
(69)
(400)
544
853
71
782
853
other
£’000
3
–
–
3
3
–
3
3
–
–
3
3
–
3
total
£’000
5,191
98
(2,282)
1,506
4,513
85
4,428
4,513
4,513
(419)
(1,038)
1,978
5,034
77
4,957
5,034
total
£’000
35
(183)
189
41
3
38
41
41
(80)
57
18
3
15
18
Employee related claims
Certain overseas Group undertakings have made provision for claims made by former employees. It is expected
that most of these costs will be incurred in the next financial year.
88
Photo-Me International plc
Product warranties
A provision is made for claims on products sold under warranty. The provision will reduce as the warranty period
expires but will be increased by warranties given with new sales. The provision is based on past experience of
level of repairs for items under warranty. It is expected that most of the provision will be utilised within the next
year. The effect of discounting is not material.
Other provisions
The other provisions are expected to be incurred in the next financial year.
24 Deferred taxation
Deferred tax comprises:
company
2012
£’000
2011
£’000
(2,453)
(2,520)
Timing differences relating to
property, plant and equipment
Other timing differences in recognising
revenue and expense items in other
periods for taxation purposes:
– research and development
– post-employment benefit provisions
– losses
– other short-term temporary differences
The closing balance comprises:
– deferred tax assets
– deferred tax liabilities
Group
2012
£’000
569
1,932
(1,864)
(259)
(1,018)
(640)
(3,148)
2,508
(640)
2011
£’000
1,131
2,359
(1,880)
–
(1,341)
269
(3,038)
3,307
269
–
(265)
–
(66)
(2,784)
(2,784)
–
(2,784)
The movements on deferred taxation during the year were as follows:
Opening balance
Exchange differences
(Credit)/charge for the year in
income statement
Transfer of subsidiary’s trade
Amounts (credited)/charged to
other comprehensive income
Closing balance
Group
company
2012
£’000
269
(20)
(771)
–
(118)
(640)
2011
£’000
2,255
219
(2,167)
–
(38)
269
2012
£’000
(2,893)
–
101
–
8
(2,784)
–
(273)
–
(100)
(2,893)
(2,893)
–
(2,893)
2011
£’000
(658)
–
(1,995)
(99)
(141)
(2,893)
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Annual Report for the year ended 30 April 2012
89
notes to the financial statements CONTINUED
24 Deferred taxation continued
Temporary differences associated with Group investments
Unremitted earnings of overseas affiliates
No deferred tax liability has been recognised on the unremitted earnings of overseas subsidiaries as no tax is
expected to be payable on them in the foreseeable future based on current legislation.
Unrecognised deferred tax assets
Deferred tax assets amounting to £2,042,000 (2011: £2,643,000) arising on temporary differences of £8,202,000
(2011: £8,978,000), in respect of unrelieved tax losses and other temporary differences have not been recognised,
as their future economic benefit is uncertain.
The expiry dates of unrelieved tax losses are as follows:
Expiring between two and 20 years
No expiry date
Group
2012
£’000
148
1,894
2,042
2011
£’000
467
2,043
2,510
company
2012
£’000
–
–
–
2011
£’000
–
–
–
In addition, the Group and the Company have an unrecognised deferred tax asset on gross capital losses of
£5,562,000 (2011: £5,562,000), which have not been recognised as their future economic benefit is not certain.
Factors that may affect future tax charges in the UK
On 21 March 2012 the Chancellor announced a reduction in the main rate of UK corporation tax to 24% with effect
from 1 April 2012. This change became substantively enacted on 21 March 2012 and therefore the effect of the rate
reduction on the UK deferred tax balances as at 30 April 2012 has been included in the above figures.
In addition, the Chancellor proposed further changes to reduce the main rate of UK corporation tax by one per cent
each annum resulting in a tax rate of 22% in 2014. This change has not been substantively enacted and therefore not
reflected in the above figures. The overall effect of the further reductions from 24% to 22%, if these rates applied to
the deferred tax balances at 30 April 2012, would be to reduce the net deferred tax asset by £231,000.
Factors that may affect future overseas tax charges
Effective 1 April 2012, the Japanese government announced a reduction in the rate of corporation tax for both large,
and small and medium companies (SMEs). The full reduction is delayed for 3 years with a 10% surcharge imposed
for the 3 years ending 1 April 2015. The effect of this is that the effective rate for companies will reduce from
approximately 41% to approximately 38% for the first 3 years and approximately 36% thereafter.
