Photo-Me International plc
Annual Report & Accounts 2015
R evolutionising
instant services
Photo-Me International plc
Church Road, Bookham
Surrey KT23 3EU
Tel: +44 (0)1372 453399
Fax: +44 (0)1372 459064
Web: www.photo-me.co.uk
Photo-Me International plc
Annual Report & Accounts 2015
About Photo-Me
Photo-Me International plc
Annual Report & Accounts 2015
Our Highlights
Our principal activity is the operation of non-food unattended vending
equipment aimed primarily at the consumer market.
The largest part of the estate comprises photobooths and digital printing
kiosks, with the remainder including laundry units, amusement machines
and business service equipment.
Strategic Report
01 Our Highlights
02 Strategic Report
04 Our Strategic Business Model
05 Where We Operate
06 Our Products
08 Chairman’s Statement
09 Overview of the Year
12 Strategic Overview
15 Financial Review
Corporate Governance
22 Board of Directors and Secretary
23 Report of the Directors
26 Corporate Governance Statement
30 Corporate Responsibility Statement
34 Remuneration Report
47 Statement of Directors’
Responsibilities
48 Independent Auditor’s Report
Financial Statements
52 Group Statement of
Comprehensive Income
53 Statements of Financial Position
54 Group Statement of Cash Flows
55 Company Statement of Cash Flows
56 Group Statement of Changes
in Equity
57 Company Statement of Changes
in Equity
58 Notes to the Financial Statements
105 Five Year Summary
106 Company Information and Advisors
107 Shareholder Information
IBC Chairman’s Closing Message
Find out more about Photo-Me
at www.investor.photo-me.com
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“The business is well positioned for growth
and our net cash position remains healthy”
John Lewis
Non-executive Chairman
Underlying Pre-tax Profit
Ordinary Dividends Per Share
Cash Generated from Operations
35.0m
4.88p
46.6m
45.6m
49.2m
30.1m
24.3m
3.75p
3.0p
15
14
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£35.0m
+16.3%
15
14
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4.88p
+30.1%
15
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£49.2m
+7.9%
Share Price at 30 April
Underlying EBITDA
135.0p
139.0p
44.9m
47.8m
51.8m
77.75p
15
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139.0p
+3.0%
15
14
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£51.8m
+8.4%
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Photo-Me International plc
Photo-Me International plc
Annual Report & Accounts 2015
Annual Report & Accounts 2015
Strategic Report
Strategic Report
Photo-Me International plc
Photo-Me International plc
Annual Report & Accounts 2015
Annual Report & Accounts 2015
Adapting to a changing
digital market
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Our digital photography and printing services have
developed and evolved to service the needs of a
constantly changing and demanding market
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Our Strategic Business Model
Where We Operate
Geographic Expansion
Photo-Me’s business model is centred around utilising the cash flow from our
long-established photobooth operations to develop new and complementary
products, driving future growth. This is combined with the penetration of new
geographic markets.
The Group has operations in 17 countries, with a strong sales and
servicing network. We serve markets that are well positioned to deliver
long-term profitable growth, as well as strong and stable cash-flows.
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UK & Ireland
Continental Europe
Asia
Value
Quality
Location
Customer Focus
Reliability
Attractiveness
Ease of Use
Location
We maintain strong
relationships with site
owners and try to ensure
optimum positioning of
our machines.
Attractiveness
The Group has a strong
history of innovation and is
constantly looking for ways
to update and modernize
its estate, while introducing
new products to the
marketplace. The Starck
photobooth and the
Revolution laundry units
are recent examples of this.
Ease of Use
Traditionally, units have
been coin-operated in
simple denominations
(e.g. £5, €5) but the Group
is intensifying its contactless
payment systems
deployment programme
to improve the customer
offering and to enhance
customer opportunity.
Reliability
Combined with the
Telemetry connected
technology, we employ
an extensive network of
experienced engineers
to minimize downtime
and maintain appearance.
Quality of Product
Photobooths produce
ICAO-compliant photos
and constant investment
in technology ensures the
estate in general offers
the consumer a
satisfying experience.
Value for money
Historically, the Group has
been cautious in raising its
prices and believes it offers
a competitively priced range
of products. Machine usage
statistics support this view.
Vending Units
12,400
UK & Ireland
United Kingdom, Ireland
Revenue
£44.7m
Underlying Operating Profit
£8.4m
Vending Units
22,400
Continental Europe
Austria, Belgium, France, Germany,
Luxembourg, Netherlands, Poland,
Portugal, Spain, Switzerland
Revenue
£94.3m
Underlying Operating Profit
£22.0m
Vending Units
9,800
Asia
China, Japan, Singapore,
South Korea, Vietnam
Revenue
£38.2m
Underlying Operating Profit
£6.9m
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Photo-Me International plc
Annual Report & Accounts 2015
Our Products
Photo-Me International plc
Annual Report & Accounts 2015
For more than 50 years, Photo-Me has been the world’s largest
operator of photobooths, with market-leading photographic
quality and innovative technology.
Photography
Laundry Services
Digital Printing
Amusements
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Photobooths
State-of-the-art cameras, tactile control screens and continually
developing designs have helped to cement Photo-Me’s position
at the head of the field.
Revolution®
A solution to the problem of washing and drying
large laundry items
SpeedLab
Benefiting 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.
Children’s Rides
Photo-Me offers the latest in interactive character rides, exciting
new simulator rides and a selection of other coin-operated
amusement machines.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Chairman’s Statement
Overview of the Year
“ The Group delivered a solid
financial performance, as
illustrated by the strong
increase in profits.”
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Serge Crasnianski
Chief Executive Officer &
Deputy Chairman
Françoise Coutaz-Replan
Group Finance Director
Revenue
Underlying Operating profit *
Year to 30 April
2015
£m
Continental Europe 94.3
UK & Republic
of Ireland
Asia & ROW
44.7
38.2
177.2
2015†
£m
101.7
44.8
41.7
188.2
2014
£m
102.9
44.9
38.8
186.6
Change†
%
-1.2
-0.2
+7.5
+0.9
Corporate
† 2015 trading results of overseas subsidiaries converted at 2014 exchange rates.
* excluding profit on sale of land (£3.5m in 2015)
Continental Europe
UK & Republic of Ireland
Asia & ROW
Total
2015
£m
22.0
8.4
6.9
37.3
(2.5)
34.8
2015†
£m
23.8
8.4
7.5
39.7
(2.4)
37.3
2014
£m
21.3
7.4
5.7
34.4
(4.1)
30.3
Change†
%
+11.7
+13.5
+31.6
+15.4
+23.1
Vending units
2015
22,400
12,400
9,800
44,600
2014
21,250
13,000
9,600
43,850
Change
+5.4%
-4.6%
+2.1%
+1.7%
John Lewis
Non-executive Chairman
“ The expansion of our Revolution
laundry product is proceeding
in line with our plan and
is producing strong returns.”
Dividend increase
+30%
Results
At constant currency (CC), Group revenue was 0.9% higher over the year.
Group EBITDA increased by 15.7% during the period, with underlying
EBITDA margins strengthening to 29.2% from 25.6% in 2014.
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 our future growth. Alongside this, we are keen
to penetrate new geographic markets, which offer the potential for long-
term growth. It is also part of our strategy to be financially independent
as far as we can be, and to concentrate on increasing our returns to
shareholders.
We have made good progress with this strategy. The expansion of our
Revolution laundry product is proceeding in line with our plan and is
producing strong returns. Our photobooth business continues to enter
new markets and our product development pipeline is encouraging.
The strength of our cash flows is allowing us both to finance the capital
expenditure programme of some £14 million p.a. for the next two years
(net of financing) and to raise returns to shareholders by way of dividends.
Dividends
Reflecting the confidence we had in the outlook for 2014/15, last year
we stated that we intended to increase the annual dividend by 30%.
We are therefore pleased to confirm that the proposed total annual
dividend will rise from 3.75 pence (2013/14) to 4.88 pence in line
with our commitment.
The business is well positioned for growth and our net cash position
remains healthy. Having raised dividends substantially in recent years –
and with the desire to retain a progressive dividend policy – we have
now decided to adopt an enhanced dividend policy for the next three
years. We therefore intend to increase the ordinary dividend by 10%
p.a. and any net cash on the balance sheet at 30 April 2016 (and the
following two years) in excess of £50m will be available to shareholders
as a special dividend in line with the new policy.
If approved at the Annual General Meeting on 21 October 2015, the
final dividend will be paid on 12 November 2015 to shareholders on the
register at the close of business on 9 October 2015. The ex-dividend
date will be 8 October 2015.
Employees
On behalf of the Board, I would once again like to thank our
management and employees for all their individual hard work,
dedication and loyalty throughout the year.
Current trading and outlook
Looking ahead, the Group’s Treasury function keeps FX under continual
review, although the continued strengthening of sterling against the euro
and the yen, which may have an adverse effect in the coming year,
remains a challenge. Importantly, however, the operational performance
of the business remains very good. Subject to the risks and
uncertainties detailed in the Strategic Report, the Board anticipates
another year of strong underlying progress.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Overview of the Year
continued
Continental Europe
This division contributed 53% of Group revenue (2014: 55%) and 59% of operating profit (2014: 62%). At the end of April 2015, 50% (2014: 48%)
of the Group's estate was sited in Continental Europe. There were 22,373 (2014: 21,226) units in total of which 12,406 (2014: 11,869) were
photobooths. The Group operates in nine countries in Continental Europe.
Asia & R.O.W.
This division contributed 22% of Group revenue (2014: 21%) and 18% of operating profit (2014: 17%). At the end of April 2015, 22% (2014: 22%)
of the Group's estate was sited in Asia & ROW. There were 9,814 (2014: 9,606) units in total of which 8,223 (2014: 7,911) were photobooths.
The Group operates in five countries, with the latest addition being the USA.
Photobooth units in operation
27,043
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The largest territory by far by reference to size of the machines estate and revenue is Japan where performance was strong. Revenues were
up by 6.4% (at CC) with profits (at CC) 18.6% higher.
The Group is deploying an additional 1,000 booths into Japan to take advantage of the new ID card regulation which is scheduled to come into force
in January 2016. Under this legislation all Japanese citizens will need a new photo ID card and with a population aged 18+ of some 87 million this is
expected to lead to a substantial increase in demand over the next two to three years. While some of this increased demand will be met by
independent photographers, the photobooth market will be a clear beneficiary and the Group is expecting a significant boost to revenue and
profitability once the new legislation is in force.
Gradual progress continues to be made in China where turnover rose by 25% (at CC). Operational efficiencies and better siting of machines have
resulted in these operations reaching a satisfactory level of profitability compared with losses last year.
UK & Ireland
This division contributed 25% of Group revenue (2014: 24%) and 23% of operating profit (2014: 22%). At the end of April 2015, 28% (2014: 30%)
of the Group's estate was sited in UK & Ireland. There were 12,412 (2014: 13,023) units in total of which 6,414 (2014: 6,347) were photobooths.
Growth in photobooth numbers was 1% year-on-year while there was a 30% reduction on bouly / amusement machines which are not material
to the Group’s business in the UK & Ireland.
With the market background remaining difficult, turnover in the UK and Ireland was flat while profit expanded following continued focus on cost
reduction through operational efficiencies and site costs optimization as well as product diversification.
The Group rolled out 32 laundry units in Ireland, where results to date have been very promising. The units in Ireland, which have been carefully
sited in areas of high demand, are currently the highest revenue-earning machines in the portfolio and further expansion is envisaged.
Reported revenue was 8.4% lower than last year, but on a constant currency basis declined by 1.2% only. Stripping out the effects of the continuing
decline in the minilab business (previously reported under "Sales and Servicing"), underlying revenue at constant currency grew by 1.6%. Operating
profits increased by 3.3% on a reported basis and by 11.7% on a constant currency basis.
The European photobooth estate increased by 4.5% year-on-year with the main areas for growth being France and Switzerland. The Group
continues its roll-out of higher-margin Starck booths and there are now 3,213 deployed across Europe, an increase of 883 over the year.
The roll-out of the Group's laundry product, predominantly using the same sites as the photobooth estate, continues to progress well.
Total (including UK & Ireland)
Owned (total)
Sold (cumulative total at year end)
Ave. revenue per owned unit (€) †
2015
644
440
14,396
2014
202
317
13,887
2013
48
236
12,276
Change
+219%
+39%
+4%
† Average calculated only on machines in France with at least one full month’s takings
The results from the units in operation in France and Belgium remain extremely encouraging with takings averaging €1,200 per unit per month
during the period across the operating estate and the more established machines seeing takings increase by some 12% year-on-year. For the full
year, the turnover of the laundry business units was £6.3m (2014: £3.3m) and represented 9% of total turnover in France and 11% in Belgium.
The Group now has laundry units in nine countries, with the most significant coverage being in France and Belgium. Besides traditional launderette
locations, the Group continues to be encouraged by potential demand in sites like equestrian centres, campsites, universities and military barracks,
all of which have demand for heavy-duty laundry capability. Prospects for the product are particularly encouraging in Portugal and Ireland. For
example, since introducing the product in Portugal in May 2014, the number of machines has grown to 37 and laundry revenues have grown rapidly
from nil to represent 28% of total Portuguese revenues in the month of April 2015. While the country is small in overall terms for Photo-Me, it
demonstrates the transforming potential of the product.
Following the relocation of the outsourced manufacturing capability to Hungary in 2014, the Group now plans to have deployed 6,000 laundry units
in Europe by 2020. As the business grows, it is expected that the majority of these will be owned/operated. The Group remains focused on ensuring
that only the best locations are targeted for the machines, given the investment and logistics involved. The achievement of the roll-out targets in the
short and medium term represents an opportunity for a material increase in Group revenue and with an attractive cash generation and EBIT profile
the Board believes will enhance returns to shareholders in future years. The Group continues to look for opportunities in Asia and the US.
The Group continues to operate over 5,000 digital printing kiosks, primarily in France and Switzerland, and is currently upgrading the estate to the
latest technology to accept all models of memory cards and smart phones. A brand new and very modern Starck-designed kiosk was unveiled at
the photo fair in Paris in November 2014. This is a new generation of kiosk with no real comparator, and the Group considers the potential worldwide
to be very promising; the Group's target is to launch this product in the next few months.
Europe remains the centre of the Group's R&D efforts and new product development. Aside from the new digital printing kiosk (see above), and
other models of photobooths, the Group is equally focusing on new technologies, such as 3D digital photos and Photolight. Aiming at becoming
a leader in the field, the Group works in partnership with official government bodies to develop enhanced ID security standards through the 3D
technology. As a first offspring of the 3D technology, the Group has started to introduce 3D-figurine photobooths. Photolight is a solar-powered
streetlight that has been under development over the last couple of years and the Group is now beginning to market the concept more widely.
The Group is still trialling a carwash concept, which would have some overlap in terms of location as the stand-alone Revolution laundry units and
use the same network of engineers. Results from those first units are encouraging and Photo-Me will report further on its plans for this concept
in 2016, based on progressively scaled-up trials.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Strategic Overview
Revolution units in operation
1,084
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What we do
Photo-Me’s principal activity is the operation of unattended vending equipment aimed primarily at the consumer market. The largest part of this
estate currently comprises photobooths and digital printing kiosks, with the balance comprising laundry units, amusement machines (including kiddie
rides) and business service equipment.
Our business model
Customers
The majority of our business is consumer-oriented and our units must therefore have certain characteristics. These are: good location, attractiveness,
ease of use, reliability, quality of product and value for money.
Photo-Me owns these units and pays the site owner a commission based on turnover. This commission varies by country and location. Photo-Me is
responsible for collecting the takings from, and the service and maintenance of, the units, and employs a network of engineers to perform these tasks.
(cid:129)
Location
We maintain strong relationships with site owners and try to ensure optimum positioning of our machines.
Where we operate
Photo-Me has three principal areas of operation geographically – UK & Ireland, Europe and Asia. Its most important territory in Europe is France,
and in Asia it is Japan.
(cid:129) Attractiveness
The Group has a strong history of innovation and is constantly looking for ways to update and modernize its estate, while introducing
new products to the marketplace. The Starck photobooth and the Revolution laundry units are recent examples of this.
With photobooths historically being its core business, Photo-Me has chosen to operate in areas offering a strong and consistent demand for identity
photos, in particular passports and driving licences. It has also chosen areas where it is able to establish a strong market share and where business
practices maintain a high ethical standard. The Group does not operate (although for differing reasons) in South America, Africa or Australasia.
(cid:129)
Ease of Use
Traditionally, units have been coin-operated in simple denominations (e.g. £5, €5) but the Group is intensifying its contactless payment
systems deployment programme to improve the customer offering and to enhance customer opportunity.
Units are generally sited in areas of high footfall and/or where there may be ambient demand for identity photos. Thus supermarkets, shopping malls
(indoors and outdoors) and public transport venues are prime locations.
Key performance indicators
The Group measures its performance using a mixture of financial and non-financial indicators. The main objective of these KPIs is to ensure that the
Group remains highly cash generative, delivers sustained long-term profitability, preserves the value of its assets and provides high returns to
shareholders.
(cid:129) Reliability
Combined with the telemetry connected technology, we employ an extensive network of experienced engineers to minimize downtime
and maintain appearance.
(cid:129) Quality of Product
Photobooths produce ICAO-compliant photos and constant investment in technology ensures the estate in general offers the consumer
a satisfying experience.
Description
Relevance
Total revenue at actual rate of exchange
Total revenue excluding minilab at
constant rate of exchange
Profit before tax
Underlying profit before tax
EBITDA margin
Underlying EBITDA margin
Increase in gross takings
(Revenue incl. VAT)
Increase in number of photobooths
Increase in number of laundry units
(operated or sold)
The turnover at constant rate of exchange
excluding minilabs translates the underlying
growth of the core business
The underlying EBITDA margin is a good
indicator of our improvements in profitability
excluding major one-off items
Gross takings are an important indicator of the
trend in our core vending business
The increase in number of photobooths is always
a priority and a main driver for growth
The increase in number of laundry units measures
our penetration in this market where there is a huge
potential for growth and large profits
April 2013
£195.6m
Performance
April 2014
£186.6m
April 2015
£177.2m
(cid:129)
Value for money
Historically, the Group has been cautious in raising its prices and believes it offers a competitively priced range of products. Machine usage
statistics support this view.
£181.3m
£24.3m
£24.3m
23.0%
23.0%
+1.2%
£182.8m
£30.1m
£30.1m
25.6%
25.6%
+1.9%
+1,399
+1,261
£187.7m
£38.5m
£35.0m
31.2%
29.2%
+2.5%
+916
NR
+235
+565
From an operational perspective, the Group has three main aims:
1. To increase the number of units in operation
2. To increase takings per unit
3. To minimize production and operational costs
1. Unit expansion
The Group’s estate can be grown in the following ways:
a. Adding further units within existing territories
b.
c. Entering new markets
Introducing new products within existing territories
a. Adding further units
The Group has strong market positions in the established countries in which it operates, therefore adding further units within these territories
is generally quite difficult to achieve. However, the Group managed a 3.5% increase of the photobooth estate over the year and will be expanding
its estate in Japan significantly to take advantage of new photo ID card legislation which comes into force in 2016.
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Photo-Me International plc
Annual Report & Accounts 2015
Strategic Overview
continued
1. Unit expansion (continued)
b. Introducing new products
With its history of innovation, the Group has been very successful at introducing new products and modernizing its portfolio. The last three years
have seen the introduction of the Philippe Starck - designed photobooth range as well as the launch of the brand-new Revolution laundry units.
The modern and elegant design of the Starck booths is intended to appeal to the consumer and to attract more of them to the booths. This is clearly
also attractive to the site owner as well. This dynamic enables Photo-Me to attract interest from non-traditional site owners. Besides, nearly all new
sitings or replacements of booths in established territories are now Starck models.
The launch of the Revolution laundry units occurred in the second half of 2012. These machines offer an attractively priced product and the initially
targeted sites were the immediate outside surroundings of supermarkets in France and Belgium where Photo-Me already has long-standing
relationships given the existence of the photobooth estate.
The Group is identifying demand for the product in additional markets at differing locations, for example campsites, military barracks and student
accommodation, and has now launched the product in all its European countries, in particular Ireland and Portugal.
c. Entering new markets
The Group takes an opportunistic approach to investments in new markets, and constantly assesses new potential markets.
In the last twelve months, very positive progress has been made in South Korea, where some 100 photobooths have been sited. Small operations
have been launched in Poland.
2. Increase takings per unit
Clearly the most obvious route for the Group is to raise prices but over the last few years the Group has chosen not to do this in the light of both
the generally difficult economic background globally as well as a desire to ensure that the offering remains very competitive. However, in the past two
years, a price rise has been effected in the Japan booths to offset VAT increases and the prices on kiddie rides and amusement machines have risen
from low levels. Elsewhere the Group does experiment with targeted price increases in specific territories when relevant to gauge its effect on
revenue and demand.
Besides price initiatives, the introduction of attractive new offerings on the existing estate as well as active re-siting of machines to more attractive
locations are also strategies to increase takings.
3. Minimizing production and operational costs
The principal operating cost – other than depreciation – is the commission paid to site owners. The Group manages commissions carefully,
and has, for example, achieved some success with the introduction of its Starck booths and the Revolution laundry units.
Thanks to sophisticated telemetry, the Group suffers virtually no fraud and the costs of operating its network of engineers are also low as
a percentage of the total cost base.
Over the last two years, the Group has transferred its production of photobooths to China and the production of the laundry units to Hungary.
The facility in each country is operated by a large, listed European manufacturer with very high production standards and capability. In both cases
this has significantly reduced production costs.
The Group reviews regularly its supply chain and endeavours to maintain low production costs.
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Photo-Me International plc
Annual Report & Accounts 2015
Financial Review
Intro Para
Underlying profit before tax
£35m +16.3%
Financial Performance
The Group delivered solid financial performance, as illustrated by the strong increase in profits.
Reported revenue declined by 5% to £177.2m due to the continued decline in the sales of the restructured minilab business, compounded
by an adverse effect of conversion exchange rates (mainly the euro and the yen).
Revenue
Underlying EBITDA *
Underlying Operating Profit *
Underlying Profit before tax *
Profit after tax
* Excludes the profit on sale of land of £3.5m
The movements in turnover are outlined in the following table:
April 2014 Turnover
Change in core business revenue
UK & Ireland
Continental Europe
Asia
Decline in the minilab business
Impact of exchange rates
April 2015 Turnover
April 2015
£m
177.2
51.8
34.8
35.0
28.0
April 2014
£m
186.6
47.8
30.3
30.1
21.6
£m
186.6
-0.1
+1.5
+2.9
+4.3
-2.7
-11.0
177.2
The decrease in the total reported turnover was largely compensated by savings in operational costs, and the Group reported an increase of 16.3%
in underlying profit before tax.
The increase in the profit before tax can be explained as follows:
April 2014 – PBT
Changes in revenue
Changes in costs
Decrease in depreciation and amortization
April 2015 – Underlying PBT
Profit on disposal of land
April 2015 – PBT
Review of operating costs
Operating costs amounted to £138.8m (2014: £156.3m).
Staff costs
Cost of materials
Other operating costs
Depreciation and amortization
Loss on disposal of fixed assets *
Operating costs
* Excluding a profit of £3.5m on the disposal of land
£m
30.1
-9.4
+13.6
+0.7
35.0
3.5
38.5
April 2014
£m
43.8
17.3
77.5
138.6
17.5
0.2
156.3
15
April 2015
£m
40.3
12.6
69.0
121.9
16.9
–
138.8
Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Financial Review
continued
Intro Para
Underlying EBITDA margin
29.2%
Review of operating costs (continued)
Staff costs amounting to £40.3m decreased by 8.0% compared with the previous year and represented 22.7% of percentage of sales (2014:
23.5%). The decrease results from the full year benefit of the savings generated by the restructuring of the former sales and servicing division,
strengthened by the leveraging of the existing maintenance network through the growth of the laundry business.
The reduction in inventory costs is the direct result of both the winding down of the parts and consumable intensive minilab division as well as
the cost reductions achieved through enhanced efficiencies in the supply chain.
Taxation
The Group tax charge of £10.5m corresponds to an effective tax rate of 27.2% (2014: 28.3%).
The Group undertakes business in over 15 countries worldwide, with most of the tax charge arising in France, Japan and the United Kingdom.
In each jurisdiction in which the Group operates, operations are organised so that the Group pays the correct and appropriate amount of tax at the
right time according to the local regulations and ensures compliance with the Group’s tax policy and guidelines.
Cash flow and net cash position
Opening net cash
Cash generated from operations
Taxation
Net cash generated from operations
Net cash used in investing activities
Dividends paid and other financing activities
Net cash generated
Impact of exchange
Net cash (outflow)/ inflow
Closing net cash
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£m
63.1
49.2
(9.1)
40.1
(18.2)
(21.1)
0.8
(3.2)
(2.4)
60.7
April 2014
£m
61.4
45.6
(9.9)
35.7
(20.3)
(11.3)
4.1
(2.4)
1.7
63.1
Dividends
During the year, the Group paid dividends totalling £21.4m in respect of the ordinary and special dividend for the year ended 30 April 2014.
