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1
8
EXECUTION
& EVOLUTION
A NNUAL RE PO R T 2018
FI NA NCI AL HIGHLIGHTS
£m
250
200
Reported Revenue
Reported profit before tax
100
150
£229.8m
2017: £214.7m
2016: £184.4m
£m
250
200
150
100
50
0
2016
2017
20182018
50
£50.2m
20182018
0
2016
2017
2017: £48.0m
2016: £40.1m
£m
60
50
40
30
20
10
0
2016
2017
2018
Cash generated from operations
Total ordinary dividend per share
8.44p
2017: 7.03p*
2016: 5.86p
* Excludes special dividend
of 2.815p per share
Earnings per share
(diluted)
10.60p
2017: 9.27p
2016: 7.72p
£m
60
£61.0m
50
2017: £61.3m
40
2016: £51.4m
30
20
10
0
Reported EBITDA
2016
2017
£m
2018
£71.0m
2017: £69.0m
2016: £56.7m
FURTHER INFOR MATION
For more information go to our website;
photo-me.com/investor-relations
PH OT O -ME INTERNATIONAL PLC
ABOUT PH OTO-ME
WE ARE...
an international market leader in automated instant-service
equipment, with more than 46,700 unattended 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.
OUR INTERNATIONAL PRESENCE
We currently operate in 18 countries worldwide, with
a focus on three core geographic areas: UK & Ireland,
Continental Europe and Asia.
We are looking to extend our geographic presence,
particularly through our existing long-standing
relationships with major high-footfall site owners
such as international superstore chains.
85%
of our profits are
generated outside
the UK.
CONTE NTS
STR ATE GIC RE PO RT
Our Business Model
Our Business
– Identification
– Laundry
– Kiosks
Growth Strategy
Innovation for Future Growth
Chairman's Statement
Chief Executive's Report
– Business Review
– Review of Performance
By Geography
– Key Performance Indicators
– Investment in innovation
– Our Team
– Future Prospects
Financial Review
Principal Risks
Corporate Responsibility Statement
Viability Statement
3
4
4
6
8
9
10
14
16
16
20
25
26
26
26
27
31
34
41
C O RP O RATE G OV E RN A NCE
Board of Directors and
44
Company Secretary
45
Report of Directors
48
Corporate Governance
52
Remuneration Report
52
– Annual Statement
53
– Remuneration Policy Report
– Annual Report on Remuneration
58
Statement of Directors’ Responsibilities 65
66
Independent Auditor's Report
FIN A N CI AL STATE ME N TS
Group Statement of
Comprehensive Income
Statements of Financial Position
74
75
Group Statement of Cash Flows
76
Company Statement of Cash Flows 77
Group Statement of Changes
in Equity
Company Statement
of Changes in Equity
Notes to the Financial Statements
Five Year Summary
Company Information & Advisors
Shareholder Information
79
80
140
142
143
78
1
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 OUR BUSINESS IS FOCU SED
ON THREE PRINCIPAL AREAS:
STRATEGIC
REPORT
2
PHO T O- ME INT ERNATIONAL PLC
OUR BUSI NESS MOD EL
O UR BU SI NESS IS FO CUSED
O N T HR EE PR INC IPA L AR EAS :
IDENTI FICAT ION
LAUN DRY
KIOSKS
STRATEGIC
REPORT
CUSTOMER
EXPERIENCE
providing easy-to-use,
reliable, high quality,
value-for-money services
R
E
D
N
U
…
LONG-TERM PARTNERSHIPS
with site owners (supermarkets,
shopping malls, public transport
and public administration buildings)
STABLE CASH
FLOWS
utilised to fund R&D for
future growth
P I N N E D BY KEY STRE
N
G
T
H
S
S
t
r
a
t
e
g
i
c
R
e
p
o
r
t
C
o
r
p
o
r
a
t
e
G
o
v
e
r
n
a
n
c
e
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
TECHNOLOGY
& INNOVATION
production of proprietary
solutions & continuous
focus on diversification
BRAND
RECOGNITION
Photo-Me’s products are
household names
INDUSTRY EXPERT
with over 50 years
of involvement with
regulatory bodies
(ISO, ICAO, HMPO et al)
COMPETITIVE
PRICING
Carefully and consistently
benchmarked against
market
ESTABLISHED
NETWORK
of engineers able to support
growth across business
segments at limited cost
TELEMETRY SYSTEM
Sophisticated and tailored
to Photo-Me’s proprietary
technology
A N N U A L R E P O R T 2 0 1 8
3
3
OUR BUSINES S
IDENTIFICATION
An established, international network
of more than 29,000 photobooths
across 18 countries, primarily
aimed at the consumer market.
GROWTH DRI VERS
OUR O PERATIONS
Governments increasingly
seeking improved and
digitalised security ID to
combat fraud and terrorist
activity.
Identification solutions for
government. We have
continued to expand the photo
ID capabilities and services
available in our photobooths.
CONFORM TO
INTERNATIONAL
STANDARDS
Integrated proprietary software ensures all
photographs conform to International Civil
Aviation Organisation (ICAO) regulations
for photo identification.
MARKET LEADING
BRANDS ACROSS ALL OUR
OPERATING REGIONS
Market leading brand across all our
geographies. Photo-Me, Photomaton,
ProntoPhot, FOTO.FIX, PRONTO PHOT,
Foto-Já!
DEDICATED SUPPORT,
MAINTENANCE
AND REMOTE TELEMETRY
Network supported, maintained and
upgraded by our skilled team of
approximately 700 field engineers
and connected via remote monitoring
telemetry.
4
PHO T O- ME INT ERNATIONAL PLC
We are rolling out encrypted ID photo capture in partnership with governments across the world.
To date, our government ID security solutions have been successfully deployed in France, Switzerland, Germany, China, Japan,
Georgia, Ireland and the UK.
CASE STUDY: STRATEGIC PROGRESS ACHIEVED ON IDENTIFICATION GROWTH STRATEGY
Encrypted digital photo ID upload technology for UK passport renewals
Late
2017
Mid-
December
2017
April
2018
December
2018
Positive conclusion of
discussions with Her Majesty’s
Passport Office
Launched deployment
of e-passport technology
in UK photobooths
2,200 photobooths upgraded
as at 30 April 2018
4,000 photobooth
upgrades planned by end
of December 2018
O VERVIEW
• Photobooth technology guides users to help them comply
with the ICAO standard and automatically detects
whether a photo meets these standards
• Encrypted digital photo ID upload enables the secure
transfer of photo ID data directly from Photo-Me's
photobooths to HMPO servers and removes the
opportunity for photo ID to be manipulated
2
PHOTO-ME
SERVER
4
Web request
5
Automatic data transfer
HMPO GOVERNMENT
SERVER
URL Creation
Checks & validation
1
PHOTO & SIGNATURE
ARE CAPTURED
Data is transferred
to a secure server
2
Customer is given a photo
with a unique code
6
Photo displayed
on the online
application
3
7
Customer inputs unique
code during the online
application on the
HMPO website
Passport delivered
to customer
Benefits of this technology
For consumers
Unique photo ID code issued to the customer
for their online passport application.
Great customer experience through an easy to use,
reliable, high-quality and value-for-money service.
For government
Simplification of administrative process, which provides
a secure, quick and easy way to digitalise and transfer
sensitive biometric data which cannot be corrupted
(customer does not have access to the data).
5
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 OUR BUSINE SS – CO NTI NU E D
LAUNDRY
Laundry business launched in 2012
and remains the primary key growth
driver for the Group.
GROWTH DRI VERS
OUR O PERATIONS
Demand for convenient,
high-capacity laundry services
at competitive prices.
4,449
LAUNDRY UNITS DEPLOYED
Total of 4,449 owned, operated and
acquired laundry units (since launch
in 2012).
TARGET TO DEPLOY 6,000
LAUNDRY UNITS BY 2020
On track to deploy 6,000 laundry units
(owned, sold and acquired) by 2020
and increase geographic presence.
2,313 REVOLUTION
MACHINES
IN OPERATION
Photo-Me operates laundry units across
12 countries – primarily in France,
Ireland, Belgium and Portugal.
WE OPERATE IN THREE
KEY AREAS
Revolution standalone laundry units,
Self-service launderettes and B2B
laundry services.
6
PHO T O- ME INT ERNATIONAL PLC
OUR THREE KEY LAUNDRY OPERATING AREAS
REVOLUTION STANDALONE
LAUNDRY UNITS
SELF-SERVICE
LAUNDERETTES
B2B LAUNDRY
SERVICES
2,313 Revolution units in operation across
12 countries – primarily France, UK,
Ireland, Belgium and Portugal.
Outdoor self-service laundry units,
providing 24-hour access to large-
capacity, rapid laundry services, located
on high-footfall sites, such as supermarket
car parks where we have an existing
photobooth presence.
We operate laundrettes in France,
Spain, Portugal, Ireland and Japan.
B2B laundry service primarily located in
the UK and Spain.
Typically located in or near town centres,
offering consumers convenient and
competitively priced large-capacity, self-
service laundry amenities.
Business-to-business distribution and
leasing of laundry and catering
equipment to institutions such as
hospitals, care homes and universities, in
the UK through Fowler UK, Tersus/Inox
and in Spain through La Wash (acquired
May 2018).
CASE STUDY: STRATEGIC PROGRESS ACHIEVED IN DELIVERING RAPID LAUNDRY GROWTH
Laundry strategy driving significant shift in revenue mix in Portugal and Ireland
PO RT UG AL
I REL AND
First Revolution laundry machine
installed in May 2014
First Revolution laundry machine
installed in May 2014
Total of 188 units deployed as at
30 April 2018 (2017: 135),
up 39.3% year-on-year
Laundry revenue was £1.4m as at
30 April 2018 (2017: £0.9m), up
55.6% year-on-year
Significant shift in revenue mix with
laundry now representing 68.9% of
total revenue in Portugal
(2017: 60.6%)
Total of 272 units deployed as at
30 April 2018 (2017: 179), up
52.0% year-on-year
Laundry revenue was £4.0m as at
30 April 2018 (2017: £2.3m),
up 73.9% year-on-year
Significant shift in revenue mix with
laundry now representing 69.8% of
total revenue in Ireland
(2017: 63.1%)
O VERVIEW
Organic and
acquisitive laundry
expansion strategy
+37%
Total of 4,449 laundry units deployed
(owned, sold & acquired) since launch
in 2012
+69%
Total revenue from laundry operations
up 69% to £36.7m
+49%
Total revenue from Revolution units
up 49% to £21.2m
+32%
Number of Revolution units increased
by 32% to 2,313 (2017: 1,750,
representing 5.0% of total Group
vending estate (2017: 3.6%)
7
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 OUR BUSINE SS – CO NTI NU E D
KIOS KS
We operate high quality,
market-leading digital printing
equipment in six countries.
OUR GROWTH STRATEGY
(2017 TO 2020)
GROWTH DRI VERS
OUR O PERATIONS
Increased use of smartphones
and digital sharing across
social media networks.
A fragmented market with
expansion opportunities across
Europe, the US and Asia.
+5,000 DIGITAL PRINTING
KIOSKS WORLDWIDE
5,416 printing kiosks in France, UK,
Japan, Belgium, Switzerland and the
Netherlands.
FULLY INTEGRATED WITH
ALL MAJOR SOCIAL MEDIA
NETWORKS
Our latest generation kiosks, designed by
Phillipe Starck, enable easy, competitively
priced digital printing from smartphones
and are fully integrated with major social
media networks for rapid, high-quality
printing.
OTH ER UNATTE NDE D
VEND ING EQUIPME NT
Our estate includes a variety of
unattended vending equipment.
This business area includes unattended children’s rides and
amusement machines which are typically located on high footfall
sites where Photo-Me has an existing presence and established
relationship with the site owner.
8
PHO T O- ME INT ERNATIONAL PLC
GROWTH S TRATE GY
Our business strategy remains focused on the diversification of our operations
– principally focused on our three key business areas.
Good strategic progress has been achieved in the year, led by
continued rapid expansion of our laundry operations and the
further deployment of photo ID security services.
Our established photobooth operations are highly cash
generative and fund our in-house technological innovation to
develop new and complementary products, which can be
rapidly deployed to existing and new territories to drive future
growth by getting the best yield from our unattended vending
estate and leveraging the scale of our operations.
O U R G ROWT H STR ATEG Y
( 2017 T O 2 020)
IDENTIFICAT ION
LAUN DRY
KIOSKS
• Target expansion into
high footfall locations
• Penetrate new territories
• Grow revenue through
multiple service offering
• Deploy proven
identification security
technologies into
existing and new
territories
• Deploy 6,000 owned,
sold and acquired
laundry units by 2020
• Identify and deliver
products to new high
demand markets
• Expand launderette
presence through the
owned/operated
model
• Extend B2B offering in
the UK and into new
territories
• Increase presence
on high footfall sites
through multi-service
offering
• Extend product
partnerships into new
territories
• Capitalise on market
leading position and
competitor landscape
9
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 INNOVATION FOR FUTURE GROWTH
In the financial year ended 30 April 2018, we invested
approximately £43.6 million in the business. Investment in
innovation for future growth lies at the core of our business.
We have international research and development capabilities, which include:
EXP ER IENCED EX PE RTS
More than 60 highly
experienced engineers
specialising in new products,
including identification and
software development,
aligned to our strategic
priorities.
FR AN C E
Primary R&D centre
located in France
(Echirolles), which is
focused on identifying
new market opportunities,
new product development,
and pilot production and
testing of new products
prior to scaled production.
AS IA
Further R&D centres
in China (Shanghai),
Vietnam (Hanoi) and
Japan (Tokyo).