90
Photo-Me International plc
25 trade and other payables
amounts shown as non-current liabilities
Other payables
Accruals and deferred income
amounts shown as current liabilities
Trade payables
– third parties
Amounts owed to subsidiaries
Amounts owed to associates
Other taxes and social security costs
Other payables
Accruals and deferred income
Group
2012
£’000
130
5,516
5,646
2011
£’000
365
7,073
7,438
15,094
19,829
–
–
3,454
6,486
9,794
34,828
–
1
2,545
12,682
12,228
47,285
company
2012
£’000
2011
£’000
–
–
–
4,298
10,418
–
925
82
3,272
18,995
–
–
–
3,993
14,075
–
1,184
3,711
3,542
26,505
Included in current liabilities – other payables, Group and Company, for 2011 is £3,614,000 relating to the interim
dividend, which was paid in May 2011.
Included in the Company figures – amounts owed to subsidiaries, are borrowings as detailed in note 15.
26 operating leases
The future minimum lease payments under non-cancellable operating leases are as follows:
land and buildings
Not later than one year
After one year but not more than five years
After five years
other
Not later than one year
After one year but not more than five years
total
Not later than one year
After one year but not more than five years
After five years
Group
2012
£’000
5,058
7,459
319
12,836
716
1,098
1,814
5,774
8,557
319
14,650
2011
£’000
4,842
8,381
1,536
14,759
973
1,004
1,977
5,815
9,385
1,536
16,736
company
2012
£’000
1,114
605
10
1,729
543
910
1,453
1,657
1,515
10
3,182
2011
£’000
1,057
955
31
2,043
586
700
1,286
1,643
1,655
31
3,329
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Lease arrangements
The Group and the Company have entered into operating lease agreements in respect of property, plant and
machinery, the majority of which are for motor vehicles. In addition, the Group and the Company have entered
into various commission agreements with site-owners enabling the Group and the Company to site vending
equipment for a number of years. The amounts recorded as operating lease rentals in the income statement and
included in land and buildings lease rentals in the above table represent the minimum fixed commission payable.
Certain agreements may, in addition, have clauses where additional commission is payable based on
a percentage of revenue generated, above a specified amount.
Annual Report for the year ended 30 April 2012
91
notes to the financial statements CONTINUED
27 capital commitments
Contracts placed for future capital expenditure not provided
in the accounts:
– for supply by third parties of property, plant and equipment,
mainly photobooths and vending machines
Group
company
2012
£’000
2011
£’000
2012
£’000
2011
£’000
462
1,428
14
–
In addition, the Group’s Operations companies have contracted with the Group’s Sales & Servicing companies
for the supply of machines totalling £303,000 (2011: £622,000), of which the Company’s commitments total
£303,000 (2011: £158,000).
28 contingent liabilities
The Group and the Company have issued guarantees as follows:
Borrowings by subsidiaries
Group
2012
£’000
–
2011
£’000
–
company
2012
£’000
20
2011
£’000
114
The Company has given guarantees for borrowings by subsidiaries. In addition, the Company and subsidiary
undertakings have given other guarantees in the normal course of business to third parties. No losses are
expected from guarantees given by the Company and subsidiary undertakings.
In the opinion of the directors, adequate provision has been made for claims and legal disputes and the
directors thus consider that no contingent liability for litigation exists.
The Group has no contingent liabilities with regard to its interest in the associated undertakings (2011: none).
92
Photo-Me International plc
29 related parties
The following transactions were carried out with related parties:
Key management compensation
Salaries and other short-term
employee benefits
– excluding ex-gratia and termination payments
– ex-gratia and termination payments
Post-employment benefits
Share-based payments – charge
Group
2012
£’000
1,340
–
1,340
8
22
1,370
2011
£’000
1,334
50
1,384
8
14
1,406
company
2012
£’000
1,340
–
1,340
8
22
1,370
2011
£’000
1,334
50
1,384
8
14
1,406
The remuneration of the directors, both executive and non-executive, of the Company, who are the key management
personnel of the Group, is set out in the table above. Further information about the remuneration of the directors
is given in the Remuneration report on pages 28 to 34. Certain executive directors, with UK salaries, are entitled to
join the Company’s Group Stakeholder Pension Plan, to which the Company contributes 5% of their basic salaries.
The charge for the year was £8,000 (2011: £8,000). No director who served during the year was a member of the
Company’s defined benefit pension scheme (2011: none).
Directors of the Company control 22.05% of the voting Ordinary shares of the Company. The interests of the
directors are shown on page 32 of the Remuneration report.
