ANNUAL REPORT 2017
About Photo-Me
WE ARE
an international market leader in automated instant-service equipment,
with 48,000 vending units across 18 countries.
OUR VISION
is to realise shareholder value as the go-to provider for multiple instant vending
services, located in the most convenient locations, and to become the leader in
digital and biometric security identification solutions.
OUR MISSION
is to extend the suite of services available through our established network and
relationships through investment in technological innovation and diversification
of our operations in existing and new geographies.
Financial Highlights
Reported revenue
Cash generated from operations
Reported EBITDA
16.7%
increase
214.7
184.4
177.2
250,0
200,0
150,0
100,0
50,0
0
70,0
60,0
50,0
40,0
30,0
20,0
10,
0
18.6%
increase
61.3
51.4
49.2
80,0
70,0
60,0
50,0
40,0
30,0
20,0
10,
0
22.0%
increase
69.2
56.7
55.3*
2017
2016
2015
2017
2016
2015
2017
2016
2015
33%
32%
31%
30%
29%
28%
27%
£ millions
£ millions
Profit before
tax (£m)
60,0
50,0
40,0
30,0
20,0
10,0
0
19.7%
increase
48.0
40.1
38.2
Earnings per
share (diluted) (p)
10,00
20.1%
increase
8,00
6,00
4,00
2,00
0
9.27
7.72
7.43
£ millions
EBITDA Margin
Total ordinary dividend
per ordinary share (p)
20.0%
increase
7.03
5.86
4.88
8,00
7,00
6,00
5,00
4,00
3,00
2,00
1,00
0
2017
2016
2015
2017
2016
2015
2017
2016
2015
£ millions
£ millions
£ millions
* Includes profit on sale of land of £3.5m
Entrepreneur of the Year Award
Serge Crasnianski, Chief Executive Officer
was presented with the Entrepreneur of
the Year Award at the prestigious PLC
Awards 2016, held at the Grosvenor
House Hotel in London.
This award recognises leadership, whilst maintaining the essential
entrepreneurial spirit that continues to drive the Group, the management
structure in place to cope with the demands of running a public company
and the proactive motivation of the management team and all employees.
Caption: Kevin Burrowes, Executive Board Member, Clients and Markets Leader, PwC; Sam Smith, CEO, finnCap;
Serge Crasnianski, CEO, Photo-Me International plc, and BBC presenter Naga Munchetty
CONTENTS
Entrepreneur of the Year Award
About Photo-Me
Financial Highlights
STRATEGIC REPORT
Our Business
- Identification
- Laundry
- Kiosks
Chairman's Statement
Growth Strategy
Business Review
- Investment in Innovation
- Case Studies
- Review of Performance
by Geography
- Key Performance Indicators
- Our Team
- Future Prospects
Financial Review
Principal Risks
Corporate Responsibility Statement
Viability Statement
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CORPORATE GOVERNANCE
FINANCIAL STATEMENTS
Board of Directors and
Company Secretary
Report of Directors
Corporate Governance
Remuneration Report
- Annual Statement
- Remuneration Policy Report
- Annual Report on Remuneration
Statement of Directors’
Responsibilities
Independent Auditor's Report
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47
53
54
Group Statement of Comprehensive
Income for the Year Ended
30 April 2017
Statements of Financial Position
for the Year Ended 30 April 2017
Group Statement of Cash Flows
Company Statement of
Cash Flows
Group Statement of
Changes in Equity
Company Statement of
Changes in Equity
Notes to the Financial Statements
for the Year Ended 30 April 2017
Five Year Summary
Company Information & Advisors
Shareholder Information
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Photo-Me International plc Annual Report 2017
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Photo-Me International plc Annual Report 2017Strategic ReportCorporate GovernanceFinancial Statements 4
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technological:
technological:
INNOVATION
INNOVATION
Photo-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017Strategic ReportCorporate GovernanceFinancial StatementsOURTEAMOURTEAM Our Business
Our Business continued
Our business is focused
on three principal areas:
Identification, Laundry and Kiosks.
Key strengths:
• Brand recognition
• Customer experience
• Partnerships with major site owners
• Established network of field engineers
• Strong balance sheet
• Investment in innovation
Identification
An established, international network of
more than 28,500 photobooths, primarily
aimed at the consumer market.
Our operations
Photo-Me is the leading brand across all our geographies.
Our integrated proprietary software ensures all photographs
conform to the International Standards Organisation (ISO) and
International Civil Aviation Organisation (ICAO) regulations for
photo identification. This network is supported, maintained and
upgraded by our skilled team of field engineers and is connected
via a sophisticated remote monitoring telemetry system.
Growth drivers
•
•
•
•
Steady replacement rates of official documents
Population growth supporting marginal expansion
Increased travel linked to GDP
Increasing appetite from governments for improved,
digitalised security ID
ID SOLUTIONS FOR GOVERNMENT
In addition to traditional 2D photo identification
services, we have cutting-edge technologies that
offer governments secure integrated solutions,
including biometric data capture, secure and direct
transfer of data to government servers, and 3D
facial image capture via our photobooths.
We work closely with national institutions to fully
understand government standards and security
requirements. To date, our government ID security
solutions have been successfully deployed in
France, Switzerland, Germany, China, Japan,
Georgia and Ireland.
28,541 photobooths
across 18 countries.
Market
leading brands.
3D enrolment booth
showcased at
TRUSTECH, Cannes.
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Photo-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017Strategic ReportCorporate GovernanceFinancial Statements Laundry
Photo-Me own and operate a total of 1,965
laundry units across 12 countries, primarily
in France, Ireland, Belgium and Portugal.
Kiosks
We operate nearly 5,900 printing kiosks
across Europe in France, UK, Belgium,
The Netherlands, Switzerland, and in Japan.
Our operations
We currently operate 1,750 self-service Revolution laundry
machines in 12 countries, as well as 50 laundrettes in France,
Spain, Portugal, Ireland and Japan. The Group also has B2B
operations in the UK with the potential to extend into other
geographies. Approximately 90 percent of the Revolution
machines recently deployed are owned/operated by
Photo-Me, and the remaining are sold to site operators.
Photo-Me is targeting 6,000 laundry units by 2020 and an
increased geographic presence.
Growth drivers
•
•
•
•
Demand for high capacity laundry services
Competitive pricing
Convenience; prime locations, open 24/7
Limited branded competition
Our laundry business, which was launched in
2012, operates in three key segments:
Our operations
We operate nearly 5,900 printing kiosks across Europe
in France, UK, Belgium, the Netherlands, Switzerland,
and in Japan.
currently rebranding these sites to Me by Photo-Me as we
continue to strengthen our market position in the photo-
printing services market and enhance our online photo-
processing offering.
Our latest-generation kiosks, designed by Phillippe Starck,
enable easy, competitively priced printing from smartphones
and are fully integrated with major social media networks
for rapid, high-quality printing.
In addition, we operate 363 sites in the UK with photo
printing and processing capability. Previously, these made
up the UK photo division of Asda Stores Limited which
was acquired by the Group in November 2016. We are
Growth drivers
•
•
•
Increased use of smartphones; used to take 80% of
photos in 2016
Digital photo sharing across social media
platforms
Fragmented market, expansion opportunities
across Europe, US and Asia
Outdoor self-service
Outdoor self-service
laundry units, providing
laundry units, providing
24 hour access to large
24 hour access to large-
capacity, rapid laundry
capacity, rapid laundry
services, located on
services, located on
high footfall sites such
high footfall sites, such
as supermarket car
as supermarket car
parks where we have
parks where we have
an existing photobooth
an existing photobooth
presence.
presence.
Launderette shops,
Launderette shops,
typically located
typically located in
in or near to town
or near town centres,
centres, offering
offering consumers
consumers convenient
convenient and
and competitively
competitively priced
priced large capacity
large-capacity, self-
self-service laundry
service laundry
amenities.
amenities.
Business to business
Business-to-business
distribution and leasing
distribution and leasing
of laundry and catering
of laundry and catering
equipment to institutions
equipment to institutions
such as hospitals, care
such as hospitals, care
homes and universities,
homes and universities,
through Fowler UK.
through Fowler UK.
(UK operations with the
potential to extend into
other geographies. )
Our international presence
We currently operate in
18 countries worldwide, focused
on three core geographic areas:
Continental Europe, UK & Ireland,
and Asia & Rest of the World.
We are looking to extend our geographic presence,
particularly through our existing long-standing relationships
with major high footfall site owners.
Our truly international presence is reflected in 90% of our
profits generated outside the UK.
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Growth Strategy
The Group is particularly focused on further developing its proven
integrated digital security solutions for governments, enabling
direct and secure transfer of data from its photobooths for official
documentation, such as driving licences and passports.
We have had a number of important milestones in our
identification division. In Ireland, the Group’s encrypted photo
ID upload technology was adopted by the Irish government for
its new Online Passport Application service, with the service
expected to be rolled out to 300 photobooths by the end of
2017. This follows the successful deployment of secure data
transfer technology photobooths in France, enabling photo ID
to be uploaded directly to ANTS (Agence Nationale des Titres
Sécurisés, a national agency linked to the French Ministry of
Transport) servers for driving licence applications.
In addition, the Group is investing in the development of
proprietary 3D capture and enrolment technologies, which were
showcased at TRUSTECH in Cannes (France), a large event
dedicated to Trust Based Technology, which took place last
autumn. As a Board, we believe these new technologies will
become increasingly important in the secure identification market
in the future and we remain focused on developing our market-
leading capabilities in this area.
The rapid expansion of our laundry division into all segments of
the laundry market in Europe has continued apace and remains
a key focus for the Group. During the year, 1,103 laundry units
were deployed and we remain on track to achieve our target of
6,000 owned and operated units by 2020.
During the year, Photo-Me has launched the new SpeedLab
digital printing kiosks designed by Philippe Starck, deploying
the new machines at major retailers in Europe and the UK. The
new machines feature enhanced technology enabling the best
customer experience in the market. Some kiosks, in France, are
enabled with the MoneyGram application allowing account
setups and money transfers.
Dividends
The Board is committed to a progressive dividend strategy. In
2016, we pledged to increase the ordinary dividend by 20% for
the financial years ending 30 April 2017 and 30 April 2018.
In line with this strategy, the Board is proposing a final dividend
payment of 3.94 pence per share (2016: 3.285 pence per
share). Together with the interim dividend of 3.09 pence per
share paid on 11 May 2017, this brings the total dividend for
the year ended 30 April 2017 to 7.03 pence per share, an
increase of 20% year on year (2016: 5.86 pence per share).
Subject to approval at the Annual General Meeting, the final
dividend will be paid on 10 November 2017 to shareholders
listed on the register on 13 October 2017. The ex-dividend date
will be 12 October 2017.
Employees
On behalf of the Board, I would like to extend my sincere
appreciation to our management team and employees around
the world for their hard work, dedication and loyalty which has
contributed to these strong results.
Current trading and outlook
The new financial year has started in line with our expectations.
Whilst uncertainties remain with regard to the evolution of
currencies, as well as to the consumer spending and disposable
incomes in many of our key markets, the Board remains confident
that our market-leading position and investment in innovation will
continue to support the future prospects of the business.
John Lewis
Non-executive Chairman
27 June 2017
In 2017, the Group delivered
record profits and, aided by
currency exchange rates, double-
digit earnings growth as we
continue to make excellent progress
in line with our strategy to invest
in technological innovation and
complementary products to drive
future growth.
John Lewis
Non-executive Chairman
Results
The Group made good progress in the financial year, reflecting
our ongoing investment in product innovation, the extension
of our services in the photo identification market and the
continued growth of our laundry business. With 90% of our
profits generated from outside the United Kingdom, the business
has also benefited from favourable currency movements.
Reported revenue increased by 16.7% to £214.7m and at
constant currency increased by 3.3% to £190.0m. Reported
EBITDA margin increased by 140 bpts to 32.2% of revenue.
Reported profit before tax rose by 19.7% to £48.0m, and at
constant currency increased by 4.2%.
Our net cash position remains strong at £39.2m (as at 30
April 2017), notwithstanding our £40.9m investment into
the business, and the distribution of dividends amounting to
£32.6m during the financial year.
Strategy
The Group’s international operations and technological
innovation is focused on three market segments, identification,
laundry and digital kiosks, and we currently operate across 18
countries.
During the financial year, we have continued to make good
progress in diversifying our operations and developing new
technologies with multiple applications. This ongoing investment
is self-funded through the stable cash flow from our established
photobooths business and, due to the scale of the Group’s
operations and low fixed-cost base, new products and services
can be deployed at a relatively low cost to the business.
Our business strategy remains focused
on the diversification of operations
by investing in the development of
technologies with multiple product
applications for deployment across
our target geographies.
We utilise the stable cash flow from our long-established
photobooth operations to develop new and complementary
products to drive future growth as we strive to get the best
yield from our instant-service equipment estate. The scale of
our operations enables us to add new products and services
to our network at a low incremental cost by using our existing
network of field engineers.
Three-year strategy (2017 - 2020)
Growth enabled by:
Brand
recognition
Customer
experience
Long-term
relationships with
major high footfall
site owners
Investment
in innovation
Stable cash
flows
Network of
field engineers
Identification & security
Kiosks
Laundry
Target high footfall locations
Penetrate new geographies
Increase revenue through
multi-service offering
Deploy proven digital ID security
into other geographies
Increase presence on high footfall
sites through multi-service offering
Extend product partnerships into
new geographies
Roll out 6,000 laundry units by 2020
Identify and deliver products to new
high-demand markets with limited
competition
Capitalise on market-leading
position and competitor landscape
Extend launderette presence through
owned/operated model
Extend business-to-business offering in
the UK and into new geographies
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Business Review continued
Our key strengths
Brand recognition: We operate market-leading brands in
identification security with household names, such as Photo-Me
in the UK, Photomaton and KIS in France.
Customer experience: The majority of our business is
consumer-oriented and we are focused on providing our
customers with modern, easy-to-use equipment which is reliable
and provides high-quality, value-for-money services in
convenient locations.
Partnerships with major site owners: We have
established long-term relationships with site owners, such as
supermarkets, shopping malls, public transport networks, city
hall and public administration buildings, to ensure optimum
positioning of our machines. These partnerships provide
access to strategically positioned, high footfall locations which
are attractive to the consumer, with the opportunity to deploy
additional services on site.
Established network of field engineers: We have an
established network of approximately 700 dedicated regional
field engineers across our geographies. These teams operate
across our range of products and are able to support growth
at a low incremental cost to the Group. They are responsible
for collecting revenues from our machines, ensuring optimal
availability of equipment and a high quality of service for the
duration of the contracts with site owners.
Strong balance sheet: The strength of our cash flow from
our established photo identification business allows us to largely
self-finance capital expenditure programmes and technological
innovation while also returning cash to shareholders by way
of dividends.
Investment in innovation: We are committed to continuing
to invest in new products and technologies as we continue to
diversify our operations and seek new and complementary
revenue streams to drive future growth.
Overview of business segments and strategy
Identification
Photo-Me is the world’s largest operator of photobooths with
market-leading photographic quality and technology. We operate
an established network of 28,541 photobooths, representing
59% of our total unattended instant-service equipment estate.
Our next-generation Starck photobooth, designed by Philippe
Starck, has a contemporary look which is more attractive
to consumers and delivers monthly revenue estimated to be
approximately10% higher than our traditional photobooth.
This new-look booth now represents approximately 18% of the
Group’s photobooth estate.
All of our photobooths have integrated software which
automatically ensures photographs conform to the multiple
technical criteria outlined in the 73 page photo identification
regulations manual issued by the International Standards
Organisation (ISO) and the International Civil Aviation
Organisation (ICAO), offering significant advantages when
compared with home-taken photographs for official documents.
In recent years, the Group has been investing in the development
of integrated solutions for the secure transfer of photo ID and
biometric data (such as e-signatures and fingerprints) direct to
government servers. This technology is currently being deployed
in seven countries. In addition, Photo-Me is a leader in employing
3D facial image capture and facial recognition technology, which
the Board believes represents the next generation in identification
security.
Photo-Me is currently developing the next generation of its
booths, evolving the machine to offer multiple services, beyond
the historical and traditional 2D photo capture. Alongside the
capability to create and operate Moneygram accounts, the new
functionality enables the booth to offer self-service retail
banking facilities.
The expansion of our laundry
business and the ongoing investment
and deployment of our integrated
identification technologies have
remained key focuses during the
year and we have made excellent
progress in these areas.
Serge Crasnianski
Chief Executive Officer & Deputy Chairman
Our business model
Photo-Me operates, sells and services a wide range of
instant-service vending equipment, primarily aimed at the
consumer market. We currently have 47,946 vending
units in operation and our technological innovation is
focused on three principal areas:
•
Identification: photobooths and integrated biometric
identification solutions
• Laundry: unattended laundry services
• Kiosks: high-quality digital printing
In addition, we operate vending equipment, such as
children’s rides, amusement machines and business
service equipment.
This equipment is generally sited in prime locations
in areas of high footfall, such as supermarkets,
shopping malls (indoors and outdoors) and public
transport venues.
The vast majority of these units are operated and
maintained by Photo-Me. Photo-Me pays the site owner a
commission based on turnover, which varies depending
on the country and location of the machine.
The Group operates in 18 countries worldwide and its
financial performance is reported with regard to three
geographic regions: UK & Ireland, Continental Europe,
and Asia & Rest of the World.
Photo-Me’s business strategy is centred on utilising cash
flow from our long-established photobooth operations
to develop new and complementary products to drive
future growth, combined with the penetration of new
geographic markets.
GROWTH DRIVERS
Steady replacement rates of official documents which
require a photograph, population growth and increasing
international travel linked to GDP growth all drive growth in
the photo ID market. In the current context of general public
security strengthening, there is also an increasing appetite
from governments for improved and digitalised security ID
requirements to combat fraud and terrorist activity.
Laundry
The Group owns and operates 1,965 laundry units across its
laundry businesses in twelve countries, primarily in France,
the UK, Ireland, Belgium and Portugal. Of the Revolution units
recently deployed, approximately 90 percent are owned/
operated by Photo-Me and the remaining are sold to site
operators.
Our growth strategy for the laundry business, which was
launched in 2012, is predicated on leveraging our well-
established relationships with site owners to access prime
locations, mainly where we already operate other instant-
service equipment, such as photobooths. We are targeting
deployment of 6,000 units by 2020 and an increased
geographic presence.
There are three key segments within our laundry operations:
Revolution: This is our 24 hour, outdoor self-service laundry
unit for large capacity, rapid laundry services. These units are
located on easy access, high footfall sites, such as supermarket
car parks or petrol forecourts. The original Revolution machine
has a 10m2 footprint and comprises two large washers and a
dryer. In 2017, we extended the Revolution range to include
two reduced footprint models; the compact and the mini, which
have a 5m2 footprint. The models are better suited to some
locations and target markets, such as the Far East.
As at April 2017, the Group operated 1,750 Revolution
machines.
Launderettes: At the end of April 2017, the Group had 50
launderettes located in France, Spain, Belgium, Ireland and
Japan. Typically, these shops are positioned in or near to town
centres where there is limited competition from other laundry
services.
Our strategy is to acquire underperforming launderette
businesses located on attractive sites and refit the shop in a
stylish, contemporary format that is more attractive to the end
consumer. More specifically, in the short to medium term, our
aim is to expand our presence in the launderette market in
Japan, estimated to be one of the largest worldwide market
for launderettes.
B2B laundry operations: Fowler UK, acquired in October
2015, is a distributor and lessor of laundry and catering
equipment. It currently operates in the UK market, however
the Board believes there is potential to extend the business
model into other geographies, particularly Continental Europe.
Our B2B customers include institutions such as hospitals, care
homes and universities. As at 30 April 2017, Fowler UK
directly operated 215 laundry units.
GROWTH DRIVERS
The laundry market is driven by demand for self-service high-
capacity laundry services at competitive prices. Customers
include small businesses (such as hotels, restaurants),
institutions and sports clubs (such as football teams) and
individuals with items and quantities of washing too large for
a domestic machine.
Kiosks
We have 5,872 digital printing kiosks in operation,
representing approximately 12% of our total instant-service
equipment estate. Our key geographic markets are Europe
(France, UK, Belgium, the Netherlands, Switzerland and
Germany) and Japan.
Our digital printing services offer a wide range of print
formats and personalised products which are competitively
priced and available via multiple devices. The latest-
generation kiosks, designed by Philippe Starck, are fully
integrated with all major social media networks to enable
rapid, high-quality printing.
Our digital printing kiosks have also been deployed in the
363 selling points of the UK Photo Division of Asda Stores
Limited, acquired on 31 October 2016. Our Kiosk product
range and recently launched products include:
• Photo-processing services via SpeedLab
• MoneyGram kiosks – money transfer services through
our MoneyGram partnership agreement
• Selfie Booth Kiosks – light-weight, portable selfie booths
for special events
• Gift Card Kiosks – self-service instant customised gift
cards (piloting in Switzerland)
GROWTH DRIVERS
The increased use of smartphones, which accounted for 80% of
photos taken in 2016, and digital sharing across social media
networks have driven demand for photo-printing services.
Other instant-service equipment
The Group operates interactive character and simulator rides
for children as well as a selection of other coin-operated
amusement machines. The 5,148 children’s rides and 6,420
other vending units in operation represent approximately 11%
and 13% of the Group’s total units in operation respectively.
These units are primarily located on sites where we already
operate other services and can leverage existing site-owner
relationships.
Our growth strategy
We aim to create shareholder value through ongoing investment
in new technologies to develop new and complementary
products and services which can be rapidly deployed across
our existing and new geographies, and provide rapid return on
investment.
This strategy is based on expanding the number of units
in operation, increasing the yield per unit and minimising
production and operational costs to the Group in achieving this
objective.
THREE-YEAR STRATEGY (2017 - 2020)
Identification & security
• Target high footfall locations
• Penetrate new geographies
•
• Deploy proven digital identification security
Increase revenue through multiple-service offering
technologies into other geographies
Laundry
• Deploy 6,000 laundry units by 2020
•
Identify and deliver offering to new high demand
markets with limited competition
• Extend launderette presence through the owned/
operated model
• Extend business-to-business offering in the UK and into
new geographies
Kiosks
•
Increase presence on high footfall sites through
multi-service offering
• Extend product partnerships into new geographies
• Capitalise on market leading position and competitor
landscape
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INVESTMENT IN INNOVATION
Investment in innovation for future
growth lies at the core of our business.
Development capabilities
We have established international research and
development (R&D) capabilities in Echirolles (France),
Shanghai (China), Hanoi (Vietnam) and Tokyo (Japan).
Our dedicated team of 60 highly experienced engineers
specialises in software development, 3D technology, ID
security standards, design and unit upgrades.
Our R&D facility in France plays a key role in the
identification of new market opportunities and new
product industrialisation, undertaking pilot production
and testing prior to large-scale production in Eastern
Europe and China.
Our key areas of focus
REFURBISHMENT AND UPGRADES
We continually refurbish and upgrade our existing product
estate to support our market-leading position.
In 2011, we commenced rollout of our next-generation
photobooth, designed by Philippe Starck. With 5,235 units
having been deployed across the estate, the new design now
accounts for approximately 18% of our total photobooth estate
and is delivering enhanced increased takings.
Our Telemetry software provides automated monitoring to
ensure optimal availability and high-quality service of our
equipment. Not only does Telemetry enable our engineers to
monitor machines remotely and receive alerts regarding any
faults, it also facilitates remote servicing and repairs.
PROPRIETARY SECURITY BIOMETRIC
IDENTIFICATION SOLUTIONS
Security identification has traditionally focused on 2D images.
However, the Board believes that the next generation in
identification will incorporate integrated 3D image capture,
facial recognition, biometrics and enrolment technologies.
Photo-Me believes itself to be the only company in the market
employing instant 3D image capture. Our photogrammetry-
based proprietary scanning system generates an accurate,
ultra-high resolution, full colour 3D surface image which is
virtually impossible to falsify.
By combining 3D images with facial recognition technology,
the digital image is significantly more accurate and creates an
unrivalled level of security.
The security features embedded in these cutting-edge
technologies greatly enhance protection against counterfeit
and fraudulent identification papers. The 3D encrypted digital
portrait photos, which use various encryptions such as QR
code, Tag RFID, holographic laser engraved and secured
chips, are the ideal, secure identification solution for
official documents.
NEW PRODUCT DEVELOPMENT
We are focused on extending the services available via our
photobooths and identifying new product segments with
attractive cash-based characteristics. We leverage our strong
existing site-owner relationships and, with any new product
introduced, we aim to achieve first year gross revenues
equivalent to the cost of the investment.
INTERNATIONAL R&D PRESENCE
Echirolles
Shanghai
Hanoi
Tokyo
A recently developed new product has the capability to provide
front-end retail banking services via our extensive network
of photobooths, supporting fintech companies competing
with traditional high street banks. The photobooth would
offer customers 100% instant, self-service banking services
through secure data transfer for account management. Once
registered, users of the service would be able to access instant
card delivery and activation services, make deposits and
print transaction histories. Customers would be able to receive
assistance via video link if they encounter any problems.
Business Review continued
CASE STUDIES
Digital photo and e-signature enrolment in France
Photo-Me has been working in close partnership with the
Agence Nationale des Titres Sécurisés (ANTS) to deploy a
national secure-connection system to collect digital signatures
and ICAO-compliant ID photos for driving licences. ANTS is
a national agency linked to the French Interior Ministry that
issues secure official personal documents.