£2.5m
Total investment
in innovation 2018
+45%
Laundry capex increased
by 45% to £15.2m
+11.6%
Identification capex
increased by 11.6%
to £13.4m
OUR KEY ARE AS OF F O CUS R EM A I N :
REFURBISHMENT
AND UPGRADES
PROPRIETARY SECURITY
BIOMETRIC IDENTIFICATION
SOLUTIONS
NEW PRODUCT
DEVELOPMENT
10
PHO T O- ME INT ERNATIONAL PLC
Track record of new product innovation
1981
MINILAB
Invention of
the Minilab.
1994
PHOTOBOOTH
First photobooth with
digital technology.
2006
PHOTOMATON
ID SOFTWARE
Providing ICAO
compliant ID photos.
2006
SPEEDLAB II
Self-service photo
processing kiosk.
2009
PHOTOBOOK
MAKER
First kiosk to print instant
photo albums
(15cm x 20 cm format).
2011
PHOTO-ME BY
STARCK
First photobooth with
social media connection
for photo sharing.
Designed by
Philippe Starck.
2013
SPEEDLAB PHONE
CASE KIOSK
First self-service kiosk
to personalise smart-phone
covers with your
own photos.
2013
REVOLUTION
Self-service outdoor
laundrette. Economical
and eco-friendly
professional washing
machines.
2012
PHOTOLIGHT
High quality solar
powered lighting.
2014
WALL'N GO
First instant self-service
wallpaper printing
machine.
2014
SPEEDLAB BIO
& SPEEDLAB CUBE
Connected photo
kiosks. Designed by
Philippe Starck.
2015
MONEY TRANSFER
In partnership with
MoneyGram.
2016
PHOTO GIFTS
Development of a
photos gifts range
available on
SpeedLab Bio and
SpeedLab Cube.
2016
3D BOOTH BY
STARCK
First photobooth to create
a lifelike figurine.
2016
UNIVERSAL BOOTH
BY STARCK
Latest version of our
Universal Photobooth,
accessible to all users.
2016
COMPACT
REVOLUTION
New outdoor self-service
Compact Revolution
laundrette.
2016
INTERNAL
LAUNDRETTE
'LAVERINE KIS
WASH'
New self-service
internal laundrette.
11
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 INNOVATI ON F OR F UT U RE G R OW T H – CO NT IN UED
CASE STUDY: SECURE BIOMETRIC ID SOLUTIONS
3D Enrolment Booth
OVERVIEW
• Increased government focus on secure identification
systems that comply with the latest standards of identity
assurance and privacy protection.
• Photo-Me has recently developed a 3D Enrolment Booth
that can improve facial recognition accuracy by more
than 100% for applications such as access control,
video surveillance and secure payments.
3D ENROLMENT BOOTH
OPERATE YOUR USUAL
SECURITY SYSTEM
5
1
2
3
4
1
2
3
4
5
Passport or identity card
is scanned.
3D facial image is captured.
The user's identity is confirmed
by matching the 3D image to the
passport or identity card.
A QR–coded receipt is printed
(or an ID badge).
The procedure is recorded by a
security camera integrated in the
booth. The video is transfered to
a secure cloud server.
IMPLEMENT FACIAL
RECOGNITION FROM
ANY ANGLE
Security camera picture
Matching 3D image,
with the same angle as the
security camera
Benefits of this technology
Facial recognition can be over 100% more accurate than
a 2D image, depending on the the angle
Unrivaled level of security
Complementary with other types of biometric security
AWARD-WINNING NEW
PRODUCT DEVELOPMENT
We showcased selected new products at TRUSTECH, a large
event dedicated to Trust Based Technology in Cannes, France.
• Our banking booth technology won the 2017 Sesames
Award for Best eTransactions Solution.
• Our 3D Enrolment Kiosk product was a finalist.
The Awards are given in recognition of the best innovations in
payments, identification, digital security and wireless technology.
12
PHO T O- ME INT ERNATIONAL PLC
CASE STUDY: NEW PRODUCT DEVELOPMENT WITH THE OPPORTUNITY TO EXPAND PHOTOBOOTH SERVICES
Banking Booth: Front-end retail banking services
O VERVIEW
• Front-end retail banking services
via our established photobooth
network, supporting fintech
companies competing with
traditional high street banks.
• Leverage our presence in high
footfall locations and our ability to
deploy technology rapidly at low
incremental cost to the business.
• Ongoing discussion regarding
deployment of this product.
Secure data transfer for
account management
Identity document
scanner
Account creation
Mobile phone
registration
Payment card
delivery and activation
Deposits
New IBAN
printing
Transaction
history printing
Proof
of identity
Benefits of this technology
For consumers
100% instant, self-service banking services through
secure data transfer for account management, such as
instant card delivery and activation services, deposits
and printing of transaction histories. Video link customer
support available if needed.
For banks
Helps to address the need from financial institutions
to find additional, cost effective platforms to support their
traditional network, especially in the context of
the rationalisation of the banking industry and cloud-based
systems and smartphones.
13
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 CHAI RMAN'S S TATEME NT
The Group remains highly cash
generative, with £61.0 million
of its cash generated from
operations in the period. This
supports the Group’s ongoing
investment in innovation and its
future growth.
JOHN LEWIS
Non-executive Chairman
Reported revenue
Reported EBITDA
£229.8m
+7.1%
£71.0m
+2.8%
Net cash position
Reported profit before tax
£26.7m
-31.9%
£50.2m
+4.4%
14
PHO T O- ME INT ERNATIONAL PLC
In the 2018 financial year, the Group delivered
further financial and operational progress.
Our Laundry business has once again been
the growth driver of the Group, with revenues
increasing 69% over the 12 month period, and
we have continued to deliver growth in our
Identification business across all of Photo-Me’s
countries of operation apart from Japan.
R ES ULTS
Reported revenue increased by 7.1% to £229.8 million (5.9% at
constant currency). This growth was driven by further expansion of
our Laundry operations, continued deployment of secure photo ID
services and progress in the unattended digital photo printing kiosk
business.
Reported EBITDA increased by 2.8% to £71.0 million (2017:
£69.0 million).
Reported profit before tax rose by 4.4% to £50.2 million, including
a one-off investment gain of £3.7 million relating to the Group’s
shareholding in Max Sight Group Holdings Limited. In addition,
these results recognise a £2.3 million profit on the sale of the head
office building in Bookham and a one-off £2.6 million Photo-Me
Retail restructuring cost. At constant currency profit before tax
increased by 2.5% to £50.2 million (2017: £49.0 million).
Underlying profit before tax, which is 2018 profit before tax
adjusted to exclude the gain on the Group’s shareholding in Max
Sight Holdings Limited, the profit on disposal of the former head
office building, and restructuring costs relating Photo-Me Retail,
was stable at £46.8 million (2017: £46.6 million, excluding the
translation reserve taken to profit on disposal of a subsidiary).
At constant currency, the underlying profit before tax decreased
by 1.6%. A reconciliation of underlying profit before tax to reported
profit before tax is provided in note 4 to the financial statements.
During the period, the Group achieved a significant increase in
profit after tax, up 14.7%, supported by a reduction of Photo-Me's
tax rate.
The Group remains highly cash generative, with £61.0 million of
its cash generated from operations in the period. This supports the
Group’s ongoing investment in innovation and its future growth.
Higher capital expenditure year-on-year supported investment in
key laundry acquisitions as part of the Group’s strategy to deliver
substantial growth in the medium and long-term, as well as the
restructuring of Photo-Me Retail. This resulted in a Group net cash
position as at 30 April 2018 of £26.7 million, compared with net
cash of £39.2 million as at 30 April 2017. This net cash position
is after the 20% uplift in dividend payments, of £26.5 million,
reflecting the Group’s progressive dividend policy (2017: £32.6
million), and investments of £43.6 million (2017: £43.5 million)
as part of the Group’s ongoing investment in the expansion of its
existing services and new product innovation in the 2018
financial year.
ST R ATEGY
Photo-Me operates, sells, and services a wide range of instant-
service equipment. Our operations are focused on three principal
business areas: Identification, Laundry, and Digital printing kiosks
which we currently operate in 18 countries.
The Group’s growth strategy is centred on diversifying operations
in these three principal business areas by developing new
technologies with multiple applications, which can be speedily
deployed across new and existing territories and provide a rapid
return on investment.
The stable cash flow from our established photobooth business
supports our investment plans, including in-house technological
innovation. Furthermore, the scale of our operations and low fixed
cost base enables us to deploy new products and services at a
relatively low cost to the business.
During the year, we continued to make excellent progress in
the expansion of our Laundry business and the deployment of
our photobooth identification solutions. In addition, we invested
in technological innovation and the commercialisation of new
products. Details of our strategic progress are set out in the
Business Review.
RE S TRUCTURING OF JAPANESE S UB SID IARY
The Japanese photo-identification market continues to be highly
competitive, with the highest density of photobooth units per person
of any country worldwide. The number of photobooths increased
significantly following the launch of the Japanese government’s My
Number ID card programme. However, this card programme is
not compulsory and has not gained the momentum photobooth
operators initially anticipated.
During the financial year ending 30 April 2019, the Group will
invest in a thorough restructuring of its Japanese subsidiary which is
expected to improve profitability in FY19 and beyond.
The planned restructuring will involve a management reorganisation,
rationalisation of administrative functions, the re-location of low
revenue machines, and removal of unprofitable units. In addition,
the Group will introduce a new photobooth to the country, the
production of which is significantly cheaper than previous units
deployed. We expect these decisive initiatives to enable our
Japanese business to return to growth in the medium term. Our
underlying profit expectations for the financial year ending 30 April
2019 take into consideration this restructuring cost.
DIVIDENDS
Photo-Me is committed to creating value for its shareholders. The
business is both highly cash-generative and lowly leveraged,
enabling the Board to constantly invest in the ongoing and future
growth of the business, whilst also delivering very attractive returns
to our shareholders.
In 2016, the Board pledged to increase the ordinary dividend
by 20% for the financial years ending 30 April 2017 and
30 April 2018. In line with this pledge, the Board is proposing
a final dividend payment of 4.73 pence per share (2017: 3.94
pence per share). When combined with the interim dividend of
3.71 pence per ordinary share, this brings the total dividend for
the year ended 30 April 2018 to 8.44 pence per ordinary share,
representing a 20.1% year-on-year increase (2017: 7.03 pence
per ordinary share).
Subject to approval at the Annual General Meeting, the final
dividend will be paid on 9 November 2018 to shareholders listed
on the register on 19 October 2018. The ex-dividend date will be
18 October 2018.
For the current financial year ending 30 April 2019, the Board
intends to maintain a total dividend of 8.44 pence per ordinary
share.
TH E BO AR D
On 2 May 2018, after the year end, Eric Mergui was appointed
an Executive Director of the Group. He will continue in his role as
Chief Operating Officer. Eric Mergui joined the Group in 1995
and was appointed Chief Operating Officer in 2015. Before this,
he headed up Photo-Me’s European operations and oversaw the
development of Photo-Me’s business in China.
The Board looks forward to working with Eric and benefiting from
his breadth of industry knowledge and expertise.
C O LLE AG UE S
Our management team and employees around the world have
worked extremely hard in the financial year. On behalf of the
Board, I would like to thank them for their continued dedication
and contribution.
CURREN T TRAD I NG AND OUTL OOK
The Laundry business grew significantly in the 2018 financial year
(revenue up 69% year on year) underpinning our confidence that
our Laundry operations will contribute an increasingly significant
share of Group profits as we expand within existing markets, and
penetrate new ones. Alongside this, we expect our Identification
business to maintain its strong performance and our main focus will
be on increasing our government partnerships for our secure ID
upload technology. We expect our photobooth estate to continue
to deliver steady cash flows to support our ongoing investment in
innovation and the international expansion of our vending estate.
In the UK, whilst there is a risk that departure from the European
Union may affect photo ID market growth, in the short to medium
term the Group may benefit from an influx of blue passport
renewals requiring photo ID. Furthermore, the Group would benefit
from foreign exchange translation if sterling were devalued against
the Euro.
As previously announced, taking into account the restructuring of
our Japanese subsidiary, the Board now believes that profit before
tax for the year ending 30 April 2019 will be at least £44 million,
which includes the reorganisation cost in Japan.
The Board remain confident about the Group’s prospects.
John Lewis
Non-executive Chairman
10 July 2018
15
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018
The 2018 financial year was focused on
the execution of our growth strategy. We are
pleased to report that good operational progress
was achieved with Group revenue increasing by
7.1% and EBITDA by 2.8%.
The expansion of our Laundry operations, both organically and
by acquisition, remained the primary growth driver for the Group.
Our photo-identification business once again delivered growth in
line with our expectations, except in Japan.
E XEC UTI ON OF O UR S TRATE G Y
Our strategy is unchanged. We aim to grow each of our three
principal areas of business through ongoing investment in new
technologies and complementary products and services.
We have a solid business model both in terms of Identification,
with the adoption of new biometric and government standards,
and in the laundry services market. In Laundry, our aim is to
further expand our operations to deliver a significant revenue
contribution in the future.
Our geographical presence and network of field engineers
enables us to leverage the scale of our operations and quickly
deploy these products and services at low incremental cost to the
business, providing a rapid return on investment.
Essentially, we are focused 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.
Site owners and large retailer chains, who are competing
with online retailers, have realised the importance of providing
additional services, such as photobooths, laundry services and
kiosks, which help to attract customers to their sites and shops.
CHI EF EXECUTIVE ’S RE PORT
Business review
Our strategy is to grow each of
our principal areas of business
through ongoing investment
in new technologies and
complementary products
and services.