The increase in the EBITDA, coupled with optimised working capital as well as lower tax paid, led to the increase in net cash generated from
operations by £4.4m.
The interim dividend for the year ended 30 April 2015 (2.34p per share) declared in December 2014 was paid in May 2015 and amounted to £8.7m.
Statement of financial position
The Group balance sheet can be summarised as follows:
Non-current assets (excl. deposits)
Current assets (excl. cash and deposits)
Non-current liabilities (excl. borrowings)
Current liabilities (excl. borrowings)
Net cash
Total equity
Minority interests
Total shareholders’ funds
April 2015
£m
71.5
23.9
(7.5)
(44.2)
60.7
104.4
(0.9)
103.5
April 2014
£m
69.5
25.6
(8.4)
(45.6)
63.1
104.2
(1.1)
103.1
Following the payment of dividends of £21.4m, the shareholders’ funds at 30 April 2015 amounting to £103.5m remained stable compared
with the previous year end.
The non-current assets detail is outlined in the following table:
Goodwill
R&D costs
Other intangible assets
Operating equipment
Plant and machinery
Land and buildings
Investment property
Investments
Deferred tax asset
Trade and other receivables
Total non-current assets
April 2015
£m
10.2
2.6
3.9
43.1
3.8
1.3
0.5
65.4
0.9
3.5
1.7
71.5
April 2014
£m
9.9
2.2
3.6
41.7
3.3
2.2
0.5
63.4
0.7
3.5
1.9
69.5
The goodwill mainly relates to the Japanese subsidiary. The addition corresponds to the acquisition of operations in Switzerland.
With a net book value of £43.1m, the operating equipment is the main component of the Group’s total non-current assets. The Group owns some
44,600 machines operated worldwide. The change in the net book value reflects the Group’s capital expenditure of £21.6m net of depreciation and
exchange differences.
The cash generation was still substantial and enabled the Group to finance its capital expenditure programme as well as to pay out to shareholders
increased dividends from £11.3m (2014) to £ 21.1m (2015).
At the end of April 2015, the Group’s net financial position amounting to £60.7m could be split as follows:
Balance at 30 April 2014
Cash flow
Non-cash movements
Balance at 30 April 2015
Cash and
deposits
£m
63.4
0.7
(3.2)
60.9
Borrowings
£m
(0.3)
0.2
(0.1)
(0.2)
Net financial
position
£m
63.1
0.9
(3.3)
60.7
Gender diversity
The table below shows the gender diversity of the Group’s employees as at 30 April 2015 with the corresponding figures as at the same date last
year for comparison purposes:
The Board of Photo-Me
Senior Managers in the Group
(excluding directors of Photo-Me)
Employees (excluding above)
Total
As at 30 April 2015
As at 30 April 2014
Total
6
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1,046
1,066
M
5 (83%)
13 (93%)
888 (85%)
906 (85%)
F
1(17%)
1 (7%)
158 (15%)
160 (15%)
Total
6
13
1,069
1,088
M
5 (83%)
12 (92%)
904 (85%)
921 (85%)
F
1 (17%)
1 (8%)
165 (15%)
167 (15%)
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Photo-Me International plc
Annual Report & Accounts 2015
Financial Review
continued
Photo-Me International plc
Annual Report & Accounts 2015
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Principal risks
Like all businesses, the Group faces risks and uncertainties that could impact the achievement of the Group’s strategy. These risks are accepted as
being part of doing business and the Board recognises that the nature and scope of these risks can change and so regularly reviews the risks faced
by the Group as well as the systems and processes to mitigate them.
The table below sets out what the Board believes to be the principal risks and uncertainties, their impact, and actions taken to mitigate them.
Nature of the risk
Description and impact
Mitigation
Nature of the risk
Description and impact
Mitigation
Economic
(cid:129) Global economic conditions
(cid:129)
Volatility of foreign exchange rates
Regulations
(cid:129) Centralisation of production of ID photos
Economic growth is a major influence on
consumer spending. A sustained period of
economic recession could lead to a decrease
in consumer expenditure in discretionary areas.
The majority of the Group’s revenue and profit
is generated outside of the UK, and the Group
results could be adversely impacted by an
increase in the value of sterling relative to
those currencies.
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
revenues and profits could be seriously affected.
The Group focuses on maintaining the
characteristics and affordability of its
needs-driven products.
The Group hedges its exposure to currency
fluctuations on transactions, as relevant.
However, by its nature, in the Board’s opinion,
it is very difficult to hedge against currency
fluctuation arising from translation in
consolidation in a cost-effective manner.
The Group is developing new systems that
could respond to this situation, including the
introduction of 3D technology in ID security
standards, as well as trialling booths
connected to the central government systems
(ANTS in France). The Group also ensures
that its ID product remains affordable and of
high quality.
The Group is also conducting lobbying actions.
Strategic
(cid:129)
Identification of new business opportunities
Failure to identify new business areas may
impact the ability of the Group to grow in the
long term.
The management teams constantly review
demand in existing markets and potential new
opportunities. The Group continues to invest
in research for new products and technologies.
(cid:129)
Inability to deliver anticipated benefits from
the launch of new products
The realisation of long-term anticipated benefits
depends upon the successful launch of the
“Revolution” laundry unit.
The Group regularly monitors the performance
of newly installed machines, which are heavily
trialled before launch.
Market
(cid:129) Commercial relationships
Operational
(cid:129) Reliance on foreign manufacturers
(cid:129) Reliance on one single supplier
of consumables
(cid:129) Reputation
(cid:129)
Product and service quality
The Group has well-established long-term
relationships with a number of site-owners.
The deterioration in the relationship with, or
ultimately the loss of, a key account or tender
process would have an adverse albeit
contained impact on the Group’s results,
considering how the Group’s turnover is
spread over a large client base.
The Group sources most of its products from
outside the UK. Consequently, the Group is
subject to risks associated with international
trade.
The Group’s major key relationships are
supported by medium-term contracts. We
actively manage our site-owner relationships
at all levels to ensure a high quality of service.
Extensive research is conducted into quality
and ethics before the Group procures
products from any new country or supplier.
The Group also maintains very close
relationships with both its suppliers and
shippers to ensure that disruption to
production and supply are managed
appropriately.
The Group currently buys all its paper for
photobooths from one single supplier. The
failure of this supplier could have a dramatic
effect.
The Board has decided to hold a strategic
stock of paper, allowing for 6 to 12 months’
worth of paper consumption, to give enough
time to put in place alternative solutions.
The Group’s brand is a key asset of the
business. Failure to protect the Group’s
reputation and brand could lead to a loss of
trust and confidence. This could result in a
decline in the customer base.
The Board recognises that the quality and
safety of both its products and services is of
critical importance and that any major failure
will affect consumer confidence.
The protection of the Group’s brand in its core
markets is sustained by products with certain
unique features and offerings as well as
regular maintenance to maintain appearance.
The Group continues to invest in both its
existing estate, to ensure that it remains
contemporary, and in constant product
innovation to meet customer needs. The
Group also has a programme to regularly
train its technicians.
Information on (i) employees, (ii) social and community matters and (iii) environmental issues is provided in the Corporate Responsibility Statement.
The Board do not think it is necessary for an understanding of the development, performance or position of the Group’s business to include anything
further on these matters in this Strategic Report (apart from the gender diversity make-up of the Group’s employees which is reported on above).
By order of the Board
Del Mansi
Company Secretary
24 June 2015
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Corporate Governance
Revolutionising
laundry services
We are revolutionising the instant service
of large load laundry facilities across a wide
and varied location basis
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Board of Directors and Secretary
Report of the Directors
Serge Crasnianski
Chief Executive Officer &
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.
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.
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.
Emmanuel Olympitis
Non-executive Director
Jean-Marcel Denis
Non-executive Director
Yitzhak Apeloig
Non-executive Director
Del Mansi
Company Secretary
Appointed to the Board in 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.
Appointed to the Board in 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
and Polar Communications Ltd and
Director of Leader Capital Markets Ltd
(all quoted on the Israeli Tel Aviv Stock
Exchange). 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.
Joined the Group in 2006. A qualified
solicitor. Served as interim Company
Secretary from April to July 2008.
Appointed Group General Counsel
in 2009, a role retained upon being
appointed Company Secretary in
May 2013.
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.
22
The directors submit to the shareholders their report, the audited
consolidated financial statements of the Group and such audited
financial statements of Photo-Me International plc as required by
law for the year ended 30 April 2015.
The Corporate Governance Statement and the Corporate Responsibility
Statement should be read as forming part of this report. In this
document, references to “The Group”, “The Company”, “we”, or “our”,
refer to Photo-Me International plc, its subsidiary companies and, where
applicable, its associated undertakings, or any of them as the context
may require.
Corporate responsibility
A summary of the Company’s approach to corporate social
responsibility and environmental matters, including a report on
the Group’s greenhouse gas emissions for the financial year ended
30 April 2015, can be found in the Corporate Responsibility Statement
on pages 30 to 33.
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, business service equipment
and laundry machines.
The principal subsidiary and associated undertakings of the Company
are shown on page 103.
Results and dividends
The results for the year are set out in the Group Statement of
Comprehensive Income on page 52.
The directors recommend a final dividend of 2.54p per ordinary share
which, if approved at the Annual General Meeting on 21 October 2015,
will be paid on 12 November 2015 to shareholders on the register at the
close of business on 9 October 2015. The ex-dividend date will be
8 October 2015. This, together with the interim dividend of 2.34p per
ordinary share paid on 14 May 2015 makes a total dividend for the year
of 4.88p per ordinary share.
Review of the business and future developments
The Strategic Report describes the activities of the business during the
financial year, recent events (including any important events affecting the
Group which have occurred since the financial year end), and give an
indication of likely future developments in the Group’s business.
A discussion of the key risks facing the Group and an analysis of key
performance indicators are also provided in the Strategic Report.
Research and development
The Group is committed to its research and development programme
in order to maintain its introduction of innovative products to the market.
The expenditure incurred on the development of new products is shown
in notes 4 and 11 to the financial statements.
Employees
Information on the Company’s employment practices including its policy
regarding applications for employment by disabled persons, for the
continuing employment of employees who have become disabled, and
the training, career development and promotion of disabled persons
employed by the Company, as well as employee communication and
involvement, is contained within the Corporate Responsibility Statement
on pages 30 to 31 forming part of this report.
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Board of directors and their interests
The current directors of the Company are: John Lewis (Chairman);
Serge Crasnianski (Chief Executive Officer and Deputy Chairman);
Françoise Coutaz-Replan (Group Finance Director); Emmanuel
Olympitis (Senior Independent Non-executive Director, Chairman of the
Remuneration Committee and a member of the Nomination and Audit
Committees); Jean-Marcel Denis (Chairman of the Audit Committee and
a member of the Nomination and Remuneration Committees); and
Yitzhak Apeloig. Further details, together with a brief biography of each
director, can be found on page 22. All directors served on the Board
throughout the year under review.
In addition to the powers conferred on the directors by law, the
Company’s Articles of Association also set out powers of the directors; in
particular, under these powers, the directors may, subject to any statutory
provision requiring prior shareholder approval, exercise all powers of the
Company to borrow money, issue shares, appoint and remove directors
and recommend dividends and pay interim dividends. A copy of the
Articles of Association can be found on the Company’s website.
The directors retiring by rotation and being put forward for re-
appointment at the Annual General Meeting this year are Mr Serge
Crasnianski, Ms Françoise Coutaz-Replan, Mr Jean-Marcel Denis and
Mr Yitzhak Apeloig.
Details of the directors’ contracts, emoluments and interests in shares and
share options are given in the Remuneration Report on pages 34 to 46.
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.
Article 191 of the Company’s Articles of Association provides for the
indemnification of directors of the Company and associated companies
and of directors of a company that is the trustee of an occupational
pension scheme for employees of the Company or an associated
company against liability incurred by them in certain situations, and is
a “qualifying indemnity provision” within the meaning of Section 236 (1)
of the Companies Act 2006. No such indemnities have been granted.
23
Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Report of the Directors
continued
Substantial shareholders
As at 24 June 2015, the Company has been notified of the following
disclosable interests in the ordinary shares of the Company:
Number of
ordinary shares
% of total
voting rights
Nature
of holding
79,783,450
Serge Crasnianski
(director)
Schroder Investment
Management Limited
Western Management
Overseas Limited
65,963,267
Dan David Foundation 45,579,318
67,244,074
21.38
*Direct/indirect
18.02
17.67
12.21
Indirect
Direct
Direct
* Except for 63,750 Ordinary shares held in his own name, the interest in which is
direct, the remaining shares are registered in the name of Tibergest S.A., and
Mr Crasnianski’s interest in those remaining shares is indirect.
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, plus details of the movements
in the Company’s issued share capital during the year, is shown in note
20 to the financial statements. Each ordinary share of the Company
carries one vote at general meetings of the Company.
Authority to purchase shares
Pursuant to a resolution passed at its 2014 Annual General Meeting,
the Company is authorised to purchase its own shares in the market.
The Company will seek approval at the 2015 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 the higher of: (a) an amount which is not more than 5%
above the average of the closing middle market quotations for an
ordinary share (derived from the London Stock Exchange Daily Official
List) for the five business days immediately before the date on which
that ordinary share is contracted to be purchased, or (b) the higher
of the price of the last independent trade or the highest current
independent bid on the London Stock Exchange at the time the
purchase is carried out. This authority will expire on the earlier of
18 months from the passing of the relevant special resolution or the
conclusion of the following Annual General Meeting. The Company
made no repurchases of shares in the year ended 30 April 2015.
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.
The structure of the Company’s share capital including the rights and
obligations attaching to the shares is set out within note 20 to the
financial statements.
No person holds securities carrying special rights with regards to
control of the Company.
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 Conduct Authority, certain
employees are required to seek the approval of the Company to deal
in its shares.
On a show of hands at a general meeting of the Company, every holder
of ordinary shares entitled to vote and who is present in person or by
proxy shall have one vote and on a poll, every member present in
person or by proxy and entitled to vote shall have one vote for every
ordinary share held (except as otherwise stated in Article 81 of the
Company’s Articles of Association). Any notice of general meeting
issued by the Company will specify deadlines for exercising voting rights
and in appointing a proxy or proxies in relation to resolutions to be
passed at the general meeting. All proxy votes are counted and the
numbers for, against or withheld in relation to each resolution are
announced at the general meeting and published on the Company’s
website after the meeting. Proxy appointment and voting instructions
must be received by the Company’s registrars not less than 48 hours
before a general meeting.
Under its Articles of Association, unless the Board otherwise
determines, no member shall be entitled to vote in respect of any share
unless all calls or other sums presently payable by them in respect of
that share shall have been paid.
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 are set out in the
Corporate Governance Statement on pages 26 to 29.
The Company’s Articles of Association may only be amended by
a special resolution at a general meeting of shareholders.
The Company is party to a number of agreements with site-owners
(such as major supermarket chains) which could be terminable by the
site-owners following a change of control of the Company.
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 28 to 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 in note 15 to the financial statements.
Political donations
No member of the Group made any political donations during the
year ended 30 April 2015.
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.
Disclosure of information to the auditor
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 auditor (KPMG LLP)
is unaware; and each director has taken all the steps that he or she
ought to have taken as a director to make himself or herself aware of
any relevant audit information and to establish that the Company’s
auditor is aware of that information.
Auditor
In accordance with section 489 of the Companies Act 2006,
a resolution for the re-appointment of KPMG LLP as auditor of the
Group is to be proposed at the forthcoming Annual General Meeting.
Annual General Meeting
The Company’s Annual General Meeting this year will be held at
12 noon on 21 October 2015 at The Thatcher’s Hotel, Guildford Road,
East Horsley, Surrey KT24 6TB.
Notice of the Annual General Meeting is sent to all shareholders of the
Company. The Notice convening the meeting provides full details of all
the resolutions to be proposed, together with explanatory notes for both
the ordinary and special business. Copies of this Annual Report are sent
only to shareholders who have requested or request a copy.
By order of the Board
Del Mansi
Company Secretary
24 June 2015
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Corporate Governance Statement
(forming part of the Report of the Directors)
Statement of compliance with the UK
Corporate Governance Code
The Financial Conduct Authority requires listed companies incorporated
in the United Kingdom to include in their annual financial report (i) a
statement of how they have applied the main principles set out in the
UK Corporate Governance Code (the “Code”) and (ii) a statement as to
whether they have complied throughout the accounting period with all
relevant provisions set out in the UK Corporate Governance Code. The
directors consider that the Company has, throughout the year ended 30
April 2015, complied with those provisions of the September 2012
edition of the Code that are applicable to it. The Code and associated
guidance are available on the Financial Reporting Council website at
www.frc.org.uk.
Explanations of how the principles have been applied and the provisions
complied with are set out below.
The Group’s business model and strategy
The Group’s business model and strategy are summarised on pages
4 to 5, and describe, amongst other things, how the Company
generates and preserves value over the longer term and the strategy
for delivering the objectives of the Company.
The Board
Board composition
Throughout the year under review, the Board comprised the same six
directors, being the Chairman, the Chief Executive Officer, the Group
Finance Director and three Non-executive Directors, all of whom the
Board considers to be independent, namely Emmanuel Olympitis,
Jean-Marcel Denis and Yitzhak Apeloig.
The Chairman
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
and Deputy Chairman.
Director independence
The Board structure has complied with the Code provision that, as a
“smaller company” (as defined by the Code), the Company has three
independent Non-executive Directors excluding the Chairman.
On his appointment in March 2012, the Nomination Committee took
the view (out of caution) that because of Mr Apeloig’s then current and
previous business relationships with the Dan David Foundation and Mr
Philippe Wahl, both of whom were (and are) either directly or indirectly
major shareholders in the Company, he should not be considered as
independent. These relationships of Mr Apeloig were indirect through
his association with other entities.
This view was reached even though (i) Mr Apeloig held no mandate
from either of those shareholders, (ii) would not be representing them,
and (iii) would not be reporting back to them (a state of affairs which
has never changed throughout his tenure of office as a director of the
Company). Since Mr Apeloig’s appointment, the Group has transacted
business with one entity of which Mr Apeloig is a director, and in which
the Dan David Foundation and Mr Philippe Wahl have ownership
interests, namely Fomat Limited, a company incorporated in Israel.
The business which Fomat Limited transacted with the Group has been
minimal (the total value of such business transactions for the financial
years ended 30 April 2013, 2014 and 2015 were £23,098, £17 and
£ nil respectively).
Accordingly, given the above, and further given that Mr Apeloig is due
to be proposed for re-election at this year’s Annual General Meeting,
the Nomination Committee has taken the opportunity to reassess
Mr Apeloig’s status and has concluded that he should be considered as
being an independent Non-executive director. The Committee will keep
the situation under observation in case of any change but it is not
expecting any such change.
The Senior independent director
Emmanuel Olympitis has served as the Company’s Senior Independent
Non-executive Director throughout the period.
If a new director were to be appointed, 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 or her duties, may take
independent advice at the Company’s expense. All directors are
required to stand for re-election every three years and newly appointed
directors are subject to election by shareholders at the first Annual
General Meeting after their appointment.
Directors’ conflicts of interest
During the year, directors completed questionnaires in respect of their
interests. 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.
Board evaluation
The Chief Executive Officer and the Chairman review the performance of
the other Executive Director. The Chairman reviews the performance of
the Chief Executive and each Non-executive Director. The Non-executive
Directors, led by the Senior Independent Non-executive Director,
evaluate the performance of the Chairman taking into account the views
of the Executive Directors. During the year, the Chairman met with the
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 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
J-M Denis
E Olympitis
Board
7
Audit Remuneration
Committee
4
Committee
3
Nomination
Committee
1
Number of meetings attended (maximum possible)
7 (7)
7 (7)
6 (7)
7 (7)
6 (7)
6 (7)
3 (3)
n/a
n/a
n/a
2 (3)
3 (3)
4 (4)
n/a
n/a
n/a
1 (4)
4 (4)
1 (1)
n/a
n/a
n/a
0 (1)
1 (1)
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Operation of the Board
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.
Meetings are normally held at least twice a year. Three meetings were
held during the year under review. Other directors (the Chief Executive
Officer, the Group Finance Director and Yitzhak Apeloig, who is a
qualified accountant) together with representatives of the external
auditor are generally invited to attend meetings, as is the Group’s
internal auditor when required. The Group’s internal auditor is in regular
contact with the Chairman of the Audit Committee and delivers regular
reports.) The minutes of the meetings are circulated to all directors.
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 circulated in advance of each
meeting and are supplemented by reports and presentations to
ensure that Board members are kept fully informed.
Board Committees
The Audit Committee
The Audit Committee consists entirely of Non-executive directors.
For the whole of the year under review, Jean-Marcel Denis (Committee
Chairman), Emmanuel Olympitis and John Lewis (Chairman of the
Board) served on the Committee. The composition of the Committee
was compliant with the Code, which permits a smaller company’s
Chairman to be a member of the Audit Committee providing he was
considered independent on appointment as Chairman. 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.
External auditor
The Audit Committee meets with the external auditor, without executive
directors present, at least once a year. On behalf of the Board, the
Committee reviews the Group’s accounting and financial reporting
practices, the reports of the internal and external auditor 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 systems and reporting processes, and risk
management procedures. The Committee considers the appointment
of the external auditor and makes a recommendation on the audit fee to
the Board; it assesses the effectiveness of the external auditor by
means of an internal review process assisted by a confidential
questionnaire; it sets a policy for safeguarding the independence of the
external auditor and reviews the external auditor’s 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 auditor to carry out
such work. Details of audit and non-audit fees are provided in note 4
to the financial statements.
KPMG LLP has been the external auditor of the Group since the Annual
General Meeting in September 2013. The Audit Committee is satisfied
with the effectiveness, objectivity and independence of the external
auditor. Accordingly, a resolution will be proposed at the forthcoming
Annual General Meeting for KPMG LLP’s re-election as auditor for the
coming year. Before the Annual General Meeting in September 2013,
KPMG Audit Plc was auditor, having been selected as a result of a
competitive tender in 2008.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Corporate Governance Statement
(forming part of the Report of the Directors)
continued
Board Committees (continued)
Key matters considered
During the last financial year, the Committee met to review the results
of the external audit for the previous financial year, the external auditor’s
half-year review and the audit plan for the audit for the year ended
30 April 2015. In June 2015, the Committee met to review this annual
report and to receive the external auditor’s update and report on its
audit activity.
The Committee’s primary areas of focus have been:
(cid:129)
the integrity, completeness and consistency of financial reporting,
including the adequacy, clarity and appropriateness of disclosures;
(cid:129)
(cid:129)
the areas where significant judgments and estimates are required
in the financial statements;
the scope and programme of audits, along with the quality and
effectiveness of audit processes so that they complement the
other risk management activities within the Group;
(cid:129)
the materiality level to apply to the audit; and
(cid:129) whether the going-concern basis of accounting should continue
to apply in the preparation of the annual financial statements.
The preparation of financial statements requires management to make
assumptions, judgements and estimates which are detailed in note 1
to the financial statements. The key areas of assumptions, judgements
and estimates that have been monitored and considered by the
Committee were:
Provision for litigation: the main judgments were considered to be the
probable outcome of claims, including the potential exposure. The
Committee has reviewed the arguments contained in the documents
initiating the legal processes and the correspondence with the lawyers.
(cid:129)
The carrying value of operating equipment and the potential
impairment of these assets.
How this was addressed: the Committee reviewed the assumptions
made for the assessment of future discounted cash flows of the
operating assets per country and per category. The review included the
discount rate applied, the achievability of the forecasts as compared
with the past performance, as well as the impact of external changes
in markets or regulations. In a few instances, when there were local
indicators of potential impairment, the Committee reviewed the
possibility of re-locating the equipment to other countries where the
performance of this type of equipment was proving to be a success.
The Committee’s Terms of Reference are available on the
Company’s website.
The Remuneration Committee
During the year under review, the Remuneration Committee comprised
Emmanuel Olympitis (Committee Chairman), Jean-Marcel Denis and
John Lewis (Chairman of the Board). Thus the composition of the
Committee was compliant with the provisions of the Code which require
the Remuneration Committee of a smaller company to comprise at
least two independent Non-executive directors with the Chairman of the
Board additionally being permitted to serve as a member providing that
he was considered independent on his appointment as Chairman.
(cid:129)
The carrying value of the GBP denominated goodwill in connection with
the Japanese subsidiary and the potential impairment of this asset.
The Committee meets at least once per year. Four meetings were held
in the year ended 30 April 2015.
How this was addressed: the determination of whether or not goodwill
has to be impaired requires a review of the value in use of the asset.