•
In 2013, the French government created a new-format
driving licence incorporating holographic design and a
machine-readable zone, similar to passports.
•
In June 2014, Photo-Me started working with ANTS
to develop software to digitally transfer ID photos and
Overview
e-signature files from its extensive photobooth network
across France. This technology enables data to be sent
from its photobooth to the ANTS national secure server,
whilst remaining fully compliant with the latest identity
assurance and privacy protection standards.
•
In December, Photo-Me secured the first agreement with
ANTS to allow the delivery of digitalised e-photos and
e-signatures, fully compliant with the new requirements,
sent from its photobooth via a secure server.
• Software upgrades to the photobooths in France were
completed during 2016.
PHOTO-ME SERVER
GOVERNMENT SERVER
Data request
4
5
Data automatically
transferred
2
Data is transferred
to a secure server
1
Photo & signature
are captured
2
Customer is
given a photo
with a unique
code
3
Customer inputs its
unique code during the
online application on the
government website
6
Single
visit to the
administration
In 2011 we commenced
rollout of our next generation
photobooth, designed by
Philippe Starck. 5,235 have
now been deployed across
the estate.
1.
This process simplifies the licence
application process and provides a
much higher level of security to the
French authorities.
2.
When customers have their new ID
photos taken in one of the connected
photobooths, the ICAO-compliant
photo is securely transferred directly
to the ANTS system where it can
be accessed online for the driving
licence application process.
3.
This ensures there is no risk of the
photo being manipulated, and
addresses increasing concerns
surrounding identity fraud.
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CASE STUDIES continued
Encrypted photo ID technology in partnership
with Irish Government
Following the success of our secure data capture and
transfer technology in France, and growing demand from
governments for increasingly sophisticated photo identification
in Europe, we have focused on opportunities to develop
similar technologies in other countries.
Our secure digital upload technology was adopted by the
Irish government in March 2017 for the digital transfer of ID
photos as part of its Online Passport Application service.
•
In February 2016, Photo-Me entered into discussions
with the Irish government to develop technology to
enable the secure digital upload of ID photographs for
Online Passport Applications to a secure
government server.
•
•
•
In November 2016, a memorandum of understanding
was signed with the Ministry of Foreign Affairs and
Trade in the Republic of Ireland.
In early 2017, Photo-Me trialled the system in 100
photobooths in Ireland.
In March 2017, the Irish government launched its new
Online Passport Application services, with ID photo
requirement exclusively supported by Photo-Me’s secure
digital upload system.
Overview
PHOTO-ME SERVER
GOVERNMENT SERVER
5
Data automatically
transferred
2
Data is transferred
to a secure server
Business Review continued
REVIEW OF PERFORMANCE BY GEOGRAPHY
The commentaries on the financial performance of the business are set out below in line with the segments as operated by the
Board and the management of Photo-Me and consistently with the information prepared to support the Board decision process.
Although the Company organisation is not articulated around product lines, some commentary below relates to the performance
of specific products in the relevant geographies
Key financials
The Group reports its financial performance based on three principal geographic areas of operation: Continental Europe,
UK & Ireland, and Asia & the Rest of the World.
Revenue
Year to 30 April
Operating profit
Year to 30 April
2017
£m
20171
£m
2016
£m
Change
%
Continental Europe
111.7
97.6
93.7 +19.2%
UK & Republic
of Ireland
Asia & ROW
Corporate
53.6
49.4
53.1
39.3
45.8 +17.0%
44.5 +11.0%
214.7
190.0
184.0 +16.7%
1 2017 trading results of overseas subsidiaries converted at 2016 exchange rates
214.7
190.0
184.0 +16.7%
2017
£m
33.9
7.3
8.4
49.6
(2.8)
46.8
20171
£m
2016
£m
Change1
%
29.6
24.1
+40.7%
7.2
6.9
43.7
(3.2)
40.5
8.0
(8.8)%
10.7
(21.5)%
42.8
+15.9%
(3.1)
(9.7)%
39.7 +17.9%
Vending units in operation
The majority of the investment was allocated to expanding the laundry business, but, as we deployed 554 additional operated
Revolution units and reached 50 opened laundry shops as at 30 April 2017, the Group has also rolled-out more than 800 of
its new SpeedLab Cube and SpeedLab Bio by Starck digital photo printing kiosks and expanded our photobooth penetration in
new locations in Asia.
1
Photo & signature
are captured
2
Customer is
given a photo
with a unique code
3
Customer inputs its
unique code during the
online application on the
government website
6
Passport
renewal
Continental Europe
UK & Republic of Ireland
Asia & ROW
2017
2016
Change year on
year
No of
units
23,751
13,287
10,908
47,946
% of total
No of units
% of total
49%
28%
23%
100%
22,800
12,500
10,200
45,500
50%
28%
22%
100%
+4.2%
+6.3%
+6.9%
+5.4%
Photo-Me started upgrading 150 photobooths across
Ireland, extending the rollout to 300 photobooths
throughout Ireland by the end of 2017. The rollout is
underway in partnership with Photo-Me’s key partners in
Ireland, including Topaz, SuperValu, Tesco, An Post and
a number of shopping centres nationwide.
This technology provides customers with a convenient,
easy-to-use and cost-effective system. Once the rollout
is completed (expected by end of 2017), 98% of the
population will live within 5km of a Photo-Me secure
upload ID photobooth.
Other ID security solutions deployed to date:
INSTANT VERIFICATION IN CHINA
Developed an intelligent photobooth that securely collects
ICAO-compliant photos, fingerprints and official documents for
validation.
SECURE DATA COLLECTION IN GEORGIA
In partnership with Oberthur Technologies, we have
implemented booths that transfer ICAO- compliant photos to the
national civil registry sever.
DIGITAL COLLECTION IN GERMANY
Integrated a secure biometric data capture solution in our
photobooths to securely transfer ICAO-compliant photos and
signatures. Fully certified by German authorities.
MY NUMBER IN JAPAN
Our photobooths can scan the unique QR code every Japanese
citizen has received, to match photos to the My Number card
application.
BIOMETRY IN SWITZERLAND
Public service buildings have been equipped with 380
enrolment stations to securely capture and transfer photos,
fingerprints and signatures.
Laundry units
Total laundry revenue across the Group increased by 79% to £21.7m1 (2016: £12.1m), reflecting our strategy to
grow those operations. The revenue relating to our operated estate increased by 89% to £14.3m (2016: £7.6m)
while the number of operated units increased by 58%.
Total laundry units
Deployed units (total)
2017
3,2512
2016
2,148
2015
1,084
Ave. takings per owned unit (€)3
€16,586
€15,382
€14,396
Change
+51%
+8%
1 Including Fowler revenue of £3.7m (2016: £1.5m)
2 Including 915 (2016: 415) deployed in the UK & Republic of Ireland and 7 (2016: 1) deployed in Asia & ROW
3 Average calculated only on machines in France, Ireland and Portugal with full month takings
Since the launch of the Revolution laundries in Ireland and Portugal in 2014, the laundry business has contributed to a
complete transformation of our businesses in those countries. The laundry revenue grew in Portugal and Ireland, respectively
by 565% and 701% between 2015 and 2017, representing now respectively 61% and 66% of the total revenue in each
country. The profit before tax and excluding group fees increased respectively by 456% and 739% in Portugal and Ireland
between 2014 and 2017.
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REVIEW OF PERFORMANCE BY GEOGRAPHY continued
Business Review continued
REVIEW OF PERFORMANCE BY GEOGRAPHY continued
Continental Europe
FINANCIAL PERFORMANCE
This division performed strongly in the period and is the largest
contributor to the Group’s results, representing 52% of total
Group revenue (2016: 51%) and 72% of operating profit
(2016: 61%).
The division operates in ten countries (Austria, Belgium, France,
Germany, Italy, the Netherlands, Poland, Portugal, Spain
and Switzerland), with France remaining the most important
country in the region. We are now entering the Italian market,
leveraging our relationships with existing site owners, and
focusing on laundry and digital kiosks.
At the end of April 2017, 49% of the Group’s estate was sited
in Continental Europe compared with 50% in the prior year,
with a total of 23,751 units in operation (2016: 22,800), an
increase of 4.2%. The division mainly invested in laundry
units and the new Philippe Starck designed digital photo
printing kiosks.
Revenue at constant currency increased by 4.2%, driven by a
60% increase in the takings from our expanded laundry estate.
Photobooth revenue contracted by 0.7%. Operating profit at
constant currency increased by 22.8%, primarily driven by
growth in the laundry division.
REVIEW OF OPERATIONS & STRATEGIC PROGRESS
Identification
Our focus has been to upgrade our photobooth estate in the
region with new digital security features as well as payment
system upgrades, in order to increase the use of electronic
payments in photobooths and in our kiosks.
In France, we have invested to upgrade the vast majority of
photobooths to enable the direct and secure transmission from
our photobooths of a digitised e-photo and e-signature to the
ANTS secure database for driving licence applications.
In Germany, our secure data capture and transfer technology
is fully certified by the German authorities and we have started
the progressive rollout of this technology.
In the first half of the year, the Company took the decision to
implement price increases in its photobooths in the Netherlands
(from €5 to €6) and Switzerland (from CHF 8 to CHF 10).
Those price increases have been successfully completed.
Laundry
The expansion of the laundry business in Continental Europe
has continued apace, primarily focused on France, Belgium
and Portugal.
In Portugal, laundry operations now account for over 60% of
the country’s revenue contribution compared with 13% in
FY 2015, reflecting a shift in our product mix as we accelerate
the rollout of our laundry business.
During the year, 27 launderette shops were added to the
estate. Results from these new sites have been solid and
encouraging.
Production of the new compact Revolution machines
commenced in March 2017 and we anticipate that these
reduced footprint units will be more attractive to Far Eastern
markets. The reduced planning requirements due to the unit size
will also speed up deployment in our target markets.
Kiosks
In 2017, the number of digital printing kiosks in Continental
Europe increased by 3%, primarily driven by the gradual
rollout of the new SpeedLab Cube and SpeedLab Bio kiosks,
designed by Philippe Starck. Specifically, Photo-Me started the
deployment at Carrefour replacing Kodak units. So far, results
have been encouraging.
We currently operate 20 dedicated MoneyGram kiosks and
a further 80 transaction kiosks in France. The Group is in
discussions with MoneyGram to extend this partnership into
other geographies.
UK & Republic of Ireland (including Corporate)
FINANCIAL PERFORMANCE
This division contributed 25% of Group revenue for the year
(2016: 25%), and 10% of operating profit (2016: 12%).
At the end of April 2017, 28% of the Group’s estate was sited
in this region, compared with 28% in the prior year. There
were 13,287 units in total (2016: 12,500), of which 6,600
were photobooths (2016: 6,600). We increased the number of
digital kiosks to 992 at the end of April 2017 from 255 in the
previous year after introducing the SpeedLab Cube by Starck at
Morrisons and Asda. The laundry estate increased by 57% to
499 operated laundry units in the UK and Ireland.
Revenues increased by 17.0% compared with the previous year
(up 15.9% at constant rate of exchange), driven by a 102%
increase in sales from our laundry business.
Operating profit in this division declined by 8.2% as a result
of start-up costs associated with the newly formed Photo-Me
Retail business (the acquired UK Photo Division of Asda Stores
Limited). This contributed to a £1.8m loss in the reported
accounting period, compounded by increased depreciation
following investment in our operated laundry and kiosk estates.
Fowler UK, the Group’s commercial laundry and catering
equipment business, made a full-year contribution of £0.7m
to the Group’s profit before tax, while the UK operations
excluding laundry contributed 5% of the Group’s profit
before tax.
REVIEW OF OPERATIONS & STRATEGIC PROGRESS
Identification
In March 2017, the Group launched the rollout of its encrypted
photo ID technology across Ireland in partnership with the Irish
government. This agreement, which leverages the secure digital
transfer technology developed for the French government,
provides customers with a convenient, easy to use and cost
effective system for the digital transfer of ID photos as part of
the Online Passport Application service.
Photo-Me Ireland is the first company licenced by Ireland’s
Department of Foreign Affairs & Trade to capture and transfer
digital photos as part of the new online passport renewal
system. The photobooths are being rolled out with premier
partners Topaz, SuperValu, Tesco and An Post, as well as a
number of shopping centres nationwide. Upon completion of
the rollout, which is expected by the end of 2017, 98% of the
population of the Republic of Ireland will live within 5km of a
Photo-Me secure upload ID photobooth. In order to maximise
the increased volume opportunity, the electronic photo is priced
at €8, compared to €5 for the traditional paper format.
During the year, a price increase from £5 to £6 has been
successfully implemented in the London area.
Laundry
The Group has now started actively deploying Revolution laundry
units at suitable sites in the UK, with 70 units deployed during the
year in petrol station forecourts, and other high footfall locations.
Kiosks
On 31 October 2016, the Group completed the acquisition of
the UK photo division of Asda Stores Limited. The addition of
363 sites previously managed by Asda, 191 photo centres and
172 self-service corners, has extended our presence in the UK
market. The reconfiguration of layouts and equipment upgrades
which are being implemented as well as ongoing operational
measures are expected to restore the profitability of the business
in the short term and progressively expand profitability going
forward.
In addition to the printing kiosks sited at the Asda locations, the
Group has sited over 120 SpeedLab Cube by Starck kiosks at
Morrisons stores.
Asia & Rest of the World
FINANCIAL PERFORMANCE
Asia and the Rest of the World contributed 23% of Group
revenue (2016: 24%) and 18% of operating profit (2016: 27%).
The Group operates in six countries (China, Japan, Singapore,
South Korea, USA and Vietnam), with Japan remaining the
largest business in the region.
At the end of April 2017, 23% of the Group’s estate was sited in
Asia and the Rest of the World (2016: 22%). In total, there were
10,908 units (2016: 10,200), of which 9,279 (2016: 8,600)
were photobooths.
Revenues in Asia and the Rest of the World increased by 11%,
benefiting from positive currency variances. At constant currency,
revenues from the Asia & Rest of the World division decreased
by 11.7%. While revenues in China and Korea increased
respectively by 28.4% and 45.3%, those incremental gains were
not sufficient to compensate for lower volumes in Japan following
the Japanese government’s decision not to enforce the My
Number card scheme immediately.
REVIEW OF OPERATIONS & STRATEGIC PROGRESS
Japan is the largest territory in the region. As previously
announced, contributions from the government’s My Number
ID card programme were lower than initially expected. Whilst
our photobooths are equipped to scan the unique QR code
every Japanese citizen has received, and match the ID photos
to the My Number Card application, the ID cards are not
mandatory and adoption by citizens has not been as rapid as
the government had anticipated. The new card is expected to
become compulsory in the medium term (2020/2021).
The group successfully opened its first launderette shop in Japan,
starting the penetration of what is believed to be one of the
largest markets in the world for launderettes.
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Business Review continued
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 the Group remains highly cash generative, delivers sustained long-term profitability, preserves the value of its assets and
provides high returns to shareholders.
Description
Relevance
April 2017
April 2016
Performance
Group total revenue at actual
rate of exchange
Group total revenue excluding
minilab business at constant
rate of exchange
Group profit before tax
The turnover at constant rate of exchange
excluding minilabs indicates the underlying
growth of the core business (for historical
comparatives purposes, all converted at
April 2012 rates)
EBITDA margin
The EBITDA margin is a good indicator
of improved profitability
Gross takings (including VAT)
Gross takings are an important indicator
of the trend in our core vending business
Increase in number of
photobooths
Increase in number of laundry
units (operated or sold)
The increase in number of photobooths
is a constant priority and a main driver
for growth
The increase in number of laundry units
measures our penetration in markets where
there is a significant potential for growth
and strong profits
£214.7m
£184.0m
£200.5m
£48.0m
32.2%
+4.8%
£195.9m
£40.1m
30.8%
+3.7%
+887
+611
+1,103
+1,064
Business Review continued
OUR TEAM
These excellent results are testament to the strength of our
teams across the business. Our Group structure reflects the
entrepreneurial and creative nature of Photo-Me and is aligned
to our business strategy. We have a team of more than 60
R&D engineers within the business focused on innovation and
new product development to support our future growth. Led by
our Head of New Product Development, the majority of this
team is located at our largest innovation facility in France with
the remainder working at our R&D centres in China, Vietnam
and Japan.
Eric Mergui, COO, is responsible for operations, driving
profitability and new business development, supported by our
Country Managers and Global Business Development and
Marketing Team. Gabriel Pirona, CFO, is responsible for our
finance function.
We are committed to nurturing talent within our teams and
developing the next generation of leaders. I would like to take
this opportunity to thank everyone who has worked for the
Group during the year and contributed to our success.
FUTURE PROSPECTS
Looking ahead, the Group will remain focused on driving
profitability from our existing estate and investing in new
and complementary products to extend the suite of services
available through our established instant-service equipment
network. Subject to the macroeconomic environment and
consumer disposable income, the Board anticipates another
year of consistent underlying progress.
Serge Crasnianski
Chief Executive Officer & Deputy Chairman
27 June 2017
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Financial Review
Financial Review continued
Financial Performance
The Group delivered a strong financial performance as illustrated by the significant increase in profits.
Review of operating costs
Operating costs amounted to £167.8m (2016: £144.3m).
Reported revenue increased by 16.7% to £214.7m as a result of the consistent, sustained expansion of our laundry business in
Europe, the rollout of new digital photo printing kiosk models designed by Philippe Starck, and the positive impact of currency
movements.
Revenue
EBITDA
Operating profit
Profit before tax
Profit after tax
The movements in turnover are outlined in the following table:
April 2017
£m
214.7
69.2
46.8
48.0
35.1
Turnover April 2016
Change in core business revenue
Continental Europe
UK & Ireland
Asia
Impact of exchange rates
Turnover April 2017
The increase in the profit before tax (PBT) can be explained as follows:
PBT - April 2016
Changes in revenue
Changes in costs
Increase in net finance income
Impact of exchange rates
PBT - April 2017
22
April 2016
£m
184.0
56.7
39.7
40.1
29.2
£m
184.0
+3.9
+7.3
(5.2)
+24.7
214.7
£m
40.1
+6.0
(5.2)
+0.9
+6.2
48.0
Staff costs amounting to £50.1m increased by £9.2m compared with the previous year and represented 23.3% of revenue
(2016: 22.2%). Excluding the impact of foreign exchange headwinds (£5.2m) and the increase linked to Photo-Me (Retail)
Limited operations (digital photo operations acquired from Asda), the modest increase in salaries is in line with salary inflation
across the Group.
The increase in inventory costs is the direct result of foreign exchange headwinds. As a percentage of sales, inventory costs
decreased to 6.3% for the year ended 30 April 2017 from 8.2% in the previous year.
The depreciation and amortisation charge at constant rate of exchange increased by £3.5m compared to the same period
last year, as a result of increased investment in our estate and depreciation of goodwill and other intangibles arising from the
acquisitions of Fowler UK.com Limited and the UK photo division of Asda Stores Limited.
At constant rate of exchange, and the other operating costs increased at a lower rate than revenues, benefiting from positive
exchange gains booked in 2017.
April 2017
£m
April 2016
£m
Staff costs
Inventory costs
Other operating costs
Depreciation and amortization
Profit / (loss) on disposal of fixed assets
Operating costs
50.1
13.5
82.7
146.3
22.4
(0.9)
167.8
40.9
11.5
75.2
127.6
16.9
(0.2)
144.3
Taxation
The Group tax charge of £12.9m corresponds to an effective tax rate of 26.9% (2016: 27.2%).
The Group undertakes business in 18 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 in accordance with local regulations, and ensures compliance with the Group’s tax
policy and guidelines.
Dividends
During the year, the Group paid dividends totalling £32.6m in respect of the interim, final and special dividends for the year
ended 30 April 2016.
The interim dividend for the year ended 30 April 2017 (3.09p per share), announced in December 2016, was paid in May
2017 and amounted to £11.6m.
Statement of Financial position
The Group balance sheet can be summarised as follows:
April 2017
£m
April 2016
£m
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
108.7
38.3
(10.9)
(46.0)
39.2
129.3
(1.3)
128.0
84.5
32.4
(8.4)
(48.2)
62.4
122.7
(1.1)
121.6
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Financial Review continued
Following the payment of dividends of £32.6m, shareholders’ funds at 30 April 2017 amounted to £128.0m, an increase of
£6.4m compared with the previous year end.
The increase in EBITDA, coupled with optimised working capital management, mitigated the impact of increased tax payments
and resulting in an increase in net cash generated from operations to £49.0m (2016: £40.6m).
Cash generated remained substantial and enabled the Group to finance its capital expenditure programme and pay out to
shareholder dividends of £32.6m.
Outstanding debt of £10.7m (2016: £10.8m) was deducted from the closing net cash balance at 30 April 2017.
Total cash and cash equivalents at 30 April 2017 amounted to £47.5m (2016: £71.0m).
At the end of April 2017, the Group’s net cash position, amounting to £39.2m (2016: £62.4m), could be split as follows:
Balance at 30 April 2016
Cash flow
Non-cash movements
Balance at 30 April 2017
Cash and deposits
£m
Borrowings
£m
Net cash
£m
73.2
(25.5)
2.1
49.8
(10.8)
1.1
(0.9)
(10.6)
62.4
(24.4)
1.2
39.2
Non-current assets detailed are outlined in the following table:
April 2017
£m
April 2016
£m
Goodwill
R&D costs
Other intangible assets
Operating equipment
Plant and machinery
Land and buildings
Investment property
Investments
Deferred tax assets
Trade and other receivables
Total non-current assets (excl. deposits)
11.8
5.7
7.8
66.6
6.8
1.6
0.7
101.0
2.1
3.6
2.0
108.7
11.6
4.7
4.0
49.8
5.1
1.3
0.6
77.1
1.7
4.2
1.5
84.5
Goodwill mainly relates to the Japanese subsidiary. The movement in the year mostly corresponds to the impact of foreign
currency translations.
The increase in other intangible assets mainly relates to the acquisition of the UK photo division of Asda Stores Limited.
With a net book value of £66.6m, operating equipment constitutes the main component of the Group’s total non-current assets.
The Group owns some 47,946 machines operated worldwide. The change in net book value reflects the Group’s capital
expenditure of £33.8m net of depreciation and exchange rate differences amounting to £12.3m.
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 utilised
Impact of exchange rates
Net cash inflow
Closing net cash
April 2017
£m
April 2016
£m
62.4
61.3
(12.0)
49.3
(40.9)
(32.9)
(24.5)
1.3
(23.2)
39.2
60.7
51.4
(10.8)
40.6
(24.8)
(17.8)
(2.0)
3.7
1.7
62.4
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Principal Risks
Principal Risks continued
Similar to any business, the Group faces risks and uncertainties that could impact the achievement of the Group’s strategy. These
risks are accepted as being part of doing business. The Board recognises that the nature and scope of these risks can change and
so regularly reviews the risks faced by the Group as well as the systems and processes to mitigate them.
The table below sets out what the Board believes to be the principal risks and uncertainties, their impact, and actions taken to
mitigate them.
Description and impact
Mitigation
Economic growth has 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 the UK, and the Group results
could be adversely impacted by an increase in the
value of sterling relative to those currencies.
The Group focuses on maintaining the characteristics and
affordability of its needs driven and regulatory products.
The Group naturally 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.
Nature of
the risk
Economic
Global
economic
conditions
Volatility
of foreign
exchange
rates
Regulations
Centralisation
of production
of ID photos
In many European countries where the Group
operates, if governments were to implement
centralised image capture for biometric passport
and other applications or widen the acceptance of
self-made or home-made photographs for official
document applications, the Group's revenues and
profits could be seriously affected.
The Group has developed new systems that respond to
this situation, leveraging 3D technology in ID security
standards, and securely linking our booths to the
administration repositories (solutions in place in France,
Ireland, Germany and Switzerland, discussions in the UK,
Belgium and Holland).
Furthermore, the Group also ensures that its ID products
remain affordable and of high quality.
In the UK, the Group is lobbying both alone and in
tandem with its trade association to propose a solution
similar to the ANTS system in France which sends photos
electronically, maintaining the integrity of the photos,
compliance with ICAO standards and, in the Board’s
opinion, posing less threat to national security.
The Board is keeping the potential impacts of the
referendum decision to leave the EU on all the Group’s
operations under review.
Any potential developments, including new information
and policy indications from the UK government and the
EU, will be looked at carefully on a continual basis with
a view to enhancing the ability to take appropriate action
targeted at managing and where possible minimising any
adverse repercussions of Brexit.
The specific impact of Brexit on the Group will depend
on the details of the conditions of the breakup to be
negotiated between the UK and the European Union.
The Board foresees however that, while in the short term
the negative impact of the uncertainty overshadowing
the general UK economy could also overspill on the
Group’s UK operations, in the long term, potential ‘re-
nationalisation’ of UK identity documents (including the
conversion of the EU burgundy passports to the navy
blue British version), as well as strengthened immigration
regulations, could lead to increased requests for the
Group's secure identification products.
The Company has engaged advisers to reduce its
exposure to business rates. The Company has received
advice that the vast majority of the affected estate may
not be subject to business rates, and therefore it is
systematically appealing before the Valuation Tribunal
the assessments received while negotiating with the
authorities to reduce that exposure. The Company
believes that following the latest decision by the Upper
Tribunal on 12 April 2017 in the ATM case, the risk may
be capable of successful mitigation.