SERGE CRASNIANSKI
Chief Executive Officer
& Deputy Chairman
KEY READS IN THE
BUSINESS REVIEW SECTION:
EXECUTION OF
OUR STRATEGY
P16
OVERVIEW OF PRINCIPAL
BUSINESS AREAS
P17
REVIEW OF PERFORMANCE
BY GEOGRAPHY
P20
INVESTMENT IN
INNOVATION
P26
FINANCIAL REVIEW
P27
16
PHO T O- ME INT ERNATIONAL PLC
OVERVI EW BY PRINCIPAL BUSINESS A REA
I DENTIFICATION
(P HOTO BOOTHS AND INT EGRATED B IOM ET R I C
ID E NTIFI CATION SOLUT IONS)
L AUN D RY
(UN ATTE N DE D LA UN D RY SE RV I CE S ,
LA UN D ER E TTES, B2 B SE RV IC E S)
Number of units
in operation
Percentage of total
Group vending estate
(number of units)
30 April
2018
30 April
2017
Change
%
29,015
28,541
+1.7%
62.0%
59.0%
+5.1%
Revenue
Capex
£149.3m £152.2m
-1.9%
£13.4m
£12.0m
+11.6%
Photo-Me is the world’s largest operator of photobooths with
market-leading photographic quality and technology, operating
a well-established network of photobooths.
Our strategy is to;
(i) expand our presence in high-footfall locations,
(ii) grow revenue by offering customers a broader range of
services via our photobooths, and
(iii) penetrate new territories. In particular, we are focused on
deploying our proven identification security technology.
The increasing appetite from governments for improved and
digitalised security ID underpin our growth strategy.
Excluding Japan, revenue from the Identification business
increased by 1.2% in the 2018 financial year.
Total laundry units
deployed (owned, sold
and acquisitions)
Total revenue from
laundry operations
Revolutions (excludes
Launderettes and
B2B):
Number of Revolutions
in operation
Percentage of total
Group vending estate
(number of units)
Total revenue from
Revolutions
30 April
2018
30 April
2017
Change
%
4,449
3,251
+36.9%
£36.7m
£21.7m
+69.1%
2,313
1,750
+32.2%
5.0%
3.6%
+38.9%
£21.2m
£14.2m
+49.3%
Revolution capex
£15.2m
£10.5m
+44.8%
The Group owns and operates laundry units and has a presence
in 12 countries, with operations primarily in France, UK, Ireland,
Belgium and Portugal. The expansion of our Laundry business,
which delivers the highest margins of Photo-Me’s three principal
business areas, remains the primary growth driver for the Group.
Total Laundry revenue now accounts for 16% of total Group
revenue (2017: 10%). This reflects the significant expansion of
our Laundry operations in recent years, which is set to continue.
17
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018
CHIEF EXECUTIV E ’S RE PO RT
Business review continued
We remain on track to deploy 6,000 owned and sold laundry
units by 2020. With continued growth in laundry (organic and
by acquisition), these operations will contribute an increasingly
dominant share to Group profits.
Our Laundry business is comprised of three areas of operation:
Revolution, Launderette, and Business-to-business (“B2B”) laundry
services.
Revolution is our 24-hour, outdoor, self-service laundry unit which
is typically located in high-footfall sites such as supermarket car
parks or petrol station forecourts. The Revolution unit comprises
two larger washers and a dryer and is manufactured in 10m2
and 5m2 footprints, providing flexibility in different locations and
the demands of different geographic markets. Our Revolution
growth strategy is to expand the estate through our partnerships
with strategic site owners globally, and identify and expand into
new high-demand markets.
Year-on-year, the Group increased its Revolution estate by 32.2%
globally, with 2,313 Revolution machines operated as at 30
April 2018 (2017: 1,750). Revolutions now represent 5.0% of
our total vending estate and the revenue contribution increased
by 69%.
The continued, and further accelerated growth of this estate will
be supported by increased production capacity. In the first half of
the year the Group’s manufacturing partner transferred production
from Hungary to Poland, enabling it to increase production
volumes. The early benefits of these additional volumes started to
come through towards the end of the financial year ended 30
April 2018.
Launderette shops are typically situated in or near to town centres
where there is limited competition from other laundry services.
Our aim is to expand our launderette presence through an
owned-and-operated model.
Our Launderette strategy is to identify and fit out suitable new and
existing retail sites and to acquire underperforming launderette
businesses located at attractive locations. We then refit the shops
in a stylish, contemporary format that is more attractive to the end
consumer to deliver good profitability. In addition, we take an
opportunistic approach to evaluating potential bolt-on acquisitions
that will further accelerate our growth in attractive markets.
Our Business-to-business (B2B) laundry services provide the
distribution and leasing of laundry and catering equipment. Our
B2B customers include institutions such as hospitals, care homes
and universities. Our B2B laundry services strategy is to extend
our presence both in the UK and into new territories through
acquisitive growth.
We have made good progress in the year, with the acquisition of
two B2B laundry service businesses in the UK to complement our
existing offer provided through Fowler UK (acquired in 2016).
Inox Equip Ltd. and Tersus Ltd, two companies that design,
procure and lease laundry and catering equipment to businesses
and institutions, were acquired by the Group in July 2017.
The profit of the Group’s B2B laundry services amounted to
£1.3 million for the year ended 30 April 2018. We continue
to seek out further B2B acquisition opportunities, with a focus on
Continental Europe.
In May 2018, the Group acquired La Wash Group, a leader
in the Spanish B2B laundry services market, for a consideration
of €4.75 million. The business, which is a franchise model, has
annual revenue of €3.7 million for the year ended 31 December
2017, along with a profit before tax of €796,000 for the
same period. In the current financial year, we will benefit from
both a financial contribution from La Wash and the company’s
launderette expertise.
KIO SKS (HI GH -Q UA LITY D IGITA L
PRI NTING S ERVICES )
Number of units in
operation
Percentage of total
Group vending estate
(number of units)
30 April
2018
30 April
2017
Change
%
5,416
5,872
(7.8)%
11.6%
12.2%
(4.9)%
Revenue
Capex
£16.5m
£13.3m
24.1%
£3.4m
£6.9m
(50.7)%
Our digital printing kiosks offer a wide range of print formats and
personalised products which are competitively priced. Our latest
generation kiosks – Speedlab cube and Speedlab bio – are fully
integrated with all major social media networks and offer rapid
and high-quality printing for customers.
18
PHO T O- ME INT ERNATIONAL PLC
Our key geographic markets are France, UK and Switzerland.
Our strategy is to capitalise on our market-leading position by
increasing our presence in high-footfall locations, extending the
range of services in our kiosks, and entering new territories.
Overall, kiosks achieved revenue growth of 24.1% in the 2018
financial year, mainly due to the reorganisation of Photo-Me
Retail, where we have replaced manned sites with unattended
vending machines (predominantly Speedlab cube). This
restructuring programme also resulted in a small decrease of kiosk
machines, delivering positive results.
OT HER VENDI NG EQUIPMENT
This business area comprises vending equipment such as
children’s rides, photocopiers and amusement machines. These
are typically an extension of our product range at sites where we
have an existing relationship with the site owner. Whilst this is
not one of our three principal business areas, these machines are
profitable and benefit from synergies relating to other areas of the
business, such as our network of field engineers.
Further details on financial and strategic progress in each of our
three principal areas of operation are provided in the Review of
Performance by Geography.
We are in discussions with financial institutions to provide front-
end retail banking services to customers via our photobooth
network. The Board believes this technology supports the
changing dynamics for the retail banking industry and the
need for financial institutions to utilise lower cost platforms to
maintain their traditional network, especially in the context of
the rationalisation of the banking industry.
In addition, we continue to identify opportunities to extend our
biometric and 3D capture technology.
19
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018
CHIEF EXECUTIV E ’S RE PO RT
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 is consistent
with the information prepared to support the
Board decision process. Although the Company
organisation is not based on product lines, some
commentary below relates to the performance of
specific products in the relevant territories.
KE Y FIN AN C IALS
The Group reports its financial performance based on three
geographic areas of operation: (i) Continental Europe; (ii) UK
& Ireland; and (iii) Asia.
In Continental Europe, revenue grew by 8.5%, and in
the UK & Ireland revenue increased by 18.8%. Asia was
down 8.8%, reflecting challenging market conditions for our
Identification business in Japan.
The operating profit decrease in Continental Europe was due
to non-recurring profits in the 2017 financial year. At constant
currency, operating profit reduced by 9.6%.
Reported segment revenue
Year to 30 April
Segment operating profit
Year to 30 April
2018
£m
2017
£m
Change2
%
20171
£m
Continental Europe
121.1
111.7
8.5%
116.3
UK & Republic of Ireland
Asia
63.6
45.0
53.6
18.8%
49.4
(8.8)%
53.8
46.8
229.8
214.7
7.1%
216.9
Corporate costs
2018
£m
31.9
10.4
5.4
47.7
(1.6)
46.1
2017
£m
33.9
7.3
8.4
Change2
%
(5.8)%
42.5%
(35.7)%
49.6
(3.8)%
(2.8)
46.8
20171
£m
35.3
7.3
8.0
50.6
(2.9)
47.7
1 2017 trading results of overseas subsidiaries converted at 2018 exchange rates.
2 Refers to change compared to reported results.
£229.8m
+7.1%
Asia
UK & Republic
of Ireland
£63.6m
+18.8%
2017: £53.6m
20171: £53.8m
£45.0m
-8.8%
2017: £49.4m
20171: £46.8m
Segment revenue
Year to 30 April 2018
Continental
Europe
£121.1m
+8.5%
2017: £111.7m
20171: £116.3m
150
120
90
60
30
Segment operating profit
Year to 30 April 2018
£47.7m
-3.8%
Continental
Europe
£31.9m
-5.8%
2017: £33.9m
20171: £35.3m
UK & Republic
of Ireland
£10.4m
+42.5%
2017: £7.3m
20171: £7.3m
Asia
£5.4m
-35.7%
2017: £8.4m
20171: £8.0m
40
35
30
25
20
15
10
5
2017 20171 20182018
2017 20171 20182018
2017 20171 20182018
2017
20171 2018
2017
20171 2018
2017 20171 2018
1 2017 trading results of overseas subsidiaries converted at 2018 exchange rates. These charts compare 2018 reported results with 2017
reported results and 2017 results at constant.
20
PHO T O- ME INT ERNATIONAL PLC
VE NDING UNITS IN OPERAT IONS
Once again, the investment focus in the financial year was
the expansion of our Laundry business as we continue to
grow and diversify our unattended vending estate.
Steady growth in Continental Europe was driven by the
continued rollout of Revolution units. A reduction in units in the
UK & Ireland reflects the restructuring of Photo-Me Retail, now
completed, and the removal of old unprofitable machines;
but this decline was mostly offset by growth in our laundry
business in this territory. In Asia, our photobooth estate
continued to grow, up 3.9%, while the decline in overall
vending units reflected the removal of old sticker machines.
Continental Europe1
UK & Republic of Ireland2
Asia3
2018
2017
Change
year-on-year
No of units
% of total
No of units
% of total
24,550
12,055
10,105
46,710
52.6
25.8
21.6
100
23,751
13,287
10,908
47,946
49.5
27.7
22.8
100
Change2
%
3.4%
(9.3)%
(7.4)%
(2.6)%
1 Mainly revolutions installation (659 units) and photobooths.
2 Photo-Me Retail restructuring (removal of 491 units) and removal of unprofitable children’s rides and photobooths in UK.
3 Removal of 1,154 sticker machines in Japan.
Number of units
Year to 30 April 2018
46,710
-2.3%
Total laundry units
deployed
(owned, sold, acquired)
Year to 30 April 2018
Continental
Europe
24,550
+3.8%
2017: 23,751
UK & Republic
of Ireland
12,055
-9.1%
2017: 13,287
Asia
Number of Revolution
units in operation
10,105
-7.3%
2017: 10,908
4,449
+37%
2,313
+32%
Percentage of total
Year to 30 April 2018
Continental
Europe
UK & Republic
of Ireland
Asia
52.6%
25.8%
21.6%
21
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018
CHIEF EXECUTIV E ’S RE PO RT
Review of performance by geography continued
CON TIN ENTAL EUROPE
FIN A NC IAL P ER FOR MANC E
Continental Europe has continued to deliver
good revenue growth during the year, up 8.5%
to £121.1 million, driven by the roll out of our
laundry operations, particularly in France,
Portugal and Spain.
Reported Revenue
Year to 30 April 2018
£121.1m
+8.5%
Operating profit
Year to 30 April 2018
£31.9m
-5.8%
Operating profit reduced by 5.8% to £31.9 million, due mainly
to an increase in costs in this financial year. Our research and
development department is focused at the moment on important
long term products (3D identification as well as self-service
banking) which are not mature and therefore are not a growth
driver yet.
At constant currency, revenue grew by 4.2%, primarily driven
by a 41.4% increase in takings from our operated laundry
machines, as well as the benefit of the digital security features
following upgrades to our photobooth estate in France, and the
continued deployment of the latest generation of kiosks.
France remained the largest contributor to the division, with
revenue up 4.9% in constant currency.
This division, which operates in Austria, Belgium, France,
Germany, the Netherlands, Poland, Portugal, Spain and
Switzerland, remains the largest contributor to Group
performance, and continued to represent 52.7% of total Group
revenue (2017: 52.0%), and 67.0% of operating profit before
corporate costs (2017: 68.0%).