The main judgements in relation to the review were considered to be the
achievability of the budget, the discount rate being applied to projected
future cash flows and the potential impact of the volatility of the
Japanese Yen. The calculation of the value in use was undertaken in
April 2015 and the Committee considered the conclusions and
sensitivity calculations that had been undertaken as part of the review.
(cid:129)
The appropriateness and valuation of provisions.
How this was addressed: provisions for termination of employment: the
main judgements were considered to be the average potential claim per
person and the period of lapse for the claims. The Committee reviewed
all the legal documentation and the methodology of calculation.
Provisions for warranties: the main judgements were considered to be
the expected number of warranty claims and associated cost.
The provision is calculated based on past experience. The Committee
has reviewed the methodology of calculation.
28
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 34 to 46 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 comprised
John Lewis (Committee Chairman), Emmanuel Olympitis and Jean-
Marcel Denis. Thus the composition of the Committee was compliant
with the applicable provision of the Code which requires the Nomination
Committee of a smaller company to have a majority of independent Non-
executive directors with the Chairman of the Board 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. As no new candidates
were considered for appointment to the Board during the year, the
Committee only met once in the year on 30 January 2015.
The Committee’s Terms of Reference are available on the
Company’s website.
The Nomination Committee is committed to the pursuit of diversity,
including gender diversity, throughout the business. Appointments to
the Board are made on merit, against objective criteria and with due
regard for the benefits of diversity on the Board, including gender
diversity. The Nomination Committee does not commit to any specific
targets. The Group’s Diversity Policy also recognises the benefits of
diversity. The Nomination Committee will also ensure that its
development in this area is consistent with the Group’s current and
future requirements, enhances Board effectiveness and reflects the
Company’s UK listing and the international activity of the Group.
Shareholder communication and engagement
The Chief Executive Officer and Group Finance Director have regular
meetings with the Company’s major institutional shareholders to help
ensure, amongst other things, that the Board develops an
understanding of the views of major shareholders about the
Company and the Group.
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 and/or by correspondence.
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 working days before the
meeting. Shareholders are given the opportunity to vote on each
separate issue. The number of proxy votes lodged is given at the
meeting after the vote on a show of hands for each resolution and is
published on the Company’s website after the meeting.
Accountability and internal control
The Board is ultimately responsible for the Group’s systems of internal
control and risk management, and for reviewing their 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 and risk management for the year under
review. 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’s internal auditor has reviewed operations in all material
Group companies during the year under review with the exception
of Japan which was visited by the Group Finance Director. The Audit
Committee receives reports from the internal auditor and from the
external auditor and reports its conclusions to the Board.
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.
Internal control and risk management in relation
to the financial reporting process
The Group has a thorough assurance process in place in respect of
the preparation, verification and approval of periodic financial reports.
This process includes:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
(cid:129)
the involvement of qualified, professional employees with an
appropriate level of experience (both in Group Finance and
throughout the business);
formal sign-offs from appropriate business segment managing
directors and finance directors;
comprehensive review and, where appropriate, challenge from
key internal Group functions;
a transparent process to ensure full disclosure of information
to the external auditor;
engagement of a professional and experienced firm as external
auditor;
(ii)
oversight by the Audit Committee, involving (amongst other duties):
a detailed review of key financial reporting judgments which
(i)
have been discussed by management;
review and, where appropriate, challenge on matters including:
the consistency of, and any changes to, significant accounting
policies and practices during the year; significant adjustments
arising as a result of an external audit; the going concern
assumption; and the Company’s statement on internal control
systems, before endorsement by the Board.
The above process, together with the review by the Audit Committee
of a comprehensive note that sets out the details of the preparation,
internal verification and approval process for the Annual Report and
Accounts, provide comfort to the Board that the Annual Report and
Accounts, taken as a whole, are fair, balanced and understandable,
and give the information necessary for shareholders to assess the
Group’s performance, business model and strategy.
29
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Corporate Responsibility Statement
(forming part of the Report of the Directors)
Our approach to corporate responsibility
The Group recognises its responsibilities to the community and 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:
(cid:129)
(cid:129)
(cid:129)
legal requirements and future policy trends;
customer, employee and investor preferences for corporate
responsibility; and
cost savings and business efficiency.
We aim at ensuring 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 corporate responsibility
The Board is ultimately accountable for corporate responsibility.
The Chief Executive Officer 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 lie
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 and
safety, and accessibility issues.
To ensure that products manufactured by KIS SAS (the Group’s
manufacturing subsidiary, based in France, which subcontracts this
function to third parties) 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.
Currently, 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 Equality Act 2010 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.
Employees
Employee communication, engagement and involvement
The Company’s employees are a valued integral part of the business
and the Company’s achieving success in key business objectives.
As such it is the Company’s policy to provide colleagues with
appropriate financial and other various information about the business,
encouraging employee engagement, and to enthuse and inspire its
work force through a network of media such as:
(cid:129)
(cid:129)
business networking tools whereby we encourage synergies among
colleagues and the businesses, sharing ideas and best practices;
the notification internally of vacancies and policy updates; and
(cid:129) monthly operational meetings for business leaders across the Group
to engage with colleagues, providing business and local updates, and
encouraging interactive feedback to ensure they are kept informed of
the Group’s performance and of the financial and economic factors
affecting the Company’s and the Group’s performance.
Despite the Group’s de-centralised approach, the Company ensures
that it has a common culture among the workforce throughout the
entire Group achieved through openness, honesty and a common goal,
focused on core values.
Within the UK, the general manager fully supports the Health and 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 the Company aspires. The Company also
continues to improve the employee induction process and has
introduced an alternative on-line training system supplied by Essential
Skillz in 2014 to train and refresh employee skills as required with the
database now showing over 1,000 training sessions.
The Company continues to maintain its membership with the British
Safety Council and is also a member of the CE Marking Association.
As well as demonstrating our commitment to safety and environmental
best practice and continual improvement, these continued partnerships
provide us with access to expert advice and quality training resources
which assist us in achieving these goals.
In the UK, the Company is accredited under the SAFEcontractor
scheme and has also received Altius assured Vendor and CDM awards.
This accreditation is reviewed annually and requires that all of our Health
and 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 and
Safety policies and procedures. This is reflected in the representation
from all levels of the business on the Health and Safety Committee.
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Equal opportunities and diversity
The Company is an equal opportunities employer and is committed
to the equality of career opportunities for all of its employees without
discrimination, with fair and equitable policies and procedures for
recruitment, training and development. Full consideration is accorded
to all applications from disabled persons, having due regard to their
aptitudes and abilities.
The Company ensures that wherever possible the continued
employment of those employees who become disabled during their
engagement is retained through a supportive mechanism of retraining,
redeployment and reasonable adjustments, enabling them to remain
within the Group. Opportunities for training, career development and
progression into and within the Group do not operate to the detriment
of disabled persons.
Health and safety
We are committed to ensuring that customers, site-owners and
employees are free from risk from 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 raise any safety concerns
directly through our own call centres, which will immediately inform
management and direct an operative to the site within 24 hours.
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.
Photobooth security is managed by a multipoint locking system with
either one or two security padlocks depending on the actual model.
Our photobooths meet current electrical standards through a
declaration of conformity (DOC) and Conformité Européene (CE)
marking confirming Restriction of Hazardous Substances (RoHS)
product compliance. Our experienced engineers also test equipment
regularly to ensure it meets both Portable Appliance Testing (PAT) and
ADIPS (Amusement Device Inspection Procedures Scheme) standards.
Children’s rides manufactured by Jolly Roger (Amusement Rides)
Limited, a 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
administered by BACTA and enables its qualified operatives to inspect
children’s rides and issue the required safety certification.
30
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Corporate Responsibility Statement
(forming part of the Report of the Directors)
continued
Environment
The Company recognises its responsibilities towards the environment
and the impact of its 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:
(cid:129)
(cid:129)
consistently reducing, in previous years, the amount of obligated
waste produced. During the current year, the UK operations were
able to maintain the gains previously achieved; and
the recovery, refurbishment and resale of electrical equipment such
as children’s rides which promote the principle embodied in recent
legislation of reuse before recycling. This not only produces cost
savings but also creates a source of income.
Where possible we endeavour to embrace technological advances
to reduce the impact of our operations on the environment.
Such initiatives include:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
the ability to automatically shut down (and restart) photobooths
during closing hours which saves around 30% of power
consumption on site;
the use of remote telemetry systems to minimise the number of
service visits 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;
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; and
(cid:129)
the development of equipment that uses solar power.
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, the Company 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 the target set last year of further reducing
vehicle CO2 ratings by 2%, to a total of 18% compared with the 2008
fleet, which will save 80 tonnes of CO2 from entering the atmosphere
each year. This 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.
Greenhouse gas (GHG) emissions
Reporting of GHG emissions
As of 1 October 2013, all quoted companies have to report their
GHG emissions in their annual report as required by the Large and
Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (as amended).
In accordance with the disclosure requirements for listed companies,
the table below shows the Group’s greenhouse gas emissions for the
current and preceding financial year.
The requirement is for the Group to report the emissions that it is
responsible for (as defined below), and to provide at least one ‘intensity
ratio’, together with an explanation of the methodology used.
32
In the table below the Group has not reported fugitive emissions (which includes leakages from refrigerants used in air conditioning units, etc.)
because no data were available and based on the low number of such units in the Group, management deemed such emissions not to be material.
Greenhouse gas (GHG) emissions
Emissions from
Scope 1
Scope 1 – travel costs
Scope 1 – gas
Scope 2
Scope 2 – operating estate
Scope 2 – electricity, heat, steam or cooling
Total emissions
Intensity ratio
Per number of units of operating equipment
Year ended
30 April 2015
Tonnes
of CO2e
Year ended
30 April 2014
Tonnes
of CO2e
4,985.92
4,681.04
304.88
17,564.97
16,825.27
739.70
3,963.39
3,571.52
391.87
14,167.98
13,589.67
578.31
22,550.89
18,131.37
0.5048
0.4187
Assessment parameters
Consolidation approach
The figures above are based on subsidiary companies owned by Photo-Me, with the exception of those
non-material subsidiary companies, each of whose vending estate comprises less than 50 machines,
being mainly new start-up ventures.
For those investments where the Group has less than 50% of the issued share capital, the Group does not
have operational control for day-to-day activities and these entities are not included in the above figures.
Boundary summary
Emission factor source
The Group has included its vending estates which are owned by the Group even though it does not
directly control the operational use (i.e. period of operation) for these assets.
DEFRA (2014) (2014: DEFRA (2013)) Guidelines to DEFRA/DECC’s GHG Conversion Factors
for Company Reporting.
Methodology
Photo-Me followed the Greenhouse Gas Protocol Corporate Standard.
Materiality threshold
As mentioned above, subsidiary companies with less than 50 units of operating equipment have been
excluded, as have depots and other property units where the total amount spent on heat, light and power
is less than £50,000 per annum per site.
Intensity ratio
As explained below.
Scope 1 emissions
The main components of these emissions are:
Scope 2 emissions
The main components of these emissions are:
(cid:129)
Emissions from motor vehicles operated by the Group, including
service and installation personnel (servicing and maintaining the
operational estate etc.) and administrative staff.
(cid:129) Natural gas consumption on the Group’s premises.
(cid:129)
Purchased electricity for use in the Group’s premises. This is mainly
for heating and lighting. The Group’s property estate largely
consists of administrative offices and storage depots. Most
manufacturing of vending equipment and products are outsourced
to third parties, where emissions are controlled by third parties.
(cid:129)
Emissions from vending equipment.
The Group’s chosen intensity ratio for external reporting is total
emissions divided by the average number of units of operating
equipment during the year for the reporting companies.
33
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Remuneration Report
Annual Statement
Remuneration Report
Remuneration Policy Report
Dear Shareholder,
I am pleased to present the Directors’ Remuneration Report for the year ended
30 April 2015, which has been prepared by the Remuneration Committee
(‘the Committee’) and approved by the Board.
This is the Company’s second year of reporting in line with The Large
and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (as amended). The report has been divided into
three sections:
− This Annual Statement, which summarises remuneration outcomes
in 2014/15 and the intended policy for 2015/16.
− The Company’s policy on the remuneration of executive and non-
executive directors which outlines the Group’s remuneration policy
approved by shareholders at the 2014 AGM. As this policy remains
unchanged from last year, we will not be asking shareholders to
vote on a new remuneration policy. We have however chosen
to replicate the policy approved last year for ease of reference.
− The Annual Report on Remuneration, which discloses details of the
Remuneration Committee, how the policy was implemented in the
year ended 30 April 2015, and how the remuneration policy will
operate for the year ending 30 April 2016.
This Remuneration Report (other than the part containing the Directors’
Remuneration Policy) will be subject to an advisory vote at the
forthcoming 2015 AGM.
Remuneration outcomes in 2014/15
For the year under review, the Remuneration Committee considers the
remuneration of the executive directors to reflect both the performance
of the Group and their individual performance. The performance against
the pre-tax profit annual bonus target was significantly above target
and, as a result, this element of the bonus paid out at 100%.
Françoise Coutaz-Replan achieved her individual performance targets
for the year and received a bonus equating to 100% of the maximum
for this element. The awards granted under the Executive Share Option
Scheme in 2012 will vest on 4 July 2015, based on three year earnings
per share (EPS) to 30 April 2015, at 100% of the maximum reflecting
the Group’s profit growth over this period.
Remuneration policy for 2015/16
We are not proposing any changes to our remuneration policy.
The key points to note are:
− In line with last year, the CEO will receive a 5% increase in base
salary for the current year; this will be effective from 1 May 2015.
− The annual bonus potential will remain capped at 100% of base
salary for the Chief Executive Officer (CEO) and at 50% of base
salary for the Group Finance Director (GFD).
− Long-term incentives will continue to be delivered through the
Photo-Me 2014 Executive Share Option Scheme approved by
shareholders at last year’s AGM. Awards are granted over market
value options which normally vest three years from grant, subject
to continued employment and performance conditions based on
earnings per share targets. Annual award limits are set at 150%
of salary and other provisions are consistent with best practice,
including the operation of a clawback provision.
− Share ownership guidelines will continue to apply at 100% of salary.
Shareholder engagement
The Committee continues to take an active interest in shareholder views
on our executive remuneration policy and is mindful of the concerns of
shareholders and other stakeholders. This is reflected in our voting result
at the 2014 AGM, which was over 91% in favour of the Directors’
Remuneration Report resolution, over 98% in favour of the
Remuneration Policy resolution, and over 99 % in favour of the new
Executive Share Option Scheme, and no significant issues were raised.
In conclusion, we remain firmly of the view that our remuneration policy
continues to be appropriately aligned with the Company’s strategic
objectives of delivering shareholder value and supporting the long-term
success of the Company.
Yours faithfully,
Emmanuel Olympitis
Chairman of the Remuneration Committee
24 June 2015
This part of the Directors’ Remuneration Report sets out the
remuneration policy for the Company since 1 May 2014. The policy was
approved by shareholders at the Company’s Annual General Meeting
held on 23 October 2014 with 98.59% of all votes cast in favour and
became effective formally following that date. Since no changes will be
made to the policy, it is not proposed to submit it to the AGM to be held
on 21 October 2015.
Remuneration scenarios for executive directors
The charts below show how the composition of the executive directors’
remuneration packages varies at three performance levels; namely, at
minimum (i.e. fixed pay), target and maximum levels, under the policy
set out in the table below.
Value of remuneration packages at different levels of performance
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 Company, 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.
Chief Executive Officer
Chief Financial Officer
£1,082
45%
£836
29%
£590
100%
71%
55%
1250
1000
750
0
0
0
’
£
500
250
0
1250
1000
750
0
0
0
’
£
500
250
0
£231
100%
£320
13%
15%
72%
£410
21%
23%
56%
Minumum
On-target
Maximum
Minumum
On-target
Maximum
Basic salary, benefits & pension Bonus ESOS award
The remuneration packages of the executive directors can comprise
the following main elements:
The charts above are based on the following:
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– Base salary
Annual bonus
–
Share options
–
–
Pensions
– Other benefits
–
–
–
Salary levels effective on 1 May 2015
An approximate value of benefits for the financial year to
30 April 2016
An annualised pension contribution and/or salary supplement
(as a % of salary) for the year to 30 April 2016
A maximum bonus of 100% of salary for the CEO and 50% of salary
for the GFD (with target assumed to be 50% of the maximum).
– Circa 195,000 share options awarded under the 2004 Executive
–
34
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Share Option Scheme to the GFD (the CEO will not receive awards
during the 2015/16 financial year). The fair value of the options is
estimated as 30% of the face value of shares, which has been based
on a share price of 144.66p as a proxy for the share price at grant
(being the average share price in the final 3 months of the year ended
30 April 2015). The target value has been assumed to be 50% of the
maximum fair value. No share price appreciation in respect of the
Executive Share Option Scheme awards has been assumed.
Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Remuneration Report
Remuneration Policy Report
continued
Summary remuneration policy table
The table below summarises the remuneration policy for directors:
Element maximum
Purpose and link
to strategy
Operation
Maximum
Salary1
Benefits
Annual bonus
Performance
measures
– N/A
– Reflects the value of the
individual and their role
– Reflects skills and
experience over time
– Provides an appropriate
level of basic fixed
income avoiding
excessive risk arising
from over reliance on
variable income
– Normally reviewed
annually, effective 1 May
– Normally paid in cash on
a monthly basis;
pensionable
– Comparison against
companies with similar
characteristics and
comparators taken into
account in review
– There is no prescribed
maximum annual base
salary or salary increase
– The Committee is
guided by the
requirements of the
Company and prevailing
market levels but may
decide to award a lower
increase or a higher
increase for executive
directors to recognise,
for example, an increase
in the scale, scope or
responsibility of the role
and/or to take account
of relevant market
movements
– Provides insured
benefits to support the
individual and their
family during periods of
ill health or death
– Gives allowances to
support individuals in
their relevant roles
– Incentivises delivery of
specific Company,
divisional and personal
annual goals
– Maximum bonus only
payable for achieving
specified targets
– Includes company car,
– N/A
– N/A
Private medical
insurance and may
include an overseas
housing allowance for a
director working outside
of his or her country of
normal residence
– Other benefits may be
offered where
appropriate
– Normally payable in
– Up to 100% of base
salary p.a.
cash
– Non-pensionable
– Committee has the
discretion to defer up to
50% of the bonus in
shares for 3 years
– Defined contribution
– Executive directors may
be offered cash in lieu of
pension
– Company profit before
tax will apply to the
majority
– Personal and strategic
KPIs may be applied to
a minority of the bonus
– One-year performance
period
Pension
– Provides competitive
retirement benefits
– Up to 15% of base
– N/A
salary p.a.
Element maximum
Executive Share Option
Scheme
Purpose and link
to strategy
– Aligns executive
directors’ interests with
those of shareholders
– Retention
Share ownership
guidelines
– Provides alignment of
interests between
executive directors and
shareholders
Non-executive directors
– Provides fees reflecting
time commitments and
responsibilities, in line
with those provided by
similarly sized
companies
Operation
Maximum
Performance
measures
– Up to 150% of base
– Financial (EPS) metrics
salary p.a.
will apply
– Up to 25% vests at
threshold increasing to
100% vesting at
maximum
– Clawback provisions
may be applied
– At least 100% of base
– N/A
salary
– N/A
– There is no prescribed
maximum fee or fee
increase
– The Committee is
guided by market rates,
time commitments and
responsibility levels
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– Annual awards of
market value options
may be granted
– The Committee reviews
the quantum of awards
annually and monitors
the continuing suitability
of the performance
measures
– Executive directors are
required to build and
maintain a shareholding
equivalent to at least
one year’s base salary
through the retention of
50% of the net-of-tax
vested share awards or
through open-market
purchases
– Cash fee paid on a
monthly basis
– Fees are reviewed
annually
– Not entitled to
participate in any Group
pension scheme, nor
will awards be granted
under the annual bonus
or ESOS
– No non-executive
directors receive any
benefits in kind
For the avoidance of doubt, in approving this Directors’ Remuneration Policy, authority was given to the Company to honour any commitments entered
into with current or former directors (such as the payment of the prior year’s annual bonus or the vesting/exercise of share awards granted in the past).
Details of any payments to former directors will be set out in the Annual Report on Remuneration for the relevant financial year.
1 Where considered appropriate, the Committee may allow the Company to pay salaries to a director and/or fees to a service company that supplies a director’s services
to the Company.
36
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Remuneration Report
Remuneration Policy Report
continued
Choice of performance measures
The Committee has given careful consideration to the performance
measures applicable to both the annual bonus and the Executive Share
Option Scheme.
The choice of the performance metrics applicable to the annual bonus
scheme reflects the Committee’s belief that any incentive compensation
should be appropriately challenging with the majority (or the entirety)
linked to the achievement of profit-related targets. The Committee may
also link a proportion of the annual bonus to personal objectives if it
deems this appropriate with regard to the Company’s key objectives.
The EPS performance condition applicable to the 2014 Executive Share
Option Scheme was selected by the Remuneration Committee on the
basis that it incentivises the delivery of sustainable long-term financial
performance and rewards management for growing the Company
whilst retaining an appropriate profit margin. The use of share options
retains a robust link between management and shareholders by
incentivising management to deliver long-term growth in the Company’s
share price. The Committee retains discretion over the calculation of
EPS in order to appropriately adjust for any material one-off items
including (but not limited to): major acquisitions, changes in accounting
policies and major share issues.
The Committee operates the Executive Share Option Scheme in
accordance with the plan rules, the Listing Rules and HMRC legislation,
and the Committee, consistent with market practice, retains discretion
over a number of areas relating to the operation and administration of
the plan.
How employees’ pay is taken into account
Pay and conditions elsewhere in the Group were considered when
finalising the current policy for executive directors and continue to be
considered in relation to implementation of this policy. Whilst employees
were not directly consulted, the Committee seeks to ensure that the
underlying principles which form the basis for decisions on executive
directors’ pay are consistent with those on which pay decisions for the
rest of the workforce are taken. In order to do so, the Committee
regularly interacts with the HR function and senior operational executives.
How the executive directors’ remuneration policy
relates to the Group
The remuneration policy described above provides an overview of the
structure that operates for the most senior executives in the Group.
Employees below executive level have a lower proportion of their total
remuneration made up of incentive-based remuneration, with
remuneration driven by market comparators and the impact of the role
of the employee in question. Long-term incentives are reserved for
those judged as having the greatest potential to influence the
Group’s earnings growth and share-price performance.
How shareholders’ views are taken into account
The Committee continues to take an active interest in shareholder views
on our executive remuneration policy and is mindful of the concerns of
shareholders and other stakeholders. This is reflected in our voting result
at the 2014 AGM, which was over 98% in favour of the Directors’
Remuneration Report resolution. Major shareholders and representative
bodies were consulted in 2014 in respect of the 2014 Executive Share
Option Scheme described in the Annual Statement and Annual Report
on Remuneration.
Approach to recruitment and promotions
The remuneration package for a new executive director would be set
in accordance with the terms of the Company’s prevailing approved
remuneration policy at the time of appointment and takes into account
the skills and experience of the individual, the market rate for a
candidate of that experience, and the importance of securing the
relevant individual.
Salary would be provided at such a level as required to attract the most
appropriate candidate, and may be set initially at a below mid-market
level on the basis that it may progress towards the mid-market level
once expertise and performance have been proven and sustained.
The annual bonus potential would be limited to 100% of salary and
grants under the 2014 Executive Share Option Scheme would be
limited to 150% of salary. In addition, the Committee may offer
additional cash and/or share-based elements to replace deferred or
incentive pay forfeited by an executive leaving a previous employer.
It would seek to ensure, where possible, that these awards would be
consistent with awards forfeited in terms of vesting periods, expected
value and performance conditions.
For an internal executive director appointment, any variable pay element
awarded in respect of the prior role may be allowed to pay out
according to its original terms.
For external and internal appointments, the Committee may agree
that the Company will meet certain relocation and/or incidental
expenses as appropriate.
Fee structure and quantum for non-executive director appointments
will be based on the prevailing non-executive director fee policy.
Service contracts
Details of the executive directors’ service contracts are as follows:
Executive director
Serge Crasnianski
Françoise Coutaz-Replan
Date of contract Notice period
12 months
6 months
1/5/2010
9/12/2009
All non-executive directors are appointed for specified terms subject
to re-election 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. Relevant appointment letter and term dates of the
non-executive directors are set out below:
Non-executive
director
John Lewis1
Yitzhak Apeloig
Jean-Marcel Denis
Emmanuel Olympitis
Appointment
letter date
26/7/2010
8/3/2012
1/3/2012
11/11/2009
Year of
last election
2014
2012
2012
2010
Expected year
of expiry of
current term
2017
2015
2015
2016
1 First appointed to the Board on 3 July 2008
External appointments
The Board may allow executive directors to accept appropriate outside
commercial non-executive director appointments provided the
aggregate commitment is compatible with their duties as executive
directors. Whether or not the executive directors concerned may retain
fees paid for these services will be considered on a case-by-case basis
and will be subject to approval by the Board. Details (if any) of non-
executive directorships held by executive directors will be disclosed
in the Annual Report on Remuneration.