Brexit
The UK’s referendum decision to leave the EU
("Brexit") will most probably lead to changes in
regulations in the UK as well as modifications of
numerous arrangements between the UK and other
members of the EEC, affecting trade and customs
conditions, taxation, movements of resources, etc.
Business rates
Since early 2015, the Valuation Office Authority
has been issuing significantly increased
assessments for some of the Company’s estate,
mainly photobooths and printing kiosks, and in
some instances applying rates that the Company
considers unreasonable. The census campaign led
by the Government is part of the well-publicised
strategy to systematically increase the amount of tax
collected through business rates. The business tax
risk is limited to the Company’s operations in the
UK, and the cost of the tax charge has been fully
expensed in the relevant periods.
Nature of
the risk
Strategic
Identification of
new business
opportunities
Inability to deliver
anticipated
benefits from the
launch of new
products
Market
Commercial
relationships
Description and impact
Mitigation
Failure to identify new business areas may impact
the ability of the Group to grow in the long term.
The realisation of long-term anticipated benefits
depends mainly upon the continued growth of the
laundry business and the successful development
of integrated secure ID solutions.
Management teams constantly review demand in
existing markets and potential new opportunities.
The Group continues to invest in research into new
products and technologies.
The Group regularly monitors the performance of its
entire estate of machines. New technology enabled
secure ID solutions are heavily trialled before launch
and the performance of operating machines is
monitored consistently.
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 would have an adverse
albeit contained impact on the Group’s results,
bearing in mind that the Group’s turnover is spread
over a large client base and none of the accounts
represent more than 1% of Group turnover.
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.
Operational
Reliance
on foreign
manufacturers
The Group sources most of its products from
outside the UK. Consequently, the Group is subject
to risks associated with international trade.
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 risks of disruption to
production and supply are managed appropriately.
Reliance on one
single supplier of
consumables
The Group currently buys all its paper for
photobooths from one single supplier. The failure
of this supplier could have a significant adverse
impact on paper procurement.
The Board has decided to hold a strategic stock of
paper, allowing for 6 to 10 months’ worth of paper
consumption, to allow enough time to put in place
alternative solutions.
Reputation
The Group’s brands are key assets of the
business. Failure to protect the Group’s reputation
and brands could lead to a loss of trust and
confidence. This could result in a decline in the
customer base.
Product and
service quality
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 brands in its core
markets is sustained by products with certain unique
features. The appearance of the machine is subject
to high maintenance standards. Furthermore,
the reputational risk is diluted as the Group also
operates under a range of brands.
The Group continues to invest in its existing estate
to ensure that it remains contemporary, and in
constant product innovation to meet customer
needs. The Group also has a programme in place
to regularly train its technicians.
Technological
Failure to keep up
with advances in
technology
The Group operates in fields where upgrades to
new technologies are mission critical, particularly
in relation to photography.
The Group mitigates this risk by continually focusing
on R&D.
Cyber risk: third
party attack on
our secure ID data
transfer feeds
The Group operates an increasing number of
photobooths capturing ID data and transferring it
directly to governmental databases.
The Group performs an ongoing assessment of the
risks and ensures that the infrastructure meets the
security requirements.
Information on (i) employees (including information on the gender diversity make-up of the Group’s employees), (ii) social and
community matters, and (iii) environmental issues is provided in the Corporate Social Responsibility Statement. The Board does
not consider it necessary for an understanding of the development, performance or position of the Group’s business to include
any further details on these issues in this Strategic Report.
By order of the Board
Del Mansi
Company Secretary
27 June 2017
26
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Photo-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017Strategic ReportCorporate GovernanceFinancial Statements
Corporate Responsibility Statement
Corporate Responsibility Statement continued
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 help us identify business
opportunities. We prioritise our corporate responsibility
activities based on three main drivers:
•
•
legal requirements and future policy trends;
customer, employee and investor preferences for
corporate responsibility; and
•
cost savings and business efficiency.
We aim to ensure that our approach is consistent with the
directors’ duty to promote the success of the Company, a legal
requirement included in the UK Companies Act 2006. This duty
is based on the principle of ‘enlightened shareholder value’.
How we manage 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 laws, 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.
with the Equality Act 2010 by introducing on-screen instructions
within our photobooths for hard-of-hearing customers, and
voice instructions and carefully selected screen colours and font
sizes for customers with visual impairments. In addition, the
development of the universal photobooth enables access for
wheelchair users.
Employees
EMPLOYEE COMMUNICATION, ENGAGEMENT AND
INVOLVEMENT
The Company’s employees are a valued integral part of the
business and the Company’s ability to achieve success in
key business objectives. As such, it is the Company’s policy
to provide colleagues with appropriate financial and other
information about the business to encourage employee
engagement, and to enthuse and inspire its workforce through
a network of media such as:
• business networking tools to encourage synergies
among colleagues and businesses, sharing ideas and
best practices
•
internal notification of vacancies and policy updates;
and
• monthly operational meetings for business leaders
across the Group to engage with colleagues, providing
business and local updates. Encourage interactive
feedback to ensure business leaders are kept informed
of the Group’s performance and of the financial and
economic factors affecting Company and Group
performance.
While it has adopted a decentralised Group management
approach, the Company nurtures a common culture among
its workforce throughout the entire Group through openness,
honesty and the pursuit of a universal goal that focuses on core
corporate values.
The Group’s internal audit programme operates 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, opportunities, or new information.
We do everything in our power to support and protect human
rights. As a responsible company with operations across the
world, we believe that strong ethics and good business go
hand in hand. We commit to complying with the laws and
regulations of the countries and jurisdictions in which
we operate.
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 increased customer expectations, including environmental,
health and safety and accessibility issues.
To ensure 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, ISO 9001 standard certification has
been achieved.
In consideration of global concerns regarding the disposal of
waste and increasing metal prices and landfill costs, we have
focused more attention on the re-use and recycling of our retired
products. Currently, more than 90% by weight of the materials
used in our photobooths, mostly steel and other metals, is
recycled at the end of their product lifecycle. In light of our
concerns regarding increased energy costs and man-made
impact on climate change, we have 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 to us. This drives
a continual review of our products and the development of
solutions to meet these needs. For example, we have improved
services offered to customers with disabilities, and complied
EQUAL OPPORTUNITIES AND DIVERSITY
The Company is an equal opportunities employer and is
committed to ensuring equal career opportunities for all its
employees without discrimination, and pursuing fair and
equitable policies and procedures for recruitment, training and
development. Full consideration is accorded to all applications
from persons with disabilities, with due regard to their aptitudes
and abilities.
The Company ensures that, wherever possible, employees who
develop a disability during their engagement can continue their
employment through a supportive mechanism of retraining,
redeployment and reasonable adjustments where practicable,
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 persons
with disabilities.
GENDER DIVERSITY
The table below shows the gender diversity of the Group’s
employees at 30 April 2017 with corresponding figures for the
previous year:
As at 30 April 2017
The Board of Photo-Me
6
5
1
Total
Male
Female
Senior managers in
the Group (excluding
directors of Photo-Me)
Employees
(excluding above)
Total
As at 30 April 2016
16
(88.88%)
2
(11.12%)
18
1,696
1,720
1,132
(66.75%)
564
(33.25%)
1,153
(67%)
567
(33%)
The Board of Photo-Me
6
5
1
Total
Male
Female
Senior managers in
the Group (excluding
directors of Photo-Me)
Employees
(excluding above)
Total
HEALTH AND SAFETY
17
16 (94%)
1 (6%)
1,123 932 (83%) 191 (17%)
1,146
953
(83%)
193
(17%)
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.
Our 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 can raise
any safety concerns directly through our call centres, which
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 relevant safety standards before being launched
in the market. We work with our suppliers where appropriate,
sharing the benefit of our many years’ experience of
developing products to the highest standard of safety.
Photobooth security is managed by a multipoint locking system
with either one or two security padlocks depending on the
model. Our photobooths meet current electrical standards
through a declaration of conformity (DOC) and Conformité
Européene (CE) marking confirming Restriction of Hazardous
Substances (RoHS2) product compliance. Our experienced
engineers also test equipment regularly to ensure it meets
both Portable Appliance Testing (PAT) and Amusement Device
Inspection Procedures Scheme (ADIPS) standards.
Children’s rides manufactured by Jolly Roger (Amusement
Rides) Limited, a Group subsidiary company in the UK, are
produced in accordance with industry guidance issued by the
British Amusement and Catering Trades Association (BACTA)
and conform to CE marking confirming RoHS2 product
compliance. 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 ADIPS Scheme administered by BACTA and enables its
qualified operatives to inspect children’s rides and issue the
required safety certification.
Within the UK, the general manager fully supports the health
and safety policy and ensures there is provision on the agenda
of regular senior executive meetings to address health and
safety matters. Policies and procedures developed over the
years continue to be reviewed and adjusted as part of the
process of continual improvement and keeping pace with
legislative advances. To achieve the standard of health and
safety performance to which the Company aspires, we believe
that it is important to empower individuals at all levels and
equip them with the tools and skills they require by providing
relevant training and information. The Company continues to
improve its employee-induction process and has introduced an
alternative online training system supplied by Essential Skillz
in 2014 to teach and refresh employee skills as required.
That database showed over 4,000 training sessions and 70%
compliance with the training plan.
The Company continues to maintain its membership of the
British Safety Council and is also a member of the CE Marking
Association. In addition to demonstrating our commitment
to best safety and environmental practice and consistent
improvement, these ongoing partnerships enable us to access
expert advice and quality training resources to assist us in
achieving these goals.
In the UK, the Company is accredited under two safe
contractor schemes, one managed by Alcumus and the other
by Altius, and has also received an assured Vendor award.
This accreditation is reviewed annually and requires all
Health and Safety policies and procedures to be 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.
ENVIRONMENT
The Company recognises its responsibility towards the
environment and the impact of its business activities. The
main risks to the business in this area arise from increased
legislation and the rising cost of waste disposal. The Company
has mitigated its exposure to these risks by:
• consistently reducing, in previous years, the amount
of waste produced. However, during the current year,
our UK operations have seen an increase in packaging
waste due to the acquisition of the ASDA Photo Centre
business, now managed by Photo-Me (Retail) Ltd.;
•
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 generates 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:
•
•
•
the ability to automatically shut down (and restart)
photobooths during closing hours which saves
approximately 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; and
•
the replacement of most old CRT monitors with new flat-
screen technology which is more energy-efficient and
eliminates associated hazardous waste.
28
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Photo-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017Strategic ReportCorporate GovernanceFinancial Statements Corporate Responsibility Statement continued
Corporate Responsibility Statement continued
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 for 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
4.22%, to a total of 26% compared with the 2008 fleet therefore a 7% reduction over the previous year, which has saved another
56.6 tonnes of CO2 from entering the atmosphere in 2016. 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.
ASSESSMENT PARAMETERS
Consolidation approach
Greenhouse gas (GHG) emissions
REPORTING OF GHG EMISSIONS
As of 1 October 2013, all quoted companies must report 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 Group is required to report the emissions it is responsible for (as defined below), and to provide at least one ‘intensity ratio’
together with an explanation of methodology used.
Materiality threshold
In the table below, the Group has not reported fugitive emissions (which include leakages from refrigerants used in air
conditioning units, etc.) because no data were available and, given the low number of such units in the Group, management did
not consider such emissions to be material.
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
Year ended 30 April
2017
Tonnes of CO2e
Year ended 30 April
2016
Tonnes of CO2e
4,339.07
3,885.42
453.65
18,701.05
18,220.11
480.94
4,372.99
3,882.59
490.40
18,324.59
17,789.42
535.17
23,040.12
22,697.58
Per number of units of operating equipment
0.4943
0.4986
The above figures are based on subsidiary companies owned by Photo-Me, except for those
non-material subsidiary companies (mainly new start-up ventures) whose vending estate
comprises less than 50 machines.
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
The Group has included 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.
Emission factor source
Department of Business, Energy & Industrial Strategy, 2016 GHG Conversion Factors for
Company Report (2016: DEFRA 2014).
Methodology
Photo-Me followed the Greenhouse Gas Protocol Corporate Standard.
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
heating, lighting 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:
• Emissions from motor vehicles operated by the Group, including service and installation personnel (servicing and
maintaining the operational estate etc.) and administrative staff.
•
Natural gas consumption on the Group’s premises.
SCOPE 2 EMISSIONS
The main components of these emissions are:
• Purchased electricity for use on 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. In those instances, emissions are controlled by third parties.
•
Emissions from vending equipment.
The Group’s chosen intensity ratio for external reporting is calculated by dividing total emissions by the average number of
units of operating equipment during the year for the reporting companies.
Viability Statement
The directors have assessed the viability and prospects of
the Group in accordance with the requirements of the 2014
revision of the UK Corporate Governance Code. In doing
so, the directors have considered and taken into account the
Group’s present position and the principal risks facing it, the
latter being set out in the Strategic Report. The directors have
carried out their assessment by: (i) considering the potential
repercussions of those principal risks at least annually as well
as the risk impact of each major event or transaction;
(ii) examining the effectiveness of the actions taken to mitigate
the principal risks; (iii) continually reviewing strategy and
market developments through regular executive briefings; and
(iv) taking into account the Group’s operational processes
and financial resources. Based on this robust assessment, the
directors have a reasonable expectation that the Group will
be able to continue in operation and meet its liabilities over a
three-year period to June 2020.
The directors decided that a three-year period is appropriate
for this assessment because it enables a good level of
confidence due to a number of factors including: (i) the
Group’s considerable financial resources including the high
cash generation of its operations; (ii) the inherent unlikelihood
of all or even most of the identified potential principal risks
materialising simultaneously; (iii) the length of major operating
contracts; (iv) the Group’s diverse geographical operations plus
its established business relationships with many customers and
suppliers in countries throughout the world; and (v) its proven
track record in R&D development and its ability to adapt to
market trends.
The directors have no reason to believe the Group will not
be viable over a longer period, however, given the inherent
uncertainty involved in looking at longer time frames, the
period over which the directors consider it possible to form a
reasonable expectation as to the Group’s longer-term viability is
three years.
By order of the Board
Del Mansi
Company Secretary
27 June 2017
30
31
Photo-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017Strategic ReportCorporate GovernanceFinancial Statements 32
33
technological:
technological:
INTEGRATION
INTEGRATION
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017OURTECHNOLOGYOURTECHNOLOGY Board of Directors and Company Secretary
Report of Directors
John Lewis OBE
Non-executive Chairman
Serge Crasnianski
Chief Executive Officer &
Deputy Chairman
Emmanuel Olympitis
Non-executive Director
Françoise Coutaz-Replan
Non-executive Director
Jean-Marcel Denis
Non-executive Director
Yitzhak Apeloig
Non-executive Director
Del Mansi
Company Secretary
34
Joined the Board in 2008 and appointed Chairman in 2010. Chairman of
the Nomination Committee and a member of the Audit and Remuneration
Committees. Currently a consultant to Eversheds Sutherland LLP (as now is)
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
& Co which became part of Eversheds Sutherland LLP (as now is) 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.
Appointed to the Board in 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.
Appointed to the Board in 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.
Appointed to the Board in 2009. Retired from her executive role as Group
Finance Director on 27 August 2015, continuing as a Non-executive Director.
Joined KIS in 1991. Appointed to the Audit Committee on 20 October 2016.
Appointed to the Board in 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 Associés (ACA) and sold
his interest in ACA in 2005. Subsequently a consultant in Finance & Conseils
Associés, which specialises in business valuations.
Appointed to the Board in 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 Atreyu 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. Appointed to the Audit Committee on 20 October 2016.
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.
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 2017.
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.
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 Company’s subsidiary and associated undertakings are
shown on pages 120 to 121.
Results and dividends
The results for the year are set out in the Group Statement of
Comprehensive Income on page 61.
The directors recommend a final dividend of 3.94p per
ordinary share which, if approved at the Annual General
Meeting (AGM) on 25 October 2017, will be paid on 10
November 2017 to shareholders listed on the register at the
close of business on 13 October 2017. The ex-dividend
date will be 12 October 2017. This, together with the interim
dividend of 3.09p per ordinary share paid on 11 May 2017,
makes a total dividend for the year of 7.03p per
ordinary share.
Review of 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 gives 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. The Strategic Report also contains the Board’s Long-
term Viability Statement.
Research and developments
The Group is committed to its research and development
programme 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 persons with disabilities, for the continuing employment
of employees who have developed disabilities, and the
training, career development and promotion of persons with
disabilities employed by the Company, as well as employee
communication and involvement, is contained within the
Corporate Responsibility Statement on pages 28 to 31 forming
part of this report.
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 2017, can be found in the Corporate
Responsibility Statement on pages 28 to 31.
Board of directors and their interests
The current directors of the Company are: John Lewis
(Chairman, member of the Audit and Remuneration
Committees, and Chairman of the Nomination Committee);
Serge Crasnianski (Chief Executive Officer and Deputy
Chairman); Emmanuel Olympitis (Senior Independent Non-
executive Director, Chairman of the Remuneration Committee
and a member of the Nomination and Audit Committees);
Françoise Coutaz-Replan (Non-executive Director and
a member of the Audit Committee); Jean-Marcel Denis
(Chairman of the Audit Committee and a member of the
Nomination and Remuneration Committees); and Yitzhak
Apeloig (Non-executive Director and member of the Audit
Committee). Further details, together with a brief biography of
each director, can be found on page 34. 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; 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 director retiring by rotation and being put forward for
re-appointment at the AGM this year is Mr John Lewis.
Details of the directors’ contracts, emoluments and interests in
shares and share options are given in the Remuneration Report
on pages 42 to 52.
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
allows 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 would, if granted,
constitute a “qualifying indemnity provision” within the
meaning of Section 236 (1) of the Companies Act 2006. No
such indemnities have been granted.
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Report of Directors continued
Report of Directors continued
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 AGM.
Annual General Meeting
The Company’s AGM this year will be held at 2.00 p.m.
on Wednesday 25 October 2017 at the offices of Hudson
Sandler LLP, 29 Cloth Fair, London, EC1A 7NN.
Notice of the AGM is sent to all shareholders of the Company,
as well as to persons nominated by a shareholder of the
Company to enjoy information rights. 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
27 June 2017
Substantial shareholders
As at 26 June 2017, the Company has been notified of
the following disclosable interests in the ordinary shares of
the Company:
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.
Number of
ordinary
shares
84,610,701
% of
total
voting
rights
Nature
of
holding
22.47 * Direct/
indirect
Serge Crasnianski
(director)
Schroders plc
52,766,600
13.97
Indirect
Dan David
Foundation
FIL Limited
45,579,318
12.11
Direct
31,343,390
8.32
Indirect
*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 as at such date.
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 2016 AGM, the Company
is authorised to purchase its own shares in the market. The
Company will seek approval at the 2017 AGM 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 as stipulated by the Regulatory
Technical Standards adopted by the European Commission
under Article 5 (6) of the EU Market Abuse Regulation 2014.
This authority will expire on the earlier of 18 months from the
passing of the relevant special resolution or the conclusion of
the following AGM. The Company made no repurchases of
shares in the year ended 30 April 2017.
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
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 appointments 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 38 to 41.
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 2017.
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
36
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Corporate Governance
Corporate Governance continued
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 Code. The directors consider that the
Company has, throughout the year ended 30 April 2017,
complied with those provisions of the September 2014 edition
of the Code that are applicable to it. The Code and associated
guidance are available on the Financial Reporting Council
website at https://www.frc.org.uk/Our-Work/Corporate-
Governance-Reporting/Corporate-governance/UK-Corporate-
Governance-Code/Consultations-and-Revisions-to-the-UK-
Corporate-G.aspx
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 6 to 11, 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 Non-executive Chairman, the
Chief Executive Officer, and four non-executive directors,
three of whom the Board considers to be independent, namely
Emmanuel Olympitis, Jean-Marcel Denis and Yitzhak Apeloig,
and one whom the Board considers to be non-independent
because of her previous employment by the Company, namely
Françoise Coutaz-Replan. Ms Coutaz-Replan resigned as an
employee of the Group in August 2015.
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 either directly or indirectly were major shareholders
in the Company, he should not be considered as independent
(the Dan David Foundation remains a major shareholder).
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 and
2014 was £23,098 and £17 respectively, and £nil for each of
the financial years ended 30 April 2015, 2016 and 2017).
Accordingly, given the above the Nomination Committee
reassessed Mr Apeloig’s status in 2015 and concluded that he
should be considered as being an independent Non-executive
director. The Committee keeps 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 other Executive Directors. 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 five 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
J Lewis
S Crasnianski
Y Apeloig
F Coutaz-Replan
J-M Denis
E Olympitis
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
5
5 (5)
5 (5)
5 (5)
5 (5)
5 (5)
5 (5)
5
5 (5)
n/a
3(5)*
3(5)*
5 (5)
5 (5)
3
3 (3)
n/a
n/a
n/a
3 (3)
3 (3)
0
0 (0)
n/a
n/a
n/a
0 (0)
0 (0)
* Mr Apeloig and Ms Coutaz-Replan attended all the meetings that were held after their appointment to the Audit Committee.
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.
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.com). 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
Meetings are normally held at least twice a year. Five
meetings were held during the year under review. Other
directors together with the Chief Financial Officer and
representatives of the external auditor are generally invited to
attend meetings, as is the Group’s internal auditor
when required.
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 auditor 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.
The Audit Committee consists entirely of non-executive
directors. For the whole of the year under review, Jean-Marcel
Denis (Committee Chairman), Emmanuel Olympitis (Senior
Independent Director) and John Lewis (Chairman of the Board)
served on the Committee; Françoise Coutaz-Replan (the
Group’s former Finance Director) and Yitzhak Apeloig, who
is a qualified accountant, were appointed to the committee
on 20 October 2016. 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 Emmanuel Olympitis, Jean-Marcel
Denis, Françoise Coutaz-Replan and Yitzhak Apeloig have
suitable recent and relevant financial experience to satisfy the
requirements of the Code.
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. From the year ended 30 April 2009 until the Annual
General Meeting in September 2013, KPMG Audit plc was
auditor, having been selected as a result of a competitive
tender in 2008. The Board is committed to putting the audit
contract out to tender at least once every ten years.
It conducted a tender process for the external audit role in
2016 in which it invited four firms (including KPMG LLP) to
tender for the role of external auditor; KPMG LLP was the
successful tenderer.
38
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 (ii) 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 the 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 position and
performance, business model and strategy.
Corporate Governance continued
Corporate Governance continued
Key matters considered
During the last financial year, the Committee conducted a
tender of the external audit function as described above. It also
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 2017. In
June 2017, 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:
•
•
•
the integrity, completeness and consistency of financial
reporting, including the adequacy, clarity and
appropriateness of disclosures;
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;
•
the materiality level to apply to the audit; and
• 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, judgments and estimates which are
detailed in note 1 to the financial statements. The key areas
of assumptions, judgments and estimates that have been
monitored and considered by the Committee were:
• The carrying value of the GBP denominated goodwill
in connection with the Japanese subsidiary and the
potential impairment of this asset.
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 judgments 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 2017
and the Committee considered the conclusions and sensitivity
calculations that had been undertaken as part of the review.
• 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.
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 (Chairman of the Audit Committee) 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.
The Committee meets at least once per year. Three meetings
were held in the year ended 30 April 2017.
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 42 to 52 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. The Committee had several discussion sessions during
the year ended 30 April 2017, but as no new candidates were
considered for appointment to the Board during that period, the
Committee held no formal meetings.
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 has 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 or dialogue.
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 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:
•
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;
• oversight by the Audit Committee, involving (amongst
other duties):
(i) a detailed review of key financial reporting
judgments which have been discussed by
management;
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017
Remuneration Report
ANNUAL STATEMENT
Dear Shareholder,
I am pleased to present the Directors’
Remuneration Report for the year
ended 30 April 2017, which has
been prepared by the Remuneration
Committee ("the Committee") and
approved by the Board.
This report has been prepared in line with the Large and
Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (as amended).
The report is divided into three sections:
•
•
•
This Annual Statement, which summarises
remuneration outcomes in 2016/17 and provides
details of the new Directors’ Remuneration Policy which
will be submitted for approval at the annual general
meeting ("AGM") for 2017.
The Remuneration Policy Report, which
details the Company’s policy on the remuneration
of executive and non-executive directors. As the
original remuneration policy, which was approved
by shareholders at the 2014 AGM and amended last
year, is nearing the end of its three-year shareholder-
approved life, we will ask shareholders to approve a
new policy at the 2017 AGM.
The Annual Report on Remuneration,
which discloses details of the Committee, how the
remuneration policy was implemented in the year
ended 30 April 2017, and how the policy will operate
for the year ending 30 April 2018.
The Annual Statement and Annual Report on Remuneration
will be subject to an advisory vote at the forthcoming 2017
AGM whilst the Remuneration Policy Report will be subject to
a binding vote.
Remuneration outcomes in 2016/17
For the year under review, the Committee considers the
remuneration of the executive director to reflect both the
performance of the Group and his individual performance.
As pre-tax profit exceeded the prior year adjusted pre-tax
profit by more than 10%, a bonus of 150% of salary is
payable to the Chief Executive Officer (“CEO”). The CEO
does not hold any unvested share option awards.