At 30 April 2018, 24,550 units were sited in Continental
Europe (2017: 23,751), representing 52.6% of the Group
total units in operation (2017: 49.5%) reflecting our laundry
expansion strategy.
STRATEGIC PROGRESS
IDENTIFICATION
In France, 5,700 photobooths have now been upgraded with
our secure and direct data transfer technologies for ANTS
driving licence applications. These machines are performing
very well, reaffirming the Group’s leading position in the photo
ID market.
The gradual rollout of our secure and direct data transfer
technologies in photobooths in Germany continued.
We continue to explore opportunities to expand the range of
services available via our photobooths. We have entered into
preliminary discussions with the Dutch government regarding
deployment of this direct and secure transmission photo ID
technology in the Netherlands.
In France, this technology has been successfully deployed
for driving licence renewals for more than one year and we
are now in discussions with the government to extend the
technology to renewals and new passports and identification
cards.
LAUNDRY
Our Laundry operations have expanded in France, Belgium,
Portugal and Spain. This resulted in a 40.4% increase in
the number of operated laundry units at the 30 April 2018,
compared with 30 April 2017.
Much of our Laundry expansion has been focused in France
and Portugal, where results have been encouraging:
In France, new Revolution machines installations increased
by 30.8% (owned Revolutions only) and revenue increase by
41.8%
In Portugal, there was a 39% increase in new Revolution
machines installed (owned Revolutions only) and a
corresponding 55.6% increase in revenue.
In Continental Europe we operated 63 unattended launderette
shops as at 30 April 2018, compared with 44 at the end of
April 2017. These sites have traded well in the period and we
continue to see further opportunities to grow our launderette
presence.
KIOSKS
We have set up Speedlab cube and Speedlab bio units at high
footfall premises.
22
PHO T O- ME INT ERNATIONAL PLC
UK & REPUBLIC OF IRELAND
FINAN CIAL P ERF ORMA NC E
This division contributed 27.7% of Group
revenue in the 2018 financial year (2017:
25.0%), and 21.8% of trading operating
profit (2017: 14.7%).
Reported Revenue
Year to 30 April 2018
£63.6m
+18.8%
Operating profit
Year to 30 April 2018
£10.4m
+42.5%
Revenue increased by 18.8% to £63.6 million (acquisitions
contributed £5.6 million). At constant rate of exchange revenue
was up 18.2%.
Operating profit in this segment increased by 42.5% to £10.4
million there was a one-off charge of £2.6 million, relating to
the restructuring of the Photo-Me Retail business.
Fowler UK, the Group’s commercial laundry and catering
equipment business, along with Inox and Tersus made a full-
year consolidated contribution of £1.3 million to the Group’s
profit before tax.
This performance reflects the continued expansion of our
laundry operations in Ireland and the UK and our business-to-
business offering, as well as the successful rollout of the secure
digital upload technology for the Irish Online Passport.
Much of our laundry expansion has been focused in
Ireland, and the results have been very encouraging with
a 52% increase in new Revolution machines installed and
a corresponding 66.7% increase in revenue. This division
contributed 27.7% of Group revenue in the 2018 financial
year (2017: 25.0%), and 21.8% of trading operating profit
(2017: 14.7%).
At 30 April 2018, 25.8% of the Group’s total units in operation
were sited in the UK & Republic of Ireland (2017: 27.7%). This
equates to a total of 12,055 units (2017: 13,287), of which
6,313 were photobooths (2017: 6,600), 446 were operated
Revolution units, an increase of 62.8% year-on-year (2017:
274), and 639 digital printing kiosks, a decrease due to the
Photo-Me Retail restructure (2017: 992).
In the UK, we successfully concluded discussions with Her
Majesty’s Passport Office regarding the deployment of this
photo ID upload technology for its new online passport renewal
service. In December 2017, we began the rollout of this
technology to our UK photobooths. At the year end, this service
had been deployed to 2,200 photobooths and we plan to
deploy 4,000 photobooths in total by the end of December
2018.
LAUNDRY
We continue to make excellent progress in expanding our
laundry business, with 183 Revolution units deployed in the
period (93 in Ireland, 79 in the UK), up 67% year on year.
We are looking for further attractive sites, including petrol
forecourts, supermarket car parks, and other high-footfall
locations, and are in discussion with the major retailers.
As part of our strategy to expand our presence in the B2B
laundry market, in July 2017 we acquired two UK companies
(Inox Equip Limited and Tersus Limited), which provide bespoke
professional design, procurement and installation of laundry
and catering facilities for blue chip companies and institutions
(such as care homes and hospitals). These laundry units are
either sold or operated by the Photo-Me Group. Our intention is
to merge the three UK B2B acquisitions to become the second
largest operator in the UK in this business sector.
KIOSKS
In the fourth quarter of the financial year, we reviewed the
progress of our Photo-Me Retail operations (previously the
UK Photo Division of Asda Stores which was acquired in
November 2016), in order to reshape the digital printing
operations and boost profitability.
ST R ATEGIC PROGRESS
IDENTIFICATION
We continued the deployment of our encrypted photo ID
upload technology for the Irish Online Passport Application
Service, with 300 units now upgraded, in line with our plan.
As previously announced, the decision was taken to refocus
Photo-Me Retail as an online and unattended digital printing
kiosks service. As a result, all the manned retail outlets have
been closed. The Board remains confident that the action taken
will improve the future profitability of these operations. Photo-Me
Retail is now profitable.
23
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 CHIEF EXECUTIV E ’S RE PO RT
Review of performance by geography continued
AS IA
FIN A NC IAL P ER FOR MANC E
The Group operates in China, Japan, Singapore,
South Korea and Vietnam, with Japan remaining
the largest business in the region.
Reported Revenue
Year to 30 April 2018
£45m
-8.8%
Operating profit
Year to 30 April 2018
£5.4m
-35.7%
Asia contributed to 20% of Group revenue (2017: 23%) and to
11% of operating profit (2017: 17%).
As at the end of April 2018, 21.6% of the Group’s estate was
sited in Asia (2017: 23%). In total there were 10,105 units
(2017: 10,908), of which were 9,628 photobooths. (2017:
9,279). The decrease in units is mainly due to the removal of
1,154 unprofitable and fully depreciated sticker machines
in Japan.
STR ATE GIC PR OG RE SS
IDENTIFICATION
Japan has the highest density of photobooth units per person
of any country worldwide resulting from photobooth operators,
including Photo-Me, expanding their presence following the
launch of the Japanese government’s My Number ID card
programme. Owing to the programme not having been
made compulsory, the ID card programme has not gained the
momentum photobooth operators initially anticipated.
Revenue in this segment declined by 8.8% to £45.0 million,
reflecting an oversupply of photobooths in the Japanese market.
At constant rates of exchange, revenue declined by 3.7%.
The Board plans to restructure its operations in Japan and re-
align activities to current market conditions. Further details are
set out in the Chairman’s statement on pages 14 and 15·
LAUNDRY
The Japanese laundry market remains attractive due to lifestyle
and other market dynamics, and the size of residential housing,
where a lack of space makes it impractical to have a washing
machine at home. However, our priority is to restructure the
Group’s Japanese subsidiary before embarking on further
expansion.
24
PHO T O- ME INT ERNATIONAL PLC
CHI EF EXECU TI VE ’ S RE PO RT
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
Group total revenue at
actual rate of exchange
Performance
30 April 2018
30 April 2017
£229.8m
£214.7m
Group profit before tax
£50.2m
£48.0m
Underlying PBT
£46.8m
£46.6m
EBITDA margin
The EBITDA margin is a good indicator
of improved profitability
30.9%
32.2%
Gross takings
(including VAT)
Increase in number
of photobooths
Increase in number
of laundry units
(operated or sold)
Gross takings are an important indicator of the trend
in our core vending business
+3.9%
+4.8%
The increase in number of photobooths is a constant
priority and a main driver for growth
+474
+887
The increase in number of laundry units measures our
penetration in markets where there is a significant
potential for growth and strong profits
+1,198
+1,103
25
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 CHIEF EXECUTIV E ’S RE PO RT
Business review continued
INVESTMENT I N INNOVATION
Investment in innovation remains at the core of the business.
This underpins our growth strategy to deploy new products
and technologies with multiple applications across our vending
estate.
O UR TE AM
At Photo-Me our team is structured to reflect our entrepreneurial
and creative heritage and is aligned to our business strategy
and objectives. We are committed to nurturing talent within our
teams and developing the next generation of leaders.
We have in-house research and development capabilities in
France, China, Vietnam and Japan, and we employ a team
of 60 dedicated and highly experienced engineers. Our
largest facility is in France, where our team plays a key role
in identifying new market opportunities and carries out small
scale product manufacture and testing. Once new products
are fully launched, larger scale production is outsourced to our
manufacturing partners.
Our team specialise in new product and software development
focused on three key areas: (i) the refurbishment and upgrade
of our estate; (ii) further development and roll out of our
proprietary security biometric identification solutions; and (iii),
complementary products and services.
We remain focused on extending our range of services,
particularly through our photobooths, and identifying new
product segments with attractive cash-based characteristics. We
look to leverage our strong existing site-owner relationships and
our network of field engineers to rapidly rollout products at low
incremental cost. We aim to achieve first year gross revenues
equivalent to or greater than the cost of investment in any new
product offering.
In November 2017, we showcased selected new products at
TRUSTECH, a large event dedicated to Trust Based Technology
in Cannes (France), and we are pleased to report that two of
our products were recognised with accolades. The Group’s
banking booth technology won the 2017 Sesames Award
for Best eTransactions Solution, and our 3D Enrolment Kiosk
product was a finalist. The Awards are given in recognition of
the best innovations in payments, identification, digital security,
and wireless technology.
We are in discussions with financial institutions to provide front-
end retail banking services to customers via our photobooth
network. The Board believes this technology supports the
changing dynamics for the retail banking industry and the
need for financial institutions to utilise lower cost platforms to
maintain their traditional network, especially in the context of
the rationalisation of the banking industry.
In addition, we continue to identify opportunities to extend our
biometric and 3D capture technology.
In May 2018 (after the period end), Eric Mergui was
appointed to the Board of Directors and he will continue in his
role as Chief Operating Officer.
We appointed Stéphane Gibon as Group Chief Financial
Officer with effect from 1 April 2018. Stephane joined Photo-
Me in 1997 and latterly was Chief Financial Officer, Europe,
and Group IT Manager, responsible for all finance operations
across Continental Europe, the UK and Ireland, as well as the
global IT support teams. Stéphane has more than 20 years’
experience working at Photo-Me and has a deep understanding
of the business and our strategic priorities.
Gabriel Pirona stepped down from his role of Group Finance
Director to pursue a new opportunity in Continental Europe.
On behalf of the Board, I would like to sincerely thank Gabriel
for his contribution and dedication throughout his three years
at Photo-Me, during a period of significant profit growth and
diversification of the business. We wish him all the best in his
new endeavours.
I would like to take this opportunity to thank everyone who has
worked for the Group during the year and contributed to our
success.
FUTUR E P RO SP EC TS
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. We remain confident for the future.
Serge Crasnianski
Chief Executive Officer & Deputy Chairman
10 July 2018
26
PHOTO-ME INTERNATIONAL PLC FINANC IAL REVIEW
The Group performed well in the
financial year.
Reported revenue increased by 7.1% to £229.8 million, driven
by continued expansion of our Laundry operation in Europe and
a solid performance from our Identification business in the UK
& Ireland and in Continental Europe. In constant currency, the
increase is 4.1%, mainly due to the decrease of sterling against
euro this year.
Revenue
EBITDA
Operating profit
Profit before tax
Profit after tax
The movements in turnover are outlined in the following table:
Turnover April 2017
Change in core business revenue:
Continental Europe
UK & Ireland
Asia
Impact of exchange rates
Turnover April 2018
The increase in the profit before tax can be explained as follows:
Profit before tax at 30 April 2017
Effect of acquisitions
Changes in revenue
Changes in costs
Restructuring costs
Profit on sale of former head office
Increase in net finance income
Impact of exchange rates
Profit before tax at 30 April 2018
Profit before tax increased by 4.4% to £50.2 million, including
a one-off investment gain of £3.7 million relating to the Group’s
shareholding in Max Sight Group Holdings.
April 2018
£m
April 2017
£m
229.8
214.7
71.0
46.1
50.2
40.3
69.0
46.8
48.0
35.1
£m
214.7
4.9
9.9
(1.9)
2.2
229.8
£m
48.0
0.8
7.3
(9.3)
(2.6)
2.3
2.8
0.9
50.2
27
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 FINAN CI AL R EV I EW C ONTINU ED
REVIEW OF OPERATING COSTS
Operating costs were £183.9 million, an increase of 9.6%
(2017: £167.8 million), due to depreciation and other
operating costs mainly, as explained below:
Staff costs were £51.7 million. The ratio of staff costs to
revenue is 22.5% (2017: 23.3%).
Photo-Me Retail restructuring costs are separately analysed
above and are not included in operating costs below.
The increase in inventory costs was the direct result of the
increase of operating activities, which was up 3.6%, combined
with the diversification of our activities reflecting expansion of
the Laundry business.
Staff costs
Inventory costs
Other operating costs
Depreciation and amortisation
Profit / (loss) on disposal of fixed assets
Operating costs
The depreciation and amortisation charge at constant rate of
exchange increased by £2.3 million compared with the same
period last year. Capex has increased significantly over the last
five years to £43.6m from £21.3m in 2014 which explains
the rise in depreciation.
At constant rate of exchange, the other operating costs
increased because we benefited from a higher profit due to
favourable currency movements last year.