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Approach to leavers
No executive director has the benefit of provisions in his or her service
contract for the payment of pre-determined compensation in the event
of termination of employment. It has been the Committee’s general
policy that the service contracts of executive directors (neither of which
is for a fixed term) should provide for termination of employment by
giving notice or by making a payment of an amount equal to base salary
(and in the case of the CEO, an additional amount equal to the cost of
providing any benefits for the period of notice) in lieu of any unserved
notice period, together with any accrued bonus entitlement. It is the
Committee’s general policy that no executive director should be entitled
to a notice period or payment on termination of employment in excess
of the levels set out in his or her service contract. In determining
amounts payable on termination, the Committee also considers, where
it is able to do so, appropriate adjustments to take into account
accelerated receipt and the executive director’s duty to mitigate his loss.
An annual bonus may be payable with respect to the period of the
financial year served although it will be pro-rated for time served and
paid at the normal payout date.
The treatment of any share awards granted to an executive director will
be determined based on the relevant plan rules.
The default treatment under the 2004 Executive Share Option Scheme
is that any outstanding awards or unexercised options lapse on
cessation of employment. However, in certain prescribed circumstances
(e.g. death, ill-health, disability, redundancy, or other circumstances at
the discretion of the Committee) ‘good leaver’ status is applied. In this
scenario, other than in the case of a retirement, any outstanding options
will normally be exercisable on the date of cessation and remain
exercisable for a period of 6 months (or 12 months in the case of death).
On a retirement, options vest at the normal vesting date and remain
exercisable for a period of 6 months.
The default treatment under the 2014 Executive Share Option Scheme
is that any outstanding awards or unexercised options lapse on
cessation of employment. However, in certain prescribed circumstances
(e.g. death, injury, disability or other circumstances at the discretion of
the Committee) ‘good leaver’ status can be applied at the discretion of
the Committee or shall apply in relation to HMRC tax-favoured options
as relevant. In this scenario, any outstanding options will normally be
exercisable on the date of cessation and remain exercisable for a period
of 6 months (or 12 months in the case of death). Alternatively, in the
case of non-tax favoured options, the Committee has the discretion to
determine that good leavers’ awards should continue to be exercisable
based on the normal timetable.
The extent to which outstanding option awards become exercisable
for good leavers will depend on the satisfaction of any applicable
performance conditions (over a curtailed or full performance period as
relevant). Time pro-ration of options will apply to good leavers’ awards
unless the Committee determines that time pro-ration is inappropriate.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Remuneration Report
Annual Report on Remuneration
Implementation of the Remuneration Policy for year ending 30 April 2016
Base salary
The base salary for each executive director is reviewed annually by the Committee and the current applicable base salaries are as follows:
Single Total Figure of Remuneration *
The detailed emoluments received by the executive and non-executive directors for the year ended 30 April 2015 are shown below.
No payments were made for loss of office, and no payments were made to past directors.
Executive director
Serge Crasnianski
Françoise Coutaz-Replan
1 May 2015
£
491,715
189,000
1 May 2014
£
468,300
189,000
%
Increase
5
0
Pension and benefits
Mr Crasnianski will continue to receive a pension contribution equal to 15% of base salary in the form of a salary supplement.
Françoise Coutaz-Replan will continue to participate in the Company’s Group Personal Pension Plan to which the Company will contribute 5%
of base salary, together with a further 5% paid as a salary supplement.
Benefits
Executive directors will continue to be provided with employment-related benefits which may 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.
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 bonus payable in respect of the forthcoming year for Serge Crasnianski will continue to be limited to 100% of base salary and for
Françoise Coutaz-Replan 50% of base salary.
In respect of Serge Crasnianski, his 100% of base salary bonus potential will be payable for exceeding the previous year’s pre-tax profit by 5% or
more while 75% of base salary will be payable as a bonus if pre-tax profit for the year is not less than that of the previous year. If the Group’s pre-tax
profit is less than that of the previous year, any bonus will be entirely at the discretion of the Committee.
The bonus for Françoise Coutaz-Replan is based on a similar sliding scale, with the relevant percentages being 35% and 25% of her base salary.
If the Group’s pre-tax profit is less than that of the previous year, any bonus will be entirely at the discretion of the Committee. In addition, in the case
of Françoise Coutaz-Replan, a further bonus of up to 15% of base salary will be awarded for the achievement of personal objectives.
Long-term incentives
For the awards to be granted in 2015 under the 2014 Photo-Me Executive Share Option Scheme, the key terms are as follows:
(cid:129)
(cid:129)
It is envisaged that Françoise Coutaz-Replan will receive share option awards over circa 195,000 shares. Serge Crasnianski is not expected
to receive an award.
100% of awards granted in 2015 will be subject to an EPS performance condition. Although the EPS target range has not yet been agreed
by the Remuneration Committee, full details of the targets will be set out in the stock exchange announcement following grant.
(cid:129) Options that vest will be exercisable between 3 and 7 years from the date of grant.
Non-executive directors
The fees for non-executive directors are reviewed at least every three years and the current applicable fee levels are as follows:
Non-executive director
John Lewis
Emmanuel Olympitis
Jean-Marcel Denis
Yitzhak Apeloig
Role
Chairman
Senior Independent director
Non-executive director
Non-executive director
Committee Chairman role
Chair of Nomination Committee
Chair of Remuneration Committee
Chair of Audit Committee
–
1 May 2015
£
120,000
50,000
45,000
40,000
1 May 2014
£
120,000
50,000
45,000
40,000
Executive directors
Serge Crasnianski5
Françoise Coutaz-Replan
Non-executive directors
John Lewis6
Yitzhak Apeloig
Jean-Marcel Denis
Emmanuel Olympitis
Year
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Salary/Fees
£
Benefits1
£
468,300
446,000
189,000
180,000
120,000
120,000
40,000
40,000
45,000
45,000
50,000
50,000
24,783
22,278
21,958
22,010
–
–
–
–
–
–
–
–
Bonus2
£
468,300
446,000
94,500
90,000
Long-Term
Incentives3
£
–
–
225,000
194,294
Pension4
£
70,245
–
18,900
8,250
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£
1,031,628
914,278
549,358
494,554
120,000
120,000
40,000
40,000
45,000
45,000
50,000
50,000
1 Taxable benefits include the provision of a car or car allowance, private medical insurance and in the case of Françoise Coutaz-Replan, an overseas housing
allowance of £15,260 (2014: £14,959).
2 Bonuses are those awarded in respect of performance in the financial year, the calculation for the 2015 annual bonus is shown on page 42.
3 The vesting calculation for the ESOS award granted to Françoise Coutaz-Replan in July 2012 (232,000 shares under award, with an exercise price of 39.17p) which
had a performance period which ended on 30 April 2015 is set out on page 42. The award does not vest until 4 July 2015 and the intrinsic value has been estimated
using the 3-month average share price ending on 30 April 2015 being 144.66p. This figure will be revised in the subsequent year using the actual intrinsic value on the
vesting date.
4 The Company contributed 5% (2014: 5%) of base salary to the Company’s Group Personal Pension Plan on behalf of Françoise Coutaz-Replan. Additional
contributions were paid as salary supplements to Serge Crasnianski and Françoise Coutaz-Replan of £70,245 (2014: £nil) and £9,450 (2014: £nil) respectively.
These supplements were based on basic salary at the rate of 15% for Mr Crasnianski and 5% for Ms Coutaz-Replan.
5 The emoluments of Serge Crasnianski shown above, include fees and bonus totalling £733,688 (2014: £650,000) payable to a third party in respect of making
available the services of Serge Crasnianski to the Company.
6 The emoluments of John Lewis shown above, include fees of £45,000 (2014: £41,250) paid to a third party in respect of making available the services of John Lewis
to the Company.
* Subject to audit
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Remuneration Report
Annual Report on Remuneration
continued
Additional information in respect of the single total figure table*
Annual bonus
For 2015 the maximum bonus opportunity for Serge Crasnianski and for Françoise Coutaz-Replan was 100% of salary and 50% of salary respectively.
Scheme interests awarded in the year*
Executive Share Option Scheme
On 10 July 2014, one executive director was granted an award over options under the ESOS with an exercise price of 145.33p.
Serge Crasnianski’s full bonus was determined by performance against profit-before-tax targets established at the start of the financial year.
For Françoise Coutaz-Replan’s bonus, an amount equivalent to 35% of salary was determined by performance against the profit-before-tax
targets with the remaining 15% of salary determined by performance against personal objectives.
Details of the performance against the profit-before-tax targets for the 2015 annual bonus are set out below.
Profit-before-tax target
Target
Maximum
Actual
Summary
Bonus payout (% of salary)
Serge
2015 Profit
Françoise
before tax £m Crasnianski Coutaz-Replan
25%
35%
35%
75%
100%
100%
30.1
31.6
38.5
2015 Maximum bonus payout
(% of salary)
2015 Actual bonus payout
(% of salary)
Executive director
Serge Crasnianski
Françoise Coutaz-Replan
Profit
before tax
100%
35%
Personal
objectives1
–
15%
Total
100%
50%
Profit
before tax
100%
35%
Personal
objectives 1
–
15%
1 Based on the Committee’s assessment of a number of pre-specified financial-related objectives.
2015 Actual
bonus
payout (£)
468,300
94,500
Total
100%
50%
Executive Share Option Scheme
The ESOS award granted to Françoise Coutaz-Replan on 4 July 2012 completed its performance period on 30 April 2015 and accordingly has
been included in the 2015 single total figure of remuneration. This award is fully based on performance against an EPS target.
Details of the EPS performance target, the level of achievement against the target and the resultant level of vesting are set out in the table below.
Performance Condition
Actual
* Subject to audit
EPS for 2015
Below 4.3p
4.3p
6.1p
7.3p
Between 4.3p and 7.3p
7.49p
Vesting (% of participant’s
salary at date of grant)
None
25%
100%
150%
Between 25% and 150%
on a straight-line basis
150%
Executive director
Françoise Coutaz-Replan
Number of ESOS awards
195,000
Basis
150% of base salary
Face value1
£283,394
1 Based on a share price of 145.33p which was the average share price over three dealing days immediately prior to grant.
The awards will vest in 2017 subject to the achievement of challenging EPS targets which are detailed below.
EPS for 2017
Below 5.5p
5.9p
6.5p
7.2p
Between 5.5p and 7.2p
Vesting (% of participant’s salary at date of grant)
None
25%
100%
150%
Between 25% and 150% on a straight-line basis
Directors’ 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. There have been
no changes to these holdings between 30 April 2015 and the date of signing the financial statements.
Executive directors
Serge Crasnianski
Françoise Coutaz-Replan
Non-executive directors
John Lewis
Yitzhak Apeloig
Jean-Marcel Denis
Emmanuel Olympitis
Beneficially owned at
30 April 2015
79,783,4504
161,800
1 May 2014
79,783,450
161,800
–
–
–
45,000
–
–
–
45,000
Vested
19.4.14
awards1
–
576,093
–
–
–
–
Unvested
ESOS
awards2
738,000
395,000
Shareholding
requirement
(% of salary)
100%
100%
Current
shareholding
(% of salary)3
23,681%
119%
–
–
–
–
–
–
–
–
–
–
–
–
Guideline
achieved
Yes
Yes
–
–
–
–
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1 Options with no further performance conditions attached that have not been exercised.
2 Options with outstanding performance conditions attached.
3 Executive directors are required to build and maintain a shareholding equivalent to at least one year’s base salary through the retention of 50% of the net of tax vested
share awards or through open-market purchases. Calculated using the closing share price on 30 April 2015 being 139.0p. The shareholding guideline is calculated
using only beneficially owned shares.
4 Of the shares beneficially owned by Serge Crasnianski, 79,719,900 (2014: 79,719,900) were registered in other names.
* Subject to audit
42
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Remuneration Report
Annual Report on Remuneration
continued
Directors’ interests in share options *
Number of options
As at
As at Granted Exercised Lapsed 30 April Exercise
Date of grant 1 May 2014 during year during year during year 2015 price
Date
from which
exercisable
Expiry
date
Serge Crasnianski
9 July 2013 2 738,000 – – – 738,000 90.63p
9 July 2016
8 July 2020
Françoise Coutaz-Replan
20 Jan 2010 44,093 – – – 44,093 36.67p 20 Jan 2013 19 Jan 2017
4 July 2011 50,000 – – – 50,000 65.25p
3 July 2018
13 Dec 2011 250,000 – – – 250,000 53.50p 13 Dec 2014 12 Dec 2018
4 July 2012 1 232,000 – – – 232,000 39.17p
3 July 2019
4 July 2015
9 July 2013 2 200,000 – – – 200,000 90.63p
8 July 2020
9 July 2016
10 July 2014 3 – 195,000 – – 195,000 145.33p 10 July 2017
9 July 2021
4 July 2014
1 The 4 July 2012 ESOS award ended its performance period in the year to 30 April 2015 and will vest subject to the performance conditions as outlined on page 42.
2 The 9 July 2013 ESOS awards are subject to the same performance conditions and vesting schedule as the 2012 ESOS awards, but the threshold 2016 EPS target
is set at 5.3p with full vesting for an EPS of 6.8p or greater
3 The 10 July 2014 ESOS award is subject to the performance conditions as outlined on page 43.
* Subject to audit
Relative importance of the spend on pay
The following table sets out the percentage change in distributions to shareholders and employee remuneration costs.
Employee remuneration costs (£’000)1
Dividends (£’000)2
2015
32,031
21,381
2014
35,410
11,140
% Change
-9.54%
91.93%
1 Based on the figure shown in note 5 to the Financial Statements.
2 Based on the cash returned to shareholders in 2015 through dividends as shown in note 9 to the Financial Statements.
Percentage increase in the remuneration of the Chief Executive Officer
The table below shows the change in the salary, benefits and annual bonus for the Chief Executive Officer between the current and previous
financial year compared with the change for a comparator group of selected employees of the Group.
Element of remuneration
Salary
Benefits
Annual bonus
Chief Executive Officer
% change
+5%
+11.2%
+5%
Employees
% change2
+1.72%
+1.03%
-5.49%
2 The Committee chose to use a comparator group comprising employees from the major operating territories, namely UK (excluding main board directors of
the Company), France and Japan as being a representative group of employees for these purposes.
Performance graph
The graph below shows the Company’s performance, measured by total shareholder return (share price growth plus dividends reinvested) (TSR),
compared with the performance of the FTSE SmallCap Index over the past six years. As the Company has been a constituent of the FTSE SmallCap
Index for all 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.
Total Shareholder Return
Source: Datastream (Thomson Reuters)
1100
1000
900
800
700
600
500
400
300
200
100
0
FTSE SmallCap
Photo-Me
International plc
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April 2009
April 2010
April 2011
April 2012
April 2013
April 2014
April 2015
This graph shows the value, by 30 April 2015, of £100 invested in Photo-Me International plc on 30 April 2009 compared with the value
of £100 invested in the FTSE SmallCap Index.
The table below shows the total remuneration for the Chief Executive Officer over the same six-year period as the TSR chart above.
All share awards are valued at the date of vesting.
Year ended
30 April
2015
2014
2013
2012
2011
2010
2010
Chief Executive
Officer
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski 2
Thierry Barel 3
Total
remuneration
(£)
1,031,628
914,278
899,487
898,693
893,312
739,548
90,327
Annual
bonus
(% of max)
100%
100%
100%
100%
100%
100%
0%
Long-term
incentives
(% of max) 1
–
–
–
–
–
–
–
1 Shows the number of share options which vested as a percentage of the maximum number of share options which could have vested. For the years ended
30 April 2010 to 30 April 2015, Serge Crasnianski did not have any outstanding share option awards that could have vested in the relevant years.
2 Serge Crasnianski was appointed to the role of Chief Executive Officer on 3 July 2009 having previously served as a non-executive director from 6 May 2009. The total
remuneration figure shown includes all payments received following his appointment as Chief Executive Officer but excludes any fees paid (£5,429) for performing the
role of non-executive director.
3 Thierry Barel resigned from the role of Chief Executive Officer on 3 July 2009. The total remuneration figure shown includes all payments received prior to his resignation
as Chief Executive Officer, but excludes a termination payment of £92,800.
44
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Remuneration Report
Annual Report on Remuneration
continued
Statement of Directors’ Responsibilities
Committee role and membership
The Remuneration Committee comprises three Non-executive directors: Emmanuel Olympitis (Committee Chairman), John Lewis and Jean-Marcel
Denis. They are all considered by the Board to be independent. Biographies of the members of the Committee are set out on page 22. Details of
their membership of the Committee and attendance at the meetings during the year are as follows:
The directors of the Company, who are named on page 22, are
responsible for preparing the Annual Report, the Report of the Directors
and the Group and the Company financial statements in accordance
with applicable law and regulations.
Responsibility statement of the directors in respect
of the annual financial report
Each of the directors of the Company, whose names and functions are
listed on page 22, confirms that, to the best of his or her knowledge:
Names
Position
Appointment date
Emmanuel Olympitis
John Lewis
Jean-Marcel Denis
Committee Chairman
Non-executive Chairman
Non-executive Director
7 December 2009
3 July 2008
1 March 2012
Number of meetings attended
(maximum possible)
4 (4)
4 (4)
1 (4)
It remains the Committee’s policy that it shall be available to meet on an ad hoc basis when the needs of the Company require it. At the invitation
of the Chairman, the Chairman of the Board and the Chief Executive Officer may attend meetings of the Committee, except when their own
remuneration is under consideration. No director is involved in determining his or her own remuneration. The Company Secretary acts as the
secretary to the Committee. The members of the Committee can, where they judge it necessary to discharge their responsibilities, obtain
independent professional advice at the Company’s expense.
The Committee’s terms of reference are published in the ‘investor relations’ section of the Company’s website at www.photo-me.co.uk.
Advisors
The Committee is advised by New Bridge Street, part of Aon plc, 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 subsidiary companies
provided pension scheme management, actuarial services and general insurance broking services to the Company, during the year. Following a
review by the Remuneration Committee, the Committee is satisfied that the additional services provided by the wider Aon plc network do not
prejudice the independence of the remuneration advice provided to it by New Bridge Street. During the financial year, fees paid to New Bridge Street
totalled £12,790 in respect of advice given to the Remuneration Committee, and £26,855 in respect of the design and implementation of the 2014
share option plan.
The Committee also receives advice from the Chief Executive Officer in relation to the remuneration of certain senior executives (but not in relation
to his own remuneration).
Statement of shareholder voting
At last year’s AGM, the Directors’ Remuneration Report received the following votes from shareholders:
Resolution
Directors’ remuneration
report (excluding the
Remuneration policy)
Remuneration policy
Renewal of Executive
Share Option Scheme
Votes cast
in favour
%
Votes cast
against
%
Total votes
cast (excludes
withheld votes)
%
293,285,488 91.56
316,046,505 98.59
27,019,236
4,526,296
8.44
1.41
320,304,724 100.00
320,572,801 100.00
320,371,408 99.95
174,557
0.05
320,545,965 100.00
1 A vote withheld is not a vote in law and is not counted in the calculation of the proportion of votes cast “for” and “against” a resolution.
Votes1
withheld
471,947
203,870
230,706
By order of the Board
Emmanuel Olympitis
Chairman of the Remuneration Committee
24 June 2015
Company law requires the directors to prepare financial statements for
the Group and the Company for each financial year. Under that law the
directors are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards (IFRSs) as
adopted by the European Union and applicable law and have elected to
prepare the Company’s 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 the Company and of their profit or
loss for that period. In preparing each of the Group and the Company’s
financial statements, the directors are required to:
(cid:129)
(cid:129)
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 Strategic Report, 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.
(cid:129)
select suitable accounting policies and then apply
them consistently;
(cid:129) make judgments and accounting estimates that are reasonable
and prudent;
(cid:129)
(cid:129)
state whether they have been prepared in accordance with IFRSs
as adopted by the EU; 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 Company’s transactions and
disclose with reasonable accuracy at any time the financial position of
the Company and the Group and enable them to ensure that their
financial statements and the Directors’ Remuneration Report comply
with the Companies Act 2006 and as regards the Group’s financial
statements, Article 4 of the IAS Regulation. 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 Strategic Report, Directors’ Report, Directors’
Remuneration Report and Corporate Governance Statement that
comply 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.
Fair, balanced and understandable
In accordance with the principles of the UK Corporate Governance
Code, the directors have arrangements in place to ensure that the
information presented in the Annual Report is fair, balanced and
understandable; these are described on page 29.
The Board considers, on the advice of its Audit Committee, that the
Annual Report, taken as a whole, is fair, balanced and understandable,
and provides the information necessary for shareholders to assess the
Company’s and the Group’s performance, business model and strategy.
Significant accounting policies,
critical estimates and key judgments
Our significant accounting policies are set out on pages 58 to 65 of the
consolidated financial statements and conform with IFRS as adopted by
the EU. These policies and applicable estimation techniques have been
reviewed by the directors who have confirmed them to be appropriate
for the preparation of the 2014/2015 consolidated financial statements.
By order of the Board
John Lewis
Non-executive Chairman
24 June 2015
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47
Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Independent Auditor’s Report
to the members of Photo-Me International plc only
Opinions and conclusions arising from our audit
1 Our opinion on the financial statements is unmodified
We have audited the financial statements of Photo-Me International plc
for the year ended 30 April 2015 set out on pages 52 to 104.
In our opinion:
(cid:129)
(cid:129)
(cid:129)
(cid:129)
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 2015
and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards as
adopted by the European Union (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.
2 Our assessment of risks of material misstatement
In arriving at our audit opinion above on the financial statements the
risks of material misstatement that had the greatest effect on our audit
were as follows:
Recoverability of Japan goodwill (£7,245,000)
Refer to page 28 (Audit Committee Report), page 60 (accounting policy)
and pages 72 to 73 (financial disclosures)
(cid:129)
The risk - There is a risk over the recoverability of the Group’s
goodwill balance in relation to Nippon Auto-Photo Kabushiki
Kasisha (Japan) due to the effect of changing exchange rates on
the recoverable amount of GBP denominated goodwill. There is an
inherent uncertainty involved in forecasting and discounting future
cash flows, which are the basis of the assessment of recoverability.
Due to the significance of this asset this is one of the key
judgemental areas that our audit is concentrated on.
(cid:129) Our response - In this area our audit procedures included testing
the Group’s budgeting procedures upon which the forecasts are
based, the principles and integrity of the Group’s discounted cash
flow model and the foreign exchange translation for the purpose of
testing the recoverability of the GBP denominated goodwill.
We compared the Group’s budgets to historical accuracy and
compared assumptions to externally derived data as well as our
own assessments in relation to key inputs such as projected
economic growth, cost inflation, and discount rates, as well as
performing break-even analysis on the assumptions. We also
assessed whether the Group’s disclosures about the sensitivity of
the outcome of the impairment assessment to changes in key
assumptions reflected the risks inherent in the valuation of goodwill.
48
Estimation of provisions (£5,557,000)
Refer to page 28 (Audit Committee Report), page 64 (accounting policy)
and page 98 (financial disclosures)
(cid:129)
The risk - In the normal course of business, provisions and contingent
liabilities may arise from potential and actual legal proceedings as well
as from warranties on products sold. Potential legal proceedings relate
to claims from former employees following a Group restructuring, as
well as other ad hoc legal claims. Due to the nature of the business
claims also arise relating to warranties on products sold. The amounts
involved are potentially significant and the calculation of the amounts,
if any, to be provided, is inherently subjective.
(cid:129) Our response - Our audit procedures included, in respect of
employee and other legal claims, discussion with the Board of
directors and the Company Secretary of all known liabilities and
potential liabilities on claims where the recognition criteria for a
provision has not been met . In addition, discussions were held with
key management at each key component of the Group to
understand their view of actual and potential claims that they are
aware of. We read Board minutes and correspondence with the
Group’s external legal advisors to gain an understanding of their
views in relation to any such potential liabilities. For employee claims
we compared the Group’s calculation of provisions with the Group’s
historical experience of similar claim settlements. We obtained
confirmations of the expected liabilities from the Group’s legal
advisors on all significant matters.
In respect of the warranty provision we have critically assessed the
extent to which the Group’s estimate takes into account the latest
available information. We compared the Group’s calculation of
provisions with the Group’s historical experience of claim settlements by
comparing amounts provided and amounts recognised as an expense
in previous periods. We also considered our own assessment of the
provision balance based on our understanding of the business gained
throughout the audit process.
We also assessed the adequacy of the Group’s disclosures in respect of
provisions and contingent liabilities and whether the Group’s disclosures
about provisions and the treatment of movements on provisions in the
income statement for the year were appropriate.