Sales of goods and services, purchases of goods and services and year end balances
Group
2012
£’000
2011
£’000
company
2012
£’000
2011
£’000
sales of goods and services
Related parties other than associates
Associates
purchases of goods and services
Related parties other than associates
Associates
trade and other receivable balances
Related parties other than associates
Associates
trade and other payable balances
Associates
–
126
126
–
–
–
–
37
37
–
130
92
222
67
1
68
45
59
104
1
–
–
–
–
–
–
–
–
–
–
F
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–
–
–
13
–
13
–
–
–
–
All transactions with related parties were conducted at arm’s-length in the ordinary course of business.
Annual Report for the year ended 30 April 2012
93
notes to the financial statements CONTINUED
29 related parties continued
Sales of goods and services, purchases of goods and services and year end balances continued
Mr David, non-executive director and Life President, who died during the year, had declared for the previous year
controlling interests in certain companies which had a trading relationship with the Group. The value of these
transactions reflected in the income statement and in the statement of financial position is as shown in the table
above under the heading related parties other than associates.
The trade and other receivable balances with related parties and associates arise from normal trading and do not
include any security or any other consideration.
The trade and other payable balances arise from normal trading.
Defined benefit pension scheme
The Company meets administration costs of the defined benefit scheme, which amounted to £51,000 (2011: £64,000).
Company transactions with subsidiaries
Sales
Purchases
Amounts owed by subsidiaries
Amounts owed to subsidiaries
2012
£’000
221
4,634
3,990
2011
£’000
215
5,381
2,051
10,418
14,075
In addition, the Company has charged interest to subsidiaries of £14,000 (2011: £15,000), has been charged
interest of £59,000 (2011: £62,000), has charged management fees of £2,441,000 (2011: £1,119,000), has been
charged management fees of £1,386,000 (2011: £1,156,000) including £1,386,000 (2011: £1,156,000) as a
contribution to research and development and has sold fixed assets to subsidiaries of £17,000 (2011: £22,000).
The Company also acquired new fixed assets from subsidiaries of £2,433,000 (2011: £2,765,000).
Dividends received from subsidiaries were £10,533,000 (2011: £14,871,000) and from associates £101,000
(2011: £65,000).
94
Photo-Me International plc
30 Group undertakings
The Company has taken advantage of the exemption under section 410 (2) of the Companies Act 2006 by
listing below details of the subsidiary and associated undertakings whose results or financial position, which in
the opinion of the directors, principally affected the financial statements.
Details of other subsidiary and associated undertakings not listed here will be annexed to the Company’s next
Annual Return.
The Company’s interest in the Group undertakings is the same as the Group’s interest, with the exception of
investments marked (*) where the shares are held by another Group undertaking. All holdings shown relate to
Ordinary shares. Unless indicated otherwise the voting rights are the same as the percentage of shares held.
The principal activities of the Group undertakings are Operations and Sales & Servicing as described in note 3.
principal activity
Group’s interest
country of
incorporation
subsidiary undertakings
Fotofix-Schnellphotoautomaten G.m.b.H.
Operations
Jolly Roger (Amusement Rides) Limited
KIS S.A.S.
Nippon Auto-Photo Kabushiki Kaisha
Photocompagnie S.A.
Photomatico (Singapore) Pte. Limited
Photomaton S.A.S.
Photo Me France S.A.S.
Photo-Me Ireland Limited
Prontophot Austria G.m.b.H.
Prontophot Belgium N.V.
Prontophot Holland B.V.
Prontophot (Schweiz) A.G.
SCI du Lotissement d’Echirolles
SCI Immobilière du 21
Shanghai Photo-Me
associated undertakings
Max Sight Limited
Photo Direct Pty Ltd
Sales & Servicing
Sales & Servicing
Operations
Sales & Servicing
Operations
Operations
Investment
Operations
Operations
Operations
Operations
Operations
Property
Property
Operations
Operations
Sales & Servicing
100%
100%
100%*
100%
100%*
100%
100%*
100%
100%
100%
100%
100%
100%
61%*
100%*
100%*
33%
33%
Germany
England
France
Japan
France
Singapore
France
France
Ireland
Austria
Belgium
Holland
Switzerland
France
France
China
Hong Kong
Australia
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Annual Report for the year ended 30 April 2012
95
notes to the financial statements CONTINUED
31 Business combinations
In March 2012, the Group acquired 100% of the equity of a small company engaged in the Operations segment
and separately acquired the trading assets and liabilities of the company. The terms of the acquisition were that
the external financial liabilities (loans and finance leases) were settled immediately, and the balance due to the
seller to be settled on deferred terms. It is expected the acquisition will strengthen the Group’s presence in the
market and result in reduced costs due to operational efficiencies.