April 2018
£m
April 2017
£m
51.7
23.6
85.9
50.1
13.5
82.7
April 2017
(constant
rate)
£m
50.6
13.8
83.1
161.2
146.3
147.5
25.1
(2.4)
22.4
(0.9)
22.8
(0.9)
183.9
169.8
169.4
REGISTERED OFFICE
In July 2017, the Group completed the sale of its head office
buildings in Bookham, Surrey. The freehold was sold to Shanly
Homes Limited for a consideration of £2.5 million. The book
value of the assets sold was £0.1 million and therefore the profit
on the sale amounts to approximately £2.3 million, taking into
account disposal costs amounting to £0.1 million.
This disposal was part of the Group’s review of the property
portfolio and consolidated its head office and UK operations into
one location. This strategy has rationalised the Group’s property
footprint and has enabled it to achieve further efficiencies in its
UK operations.
The Group’s new registered office is Unit 3B Blenheim Road,
Epsom, KT19 9AP
E ARNINGS PER SHARE
Diluted earnings per share were 10.60 pence (2017: 9.27
pence), an increase of 14.2%. Basic earnings per share were
10.64 pence (2017: 9.30 pence).
TAXATIO N
The Group tax charge of £9.9 million corresponds to an effective
tax rate of 19.7% (2017: 26.9%).
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 appropriate
amount of tax at the right time in accordance with local
regulations, and ensures compliance with the Group’s tax policy
and guidelines.
The Group’s effective tax rate was reduced mainly due to a
statutory tax rate reduction in the UK and the effect of “Loi
Macron” tax initiatives in France.
D IV ID EN D S
During the year, the Group paid dividends totalling £26.5 million
in respect of the interim and final dividends for the year ended
30 April 2017.
The interim dividend for the year ended 30 April 2018 was
3.71 pence per share (H1 2017: 3.09 pence per share),
announced in December 2017 was paid on 11 May 2018
and amounted to £11.6 million.
28
PHO T O- ME INT ERNATIONAL PLC
STATEMENT O F FINANCIAL P OSITI ON
The Group balance sheet can be summarised as follows:
Non-current assets (excl. deposits)
Current assets (excl. cash and deposits)
Non-current liabilities (excl. borrowings)
Current liabilities (excl. borrowings)
Net cash
Total equity
Minority interests
Total shareholders’ funds
April 2018
£m
April 2017
£m
130.6
108.7
48.0
(8.4)
(52.0)
26.7
38.3
(10.9)
(46.0)
39.2
144.9
129.3
(1.6)
(1.3)
143.3
128.0
Following the payment of dividends of £26.5 million, shareholders’ funds at 30 April 2018 amounted to £143.3 million,
an increase of £15.3 compared with the previous financial year end.
Non-current assets detailed are outlined in the following table:
Goodwill
R&D costs capitalised
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)
April 2018
£m
April 2017
£m
13.4
11.8
6.5
7.5
5.7
7.8
80.8
66.6
9.5
2.3
0.7
6.8
1.6
0.7
120.7
101.0
5.8
1.9
2.1
2.1
3.6
2.0
130.5
108.7
Goodwill increased due to the Group’s acquisition of Inox and Tersus in July 2017. The rise in operating equipment reflects the
increase in laundry capex in the period.
With a net book value of £80.8 million, operating equipment constitutes the main component of the Group’s total non-current assets.
At 30 April 2018, the Group owned 46,710 machines operated worldwide. The change in net book value reflects the Group’s
capital expenditure of £14.2 million, net of depreciation and exchange rate differences amounting to £1.3 million.
29
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018
FINAN CI AL R EV I EW C ONTINU ED
C ASH FLOW AND NET CASH POSIT ION
Opening net cash
Cash generated from operations
Taxation
Net cash generated from operations
Net cash used in investing activities
Dividends paid net of shares issued
Net cash utilised
Impact of exchange rates
Net cash outflow
Closing net cash
April 2018
£m
April 2017
£m
39.2
61.0
(8.3)
52.7
(39.9)
(25.1)
(12.3)
(0.2)
62.4
61.3
(12.0)
49.3
(42.0)
(31.8)
(24.5)
1.3
(12.5)
(23.2)
26.7
39.2
The stability of the EBITDA, and the advantageous impact of decreased tax payments resulted in an increase in net cash generated from
operations to £52.7 million (2017: £49.3 million).
Cash generated remained substantial and enabled the Group to finance its capital expenditure programme and pay out to shareholder
dividends of £26.5 million.
Outstanding debt of £33.7 million (2017: £10.7 million) was deducted from the closing net cash balance at 30 April 2018.
Total cash and cash equivalents at 30 April 2018 were £58.7 million (2017: £47.5 million).
At the end of April 2018, the Group’s net cash was £26.7 million (2017: £39.2 million) could be split as follows:
Balance at 30 April 2017
Cash flow
Non-cash movements
Balance at 30 April 2018
Cash and
deposits
£m
49.8
11.0
0.4
60.4
Borrowings
£m
Net cash
£m
(10.6)
39.2
(11.6)
(0.9)
26.7
(0.5)
(33.7)
A UDITOR
KPMG LLP, together with its subsidiary KPMG Audit plc, has been the external auditor of the Group since the year ended 30 April
2009. The Audit Committee has been satisfied with the effectiveness, objectivity and independence of the external auditor. KPMG
and the Company have agreed that, for commercial reasons, KPMG will not be re-appointed as the Group's auditor when its current
appointment comes to an end at the AGM on 24 October 2018. The Audit Committee has commenced a tender process to select a
new external auditor which will conclude in time for the new firm's appointment to be put forward at the AGM.
30
PHOTO-ME INTERNATIONAL PLC
PRI NCI PAL RISKS
Similar to any business, the Group faces risks and uncertainties that could impact the achievement of the Group's strategy. These
risks are accepted as inherent to the Group’s business. The Board recognises that the nature and scope of these risks can change
and so regularly reviews the risks faced by the Group as well as the systems and processes to mitigate them.
The table below sets out what the Board believes to be the principal risks and uncertainties, their impact, and actions taken to
mitigate them.
EC ONOM IC
Global economic conditions
Description and impact
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.
Mitigation
The Group focuses on maintaining the characteristics and affordability of its
needs-driven products.
Volatility of foreign exchange rates
Description and impact
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.
REGU L ATIO NS
Centralisation of production of ID photos
Mitigation
The Group hedges its exposure to currency fluctuations on transactions, as
relevant. However, by its nature, in the Board's opinion, it is very difficult to
hedge against currency fluctuations arising from translation in consolidation
in a cost-effective manner.
Description and impact
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 affected.
Mitigation
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, Switzerland and the UK, discussions in
Belgium and Holland).
Furthermore, the Group also ensures that its ID products remain
affordable and of high quality.
Brexit
Description and impact
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 to numerous arrangements between the UK and other
members of the EU, affecting trade and customs conditions, taxation,
movements of resources, etc.
Mitigation
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 break-up to be negotiated between the UK and the
European Union.
The Board foresees that in the short term the negative impact of the
uncertainty overshadowing the general UK economy could also spill
over into 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.
31
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 PRINCIPAL R ISK S CO NTI NU E D
R E GU LAT IONS c o n t i n u e d
Business rates
Description and impact
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. The Company has expensed the cost of the tax charge as
reasonably estimated.
STRATE GIC
Identification of new business opportunities
Description and impact
Failure to identify new business areas may impact the ability of the
Group to grow in the long term.
Mitigation
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 should not be subject to business rates, and therefore
it has systematically appealed 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
should be capable of successful mitigation. Discussions are ongoing
with the Valuation Office Agency on this matter.
Mitigation
Management teams constantly review demand in existing markets and
potential new opportunities. The Group continues to invest in research in
new products and technologies
Inability to deliver anticipated benefits from the launch of new products
Description and impact
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.
Mitigation
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 continually monitored.
MARKE T
Commercial relationships
Description and impact
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.
OPE R AT IONAL
Reliance on foreign manufacturers
Description and impact
The Group sources most of its products from outside the UK.
Consequently, the Group is subject to risks associated with
international trade.
Mitigation
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.
Mitigation
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
Description and impact
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.
Mitigation
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
Description and impact
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.
Mitigation
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.
32
PHO T O- ME INT ERNATIONAL PLC
OPE R ATI ONA L c o n t i n u e d
Product and service quality
Description and impact
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.
Mitigation
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.
TEC H NOLOG I CAL
Failure to keep up with advances in technology
Description and impact
The Group operates in fields where upgrades to new technologies are
mission-critical.
Mitigation
The Group mitigates this risk by continually focusing on R&D.
Cyber risk: third party attack on our secure ID data transfer feeds
Description and impact
The Group operates an increasing number of photobooths capturing ID
data and transferring these data directly to governmental databases.
Mitigation
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
10 July 2018
33
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018
COR PORATE RESP ONSIBILITY STATE ME NT
OUR APPROACH
TO CORPO RATE 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 Operating 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.
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.
H IGH LI GH TS
P RO D UC TS
ISO
CERTIFIED
ISO International Standards
ensure that products and
services are safe, reliable
and of good quality.
ECO
-FRIENDLY
The Revolution
USER
-FRIENDLY
Laundrettes
EQUAL
OPPORTUNITIES
AND DIVERSITY
• Fair and equitable policies
and procedures for all
• Support for employees
who develop a disability
– Retraining
– Redeployment
• Gender diversity
E MPL O YE ES
EMPLOYEE
ENGAGEMENT
• Business networking
• Notification of vacancies and
policy updates
• Monthly operational meeting
for business leaders
34
PHO T O- ME INT ERNATIONAL PLC
P RO DUCTS
E MPL OYEES
HEALT H & SAFETY
DEDICATED
EXPERTS
• Network of trained
service operators
• Periodic safety inspections
and tests
• Call centres provide
customer assurance and
within 24-hour service
• New product assessments
CE MARKING
Confirms that our products comply
with all health, product safety and
environmental protection.
Photobooths:
CE Marking (RoHS2)
Children’s rides:
BACTA CE Marking (RoHS2)
ACCREDITED
CONTRACTOR
• Safe Contractor accreditation
managed by Alcumus
and Altius
• Assured award
ENV IRONMENT
GREEN
AWARENESS
We actively work to decrease
energy use and demand for
natural resources.
RECYCLING
POLICY
We recover, refurbish and re-sell
our electrical equipment.
MONITOR
POWER
CONSUMPTION
• Automatic shut down of units
when not in use
• Remote telemetry reduces the
number of service visits and
consumables
• Use of low-energy lamps
• Use of energy-efficient flat screen
technology
BUYER
-FRIENDLY
Equipment
EQUAL
OPPORTUNITIES
AND DIVERSITY
• Fair and equitable policies
and procedures for all
• Support for employees
who develop a disability
– Retraining
– Redeployment
• Gender diversity
35
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 CORPO RATE RE SPO NSI BI L IT Y S TAT EMEN T C ON T IN UED
PRO DUCTS
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.
The Revolution units are Eco-friendly:
• The built-in washing liquid pump provides the ideal quantity
for each washing cycle and reduces waste.
• The highly concentrated washing liquid, free of phosphates,
colouring agents and preservatives, meets the French OCERT
standard. Ecological, effective low-temperature and without
allergen, this washing liquid naturally perfumes the linen.
• The boiler only heats the water when the dryer
is not in operation.
• The energy-saving dryer reduces power consumption.
• LED lights use less energy than standard lighting.
• The launderette only requires 13KW (compared with 30KW
for a classical launderette).
They are also user-friendly
• The launderettes comply with CE standards and the new
decree N° 2012-412 practical since the 1st July 2012.
• Accessibility for our disabled customers has been a priority
in the design of this launderette from the outset. The
machines and touchpads are located at the legally required
height, thus combining a beautiful design with easy access
for our customers.
• As an added service to the customer, a built-in pump
releases a specially designed neutral and mild washing
liquid with a pleasant fragrance. This also helps ensure the
machines are kept clean and tidy.
• Equipped with high capacity professional washing machines
(8 and 18kg) the user can wash and dry large or heavy
loads such as duvets, blankets and pillows in a record time
of 30 minutes per washing cycle.
• Customers can enter their mobile number at the point of
payment and an SMS will be sent to alert them 5 minutes
before the end of the cycle.
• This free service is convenient for customers who might use
this waiting time for shopping.
• Thanks to the touch screen, the payment station is easy to
use by following the on-screen instructions.
• Besides the coin and bill acceptor, the credit card payment
is available as an option. It is a service which facilitates the
use of the launderette and thus increases its use.
They are also buyer-friendly
• Floor space used is less than 5m² – relatively little for a new
innovative service.
• Low installation cost.
• The launderette is delivered fully assembled, cabled
and can be installed in half a day.
• Thinner power cables (due to low power), thus cheaper.
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
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.
36
PHO T O- ME INT ERNATIONAL PLC
EMPLOYEES
The Company’s employees are a valued
integral part of the business and the
Company’s ability to achieve success
in key business objectives.
G EN D E R D IVE R SITY
The table below shows the gender diversity of the Group’s
employees at 30 April 2018 with corresponding figures
for the previous year:
As at 30 April 2018
Total
Male
Female
The Board of Photo-Me
6
5
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:
Senior managers in the
Group (excluding directors
of Photo-Me)
Employees
(excluding above)
• business networking tools to encourage synergies among
colleagues and businesses, sharing ideas and best practices;
Total
18
17
1,106
1,130
Total
6
922
944
Male
5
18
16
1,696
1,132
As at 30 April 2017
The Board of Photo-Me
Senior managers in the
Group (excluding directors
of Photo-Me)
Employees
(excluding above)
Total
1,720
1,153
• 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.
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.