Recoverability of carrying value of photobooths and
vending machines (£43,087,000)
Refer to page 28 (Audit Committee Report), page 61 (accounting policy)
and pages 76 to 77 (financial disclosures)
(cid:129)
The risk - The Group has significant property, plant and equipment
including the photobooths and vending machines that generate the
Group’s revenue. There is a risk over the carrying value of machines
in specific countries if they are not generating sufficient cash flows
due, for example, to changes in technology and/or changes in
demand. Demand is principally affected by changes in consumer
preference for the primary product of printed photographs and
country-specific regulation. Due to the significance of the amounts,
the Group carries out cash flow forecasts at a country-specific
entity level to determine whether an impairment trigger exists and
therefore whether more detailed impairment testing is required.
(cid:129) Our response - Our audit procedures included comparing the
aggregate carrying value of the photobooths and vending machines
in each entity against the profit before tax and depreciation in the
year of that entity. Where the carrying value of photobooths and
vending machines of an entity were more than double profit before
tax and depreciation, we discussed the Group’s future plans for the
assets and challenged the Group’s assessment of whether an
impairment trigger existed based on our knowledge and experience
of the Group and past performance and the Group’s ability to
implement similar plans in previous periods.
3 Our application of materiality and an overview
of the scope of our audit
The materiality for the Group financial statements as a whole was set
at £2.3m. This has been determined with reference to a benchmark of
Group profit before taxation of £35m, of which it represents 6.6%.
We report to the audit committee any corrected or uncorrected
identified misstatements exceeding £115,000, in addition to other
identified misstatements that warrant reporting on qualitative grounds.
Of the Group’s 30 reporting components, we subjected 5 to audits for
Group reporting purposes and 6 to specified risk-focused audit
procedures. The latter were not individually financially significant enough
to require an audit for Group reporting purposes, but did present
specific individual risks that needed to be addressed.
The components within the scope of our work accounted for the
following percentages of the Group’s results:
Group
revenue
Group profit
before tax
Group
total assets
Audits for Group reporting
purposes
Risk specified audit
procedures
Total
87%
8%
95%
89%
5%
94%
90%
8%
98%
The remaining 5% of total Group revenue, 6% of Group profit before
tax and 2% of total Group assets is represented by 19 reporting
components, none of which individually represented more than 1.2%
of any of total Group revenue, Group profit before tax or total Group
assets. For the remaining components, we performed analysis at an
aggregated Group level to re-examine our assessment that there were
no significant risks of material misstatement within these.
The Group audit team instructed component auditors as to the
significant areas to be covered, including the relevant risks detailed
above and the information to be reported back. The Group audit team
approved the component materialities, which ranged from £1m to
£1.2m, having regard to the mix of size and risk profile of the Group
across the components. The work on 10 of the 30 components was
performed by component auditors and the rest by the Group audit team.
Telephone conference meetings were held with these component
auditors. At these meetings, the findings reported to the Group audit
team were discussed in more detail, and any further work required by
the Group audit team was then performed by the component auditor.
4 Our opinion on other matters prescribed by the
Companies Act 2006 is unmodified
In our opinion:
(cid:129)
(cid:129)
the part of the Directors’ Remuneration Report to be audited
has been properly prepared in accordance with the
Companies Act 2006;
the information given in the Strategic Report and the Directors’
Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.
5 We have nothing to report in respect of the matters
on which we are required to report by exception
Under ISAs (UK and Ireland) we are required to report to you if, based
on the knowledge we acquired during our audit, we have identified
other information in the annual report that contains a material
inconsistency with either that knowledge or the financial statements,
a material misstatement of fact, or that is otherwise misleading.
In particular, we are required to report to you if:
(cid:129) we have identified material inconsistencies between the knowledge
we acquired during our audit and the directors’ statement that they
consider that the annual report and financial statements taken as a
whole is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Group’s
performance, business model and strategy; or
(cid:129)
the Corporate Governance Statement does not appropriately
address matters communicated by us to the audit committee.
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
(cid:129)
(cid:129)
(cid:129)
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
(cid:129) we have not received all the information and explanations we
require for our audit.
Under the Listing Rules we are required to review:
(cid:129)
(cid:129)
the directors’ statement, set out on page 47, in relation to going
concern; and
the part of the Corporate Governance Statement on pages 26 to
29 relating to the Company’s compliance with the ten provisions of
the 2012 UK Corporate Governance Code specified for our review.
We have nothing to report in respect of the above responsibilities.
Scope of report and responsibilities
As explained more fully in the Directors’ Responsibilities Statement set
out on page 47, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair
view. A description of the scope of an audit of financial statements is
provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate. This report is made solely to the
Company’s members as a body and is subject to important
explanations and disclaimers regarding our responsibilities, published
on our website at www.kpmg.com/uk/auditscopeukco2014a, which
are incorporated into this report as if set out in full and should be read
to provide an understanding of the purpose of this report, the work we
have undertaken and the basis of our opinions.
Martin Newsholme (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Forest Gate, Brighton Road
Crawley, RH11 9PT
24 June 2015
49
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Financial Statements
We’re taking care of
our investment
We ensure that all our on-site equipment
is serviced and maintained to fulfil our
customers expectations
50
S
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Group Statement of Comprehensive Income
for the year ended 30 April 2015
Statements of Financial Position
for the year ended 30 April 2015
Revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses
Share of post-tax profits from associates
Operating profit
Analysed as:
Operating profit before special items
Profit on sale of land
Operating profit after special items
Finance revenue
Finance cost
Profit before tax
Total tax charge
Profit for year
Other comprehensive income
Items that are or may subsequently be classified to profit and loss:
Exchange differences arising on translation of foreign operations
Total items that are or may subsequently be classified to profit and loss
Items that will not be classified to profit and loss:
Remeasurement losses in defined benefit obligations and other post-employment benefit obligations
Deferred tax on remeasurement gains/(losses)
Total items that will not be classified to profit and loss
Other comprehensive expense (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
All results derive from continuing operations.
Notes
3
4
14
6
6
7
10
10
2015
£’000
177,202
(129,638)
47,564
1,166
(10,524)
164
38,370
34,886
3,484
38,370
191
(65)
38,496
(10,452)
28,044
(6,779)
(6,779)
(860)
221
(639)
(7,418)
20,626
27,900
144
28,044
20,605
21
20,626
7.49p
7.43p
2014
£’000
186,598
(139,400)
47,198
1,420
(18,513)
161
30,266
30,266
–
30,266
227
(400)
30,093
(8,514)
21,579
(4,803)
(4,803)
(67)
(11)
(78)
(4,881)
16,698
21,422
157
21,579
16,579
119
16,698
5.77p
5.70p
Group
Company
Notes
11
11
12
13
14
14
15
15
24
16
17
16
15
18
30
20
21
22
23
24
25
21
23
25
2015
£’000
10,180
6,507
48,263
458
848
–
2,220
70
3,512
1,684
73,742
12,099
10,874
–
869
58,632
82,474
–
156,216
1,866
7,131
4,766
89,744
103,507
904
104,411
124
4,291
17
1,067
2,050
7,549
59
5,540
5,981
32,676
44,256
156,216
2014
£’000
9,911
5,776
46,529
516
620
–
2,334
78
4,231
1,831
71,826
11,196
14,345
86
57
60,996
86,680
705
159,211
1,859
6,521
11,402
83,332
103,114
1,119
104,233
64
3,418
10
1,381
3,840
8,713
240
8,256
5,457
32,312
46,265
159,211
2015
£’000
–
5,179
8,480
–
257
41,690
967
–
1,702
–
58,275
814
7,991
–
–
20,938
29,743
–
88,018
1,866
7,131
1,399
55,163
65,559
–
65,559
–
–
17
–
–
17
–
–
1,128
21,314
22,442
88,018
2014
£’000
–
5,502
8,481
–
257
41,617
963
–
2,334
–
59,154
850
6,031
1
–
19,920
26,802
705
86,661
1,859
6,521
1,172
56,470
66,022
–
66,022
–
–
10
–
–
10
–
–
570
20,059
20,629
86,661
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant & equipment
Investment property
Investment in - associates
- subsidiaries
Other financial assets - held to maturity
- available for sale
Deferred tax assets
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Other financial assets - available for sale
Current tax
Cash and cash equivalents
Assets held for sale
Total assets
Equity
Share capital
Share premium
Translation and 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
Provisions
Current tax
Trade and other payables
Total equity and liabilities
The accounts were approved by the Board on 24 June 2015.
Serge Crasnianski
Chief Executive Officer Group Finance Director
Françoise Coutaz-Replan
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The notes on pages 58 to 104 are an integral part of these consolidated financial statements.
The notes on pages 58 to 104 are an integral part of these consolidated financial statements.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Group Statement of Cash Flows
for the year ended 30 April 2015
Company Statement of Cash Flows
for the year ended 30 April 2015
Cash flow 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
(Loss)/profit on sale of property, plant and equipment
Exchange differences
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
Acquisition of subsidiaries net of cash acquired
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
Proceeds of sale of subsidiaries net of cash sold
Interest received
Dividends received from associates
Net cash generated from investing activities
Cash flows from financing activities
Issue of Ordinary shares to equity shareholders
Repayment of capital element of finance leases
Repayment of borrowings
Decrease 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 on cash and cash equivalents
Cash and cash equivalents at end of year
Notes
9
18
2015
£’000
38,496
65
(191)
38,370
(164)
2,092
14,789
(3,510)
(1,996)
(876)
(1,910)
2,587
451
(671)
49,162
(64)
(9,124)
39,974
(422)
(146)
(3,641)
1
(19,833)
5,623
32
189
96
(18,101)
617
(78)
(158)
76
(21,381)
(158)
(21,082)
791
60,996
(3,155)
58,632
2014
£’000
30,093
400
(227)
30,266
(161)
3,034
14,503
198
(1,546)
(46)
1,485
(2,310)
32
143
45,598
(95)
(9,916)
35,587
–
(121)
(2,007)
3
(19,153)
781
–
227
63
(20,207)
237
(90)
(449)
83
(11,140)
(197)
(11,556)
3,824
59,651
(2,479)
60,996
Cash flow 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
Loss/(profit) on sale of property, plant and equipment
Movement 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
Investment in subsidiaries
Investment in associates
Purchase of intangible assets
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Interest received
Dividends received from associates and subsidiaries
Net cash generated from investing activities
Cash flows from financing activities
Issue of Ordinary shares to equity shareholders
Borrowings from subsidiaries
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 increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
9
18
2015
£’000
22,481
191
(205)
(8,430)
14,037
702
3,054
(3,601)
145
36
(1,960)
(6,355)
7
6,065
(32)
(1,364)
4,669
(4)
–
(379)
(3,259)
4,513
109
8,526
9,506
617
7,611
–
(4)
(21,381)
(13,157)
1,018
19,920
20,938
2014
£’000
20,296
383
(185)
(13,611)
6,883
631
2,627
123
19
42
(334)
5,642
6
15,639
(78)
(1,782)
13,779
(60)
(121)
(6,114)
(4,178)
175
122
13,674
3,498
237
–
(1,950)
(5)
(11,140)
(12,858)
4,419
15,501
19,920
The notes on pages 58 to 104 are an integral part of these consolidated financial statements.
54
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Group Statement of Changes in Equity
for the year ended 30 April 2015
Company Statement of Changes in Equity
for the year ended 30 April 2015
– – (556) – 556 –
Attributable
Share Share Other Translation Retained to owners of
capital premium reserves reserve earnings the Parent
£’000 £’000 £’000 £’000 £’000 £’000
At 1 May 2013 1,856 6,287 2,430 14,293 72,295 97,161
Profit for year – – – – 21,422 21,422
Other comprehensive
(expense)/income
Exchange differences – – – (4,765) – (4,765)
Transfers between
reserves
Remeasurement losses in
defined benefit pension
scheme and other post-
employment benefit obligations – – – – (67) (67)
Deferred tax on remeasurement gains – – – – (11) (11)
Total other comprehensive
(expense)/income – – (556) (4,765) 478 (4,843)
Total comprehensive
(expense)/income – – (556) (4,765) 21,900 16,579
Transactions with owners
of the Parent
Shares issued in the period 3 234 – – – 237
Share options – – – – 277 277
Dividends
– – – – (11,140) (11,140)
Total transactions with owners
of the Parent 3 234 – – (10,863) (10,626)
At 30 April 2014 1,859 6,521 1,874 9,528 83,332 103,114
At 1 May 2014 1,859 6,521 1,874 9,528 83,332 103,114
Profit for year – – – – 27,900 27,900
Other comprehensive
(expense)/income
Exchange differences – – – (6,656) – (6,656)
Translation reserve taken to
income statement on disposal
of subsidiaries – – – 20 (20) –
Remeasurement losses in
defined benefit pension scheme
and other post-employment
benefit obligations – – – – (860) (860)
Deferred tax on
remeasurement gains – – – – 221 221
Total other comprehensive
(expense)/income – – – (6,636) (659) (7,295)
Total comprehensive
(expense)/income – – – (6,636) 27,241 20,605
Transactions with owners
of the Parent
Shares issued in the period 7 610 – – – 617
Share options – – – – 371 371
Deferred tax on share options – – – – 181 181
– – – – (21,381) (21,381)
Dividends
Disposal of minority – – – – – –
Total transactions with
owners of the Parent 7 610 – – (20,829) (20,212)
At 30 April 2015 1,866 7,131 1,874 2,892 89,744 103,507
Non-
controlling
interests
£’000
1,197
157
Total
£’000
98,358
21,579
(38)
(4,803)
–
–
–
(38)
119
–
–
(197)
(197)
1,119
1,119
144
–
(67)
(11)
(4,881)
16,698
237
277
(11,337)
(10,823)
104,233
104,233
28,044
At May 1 2013
Profit for year
Other comprehensive expense
Remeasurement losses in defined benefit pension scheme
and other post employment benefit obligations
Total comprehensive expense
Total comprehensive income for year
Transactions with owners of the Parent
Shares issued in period
Share options
Capital contributions relating to share-based payments
(net of disposals)
Dividends
Total transactions with owners of the Parent
At 30 April 2014
At May 1 2014
Profit for year
Other comprehensive expense
Total comprehensive income for year
Transactions with owners of the Parent
Shares issued in period
Share options
Deferred tax on share options
Capital contributions relating to share-based payments
(net of disposals)
Dividends
Total transactions with owners of the Parent
At 30 April 2015
Share
capital
£’000
1,856
–
Share
premium
£’000
6,287
–
Other
reserves
£’000
1,024
–
Retained
earnings
£’000
48,265
19,323
–
–
–
3
–
–
–
3
1,859
1,859
–
–
–
7
–
–
–
–
7
1,866
–
–
–
234
–
–
–
234
6,521
6,521
–
–
–
610
–
–
–
–
610
7,131
–
–
–
–
–
148
–
148
1,172
1,172
–
–
–
–
–
–
227
–
227
1,399
(107)
(107)
19,216
–
129
–
(11,140)
(11,011)
56,470
56,470
19,749
–
19,749
–
144
181
–
(21,381)
(21,056)
55,163
Total
£’000
57,432
19,323
(107)
(107)
19,216
237
129
148
(11,140)
(10,626)
66,022
66,022
19,749
–
19,749
617
144
181
227
(21,381)
(20,212)
65,559
(123)
(6,779)
Details of share capital and reserves are given in note 20.
–
–
–
–
(860)
221
(123)
(7,418)
21
20,626
–
–
–
(158)
(78)
(236)
904
617
371
181
(21,539)
(78)
(20,448)
104,411
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The non-controlling interests in the above table mainly relate to interests not held by the Group in SCI du Lotissement d’Echirolles,
where the Group’s interest is 61% as described in note 29.
The notes on pages 58 to 104 are an integral part of these consolidated financial statements.
Details of share capital and reserves are given in note 20.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
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 2015 were authorised
for issue by the directors on 24 June 2015 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 23.
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 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, unless otherwise stated, to all of the statements presented. New
standards adopted for this financial year are shown in note 2 on page 65.
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 and 1.9 on pages 61 and 62.
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 all entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to variable returns form its
involvement with the entity and has the ability to affect those returns through its power over the entity. In accessing control, the Group takes into
consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer.
The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date
of control ceases. Losses applicable to non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so
causes the non-controlling interests to have a negative balance.
The principal subsidiaries affecting the results and financial position of the Group are shown in note 29.
In presenting these financial statements, the directors have followed the Financial Reporting Council’s (“FRC”) objective in “cutting clutter” with the
aim of simplifying notes and descriptions and removing non-material disclosures.
Changes in ownership of subsidiaries and loss of control
Changes in the Group’s interest in a subsidiary that do not result in loss of control are accounted for as equity transactions.
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.
Where the Group loses control of a subsidiary, the assets and liabilities are derecognised along with any related non-controlling interest and other
components of equity. Any resulting gain or loss is recognised in profit and loss. Any interest retained in a subsidiary is measured at fair value when
control is lost.
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, 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 Strategic Report.
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.
The recoverable amount of cash generating units (cgus) has been determined by management based on a value in use basis.
These calculations require estimates by management, including management’s expectations of future growth in revenue, costs
and profit margins, cash flows and discount rates.
2) Development costs – notes 1.4 and 11.
3) Depreciation and impairment of property, plant and equipment – notes 1.5, 12 and 13.
Management make estimates of the useful life of capitalised development costs and property, plant and equipment as disclosed
below in notes 1.4 and 1.5.Technogical developments and regulatory changes can impact on the lives of the vending estate.
Management consider these factors in assessing the useful lives of the asset.
4) Taxation – notes 1.17, 7 and 24.
5) Provisions – note 23.
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
will be required to settle the obligation and the amount can be reliably estimated. In respect of claims, litigation and other provisions, including
property restitution, management make estimates based on anticipated costs where it is considered that an outflow of resources is probable.
For all risks the ultimate liability may vary from the amount provided and will be dependent upon the eventual outcome of any settlement.
58
The Group uses the acquisition method of accounting to account for business combinations. Acquisition costs for business combinations are
expensed as incurred. The consideration transferred for the acquisition of a subsidiary is the fair vale of the assets acquired, the liabilities incurred to
the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or
liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are initially measured at their fair values on acquisition date. The Group recognises any non-controlling interest in the acquiree
on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of
acquiree’s identifiable net assets.
If the business combination is achieved in stages, the acquisition date carrying value of the acquiree’s previously held interest in the acquire is
re-measured to fair value at the acquisition date, with such gains or losses arising from re-measurement recognised in profit and loss.
Transactions eliminated on consolidation
Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. Unrealised gains
arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee.
Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
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 has significant influence, but not control, over the financial and operating policies.
Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity.
Application of the equity method to associates and joint ventures
Associates are accounted for using the equity method (equity accounted investees) and are initially recognised at cost. The Group’s investment
includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s
share of the total comprehensive income and equity movements of equity accounted investees, from the date that significant influence or joint control
commences until the date that significant influence or joint control ceases. When the Group’s share of losses exceeds its interest in an equity
accounted investee, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the
Group has incurred legal or constructive obligations or made payments on behalf of an investee.
The principal associates affecting the results and financial position of the Group are shown in note 29.
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.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
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 being 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. There were no qualifying cash flow hedges in 2015 and 2014.
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 of the subsidiary or associate.
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. On transition to IFRS on 1 May 2004, business combinations were not retrospectively adjusted to comply with Adopted IFRS and
goodwill was recognised based on the carrying value under the previous accounting policies. Pre 1 May 2004 goodwill was treated as a Sterling
asset and is included in these financial statements at that value less any subsequent impairment.
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 disposal, 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 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.
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.
Internally generated or acquired
60
Internally generated
Patents
and licences
Finite
Software
Finite
Straight-line
basis, with
Customer
Other
related
Indefinite
Finite
Straight-line Not amortised,
Straight-line
but subject
basis, with a
basis, with a
to impairment
maximum life
a maximum maximum life of
testing.
of 20 years,
20 years, with
life of three
years, with no no residual value with no residual
value. Most
The majority
residual value.
patents are
of customer
depreciated
related
over a period
intangible
of 10 years
assets are
depreciated
or less.
over their useful
lives of between
three and five
years.
Acquired
Acquired
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 the estimated residual value over the estimated useful life of the asset 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
Plant, machinery, furniture, fixtures and motor vehicles
Capitalised finance lease assets
10% – 33.33% straight-line
12.5% – 33.33% straight-line or reducing balance
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.
The critical judgement areas for operating equipment revolve around the useful life of the asset and whether an impairment charge is required.
Operating equipment assets are reviewed at least annually for impairment testing.
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.
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 a Group company acts as a lessor the lease is classified as finance or operating lease and accounted for as follows.
When assets are leased out under a finance lease, the present value of the lease payments are recognised as a receivable. The rental is allocated
between finance income and repayment of capital in each accounting period using the actuarial method, such that finance income will emerge as
a constant rate of return on the lessor’s net investment in the lease.
Lease income on operating leases is recognised over the term of the lease on a straight-line basis and the asset is included in the statement
of financial position based on the nature of the asset.
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.
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Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
1 Accounting policies (continued)
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.
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.
(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.
1.13 Share capital
Shares of the Company are classified as equity.
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.
(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. Indications of impairment may include a reduction in the quoted
price, a reduction in the underlying profitability of the investment and other factors indicating that the value of the investment has fallen.
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the
recognised amounts and there is an intention to settle on a net basis or realise the asset and simultaneously settle the liability.
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.
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 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.
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.
The Group also has defined benefit pension schemes as noted in note 22.
The net obligation for the Group’s defined benefit pension schemes is calculated for each scheme separately by estimating the future benefit that
employees have earned in the current and prior periods, discounting that amount and deducting the fair value amount of plan assets. The calculation
is performed by independent actuaries using the projected unit credit actuarial method. If this calculation results in a potential asset for the Group, this
asset is only recognised to the present value of the economic benefits available in the form of a refund of contributions paid to the fund or reductions
in future contributions. In calculating the present value of any economic benefit consideration is given to any minimum funding requirements.
Re-measurement of the net liability, which comprises actuarial gains and losses, the return on plan assets (excluding interest) and the effects of any
asset ceiling, are recognised in other comprehensive income. The Group determines the net interest expense (income) on the net liability (asset) for the
period by applying the discount rate used to measure the defined benefit obligation at the beginning of the period to the then net defined liability(asset),
taking into account changes in the period as a result of contributions and pension benefits paid. Other expenses are charged to profit and loss.
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.
When plan benefits are changed or the plan curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is
recognised in profit and loss. Gains and losses on settlement of any plan are recognised when settlement occurs.
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.
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.
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Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
1 Accounting policies (continued)
1.15 Employee benefits (continued)
Equity compensation benefits (continued)
The grant by the Company of options over its equity instruments (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.
Short-term employee benefits
The Group recognises a liability and an expense for short-term employee benefits (such as holiday pay, bonuses and profit sharing) where these
obligations contractually arise (for example, as a result of employment contracts) or where a constructive obligation has arisen from past practice.
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.
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, and held in machines up to the year-end date,
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.
Interest income is recognised using the effective interest method and mainly consists of bank interest. It is accounted for as finance income.
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 Dividend distributions
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 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 27).
1.24 Government grants
Grants that compensate the Group for expenses incurred are recognised in profit and loss on a systematic basis in periods in which the expenses
are recognised, provided the terms of the grant are satisfied.
1.25 Specific items
The Group’s Statement of Comprehensive Income and segmental analysis show operating profit before and after specific items. The presentation
and use of specific items is a non-GAAP measure and the use of this measure may not be comparable to similarly titled measures used by other
companies. Specific items are those that in management’s judgement need to be disclosed separately by virtue of their size, nature or incidence.
Management determines whether an item is specific and warrants separate disclosure by considering both qualitative and quantitative factors, such
as the frequency or predictability of occurrence. This is consistent with the way operating performance is presented and reported to management.
The directors believe that the presentation of the Group’s results in this way is relevant to an understanding of the Group’s performance, as specific
items are identified by their size, nature or incidence.
For those years where specific items are shown in the Group Statement of Comprehensive Income an alternative earning per share is shown in the
earnings per share note. Alternative earnings per share and alternative diluted earnings per share are shown and are calculated on earnings available
to Ordinary shareholders excluding specific items.
2 New standards, amendments and interpretations
New and amended standards adopted by the Group
The Group has adopted the following standards, amendments and interpretations for the first time in these financial statements, none of which has
had an impact on the consolidated financial statements.
(cid:129)
(cid:129)
(cid:129)
IAS 32 Offsetting Financial Assets and Financial Liabilities (amendments)
IAS 36 Recoverable Amount Disclosures for Non-financial Assets (amendments)
IAS 39 Novation of Derivatives and Continuation of Hedge Accounting (amendments)
The directors have decided to change the way segment information is presented in these financial statements from an operations basis (operations,
sales and service) to a geographical basis as this change reflects how business performance is presented to the Chief Operating Decision Maker
(CODM) and the Board of directors with effect from 1 May 2014. The comparative segment analysis (note 3) below has been restated to reflect the
new way of reporting segment information.