Policy Renewal at the 2017 AGM
The Directors’ Remuneration Policy was approved by
shareholders at the 2014 AGM and, while a number of
changes were made to the policy at the 2016 AGM with
shareholder approval (i.e. amending the CEO’s annual bonus
potential, increasing shareholding guidelines and introducing
post-vesting holding periods), the Committee has carried
out a more fundamental review of the policy ahead of the
2017 AGM.
When reviewing the policy, the Committee considered a
number of factors, including:
•
The appropriateness of Photo-Me’s pay for
performance outcomes since the current remuneration
policy was approved by shareholders in 2014;
•
The recent output from the Executive Remuneration
Working Group, the Government’s Green Paper on
corporate governance reform, shareholder investor
bodies and individual investors’ updated voting
guidance;
•
The changes made to the Directors’ Remuneration Policy
last year (as noted above), including feedback received
from investors during the consultation exercise;
•
Pay and employment conditions in the wider workforce.
The main conclusion in respect of the Committee’s review was
that the current Directors’ Remuneration Policy (i.e. as originally
approved in 2014 and amended in 2016), remains fit for
purpose and no material amendments should be made at
the present time. The Committee will therefore seek shareholder
approval to “roll over” the existing policy, as presented
in the Remuneration Policy Report overleaf. That said,
reflecting best practice, the new policy now contains caps on
executive directors’ base salaries, benefits, and non-executive
directors’ fees.
Implementation of the Remuneration Policy for 2017/18
Whilst the Committee does not intend to make material changes
to the current Directors’ Remuneration Policy, the Committee
proposes to make the following two alterations to the
implementation of the Remuneration Policy for the year ending
30 April 2018:
•
Following a review of the CEO’s base salary, the
Committee awarded an inflationary increase of 3% from
1 May 2017.
• The CEO’s annual bonus will continue to be structured
to incentivise year-on-year profit growth with the
maximum annual potential maintained at 150% of
salary. However, rather than an automatic “start to
earn” of 75% of salary payable for equalling or
exceeding the prior year’s Group pre-tax profit (which
the Committee now considers would be too high under
normal circumstances), the Committee will determine
the annual bonus payable where year-on-year pre-tax
profit growth is between 0% and 5% on the prior year.
This determination will consider both the quality and
sustainability of the profit delivered.
In addition, for the 2017/18 financial year, the base fees of the
Chairman of the Board and Non-executive Directors have been
increased by 10%. This represents the first increase for Non-
executive Directors since 2013, and the first increase for
the Chairman and the senior independent director since 2010,
and brings the fees more into line with those of similar
sized companies.
Whilst both of the changes above are permitted under the current
shareholder-approved policy, major shareholders were consulted
in advance of the changes being made.
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 the Company’s voting results at the 2016 AGM, where both
the Directors’ Remuneration Report and Remuneration Policy
resolutions were supported by significant majorities.
In conclusion, the Committee is 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
27 June 2017
Remuneration Report continued
REMUNERATION POLICY REPORT
This part of the Directors'
Remuneration Report sets out the
new remuneration policy for which
shareholder approval will be sought
at the forthcoming AGM.
If shareholder approval for this new policy is obtained, it will
replace the policy currently in existence, with it being intended
that this new policy will apply from its adoption at the 2017
AGM until the 2020 AGM. As set out in the Committee
Chairman's introductory letter, no material changes are to be
made to the existing policy, such key changes that are to be
made being explained in that letter.
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.
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.
The remuneration packages of the executive directors can
comprise the following main elements:
•
•
•
•
•
Base salary
Annual bonus
Share options
Pensions
Other benefits
Remuneration scenarios for executive directors
The chart below shows how the composition of the CEO’s
remuneration package varies at three performance levels:
at minimum (i.e. fixed pay), target, and maximum levels,
under the policy set out in the table below.
Value of remuneration package at different levels of performance
£'000
Salary
Benefits
Pension contribution
Target bonus
Maximum bonus
CEO
£557
£65
£84
£418
£836
£'000
Minimum On-target Maximum
Basic salary,
benefits &
pension
Bonus
Total
£706
£706
£706
0
£418
£836
£706
£1,124
£1,542
Summary remuneration policy table
The table below summarises the remuneration policy for directors:
Element
Purpose and link to
strategy
Operation
Maximum
Salary1
Reflects the value of the
individual and their role
Normally reviewed
annually, effective 1 May
Reflects skills and
experience over time
Normally paid in cash;
pensionable
Provides an appropriate
level of basic fixed income
avoiding excessive risk
arising from over reliance
on variable income
Comparison against
companies with similar
characteristics and
comparators taken into
account in review
Benefits
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
Includes company car,
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
The Committee is guided by the
requirements of the Company
and prevailing market levels.
However, no executive director
will receive a base salary
increase in excess of 10% p.a.,
except to reflect the fact that
their salary was set at a lower
level initially with the intention
that the salary be increased to
a more market-reflective level as
the individual gains experience
(subject to performance)
Benefits will not normally be
provided with a value per
executive director in excess of
£75,000 p.a.
Performance
measures
N/A
N/A
42
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REMUNERATION POLICY REPORT continued
Remuneration Report continued
REMUNERATION POLICY REPORT continued
Element
Annual
bonus
Purpose and
link to strategy
Incentivises
delivery of
specific Company,
divisional and
personal annual
goals
Maximum bonus
only payable
for achieving
specified targets
Pension
Provides
competitive
retirement benefits
Executive
Share
Option
Scheme
(“ESOS”)
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
Normally payable in cash
Up to 150% of base salary p.a.
Non-pensionable
Committee has the discretion
to defer up to 50% of the
bonus in shares for 3 years
Performance
measures
Performance is assessed
on an annual basis, based
on the achievement of
objectives relating to
financial performance,
progress of strategic
priorities and/or personal
targets. The specific
measures used in the
bonus and their weighting
may vary each year
depending on business
context and strategy
Clawback provisions are
operated
Defined contribution
Up to 15% of base salary p.a.
N/A
Executive directors may
be offered cash in lieu of
pension
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 two
years’ 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.
No awards to be granted
under the annual bonus or
ESOS
No non-executive director
receives any benefits in
kind (other than in respect
of the expenses relating
to the performance of that
individual’s duties, such
as travel to/from Board
meetings)
Up to 150% of base salary p.a.
The Remuneration
Committee may set such
performance conditions
on awards as it considers
appropriate (whether
financial or non-financial,
and whether corporate,
divisional or individual)
Up to 25% of salary vests
at threshold increasing to
150% vesting at maximum
Clawback provisions are
operated
At least 200% of base salary
N/A
N/A
The Committee is guided by
market rates, time commitments
and responsibility levels.
However, aggregate annual
fees will not exceed £750,000
or such other figure as provided
for in the Company’s Articles of
Association from time to time
The Board may request that a
non-executive director undertake
services not within the normal
scope of his/her role. Should
this be the case in the future,
a commercial rate would be
paid and full disclosure would
be provided in the relevant
Directors’ Remuneration Report
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.
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 Directors’ Remuneration Report for the relevant financial
year. The policy will be binding except that the Committee may make changes only in so far as required to comply with new legal requirements.
If material, such changes would be submitted to the subsequent shareholders’ meeting for approval.
Minimum On-target Maximum
Basic salary,
benefits & pension
100%
Bonus
63%
37%
46%
54%
The chart above is based on the following:
• Salary level effective on 1 May 2017.
• An approximate value of benefits for the financial year,
using the figures for the year ended 30 April 2017.
• An annualised pension contribution and/or salary
supplement (as a % of salary) for the year to
30 April 2017.
• A maximum bonus of 150% of salary (with target
assumed to be 50% of the maximum).
• The CEO will not receive share option awards during
the 2017/2018 financial year.
Choice of performance measures
The Committee has given careful consideration to the
performance measures applicable to both the annual bonus
and the 2014 Executive Share Option Scheme.
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 2016
AGM, which showed over 91% 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
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 take 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 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 strategic and/or personal
objectives if it deems this appropriate with regard to the
Company’s key objectives.
Consistent with Part 4 of the Large and Medium-sized
Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013, which amended the Large and Medium-
sized Companies and Groups (Accounts and Reports)
Regulations 2008, any caps contained within the policy
for fixed pay do not apply to new recruits, although the
Committee would not envisage exceeding these caps in
practice unless absolutely necessary.
The earnings per share (EPS) performance condition
applicable to the 2014 Executive Share Option Scheme was
selected by the 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 use of other financial/share price-based
performance metrics and 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 2014 Executive Share Option
Scheme in accordance with the scheme rules, the Listing Rules,
and HMRC legislation. 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
The Committee is aware of the general pay and conditions
in the Group as a whole when determining the directors'
remuneration policy and its implementation. However,
reflecting standard practice, employees are not directly
consulted in the formulation of the policy.
How the executive directors’ remuneration policy relates
to the Group
The Remuneration Policy described above provides an
overview of the structure that operates for 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.
The annual bonus potential would be limited to 150% 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.
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 (none 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. 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 or her loss. An annual bonus
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Remuneration Report continued
REMUNERATION POLICY REPORT continued
of the Company during the non-executive director’s normal
term of appointment, he or she will be entitled to compensation
equal to three months’ fees, six months’ fees in the case of the
Chairman. Relevant appointment letter and term dates of the
non-executive directors are set out below:
Non-
executive
director
Appointment
letter date
Year
of last
election
Expected
year of
expiry of
current
item
John Lewis2
26/07/2010
2014
2017
Yitzhak
Apeloig
Françoise
Coutaz-Replan3
Jean-Marcel
Denis
Emmanuel
Olympitis
08/03/2012
2015
2018
27/08/2015
2015
2018
01/03/2012
2015
2018
11/11/2009
2016
2019
1 Mr Crasnianski’s contract is with Photo-Me Limited, a wholly
owned subsidiary of the Company.
2 First appointed to the Board on 3 July 2008.
3 First appointed to the Board as Group Finance Director on
24 September 2009, and resigned as an executive director on
27 August 2015.
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
relevant Directors’ Remuneration Report.
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 scheme 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 six 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 six 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 six 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-rating of options will
apply to good leavers’ awards unless the Committee determines
that time pro-rating is inappropriate.
The Company has the power to enter into settlement
agreements with directors and to pay compensation to settle
potential legal claims. In addition, and consistent with market
practice, in the event of the termination of an executive director,
the Company may make a contribution towards that individual’s
legal fees and fees for outplacement services as part of a
negotiated settlement. Any such fees will be disclosed as part
of the detail of termination arrangements. For the avoidance of
doubt, the policy does not include an explicit cap on the cost of
termination payments.
Service contracts
Details of the executive director’s service contract are as
follows:
Executive director
Date of
contract
Notice
period
Serge Crasnianski1
01/05/2010
12 months
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
Remuneration Report continued
ANNUAL REPORT ON REMUNERATION
Implementation of the Remuneration Policy for year ending 30 April 2018.
Base salary
The base salary for each executive director is reviewed annually by the Committee and the current applicable base salaries are
as follows:
Executive director
Serge Crasnianski
1 May 2017
£
1 May 2016
£
557,114
540,887
%
Increase
3
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.
Benefits
Executive directors are entitled to a company car, private medical insurance and an accommodation allowance.
Annual bonus
The annual bonus will continue to be structured to incentivise year-on-year profit growth with a maximum annual amount
set at 150% of salary. In the previous year, an automatic “start to earn” of 75% of salary was payable for equalling or
exceeding the prior year’s Group pre-tax profit by 5% or more. The Committee now considers this would be too high under
normal circumstances, so the Committee will determine the annual bonus payable where year-on-year pre-tax profit growth
is between 0% and 5% compared to the prior year. This determination will consider both the quality and sustainability of the
profit delivered. The targets operated for the year ended 30 April 2017 and the targets for the year ending 30 April 2018 are
therefore as follows:
2017/18 Annual Bonus
(% of salary)
2016/17 Annual Bonus
(% of salary)
Group pre-tax profit is less than the prior year*
0%*
Group pre-tax profit is between 100% and 105% of
the prior year
Group pre-tax profit is 5% higher, but less than 10% higher
than that of the prior year
Group pre-tax profit is 10% or above that of the prior year
Committee discretion
to determine a bonus
depending on year-on-
year profit growth
100%
150%
*Any bonus for this level of performance would be entirely at the Committee’s discretion
Long-term incentives
No options will be granted to the CEO under the 2014 Executive Share Option Scheme this year.
0%*
75%
100%
150%
Non-executive directors
The fees for non-executive directors are reviewed at least every three years and the current applicable fee levels for the roles
below are as follows:
Non-executive director
Role
Committee Chairman
John Lewis
Chairman
Emmanuel Olympitis
Senior Independent
Director
Chair of Nomination
Committee
Chair of Remuneration
Committee
Françoise Coutaz-Replan
Non-executive Director
–
Jean-Marcel Denis
Non-executive Director
Chair of Audit Committee
Yitzhak Apeloig
Non-executive Director
–
1 May 2017
£
1 May 2016
£
132,000
120,000
55,000
50,000
44,000
49,500
44,000
40,000
45,000
40,000
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ANNUAL REPORT ON REMUNERATION continued
Remuneration Report continued
ANNUAL REPORT ON REMUNERATION continued
Single Total Figure of Remuneration*
The detailed emoluments received by the executive and non-executive directors for the year ended 30 April 2017 are shown
below. No payments were made for loss of office, and no payments were made to past directors.
Salary/
Fees
£
Year
Benefits1
£
Bonus2
£
Long-Term
Incentives3
£
Pension4
£
Total
£
Executive director
Executive Share Option Scheme (ESOS)
The ESOS awards granted to Françoise Coutaz-Replan on 10 July 2014 completed their performance period on 30 April
2017 and accordingly have been included in the 2017 single total figure of remuneration. These awards are 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.
Serge Crasnianski5
2017
540,887
64,763
811,330
–
81,133
1,498,113
2016
491,715
27,397
491,715
368,040
73,757
1,452,624
Performance condition
Non-executive directors
John Lewis7
2017
120,000
2016
120,000
Yitzhak Apeloig
2017
40,000
Françoise Coutaz-Replan6
2017
40,000
2016
40,000
–
–
–
–
–
2016
89,667
8,159
Jean-Marcel Denis
2017
45,000
Emmanuel Olympitis
2017
50,000
2016
45,000
2016
50,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
39,702
–
–
–
–
–
120,000
120,000
40,000
40,000
79,702
99,740
3,150
200,716
–
–
–
–
–
–
–
–
45,000
45,000
50,000
50,000
1 Taxable benefits comprise the provision of a car or car allowance, private medical insurance, and (where appropriate) an accommodation
allowance which for the CEO amounted to £30,000.
2 Bonus is that awarded in respect of performance in the financial year, the calculation for the 2017 annual bonus is shown on page 47
3 The value for Long-term Incentives shown above for- Françoise Coutaz-Replan in respect of the year ended 30 April 2017 relates to ESOS
awards granted in July 2014 (195,000 shares) with an exercise price of 145.33p and for which the performance period ended on 30 April
2017. The value shown above is the intrinsic value calculated using the three-month average share price to 30 April 2017 (165.6905p) as
required by the relevant regulations. The 2016 financial year long-term incentive values for calculations relate to ESOS awards granted in July
2013 to Serge Crasnianski (738,000 shares) and Françoise Coutaz-Replan (200,000 shares), each with an exercise price of 90.63p and
with a performance period which ended on 30 April 2016. The awards vested on 9 July 2016 (share price 140.5p) and the intrinsic values
at vesting were as shown above. These are lower than the values shown in the single figure table for the year ended 30 April 2016, where
intrinsic values were calculated using the three-month average share price to 30 April 2016 (167.61p).
4 The pension payment to Serge Crasnianski in the year ended 30 April 2017 represented 15% of base salary.
5 The emoluments of Serge Crasnianski shown above include fees and bonus totalling £847,410 (2016: £770,373) payable to a third party in
respect of making available the services of Serge Crasnianski to the Company.
6 Françoise Coutaz-Replan stepped down as an executive director on 27 August 2015, and was appointed as a non-executive director on the
same date.
7 The emoluments of John Lewis shown above include fees of £45,000 (2016: £45,000) paid to a third party in respect of making available the
services of John Lewis to the Company.
* Subject to audit
Additional information in respect of the single total figure table*
ANNUAL BONUS
For the year ended 30 April 2017, the maximum bonus opportunity for Serge Crasnianski was 150% of salary. Serge
Crasnianski’s full bonus for that year was determined by performance against profit-before-tax targets established at the start of the
financial year. Details of the performance against the profit-before-tax targets for the 2017 annual bonus are set out below:
Threshold
Target
Maximum
Actual
48
Profit before tax
Bonus payout
(% of salary)
£40.1m
£42.1m
£44.1m
£48.0m
75%
100%
150%
150%
EPS for 2017 Vesting (% of participant’s
salary at date of grant)
Below 5.5p
5.5p
6.5p
7.2p
None
25%
100%
150%
Between 5.5p
and 7.2p
Between 25% and 150%
on a straight-line basis
9.3p
150%
Actual
*Subject to audit
Scheme interests awarded in the year *
Executive Share Option Scheme
The Company made no option awards to directors during the year ended 30 April 2017.
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 2017 and the date of signing the financial statements.
Beneficially owned at
1 May
30 April
2017
2016
84,610,7014
Vested
ESOS
awards1
79,783,450 738,000
Unvested
ESOS
awards2
Shareholding
requirement
(% of salary)
200%
Current
shareholding
(% of salary)3 Guideline
Yes
27,219%
Executive
director
Serge
Crasnianski
Non-executive directors
John Lewis
Yitzhak
Apeloig
Françoise
Coutaz-Replan5
Jean-Marcel
Denis
Emmanuel
Olympitis
–
–
–
–
200,000
161,800 732,000
407,600
–
–
45,000
45,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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 200% of 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 2017 being
174p. The shareholding guideline is calculated using only beneficially owned shares.
4 Of the shares beneficially owned by Serge Crasnianski, 79,719,900 shares (2016: 79,719,900) were registered in other names.
5 Françoise Coutaz-Replan stepped down as an executive director on 27 August 2015, continuing as a non-executive director.
49
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Remuneration Report continued
ANNUAL REPORT ON REMUNERATION continued
Directors’ interests in share options*
Number of options
As at
1 May
2016
Granted
during
year
Exercised
during
year
Lapsed
during
year
As at
30 April
2017
Exercise
price
Date from
which
exercisable Expiry date
Date of grant
Serge Crasnianski
9 July 20131
738,000
Françoise Coutaz-Replan
20 Jan 2010
4 July 2011
44,093
50,000
13 Dec 2011
250,000
4 July 2012
232,000
9 July 20131
200,000
10 July 20142
195,000
9 July 20153
212,600
–
–
–
–
–
–
–
–
–
44,093
–
–
–
–
–
–
–
–
–
–
–
–
–
–
738,000
90.63p
9 July 2016
8 July 2020
-–
36.67p
20 Jan 2013 19 Jan 2017
50,000
65.25p
4 July 2014
3 July 2018
250,000
53.50p 13 Dec 2014 12 Dec 2018
232,000
39.17p
4 July 2015
3 July 2019
200,000
90.63p
9 July 2016
8 July 2020
195,000
145.33p
10 July 2017
9 July 2021
212,600
133.33p
9 July 2018
8 July 2022
1 The 10 July 2014 ESOS awards are subject to the performance conditions and vesting schedule as set out on page 49
2 The 9 July 2015 ESOS award is subject to the performance and vesting schedule in the 2014 ESOS award but the threshold 2018 EPS
target is set at 6.5p with full vesting for an EPS of 8.5p or greater.
* 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.
Remuneration Report continued
ANNUAL REPORT ON REMUNERATION continued
Performance graph
The graph below shows the Company’s performance, measured by total shareholder return (TSR) (share price growth plus
dividends reinvested),compared with the performance of the FTSE SmallCap Index (calculated on the same basis) over the past
eight 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)
1500
1400
1300
1200
1100
1000
900
800
700
600
500
400
300
200
100
0
April 2009
April 2010
April 2011
April 2012
April 2013
April 2014
April 2015
April 2016
April 2017
Photo-Me International plc
FTSE Small Cap
Employee remuneration costs (£’000)1
Dividends (£’000)2
2017
2016
% Change
40,658
32,6293
32,653
18,217
24.5%
79%
This graph shows the value at 30 April 2017 of £100 invested in the Company 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 CEO over the same eight-year period as the TSR chart above. All share
awards are valued at the date of vesting.
1 Based on the figure shown in note 5 to the Financial Statements.
2 Based on the cash returned to shareholders in 2017 through dividends as shown in note 9 to the Financial Statements. The Company did not
undertake any buy-backs in the year ended 30 April 2017.
3 This includes the special dividend of 2.815p paid on 10 November 2016.
Percentage increase in the remuneration of the CEO
The table below shows the change in the salary, benefits and annual bonus for the CEO 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
CEO
% change
10%
136.39%
65%
Employees
% change1
0.8%
0%
(6.6)%
1 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.
Year ended
30 April
2017
2016
2015
2014
2013
2012
2011
2010
2010
CEO
Total
remuneration
(£)
Annual
bonus
(% of max)
Long-term
incentives
(% of max)1
Serge Crasnianski
1,498,113
Serge Crasnianski
1,429,209
Serge Crasnianski
1,031,628
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski2
Thierry Barel3
914,278
899,487
898,693
893,312
739,548
90,327
100%
100%
100%
100%
100%
100%
100%
100%
0%
–
100%
–
–
–
–
–
–
–
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 2011 to 30 April 2017 (but excluding 2016), 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 CEO 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 CEO but excludes any fees paid (£5,429) for
performing the role of non-executive director.
3 Thierry Barel resigned from the role of CEO on 3 July 2009. The total remuneration figure shown includes all payments received prior to his
resignation as CEO, but excludes a termination payment of £92,800.
50
51
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Remuneration Report continued
ANNUAL REPORT ON REMUNERATION continued
Payment for loss of office
No termination payments were made in the year.
Committee role and membership
The Remuneration Committee comprises three non-executive directors: Emmanuel Olympitis (Committee Chairman, member of the
Audit and Nomination Committees, and Senior Independent Director); John Lewis (Chairman of the Board and the Nomination
Committee, and member of the Audit and Remuneration Committees); and Jean-Marcel Denis (Chairman of the Audit Committee
and member of the Nomination and Remuneration Committees). They are all considered by the Board to be independent.
Biographies of the members of the Committee are set out on page 34. Details of their membership of the Committee and
attendance at the meetings during the year are as follows:
Name
Emmanuel Olympitis
John Lewis
Position
Appointment
date
Committee Chairman
11 November 2009
Non-executive Chairman
3 July 2008
Jean-Marcel Denis
Non-executive Director
1 March 2012
Number of meetings
attended (maximum
possible)
3 (3)
3 (3)
3 (3)
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 CEO may attend meetings of the Committee, except when his 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.com.
Advisers
The Committee is advised by FIT Remuneration Consultants LLP, which has been appointed by the Committee to replace New
Bridge Street, part of Aon plc. FIT advises the Committee on various matters relating to the remuneration of the Chairman,
executive directors and senior executives and also provides advice to the executive director in respect of the remuneration of non-
executive directors. During the financial year ended 30 April 2017, fees paid to FIT and New Bridge Street in respect of advice
given to the Committee totalled £8,175 and £4,700 (exclusive of VAT) respectively. The Committee is satisfied that the advice
provided by FIT and New Bridge Street is objective and independent and those firms charge on their normal respective terms.
The Committee also receives advice from the CEO 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 resolution on the Directors’ Remuneration Report received the following votes from shareholders:
Resolution
Directors’ Remuneration
Report (excluding the
Remuneration policy)
Amending the Directors’
Remuneration Policy
Votes cast in
favour
Votes cast
against
%
%
Total votes
cast (excludes
withheld
votes)
Votes
withheld1
%
282,550,683 91.72
25,497,850
8.28
308,048,533 100.00
10,481,309
189,938,061 83.27
38,164,370
16.73
228,102,431 100.00
90,427,411
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.
By order of the Board
Emmanuel Olympitis
Chairman of the Remuneration Committee
27 June 2017
Statement of Directors’ Responsibilities
The directors of the Company,
who are named on page 34, are
responsible for preparing the Annual
Report, the Report of the Directors
and the Group and Company
financial statements in accordance
with applicable law and regulations.
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 (IFRS) 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:
• select suitable accounting policies and then apply them
consistently;
• make judgments and accounting estimates that are
reasonable and prudent;
• state whether they have been prepared in accordance
with IFRS 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.
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 34, confirms that, to the best of
his or her knowledge:
•
•
the financial statements, prepared in accordance with
IFRS 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.
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 41.
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
position and performance, business model and strategy.
Significant accounting policies, critical estimates and key
judgments
Our significant accounting policies are set out on pages
66 to 73 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 2016/2017 consolidated financial
statements.
By order of the Board
John Lewis
Non-executive Chairman
27 June 2017
52
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Independent Auditor's Report
Independent Auditor's Report continued
Independent
auditor’s report
to the members of Photo-Me
International plc only
Opinions and conclusions
arising from our audit
Overview
Materiality:
group financial
statements as a
whole
Coverage
£2.4m (2016:£2.0m)
5% (2016: 5%) of profit before tax
79% (2016:91%) of group profit
before tax
Risks of material misstatement vs 2016
Recurring risks
Recoverability of carrying
value of photobooths and
vending machines
◄►
Recoverability of Japan
goodwill
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
2017 set out on pages 60 to 123. In our opinion:
— the financial statements give a true and fair
view of the state of the group’s and of the
parent company’s affairs as at 30 April 2017 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, in decreasing order of audit significance, were as follows:
The risk
Our response
Recoverability of carrying
value of photobooths
and vending machines
(£66.6m; 2016: £49.7m)
Refer to page 40 (Audit
Committee Report), page
69 (accounting policy) and
page 87 (financial
disclosures).