There was nil consideration for this acquisition. The following table summarises the provisional fair value
of assets and liabilities acquired.
recognised amounts of identifiable assets acquired and liabilities assumed
Property, plant & equipment
Held to maturity investments
Loans and finance leases
Trade and other payables due to seller
Total identifiable net assets
£’000
760
200
960
(438)
(522)
(960)
–
Costs relating to the acquisition have been charged to administrative expenses in the consolidated income statement
for the year ended 30 April 2012.
The assets and liabilities shown in the above table are provisionally determined. If new information obtained
within one year of the acquisition date about facts and circumstances that existed at the acquisition date identifies
adjustments to the above amounts, or any additional provisions that existed at the acquisition date, then the
acquisition accounting will be revised.
Since its acquisition the acquired company has contributed £250,000 of revenue and a profit before tax of £1,000.
96
Photo-Me International plc
five year summary
for the years ending 30 April
income statement (unaudited)
revenue
Operations
Sales & Servicing
total revenue
operating profit/(loss) after special items
before finance costs
Net finance cost
profit/(loss) before tax
Taxation
profit/(loss) after taxation
Attributable to:
– Equity owners of the Parent
– Non-controlling interests
Earnings per share – Basic
Earnings per share – Diluted
Dividends – interim
Dividends – final
total dividends
* Including discontinued operations.
statement of financial position (unaudited)
Intangible assets
Property, plant and equipment
Other non-current investments
Other non-current assets
Current assets
Assets held for sale
total assets
Share capital
Treasury shares
Reserves
Non-controlling interests
Total equity
Total non-current liabilities
Total current liabilities
Liabilities held for sale
total equity and liabilities
net cash/(debt)
2012
£’000
2011
£’000
2010*
£’000
2009*
£’000
2008*
£’000
178,063
176,852
172,456
166,144
150,139
29,778
42,968
51,810
59,147
60,701
207,841
219,820
224,266
225,291
210,840
20,019
18,388
13,595
(16,687)
(19,333)
121
(385)
(1,283)
(3,401)
(3,064)
20,140
18,003
12,312
(20,088)
(22,397)
(5,594)
(4,252)
(2,484)
2,351
2,584
14,546
13,751
9,828
(17,737)
(19,813)
14,349
13,608
9,722
(15,622)
(19,908)
197
143
106
(2,115)
95
14,546
13,751
9,828
(17,737)
(19,813)
3.97p
3.95p
1.25p
1.25p
2.50p
3.77p
3.74p
1.00p
1.00p
2.00p
2.70p
2.69p
0.25p
1.00p
1.25p
(4.34)p
(5.52)p
(4.34)p
(5.52)p
–
–
–
–
–
–
2012
£’000
18,853
47,275
592
6,877
2011
£’000
20,461
52,596
598
6,922
2010
£’000
19,773
61,219
583
3,441
2009
£’000
19,038
77,526
716
2,503
2008
£’000
30,461
82,955
595
2,069
86,075
97,539
84,418
69,729
101,728
–
–
–
8,008
469
159,672
178,116
169,434
177,520
218,277
1,850
1,844
2,039
2,037
2,037
(5,802)
(5,802)
(5,802)
(5,802)
(5,802)
99,792
91,778
81,323
76,618
80,697
1,001
96,841
13,292
49,539
–
935
88,755
20,595
68,766
–
792
78,352
25,298
65,784
–
781
73,634
38,022
58,063
7,801
2,589
79,521
45,203
92,269
1,284
159,672
178,116
169,434
177,520
218,277
51,832
40,679
8,077
(23,499)
(45,563)
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Note:
The figures above have been extracted from the accounts for the relevant year and have not been adjusted for changes in accounting policies as a result
of adoption of new accounting standards.
Annual Report for the year ended 30 April 2012
97
company information anD aDvisors
registered in england and wales
Number 735438
registered office
Church Road
Bookham
Surrey
KT23 3EU
Tel: +44 (0)1372 453399
Fax: +44 (0)1372 459064
Web: www.photo-me.co.uk
e-mail: ir@photo-me.co.uk
auditor
KPMG Audit Plc
1 Forest Gate
Brighton Road
Crawley
RH11 9PT
Brokers
JPMorgan Cazenove Ltd
25 Bank Street
Canary Wharf
London
E14 5JP
finnCap Limited
60 New Broad Street
London
EC2M 1JJ
Bankers
Lloyds TSB Bank plc
City Office
11–15 Monument Street
London
EC3V 9JA
Santander UK plc
2 Triton Square
Regents Place
London
NW1 3AN
financial public relations
Madano Partnership Ltd
76 Great Suffolk Street
London
SE1 0BL
registrars
Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
98
Photo-Me International plc
shareholDer information
analysis of registered shareholdings at 27 June 2012
number of holdings
number of
ordinary shares
% of issued
ordinary share capital
category:
Individuals
Nominees
Other corporate bodies
size of holding:
1 – 1,000
1,001 – 10,000
10,001 – 100,000
100,001 – 500,000
500,001 – 1,000,000
1,000,001 and above
2,479
365
48
2,892
1,429
1,111
242
61
23
26
2,892
11,099,529
214,814,737
144,066,297
369,980,563
728,478
3,407,493
7,789,873
13,362,341
16,485,172
328,207,206
369,980,563
3.0
58.1
38.9
100.0
0.2
0.9
2.1
3.6
4.5
88.7
100.0
The above analysis includes the treasury shares held by the Company.