The directors have also changed the way operating lease commitments and expenses are presented with regard to commission agreements with
site owners where the agreement covers a period greater than one year (notes 26 and 4). Comparative figures have been restated.
New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations have been issued for future accounting periods and have not been
adopted in these financial statements. None of these is expected to have a significant effect on the Group’s consolidated financial statements.
These include the annual IFRS Improvements Cycle 2010-2012 and the IFRS Improvement Cycle 2011-2013, both effective for accounting periods
after 30 June 2015, IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers. IFRS 9 will eventually replace IAS 39. IFRS
9 has an effective date of 1 January 2018 and the EU will only endorse the standard when all parts of the project have been issued and ratified by the
EU. IFRS 15 has an effective date of 1 January 2017 but may be extended by one year as a result of a recent IASB Exposure Draft and has not yet
been endorsed by the EU. Once approved by the EU it can be adopted early. The subject of this standard is revenue recognition and establishes
principles for reporting information about the nature, timing and uncertainty of revenue and cash flows arising from contracts with customers. The
Group currently expects this standard not to have a material impact for the Group. Revenue is recognised when a customer obtains control of goods
and services and thus has the ability to direct the use and obtain benefits from the goods or services supplied. The IASB continues with its intention
to issue a revised standard on leasing, but to date no new standard has been issued.
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Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
3 Segmental analysis
IFRS 8 requires operating segments to be identified, based on information presented to the Chief Operating Decision Maker (CODM) in order to
allocate resources to the segments and monitor performance. As noted above the directors have decided to change how segmental analysis is
reported to the CODM. Comparative information has been restated to reflect the new geographical presentation of segmental information.
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:
2015
Total revenue
Inter-segment sales
Revenue from external customers
EBITDA
Depreciation and amortisation
Operating profit excluding associates
Share of post-tax profits 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
Asia
£’000
38,925
(720)
38,205
10,232
(3,465)
6,767
United Kingdom
& Ireland
£’000
Europe
£’000
100,127
(5,782)
94,345
32,013
(9,967)
22,046
44,867
(215)
44,652
11,810
(3,359)
8,451
3,895
14,193
3,799
Included in corporate costs for April 2015 is the profit on sale of vacant land at the Bookham site of £3,484,000.
Reconciliation of operating profit
Operating profit before associates
Share of post-tax profits from associates
Corporate operating profit
Total operating profit
Asia
£’000
6,768
164
–
6,932
United Kingdom
& Ireland
£’000
8,453
–
(72)
8,381
Europe
£’000
22,045
–
1,012
23,057
Total
£’000
183,919
(6,717)
177,202
54,055
(16,791)
37,264
164
1,032
(90)
38,370
191
(65)
38,496
(10,452)
28,044
21,887
1,729
23,616
Total
£’000
37,266
164
940
38,370
2014 Restated
Total revenue
Inter-segment sales
Revenue from external customers
EBITDA
Depreciation and amortisation
Operating profit excluding associates
Share of post-tax profits 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
Restated - as per note 2 and above
Reconciliation of operating profit
Operating profit before associates
Share of post-tax profits from associates
Corporate operating profit
Total operating profit
Asia
£’000
39,558
(819)
38,739
10,060
(4,525)
5,535
United Kingdom
Europe
£’000
108,623
(5,691)
102,932
31,016
(9,838)
21,178
& Ireland
£’000
45,453
(526)
44,927
10,313
(2,826)
7,487
3,449
12,884
4,704
Asia
£’000
5,535
161
–
5,696
United Kingdom
Europe
£’000
21,178
–
747
21,925
& Ireland
£’000
7,487
–
(4,842)
2,645
Inter-segment revenue mainly relates to sales of equipment.
The Parent Company is domiciled in the UK. Total revenue from external customers is as follows:
Total revenue from external customers
Asia and rest of the world
Europe
UK
Group
2015
£’000
38,205
96,265
42,732
177,202
Total
£’000
193,634
(7,036)
186,598
51,389
(17,189)
34,200
161
(3,747)
(348)
30,266
227
(400)
30,093
(8,514)
21,579
21,037
222
21,259
Total
£’000
34,200
161
(4,095)
30,266
2014
£’000
38,739
105,169
42,690
186,598
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Annual Report & Accounts 2015
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Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
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
2015
£’000
1,678
414
2,092
14,709
80
14,789
Amortisation and impairment of capitalised research and development expenditure is reflected in the income statement in cost of sales.
Amortisation of intangible assets other than research and development.
- reflected in income statement in cost of sales
- reflected in income statement in administrative expenses
Operating lease rentals
- property
- plant and equipment
Restated as per note 2
Inventory cost
Cost of inventories recognised as an expense
Inventory provision reversed
2014
£’000
2,734
300
3,034
14,411
92
14,503
109
191
300
Restated
2014
£’000
519
1,000
1,519
206
208
414
2015
£’000
462
966
1,428
12,575
–
12,575
17,346
(14)
17,332
Inventory provision reversed related 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)
(Gains)/losses on sale of property, plant and equipment
Direct expenses for investment properties generating rental income
2015
£’000
377
(2,613)
292
(956)
(3,510)
68
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 LLP and its associates.
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
Audit fee of the Company
68
2015
£’000
162
151
57
370
2015
£’000
60
2014
£’000
245
(2,902)
(35)
(445)
198
78
2014
£’000
159
169
32
360
2014
£’000
58
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 LLP 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 LLP and its associates, certain Group subsidiaries are audited by other firms. The following shows the
fees payable to those firms:
Audit fees
Other services
Summary
Total fees paid or payable to all of the Group’s auditors for audit and other services were
Other operating income
Other operating income
Other operating income principally includes rental income from investment property (note 13)
Specific Items
Specific items are as follows:
Profit on sale of land
Total
2015
£’000
89
3
92
2015
£’000
462
2015
£’000
1,166
2015
£’000
3,484
3,484
Specific items are those that in management’s judgement need to be disclosed separately by virtue of their size, nature or incidence.
Management determines whether an item is specific and warrants separate disclosure by considering both qualitative and quantitative
factors, such as the frequency or predictability of occurrence.
In the year ended 30 April 2015 the Company sold its vacant land at the Bookham site.
5 Employees
Staff costs, including costs relating to the Group’s key management personnel, who comprise the directors of the Parent Company,
during the year amounted to:
Wages and salaries
Social security costs
Share options granted to directors and employees
Post employment benefit costs
- defined benefit schemes
- defined contribution schemes
- other post-employment costs
Group
2015
£’000
32,031
7,242
371
247
218
191
40,300
2014
£’000
85
3
88
2014
£’000
448
2014
£’000
1,420
2014
£’000
–
–
2014
£’000
35,410
7,701
277
189
181
79
43,837
69
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
5 Employees (continued)
Directors’ emoluments
Full details of directors’ remuneration and share options are given in the Remuneration Report on pages 34 to 46.
The average number of employees during the year (including executive directors) comprised:
Full - time
Part - time
UK : full - time
UK : part - time
Europe : full - time
Europe : part - time
Asia and rest of the world : full - time
Asia and rest of the world : part - time
6 Finance revenue and costs
Finance Revenue
Bank interest
Other interest
Other financial income
Finance costs
Bank loans and overdrafts at amortised cost
Other loans at amortised costs
Provision on investments and other finance charges
7 Taxation expense
Tax charges/(credits) in the statement of comprehensive income
Taxation
Current taxation
UK Corporation tax
- current year
- prior years
Overseas taxation
- current year
- prior years
Total current taxation
Deferred taxation
Origination and reversal of temporary differences
- current -year - UK
- current -year - 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
70
Group
2015
£’000
924
164
1,088
264
11
515
42
146
110
1,088
2015
£’000
170
19
2
191
52
12
1
65
2015
£’000
2,164
(144)
2,020
7,491
(62)
7,429
9,449
1,103
(123)
(56)
79
–
1,003
10,452
2014
£’000
974
136
1,110
282
11
544
23
147
103
1,110
2014
£’000
191
36
–
227
77
18
305
400
2014
£’000
1,229
4
1,233
8,675
58
8,733
9,966
(1,550)
29
(26)
58
37
(1,452)
8,514
Tax relating to items charged to other components of comprehensive income
Deferred tax
Unexercised share options
Actuarial gains and losses on pension schemes
Tax credit in other comprehensive income
2015
£’000
181
221
402
Reconciliation of total tax charge
The difference between the Group tax charge and the standard UK corporation tax rate of 20.9% (2014: 22.9%) is explained below:
Profit before tax
Tax using the UK corporation tax rate of 20.9% (2014: 22.9%)
Effect of:
- non-taxable items
- change in UK tax rates
- overseas tax rates
- losses not recognised in deferred tax (relieved)/incurred
- adjustments to tax in respect of prior years
Total tax charge
Effective tax rate
2015
£’000
38,496
8,052
168
7
2,648
(125)
(298)
10,452
27.2%
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 £19,749,000 (2014: £19,323,000),
including dividends received from subsidiaries.
2014
£’000
–
11
11
2014
£’000
30,093
6,871
122
242
2,845
(1,658)
92
8,514
28.3%
9 Dividends paid and proposed
Interim
2014 paid on 6 May 2014
2013 paid on 7 May 2013
Final
2014 paid on 7 November 2014
2013 paid on 7 November 2013
Special
paid on 15 May 2014
2015
2014
Pence per
share
1.80
£’000
6,690
Pence per
share
£’000
1.50
5,568
1.95
7,257
1.50
5,572
2.00
5.75
7,434
21,381
3.00
11,140
Year ended 30 April 2015 – Proposed dividends not yet paid
The Board declared an interim dividend of 2.34p per share for the year ended 30 April 2015, amounting to £8,734,000 which was paid on
14 May 2015. The Board proposes a final dividend for the year ended 30 April 2015 of 2.54p per share, which is subject to shareholders’
approval at the Annual General Meeting to be held on 21 October 2015.
Year ended 30 April 2014 – Paid after 30 April 2014
The Board declared an interim dividend of 1.80p per share for the year ended 30 April 2014, amounting to £6,690,000 which was paid on
6 May 2014. The Board proposed a final dividend for the year ended 30 April 2014 of 1.95p per share, amounting to £7,257,000 which was paid
on 7 November 2014.The Board proposed a special dividend of 2.00p per share amounting to £7,434,000, which was paid on 15 May 2014.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
10 Earnings per share
Basic earnings per share amounts are calculated by dividing net earnings attributable to shareholders of the Parent of £27,900,000
(2014:£21,422,000) by the weighted average number of shares in issue during the year, excluding those held, where applicable, as treasury shares.
Diluted earnings per share amounts are calculated by dividing the net earnings attributable to shareholders of the Parent by the weighted average
number of shares outstanding during the year plus the weighted average number of shares that would be issued on conversion of all the dilutive
potential shares into shares. The Group has only one category of dilutive potential 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:
2015
Weighted
average
number of
shares
£’000
372,381
3,314
375,695
Earnings
£’000
27,900
27,900
Earnings
per share
pence
7.49
(0.06)
7.43
Earnings
£’000
21,422
21,422
2014
Weighted
average
number of
shares
£’000
371,506
4,330
375,836
Earnings
per share
pence
5.77
(0.07)
5.70
Basic earnings per share
Effect of dilutive share options
Diluted earnings per share
Potential shares (for example, arising from exercising share options) are treated as dilutive only when their conversion to shares would decrease
basic earnings per share or increase loss per share from continuing operations.
Alternative earnings per share
The table below reconciles earnings per share (EPS) and diluted earnings per share (DPS) before and after specific items. There were no specific
items in the year ended 30 April 2014.
Earnings available to shareholders
Special items net of tax
Earnings after special items
£’000
27,900
(2,752)
25,148
2015
EPS
7.49
(0.74)
6.75
DPS
7.43
(0.73)
6.70
£’000
21,422
–
21,422
2014
EPS
5.77
–
5.77
DPS
5.70
–
5.70
Specific items for the year ended 30 April 2015 relate to the sale of vacant land at the Bookham site. The contract for £4,200,000 was exchanged
on 5 June 2014 with cash settlement on completion one month later.
11 Goodwill and other intangible assets
Goodwill
Group
Cost:
At 1 May 2013
Exchange difference
At 30 April 2014
At 1 May 2014
Exchange difference
Additions
At 30 April 2015
Impairment charges:
At 1 May 2013
Exchange difference
At 30 April 2014
At 1 May 2014
Exchange difference
At 30 April 2015
Net book value:
At 1 May 2015
At 1 May 2014
At 1 May 2013
The addition to goodwill in 2015 relates to the acquisition of operations in Switzerland as shown in note 31.
Company
The Company has no goodwill.
72
£’000
10,281
(72)
10,209
10,209
(246)
513
10,476
301
(3)
298
298
(2)
296
10,180
9,911
9,980
Goodwill by segments and impairment of goodwill
The table below shows the allocation of goodwill acquired through business combinations between segments.
Goodwill has been allocated for impairment testing purposes to seven (2014: six) cash-generating units (CGUs); allocated between operations
and sales & servicing in accordance with impairment testing in the prior year:
Carrying amount
UK & Ireland
CGU 1
CGU 2
CGU 3
Total UK & Ireland
Continental Europe
CGU 1 - France
CGU 2 - Germany
CGU 3 - Switzerland
Total Continental Europe
Asia
CGU 1 - Japan
Total Asia
Total
Total
2015
£’000
154
14
317
485
261
1,676
513
2,450
7,245
7,245
10,180
2014
£’000
154
14
317
485
294
1,887
–
2,181
7,245
7,245
9,911
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% (2014: 3%)
The growth rate has been determined based on a conservative basis for 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 8–11% (2014: 8–11%)
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: United Kingdom 9.5% (2014: 9.0%), Ireland 8.7% (2014: 8.0%), France 8.4% (2014: 10.0%), Germany 8.1% (2014: 8.0%),
Switzerland 7.8% (2014: 0% ) and Japan 8.3% (2014: 8.0%). 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 no impairment losses were recognised in 2015 (2014: none).
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Company
Cost:
At 1 May 2013
Additions
- internally generated
- external
Disposals
- external
At 30 April 2014
At 1 May 2014
Additions
- external
Disposals
- external
At 30 April 2015
Amortisation:
At 1 May 2013
Provided during year
Disposals
- external
At 30 April 2014
At 1 May 2014
Provided during year
Disposals
- external
At 30 April 2015
Net book value:
At 30 April 2015
At 30 April 2014
At 30 April 2013
Notes to the Financial Statements
for the year ended 30 April 2015
continued
11 Goodwill and other intangible assets (continued)
Other intangible assets
Group
Cost:
At 1 May 2013
Exchange differences
Additions
- internally generated
- external
Reclassifications
Disposals
At 30 April 2014
At 1 May 2014
Exchange differences
Additions
- internally generated
- external
Reclassifications
Disposals
At 30 April 2015
Amortisation:
At 1 May 2013
Exchange differences
Provided during year
Reclassifications
Disposals
At 30 April 2014
At 1 May 2014
Exchange differences
Provided during year
Disposals
Reclassifications
At 30 April 2015
Net book value:
At 30 April 2015
At 30 April 2014
At 30 April 2013
Research
& development
costs
£’000
Other
intangible
assets
£’000
25,853
(887)
1,125
–
271
(18,755)
7,607
7,607
(742)
2,560
–
–
(1,149)
8,276
22,177
(833)
2,734
51
(18,755)
5,374
5,374
(604)
1,678
(814)
–
5,634
2,642
2,233
3,676
6,657
(183)
–
882
–
(244)
7,112
7,112
(479)
–
1,081
(8)
(121)
7,585
3,598
(90)
300
–
(239)
3,569
3,569
(160)
414
(95)
(8)
3,720
3,865
3,543
3,059
Total
£’000
32,510
(1,070)
1,125
882
271
(18,999)
14,719
14,719
(1,221)
2,560
1,081
(8)
(1,270)
15,861
25,775
(923)
3,034
51
(18,994)
8,943
8,943
(764)
2,092
(909)
(8)
9,354
6,507
5,776
6,735
Capitalised research and development expenditure is amortised over a maximum of four years, with no residual value.
Included in the net book value of other intangible assets is £2,194,000 corresponding to droit de bail (2014: £2,068,000 and 2013: £2,119,000).
Droit de bail, which occur in France, are payments made for the right to occupy a space to site vending equipment. The Group has control over the
use of these rights and has classified them as having an indefinite life, as the Group considers that there is no foreseeable limit to the period in which
they can be utilised. 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 at least once a year and more frequently if there is
an indication that they may be impaired. If their fair value is less than their carrying value, an impairment loss is recognised and charged to cost of
sales. 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.
74
Other intangible
Patents
assets & trade marks
£’000
£’000
942
108
500
(241)
1,309
1,309
379
(88)
1,600
921
80
(239)
762
762
152
(88)
826
774
547
21
–
5,506
–
–
5,506
5,506
–
–
5,506
–
551
–
551
551
550
–
1,101
4,405
4,955
–
Total
£’000
942
5,614
500
(241)
6,815
6,815
379
(88)
7,106
921
631
(239)
1,313
1,313
702
(88)
1,927
5,179
5,502
21
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
12 Property, plant and equipment
Group
Cost:
At 1 May 2013
Exchange difference
Additions
- internal
- external
Reclassifications
Transfer to assets held for sale
Disposals
At 30 April 2014
Exchange difference
Additions
- new subsidiaries
- internal
- external
Reclassifications
Disposals
At 30 April 2015
Depreciation
At 1 May 2013
Exchange difference
Provided during year
Reclassifications
Disposals
At 30 April 2014
Exchange difference
New subsidiary
Provided during year
Reclassifications
Disposals
At 30 April 2015
Net book value:
At 30 April 2015
At 30 April 2014
At 30 April 2013
Land
& buildings
£’000
8,533
(306)
–
136
–
(705)
(394)
7,264
(495)
–
–
31
–
(387)
6,413
5,939
(251)
177
–
(127)
5,738
(399)
–
113
–
(386)
5,066
1,347
1,526
2,594
Photobooths
and vending
Plant,
machinery,
furniture,
fixtures and
machines motor vehicles
£’000
£’000
175,109
(8,491)
2,902
14,425
–
–
(14,917)
169,028
(10,679)
1,516
2,613
15,674
–
(12,253)
165,899
135,029
(6,775)
13,299
–
(14,215)
127,338
(8,437)
1,291
13,925
–
(11,305)
122,812
43,087
41,690
40,080
24,719
(852)
–
1,789
(271)
–
(445)
24,940
(2,539)
90
–
1,657
8
(409)
23,747
22,059
(779)
837
(51)
(439)
21,627
(2,240)
82
751
8
(310)
19,918
3,829
3,313
2,660
Total
£’000
208,361
(9,649)
2,902
16,350
(271)
(705)
(15,756)
201,232
(13,713)
1,606
2,613
17,362
8
(13,049)
196,059
163,027
(7,805)
14,313
(51)
(14,781)
154,703
(11,076)
1,373
14,789
8
(12,001)
147,796
48,263
46,529
45,334
Internal additions for photobooths and vending machines of £2,613,000 (2014: £2,902,000) relate to own work capitalised, being equipment
produced by the subsidiaries and capitalised by the Group companies.
Included in the above are assets held under finance leases, as follows:
2015
Plant,
machinery,
furniture,
fixtures and
2014
Plant,
machinery,
furniture,
fixtures and
motor vehicles motor vehicles
£’000
£’000
Net book value
Additions/reclassifications
Depreciation charge
76
187
142
80
133
99
92
Company
Cost:
At 1 May 2013
Additions
- internal
- external
Transfer to assets held for sale
Disposals
- external
At 30 April 2014
Additions
- new subsidiaries
- internal
- external
Disposals
- internal
- external
At 30 April 2015
Depreciation
At 1 May 2013
Provided during year
Disposals
- external
At 30 April 2014
Provided during year
Disposals
- internal
- external
At 30 April 2015
Net book value:
At 30 April 2015
At 30 April 2014
At 30 April 2013
Photobooths
and vending
Plant,
machinery,
furniture,
fixtures and
machines motor vehicles
£’000
£’000
Land
& buildings
£’000
Total
£’000
2,646
38,976
1,365
42,987
–
101
(705)
(394)
1,648
–
–
–
–
(6)
1,642
1,601
59
(127)
1,533
12
–
–
1,545
97
115
1,045
3,879
175
–
(7,253)
35,777
–
3,056
183
(451)
(2,884)
35,681
32,201
2,504
(7,226)
27,479
3,007
(319)
(2,816)
27,351
8,330
8,298
6,775
1
22
–
(313)
1,075
–
–
20
–
(41)
1,054
1,254
64
(311)
1,007
35
–
(41)
1,001
53
68
111
3,880
298
(705)
(7,960)
38,500
–
3,056
203
(451)
(2,931)
38,377
35,056
2,627
(7,664)
30,019
3,054
(319)
(2,857)
29,897
8,480
8,481
7,931
Internal additions for photobooths and vending machines of £3,056,000 (2014: £3,879,000) relate to new equipment produced by subsidiaries and
equipment previously capitalised by the Group’s subsidiaries and sold to the Parent. Internal disposals relate to disposals to subsidiary companies.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
13 Investment property
Group
Cost:
At 1 May 2013
Exchange difference
At 30 April 2014
Exchange difference
At 30 April 2015
Depreciation:
At 1 May 2013
Exchange difference
Provided during year
At 30 April 2014
Exchange difference
At 30 April 2015
Net book value:
At 30 April 2015
At 30 April 2014
At 30 April 2013
£’000
12,703
(388)
12,315
(1,379)
10,936
11,980
(371)
190
11,799
(1,321)
10,478
458
516
723
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 2015 that net of the remaining deferred
rental income creditor of €4,334,000 (£3,160,000), the property continues to be worth more than its £458,000 net book value. 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 £946,000 (2014: £1,019,000) (note 4) and finance costs were £52,000 (2014: £77,000).
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:
14 Investments in associates and subsidiaries
Investment in associates
Group
Cost:
At 30 April 2013
Exchange differences
Additions
Share of profits
Impairment
Dividends
At 30 April 2014
Exchange differences
Additions
Share of profits
Dividends
At 30 April 2015
£’000
790
(85)
121
161
(304)
(63)
620
14
146
164
(96)
848
Additions for 2015 relate to the investment in Stilla Technologies SA.
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 2014
Max Sight Ltd
Photo Direct Pty Ltd
Other associates
At 30 April 2015
Max Sight Ltd
Photo Direct Pty Ltd
Stilla Technologies SA
Other associates
Country of
incorporation
Assets
£’000
Liabilities
£’000
Revenue
£’000
Profit/(loss)
£’000
% interest
Hong Kong
Australia
Hong Kong
Australia
France
372
728
74
1,174
460
499
146
80
1,185
83
434
37
554
98
198
–
41
337
576
2,731
109
3,416
585
1,938
–
105
2,628
33.33
26.95
33.33
26.95
8.00
119
41
1
161
137
28
–
(1)
164
Included in associates is an investment in Stilla Tecnnologies SA, a French company which provides researchers with a universal and flexible
digital PCR (dPCR) solution for genetic testing. At 30 April 2015 the Group had made an initial investment giving it an interest of 8%.
2015
£’000
888
2,664
3,552
2014
£’000
994
3,976
4,970
No later than one year
After one year but no more than five years
Company
The Company has no investment property.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
14 Investments in associates and subsidiaries (continued)
Investment in associates (continued)
Company
Costs:
At 1 May 2013
Additions
Capital increase relating to share-based payment (net)
Reclassification
Disposals
At 30 April 2014
Additions
Capital increase relating to share-based payment (net)
At 30 April 2015
Provision:
At 1 May 2013
Increase
Reclassification
Decrease
At 30 April 2014
Increase
At 30 April 2015
Net book value:
At 30 April 2015
At 30 April 2014
At 1 May 2013
Associated
Subsidiary
undertakings undertakings
£’000
£’000
590
121
–
(304)
–
407
–
–
407
150
304
(304)
–
150
–
150
257
257
440
42,742
60
148
–
(388)
42,562
4
227
42,793
1,333
–
–
(388)
945
158
1,103
41,690
41,617
41,409
Total
£’000
43,332
181
148
(304)
(388)
42,969
4
227
43,200
1,483
304
(304)
(388)
1,095
158
1,253
41,947
41,874
41,849
The net capital increase relating to share-based payments relates to share options granted to 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 29.
15 Financial instruments
Group Treasury
During the year ended 30 April 2015, the Group worked to set up a centralised Group Treasury Function which came into effect from 1 May 2015.
The primary aim for this function is to manage liquidity and funding arrangements and the Group’s exposure to associated financial and market risks,
including credit risk, interest rate risk and foreign currency risk. The planned general approach for Group Treasury is one of risk reduction within a
framework of delivering total shareholder return.