The carrying value of photobooths
and vending machines is significant
and there is a risk of impairment of
these assets in some countries due
to potential changes in technology,
consumer preference and
regulations.
The carrying value of the asset
classes are first reviewed at a high
level by comparing the carrying
amount to the 18 month cash flows
expected from the asset. If this high
level review indicates potential
impairment issues then the group
prepares discounted cash flow
forecasts taking into consideration
their full useful economic life, on all
asset classes with a carrying value
greater than £150K and compares
the results to the carrying value of
the assets to assess if an
impairment of the asset is required.
The estimated recoverable amount is
subjective due to the inherent
uncertainty involved in forecasting
and discounting future cash flows.
Recoverability of Japan
goodwill
(£7.2m; 2016: £7.2m)
Goodwill in relation to Nippon Auto-
Photo Kabushiki Kaisha (Japan) is
significant and at risk of
recoverability due to:
Refer to page 40 (Audit
Committee Report), page
68 (accounting policy) and
page 83 (financial
disclosures).
-the potential impact of the volatility
of the Japanese Yen on the
recoverable amount of this GBP
denominated goodwill and;
-the inherent uncertainty involved in
the forecasting of cash flows and
use of inputs and discount rates.
Our procedures included:
— Control design: Evaluating the controls over the
process used for identifying potential impairment
including their operating effectiveness.
— Our sector experience: Assessing assumptions
made in the discounted cash flow models such as
EBITDA based on our knowledge of the group and
the country specific markets.
— Historical comparisons: Challenging the
methodology used to determine the discount rate
used in the cash flow models by comparing against
past performance.
— Benchmarking assumptions: Assessing whether
the forecasts appropriately considered any changes
in the market place and local regulations based on
our industry knowledge; and
— Challenge of business plans : For those assets
where there were indicators of impairment but
impairment analysis indicated otherwise, we
challenged the directors’ assumptions of the
achievability of the country-specific plans using our
understanding of the legislation and product mix in
the relevant country.
— Comparing carrying value: For those asset classes,
where there is a potential impairment, that are below
the Group’s impairment testing threshold, we
checked the EBIDTA as a proxy for cash flows
expected in aggregate by entity, from these assets
against carrying amount.
Our procedures included:
— Control design : Evaluating the group's budgeting
procedures upon which the cash flow forecasts are
based.
— Historical comparisons : Consideration of the
historical accuracy of key assumptions used in the
model by comparing forecasted revenue and cost
growth to the actual amounts achieved in prior
periods.
— Tests of detail: Comparing forecast exchange rates
to externally derived data.
— Sensitivity analysis : Performing break-even
analysis on the discount rate and exchange rate
used.
— Assessing transparency: Assessing whether the
group's disclosures (see note 11) about the
sensitivity of the outcome of the impairment
assessment to changes in key assumptions
adequately reflected the risks inherent in the
valuation of goodwill.
We continue to perform procedures over Estimation of provisions. However, following the reduction of this balance, we
have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately
identified in our report this year.
1
2
54
55
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Independent Auditor's Report continued
Independent Auditor's Report continued
4. Our opinion on other matters prescribed by the
3. Our application of materiality and an
Companies Act 2006 is unmodified
overview of the scope of our audit
Group profit before tax
£48.0m (2016: £40.0m)
— the parent company financial statements and the part
Materiality
£2.4m (2016: £2.0m)
In our opinion:
— the part of the Directors’ Remuneration Report to be
The materiality for the group financial statements as
a whole was set at £2.4m (2016: £2.0m),
determined with reference to a benchmark of group
profit before taxation of £48m, of which it
represents 5.0% (2016: 5.0%).
audited has been properly prepared in accordance with
the Companies Act 2006; and
— the information given in the Strategic Report and the
Directors’ Report for the financial year is consistent
with the financial statements.
We report to the audit committee any corrected or
uncorrected identified misstatements exceeding
£0.1m (2016: £0.1m), in addition to other identified
misstatements that warrant reporting on qualitative
grounds.
Based solely on the work required to be undertaken in the
course of the audit of the financial statements and from
reading the Strategic Report and the Directors’ Report:
— we have not identified material misstatements in those
reports; and
— in our opinion, those reports have been prepared in
Of the group's 36 (2016: 34) reporting components,
we subjected 7 (2016: 5) to audits for group
reporting purposes and 1 (2016: 1) to specified risk-
accordance with the Companies Act 2006.
focused audit procedures. The latter was not
individually financially significant enough to require
5. We have nothing to report on the disclosures of
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 percentages of the group's
results as set out across the page.
Based on the knowledge we acquired during our audit, we
have nothing material to add or draw attention to in relation
to:
— the directors’ statement of viability on page 31,
principal risks
— the disclosures in note 1 of the financial statements
concerning the use of the going concern basis of
accounting.
concerning the principal risks, their management, and,
The remaining 14% (2016: 12%) of total group
based on that, the directors’ assessment and
revenue, 21% (2016: 9%) of group profit before tax
expectations of the group’s continuing in operation over
and 20% (2016: 12%) of total group assets is
the three years to 30 April 2020; or
represented by 28 (2016: 28) reporting components,
none of which individually represented more than
5.6% (2016: 4.9%) of any of total group revenue,
group profit before tax or total group assets. -
6. We have nothing to report in respect of the matters
For the remaining components, we performed
on which we are required to report by exception
analysis at an aggregated group level to re-examine
our assessment that there were no significant risks
of material misstatement within these. -
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.
— 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 position and performance, business model and
strategy; or
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
In particular, we are required to report to you if:
team approved the component materialities, which
ranged from £0.1m to £1.2m (2016: £0.1m to
£1.2m), having regard to the mix of size and risk
profile of the Group across the components. The
work on 5 of the 36 components (2016: 6 of the 34
components) was performed by component
auditors and the rest by the Group audit team.
The Group Engagement Partner visited 1 (2016: 1)
component location in France, including to assess
the audit risk and strategy. Multiple telephone
conference meetings were held with the
component auditors, including planning calls and
post reporting calls. 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.
— 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
Under the Companies Act 2006 we are required to report to
you if, in our opinion:
appropriately address matters communicated by us to
the audit committee.
— the corporate governance statement does not
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
£2.4m
Whole financial
statements materiality
(2016: £2.0m)
by law are not made; or
— we have not received all the information and
Under the Listing Rules we are required to review:
explanations we require for our audit.
£1.2m
Range of materiality at 7
components (£0.1m-£1.2m)
— the directors’ statements, set out on page 31, in
(2016: £0.1m to £1.2m)
relation to going concern and longer-term viability; and
— the part of the Corporate Governance Statement on
page 38 relating to the company’s compliance with the
eleven provisions of the 2014 UK Corporate
Governance Code specified for our review.
Group profit before tax
We have nothing to report in respect of the above
responsibilities.
£0.1m
Misstatements reported to the
audit committee (2016: £0.1m)
Group materiality
Scope and responsibilities
Group revenue
2
2
Group profit before tax
As explained more fully in the Directors’ Responsibilities
Statement (set out on page 53), 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
2
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
88
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.
86%
79%
(2016 88%)
(2016 91%)
77
86
84
3
Group total assets
Steve Masters (Senior Statutory Auditor)
2
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
2
80%
1 Forest Gate
Brighton Road
(2016 88%)
Crawley
RH11 9PT
86
78
27 June 2017
4. Our opinion on other matters prescribed by the
Companies Act 2006 is unmodified
In our opinion:
— the part of the Directors’ Remuneration Report to be
audited has been properly prepared in accordance with
the Companies Act 2006; and
— the information given in the Strategic Report and the
Directors’ Report for the financial year is consistent
with the financial statements.
Based solely on the work required to be undertaken in the
course of the audit of the financial statements and from
reading the Strategic Report and the Directors’ Report:
— we have not identified material misstatements in those
reports; and
— in our opinion, those reports have been prepared in
accordance with the Companies Act 2006.
5. We have nothing to report on the disclosures of
principal risks
Based on the knowledge we acquired during our audit, we
have nothing material to add or draw attention to in relation
to:
— the directors’ statement of viability on page 31,
concerning the principal risks, their management, and,
based on that, the directors’ assessment and
expectations of the group’s continuing in operation over
the three years to 30 April 2020; or
— the disclosures in note 1 of the financial statements
concerning the use of the going concern basis of
accounting.
6. 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:
— 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 position and performance, business model and
strategy; or
— 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:
— adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
— the parent company financial statements and the part
of the Directors’ Remuneration Report to be audited are
not in agreement with the accounting records and
returns; or
— certain disclosures of directors’ remuneration specified
by law are not made; or
— we have not received all the information and
explanations we require for our audit.
Under the Listing Rules we are required to review:
— the directors’ statements, set out on page 31, in
relation to going concern and longer-term viability; and
— the part of the Corporate Governance Statement on
page 38 relating to the company’s compliance with the
eleven provisions of the 2014 UK Corporate
Governance Code specified for our review.
We have nothing to report in respect of the above
responsibilities.
Scope and responsibilities
As explained more fully in the Directors’ Responsibilities
Statement (set out on page 53), 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.
Steve Masters (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Forest Gate
Brighton Road
Crawley
RH11 9PT
27 June 2017
Key:
Full scope for group audit purposes 2017
Specified risk-focused audit procedures 2017
Full scope for group audit purposes 2016
Specified risk-focused audit procedures 2016
Residual components
4
3
4
56
57
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 58
59
technological:
technological:
INTERACTION
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017OURCUSTOMERSOURCUSTOMERS Group Statement of Comprehensive Income
for the year ended 30 April 2017
Statements of Financial Position
for the year ended 30 April 2017
Revenue
Cost of sales
Gross profit
Other operating Income
Administrative expenses
Share of post tax profits from associates
Operating profit
Finance income
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
Taxation on exchange differences
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)/gains in defined benefit obligations and other post-
employment benefit obligations
Deferred tax on remeasurement (losses)/gains
Total items that will not be classified to profit and loss
Other comprehensive income/(expense) for the year 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
2017
£’000
2016
£’000
214,653
183,994
(156,427)
(131,546)
58,226
2,203
52,448
1,306
(13,818)
(14,185)
196
46,807
1,488
(256)
48,039
(12,901)
35,138
1,862
1,058
2,920
(48)
21
(27)
2,893
38,031
34,991
147
35,138
37,799
232
38,031
9.30p
9.27p
165
39,734
538
(166)
40,106
(10,907)
29,199
5,328
485
5,813
43
(9)
34
5,847
35,046
29,066
133
29,199
34,841
205
35,046
7.77p
7.72p
Notes
Group
2017
£’000
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant & equipment
Investment property
Investment in associates
Investment in subsidiaries
Other financial assets – held to maturity
Other financial assets – available for sale
Deferred tax assets
Trade and other receivables
Current assets
Inventories
Trade and other receivables
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
11
11
12
13
14
14
15
15
24
16
17
16
18
20
21
22
23
24
25
21
23
25
11,812
13,451
74,989
662
2,095
–
2,389
81
3,641
2,025
111,145
19,418
18,542
288
47,505
85,753
96
196,994
1,882
8,999
13,249
103,831
127,961
1,341
129,302
8,192
5,456
–
3,087
2,310
19,045
2,490
2,072
4,209
39,876
48,647
196,994
The accounts were approved by the Board on 27 June 2017.
Serge Crasnianski
Chief Executive Officer
John Lewis
Non-executive Chairman
2016
£’000
11,606
8,706
56,094
629
1,713
–
2,253
75
4,216
1,548
86,840
17,094
13,010
2,273
71,005
103,382
96
190,318
1,877
8,156
10,507
101,101
121,641
1,109
122,750
9,183
4,755
10
1,887
1,821
17,656
1,660
4,103
8,341
35,808
49,912
190,318
Company
2017
£’000
–
230
9,330
–
400
47,437
973
–
1,835
–
60,205
1,865
35,347
–
11,535
48,747
96
109,048
1,882
8,999
1,887
72,101
84,869
–
84,869
–
–
–
–
–
–
–
–
1,021
23,158
24,179
109,048
2016
£’000
–
5,723
8,383
–
400
44,462
971
–
2,227
–
62,166
1,723
4,974
–
46,840
53,537
96
115,799
1,877
8,156
1,660
57,110
68,803
–
68,803
–
–
10
–
200
210
–
–
997
45,789
46,786
115,799
The notes on pages 66 to 123 are an integral part of these consolidated financial statements.
The notes on pages 66 to 123 are an integral part of these consolidated financial statements.
60
61
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Group Statement of Cash Flows
for the year ended 30 April 2017
Company Statement of Cash Flows
for the year ended 30 April 2017
Cash flow from operating activities
Profit before tax
Finance cost
Finance income
Operating profit
Share of post tax profit from associates
Amortisation of intangible assets
Depreciation of property, plant and equipment
Profit/(loss) on sale of property, plant and equipment
Exchange differences
Other items
Changes in working capital:
Inventories
Trade and other receivables
Trade and other payables
Provisions
Cash generated from operations
Interest paid
Taxation paid
Net cash generated in operating activities
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired
Investment in associates
Loans advanced to 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
Interest received
Dividends received from associates
Net cash utilised in investing activities
Cash flows from financing activities
Issue of Ordinary shares to equity shareholders
Repayment of capital element of finance leases
Repayment of borrowings
Increase/Increase in borrowings
Increase/Decrease 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
Exchange loss on cash and cash equivalents
Cash and cash equivalents at end of year
Notes
2017
£’000
2016
£’000
48,039
256
(1,488)
46,807
(196)
2,479
19,944
(887)
(727)
(3,877)
(1,088)
(1,534)
2,377
(2,045)
61,253
(256)
(11,969)
49,028
–
(361)
(1,014)
(6,686)
9
(36,652)
2,783
75
279
40,106
166
(538)
39,734
(165)
1,548
15,413
(236)
2,031
(1,615)
(3,665)
52
108
(1,775)
51,430
(166)
(10,816)
40,448
(1,642)
(671)
-
(3,221)
–
(21,276)
1,521
538
–
(41,567)
(24,751)
848
(173)
(1,630)
693
(29)
(32,629)
(32,920)
(25,459)
71,005
1,959
47,505
1,036
(147)
(665)
10,946
29
(18,217)
(7,018)
8,679
58,632
3,694
71,005
9
18
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
Proceeds from disposal of subsidiaries
Purchase of intangible assets
Proceeds from sale of intangible assets
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Loans advanced to subsidiaries
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
2017
£’000
2016
£’000
49,623
21,453
69
(373)
(40,084)
9,235
866
3,574
(96)
68
(142)
(30,373)
(7,216)
(10)
74
(532)
(10,692)
10,303
1,073
3,275
(255)
(249)
(909)
3,132
16,157
(7)
(24,094)
32,520
(69)
(1,656)
(25,819)
(74)
(2,098)
30,348
(3,069)
(1,851)
356
(410)
5,037
(5,382)
957
–
60
40,363
37,912
848
–
(15,615)
(2)
(32,629)
(47,398)
(35,305)
46,840
11,535
–
(1,617)
–
(3,416)
397
(115)
532
10,692
4,622
1,036
15,615
(7,498)
(4)
(18,217)
(9,068)
25,902
20,938
46,840
9
18
The notes on pages 66 to 123 are an integral part of these consolidated financial statements.
The notes on pages 66 to 123 are an integral part of these consolidated financial statements.
62
63
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Group Statement of Changes in Equity
for the year ended 30 April 2017
Company Statement of Changes in Equity
for the year ended 30 April 2017
At 1 May 2015
Profit for year
Other comprehensive (expense)/
income
Exchange differences
Transfers between reserves
Remeasurement losses in defined
benefit pension scheme and
other post-employment benefit
obligations
Deferred tax on remeasurement
gains
Total other comprehensive
(expense)/income
Total comprehensive (expense)/
income
Transactions with owners of the
Parent
Shares issued in the period
Share options
Deferred tax on share options
Dividends
Total transactions with owners of
the Parent
At 30 April 2016
At 1 May 2016
Profit for year
Other comprehensive
(expense)/income
Exchange differences
Tax on exchange
Translation reserve taken to
income statement on disposal of
subsidiaries
Transfers between reserves
Remeasurement losses in defined
benefit pension scheme and
other post-employment benefit
obligations
Deferred tax on remeasurement
gains
Total other comprehensive
(expense)/income
Total comprehensive
(expense)/income
Transactions with owners
of the Parent
Shares issued in the period
Share options
Deferred tax on share options
Dividends
Total transactions with owners
of the Parent
At 30 April 2017
Share
capital
£’000
1,866
–
Share
premium
£’000
7,131
–
Other
reserves
£’000
Translation
reserve
£’000
1,874
–
2,892
–
Retained
earnings
£’000
89,744
29,066
Attributable
to owners of
the Parent
£’000
Non-
controlling
interests
£’000
Total
£’000
103,507
29,066
904
133
104,411
29,199
–
–
–
–
–
–
11
–
–
–
11
1,877
1,877
–
–
–
–
–
–
–
-
-
5
–
–
-
–
–
–
–
–
–
1,025
–
–
–
1,025
8,156
8,156
–
–
–
–
–
–
–
-
-
843
–
–
-
–
–
–
–
–
–
–
–
–
–
5,256
485
–
–
5,741
–
–
5,256
485
72
–
5,328
485
43
(9)
34
43
(9)
–
–
43
(9)
5,775
72
5,847
5,741
29,100
34,841
205
35,046
–
–
–
–
–
413
61
(18,217)
1,036
413
61
(18,217)
–
–
–
–
–
1,874
1,874
–
–
8,633
8,633
–
(17,743)
101,101
101,101
34,991
(16,707)
121,641
121,641
34,991
–
1,109
1,109
147
1,036
413
61
(18,217)
(16,707)
122,750
122,750
35,138
–
–
3,192
1,058
–
(93)
(1,415)
–
–
–
2,835
–
–
(93)
(93)
–
–
–
-
–
–
–
93
(48)
21
66
3,192
1,058
(1,415)
–
(48)
21
85
–
3,277
1,058
–
–
–
–
(1,415)
–
(48)
21
2,808
85
2,893
2,835
35,057
37,799
232
38,031
–
–
–
-
–
296
6
(32,629)
848
296
6
(32,629)
–
–
–
-
848
296
6
(32,629)
5
1,882
843
8,999
–
1,781
–
11,468
(32,327)
103,831
(31,479)
127,961
–
1,341
(31,479)
129,302
Share
capital
£’000
1,866
Share
premium
£’000
7,131
Other
reserves
£’000
1,399
At 1 May 2015
Profit for year
Other comprehensive expense
Total 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 2016
At 1 May 2016
Profit for year
Other comprehensive expense
Total comprehensive expense
Total comprehensive income for
year
Transactions with owners of the
Parent
–
–
–
–
–
–
11
1,025
–
–
–
–
–
–
–
–
11
1,877
1,877
1,025
8,156
8,156
–
–
–
–
–
–
Shares issued in period
5
843
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 2017
–
–
–
–
–
–
–
–
5
1,882
843
8,999
Details of share capital and reserves are given in note 20.
Retained
earnings
£’000
55,163
19,951
Total
£’000
65,559
19,951
–
–
19,951
19,951
–
152
61
1,036
152
61
–
261
(18,217)
(18,217)
(18,004)
(16,707)
57,110
57,110
47,569
68,803
68,803
47,569
–
–
47,569
47,569
–
69
(18)
848
69
(18)
–
–
–
–
–
–
261
–
261
1,660
1,660
–
–
–
–
–
–
227
–
227
1,887
–
227
(32,629)
(32,629)
(32,578)
72,101
(31,503)
84,869
The non-controlling interests in the above table 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.
Details of share capital and reserves are given in note 20.
The notes on pages 66 to 123 are an integral part of these consolidated financial statements.
The notes on pages 66 to 123 are an integral part of these consolidated financial statements.
64
65
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
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
2017 were authorised for issue by the directors on 27 June 2017 and the statements of financial position were signed by
S Crasnianski, Chief Executive Officer and J Lewis, Non-executive Chairman.
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 35.
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 the statements presented. New standards adopted for this financial year are shown in note 2 on page 74.
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.
1.1 Basis of preparation
The consolidated financial statements have been prepared under the historical cost convention except for certain derivative
financial instruments and available-for-sale financial assets that are measured at fair value.
Going concern
The financial statements of the Group and the Company have been prepared on the going concern basis.
In reaching this conclusion management has reviewed detailed budgets, which reflect, where applicable, the current economic
conditions, with regard to the level of demand for the Group’s manufactured products, the level of consumer confidence,
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.
Judgement is required in assessing whether the development costs associated with a project meet the criteria for
capitalisation and in determining that amounts capitalised continue to be supported by future net cash flows.
3) Depreciation and impairment of property, plant and equipment – notes 1.5,1.8,12 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. Technological 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.
The Group is subject to tax in a number of jurisdictions. Determining the overall provision for income taxes involves
therefore the interpretation of applicable tax laws and regulations in many jurisdictions throughout the world and
judgement is required. Tax assets and liabilities represent Management’s estimates of tax that will be payable or
recoverable in the future and may be dependent on estimates of future profitability. Where sufficient uncertainty exists with
the interpretation of tax law, tax provisions are recognised when it is considered probable that there will be a future
outflow of funds.
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.
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 70 and 71.
1.2 Basis of consolidation
The Group consolidates the financial statements of the Company and all 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 from 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 on which 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.
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.
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.
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 value 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 acquiree 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.
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017
Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
1 Accounting policies continued
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. They are presented
separately within the statement of comprehensive income and the statement of financial position.
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 2017 and 2016.
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. For this purpose
net assets includes loans between group companies and any related foreign exchange contracts where settlement is neither
planned nor likely to occur in the foreseeable future. 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 disposals, goodwill is included in the
calculation of gains or losses on the sale of the previously acquired entity.
Goodwill relating to previous acquisitions (pre-1999) was charged under UK GAAP to equity and is not included in the gain or
loss on sale of the previously acquired entity to which it relates.
For the purposes of impairment testing, goodwill is allocated to cash-generating units. Each of these 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.
1 Accounting policies continued
The policies applied to the Group’s intangible assets are summarised as follows:
Research and
development costs
Useful lives
Finite
Amortisation
Straight-line basis,
with a maximum life
of four years from
commencement
of commercial
production, with no
residual value
Software
Finite
Straight-line basis,
with a maximum
life of three years,
with no residual
value
Patents and licences
Other
Finite
Indefinite
Not amortised,
but subject to
impairment testing
Straight-line basis,
with a maximum life
of 20 years,
with no residual
value. Most patents
are depreciated
over a period of 10
years or less
Customer
related
Finite
Straight-line basis,
with a maximum
life of 20 years,
with no residual
value. The majority
of customer related
intangible assets
are depreciated
over their useful
lives
of between three
and five years
Internally
generated or
acquired
Internally generated 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
10% – 33.33% straight-line
Plant, machinery, furniture, fixtures and motor vehicles
12.5% – 33.33% straight-line or reducing balance
Capitalised finance lease assets
over the shorter of the life of the asset or the life of the lease
The assets’ residual values and useful lives are reviewed at each year end and adjusted, if appropriate.
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.
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
1 Accounting policies continued
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.
1 Accounting policies continued
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.
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.
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.
Loans and receivables
(i)
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market.
Such financial assets arise when the Group provides money, goods or services directly to a debtor with no intention of trading
the receivable. They are included in trade and other receivables in the statement of financial position. These assets are held at
amortised cost using the effective interest rate method.
(ii) Held to maturity financial assets
These financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the
Group has the positive intention and ability to hold to maturity. These assets are held at amortised costs using the effective
interest rate method.
Included within these amounts are cash deposits that are subject to restrictions and are not freely available for use by the Group
until a future date.
(iii) Financial assets at fair value through profit or loss
A financial asset is classified in this category if acquired principally for the purpose of trading or if so designated by
management. Assets held in this category are classified as current assets if expected to be settled within one year; otherwise
they are classified as non-current. Financial assets in this category are initially recorded and subsequently valued at fair value,
with changes in fair value recognised in the income statement.
(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.
Company
In the Company statement of financial position, investments in subsidiaries and associates are stated at cost less impairment. The
Company reviews, at least annually, the carrying value of investments and performs an impairment exercise.
An impairment charge is made where there is evidence that the carrying value exceeds the future cash flows of the investment
or where its carrying amount will not be recovered from sale.
Inventories
1.10
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.
Finished goods also includes operating equipment not yet sited.
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.
Inventories are stated net of provisions for slow moving and obsolete inventory based on expected future usage.
1.11 Trade receivables
Trade receivables are stated at fair value and subsequently measured at amortised cost using the effective interest method net of
impairment provisions. An impairment provision is reflected in the income statement if there is objective evidence that the Group
will not be able to recover the full amount of the receivable. The impairment is calculated as the difference between the carrying
value of the receivable and the present value of the expected future cash flows, discounted at the original interest rate. Such
factors as the debtor experiencing significant financial difficulties, bankruptcy, financial reorganisation or default on payments
are indicators that the receivable is impaired.