E QUAL OPPORTUNITIES AND DI VER S I TY
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.
1
1
184
186
Female
1
2
564
567
37
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 CORPO RATE RE SPO NSI BI L IT Y S TAT EMEN T C ON T IN UED
HEA LT H AND SAFE TY
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.
38
PHO T O- ME INT ERNATIONAL PLC
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:
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.
GR E E NH O USE G AS (G HG ) EMI S S IO N S
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 ability to automatically shut down (and restart)
photobooths during closing hours which saves approximately
30% of power consumption on site;
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.
• 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.
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 2018
Tonnes of CO2e
Year ended 30 April 2017
Tonnes of CO2e
4,547.14
4,048.94
498.20
18,938.35
18,515.86
422.49
4,339.07
3,885.42
453.65
18,701.05
18,220.11
480.94
23,485.49
23,040.12
Per number of units of operating equipment
0.50227
0.4943
39
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 CORPO RATE RE SPO NSI BI L IT Y S TAT EMEN T C ON T IN UED
Assessment parameters
Consolidation approach
Boundary summary
Emission factor source
Methodology
Materiality threshold
The figures on the previous page 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.
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.
Department of Business, Energy & Industrial Strategy, 2016 GHG Conversion Factors for
Company Report (2016: DEFRA 2014).
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
Scope 2 emissions
The main components of these emissions are:
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.
• 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.
40
PHO T O- ME INT ERNATIONAL PLC
VIAB ILIT Y STATEME NT
The directors have assessed the viability and prospects of
the Group in accordance with the requirements 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 2021.
This assessment included stress tests on the future performance
and solvency for changes in the base assumptions over the
three years and also for the principal risks facing the business
in severe but plausible combination scenarios together with
the effectiveness of any mitigating actions. Consideration has
also been given to the risk of regional changes such as Brexit;
however, the Board believes that having diverse geographical
operations means that the Group is less susceptible to the
effects of regional changes.
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.
Del Mansi
Company Secretary
10 July 2018
41
Strategic ReportCorporate GovernanceFinancial StatementsANNUAL REPORT 2018 42
P H O T O - M E I N T E R N AT I O N A L P L C
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CORPORATE
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A N N U A L R E P O R T 2 0 1 8
43
Strategic ReportCorporate GovernanceFinancial Statements
BOA RD OF DIRE CTORS AND C OMPAN Y S ECR ETA RY
7
1
2
4
5
6
3
8
1 John Lewis OBE
Non-executive Chairman
4 Yitzhak Apeloig
Non-executive Director
7 Emmanuel Olympitis
Non-executive Director
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. Previously served as Chairman of
Cliveden plc and Principal Hotels plc and as
Vice Chairman of John D Wood & Co plc
and Pubmaster Group Ltd.
2 Serge Crasnianski
Chief Executive Officer
& Deputy Chairman
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.
3 Eric Mergui
Chief Operating Officer
Appointed to the Board in May 2018. Eric
Mergui joined the Group in 1995 and was
appointed Chief Operating Officer in 2015.
Before this, Mr Mergui headed up Photo-
Me's European operations and oversaw the
development of Photo-Me's business in China.
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 (both 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.
5 Françoise Coutaz-Replan
Non-executive Director
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.
6 Jean-Marcel Denis
Non-executive Director
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 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.
8 Del Mansi
Company Secretary
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.
44
PHOTO-ME INTERNATIONAL PLC RE PORT OF DIREC TORS
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 2018.
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.
PR INCIPAL ACTI VITIES
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 136 to 137.
RE S ULTS AND DIVIDENDS
The results for the year are set out in the Group Statement of
Comprehensive Income on page 74.
The directors recommend a final dividend of 4.73p per
ordinary share which, if approved at the Annual General
Meeting (AGM) on 24 October 2018, will be paid on
9 November 2018 to shareholders listed on the register at
the close of business on 19 October 2018. The ex-dividend
date will be 18 October 2018. This, together with the interim
dividend of 3.71p paid on 11 May 2018, makes a total
dividend for the year of 8.44p per ordinary share.
RE V IEW OF BUSI NESS
A ND FUTURE DE VELOP MENTS
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.
RE S EA RCH AND DEV ELOPMEN TS
The Group is committed to its research and development
programme in order to maintain its introduction of innovative
products to the market. The expenditure incurred on the
development of new products is shown in notes 4 and 11
of the financial statements.
E MPL OY E ES
Information on the Company’s employment practices
including: its policy regarding applications for employment
by persons with disabilities; 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 page 37, forming part of
this report.
C O RP O RATE R E SP O N SIBIL ITY
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 2018, can be found in the Corporate
Responsibility Statement on pages 34 to 40.
BO AR D O F D IR EC T OR S A N D TH E IR IN TE R E ST S
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);
Eric Mergui (Chief Operating Officer); 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 44. Apart from Eric
Mergui, who was appointed director on 2 May 2018, 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 directors retiring by rotation and being put forward for
re-election at the AGM this year are Mr Crasnianski, Ms
Coutaz-Replan, Mr Denis and Mr Apeloig. Mr John Lewis is
being put forward for re-election as required by the Corporate
Governance Code as he has been a director for more than
nine years. Mr Mergui is being put forward for re-election as
because the Articles of Association of the Company require
that. Any director appointed by the directors as an addition to
the board must retire at the next annual general meeting and
then be eligible for re-appointment.
Details of the directors’ contracts, emoluments and interests in
shares and share options are given in the Remuneration Report
on pages 52 to 64.
45
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements REPORT O F D IR E CT OR S CONT I N UED
D IRECTORS’ 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.
SUBSTANTIAL SHAREH OLDERS
As of 25 June 2018, the Company had been notified of the
following disclosable interests in the ordinary shares of the
Company:
Number of
ordinary
shares
%
of total
voting
rights
Serge Crasnianski
(Director)
84,610,701
22.41
Nature
of holding
Direct*/
indirect
Schroders plc
47,238,747
12.51
Indirect
Dan David Foundation 45,293,404
12.00
Direct
FIL Investment
International
37,427,986
9.91
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 had 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 of the financial statements. Each
ordinary share of the Company carries one vote at general
meetings of the Company.
AU THO R ITY TO PU RC H ASE SH A R E S
Pursuant to a resolution passed at its 2017 AGM, the
Company is authorised to purchase its own shares in the
market. The Company will seek approval at the 2018 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 2018.
ADD IT IONAL I NFO R MATI O N
Where not provided elsewhere in the Report of the Directors,
the following provides the additional information required to be
disclosed in the Report of the Directors.
The structure of the Company’s share capital including the rights
and obligations attaching to the shares is set out within note 20
to the financial statements.
No person holds securities carrying special rights with regards
to control of the Company.
There are no restrictions on the transfer of ordinary shares in
the capital of the Company other than certain restrictions which
may from time to time be imposed by law, for example, insider
trading law. In accordance with the Listing Rules of the Financial
Conduct Authority, certain employees are required to seek the
approval of the Company to deal in its shares.
On a show of hands at a general meeting of the Company,
every holder of ordinary shares entitled to vote and who is
present in person or by proxy shall have one vote and on a
poll, every member present in person or by proxy and entitled
to vote shall have one vote for every ordinary share held
(except as otherwise stated in Article 81 of the Company’s
Articles of Association). Any notice of general meeting issued
by the Company will specify deadlines for exercising voting
rights and in appointing a proxy or proxies in relation to
resolutions to be passed at the general meeting. All proxy votes
are counted and the numbers for, against or withheld in relation
to each resolution are announced at the general meeting and
published on the Company’s website after the meeting.
Proxy appointments and voting instructions must be received
by the Company’s registrars not less than 48 hours before a
general meeting.
46
PHOTO-ME INTERNATIONAL PLC 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.
GO IN G C O N CE R N
Having reviewed forecasts, cash flow, financial resources
and financing arrangements and after making enquiries, the
directors consider that the Company and the Group have
adequate resources to remain in operation for the foreseeable
future. Accordingly, the directors continue to adopt the going
concern basis in preparing the financial statements.
The rules governing the appointment of directors are set out in
the Corporate Governance Statement on pages 48 to 51.
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.
RE L ATED-PARTY TRANSACTION S
Details of related-party transactions are set out in note 28 to the
financial statements.
FINANCIAL INSTRUMENT S
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 DO NATIONS
No member of the Group made any political donations during
the year ended 30 April 2018.
D ISC L OS URE O F I NFO R MATI O N
TO T HE A UD ITO R
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.
AN N UA L GE NE R AL ME E TIN G
The Company’s AGM this year will be held at 2:00 p.m.
on 24 October 2018 at the offices of Hudson Sandler LLP,
25 Charterhouse Square, London, EC1M 6AE.
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
10 July 2018
47
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements COR PORATE GOVERNANCE
STATEMENT OF COM PLIANCE W ITH TH E UK
C ORPORATE GOV ERNANCE COD E
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,
with the exception of the audit committee's composition (on
which see more below), the Company has, throughout the year
ended 30 April 2018, complied with those provisions of the
April 2016 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/
directors/corporate-governance-and-stewardship/uk-corporate-
governance-code.
Explanations of how the principles have been applied and the
provisions complied with are set out below.
THE GROUP’S BUSINESS MODEL A ND STRATEG Y
The Group’s business model and strategy are summarised on
pages 3 to 13, 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.
T HE 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.
PHOTO-ME GROUP
BOARD
AUDIT
COMMITTEE
NOMINATION
COMMITTEE
REMUNERATION
COMMITTEE
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. ATE Technology Equipment B.V.,
of which Mr Apeloig is Managing Partner, is controlled by the
Dan David Foundation.
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).
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.
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 whom 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.
48
PHOTO-ME INTERNATIONAL PLC Number of meetings held
J Lewis
S Crasnianski
Y Apeloig
F Coutaz-Replan
J-M Denis
E Olympitis
E Mergui
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
8
8(8)
8(8)
8(8)
8(8)
8(8)
8(8)
n/a
4
4(4)
n/a
4(4)
4(4)
4(4)
4(4)
n/a
2
2(2)
n/a
n/a
n/a
2(2)
2(2)
n/a
1
1(1)
n/a
n/a
n/a
1(1)
1(1)
n/a
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 eight meetings during the year under review.
The attendance of directors at those meetings and meetings of
Board Committees is set out above.
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 COMMI TT EES
The Audit Committee
The Audit Committee consists entirely of non-executive
directors. For the whole of the year under review, Jean-Marcel
Denis (Committee Chairman), Emmanuel Olympitis (Senior
Independent Director), John Lewis (Chairman of the Board),
Françoise Coutaz-Replan (the Group’s former Finance Director)
and Yitzhak Apeloig, who is a qualified accountant, served
on the Committee. Except as stated below, 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. Although
Ms Coutaz-Replan is not considered to be independent, the
Committee believe that her extensive knowledge of the Group’s
accounting systems and her long involvement with the Company
in various capacities before becoming a non-executive director
(latterly as finance director) give the Committee a wide and
all-encompassing perspective which is very useful to it in
fulfilling its responsibilities. To this extent the Committee's
composition did not comply with the Code which requires an
Audit Committee's members to be independent non-executive
directors.
Meetings are normally held at least twice a year. Four 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 generally 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.
49
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements
CORPO RATE GOV E R NANC E C ON TI N UED
KPMG LLP, together with its subsidiary KPMG Audit plc, has
been the external auditor of the Group since the year ended
30 April 2009. The Audit Committee has been satisfied with the
effectiveness, objectivity and independence of the external auditor.
KPMG and the Company have agreed that, for commercial
reasons, KPMG will not be re-appointed as the Group's auditor
when its current appointment comes to an end at the AGM on 24
October 2018. The Audit Committee has commenced a tender
process to select a new external auditor which will conclude in time
for the new firm's appointment to be put forward at the AGM. The
Board continues to be committed to putting the external audit out to
tender at least once every ten years.
Key matters considered
During the last financial year, the Committee met to review the
results of the external audit for the previous financial year, the
external auditor’s half-year review and the audit plan for the audit
for the year ended 30 April 2018. In July 2018, 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 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 carrying value of the GBP denominated goodwill in
connection with the Japanese subsidiary and also of investment
by the company in connection with this subsidiary and the
potential impairment of those assets.
How this was addressed: the determination of whether or not
goodwill and the investment by the Company has to be impaired
requires a review of the value in use of those assets. 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 2018 and the Committee considered the
conclusions and sensitivity calculations that had been undertaken as
part of the review.
• The carrying value of goodwill on laundry companies and Asda
licence intagible
How this was addressed: The determination of whether or not
goodwill on laundry comapnies and the Asda licence intangible
has to be impaired requires a review of the value in use of
those assets. The main judgements in relation to the review were
considered to be the achievability of the budgets and the discount
rate being applied to projected future cash flows. The calculation
of these values in use was undertaken in April 2018 and the
Committee considered the conclusions and sensitivity calculations
that had been undertaken as part of these reviews.
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. Two meetings were
held in the year ended 30 April 2018.
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 52 to 64 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
2018, and one formal meeting.
50
PHOTO-ME INTERNATIONAL PLC
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
A ND 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 continually seeks
to improve systems of internal controls.
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 processes in place for identifying, evaluating and
managing the significant risks which are applicable to the business.
The Board continually seeks to improve 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.
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.
IN TE R NA L CO N TRO L A ND R I SK
MAN A GE MEN T IN R EL ATIO N TO TH E
FIN A NC IA L RE PO RTIN G PR O CE S S
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;
(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.