capital gains tax
For shareholders wishing to calculate United Kingdom capital gains tax, the example below shows the effect on 100
shares at 31 March 1982 after all subsequent capitalisations and subdivisions:
31 March 1982
9 December 1983 (1 for 5 Cap.)
12 December 1985 (1 for 6 Cap.)
12 December 1985 (subdivision)
18 December 1987 (subdivision)
13 December 1989 (subdivision)
8 November 1999 (subdivision)
100
20
120
20
140
140
280
1,120
1,400
1,400
2,800
11,200
14,000
Ordinary shares of 50p each
(at market value of 445p per 50p share)
Ordinary shares of 50p each
Ordinary shares of 50p each
(50p to 25p)
Ordinary shares of 25p each
(25p to 5p)
Ordinary shares of 5p
(5p to 2.5p)
Ordinary shares of 2.5p each
(2.5p to 0.5p)
Ordinary shares of 0.5p each
investor relations website
Investor relations information, including share price, is available through the Company’s website
www.photo-me.co.uk
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Annual Report for the year ended 30 April 2012
99
shareholDer information CONTINUED
transfer office and registration services
Capita Registrars Limited act on behalf of the Company. All shareholder enquiries, notifications of change
of address, dividend mandates, etc. should be referred to them at:
Capita Registrars Limited
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Tel: 0871 664 0300
Overseas Tel: 00 44 208 639 3399
Fax: 0871 644 0399
Capita Registrars also offer a range of shareholder information online at www.capitashareportal.com
The Register of directors’ interests is maintained at the Registered Office at Bookham.
Copies of the Annual Report should be requested from:
Photo-Me International plc
Church Road
Bookham
Surrey
KT23 3EU
Tel: +44 (0)1372 453399
Fax: +44 (0)1372 459064
e-mail: ir@photo-me.co.uk
financial calendar
annual General meeting
half year results
(to 31 October 2012)
full year results
(to 30 April 2013)
Dividend
Final (year to 30 April 2012) – ex-dividend date
Final (year to 30 April 2011) – record date
Final (year to 30 April 2011) – payment date
13 September 2012
Announcement in December 2012
Announcement in June/July 2013
26 September 2012
28 September 2012
7 November 2012
100
Photo-Me International plc
Photo-Me has two main activities:
operations and sales & servicing.
operations comprises the operation of unattended vending equip-
ment, in particular photobooths, digital printing kiosks, amusement
machines and business service equipment.
sales & servicing comprises the development, manufacture, sale
and after sale servicing of this operations equipment and a range
of photo processing equipment, including photobook makers, kiosks
and minilabs, together with the servicing of other third party equipment.
1962
Mark (age 9)
Business Profile
01 2012 Highlights
02 50 years of Photo-Me
04 Photo-Me at a Glance
the year in review
06 Chairman’s Statement
08 Business and Financial Review
governance
16 Board of Directors and Secretary
18 Report of the Directors
21 Corporate Governance
25 Corporate Responsibility
28 Remuneration Report
Photo-Me International plc
35 Statement of Directors’ Responsibilities
36
Independent Auditor’s Report
financial statements
38 Group Statement of Comprehensive Income
39 Statements of Financial Position
40 Group Statement of Cash Flows
41 Company Statement of Cash Flows
42 Group Statement of Changes in Equity
43 Company Statement of Changes in Equity
44 Notes to the Financial Statements
97 Five year Summary
company information
98 Company Information and Advisors
99 Shareholder Information
2012
Mark (age 59)
Providing ID photos
for 50 years
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101
Putting you in the Picture
for 50 years
Photo-Me International plc
Annual Report 2012
P
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Photo-Me international plc
Church Road
Bookham
Surrey KT23 3EU
Tel:
Fax:
Web: www.photo-me.co.uk
+44 (0)1372 453399
+44 (0)1372 459064