1.12 Cash and cash equivalents
Cash and cash equivalents are carried in the statements of financial position at cost. Bank overdrafts are included within
borrowings in current liabilities in the statements of financial position. For the purposes of the statements of cash flows, cash
and cash equivalents comprises cash on hand, unrestricted deposits held at banks with less than three months’ notice and other
highly liquid investments with an original maturity of three months or less, less bank overdrafts.
1.13 Share capital
Shares of the Company are classified as equity.
Where the Company acquires its own equity share capital (treasury shares), the consideration paid, including any directly
attributable incremental costs (net of tax relief), is deducted from equity attributable to the Company’s equity shareholders
until the shares are either cancelled or subsequently reissued. The amount is shown in equity as treasury shares. Where such
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.
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
1 Accounting policies continued
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.
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.
Other post-employment benefits
In addition to the pension schemes noted above, certain Group companies are required to make provisions for employee
retirements. These provisions are based on local circumstances, length of service and salaries of the employees concerned. They
are included in post-employment benefit obligations, and shown in note 22 as other retirement provisions.
Equity compensation benefits
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date of grant, determined
using the Black-Scholes model. The cost of equity-settled transactions is recognised, together with a corresponding increase in
equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant employees
become fully entitled to the award (“vesting date”). The cumulative expense recognised at each reporting date until the vesting
date, reflects the extent to which the vesting period has expired and the number of awards that, in the opinion of the directors
of the Group and based on the best available estimate, at that date, of the number of equity instruments that will ultimately vest.
The income statement charge or credit for the period represents the movement in the cumulative expense recognised as at the
beginning and end of the period. No expense is recognised for awards that do not ultimately vest. The Group does not have
options with market conditions.
On exercise of the option the proceeds received are allocated to share capital (nominal value of shares) and share premium.
The grant by the Company of options over its equity instruments (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.
1 Accounting policies continued
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 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 earning per share are
shown and are calculated on earnings available to Ordinary shareholders excluding specific items.
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
2 New standards, amendments and interpretations
New accounting standards
Adopted by the Group
The Group has adopted the following new standards and amendments for the first time in these financial statements with no
material impact.
Clarification of Acceptable Methods of Depreciation and Amortisation (amendments to IAS 16 and IAS 38)
Equity Method in Separate Financial Statements (Amendment to IAS 27)
Annual Improvements to IFRS 2012-2014 Cycle- various standards
Investment Entities: Applying the consolidation Exemption (Amendment to IFRS 10, IFRS 12 and IAS 28)
Disclosure Initiative (Amendment to IAS1)
Not adopted by the Group
The following are the significant new standards that have been issued by the IFRS but adoption is
not yet mandatory.
IFRS 9 Financial instruments
IFRS 9 Financial Instruments (effective from 1 January 2018) reflects all phases of the financial instruments project and replaces
IAS 39 Financial Instruments: Recognition and Measurement. This standard introduces new classification and measurement
requirements of financial instruments, new general hedge accounting requirements and a new expected credit loss model for
measuring impairment on financial assets. The Group’s initial impression is that adopting this standard will not have a material
impact on the financial statements of the Group, given the Group’s current profile of financial instruments.
IFRS15 Revenue from Contracts with Customers
IFRS15 Revenue from Contracts with Customers (effective from 1 January 2018) replaces the existing Revenue Standard. The
new standard is based on the principle that revenue is recognised when control of goods or services is transferred and provides
a single principle based standard. A detailed evaluation of the impact of this standard has commenced and is continuing. As
the majority of the Group’s turnover with external customers comes from vending; over 92% in 2016 91 % in 2017 the impact
of this standard is not likely to have a material impact on revenue.
IFRS16 Leases
IFRS16 Leases was issued in January 2016 and is effective from 1 January 2019. The standard will replace all existing lease
accounting requirements.
The key change for the Group in adopting this standard will be the change in accounting for operating leases. Under the new
standard all leases, both operating and finance will appear on the balance sheet. The statement of financial position will be
grossed up to show an asset and a liability, with no effect on net assets. The impact on the income statement will be a new
interest expense and a depreciation charge in replace of the current operating lease expense. Work has commenced and is
continuing to evaluate the impact of this standard and what options will be adopted on transition.
Amendment to IAS 7 Statement of Cash flows
The amendment to IAS 7 was generated by the IASB’s “Disclosure initiative” project and requires reporting entities to provide
disclosures that enables users of financial statements to evaluate changes in liabilities arising from financing activities, by
disclosing changes in arising from cash flows as well as non- monetary changes. This amendment has not been endorsed by
the EU.
The Group already publishes a statement explaining the movement in net cash (see note 19: Net cash).
Segmental analysis
3
IFRS 8 requires operating segments to be identified, based on information presented to the Chief Operating Decision Maker
(CODM). The Group reports its segments on a geographical basis, Asia, Continental Europe and United Kingdom and Ireland.
The CODM, being the Board, regularly reviews operating results on this geographical basis to assess performance and allocate
resources within the Group. The Group’s European operations are predominately based in Western Europe and with the
exception of the Swiss operations use the Euro as their domestic currency. The Board believes that the economic characteristics
of the European operations, together with the fact that they are similar in terms of operation, they use common systems for
operations and administrative functions and the nature of the regulatory environment allows the European operations to be
aggregated into one reporting segment.
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.
Segmental analysis continued
3
The segment results are as follows:
2017
Total revenue
Inter segment sales
Revenue from external customers
EBITDA
Depreciation and amortisation
Operating profit excluding associates
and Corporate costs
Share of post tax profits from associates
Corporate costs excluding depreciation and
amortisation
Corporate depreciation and amortisation
Operating profit
Finance income
Finance costs
Profit before tax
Tax
Profit for year
Capital expenditure
Corporate capital expenditure
Total capital expenditure
Reconciliation of operating profit
Operating profit before associates
Share of post-tax profits from associates
Corporate operating loss
Total operating profit
Asia
£’000
Continental
Europe
£’000
49,472
(128)
49,344
12,340
(3,940)
124,739
(13,069)
111,670
46,978
(13,038)
United
Kingdom
& Ireland
£’000
53,870
(231)
53,639
12,349
(5,041)
8,400
33,940
7,308
7,227
20,125
15,301
Asia
£’000
8,400
196
–
8,596
Continental
Europe
£’000
33,940
–
938
34,878
United
Kingdom
& Ireland
£’000
7,308
–
(3,975)
3,333
Total
£’000
228,081
(13,428)
214,653
71,667
(22,019)
49,648
196
(2,633)
(404)
46,807
1,488
(256)
48,039
(12,901)
35,138
42,653
820
43,473
Total
£’000
49,648
196
(3,037)
46,807
74
75
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
3
Segmental analysis continued
2016
Total revenue
Inter segment sales
Revenue from external customers
EBITDA
Depreciation and amortisation
Operating profit excluding associates
and Corporate costs
Share of post-tax profits from associates
Corporate costs excluding depreciation and
amortisation
Corporate depreciation and amortisation
Operating profit
Finance income
Finance costs
Profit before tax
Tax
Profit for year
Capital expenditure
Corporate capital expenditure
Total capital expenditure
Reconciliation of operating profit
Operating profit before associates
Share of post-tax profits from associates
Corporate operating loss
Total operating profit
Inter-segment revenue mainly relates to sales of equipment.
Asia
£’000
45,364
(865)
44,499
13,633
(3,134)
Continental
Europe
£’000
United Kingdom
& Ireland
£’000
100,816
(7,104)
93,712
33,881
(9,718)
46,066
(283)
45,783
11,934
(3,973)
10,499
24,163
7,961
4,623
13,221
4,669
Asia
£’000
10,499
165
–
Continental
Europe
£’000
United Kingdom
& Ireland
£’000
24,163
–
737
7,961
–
(3,791)
4,170
10,664
24,900
Total
£’000
192,246
(8,252)
183,994
59,448
(16,825)
42,623
165
(2,918)
(136)
39,734
538
(166)
40,106
(10,907)
29,199
22,513
2,303
24,816
Total
£’000
42,623
165
(3,054)
39,734
Segmental analysis continued
3
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
Total revenue from external customers
Sales of equipment
Sales of spare parts, consumables & services
Other sales
Vending revenue
Total revenue
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
Amortisation and impairment of capitalised research and development expenditure is
reflected in 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
Group
2017
£’000
49,344
115,738
49,571
214,653
2017
£’000
9,971
9,249
331
19,551
195,102
214,653
2017
£’000
1,692
787
2,479
2016
£’000
44,499
95,960
43,535
183,994
2016
£’000
6,590
7,517
183
14,290
169,704
183,994
2016
£’000
1,015
533
1,548
19,763
181
19,944
15,304
109
15,413
864
(77)
787
280
253
533
76
77
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
4 Profit for the year continued
Operating lease rentals
– property
– plant and equipment
Inventory cost
Cost of inventories recognised as an expense
Inventory provision (charged)/reversed
Inventory provision reversed relate to provisions which have been reversed 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 on sale of property, plant and equipment
Direct expenses for investment properties generating rental income
2017
£’000
613
1,025
1,638
2016
£’000
396
1,866
2,262
14,674
(1,188)
13,486
11,441
52
11,493
2017
£’000
181
(2,987)
(170)
(3,142)
(887)
84
2016
£’000
177
(1,842)
(45)
(106)
(236)
53
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
2017
£’000
86
183
21
290
2017
£’000
40
2016
£’000
162
131
21
314
2016
£’000
60
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.
4 Profit for the year continued
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 the Groups' auditors for audit and other services were
Other operating income
Other operating income
2017
£’000
101
-
101
2017
£’000
391
2017
£’000
2,203
2016
£’000
67
3
70
2016
£’000
384
2016
£’000
1,306
Other operating income principally includes rental income from investment property (note 13).
Employees
5
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
2017
£’000
40,658
8,402
296
220
289
278
2016
£’000
32,653
7,096
413
228
243
243
50,143
40,876
78
79
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
Employees continued
5
Directors’ emoluments
Full details of directors’ remuneration and share options are given in the Remuneration Report on pages 42 to 52.
The average number of employees during the year (including executive directors) comprised:
Taxation expense
7
Tax charges/(credits) in the statement of comprehensive income.
Full – time
Part – time
UK: Full – time
UK: Part – time
Continental Europe: Full – time
Continental Europe: Part – time
Asia and rest of the world: Full – time
Asia and rest of the world: Part – time
6
Finance income and costs
Finance Income
Bank interest
Other interest
Other financial income
Finance costs
Bank loans and overdrafts at amortised cost
Other loans at amortised costs and finance leases
Group
2017
£’000
975
418
1,393
296
257
518
35
161
126
2016
£’000
950
167
1,117
291
9
507
42
152
116
Taxation
Current taxation
UK Corporation tax
– current year
– prior years
Overseas taxation
– current year
– prior years
Total current taxation
Deferred taxation
1,393
1,117
Origination and reversal of temporary differences
2017
£’000
69
7
1,412
1,488
241
15
256
2016
£’000
528
10
–
538
149
17
166
– 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
Tax relating to items charged to other components of comprehensive income.
Corporation tax
Deferred tax
Tax credit in other comprehensive income
2017
£’000
2016
£’000
2,641
(26)
2,615
8,917
(333)
8,584
11,199
326
1,225
201
(124)
74
1,702
12,901
2017
£’000
1,058
27
1,085
1,965
(15)
1,950
9,023
(64)
8,959
10,909
(520)
256
(15)
205
72
(2)
10,907
2016
£’000
485
52
537
80
81
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
7
Taxation expense continued
Reconciliation of total tax charge
The difference between the Group tax charge and the standard UK corporation tax rate of 19.92% (2016: 20.0%) is
explained below:
Profit before tax
Tax using the UK corporation tax rate of 19.92% (2016: 20.0%)
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
2017
£’000
48,039
9,569
(254)
60
3,809
(1)
(282)
12,901
26.9%
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 £47,569,000 (2016:
£19,951,000), including dividends received from subsidiaries.
9 Dividends paid and proposed
Interim
2016 paid on 12 May 2016
2015 paid on 14 May 2015
Final
2016 paid 10 November 2016
2015 paid on 12 November 2015
Special
2016 paid 10 November 2016
2017
Pence
per share
2.575
–
3.285
–
2.815
8.675
£’000
9,669
–
12,365
–
10,595
32,629
2016
Pence
per share
–
2.340
–
2.540
–
4.880
2016
£’000
40,106
8,021
(227)
112
3,598
(708)
111
10,907
27.2%
£’000
–
8,733
–
9,484
–
18,217
Year ended 30 April 2017 – Proposed dividends not yet paid
The Board declared an interim dividend of 3.09p per share for the year ended 30 April 2017, amounting to £11,633,000
which was paid on 11 May 2017. The Board proposes a final dividend for the year ended 30 April 2017 of 3.94p per share,
which is subject to shareholders’ approval at the Annual General Meeting to be held on 25 October 2017.
Year ended 30 April 2016 – Paid after 30 April 2016
The Board declared an interim dividend of 2.575p per share for the year ended 30 April 2016, amounting to £9,669,000
which was paid on 12 May 2016. The Board proposed a final dividend for the year ended 30 April 2016 of 3.285p per
share, amounting to £12,365,000 which was 16 paid 10 November 2016 and a special dividend of 2.815p per share which
was paid on 10 November 2016.
10 Earnings per share
Basic earnings per share amounts are calculated by dividing net earnings attributable to shareholders of the Parent of
£34,991,000 (2016: £29,066,000) 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:
2017
Weighted
average
number of
shares
’000
Earnings
£’000
Basic earnings per share
34,991
376,141
Effect of dilutive share options
1,321
Diluted earnings per share
34,991
377,462
2016
Weighted
average
number of
shares
’000
Earnings
£’000
29,066
374,121
2,514
29,066
376,635
Earnings
per share
pence
7.77
(0.05)
7.72
Earnings
per share
pence
9.30
(0.03)
9.27
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.
11 Goodwill and other intangible assets
Goodwill
Group
Cost:
At 1 May 2015
Exchange difference
Additions
At 30 April 2016
At 1 May 2016
Exchange difference
At 30 April 2017
Impairment charges:
At 1 May 2015
Exchange difference
At 30 April 2016
At 1 May 2016
Exchange difference
At 30 April 2017
Net book value:
At 1 May 2017
At 1 May 2016
At 1 May 2015
The addition to goodwill in 2016 relates to the acquisition of operations in the United Kingdom.
£’000
10,476
154
1,273
11,903
11,903
207
12,110
296
1
297
297
1
298
11,812
11,606
10,180
82
83
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017
Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
11 Goodwill and other intangible assets continued
Company
The Company has no goodwill.
11 Goodwill and other intangible assets continued
Other intangible assets
Group
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 eight (2016: seven ) cash-generating units (CGUs); allocated
between geographical areas and activity in accordance with impairment testing in the prior year:
Carrying amount
UK & Ireland
CGU 1
CGU 2
CGU 3
CGU 4
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
2017
£’000
154
14
317
1,273
1,758
301
1,934
574
2,809
7,245
7,245
11,812
2016
£’000
154
14
317
1,273
1,758
280
1,797
526
2,603
7,245
7,245
11,606
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% (2016: 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 6.5–7.8% (2016: 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 7.7%, (2016:8.7%), Ireland 7.6% (2016: 8.1%), France 7.5% (2016: 7.8%), Germany
6.9% (2016:7.5%), Switzerland 6.5% (2016: 7.3% ) and Japan 6.5% (2016: 7.3%). 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 2017 (2016: none).
Cost:
At 1 May 2015
Exchange differences
Additions
– Subsidiaries acquired
– Internally generated
– External
Reclassifications
Disposals
At 30 April 2016
At 1 May 2016
Exchange differences
Additions
– Subsidiaries acquired
– Internally generated
– External
Reclassifications
Disposals
At 30 April 2017
Amortisation:
At 1 May 2015
Exchange differences
Subsidiaries acquired
Provided during year
Reclassifications
Disposals
At 30 April 2016
At 1 May 2016
Exchange differences
Provided during year
Disposals
Reclassifications
At 30 April 2017
Net book value:
At 30 April 2017
At 30 April 2016
At 30 April 2015
Research &
development
costs
£’000
Other
intangible
assets
£’000
8,276
577
–
2,935
–
–
(5,675)
6,113
6,113
364
–
2,390
–
–
(984)
7,883
5,634
457
–
1,015
–
(5,675)
1,431
1,431
61
1,692
(984)
–
2,200
5,683
4,682
2,642
7,585
396
255
–
286
56
(578)
8,000
8,000
513
–
–
4,296
13
(165)
12,657
3,720
189
1
533
43
(510)
3,976
3,976
269
787
(156)
13
4,889
7,768
4,024
3,865
Total
£’000
15,861
973
255
2,935
286
56
(6,253)
14,113
14,113
877
–
2,390
4,296
13
(1,149)
20,540
9,354
646
1
1,548
43
(6,185)
5,407
5,407
330
2,479
(1,140)
13
7,089
13,451
8,706
6,507
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 £3,216,000 corresponding to droit de bail (2016: £2,343,000
and 2015: £2,194,000). Also included is £2,846,000 relating to a licence which grants right to use space in Asda stores. The
useful life of this intangible asset is finite and is being amortised over a 10 year period to October 2026. This amortisation is
included within cost of sales.
84
85
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
11 Goodwill and other intangible assets continued
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.
Company
Cost:
At 1 May 2015
Additions
– Internally generated
– External
Disposals
– External
At 30 April 2016
At 1 May 2016
Additions
– Internally generated
– External
Disposals
– Internal
– External
At 30 April 2017
Amortisation:
At 1 May 2015
Provided during year
Disposals
– External
At 30 April 2016
At 1 May 2016
Provided during year
Disposals
– Internal
– External
At 30 April 2017
Net book value:
At 30 April 2017
At 30 April 2016
At 30 April 2015
Research &
development
costs
£’000
Other
intangible
assets
£’000
Patents &
trade
marks
£’000
Total
£’000
–
1,600
5,506
7,106
1,457
–
–
–
1,457
1,457
376
–
(1,833)
–
–
243
–
–
243
243
314
(557)
–
–
–
1,214
–
–
160
(475)
1,285
1,285
–
34
(431)
(108)
780
826
279
(475)
630
630
275
(247)
(108)
550
230
655
774
–
–
–
5,506
5,506
–
–
(5,506)
-
–
1,101
551
–
1,652
1,652
277
1,457
160
(475)
8,248
8,248
376
34
(7,770)
(108)
780
1,927
1,073
(475)
2,525
2,525
866
(1,929)
(2,733)
–
–
–
3,854
4,405
(108)
550
230
5,723
5,179
12 Property, plant and equipment
Group
Cost:
At 1 May 2015
Exchange difference
Additions
– new subsidiaries
– internal
– external
Reclassifications
Transfer to assets held for sale
Disposals
At 30 April 2016
Exchange difference
Additions
– internal
– external
Reclassifications
Disposals
At 30 April 2017
Depreciation
At 1 May 2015
Exchange difference
New subsidiary
Provided during year
Reclassifications
Transfers to assets held for sale
Disposals
At 30 April 2016
Exchange difference
Provided during year
Reclassifications
Disposals
At 30 April 2017
Net book value:
At 30 April 2017
At 30 April 2016
At 30 April 2017
Land &
Buildings
£’000
Photobooths
and vending
machines
£’000
Plant,
machinery,
furniture,
fixtures and
motor vehicles
£’000
Total
£’000
6,413
437
165,899
12,376
23,747
196,059
1,608
14,421
278
–
192
–
(1,542)
(719)
5,059
331
–
515
–
(284)
5,621
5,066
366
28
55
–
(1,446)
(302)
3,767
278
92
–
(138)
3,999
1,622
1,292
1,347
–
925
590
–
868
925
18,477
1,861
20,530
14
–
(9,381)
188,310
12,247
1,381
32,406
(77)
(15,984)
218,283
122,812
10,046
–
14,507
5
(8,728)
138,642
8,732
18,673
(15)
(14,334)
151,698
66,585
49,668
43,087
(14)
–
(2,321)
25,471
1,804
–
2,485
77
(1,700)
28,137
–
(1,542)
(12,421)
218,840
14,382
1,381
35,406
–
(17,968)
252,041
19,918
147,796
1,390
11,802
291
849
(5)
(2,106)
20,337
1,430
1,164
15
(1,591)
21,355
6,782
5,134
3,829
319
15,411
–
(1,446)
(11,136)
162,746
10,440
19,929
–
(16,063)
177,052
74,989
56,094
48,263
Internal additions for photobooths and vending machines of £1,381,000 (2016: £925,000) relate to own work capitalised,
being equipment produced by the subsidiaries and capitalised by the group companies.
Internal disposals in the year ended 30 April 2017 of research and development, other intangible assets and patents and
trademarks relate to transfers to a fellow UK subsidiary.
86
87
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
12 Property, plant and equipment continued
Included in the above are assets held under finance leases, as follows:
Net book value
Additions/reclassifications
Depreciation charge
2017
2017
2016
2016
Photobooths
and vending
machines
£’000
Plant,
machinery,
furniture,
fixtures and
motor vehicles
£’000
–
–
–
473
135
181
Photobooths
and vending
machines
£’000
–
–
–
Plant,
machinery,
furniture,
fixtures and
motor vehicles
£’000
483
319
109
Assets held for sale at 30 April 2016 and 30 April 2017 for both the Group and the Company of £96,000 consist of a
Group property.
Company
Cost:
At 1 May 2015
Additions
– internal
– external
Transfer to assets held for sale
Disposals
– internal
– external
At 30 April 2016
Additions
– internal
– external
Disposals
– internal
– external
At 30 April 2017
Depreciation
At 1 May 2015
Provided during year
Transfers to assets held for sale
Disposals
– internal
– external
At 30 April 2016
Provided during year
Disposals
– internal
– external
At 30 April 2017
Net book value:
At 30 April 2017
At 30 April 2016
At 30 April 2015
Land &
Buildings
£’000
Photobooths
and vending
machines
£’000
Plant,
machinery,
furniture,
fixtures and
motor vehicles
£’000
Total
£’000
1,642
35,681
1,054
38,377
–
–
(1,542)
–
–
100
–
–
–
(92)
8
1,545
1
(1,446)
–
–
100
–
–
(92)
8
–
–
97
3,092
274
–
(41)
(2,197)
36,809
4,788
396
(41)
(3,630)
38,322
27,351
3,240
–
(5)
(2,091)
28,495
3,540
(5)
(2,849)
29,181
9,141
8,314
8,330
–
50
–
–
(41)
1,063
–
198
(130)
(716)
415
1,001
34
–
–-
(41)
994
34
(81)
(721)
226
189
69
53
3,092
324
(1,542)
(41)
(2,238)
37,972
4,788
594
(171)
(4,438)
38,745
29,897
3,275
(1,446)
(5)
(2,132)
29,589
3,574
(86)
(3,662)
29,415
9,330
8,383
8,480
12 Property, plant and equipment continued
Internal additions for photobooths and vending machines of £4,788,000 (2016: £3,092,000) 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.
13 Investment property
Group
Cost:
At 1 May 2015
Exchange difference
Additions
At 30 April 2016
Exchange difference
At 30 April 2017
Depreciation
At 1 May 2015
Exchange difference
Provided during year
At 30 April 2016
Exchange difference
Provided during year
At 30 April 2017
Net book value:
At 30 April 2017
At 30 April 2016
At 30 April 2015
£’000
10,936
790
140
11,866
908
12,774
10,478
757
2
11,237
860
15
12,112
662
629
458
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 €2,188,000 (£1,842,000).
The Board believes at 30 April 2017; the property continues to be worth more than its £662,000 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 £1,038,000 (2016: £903,000) (note 4) and finance costs were £21,000
(2016: £32,000).
The Group will continue to act as a cash collection agent for the underlying lease agreement.
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for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
13 Investment property continued
The non-cancellable future minimum rentals receivable on this basis are as follows:
14 Investments in associates and subsidiaries continued
Company
No later than one year
After one year but no more than five years
Company
The Company has no investment property.
14 Investments in associates and subsidiaries
Investment in associates
Group
Cost:
At 30 April 2015
Exchange differences
Additions
Share of profits
At 30 April 2016
Exchange differences
Additions
Share of profits
Dividends
At 30 April 2017
2017
£’000
1,033
1,033
2,066
2016
£’000
956
1,912
2,868
£’000
848
29
671
165
1,713
104
361
196
(279)
2,095
Costs:
At 1 May 2015
Additions
Capital increase relating to share-based payment (net)
At 30 April 2016
Additions
Capital increase relating to share-based payment (net)
Disposals
At 30 April 2017
Provision:
At 1 May 2015
Increase
Decrease
At 30 April 2016
Increase
Decrease
At 30 April 2017
Net book value:
At 30 April 2017
At 30 April 2016
At 30 April 2015
Associated
undertakings
£’000
Subsidiary
undertakings
£’000
407
–
–
407
–
–
–
42,793
2,251
261
45,305
3,069
227
(771)
Total
£’000
43,200
2,251
261
45,712
3,069
227
(771)
407
47,830
48,237
150
7
(150)
7
–
–
7
400
400
257
1,103
1,253
3
(263)
843
–
(450)
393
10
(413)
850
–
(450)
400
47,437
44,462
41,690
47,837
44,862
41,947
The summarised financial information of the principal associates, relating to the Group’s share, is set out below. All companies are
unlisted.
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.
Name
At 30 April 2016
Max Sight Ltd
Photo Direct Pty Ltd
Stilla Technologies SA
Other associates
At 30 April 2017
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
%
The details of all the Group’s subsidiaries and associates are given in note 29.