51
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements
IMP LE ME NTATIO N OF THE RE MU NE R ATI ON
P OL IC Y FOR 20 1 8/1 9
The Committee proposes to operate the Remuneration Policy for
the CEO for the year ending 30 April 2019 as follows:
• Following a review of the CEO’s base salary and noting
that he waived the 2017 increase, the CEO's salary will be
increased by an inflationary amount from 1 May 2018;
• Benefit and pension provision will be in line with the
approved Remuneration Policy;
• Annual bonus will continue to be capped at 150% of salary
with targets based on year-on-year pre-tax profit growth for a
majority of the bonus, after considering both the quality and
sustainability of the profit delivered. A minority of the bonus
will be based on a number of key personal/strategic targets
which will be disclosed retrospectively;
• The Committee will consider at half-year whether to
grant share option awards to the CEO or COO for
the current year.
SH AR E HO LD E R E NG AGE M EN T
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 2017
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
10 July 2018
REMUN ERATION RE PORT
Annual statement
Dear Shareholder,
I am pleased to present the Directors’ Remuneration Report for
the year ended 30 April 2018, 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)
(Amendment) Regulations 2013.
The report is divided into three sections:
• This Annual Statement, which summarises remuneration
outcomes in 2017/18 and how the Remuneration Policy
will be operated in 2018/19;
• The Remuneration Policy Report, which details the
Company’s policy on the remuneration of executive and non-
executive directors which was last approved by shareholders
at the 2017 AGM; and
• The Annual Report on Remuneration, which discloses
details of the Committee, how the remuneration policy was
implemented in the year ended 30 April 2018, and how
the policy will operate for the year ending 30 April 2019.
As no changes are being proposed in respect of the
Remuneration Policy Report – given that it was approved by
shareholders last year – only the Annual Statement and Annual
Report on Remuneration will be subject to a vote (advisory) at
the forthcoming 2018 AGM.
REMUNERATION OUTCOMES IN 2017/18
For the year under review, the Committee considers the
remuneration of the CEO to reflect both the performance of the
Group and his individual performance.
While the Committee awarded the CEO a 3% inflationary
base salary increase from 1 May 2017, this was waived by
the individual. In respect of annual bonus, despite the CEO
being eligible for consideration for an annual bonus for the
year ended 30 April 2018, he asked the Committee not to do
so. The Committee accepted this request in light of shareholder
experience around the year end. The CEO does not hold any
unvested share option awards.
52
PHOTO-ME INTERNATIONAL PLC
RE MUNERATION POLIC Y RE PO RT
The policy set out below was approved by shareholders at the
2017 AGM and it is currently intended that it will apply until
the 2020 AGM.
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.
SU MMARY REMUNERATION P OLICY TAB L E
The table below summarises the remuneration policy for directors:
SALARY
Purpose and link
to strategy
Operation
Maximum
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
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)
Performance
measures
N/A
BE NE FITS
Purpose and link
to strategy
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
Performance
measures
N/A
Operation
Maximum
Benefits will not normally be
provided with a value per
executive director in excess of
£75,000 p.a.
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
53
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements REMUNERATI ON PO LI CY R E PO RT CON T I NUED
SUMMARY REM UNERATION P OLICY TAB L E CO N TI N UE D
ANNUAL BONU S
Purpose and link
to strategy
Incentivises delivery of specific
Company, divisional and
personal annual goals
Maximum bonus only payable
for achieving specified targets
Operation
Maximum
Normally payable in cash
Non-pensionable
Up to 150% of base
salary p.a.
Committee has the discretion to
defer up to 50% of the bonus in
shares for 3 years
PENSION
Purpose and link
to strategy
Provides competitive retirement
benefits
Operation
Maximum
Defined contribution
Executive directors may
be offered cash in lieu
of pension
Up to 15% of base
salary p.a.
EXECUTIVE SHAR E OPT ION SCH EM E (“ES O S ”)
Purpose and link
to strategy
Aligns executive directors’
interests with those of
shareholders
Retention
Operation
Maximum
Annual awards of market value
options may be granted
Up to 150% of base
salary p.a.
The Committee reviews the
quantum of awards annually and
monitors the continuing suitability
of the performance measures
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
Performance
measures
N/A
Performance
measures
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
A two-year post holding period
applies to any awards granted
to executive directors after the
2016 AGM
54
PHOTO-ME INTERNATIONAL PLC SHARE OWNER SHIP GUIDELINES
Purpose and link
to strategy
Provides alignment of interests
between executive directors and
shareholders
Operation
Maximum
Performance
measures
At least 200% of base salary
N/A
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
NON- EXECUTIVE DIRECTORS
Purpose and link
to strategy
Provides fees reflecting
time commitments and
responsibilities, in line with those
provided by similarly sized
companies
Performance
measures
N/A
Operation
Maximum
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)
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
RE MUNERATION SCENARIOS F OR TH E CEO
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.
Value of remuneration package at different levels of performance
£'000
£1,600
£1,200
£800
£400
0
£696
100%
Minimum
£1,114
38%
62%
On-target
Basic salary, benefits and pensions
Bonus
The chart above is based on the following:
£1,531
55%
45%
Maximum
• Salary level effective on 1 May 2018.
• An approximate value of benefits for the financial year to 30 April 2019.
• An annualised pension contribution and/or salary supplement (as a % of salary) for the year to 30 April 2019.
• A maximum bonus of 150% of salary (with target assumed to be 50% of the maximum).
• No value has been presented for share option awards in respect of the 2018/19 financial year. The Committee will
consider at the half year whether to grant share options to the CEO or COO for the current year.
55
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements REMUNERATI ON PO LI CY R E PO RT CON T I NUED
C HOICE OF PERFORMANCE MEA SUR ES
The Committee has given careful consideration to the
performance measures applicable to both the annual bonus
and the 2014 Executive Share Option Scheme.
The choice of the performance metrics applicable to the annual
bonus scheme reflects the Committee’s belief that any incentive
compensation should be appropriately challenging, with the
majority (or the entirety) linked to the achievement of profit-
related targets. The Committee may also link a proportion of the
annual bonus to strategic and/or personal objectives if it deems
this appropriate with regard to the Company’s key objectives.
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 EXECUTIV E DIR ECTORS’
REMUNERATION POLICY R ELATES TO T HE GR OU P
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.
H OW SH AR EH OL D E RS’ VI EWS
AR E TAKE N I NTO AC C OU NT
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 2017 AGM, which
showed over 99.95% in favour of the Directors’ Remuneration
Report resolution and 99.86% in favour of the Directors’
Remuneration Policy Report resolution.
AP P RO A CH TO RE C RU ITME NT
AN D PR O MOTI ON S
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.
Consistent with Part 4 of the Large and Medium-sized
Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013, 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 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.
56
PHOTO-ME INTERNATIONAL PLC 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.
SE RVI CE CO N TRA C TS
Details of the CEO'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
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
John Lewis2
Appointment
letter date
Year
of last
election
Expected
year of
expiry of
current
26/07/2010
2017
2018
Yitzhak Apeloig
08/03/2012
2015
2018
Françoise Coutaz-Replan3
27/08/2015
2015
2018
Jean-Marcel Denis
01/03/2012
2015
2018
Emmanuel Olympitis
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.
APPRO ACH 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 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.
57
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements ANNUAL REPORT ON REMUNE R ATI ON
E XTERNAL 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.
Implementation of the Remuneration Policy for year ending 30 April 2019
BASE SALARY
The base salary for the CEO from 1 May 2018 is as follows:
Executive director
Serge Crasnianski
1 May 2018
£
557,114
1 May 2017
£
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.
BENE FITS
Executive directors are entitled to a company car, private medical insurance and an accommodation allowance.
A NNUAL BONUS
The annual bonus will continue to be capped at 150% of salary. However, the Committee has introduced a number of key
personal/strategic targets for a minority of the bonus potential. For 2018/19, 80% of the bonus potential will be based on
incentivising year-on-year profit growth. As per 2017/18, 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 for the year ending 30 April 2019 are as follows:
Group pre-tax profit is less than the prior year*
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
2019/20 Annual Bonus
(% of salary)
0%*
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. 20% of the bonus potential will be based
on personal/strategic targets which will be disclosed retrospectively next year.
LONG-TERM INCENT IV ES
The Committee shall consider at half-year whether any options should be granted to the CEO or COO under the 2014 Executive
Share Option Scheme this year.
NEW EXECUTIVE DIRECTOR
Eric Mergui was appointed to the Board on 2 May 2018. Full details of his remuneration package, which is consistent with the
shareholder approved Remuneration Policy, will be disclosed in next year's Directors' Remuneration Report.
58
PHOTO-ME INTERNATIONAL PLC 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
30 April 2018
£
30 April 2017
£
John Lewis
Chairman
Chair of Nomination Committee
132,000
120,000
Emmanuel Olympitis
Senior Independent Director
Chair of Remuneration Committee
55,000
50,000
Françoise Coutaz-Replan
Non-executive Director
—
44,000
40,000
Jean-Marcel Denis
Non-executive Director
Chair of Audit Committee
49,500
45,000
Yitzhak Apeloig
Non-executive Director
—
44,000
40,000
SINGLE TOTAL FIGURE OF REMUNER ATION*
The detailed emoluments received by the executive and non-executive directors for the year ended 30 April 2018 are shown below.
No payments were made for loss of office, and no payments were made to past directors.
E XECUTIVE DIRE CTOR
Serge Crasnianski5
Year
2018
2017
NON–EXECUTIVE DIR ECTOR S
John Lewis7
2018
Yitzhak Apeloig
2017
2018
2017
Françoise Coutaz-Replan6
2018
Jean-Marcel Denis
Emmanuel Olympitis
2017
2018
2017
2018
2017
Salary/Fees
£
Benefits1
£
Bonus2
£
Long-Term
Incentives3
£
Pension4
£
Total
£
540,887
59,934
0
540,887
54,184
811,330
132,000
120,000
44,000
40,000
44,000
40,000
49,500
45,000
55,000
50,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
-
-
—
—
—
—
79,619
39,702
—
—
—
—
81,133
681,954
81,133
1,487,534
—
—
—
—
—
—
—
—
—
—
132,000
120,000
44,000
40,000
123,619
79,702
49,500
45,000
55,000
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 2018 annual bonus is shown on page 60.
3
The value for Long-term Incentives shown above for- Françoise Coutaz-Replan in respect of the year ended 30 April 2018 relates to ESOS awards granted in
2015 (212,600 shares) with an exercise price of 133.33p and for which the performance period ended on 30 April 2018. The value shown above is the
intrinsic value based on the expected vesting level, as calculated using the three-month average share price to 30 April 2018 (170.78p) as required by the
relevant regulations.
4 The pension payment to Serge Crasnianski in the year ended 30 April 2018 represented 15% of base salary.
5
The emoluments of Serge Crasnianski shown above include fees (and for 2017 only, a bonus) totalling £394,144 (2017: £847,410) payable to a third party
in respect of making available the services of Serge Crasnianski to the Company.
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.
The emoluments of John Lewis shown above include fees of £49,500 (2017: £45,000) paid to a third party in respect of making available the services of
John Lewis to the Company.
6
7
* Subject to audit
59
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements ANNU AL RE PORT ON R E MU NE R AT IO N C ON TI N UED
* ADDITIONAL INFORMAT ION IN RES P ECT O F TH E S IN GL E TO TAL FIG U R E TABL E
Annual bonus
For the year ended 30 April 2018, 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 2018 annual bonus are set out below:
Threshold
Target
Maximum
Actual
Profit before tax
Bonus payout (% of salary)
£48.4m
£50.4m
£52.8m
£50.2m
75%
100%
150%
0%*
*
As the CEO said he did not wish to be considered for a bonus otherwise he would have been entitled to a bonus at the Committee's discretion
of up to 50% of salary.
E XECUTIVE SHARE OPT ION SCH EM E (ES OS )
The ESOS awards granted to Françoise Coutaz-Replan on 9 July 2015 completed their performance period on 30 April 2018
and accordingly have been included in the 2018 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.
EPS for 2018
Below 6.5p
6.5p
7.7p
8.5p
Between 6.5p
and 8.5p
10.6p
Vesting (% of participant’s salary at
date of grant)
None
25%
100%
150%
Between 25% and 150%
on a straight-line basis
150%
Performance condition
Actual
* Subject to audit
60
PHOTO-ME INTERNATIONAL PLC SC HEME I NTERE STS AWARDED IN THE Y EA R *
Executive Share Option Scheme
The Company made no option awards to directors during the year ended 30 April 2018.
D IRECTORS’ INTER EST S IN SH AR ES *
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 2018 and the date of signing the financial statements.
E XECUTIVE DIRE CTOR
Beneficially owned at
30 April 2018
1 May 2017
Vested
ESOS
awards1
Unvested
ESOS
awards2
Shareholding
requirement
(% of salary)
Current
shareholding
(% of salary)3
Guideline
Serge
Crasnianski
84,610,7014
84,610,7014 738,000
NON-EXECUTIVE DIRECTORS
John Lewis
–
–
–
Yitzhak
Apeloig
Françoise
Coutaz-Replan5
Jean-Marcel
Denis
Emmanuel
Olympitis
200,000
200,000
877,000
212,600
–
–
45,000
45,000
–
–
–
–
–
–
–
200%
24,269%
Yes
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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 2018 being 159.8p. The shareholding guideline
is calculated using only beneficially owned shares.
4 Of the shares beneficially owned by Serge Crasnianski, 79,719,900 shares (2017: 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.
D IRECTORS’ INTER EST S IN SH AR E OP TIONS *
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 2018 and the date of signing the financial statements.