Treasury operations
Overview and policy
Treasury policy is set by the Board. Group treasury activities are subject to a set of controls appropriate for the magnitude of the borrowing,
investments and Group-wide exposures. Initially the treasury function will limit itself to obtaining surplus cash from the subsidiaries and depositing
this in a bank account owned by the Parent Company. Group Treasury may expand its activities and possibly look to finance the Group’s capital
expenditure programme. Depending on the exchange rate determined by the Board bank balances may be converted into sterling, thus creating
an exchange rate exposure for the Parent but protecting the Group’s total net cash position. The Board has defined an investment strategy,
amounts and types of products to which the surplus cash may be invested, such as Government bonds.
The Board will monitor the performance of the Treasury function and will be responsible for making changes to the personnel and limits of authority
of Treasury personnel.
The Board has provided written principles for overall risk management of the planned Treasury Function. It has also defined policies and procedures
covering such areas as foreign exchange risk, interest rate risk, credit risk, the use of derivative instruments and investment of excess liquidity
(surplus funds above the immediate and short –term operational funding needs, such as working capital requirements).
Liquidity risk
During the current year, the Board worked to set up a centralised Treasury Function, which came into effect from 1 May 2015. It is planned that
surplus cash held by the operating subsidiaries, over and above balances required for working capital management would be transferred to Group
Treasury. These funds may be kept in their local currency, or converted into sterling and kept in a Parent Company bank account, where overdrafts
and bank balances are netted and interest paid or received on the net balance. Previously surplus cash was maintained by the operating subsidiaries
and invested locally in suitable products, if not remitted to the Parent.
The key objective for Group Treasury will be to protect the principal value of cash and cash equivalents, to concentrate cash at the centre to minimise
external borrowings, and to maximise the return on cash.
80
The Group may hold financial instruments (such as bank and other loans) to finance its day to day working capital requirements, for capital expenditure,
for corporate transactions (such as dividend payments to shareholders, share buybacks, acquisitions), for the management of currency and interest rate
exposure arising from its operations (which may involve the use of derivatives and swaps) and for the temporary investment of short-term funds. With a
strong net cash position, the Group currently finances its working capital and capital expenditure programmes from its own resources, resulting in no
new loans. The Group has not used swaps or derivatives in the current or comparative year. In addition, financial instruments such as trade receivables
(amounts due from customers as a result of a sale) and trade payables (arising from purchases of materials and services) arise from day to day trading.
The following notes describe the Group’s financial risk management policy and details on 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.
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.
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.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
15(b) Financial statement risk management (continued)
Risk Management Framework (continued)
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.
(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 2015 and 30 April 2014 has reduced liquidity risk for the Group.
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.
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. Once Group Treasury is operational
(planned to start on 1 May 2015) surplus cash will be deposited with Group Treasury bank deposit accounts, formally these deposits were 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
At 30 April
Group
Company
2015
£’000
327
(37)
292
(197)
385
2014
£’000
4,752
(59)
(35)
(4,331)
327
2015
£’000
846
(11)
(34)
(86)
715
2014
£’000
737
–
135
(26)
846
At 30 April 2015, trade receivables of £535,000 (2014:£1,666,000) 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 more than 60 days
Total past due
Total trade receivables
Group
Company
2015
£’000
4,932
192
133
210
535
5,467
2014
£’000
8,198
471
333
862
1,666
9,864
2015
£’000
328
25
6
39
70
398
2014
£’000
1,326
33
11
38
82
1,408
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 £6,849,000 (2014: £3,837,000) are all current.
At 30 April 2015, the Group has undrawn facilities of £10,490,000 (2014:£11,791,000). 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 and may be subject to the normal covenant conditions attached to such borrowings.
Certain lending banks may impose loan covenants on borrowings, which are normal for these types of borrowings, and, during the years
to 30 April 2015 and 30 April 2014, the Group and the Company have comfortably complied with such requirements.
The table below summarises the maturity profile of the Group’s and Company’s financial liabilities (including trade and other payables)
at 30 April 2015 and 30 April 2014 based on contractual undiscounted payments.
Group contractual cash flows
Within one year
£’000
Year 2
£’000
Year 3
£’000
Year 4
£’000
Year 5 Over 5 years
£’000
£’000
At 30 April 2015
Finance leases
Trade and other payables
At 30 April 2014
Interest bearing loans and
borrowings and interest free loans
Finance leases
Trade and other payables
Company contractual cash flows
59
26,965
27,024
177
63
27,050
27,290
45
–
45
–
64
–
64
38
–
38
–
–
–
–
28
–
28
–
–
–
–
13
–
13
–
–
–
–
–
–
–
–
–
–
–
Within one year
£’000
Year 2
£’000
Year 3
£’000
Year 4
£’000
Year 5 Over 5 years
£’000
£’000
At 30 April 2015
Trade and other payables
Interest bearing Group
balances including interest
At 30 April 2014
Trade and other payables
Interest bearing Group
balances including interest
9,663
10,931
20,594
15,869
3,372
19,241
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£’000
183
26,965
27,148
177
127
27,050
27,354
Total
£’000
9,663
10,931
20,594
15,869
3,372
19,241
Held to maturity financial assets
These largely comprise of restricted bank deposit accounts where the cash acts as security against possible shortfalls in the funding required to meet
future payments in the course of business.
(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. 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).
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
15(b) Financial statement risk management (continued)
Operational foreign exchange exposure
Where possible, the Group tries to invoice in the local currency of the respective entity. If this is not possible, 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.
Subject to the requirements of Group Treasury, as noted above, 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 may use 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.
FRS 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.
2015
Profit for the year
Total equity
2014
Profit for the year
Total equity
Reported
£’000
28,044
104,411
10%
increase
£’000
28,883
105,265
10%
decrease
£’000
27,018
103,367
21,579
104,233
21,798
104,440
21,311
103,980
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
Trade and other receivables
Sterling
Euro
Swiss Franc
US Dollar
Japanese Yen
Other currencies
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
2015
£’000
159
584
345
807
375
11
2,281
2014
£’000
4,368
86
–
929
–
–
5,383
2015
£’000
–
579
14
–
–
–
593
2015
£’000
486
2014
£’000
–
86
–
–
–
–
86
2014
£’000
547
Borrowings
At 30 April 2015 and 30 April 2014 the Group had no borrowings which were not denominated in the functional currency of the Group company
concerned.
The table below shows trade and other payables that are not in the domestic currency of the individual Group company they are held by, with the
majority arising from inter-Group trading.
Group
Company
Trade and other payables
Sterling
Euro
Swiss Franc
US Dollar
Japanese Yen
Other currencies
Analysis of net cash by currency
Group
2015
Sterling
Euro
Swiss Franc
US Dollar
Japanese Yen
Other currencies
2014
Sterling
Euro
Swiss Franc
US Dollar
Japanese Yen
Other currencies
Interest rate risk
Net cash
Mainly non-interest bearing current accounts:
- cash at bank and in hand
Deposit accounts - generally interest bearing:
- bank deposit accounts
- restricted deposit accounts
Other items
Financial assets - available-for-sale
Interest free and interest bearing loans
Interest bearing finance leases
Bank
£’000
22,052
24,791
1,902
84
7,673
2,130
58,632
24,082
24,481
4,299
200
6,515
1,419
60,996
2015
£’000
7,990
9,958
1,692
948
314
41
20,943
2014
£’000
3,171
7,513
9
1,192
675
–
12,560
2015
£’000
–
8,971
1,336
–
–
8
10,315
Financial
assets
£’000
Loans
£’000
Leases
£’000
967
649
604
–
–
–
2,220
963
786
585
–
–
85
2,419
–
–
–
–
–
–
–
–
(175)
–
–
–
(2)
(177)
–
(12)
–
–
(171)
–
(183)
–
(9)
–
–
(118)
–
(127)
2015
£’000
29,275
29,357
2,220
–
–
(183)
60,669
2014
£’000
–
6,857
–
59
–
–
6,916
Total
£’000
23,019
25,428
2,506
84
7,502
2,130
60,669
25,045
25,083
4,884
200
6,397
1,502
63,111
2014
£’000
30,645
30,351
2,334
85
(177)
(127)
63,111
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The above table shows which components of net debt are subject to interest. With the current low interest rates for bank base rates worldwide,
the interest which can be earned on bank deposits is low. The Group’s exposure to interest bearing debt (mainly finance leases) is small and a
change in interest rates will not have a material change on interest expense.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
15(b) Financial statement risk management (continued)
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 2015 and 30 April 2014.
IFRS 7 sensitivity analysis
With current low interest rates and the Group’s low level of debt financing, the impact on the total interest payable charges due to a change of
100 basis points (1%) on borrowings subject to floating rates of interest is not material. Consequently, no sensitivity tables have been presented.
Terms and debt repayment schedule
The table below shows the maturity profile and interest rates of the Groups borrowings at 30 April 2015 and 30 April 2014. 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 Company has no loans outstanding at 30 April 2015 (2014: none).
Group
Finance leases
Loans
Status
Fixed rate
Interest free
Currency
Various
Euro
Interest rate
0.0% -7.2%
0.0%
Included in the Company receivables – amounts due from subsidiaries, are loans as follows.
Floating rate Euro loans
Year of
maturity
2018
2015
2015
Carrying
amount
£’000
183
–
183
2014
Carrying
amount
£’000
127
177
304
2015
£’000
486
2014
£’000
547
The interest rate on floating rate Euro loans are 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.
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. Details of how the Group and subsidiaries are funded are shown below. There were no changes to the Group’s approach to capital
management during the year.
Group
The Group is funded by share capital and retained earnings; external borrowings in the current and comparative year were not significant.
The Group has had a strong net cash position throughout the current and comparative year.
86
Subsidiary companies
Subsidiary companies are funded by share capital and retained earnings, and where applicable local borrowings by the subsidiaries
in appropriate currencies.
The capital structure of the Group is presented below.
Cash and cash equivalents
Borrowings
Net cash (excluding restricted deposits)
Equity
2015
£’000
58,632
(183)
58,449
104,411
2014
£’000
61,081
(304)
60,777
104,233
The Group has various borrowings and available facilities that contain certain external capital requirements (covenants) that are considered normal
for these types of arrangements. The Group remains comfortably within all such covenants.
15(d) Other financial assets held to maturity and available for sale
Group
Non-current
Current
Assets
held to
maturity
2015
£’000
2,220
–
2,220
Assets
available
for sale
2015
£’000
70
–
70
Assets
held to
maturity
2014
£’000
2,334
–
2,334
Assets
available
for sale
2014
£’000
78
86
164
Assets held to maturity consist of restricted bank deposit accounts – see note 19.
Assets available for sale consist of short-term monetary funds of £nil (2014: £86,000) and investments in unlisted entities, net of impairment provisions.
In 2014 an investment in associated undertakings of £304,000, was fully impaired, and then reclassified to assets available for sale (note 14).
Company
Non-current
Current
Assets
held to
maturity
2015
£’000
967
–
967
Assets
available
for sale
2015
£’000
–
–
–
Assets
held to
maturity
2014
£’000
963
–
963
Assets
available
for sale
2014
£’000
–
1
1
Assets held to maturity consist of restricted bank deposit accounts – see note 19.
16 Trade and other receivables
Non-current assets
Other receivables
Prepayments and accrued income
Current assets
Trade receivables
Amounts due from subsidiaries
Amounts due from associated undertakings
Other receivables
Prepayments and accrued income
Group
Company
2015
£’000
1,639
45
1,684
5,467
–
–
2,593
2,814
10,874
2014
£’000
1,789
42
1,831
9,864
–
46
1,909
2,526
14,345
2015
£’000
–
–
–
398
6,849
–
159
585
7,991
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.
2014
£’000
–
–
–
1,408
3,837
–
172
614
6,031
87
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
17 Inventories
Raw materials and consumables
Work-in-progress
Finished goods
The replacement value of inventories is not materially different from that stated above.
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
2015
£’000
10,154
90
1,855
12,099
2014
£’000
8,946
12
2,238
11,196
2015
£’000
814
–
–
814
Group
Company
2015
£’000
29,275
29,357
58,632
58,632
2014
£’000
30,645
30,351
60,996
60,996
2015
£’000
2,882
18,056
20,938
20,938
2014
£’000
850
–
–
850
2014
£’000
6,209
13,711
19,920
19,920
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
Cash and cash equivalents per statement of financial position
Financial assets - held to maturity
Financial assets - available-for-sale
Current instalments due on bank loans
Non-current finance leases
Current finance leases
Notes
18
15
15
21
21
21
The Company’s net cash excludes inter-Group financing.
Group
Company
2015
£’000
58,632
2,220
–
–
(124)
(59)
60,669
2014
£’000
60,996
2,334
85
(177)
(64)
(63)
63,111
2015
£’000
20,938
967
–
–
–
–
21,905
2014
£’000
19,920
963
–
–
–
–
20,883
At 30 April 2015, £2,220,000 of the total net cash (2014: £2,334,000 ) comprised bank deposit accounts that are subject to restrictions and are
not freely available for use by the Group and the Company. These amounts are shown under financial assets held to maturity.
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.
88
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. Presentation of this information is recommended by the Financial
Reporting Council (FRC) as good practice as being of use to shareholders and analysts, in their Financial Lab Project, Net Debt Reconciliations.
Group
2014/15
Cash and cash equivalent per statement of
financial position and cash flow
Financial assets - held to maturity
- available-for-sale
Loans
Leases
2013/14
Cash and cash equivalent per statement of
financial position and cash flow
Financial assets - held to maturity
- available-for-sale
Loans
Leases
1 May
£’000
60,996
2,334
85
(177)
(127)
63,111
59,651
2,461
86
(646)
(133)
61,419
Other movements for finance leases relates to new finance leases during the year.
1 May
£’000
19,920
963
20,883
15,501
958
16,459
Company
2014/15
Cash and cash equivalent per statement of
financial position and cash flow
Financial assets - held to maturity
2013/14
Cash and cash equivalent per statement of
financial position and cash flow
Financial assets - held to maturity
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
Exchange
Other
differences movements
£’000
£’000
(3,155)
(69)
(9)
19
8
(3,206)
(2,479)
(44)
(5)
20
15
(2,493)
–
–
(31)
–
(142)
(173)
–
–
–
–
(99)
(99)
Exchange
Other
differences movements
£’000
£’000
–
–
–
–
–
–
–
–
–
–
–
–
2015
Number
2014
Number
371,794,278
371,208,211
1,435,500
373,229,778
586,067
371,794,278
Cash flow
£’000
30 April
£’000
791
(45)
(45)
158
78
937
3,824
(83)
4
449
90
4,284
58,632
2,220
–
–
(183)
60,669
60,996
2,334
85
(177)
(127)
63,111
Cash flow
£’000
30 April
£’000
1,018
4
1,022
4,419
5
4,424
2015
£’000
1,859
7
1,866
20,938
967
21,905
19,920
963
20,883
2014
£’000
1,856
3
1,859
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.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
20 Share capital and reserves (continued)
Share capital (continued)
Share options, which have been granted to senior staff, including directors, to purchase Ordinary shares of 0.5p each, are as follows:
Last date
Date
Lapsed
on which
Date options At 30 April Granted or forfeited Exercised At 30 April Exercise from which
granted
2014 during year during year during year 2015 price exercisable exercisable
29 Jan 2009 95,000 – (40,000) (5,000) 50,000 10.92p 29 Jan 2012 28 Jan 2016
20 Jan 2010 44,093 – – – 44,093 36.37p 20 Jan 2013 19 Jan 2017
12 Jul 2010 1,140,500 – (30,000) (1,095,500) 15,000 36.33p
11 Jul 2017
4 Jul 2011 1,085,000 – (10,000) (335,000) 740,000 65.25p
3 Jul 2018
13 Dec 2011 250,000 – – – 250,000 53.50p 13 Dec 2014 12 Dec 2018
4 Jul 2012 1,926,000 – – – 1,926,000 39.17p
3 Jul 2019
9 Jul 2013 2,030,000 – (50,000) – 1,980,000 90.63p
8 Jul 2020
11 Jul 2014 – 1,331,700 – – 1,331,700 145.33p
10 Jul 2021
6,570,593 1,331,700 (130,000) (1,435,500) 6,336,793
4 Jul 2015
9 Jul 2016
11 Jul 2017
12 Jul 2013
4 Jul 2014
Last date
Lapsed
on which
Date options At 30 April Granted or forfeited Exercised At 30 April Exercise
granted
exercisable
2013 during year during year during year 2014 price
29 Jan 2009 115,000 – – (20,000) 95,000 10.92p 29 Jan 2012 28 Jan 2016
20 Jan 2010 168,200 – – (124,107) 44,093 36.37p 20 Jan 2013 19 Jan 2017
11 Jul 2017
12 Jul 2010 1,915,000 – (432,540) (341,960) 1,140,500 36.33p
4 Jul 2011 1,215,000 – (30,000) (100,000) 1,085,000 65.25p
3 Jul 2018
13 Dec 2011 250,000 – – – 250,000 53.50p 13 Dec 2014 12 Dec 2018
3 Jul 2019
4 Jul 2012 1,926,000 – – – 1,926,000 39.17p
8 Jul 2020
9 Jul 2013 – 2,030,000 – – 2,030,000 90.63p
5,589,200 2,030,000 (462,540) (586,067) 6,570,593
Date
from which
exercisable
12 Jul 2013
4 Jul 2014
4 Jul 2015
9 Jul 2016
Full details of directors’ share options are given in the Remuneration report on pages 42 to 44.
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.
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 2015 is 80.9p (2014: 59.0p) and the weighted average exercise price
of options exercisable at 30 April 2015 is 58.6p (2014: 34.5p).
The weighted average share price for options exercised during the year ended 30 April 2015 was 133.6p (30 April 2014: 106.1p).
The weighted average remaining years for options outstanding at the year end date is 4.8 years (2014: 5.0 years).
90
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 2015 and 30 April 2014:
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
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
29 January
2009
3 years
52.80%
10.75p
10.92p
3.25years
0.00%
2.52%
4.693p
20 January
2010
3 years
69.10%
35.50p
36.67p
3.25years
0.70%
2.27%
16.36p
4 July 13 December
2011
2011
3 years
3 years
63.20%
65.40%
50.25p
64.00p
65.25p
53.50p
3.25years
3.25years
4.48%
3.13%
0.50%
1.32%
16.38p
24.46p
9 July
2013
3 years
48.50%
94.00p
90.63p
3.25years
3.83%
0.62%
26.20p
12 July
2010
3 years
70.10%
38.00p
36.33p
3.25years
3.29%
1.27%
15.95p
4 July
2012
3 years
58.30%
38.00p
39.17p
3.25years
6.58%
0.46%
10.23p
11 July
2014
3 years
39.10%
141.00p
145.33p
3.25years
2.66%
1.28%
32.20p
The charge for share-based payments is £371,000 (2014: £277,000) and for the Company the charge is £144,000 (2014: £129,000).
Share price volatility is based on historical volatility.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
20 Share capital and reserves (continued)
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 2015 and 30 April 2014 the Company held no shares in treasury.
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.
Company
Other reserves
The Company’s other reserves include £ 201,000 (2014: £201,000) arising on the redemption of the deferred shares and £1,198,000 (2014:
£971,000) relating to the fair value of options granted to employees of Group undertakings (note 14).
The Group’s and the 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 amounts charged to profit and loss for all post-employment benefits are shown in note 5.
The amount shown in the statement of financial position is detailed as follows:
Company defined benefit obligations
Overseas employment benefit obligations
Overseas defined benefit scheme
Group
Company
2015
£’000
–
3,318
973
4,291
2014
£’000
–
3,094
324
3,418
2015
£’000
–
–
–
–
2014
£’000
–
–
–
–
Photo-Me International plc defined benefit pension scheme
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 valuation being at 1 June 2012. The next valuation will be performed with an effective
date of 1 June 2015.
21 Financial Liabilities
Reconciliation of the movement in the present value of the defined benefit obligation
Non-current liabilities
Finance lease creditors
Current liabilities
Current instalments due on loans
Finance lease creditors
Group
Company
2015
£’000
124
124
–
59
59
2014
£’000
64
64
177
63
240
2015
£’000
2014
£’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 0.4% and 1.0%.
At 30 April 2015 there were no loans outstanding.
Obligations under finance leases
The Group has entered into finance lease arrangements for certain items of property, plant and equipment, for periods of up to four (2014: four) years
(note 12). The total finance lease creditor at 30 April 2015 is £183,000, £59,000 due within one year and £124,000 due between two and five years,
(2014: total finance lease creditor £127,000, £63,000 due within one year and £64,000 due within two to five years).
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 and defined contribution schemes.
Defined benefit plans
A defined benefit plan is a pension arrangement under which participating members receive a benefit at retirement. The amount is determined by
the plan rules and is dependent on such factors as age, years of service and pensionable pay and is not dependent on contributions made by the
Company or members. The income statement service cost, in respect of defined benefit plans, represents the increase in the defined benefit liability
arising from pension benefits accrued by members in the current period. The Company having such plans is exposed to investment and other
experience risks and may need to make additional contributions where it is estimated that the benefits will not be covered by the assets of the plan.
As is explained below, the defined benefit plan for the Company has been closed to new members for over 30 years.
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. These comprise the impact on the defined benefit liability of changes in demographic and financial assumptions
compared with the start of the year, actual experience being different to those assumptions and the return on plan assets above the amount included
in net pension interest.
Defined contributions plans are arrangements in which the benefits paid to participants are linked to the amount of contributions paid and the
performance of the scheme. Such plans are independent of the Company and the Group and the Company and the Group have no exposure to
investment and experience risks. The income statement charge for these plans represents the contributions paid by the Group based on a
percentage of employees’ pay.
92
Present value of defined benefit obligation at beginning of year
Current service cost
Interest cost
Contributions by members
Actuarial (gains)/losses on fund liabilities arising in demographic assumptions
Actuarial losses/(gains) from changes in financial assumptions
Actuarial losses/(gains) on liabilities from experience
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
Interest income on fund assets
Remeasurement gains/(losses) on assets
Contributions by the Company
Contributions by members
Benefits paid
Fair value of plan assets at end of year
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
Amount recognised in statement of financial position
2015
£’000
5,922
14
243
1
(18)
659
40
(299)
6,562
2015
£’000
6,379
262
581
14
1
(299)
6,938
2015
£’000
6,562
(6,938)
(376)
376
–
2014
£’000
6,696
22
249
1
57
(230)
(246)
(627)
5,922
2014
£’000
6,973
262
(357)
127
1
(627)
6,379
2014
£’000
5,922
(6,379)
(457)
457
–
93
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
22 Post-employment benefit obligations (continued)
The cumulative amount of remeasurement 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 £1,375,000 (2014: loss of £1,375,000) in respect of the Company’s defined benefit scheme.
This has been charged to retained earnings.
2015
£’000
2014
£’000
Amount recognised in profit and loss and other comprehensive income
Amount recognised in profit and loss
Current service cost
Interest on net defined liability/(asset)
Total charge
Pension expense recognised in profit and loss
Remeasurement in other comprehensive income
Return on Scheme assets (in excess of)/below that recognised in net interest
Actuarial losses/(gains) due to changes in financial assumptions
Actuarial (gains)/losses due to changes in demographic assumptions
Actuarial losses/(gains) on liabilities arising from experience
Adjustment due to the asset ceiling
Adjustment due to minimum funding requirement
Total expense amount recognised in other comprehensive income
Total expense amount recognised in comprehensive income
The amounts shown above are included in staff costs (note 5) and in administrative expenses.
An analysis of the assets of the plan is as follows:
14
–
14
14
(581)
659
(18)
40
(100)
–
–
14
Growth assets
Insurance policies and bonds
Other
2015
2014
£’000
827
6,097
14
6,938
%
12
88
–
100
£’000
813
5,530
36
6,379
22
(2)
20
20
357
(230)
57
(246)
169
–
107
127
%
13
87
–
100
Experience gains/(losses) on fund assets
Experience (losses)/gains on plan liabilities
- as a percentage of present value of plan liabilities
Differences between expected and actual return on plan assets
- as a percentage of present value of plan assets
2015
£’000
581
(40)
–
–
–
2014
£’000
(357)
246
–
–
–
2013
£’000
–
(731)
(11%)
602
9%
2012
£’000
–
(316)
(5%)
(165)
(3%)
2011
£’000
–
(42)
(1%)
131
2%
The figure of liabilities for 2015, 2014 and 2013 relates to gains/(losses) in respect of liability experience only, and excludes any change in liabilities
in respect of changes to the actuarial assumptions used, previous years’ figures include changes in respect of the actuarial assumptions used.
The Company’s best estimate of contributions to be paid by the Company next year is £14,000 (2014: £14,000).
Sensitivity to key assumptions
The key assumptions used for the IAS 19 valuation are: discount rate, inflation rate and mortality. If different assumptions were used, this could have
a material effect on the results disclosed. The table below shows the sensitivity to the key assumptions noted above.