Hong Kong
Australia
France
Hong Kong
Australia
France
682
419
817
76
1,994
604
418
1,178
91
2,291
125
121
–
35
281
79
74
–
43
662
784
–
91
173
(8)
–
–
1,537
165
777
886
–
107
163
30
–
3
196
196
1,770
33.33
26.95
40.00
33.33
26.95
50.00
15 Financial instruments
Group Treasury
During the current year ending 30 April 2017, the Group’s centralised Treasury Function operated, having become operational
in the previous year. 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 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. To date the treasury function has limited itself to obtaining surplus cash
from the subsidiaries and depositing this in bank accounts owned by the Parent Company. 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.
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.
Included in associates is an investment in Stilla Technologies SA, a French company which provides researchers with a universal
and flexible digital PCR (dPCR) solution for genetic testing.
The Group has increased its holding in this company during the year.
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for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
15 Financial instruments continued
The Board has provided written principles for overall risk management of the 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
Liquidity risk is the risk that the Group will face in meeting is obligations in settling its financial liabilities. The Group’s approach
to managing liquidity risk is to ensure that it has sufficient funds to meet its liabilities when due without incurring unacceptable
losses. A material and sustained shortfall in the Group’s cash flow could undermine the Group’s credit rating, impair major
investor confidence and restrict the ability of the Group to raise new funds.
15 (a) Fair values of financial instruments by class continued
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.
IFRS13 requires an analysis of financial instruments carried at fair value by valuation method as follows.
Level 1 – quoted prices in active markets for identical assets or liabilities
Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that
is, as process) or indirectly (that is derived from process)
The Group maintained a strong net cash position throughout the year and preceding year as a result of cash generation from
the business.
Level 3 – inputs for assets or liability that are not based on observable market data
During the current year and prior year surplus cash held by the operating subsidiaries, over and above balances required for
working capital management was transferred to Group Treasury. These funds were kept in their local currency, or converted into
sterling and kept in Parent Company bank accounts which are interest bearing.
The key objectives for Group Treasury are 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.
The strong cash generation and retention from the business together with available credit resources help mitigate liquidity risk.
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 largely finances
its working capital and capital expenditure programmes from its own resources. 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 at 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.
The Group’s financial instruments are fair valued at level 2.
Financial instruments by category
The tables below show financial instruments by category
At 30 April 2017
Assets per statement of financial position
Other financial assets – held to maturity
Other financial assets – available for sale
Trade and other receivables
Cash and cash equivalents
Liabilities per statement of financial position
Borrowings
Leases
Trade and other payables excluding non – financial liabilities
At 30 April 2016
Assets per statement of financial position
Other financial assets – held to maturity
Other financial assets – available for sale
Trade and other receivables
Cash and cash equivalents
Loans and
receivables
£’000
Available
for sale
£’000
2,389
–
17,080
47,505
66,974
–
81
–
–
81
Other
financial
liabilities at
amortised
cost
£’000
10,238
444
39,486
50,168
Loans and
receivables
£’000
Available
for sale
£’000
2,253
–
12,247
71,005
85,505
–
75
–
–
75
Total
£’000
2,389
81
17,080
47,505
67,055
Total
£’000
10,238
444
39,486
50,168
Total
£’000
2,253
75
12,247
71,005
85,580
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for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
15 (a) Fair values of financial instruments by class continued
Liabilities per statement of financial position
Borrowings
Leases
Trade and other payables excluding non – financial liabilities
Other
financial
liabilities at
amortised cost
£’000
10,381
462
34,005
44,848
Total
£’000
10,381
462
34,005
44,848
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.
With regard to management of interest rate risk, the objectives are to lessen the impact of adverse interest rate movements on
earnings and shareholders’ funds and to ensure no breach of covenants. This is mainly achieved by reviewing the mix of fixed
and floating rate borrowings.
The Group’s liquidity risk management involves maintaining sufficient cash and cash equivalents and the availability of funding
through an adequate amount of committed credit facilities.
15 (b) Financial statement risk management continued
(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 with Group Treasury bank accounts, as described above. 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 are normally interest free. The normal terms of settlement are between 30 and 90 days. The balance due
from Associates of £1,015,000 consists of an interest-bearing loan, based on Euribor plus a margin. 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 and other movements
At 30 April
Group
Company
2017
£’000
420
33
(170)
(1)
282
2016
£’000
385
70
(45)
10
420
2017
£’000
591
–
16
–
607
2016
£’000
715
38
(162)
–
591
At 30 April 2017, trade receivables of £2,913,000 (2016: £978,000) were past due and relate to a number of individual
customers for whom there is no recent evidence of default and therefore are not impaired.
The ageing of net trade current receivables is as follows:
Current
Past due
– overdue 1-30 days
– overdue 31-60 days
– overdue 61 days
Total past due
Total trade receivables
Group
Company
2017
£’000
8,475
545
382
1,986
2,913
11,388
2016
£’000
5,910
210
54
714
978
6,888
2017
£’000
804
18
6
91
115
919
2016
£’000
712
12
7
179
198
910
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 £33,272,000 (2016: £3,095,000) are all current.
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for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
15 (b) Financial statement risk management continued
(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 2017 and 30
April 2016 has reduced liquidity risk for the Group.
The Group has adequate undrawn facilities and 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 2017 and 30 April 2016, 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 2017 and 30 April 2016 based on contractual undiscounted payments.
Group contractual cash flows
At 30 April 2017
Interest bearing loans and borrowings and
interest free loans
Finance leases
Rental payments
Trade and other payables
At 30 April 2016
Interest bearing loans and borrowings and
interest free loans
Finance leases
Rental payments
Trade and other payables
Company contractual cash flows
At 30 April 2017
Trade and other payables
Interest bearing group balances including
interest
Within
one year
£’000
Year 2
£’000
Year 3
£’000
Year 4
£’000
Year 5
£’000
Over 5
years
£’000
Total
£’000
2,459
1,765
1,765
1,765
1,765
1,105
10,624
146
1,032
36,144
141
810
750
104
–
750
45
–
–
8
–
–
–
–
–
444
1,842
37,644
39,781
3,466
2,619
1,810
1,773
1,105
50,554
1,633
1,633
1,633
1,633
1,633
2,794
10,959
156
810
31,374
141
810
200
104
811
–
69
–
–
17
–
–
–
–
–
487
2,431
31,574
33,973
2,784
2,548
1,702
1,650
2,794
45,451
Year 2
£’000
Year 3
£’000
Year 4
£’000
Year 5
£’000
Over 5
years
£’000
Total
£’000
Within
one year
£’000
22,375
–
22,375
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
22,375
–
22,375
29,653
15,755
45,408
At 30 April 2016
Trade and other payables
29,453
200
Interest bearing group balances including
interest
70
15,685
29,523
15,885
15 (b) Financial statement risk management continued
(iii) Market risk
Foreign exchange risk
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the local
functional currency. In addition, the Group faces currency risks arising from monetary financial instruments held in non-functional
currencies. The income statement reflects the impact of realised and unrealised exchange differences on trading items and
monetary financial instruments (note 4).
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. The
main currency translation risk relates to foreign operations whose functional currency is the Euro, Swiss franc or Japanese yen.
The investments are not hedged. The translation reserve reflects the exchange differences arising on translation of the opening
net assets and results of the foreign operation (note 20).
Operational foreign exchange exposure
Where possible, the Group tries to invoice in the local currency of the respective entity. If this is not possible, 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.
IFRS 7 sensitivity analysis
The following table shows the impact on profit and equity of a change of 10% in exchange rates, excluding translation risk,
assuming all other variables held constant. This analysis is for illustrative purposes only.
2017
Profit for the year
Total equity
2016
Profit for the year
Total equity
Reported
£’000
10% increase
£’000
10% decrease
£’000
35,138
129,302
29,199
122,750
35,388
129,537
28,537
121,957
34,815
128,998
29,993
123,630
The exposure in the above sensitivity table is the result of the Group companies having assets (cash and trade and other
receivables) and liabilities (trade and other payables) in currencies other than their domestic currency, including intergroup
balances. At April 2017, the exposure consisted of a net exposure in Sterling of £100,000 and in Euro of £157,000
(2016: Sterling of £1,529,000 and Euro of £238,000).
Borrowings
At 30 April 2017 and 30 April 2016, the Group had no borrowings which were not denominated in the functional currency of
the Group company concerned.
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.
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for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
15 (b) Financial statement risk management continued
Analysis of net cash by currency
Financial
assets
£’000
Loans
£’000
Leases
£’000
Group
2017
Sterling
Euro
Swiss Franc
US Dollar
Japanese yen
Other currencies
2016
Sterling
Euro
Swiss Franc
US Dollar
Japanese yen
Other currencies
Interest rate risk
Bank
£’000
12,940
23,972
4,045
135
5,200
1,213
47,505
30,103
26,870
2,383
128
9,820
1,701
973
692
724
–
–
–
–
(9,545)
–
–
(693)
–
2,389
(10,238)
971
662
620
–
–
–
–
(10,381)
–
–
–
–
71,005
2,253
(10,381)
Total
£’000
13,863
15,096
4,769
135
4,136
1,213
39,212
30,989
17,116
3,003
128
9,478
1,701
62,415
(50)
(23)
–
–
(371)
–
(444)
(85)
(35)
–
–
(342)
–
(462)
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
Interest free and interest bearing loans
Interest bearing finance leases
2017
£’000
2016
£’000
47,094
38,368
411
2,389
(10,238)
(444)
39,212
32,637
2,253
(10,381)
(462)
62,415
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 floating rate interest
bearing debt is small and a change in interest rates will not have a material change on interest expense.
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 2017 and 30 April 2016.
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. The Group has total loans outstanding at 30 April 2017 of £10,238,000, of which
£9,545,000 (30 April 2016 of £10,381,000) are subject to a fixed interest rate of 1.2%. An increase of 1% in the fixed rate
of interest would result in an extra £ 95,000 interest expense.
15 (b) Financial statement risk management continued
Terms and debt repayment schedule
The table below shows the maturity profile and interest rates of the Groups borrowings at 30 April 2017 and 30 April 2016.
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 external loans outstanding at 30 April 2017 (2016: none).
Group
Finance leases
Loans
Loans
Status
Fixed rate
Fixed rate
Fixed rate
Currency
Various
Euro
YPY
Interest rate Year of maturity
0.0% –7.2%
1.20%
1.48%
2022
2023
2018
2017
Carrying
amount
£’000
444
9,545
693
2016
Carrying
amount
£’000
462
10,381
–
10,682
10,843
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; supplemented by external borrowing as required. The Group has
had a strong net cash position throughout the current and comparative year.
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
2017
£’000
47,505
(10,682)
36,823
129,302
2016
£’000
71,005
(10,843)
60,162
122,750
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.
98
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
15 (d) Other financial assets held to maturity and available for sale
18 Cash and cash equivalents
Group
Non-Current
Assets held to
maturity
2017
£’000
2,389
2,389
Assets
available
for sale
2017
£’000
81
81
Assets held to
maturity
2016
£’000
2,253
2,253
Assets
available
for sale
2016
£’000
75
75
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 (2016: £nil) and investments in unlisted entities, net of
impairment provisions.
Company
Non-Current
Assets held to
maturity
2017
£’000
973
973
Assets
available
for sale
2017
£’000
–
–
Assets held to
maturity
2016
£’000
971
971
Assets
available
for sale
2016
£’000
–
–
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
2017
£’000
1,977
48
2,025
11,388
–
1,015
2,700
3,439
18,542
2016
£’000
1,546
2
1,548
6,888
–
51
3,762
2,309
13,010
Company
2017
£’000
–
–
–
919
33,272
–
79
1,077
35,347
2016
£’000
–
–
–
910
3,095
–
171
798
4,974
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.
17 Inventories
Raw materials and consumables
Work-in-progress
Finished goods
Group
Company
2017
£’000
15,223
118
4,077
19,418
2016
£’000
12,595
40
4,459
17,094
2017
£’000
1,267
–
598
1,865
2016
£’000
850
–
873
1,723
The replacement value of inventories is not materially different from that stated above.
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
2017
£’000
47,094
411
47,505
47,505
2016
£’000
38,368
32,637
71,005
71,005
2017
£’000
11,515
20
11,535
11,535
2016
£’000
14,732
32,108
46,840
46,840
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
Non-current instalments due on bank loans
Current instalments due on bank loans
Non-current finance leases
Current finance leases
Notes
18
15
21
21
21
21
The Company’s net cash excludes inter-group financing.
Group
2017
£’000
47,505
2,389
(7,894)
(2,344)
(298)
(146)
2016
£’000
71,005
2,253
(8,866)
(1,515)
(317)
(145)
Company
2017
£’000
11,535
973
2016
£’000
46,840
971
–
–
–
–
–
–
–
–
39,212
62,415
12,508
47,811
At 30 April 2017, £2,389,000 of the total net cash (2016: £2,253,000) comprised bank deposit accounts that are subject to
restrictions and are not freely available for use by the Group and 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 instalments on loans 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.
100
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
19 Net cash continued
The tables below, which are not currently required by IFRS, reconcile the Group’s net cash to the Group’s statement of cash
flows. Management believes the presentation of the tables will be of assistance to shareholders. 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.
20 Share capital and reserves
Share capital
Company
1 May
£’000
Exchange
differences
£’000
Other
movements
£’000
Cash flow
£’000
30 April
£’000
Allotted, issued and fully paid:
Ordinary shares of 0.5p each
2017
Number
2016
Number
2017
£’000
2016
£’000
2016/17
Cash and cash equivalents per statement of
financial position and cash flow
Financial assets held to maturity
Non-current loans
Current loans
Leases
2015/16
Cash and cash equivalents per statement of financial
position and cash flow
Financial assets held to maturity
Non-current loans
Current loans
Leases
71,005
2,253
(8,866)
(1,515)
(462)
62,415
58,632
2,220
–
–
(183)
1,959
165
(678)
(116)
(32)
1,298
3,694
62
–
–
(30)
60,669
3,726
–
–
1,650
(1,650)
(123)
(123)
(25,459)
(29)
–
937
173
47,505
2,389
(7,894)
(2,344)
(444)
(24,378)
39,212
–
–
(76)
(24)
(396)
(496)
8,679
71,005
(29)
(8,790)
(1,491)
147
2,253
(8,866)
(1,515)
(462)
(1,484)
62,415
Other movements for finance leases relates to new finance leases during the year.
Company
2016/17
Cash and cash equivalents per statement of
financial position and cash flow
Financial asset held to maturity
2015/16
Cash and cash equivalents per statement of financial
position and cash flow
Financial asset held to maturity
1 May
£’000
Exchange
differences
£’000
Other
movements
£’000
Cash flow
£’000
30 April
£’000
46,840
971
47,811
20,938
967
21,905
–
–
–
–
–
–
–
–
–
–
–
–
(35,305)
11,535
2
973
(35,303)
12,508
25,902
46,840
4
971
25,906
47,811
At 1 May
Issued in year
– share options
At 30 April
375,478,778
373,229,778
1,877
1,866
996,093
2,249,000
376,474,871
375,478,778
5
1,882
11
1,877
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.
Share options, which have been granted to senior staff, including directors, to purchase Ordinary shares of 0.5p each, are
as follows:
13 Jul 2016
– 1,123,300
5,492,793 1,123,300
(30,000)
(996,093) 5,590,000
Date options
granted
29 Jan 2009
20 Jan 2010
12 Jul 2010
At
30 April
2016
–
44,093
15,000
4 Jul 2011
125,000
13 Dec 2011
250,000
4 Jul 2012
312,000
9 Jul 2013
1,980,000
11 Jul 2014
1,331,700
9 Jul 2015
1,377,600
15 Dec 2015
57,400
Date options
granted
29 Jan 2009
20 Jan 2010
12 Jul 2010
At
30 April
2015
50,000
44,093
15,000
4 Jul 2011
740,000
13 Dec 2011
250,000
4 Jul 2012
1,926,000
9 Jul 2013
1,980,000
11 Jul 2014
1,331,700
Granted
during
year
Lapsed or
forfeited
during year
Exercised
during year
–
(44,093)
At
30 April
2017
Exercise
price
Date from
which
exercisable
Last date
on which
exercisable
–
–
10.92p 29 Jan 2012 28 Jan 2016
36.37p 20 Jan 2013 19 Jan 2017
–
15,000
36.33p
12 Jul 2013
11 Jul 2017
(20,000)
105,000
65.25p
4 Jul 2014
3 Jul 2018
–
250,000
53.50p 13 Dec 2014 12 Dec 2018
(50,000)
262,000
39.17p
4 Jul 2015
3 Jul 2019
(882,000) 1,098,000
90.63p
9 Jul 2016
8 Jul 2020
– 1,331,700
145.33p
11 Jul 2017
10 Jul 2021
–
–
–
–
–
–
–
–
(30,000)
– 1,347,600
133.33p
9 Jul 2018
8 Jul 2022
–
–
–
57,400
153.25P 15 Dec 2018 14 Dec 2022
– 1,123,300
141.50p 13 July 2019 12 July 2023
Granted
during
year
Lapsed or
forfeited
during year
Exercised
during year
At
30 April
2016
Exercise
price
Date from
which
exercisable
Last date
on which
exercisable
(30,000)
(20,000)
–
10.92p 29 Jan 2012 28 Jan 2016
–
–
–
–
–
–
44,093
15,000
36.37p 20 Jan 2013 19 Jan 2017
36.33p
12 Jul 2013
11 Jul 2017
(615,000)
125,000
65.25p
4 Jul 2014
3 Jul 2018
–
250,000
53.50p 13 Dec 2014 12 Dec 2018
– (1,614,000)
312,000
39.17p
4 Jul 2015
3 Jul 2019
–
–
–
–
– 1,980,000
90.63p
9 Jul 2016
8 Jul 2020
– 1,331,700
145.33p
11 Jul 2017
10 Jul 2021
– 1,377,600
133.33p
9 Jul 2018
8 Jul 2022
–
57,400
153.25P 15 Dec 2018 14 Dec 2022
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9 Jul 2015
15 Dec 2015
– 1,377,600
–
57,400
102
103
6,336,793 1,435,000
(30,000) (2,249,000) 5,492,793
Full details of directors’ share options are given in the Remuneration report on pages 42 to 52.
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
20 Share capital and reserves continued
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 2017 is 120.1p (2016: 109.5p) and the weighted
average exercise price of options exercisable at 30 April 2017 is 74.7p (2016: 48.3p).
The weighted average share price for options exercised during the year ended 30 April 2017 was 162.8p
(30 April 2016: 159.3p).
The weighted average remaining years for options outstanding at the year-end date is 4.3 years (2016: 4.8 years).
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 2017 and 30 April 2016:
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
20 January
2010
3 years
52.80%
10.75p
10.92p
3 years
69.10%
35.50p
36.37p
12 July
2010
3 years
70.10%
38.00p
36.33p
3.25 years
3.25 years
3.25 years
0.00%
2.52%
4.693p
0.70%
2.27%
16.36p
04 July
2011
13 December
2011
3 years
65.40%
64.00p
65.25p
3 years
63.20%
50.25p
53.50p
3.29%
1.27%
15.95p
04 July
2012
3 years
58.30%
38.00p
39.17p
3.25 years
3.25 years
3.25 years
3.13%
1.32%
24.46p
4.48%
0.50%
16.38p
6.58%
0.46%
10.23p
20 Share capital and reserves continued
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
09 July
2013
3 years
48.50%
94.00p
90.63p
11 July
2014
3 years
39.10%
141.00p
145.33p
09 July
2015
3 years
30.70%
113.50p
133.33p
3.25 years
3.25 years
3.25 years
4.02%
0.82%
21.00p
3.83%
0.62%
26.20p
15 December
2015
3 years
26.16%
154.00p
153.25p
2.66%
1.28%
32.20p
13 July
2016
3 years
26.35%
146.75p
141.50p
3.25 years
3.25 years
3.32%
0.90%
21.78p
3.99%
0.11%
19.72p
The charge for share-based payments is £296,000 (2016: £413,000) and for the Company the charge is £69,000
(2016: £152,000).
Share price volatility is based on historical volatility.
Reserves
Group
Treasury shares (Group and Company)
In accordance with shareholders’ resolutions passed at Annual General Meetings, the Company may purchase its own shares
up to a maximum of 10% of the Ordinary shares in issue. At 30 April 2017 and 30 April 2016, 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 (2016: £201,000) arising on the redemption of the deferred shares and
£1,687,000 (2016: £1,459,000) relating to the fair value of options granted to employees of Group undertakings (note 14).
104
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
21 Financial Liabilities
Non-current liabilities
Non-current instalments due on bank loans
Finance lease creditors
Current liabilities
Current instalments due on loans
Finance lease creditors
Group
2017
£’000
7,894
298
8,192
2,344
146
2,490
2016
£’000
8,866
317
9,183
1,515
145
1,660
Company
2017
£’000
2016
£’000
–
–
–
–
–
–
–
–
–
–
–
–
Bank loans 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%.
Obligations under finance leases
The Group has entered into finance lease arrangements for certain items of property, plant and equipment, largely for periods
of up to four (2016: four) years (note 12). The total finance lease creditor at 30 April 2017 is £444,000, £146,000 due within
one year and £298,000 due between two and five years, (2016: total finance lease creditor £462,000, £145,000 due within
one year and £317,000 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 plans 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.
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
2017
£’000
–
4,441
1,015
5,456
2016
£’000
–
3,833
922
4,755
Company
2017
£’000
–
–
–
–
2016
£’000
–
–
–
–
22 Post-employment benefit obligations continued
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 2015. The results of the funding valuation at 1 June 2015 have been adjusted to the balance sheet
date taking account of experience over the period since 1 June 2015, changes in market conditions, and differences in the
financial and demographic assumptions.
Reconciliation of the movement in the present value of the
defined benefit obligation
Present value of defined benefit obligation at beginning of year
Current service cost
Interest cost
Contributions by members
Actuarial losses/(gains) on fund liabilities arising in demographic assumptions
Actuarial (gains)/ losses from changes in financial assumptions
Actuarial (gains)/losses 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 (losses)/gains 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
2017
£’000
6,303
9
202
1
(62)
607
(49)
(372)
6,639
2017
£’000
6,716
216
653
9
1
(372)
7,223
2017
£’000
6,639
(7,223)
(584)
584
–
2016
£’000
6,562
16
210
1
–
(25)
(76)
(385)
6,303
2016
£’000
6,938
223
(75)
14
1
(385)
6,716
2016
£’000
6,303
(6,716)
(413)
413
–
The actuarial valuation of the UK Pension scheme has revealed a surplus at 30 April 2017, 30 April 2016 and 30 April 2015.
This surplus has not been recognised as an asset, in accordance with IFRIC14, as in the future the surplus will not be recovered
by a reduction in future contributions to the scheme. The scheme has been closed to new members for over 30 years.
106
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
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 (2016: loss of £1,375,000)
in respect of the Company’s defined benefit scheme. This has been charged to retained earnings.
Amount recognised in profit and loss and other comprehensive income
2017
£’000
2016
£’000
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 (gains)/losses due to changes in financial assumptions
Actuarial (gains)/losses due to changes in demographic assumptions
Actuarial (gains)/losses on liabilities arising from experience
Adjustment due to the asset ceiling
Total (income)/expense amount recognised in Other Comprehensive Income
Total (income)/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:
9
–
9
9
(653)
607
(62)
(49)
157
–
9
Bonds
Insurance policies
Other
2017
2016
£’000
4,090
3,133
–
7,223
%
57
43
–
100
£’000
3,613
3,035
68
6,716
16
–
16
16
75
(25)
–
(76)
24
(2)
14
%
54
45
1
100
There were no financial instruments of the Company included in the plan assets (2016: none) and there were no property assets
occupied by the Company (2016: none).
Principal actuarial assumptions
Discount rate for scheme liabilities
Rate for increase in salaries
Price inflation
Pension increases
30 April 2017
100
30 April 2016
0
2.50
1.50
3.30
3.00
3.30
3.90
2.90
2.90
22 Post-employment benefit obligations continued
The mortality tables used for 2017 are S2NXA Light tables for males and S2NXA all lives for females, with CMI 2014
projections and a long-term rate of improvement of 1.5% pa. The mortality tables used for 2016 are S1NXA Light tables with
CMI2014 projections and a long-term rate of improvement of 1.5% pa. The mortality assumptions allow for expected future
improvements in mortality rates.
Male currently aged 65
Female currently aged 65
Male currently aged 45
Female current aged 45
Fair value of defined benefit obligation
Fair value of assets
Surplus/(deficit)
Experience (losses)/gains on fund assets
Experience gains/(losses)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
2017
2016
24.1 years (age 89.10)
24.1 years (age 89.10)
25.3 years (age 90.30)
25.5 years (age 90.50)
26.2 years (age 91.20)
26.1 years (age 91.10)
27.5 years (age 92.50)
27.8 years (age 92.80)
2017
£’000
6,639
7,223
584
2017
£’000
653
49
–
–
–
2016
£’000
6,303
6,716
413
2016
£’000
(75)
76
–
–
–
2015
£’000
6,562
6,938
376
2015
£’000
581
(40)
–
–
–
2014
£’000
5,922
6,379
457
2014
£’000
(357)
246
–
–
9.0%
2013
£’000
6,696
6,973
277
2013
£’000
–
(731)
(11.0%)
602
(3.0%)
The figure of liabilities for 2017, 2016, 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.