Service cost
£’000
Year ended 30 April 2015
14
As reported
Following a 0.1% decrease in the discount rate
14
Following a 0.1% increase p.a. in the inflation assumption 14
14
Following an increase in the life expectancy of one year
Net Interest
£’000
–
–
–
–
Total
profit and
loss charge
£’000
14
14
14
14
Plan
assets
£’000
6,938
6,969
6,941
7,117
Defined
benefit
obligation
£’000
6,562
6,649
6,589
6,872
Surplus
£’000
376
320
352
245
The sensitivity information shown above has been prepared using the same method as adopted when adjusting the results of the latest valuation
to the balance sheet data. This is the same approach as has been adopted in previous years.
Overseas post-employment benefit obligations
Provisions for obligations to make termination payments on retirement, to employees who are not members of the pension and retirement schemes,
are as follows:
(cid:129)
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. Nippon Auto–Photo K.K. agreed with the employees that 50 % of the liability for the
retirement provision will be paid in cash to an independently controlled defined continuation scheme, with the balance to be met by the
company when the employee leaves.
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 2015 and 30 April 2014. This actuarial valuation incorporated the
following principal assumptions in arriving at the present value of the obligations:
There were no financial instruments of the Company included in the plan assets (2014: none) and there were no property assets occupied
by the Company (2014: none).
(cid:129)
Principal actuarial assumptions
Discount rate for scheme liabilities
Rate for increase in salaries
Price inflation
Pension increases
30 April 2015
%
3.30
4.10
3.10
3.00
30 April 2014
%
4.20
4.30
3.30
3.20
Discount rate
Rate of increase in salaries
Retirement age
Inflation rate
Mortality table
2015
1.25%
2.00%
62-64 years
2.00%
TGH/TGF 05
2014
2.75%
2.50%
62-64 years
2.00%
TGH/TGF 05
The mortality tables used for 2015 are S1NXA Light tables with CMI 2014 projections and a long-term rate of improvement of 1.5% p.a.
The mortality tables used for 2014 are S1NXA Light tables with CMI2013 projections and a long-term rate of improvement of 1.5% p.a.
The mortality assumptions allow for expected future improvements in mortality rates.
Male currently aged 65
Female currently aged 65
Male currently aged 45
Female currently aged 45
History of assets, liabilities and actuarial gains and losses
Fair value of defined benefit obligation
Fair value of assets
Surplus
94
2015
24.0 years (age 89.00)
25.3 years (age 90.30)
26.0 years (age 91.00)
27.6 years (age 92.60)
2014
24.0 years (age 89.00)
25.3 years (age 90.30)
26.0 years (age 91.00)
27.6 years (age 92.60)
2015
£’000
6,562
6,938
376
2014
£’000
5,922
6,379
457
2013
£’000
6,696
6,973
277
2012
£’000
5,865
5,923
58
2011
£’000
5,450
5,624
174
Management believes that the book value for retirement obligations in France fairly states the position at 30 April 2015 and 30 April 2014.
The movement on these schemes is as follows:
At 1 May
Exchange differences
Utilised and other movements
At 30 April
2015
£’000
3,094
(320)
544
3,318
Utilised and other movements for 2015 include amounts reflected in other comprehensive income of £353,000 and £191,000 charged to
profit and loss (note 5).
2014
£’000
3,384
(234)
(56)
3,094
95
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
22 Post-employment benefit obligations (continued)
Overseas pension schemes
The Group’s Swiss subsidiary, Prontophot (Schweiz) A.G. participates in funded multi-employer pension schemes. A guaranteed return for such
employees’ schemes is mandated by the Swiss state. An actuarial valuation was performed at 30 April 2015 and 30 April 2014 by independent actuaries.
Reconciliation of the movement in the present value of the defined benefit obligation
Present value of defined benefit obligation at 1 May
Exchange difference
Contribution by members
Current service cost
Interest cost
Past service cost
Remeasurement losses/(gain) on plan liabilities
Benefits (paid)/deposited
Administration costs
Present value of defined benefit obligation at 30 April
Fair value of plan assets at 1 May
Exchange difference
Contributions by company and members
Expected return on plan assets
Remeasurement gain on plan assets
Benefits (paid)/deposited
Fair value of plan assets at 30 April
Net liability at 1 May
Exchange difference
Increase/(decrease) in liability
Net liability at 30 April
Amounts recognised in comprehensive income
Amount recognised in profit and loss
Service costs
Current service cost
Past service cost
Administration expenses
Interest on net defined benefit liability
Total expenses recognised in profit and loss
Amount recognised in other comprehensive income
Return on scheme assets
Actuarial losses/(gains) on defined benefit obligation
Total amount recognised on other comprehensive income
Total amount recognised in profit and loss and other comprehensive income
Cash
Equities & debt instruments
Other
Total plan assets
96
2015
£’000
30
1,750
711
2,491
%
1
70
29
100
2015
£’000
2,529
37
33
169
52
36
571
(47)
1
3,381
2015
£’000
2,205
27
167
45
94
(47)
2,491
2015
£’000
324
10
556
890
2015
£’000
169
36
1
7
213
(94)
571
477
690
2014
£’000
7
1,526
672
2,205
2014
£’000
2,383
(72)
34
162
49
–
(78)
51
–
2,529
2014
£’000
2,002
(61)
170
42
1
51
2,205
2014
£’000
381
(11)
(46)
324
2014
£’000
162
–
–
7
169
(1)
(34)
(35)
134
%
–
69
31
100
Principal actuarial assumptions
Discount rate
Expected return on plan assets at end of year
Rate of increase in salaries
Price inflation
Pension increase
30 April 2015
%
0.80
n/a
2.00
1.00
0.00
30 April 2014
%
2.00
n/a
2.00
1.00
0.00
The normal retirement age for males is between 60 - 65 years and for females between 59 - 64 years for both 2015 and 2014.
The mortality tables used in 2015, 2014 and 2013 were the BVG 2010 GT tables.
History of assets, liabilities and actuarial gains and losses
Present value of defined benefit obligation
Fair value of assets
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
2015
£’000
3,381
2,491
(890)
2015
(571)
(17%)
94
3%
2014
£’000
2,529
2,205
(324)
2014
78
3%
1
0%
2013
£’000
2,383
2,002
(381)
2013
205
9%
98
5%
2012
£’000
3,297
2,746
(551)
2012
(372)
(13%)
162
6%
2011
£’000
3,217
3,029
(188)
2011
(71)
(2%)
191
7%
The 2015 and 2014 figures in the table above represent actuarial gains on plan liabilities and plan assets.
Sensitivity to key assumptions
The key assumptions used for the IAS 19 valuation are: discount rate, inflation rate and mortality.
If different assumptions were used, this could have a material effect on the results disclosed.
The table below shows the sensitivity to the key assumptions noted above.
Defined benefit obligation as reported
- with discount rate -0.25%
- with discount rate +0.25%
- with salary decrease -0.25%
- with salary increase +0.25%
- with life expectancy +1 year
- with life expectancy -1 year
Increase/
(decrease)
in defined
benefit
obligation
£’000
–
164
(151)
(39)
39
50
(51)
Defined
benefit
obligation
£’000
3,381
3,545
3,230
3,342
3,420
3,431
3,330
The Group's best estimate for contributions to be paid by the company next year to the scheme is £141,000 (2014: £153,000).
The amount recognised in the income statement for this scheme was £214,000: £170,000 included in cost of sales and £44,000 included
in administrative expenses (2014: £169,000: £137,000 included in cost of sales and £32,000 included in administrative expenses).
In addition to the above, Copyphot SA, participates in funded multi-employer pension schemes. A guaranteed return for such employees’
schemes is mandated by the Swiss State. An actuarial valuation has not been performed for this company at 30 April 2015. The liability for this
at 30 April 2015 is £ 83,000 and the charge for the year was £ 20,000.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
23 Provisions
Group
At 30 April 2013
Exchange differences
Utilised and other movements
Charged to income statement
At 30 April 2014
Amount shown as non-current liability
Amount shown as current liability
At 30 April 2014
Exchange differences
Utilised and other movements
Charged to income statement
At 30 April 2015
Amount shown as non-current liability
Amount shown as current liability
Employee
related claims
£’000
2,170
(57)
(717)
322
1,718
–
1,718
1,718
1,718
(161)
(626)
118
1,049
–
1,049
1,049
Product
warranties
£’000
2,995
(80)
(474)
–
2,441
–
2,441
2,441
2,441
(143)
(2,113)
–
185
–
185
185
Other
£’000
3,139
(128)
(934)
2,030
4,107
10
4,097
4,107
4,107
(503)
(769)
1,488
4,323
17
4,306
4,323
Total
£’000
8,304
(265)
(2,125)
2,352
8,266
10
8,256
8,266
8,266
(807)
(3,508)
1,606
5,557
17
5,540
5,557
Employee related claims
Certain overseas Group undertakings have made provision for claims made by former employees.
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
Additions to other provisions relate for 2015 to property restitution costs and for 2014 potential legal claims against certain Group companies.
These have been calculated by management based on legal advice and are expected to be incurred in the next financial year.
Company
At 30 April 2013
Utilised and other movements
Charged to income statement
At 30 April 2014
Amount shown as non-current liability
Amount shown as current liability
At 30 April 2014
Charged to income statement
At 30 April 2015
Amount shown as non-current liability
Amount shown as current liability
Employee
related claims
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
Product
warranties
£’000
1
(1)
–
–
–
–
–
–
–
–
–
–
–
Other
£’000
3
–
7
10
10
–
10
10
7
17
17
–
17
Total
£’000
4
(1)
7
10
10
–
10
10
7
17
17
–
17
98
24 Deferred taxation
Deferred tax comprises:
Timing difference 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
The movements on deferred taxation during the year were as follows:
Opening balance
Exchange differences
Charge/(credit) for the year in income statement
Amounts (credited)/charged to other comprehensive income
Closing balance
Group
Company
2015
£’000
(956)
542
(1,280)
(123)
(628)
(2,445)
(3,512)
1,067
(2,445)
2014
£’000
(766)
291
(1,168)
(805)
(402)
(2,850)
(4,231)
1,381
(2,850)
2015
£’000
(1,365)
–
–
–
(337)
(1,702)
(1,702)
–
(1,702)
Group
Company
2015
£’000
(2,850)
(196)
1,003
(402)
(2,445)
2014
£’000
(1,299)
(110)
(1,452)
11
(2,850)
2015
£’000
(2,334)
–
813
(181)
(1,702)
2014
£’000
(1,529)
–
–
(731)
(74)
(2,334)
(2,334)
–
(2,334)
2014
£’000
(2,029)
–
(305)
–
(2,334)
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 or where the Group is able to control the remittance of earnings and it is possible that such
earnings will not be remitted in the foreseeable future.
Unrecognised deferred tax assets
Deferred tax assets amounting to £1,009,000 (2014: £1,260,000) arising on temporary differences of £4,308,000 (2014: £5,261,000), 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 in less than one year
Expiring between two and 20 years
No expiry date
Group
2015
£’000
–
230
779
1,009
2014
£’000
5
281
974
1,260
In addition, the Group has an unrecognised deferred tax asset on gross capital losses of £3,737,000 (2014: £2,167,000), of which £3,608,000
(2014: £2,167,000) relate to the Company, which have not been recognised as their future economic benefit is not certain.
Factors that may affect future tax charges in the UK
The rate of UK corporation tax changed from 21% to 20% on 1 April 2015. UK deferred tax has been calculated at 20% for balances at
30 April 2015 and 30 April 2014, apart from losses which were utilised before 31 March 2015.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
25 Trade and other payables
Amounts shown as non-current liabilities
Accruals and deferred income
Amounts shown as current liabilities
Trade payables
Amounts owed to subsidiaries
Other taxes and social security costs
Other payables
Accruals and deferred income
Group
2014
£’000
3,840
3,840
14,678
–
4,293
5,988
7,353
32,312
Company
2014
£’000
–
–
5,091
10,949
860
106
3,053
20,059
2015
£’000
–
–
4,398
13,226
765
103
2,822
21,314
2015
£’000
2,050
2,050
15,779
–
4,600
5,437
6,860
32,676
Included in the Company figures – amounts owed to subsidiaries, are borrowings as detailed in note 15.
26 Operating leases and site agreements
The future minimum lease payments under non-cancellable operating leases are as follows:
27 Capital commitments and contingent liabilities
Capital commitments
The table below shows the amount of capital commitments with third parties for property, plant and equipment and the amounts placed with the
Group’s procurement companies for vending equipment.
Amounts with third parties
For supply of property, plant & equipment - mainly vending equipment
Amounts with Group companies
Amount of vending equipment contracted by the Group’s operating
companies with the Group’s procurement companies
Group
Company
2015
£’000
9,640
2014
£’000
6,118
2015
£’000
–
2014
£’000
-
173
589
146
540
Contingent liabilities
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.
Group
Company
The Group has no contingent liabilities with regard to its interest in the associated undertakings (2014: none).
Land and buildings
Not later than one year
After one year but not more than five years
Other
Not later than one year
After one year but not more than five years
After five years
Total
Not later than one year
After one year but not more than five years
After five years
Site owner agreements
Not later than one year
After one year but not more than five years
After five years
Restated as per note 2 and below.
2015
£’000
666
1,074
1,740
1,010
1,028
7
2,045
1,676
2,102
7
3,785
7,126
9,932
3,154
20,212
Restated
2014
£’000
689
988
1,677
1,071
1,016
–
2,087
1,760
2,004
–
3,764
6,595
14,746
924
22,265
2015
£’000
151
362
513
412
246
–
658
563
608
–
1,171
1,895
843
–
2,738
Restated
2014
£’000
147
513
660
504
417
–
921
651
930
–
1,581
842
615
–
1,457
28 Related parties
The following transactions were carried out with related parties:
Key management compensation
Salaries and other short-tem employee benefits excluding long-term
incentives and pension contributions
Post-employment benefits
Share-based payments - charge
Group
Company
2015
£’000
1,491
9
99
1,599
2014
£’000
1,461
8
94
1,563
2015
£’000
1,491
9
99
1,599
2014
£’000
1,461
8
94
1,563
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. These figures include amounts payable to third party companies for services of the directors. Further information about the
remuneration of the directors is given in the Remuneration report on pages 34 to 46. Certain executive directors, with UK salaries, are entitled to join
the Company’s Group Personal Pension Plan, to which the Company contributes 5% of their basic salaries. The charge for the year was £9,000
(2014: £8,000). No director who served during the year was a member of the Company’s defined benefit pension scheme (2014: none). The gain
made by the directors in exercising options during the year was £nil (2014: £122,000).
Directors of the Company control 21.43% of the Ordinary shares of the Company. The interests of the directors are shown on page 43
of the Remuneration report.
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 March 2015 the IASB published a Project Update: Leases Practical implications of the new Leases Standard and In February 2015 the IASB
published a Project Update: Leases Definition of a Lease. Based on examples and definitions proposed in these documents, the Board has decided
to show separately the obligations arising under commission agreements with site owners which extend beyond 12 months, as such agreements do
not appear to meet the definition of a lease. Previously the Group include such agreements in property operating leases. Comparative figures have
been restated in this note and in note 4.
The Group and the Company have also 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 shown in the table above 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.
100
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
28 Related parties (continued)
Sales of goods and services, purchases and year end balances
Sales of goods and services
Associates
Purchases of goods and services
Related parties other than associates
Trade and other receivable balances
Associates
Group
Company
2015
£’000
2014
£’000
2015
£’000
2014
£’000
92
92
-
-
-
-
122
122
119
119
46
46
-
-
-
-
-
-
-
-
-
-
-
-
Transactions with related parties other than associates refer to transactions with companies in which certain directors have declared an interest.
All transactions with related parties were conducted at arm’s-length in the ordinary course of business.
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.
The Company has the following transactions with related parties.
Defined benefit pension scheme
Administration costs of company defined benefit scheme
Transactions with subsidiaries
Sales
Purchases
Amounts owed by subsidiaries
Amounts owed to subsidiaries
Other items
Interest due from subsidiaries
Interest paid to subsidiaries
Intercompany fee due from subsidiaries
Intercompany fees charged by subsidiaries
Property, plant and equipment
- sold to subsidiaries
- acquired from subsidiaries
Intangible assets
- acquired from subsidiaries
Dividend income
- from subsidiaries
Transactions with associates
Dividends received from associates
102
2015
£’000
39
2015
£’000
54
5,707
6,849
13,226
5
32
8,681
1,358
132
3,056
–
2014
£’000
58
2014
£’000
172
5,409
3,837
10,949
6
69
6,357
1,232
-
3,879
5,614
8,430
13,611
2015
£’000
96
2014
£’000
63
29 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, 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 group operates in three main geographical areas, Asia, Europe and the United Kingdom and Ireland as described in note 3. The principal
activity of the subsidiary and associated undertakings are shown below; operations refers to the operation of unattended vending equipment, mainly
photobooths and laundry machines, production refers to the manufacture and procurement of the vending equipment and sales refers to the sale
of photographs and related services.
Subsidiary undertakings
Copyphot S.A
Fotofix-Schnellphotoautomaten G.m.b.H.
Jolly Roger (Amusement Rides) Limited
KIS S.A.S.
Nippon Auto-Photo Kabushiki Kaisha
Photomatico (Singapore) Pte. Limited
Photomaton S.A.S.
Photo Me France S.A.S.
Photo-Me Ireland Limited
Photo-Me (Shanghai) Co. Ltd.
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
Associated undertakings
Max Sight Limited
Photo Direct Pty Ltd
Stilla Technologies SA
30 Assets held for sale
Assets and liabilities held for sale
Assets held for sale
Principal
activity
Group’s
interest*
Country of
incorporation
Operations
Operations
Production
Production
Operations
Operations
Operations
Investment
Operations
Operations
Operations
Operations
Operations
Operations
Property
Property
Operations
Sales
Biotechnology
100%*
100%
100%
100%*
100%
100%
100%*
100%
100%
100%*
100%
100%
100%
100%
61%*
100%*
33%
27%
8%
Switzerland
Germany
England
France
Japan
Singapore
France
France
Ireland
China
Austria
Belgium
Holland
Switzerland
France
France
Hong Kong
Australia
France
Group
Company
2015
£’000
–
2014
£’000
705
2015
£’000
–
2014
£’000
705
There were no assets held for sale at 30 April 2015. Assets held for sale at 30 April 2014 for both the Group and the Company of £705,000
consisted of vacant land in Bookham. Contracts were exchanged for the sale of the land on 5 June 2014 for £4,200,000, with settlement in cash
on completion one month later.
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Notes to the Financial Statements
for the year ended 30 April 2015
continued
Five Year Summary
31 Business combinations and disposals
Business combinations
On 14 May 2014 the Group acquired 100% of the share capital and voting interests in Copyphot SA, a small operating company in Switzerland.
Income statement (unaudited)
The table below summarises the fair value of assets acquired, liabilities assumed and the consideration paid.
Intangible assets
Property, plant and equipment
Inventory
Trade and other receivables
Cash and cash equivalents
Total assets
Post-employment benefit obligations
Trade and other payables
Total liabilities
Total identifiable net assets
Total net assets excluding cash and cash equivalents
Goodwill
Cash consideration
Less cash acquired
Price paid net of cash acquired
£’000
112
233
22
93
11
471
33
518
551
(80)
(91)
513
422
433
11
422
The revenue included in the consolidated income for the year ended 30 April 2015 contributed by Copyphot SA was £724,000.
As a result of this acquisition, the Group is expected to strengthen its presence in the Swiss market and to benefit from future cost savings.
Goodwill of £513,000 arose on this acquisition.
Disposals
Transactions with non-controlling interests.
During the year ended 30 April 2015 the Group disposed of its 51% interest in Photo-Me Hungary KFT, a small operating company,
to its other shareholder for a total consideration of €110,000 (£80,000), which was the Group’s share of the net assets.
The profit on this transaction is shown in finance income after including the recycling of accumulated exchange differences through
the income statement.
Revenue
UK & Ireland
Europe
Asia
Total revenue
Operating profit after special items before finance costs
Net finance income/(cost)
Profit before taxation
Taxation
Profit after taxation
Attributable to:
- equity owners of the Parent
- Non-controlling interests
Earnings per share - basic
Earnings per share - diluted
Dividends - interim
- final
- special
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
Share premium
Treasury shares
Reserves
Equity of the Parent
Non-controlling interests
Total equity
Total non-current liabilities
Total current liabilities
Total equity and liabilities
Net cash
2015
£’000
44,652
94,345
38,205
177,202
38,370
126
38,496
(10,452)
28,044
27,900
144
28,044
7.49p
7.43p
2.34p
2.54p
–
4.88p
2015
£’000
16,687
48,721
848
7,486
82,474
-
156,216
1,866
7,131
-
94,510
103,507
904
104,411
7,549
44,256
156,216
60,669
2014
£’000
44,927
102,932
38,739
186,598
30,266
(173)
30,093
(8,514)
21,579
21,422
157
21,579
5.77p
5.70p
1.80p
1.95p
2.00p
5.75p
2014
£’000
15,687
47,045
620
8,474
86,680
705
159,211
1,859
6,521
-
94,734
103,114
1,119
104,233
8,713
46,265
159,211
63,111
2013
£’000
45,744
104,913
44,933
195,590
24,199
107
24,306
(6,746)
17,560
17,405
155
17,560
4.78p
4.76p
1.50p
1.50p
3.00p
6.00p
2013
£’000
16,715
46,057
790
6,376
85,872
-
155,810
1,856
6,287
-
89,018
97,161
1,197
98,358
9,847
47,605
155,810
61,419
2012
£’000
46,173
114,045
47,623
207,841
20,019
121
20,140
(5,594)
14,546
14,349
197
14,546
3.97p
3.95p
1.25p
1.25p
–
2.50p
2012
£’000
18,853
47,275
592
6,877
86,075
-
159,672
1,850
5,873
(5,802)
93,919
95,840
1,001
96,841
13,292
49,539
159,672
51,832
2011*
£’000
43,277
122,892
53,651
219,820
18,388
(385)
18,003
(4,252)
13,751
13,608
143
13,751
3.77p
3.74p
1.00p
1.00p
–
2.00p
2011
£’000
20,461
52,596
598
6,922
97,539
-
178,116
1,844
5,718
(5,802)
86,060
87,820
935
88,755
20,595
68,766
178,116
40,679
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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.
Financial & operating statistics
Capital expenditure - photobooths & vending machines £’000
Capital expenditure - research & development £’000
EBITDA £’000
EBITDA % of revenue
Number of vending sites
2015
18,287
2,560
55,251
31.2
44,600
2014
17,327
1,125
47,803
25.6
43,850
2013
16,381
1,058
44,927
23.0
43,150
2012
15,032
2,169
44,033
21.2
43,000
2011
15,853
3,358
47,568
21.6
43,700
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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Company Information & Advisors
Shareholder Information
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 LLP
1 Forest Gate, Brighton Road
Crawley, RH11 9PT
Brokers
Liberum Capital Ltd
Ropemaker Place, 25 Ropemaker Street
London, EC2Y 9LY
finnCap Limited
60 New Broad Street
London, EC2M 1JJ
Bankers
Lloyds Bank plc
City Office, 11–15 Monument Street
London, EC3V 9JA
Santander UK plc
2 Triton Square, Regent’s Place
London, NW1 3AN
Financial public relations
Madano Partnership Ltd
76 Great Suffolk Street
London, SE1 0BL
Registrars
Capita Asset Services
The Registry, 34 Beckenham Road
Beckenham, Kent , BR3 4TU
Analysis of registered shareholdings at 24 June 2015
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
Number
of holdings
Number of
Ordinary
shares
% of issued
Ordinary
share capital
2,087
414
16
2,517
1,234
947
227
63
18
28
2,517
8,432,344
318,818,961
45,978,473
373,229,778
612,906
2,973,902
7,383,012
14,461,936
13,619,206
334,178,816
373,229,778
2.3
85.5
12.3
100.0
0.2
0.8
2.0
3.9
3.6
89.5
100.0
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 each
(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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Photo-Me International plc
Annual Report & Accounts 2015
Photo-Me International plc
Annual Report & Accounts 2015
Shareholder Information
continued
Chairman’s Closing Message
Transfer office and registration services
Capita Asset Services Limited act on behalf of the Company. All shareholder enquiries, notifications of change of address, dividend mandates, etc.
should be referred to them at:
John Lewis
Non-executive Chairman
Capita Asset Services
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 Asset Services 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 2015)
Full-year results
(to 30 April 2016)
Dividend
Final (year to 30 April 2015) – ex-dividend date
– record date
– payment date
21 October 2015
Announcement in December 2015
Announcement in June/July 2016
8 October 2015
9 October 2015
12 November 2015
“ The business is well positioned
for growth and our net cash
position remains healthy.”
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Designed and produced by effektiv
+44 (0)20 7251 7720 / www.effektiv.co.uk
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