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.
Year ended 30 April 2017
As reported
Following a 0.1% decrease in the discount rate
Following a 0.1% increase pa in the inflation
assumption
Following an increase in the life expectancy of
one year
Service
cost
£’000
Net
Interest
£’000
Total profit
and loss
charge
£’000
9
9
9
9
–
–
–
–
9
9
9
9
Plan
assets
£’000
7,223
7,253
Defined
benefit
obligation
£’000
6,639
6,722
7,226
6,659
7,421
6,991
Surplus
£’000
584
531
567
430
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.
108
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
22 Post-employment benefit obligations continued
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:
•
•
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 contribution 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 2017 and 30 April
2016. This actuarial valuation incorporated the following principal assumptions in arriving at the present value of
the obligations:
Discount rate
Rate of increase in salaries
Retirement age
Inflation rate
Mortality table
2017
1.35%
2.00%
2016
1.35%
2.00%
62-64 years
62-64 years
2.00%
2.00%
TGH/TGF 05
TGH/TGF 05
Management believes that the book value for retirement obligations in France fairly states the position at 30 April 2017 and
30 April 2016.
The movement on these schemes is as follows:
At 1 May
Exchange differences
Utilised and other movements
At 30 April
2017
£’000
3,833
304
304
4,441
2016
£’000
3,318
373
142
3,833
Utilised and other movements for 2017 include amounts reflected in other comprehensive income, amounts charged to profit
and loss and amounts paid to employees.
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 2017
and 30 April 2016 by independent actuaries.
22 Post-employment benefit obligations continued
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
Remeasurement losses on plan liabilities
Prepaid risk premiums
Benefits deposited/(paid)
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
Prepaid risk premiums
Fair value of plan assets at 30 April
Net liability at 1 May
Exchange difference
Increase/(decrease) in liability
Net liability at 30 April
2017
£’000
3,526
317
42
203
20
186
(63)
(171)
2
4,062
2017
£’000
2,604
234
211
14
218
(171)
(63)
3,047
2017
£’000
922
83
10
1,015
2016
£’000
3,381
97
36
203
27
107
(61)
(265)
1
3,526
2016
£’000
2,491
71
181
19
168
(265)
(61)
2,604
2016
£’000
890
25
7
922
110
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
22 Post-employment benefit obligations continued
Amounts recognised in comprehensive income
22 Post-employment benefit obligations continued
History of assets, liabilities and actuarial gains and losses
2017
£’000
2016
£’000
Amount recognised in profit and loss
Service costs
Current service cost
Administrative expenses
Net pension interest
Total charge
Amount recognised in other comprehensive income
Return on scheme assets
Actuarial losses on defined benefit obligation
Total amount recognised in other comprehensive income
Total amount recognised in profit and loss and other comprehensive income
203
2
6
211
(218)
186
(32)
179
2017
2016
Cash
Equities & debt instruments
Other
Total plan assets
Principal actuarial assumptions
Discount rate
Expected return on plan assets at end of year
Rate of increase in salaries
Price inflation
£’000
51
2,077
919
3,047
%
2
68
30
100
£’000
73
1,753
778
2,604
30 April
2017
%
0.60
n/a
2.00
0.00
203
1
8
212
(168)
107
(61)
151
%
3
67
30
100
30 April
2016
%
0.50
n/a
2.00
0.00
The normal retirement age for males is between 60 – 65 years and for females between 59 – 64 years for both 2017 and 2016.
The mortality tables used in 2017 and 2016 were the BVG2015 GT tables; 2015, 2014 and 2013 used the BVG 2010 GT tables.
.
Present value of defined benefit obligation
Fair value of assets
Deficit
Experience (losses)/gains on plan liabilities
– as a percentage of the present value of plan
liabilities
Difference between expected and actual return
on plan assets
– as a percentage of the present value of plan assets
2017
£’000
4,062
3,047
2016
£’000
3,526
2,604
2015
£’000
3,381
2,491
2014
£’000
2,529
2,205
2013
£’000
2,383
2,002
(1,015)
(922)
(890)
(324)
(381)
2017
£’000
(186)
2016
£’000
(107)
2015
£’000
(571)
0
3%
(17%)
218
7%
168
6%
94
3%
2014
£’000
78
3%
1
0%
2013
£’000
205
9%
98
5%
The 2016, 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
Defined benefit obligation
– 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
Defined benefit
obligation
£’000
Increase/(decrease)
in defined benefit
obligation
£’000
4,062
4,258
3,880
4,029
4,096
4,125
3,996
–
196
(182)
(33)
34
63
(66)
The Group’s best estimate for contributions to be paid by the company next year to the scheme is £189,000 (2016:
£215,000).
The amount recognised in the income statement for this scheme was £211,000.
112
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
23 Provisions
Group
At 30 April 2015
Exchange differences
Utilised and other movements
Charged to income statement
At 30 April 2016
Amount shown as non-current liability
Amount shown as current liability
At 30 April 2016
Exchange differences
Utilised and other movements
Charged to income statement
At 30 April 2017
Amount shown as non-current liability
Amount shown as current liability
Employee
related claims
£’000
Product
warranties
£’000
1,049
63
(314)
97
895
–
895
895
895
103
(88)
(861)
49
–
49
49
185
7
(117)
–
75
–
75
75
75
7
(1)
(37)
44
–
44
44
Other
£’000
4,323
229
Total
£’000
5,557
299
(1,495)
(1,926)
86
3,143
10
3,133
3,143
3,143
307
(493)
(978)
1,979
–
1,979
1,979
183
4,113
10
4,103
4,113
4,113
417
(582)
(1,876)
2,072
–
2,072
2,072
Employee related claims
Certain overseas Group undertakings have made provision for claims made by former employees.
Other provisions
Other provisions include provisions of £1,500,000 for potential legal claims against certain Group companies. These have
been assessed by management based on legal advice and are expected to be resolved in the following year.
Company
At 30 April 2015
Utilised and other movements
At 30 April 2016
Amount shown as non-current liability
Amount shown as current liability
At 30 April 2016
Utilised and other movements
At 30 April 2017
Amount shown as non-current liability
Amount shown as current liability
Employee
related claims
£’000
Product
warranties
£’000
Other
£’000
Total
£’000
-
–
–
–
–
–
–
–
–
–
–
–
-
–
–
–
–
–
–
–
–
–
–
–
17
(7)
10
10
–
10
10
(10)
–
–
–
–
17
(7)
10
10
–
10
10
(10)
–
–
–
–
114
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:
Group
Company
2017
£’000
1,025
2016
£’000
(447)
2017
£’000
2016
£’000
(1,465)
(1,881)
572
842
(1,796)
(1,400)
(352)
(972)
–
–
–
–
–
–
(370)
(346)
(2,329)
(1,835)
(2,227)
(4,216)
1,887
(2,329)
(1,835)
(2,227)
–
–
(1,835)
(2,227)
(220)
(135)
(554)
(3,641)
3,087
(554)
Opening balance
Exchange differences
Newly acquired subsidiary
Charge/(Credit) for the year in income statement
Amounts (credited)/charged to other comprehensive income
Closing balance
Group
Company
2017
£’000
2016
£’000
2017
£’000
2016
£’000
(2,329)
(2,445)
(2,227)
(1,702)
75
25
1,702
(27)
(554)
115
55
(2)
(52)
–
–
374
18
–
–
(464)
(61)
(2,329)
(1,835)
(2,227)
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 £1,220,000 (2016: £958,000) arising on temporary differences of £5,052,000 (2016:
£3,809,000), in respect of unrelieved tax losses and other temporary differences have not been recognised, as their future
economic benefit is uncertain.
An analysis of the unrecognised deferred asset by the expiry dates of unrelieved tax losses is as follows:
Expiring in less than one year
Expiring between two and 20 years
No expiry date
Group
2017
£’000
–
228
992
1,220
2016
£’000
–
81
877
958
115
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
24 Deferred taxation continued
In addition, the Group has an unrecognised deferred tax asset on gross capital losses of £3,756,000 (2016: £3,765,000),
of which £3,627,000 (2016: £3,627,000) 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
There will be a reduction in the corporate tax rates in two of the major jurisdictions in which the Group operates, in the UK to
17% from 2020, and in France to 28% from 2019. The deferred tax assets and liabilities have been recognised based on the
respective corporation tax rates at which they are anticipated to unwind in each jurisdiction.
25 Trade and other payables
Amounts shown as non-current liabilities
Trade payables
Other payables
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
2017
£’000
–
1,500
810
2,310
2016
£’000
–
200
1,621
1,821
24,650
19,672
3,585
–
2,700
5,785
6,741
–
17,496
3,624
5,435
7,077
783
395
899
39,876
35,808
23,158
Company
2017
£’000
2016
£’000
–
–
–
–
–
200
–
200
4,015
34,246
721
295
6,512
45,789
Included in other payables current and non- current for both the Group and the Company is the balance of deferred
consideration for the acquisition of business combinations and subsidiary undertakings as shown in note 30 Business
combinations and disposals.
Included in accruals and deferred income is the liability relating to the sale of the future rental stream on the investment property
(note 13).
26 Operating leases and Site Agreements
The future minimum lease payments under non-cancellable operating leases are as follows:
Land and buildings
Not later than one year
After one year but not more than five years
After five years
Other
Not later than one year
After one year but not more than five years
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
Group
Company
2017
£’000
742
1,197
177
2,116
1,172
1,991
–
2016
£’000
667
1,241
144
2,052
1,133
1,712
6
2017
£’000
2016
£’000
25
–
–
25
633
1,165
–
144
229
–
373
462
927
–
3,163
2,851
1,798
1,389
1,914
3,188
177
5,279
5,263
7,743
2,538
15,544
1,800
2,953
150
4,903
6,836
10,336
3,451
20,623
658
1,165
–
606
1,156
–
1,823
1,762
1,399
1,381
–
1,273
884
1
2,780
2,158
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.
Site owner agreements
The Group and the Company have entered into various commission agreements with site-owners enabling the Group and the
Company to site vending equipment for a number of years. The amounts 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.
In January 2016, the IASB issued IFRS16 Leases which is effective for annual reporting periods beginning on or after 1 January
2019. Under this standard all leases, both finance and operating will be included on the balance sheet. The Group is currently
studying the impact of IFRS 16 on its operating leases and in regard to commission arrangements, whether these arrangements will
meet the definition of a lease.
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
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.
28 Related parties continued
Sales of goods and services, purchases and year end balances
Amounts with third parties
For supply of property, plant & equipment – mainly vending
equipment
Amounts with Group companies
Group
Company
2017
£’000
2016
£’000
2017
£’000
2016
£’000
Sales of goods and services
Associates
4,496
8,942
–
17
Trade and other receivable balances
Associates
Group
Company
2017
£’000
2016
£’000
2017
£’000
2016
£’000
166
166
1,015
1,015
84
84
51
51
–
–
–
–
–
–
–
–
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.
Included in trade and other receivable balances with associates is an interest-bearing loan of £1,015,000.
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
2017
£’000
2016
£’000
44
47
Amount of vending equipment contracted by the Group’s operating
Companies with the Group’s procurement companies
669
1,398
669
1,394
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.
The Group has no contingent liabilities with regard to its interest in the associated undertakings (2016: none).
28 Related parties
The following transactions were carried out with related parties:
Directors’ compensation
Salaries and other short-term employee benefits excluding long-term
incentives and pension contributions
Post-employment benefits
Share– based payments – charge
Group
Company
2017
£’000
2016
£’000
2017
£’000
2016
£’000
1,647
1,360
1,647
1,360
81
40
80
117
81
40
80
117
1,768
1,557
1,768
1,557
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 42 to 52.
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 £nil (2016: £3,000). No director who served
during the year was a member of the Company’s defined benefit pension scheme (2016: none).
Directors of the Company control 22.54% of the Ordinary shares of the Company. The interests of the directors in the share
capital of the Company are shown on page 49 of the Remuneration report.
118
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
28 Related parties continued
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
– sold to subsidiaries
Dividend income
– from subsidiaries
Transactions with Associates
Dividends received from associates
2017
£’000
2016
£’000
159
9,103
33,272
17,496
5
69
7,832
2,763
85
4,788
5,037
72
5,428
3,095
34,246
5
73
7,458
1,591
36
3,092
–
40,084
10,692
2017
£’000
279
2016
£’000
–
29 Group undertakings
This disclosure is made in accordance with Section 409 of the Companies Act 2006 and the Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008, as amended by the Companies, Partnerships and Groups (accounts and
reports) Regulations 2015. A full list of subsidiary undertakings and associated undertakings (showing country of incorporation,
which is also the main trading location of the company, the effective percentage of equity shares held) and full registered office
addresses at 30 April 2017 are shown below. Unless indicated otherwise the equity shares held are in the form of ordinary shares
or common stock.
Principal group undertakings which affect the financial statements of the Group are highlighted in bold. Together with the parent
company, Photo-Me international plc, these companies contributed over 90% of the Group’s revenue and operating profit.
Company name
UK & Ireland
Principal
Activity
Group
interest Registered office address
Country of
incorporation
c/o Photo-Me International plc, Church Road, Bookham,
Surrey, KT23 3EU
England & Wales
Fowler UK.Com Limited Operations 100%
Jolly Roger
(Amusement Rides)
Limited
Production
MgInvest Investments Limited Investment
Photo-Me (2016) Limited
Photo-Me (Retail)
Limited
Photo-Me Limited
Dormant
Photo-Me Trustees Limited
Power-Me Limited
Xpand Investments Limited
Impact (Web Services)
Limited
Photo-Me Ireland Limited
Operations 100%
Continental Europe
100% Photo-Me House, Church Road, Bookham, Surrey, KT23 3EU England & Wales
100%* 12 Catherine Street, Warrington, Cheshire, WA5 0LH
England & Wales
100% Photo-Me House, Church Road, Bookham, Surrey, KT23 3EU England & Wales
Operations 100% Photo-Me House, Church Road, Bookham, Surrey, KT23 3EU England & Wales
100% Photo-Me House, Church Road, Bookham, Surrey, KT23 3EU England & Wales
Corporate
100% Photo-Me House, Church Road, Bookham, Surrey, KT23 3EU England & Wales
Dormant
100% Photo-Me House, Church Road, Bookham, Surrey, KT23 3EU England & Wales
Dormant
100% Photo-Me House, Church Road, Bookham, Surrey, KT23 3EU England & Wales
Investment
Dormant
100%
Unit A4, Alexander House, Tallaght Cross East, Tallaght,
Dublin 24
Unit A4, Alexander House, Tallaght Cross East,Tallaght,
Dublin 24
Republic
of Ireland
Republic
of Ireland
Notes to the Financial Statements
for the year ended 30 April 2017
Photo-Me Czech Republic
s.p.o.l. s.r.o.
KIS SAS
Photomaton SAS
Photo-Me France SAS
SCI du Lotissement
d’Echirolles
Property
SCI Immobilière du 21 Property
Stilla Technologies SA
(associate)
Fotofix-
Schnellphotoautomaten
G.m.b.H.
Bio-
technology 50%
100%* Husova 2117, 256 01 Benešov
100%* 7 Rue Jean-Pierre Timbaud, 38130 Echirolles
Dormant
Trading
Operations 100%* 4 Rue de la Croix Faron, 93217 La Plaine Saint-Denis
Investment
100% 7 Rue Jean-Pierre Timbaud, 38130 Echirolles
Czech Republic
France
France
France
2110 Avenue Du Général De Gaulle, 38130 Echirolles
61%*
100%* 7 Rue Jean-Pierre Timbaud, 38130 Echirolles
France
France
1, Mail du Professeur Georges Mathé, 94800 Villejuif
France
Operations 100% Medienstrasse 4, 47807 Krefeld
Dormant
Kis Italia Srl
Prontophot Holland B.V Operations 100% Loonseweg 14, 5527 AC Hapert
KIS Poland s.p.z.o.o.
Operations 100% ul. Targowa 46/5, 03-733 Warszawa
100% Via Tiziano 32, 20145 Milano
Animate Fotofixe
Limitada
Operations 100% Rua Sto António do Zaire, n°138, 2685-492 Camarate
KIS Automatic Services SL Operations 100% Calle Freixa 26-28, Planta Bj, 08021 Barcelona, Spain
Copyphot SA
Photo-Me Suisse SA
Prontophot
(Schweiz) AG
Operations 100%* Sonnentalstrasse 5, 8600 Dübendorf
Dormant
Operations 100% Sonnentalstrasse 5, 8600 Dübendorf
100% Rue du Rhône 65, 1204 Genève
Germany
Italy
Netherlands
Poland
Portugal
Spain
Switzerland
Switzerland
Switzerland
Asia & ROW
Photo Direct Pty Ltd
(associate)
Photo-Me (Shanghai)
Co Limited
Sales &
Servicing
26.95% Unit 4, 109 Whitehorse Rd, Blackburn, Victoria 3130
Australia
Operations 100%*
Room 1102 Tongyong Tower, No. 1346 Gong he Xin Road,
Zha bei District, Shanghai 200070
Room 1124, Ocean Natural Xintiandi, No.106 East Majiapu
Road, Fengtai District, Beijing 100000
China
China
Photo-Me Beijing Co Limited Operations 100%*
Fullwise International Limited
(associate)
Max Sight Limited
(associate)
Photomaton Maroc SARL
(associate)
Nippon Auto-Photo
Kabushiki Kaisha
Photo-Me Korea Company
Limited
Photomatico (Singapore) Pte
Limited
Dormant
33.33% 48 Yee Wo Street, 14/F McDonald's Bldg, Causeway Bay
Hong Kong
Operations 33.33% 48 Yee Wo Street, 14/F McDonald's Bldg, Causeway Bay
Hong Kong
Operations 50%
Operations 100%
Operations 100%*
131, Bd d'Anfa, Casablanca, 20250
Room 1302, Atlas Tower Roppongi, Roppongi 7-7-13,
Minato-Ku, 106 0032 Japan
Room #203-1, Daeryung techno town 1st, Gasan Digital 2
ro 18, Geumcheon-gu, Seoul, 08592
Morocco
Japan
Korea
Operations 100% 26 Sin Ming Lane, Singapore 573971
Singapore
KIS (Thailand) Limited
Dormant
49%
KIS USA LLC
KIS Technology Company
Limited
Operations 100%
Trading
100%
53/3, 4th Floor, Unit 4, Goldenland Bldg, Soi
Mahardlekluang 1, Badmiri Rd, Lumpini Phathumwan,
10330 Bangkok
150 Fayetteville Street, Box 1011, Raleigh, N Carolina,
27601
P.1003, Ford Thang Long Building, 105 Lang Ha Street, Ba
Dinh district, Hanoi
Thailand
USA
Vietnam
Prontophot Austria G.m.b.H. Operations 100% Viktor Kaplan Strasse 9B, 2201 Gerasdorf bei Wien
Prontophot Belgium NV Operations 100% Boulevard Paepsem 8a, 1070 Anderlecht
Austria
Belgium
120
121
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Notes to the Financial Statements
for the year ended 30 April 2017
Notes to the Financial Statements
for the year ended 30 April 2017
30 Business combinations and disposals
Business combinations
Current year
The Group completed its acquisition of the Photo Division of Asda Stores Limited (“Asda”) on 31 October 2016 and trading
commenced on 1 November 2016 in this activity under the name Photo-Me Retail Limited.
The table below shows the assets acquired and the consideration paid and payable.
Prior year business combinations
Business combinations
The Group completed its acquisition of 100% of the share capital and voting interests in Fowler UK.com Ltd (“Fowler”) in
early November 2015. Fowler is a UK company which supplies and installs laundry and catering equipment. The acquisition
was effective on 1 October 2015 and Fowler was consolidated in the Group’s consolidated results and balance sheet from
that date.
The table below summarises the fair value of the assets acquired, liabilities assumed and the consideration paid.
Intangible assets
Property, plant and equipment
Inventory
Total assets
Satisfied by
Trade and other payables
Deferred consideration
Cash paid
Total consideration paid and deferred consideration
£’000
2,965
348
500
3,813
£’000
500
2,250
1,063
3,813
On 31 October 2016, the Group completed the acquisition of the UK photo division of Asda Stores Limited. The addition of
363 sites previously managed by Asda, 119 photo centres and 172 self-service corners, has extended our presence in the
UK market. This acquisition reported a loss of £1.8m in the period to 30 April 2017 and turnover in the period to 30 April
2017 was £5.3m. The reconfiguration of layouts and equipment upgrades which are being implemented as well as ongoing
operational measures, are expected to restore the profitability of the business in the short term and progressively expand
profitability going forward.
An intangible asset of £2,965,000 has been included in the other intangible additions totalling £4,296,000 (note 11), that
relates to the operating licence for 10 years in the Asda stores.
A deferred consideration of £2,250,000 is payable in equal instalments over 3 years from the anniversary of the date of
acquisition.
Disposals
During the year, the Group has disposed of its 100% interest in Camden Management Services Ltd, a small operating company
in the United Kingdom and two dormant companies were dissolved.
Intangible assets
Property, plant and equipment
Inventory
Trade and other receivables
Cash and cash equivalents
Total assets
Borrowings
Deferred tax
Trade and other payables
Current tax
Total liabilities
Total identifiable net assets
Total net assets excluding net cash and cash equivalents
Goodwill
Goodwill and total identifiable net assets
Cost of investment
Deferred consideration
Cash flow as per Company Statement of Cash Flows
Net cash acquired
Net cash consideration per Group Statement of Cash Flows
£’000
253
549
265
280
209
1,556
178
55
289
56
578
978
947
1,273
2,251
2,251
400
1,851
209
1,642
122
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Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Five Year Summary
Company Information & Advisors
Registered in England and Wales
Number 735438
Registered Office
Church Road
Bookham Surrey
KT23 3EU
Tel: +44 (0) 1372 453399
Fax: +44 (0) 1372 451044
Web: www.photo-me.com
e-mail: ir@photo-me.co.uk
Auditor
KPMG LLP
1 Forest Gate
Brighton Road
Crawley
RH11 9PT
Brokers
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
finnCap Limited
60 New Broad Street
London
EC2M 1JJ
Bankers
Lloyds Bank plc
25 Gresham Street
London
EC2V 7HN
Santander UK plc
2 Triton Square
Regent’s Place
London
NW1 3AN
Financial public relations
Hudson Sandler LLP
29 Cloth Fair
London
EC1A 7NN
Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Income statement (unaudited)
Revenue
UK & Ireland
Continental Europe
Asia
Total revenue
Operating profit after special items before finance
costs
Net finance (cost)/income
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
Dividends – final
Dividends – 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
Reserves
Equity of the Parent
Non-controlling interests
Total equity
Total non-current liabilities
Total current liabilities
Total equity and liabilities
Net cash
2017
£’000
2016
£’000
2015
£’000
2014
£’000
2013
£’000
53,639
111,670
49,344
214,563
46,807
1,232
48,039
(12,901)
35,138
34,991
147
35,138
9.30p
9.27p
3.09p
3.94p
–
7.03p
2017
£’000
25,263
75,651
2,095
8,136
85,753
96
196,994
1,882
8,999
117,080
127,961
1,341
129,302
19,045
48,647
196,994
39,212
45,783
93,712
44,499
183,994
39,734
372
40,106
(10,907)
29,199
29,066
133
29,199
7.77p
7.72p
2.575p
3.285p
2.815p
8.675p
2016
£’000
20,312
56,723
1,713
8,092
103,382
96
190,318
1,877
8,156
111,608
121,641
1,109
122,750
17,656
49,912
190,318
62,415
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
44,927
102,932
38,739
186,598
45,744
104,913
44,933
195,590
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
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
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 – photobooth & vending
machines £’000
Capital expenditure – research & development £’000
EBITDA £’000
EBITDA % of revenue
Number of vending sites
2017
2016
2015
2014
2013
33,787
2,390
69,230
32.3
48,000
19,402
2,935
56,695
30.8
45,500
18,287
2,560
55,251
31.2
44,600
17,327
1,125
47,803
25.6
43,850
16,381
1,058
44,927
23.0
43,150
124
125
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Shareholder Information
Shareholder Information
Analysis of registered shareholdings at 27 June 2017
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
1,926
405
35
7,528,847
364,984,996
4,011,028
2,366
376,524,871
1,154
862
218
75
19
38
560,740
2,677,400
7,302,173
17,735,716
13,339,544
334,909,298
2,366
376,524,871
2.00
96.94
1.06
100
0.15
0.71
1.94
4.71
3.54
88.95
100
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.com
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:
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 451044
e-mail: ir@photo-me.co.uk
Financial calendar
Annual General Meeting
Half year results
(to 31 October 2017)
Full year results
(to 30 April 2018)
Dividend
Final (year to 30 April 2017) – ex dividend date
Final (year to 30 April 2017) – record date
Final (year to 30 April 2017) – payment date
25 October 2017
Announcement in December 2017
Announcement in June/July 2018
12 October 2017
13 October 2017
10 November 2017
126
Designed and produced by Invicomm Limited
www.invicomm.com +44(0)207 205 2586
127
Strategic ReportCorporate GovernanceFinancial StatementsPhoto-Me International plc Annual Report 2017Photo-Me International plc Annual Report 2017 Photo-Me International plc
Church Road, Bookham
Surrey KT23 3EU
T: +44(0)1372 453399
F: +44(0)1372 451044
W: www.photo-me.com