SE RGE CRASNI ANSKI
Date of grant
9 July 20131
Number of options
As at
1 May 2017
Granted
during year
738,000
–
FR ANÇOISE COUTAZ-REP LAN
20 Jan 2010
44,093
4 July 2011
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
–
–
–
–
–
–
–
Exercised
during
year
Lapsed
during
year
As at
30 April
2018
Exercise
price
Date
from which
exercisable
Expiry
date
–
–
50,000
–
–
–
–
–
–
738,000
90.63p
9 July 2016
8 July 2020
-
–
36.67p
20 Jan 2013
19 Jan 2017
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 9 July 2015 ESOS awards are subject to the performance conditions and vesting schedule as set out on page 60.
* Subject to audit
61
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements ANNU AL RE PORT ON R E MU NE R AT IO N C ON TI N UED
RELATIVE IMPORTANCE OF THE S PEND ON PAY
The following table sets out the percentage change in distributions to shareholders and employee remuneration costs.
Executive director
Employee remuneration costs (£’000)1
Dividends (£’000)2
2018
42,372
26,478
2017
% Change
40,658
32,62933
4.2%
-18.9%
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 2018.
3 This includes the special dividend of 2.815p paid on 10 November 2016.
PERCENTAGE I NCREASE IN T HE REMU NERATI O N O F T HE C EO
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
CEO % change
Employees % change1
Salary
Benefits
Annual bonus
0%
10.6%
-100%
0.1%
- 3.9%
1%
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 nine 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
April 2018
Photo-Me International plc
FTSE Small Cap
62
PHOTO-ME INTERNATIONAL PLC The table below shows the total remuneration for the CEO over the same nine-year period as the TSR chart above. All share awards are
valued at the date of vesting.
Year ended
30 April
2018
2017
2016
2015
2014
2013
2012
2011
2010
2010
CEO
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski2
Thierry Barel3
Total
remuneration
(£)
Annual
bonus
(% of max)
Long-term
incentives
(% of max)1
681,954
1,498,113
1,429,209
1,031,628
914,278
899,487
898,693
893,312
739,548
90,327
0%
100%
100%
100%
100%
100%
100%
100%
100%
0%
–
–
100%
–
–
–
–
–
–
–
1
2
3
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 2018 (but excluding 2016), Serge Crasnianski did not have any outstanding share option awards that could have vested in the
relevant years.
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.
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.
PAY MENT FOR LOSS OF OFFICE
No termination payments were made in the year.
COMMITTEE ROLE AND MEMB ER SH I P
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). The Board considers Mr Olympitis and Mr Marcel to be
independent and Mr Lewis to have been independent on appointment as Chairman.
Biographies of the members of the Committee are set out on page 44. Details of their membership of the Committee and attendance
at the meetings during the year are as follows:
Name
Position
Appointment date
Emmanuel Olympitis
Committee Chairman
11 November 2009
John Lewis
Non-executive Chairman
3 July 2008
Jean-Marcel Denis
Non-executive Director
1 March 2012
Number of
meetings attended
(maximum possible)
2(2)
2(2)
2(2)
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.
63
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements ANNU AL RE PORT ON R E MU NE R AT IO N C ON TI N UED
A DVISERS
The Committee is advised by FIT Remuneration Consultants LLP. 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 2018, fees paid to FIT in respect
of advice given to the Committee totalled £14,905 (exclusive of VAT). The Committee is satisfied that the advice provided by FIT is
objective and independent and fees were charged on their normal 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 the 2017 AGM, the resolutions on the Directors’ Remuneration Report and Directors’ Remuneration Policy 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
319,403,371
99.95
152,682
0.05
319,556,053
100
1,199,298
319,144,977
99.86
445,370
0.14
319,590,347
100
1,165,003
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
10 July 2018
64
PHOTO-ME INTERNATIONAL PLC STAT E ME NT OF DIRECTORS’ RESPONSIBILITIES
R ES PO N SIBI LITY STATE ME N T O F TH E
D IR EC TO R S I N R ESP E CT O F T HE AN N UA L
FIN A NC IA L RE PO RT
Each of the directors of the Company confirms that, to the best
of his or her knowledge:
• the financial statements, prepared in accordance with the
applicable set of accounting standards, 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 , BAL AN C ED AN D UN D ER S TA N D A B LE
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 51.
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.
SIG N IFIC AN T AC C O UN TIN G P OL I CI E S,
C RI TIC AL E STIMATE S A N D KE Y JUD G ME N T S
Our significant accounting policies are set out on pages 80 to
87 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 2017/2018 consolidated financial statements.
By order of the Board
John Lewis
Non-executive Chairman
10 July 2018
The directors of the Company, who are
named on page 44, are responsible
for preparing the Annual Report,
and the Group and the 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 as adopted by the European
Union (IFRSs as adopted by the EU) 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 estimates that are reasonable,
relevant and prudent;
• state whether they have been prepared in accordance
with IFRSs as adopted by the EU; and
• assess the Group and the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to
going concern;
• use the going concern basis of accounting unless they either
intend to liquidate the Group or the Company, or
to cease operations, or have no realistic alternative but to
do so.
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 enable them to
ensure that its financial statements comply with the Companies
Act 2006. They are responsible for such internal control as
they determine what is necessary to enable the preparation
of financial statements that are free from material misstatement
– whether due to fraud or error – and 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.
65
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements INDEP END ENT AUD I TOR' S REP ORT
Independent
auditor’s report
to the members of Photo-Me International plc only
1. Our opinion is unmodified
We have audited the financial statements of Photo-
Me International plc (“the Company”) for the year
ended 30 April 2018 which comprise the Group
Statement of Comprehensive Income, Statements
of Financial Position, Group Statement of Cash
Flows, Company Statement of Cash Flows, Group
Statement of Changes in Equity, Company
Statement of Changes in Equity, and the related
notes, including the accounting policies in note 1.
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 2018
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.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs
(UK)”) and applicable law. Our responsibilities are
described below. We believe that the audit
evidence we have obtained is a sufficient and
appropriate basis for our opinion. Our audit opinion
is consistent with our report to the audit
committee.
We were appointed as auditor by the directors on 1
December 2008. The period of total uninterrupted
engagement is for the 10 financial years ended 30 April
2018. We have fulfilled our ethical responsibilities
under, and we remain independent of the Group in
accordance with, UK ethical requirements including the
FRC Ethical Standard as applied to listed public interest
entities. No non-audit services prohibited by that
standard were provided.
Overview
Materiality:
group financial
statements as a
whole
Coverage
£2.3m (2017:£2.4m)
5% (2017: 5%) of normalised
group profit before tax
94% (2017:79%) of group profit
before tax
Risks of material misstatement vs 2017
Recurring risks
Recoverability of
carrying value of
photobooths and
vending machines
Recoverability of Japan
goodwill and Parent
investment in
Japanese subsidiary
New: Carrying value of
goodwill on laundry
companies and Asda
licence intangible
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P H O T O - M E I N T E R N AT I O N A L P L C
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below the key audit matters, in decreasing order of audit
significance, in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as
required for public interest entities, our results from those procedures. These matters were addressed, and our results are
based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a
whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate
opinion on these matters.
Recoverability of carrying value
of photobooths and vending
machines (£80.8m; 2017: £66.6m)
Refer to page 50 (Audit
Committee Report), page 83
(accounting policy) and page 106
(financial disclosures).
The risk
Our response
Forecast based valuation
Our procedures included:
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.
— Control design: Evaluating the controls
over the process used for identifying
potential impairment.
— Our sector experience: Assessing
assumptions made in the discounted cash
flow models such as EBITDA and number of
machines 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
consider any changes in the market place
and local regulations based on our industry
knowledge;
— Challenge of business plans : For those
assets where there are 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 competitive
environment and product mix in the relevant
country; and
— Comparing carrying value: For those asset
classes that are below the Group’s
impairment testing threshold, where there is
a potential impairment in aggregate, we
checked the EBITDA (as a proxy for cash
flows expected by entity from these assets)
against carrying amount.
Our results
— We found the carrying value of photobooths
and vending machines to be acceptable
(2017 result: acceptable).
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ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements
INDEPENDE NT AU DI TO R' S R E PORT C ON TI N UE D
2. Key audit matters: our assessment of risks of material misstatement (continued)
Group and Parent:
Recoverability of Japan
goodwill and Parent
investment in Japanese
subsidiary (Group: £7.2m
million; 2017: £7.2m; Parent:
£33.8 million; 2017: £33.8m)
Refer to page 50 (Audit
Committee Report), pages
82, 85 (accounting policy)
and pages 99, 112 (financial
disclosures).
Carrying value of goodwill
on laundry companies and
Asda licence intangible
Refer to page 50 (Audit
Committee Report), pages
82, 83 (accounting policy)
and pages 99, 102, 104
(financial disclosures).
The risk
Our response
Forecast based valuations:
Our procedures included:
Goodwill in relation to Nippon Auto-
Photo Kabushiki Kaisha (Japan) is
significant, and this and the carrying
amount of the parent company’s
investment in the Japanese
subsidiary are at risk of recoverability
due to:
-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.
— 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.
— Benchmarking assumptions : Assessing whether
the forecasts appropriately considered any changes in
the market place and competitive environment based
on our industry knowledge;
— Sensitivity analysis : Performing break-even analysis
on the discount rates and exchange rates 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 assessment of goodwill.
Our results
— We found the carrying amount of Japan goodwill and
the parent company’s investment in the Japanese
subsidiary to be acceptable (2017 result: acceptable).
The risk
Our response
Forecast based valuations:
Our procedures included:
The Group holds the following
significant intangible assets: goodwill
on laundry companies (£2.8m, 2017:
£1.3m) and a license (£2.5m, 2017:
£2.8m).
Goodwill on laundry companies is
allocated across 2 Cash Generating
Units (“CGU”) (2017: 1). 1 laundry
CGU has been acquired during the
year, and goodwill on laundry
companies is now material. The Group
is growing its laundry offerings but
these are less established within the
Group. The goodwill is at risk of
recoverability due to the inherent
uncertainty involved in the forecasting
of cash flows and use of inputs and
discount rates.
In October 2016 the group acquired a
10 year licence which grants the right
to site its machines in Asda stores.
During the year the group has
undertaken restructuring in the Photo-
Me Retail division in order to improve
the future profitability of these
operations. There is a risk of
recoverability of this asset due to the
inherent uncertainty involved in
the cash flows of the recently
restructured business.
— 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
models by comparing forecasted revenue and cost
growth to the actual amounts achieved in prior
periods.
— Benchmarking assumptions : Assessing whether
the forecasts appropriately considered any changes
in the market place and competitive environment
based on our industry knowledge;
— Valuations expertise: With the assistance of our
internal valuation specialists we challenged the
inputs and methodology used to determine the
discount rate used in the licence forecasts;
— 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
assessment of goodwill.
Our results
— We found the carrying value of goodwill on laundry
companies and Asda licence intangible to be
acceptable (2017 result: n/a).
68
PHOTO-ME INTERNATIONAL PLC 3. Our application of materiality and an overview of
the scope of our audit
Group profit before tax
£50.2m (2017: £48.0m)
Group Materiality
£2.3m (2017: £2.4m)
Materiality for the group financial statements as a
whole was set at £2.3m (2017: £2.4m), determined
with reference to a benchmark of group profit before
tax, normalised to exclude this year’s gains on the sale
of the Bookham property (£2.3m, 2017: £nil) and
listing of Max Sight (£3.7m, 2017: £nil), and the costs
incurred on the restructuring of Photo-Me Retail
(£2.6m, 2017: £nil), of which it represents 5.0% (2017:
5.0%).
Materiality for the parent company financial
statements as a whole was set at £0.75m (2017:
£0.9m), determined with reference to a benchmark
of company total assets, of which it represents 0.7%
(2017: 0.8%).
We agreed to report to the Audit Committee any
corrected or uncorrected identified misstatements
exceeding £115,000, in addition to other identified
misstatements that warranted reporting on
qualitative grounds.
Of the group’s 38 (2017: 36) reporting components,
we subjected 6 (2017: 7) to full scope audits for
group purposes and 4 (2017: 1) to specified risk-
focused audit procedures. The latter were not
individually financially significant enough to require a
full scope audit for group purposes, but did present
specific individual risks that needed to be addressed.
The components within the scope of our work
accounted for the percentages illustrated opposite.
The remaining 18% of total group revenue, 6% of
group profit before tax and 17% of total group assets
is represented by 28 (2017: 28) reporting
components, none of which individually represented
more than 5% of any of total group revenue, group
profit before tax or total group assets. For these
residual components, we performed analysis at an
aggregated group level to re-examine our
assessment that there were no significant risks of
material misstatement within these.
The Group 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 team approved the
component materialities, which ranged from £0.1m
to £1.3m (2017: £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 38
components (2017: 5 of the 36 components) was
performed by component auditors and the rest,
including the audit of the parent company, was
performed by the Group team.
The Group Engagement Partner visited 1 (2017: 1)
component location in France, to assess the audit
risk and strategy. 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.
Key:
£2.3m
Whole financial
statements materiality
(2017: £2.4m)
£1.3m
Range of materiality at 6
components (£0.1m-£1.3m)
(2017: £0.1m to £1.2m)
Group profit before tax
(normalised)
Group materiality
£0.1m
Misstatements reported to the
audit committee (2017: £0.1m)
Group revenue
Group profit before tax
1
2
94%
(2017 79%)
77
93
2
7
82%
(2017 86%)
84
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Group total assets
1
2
83%
(2017 80%)
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Full scope for group audit purposes 2018
Specified risk-focused audit procedures 2018
Full scope for group audit purposes 2017
Specified risk-focused audit procedures 2017
Residual components
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ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements
INDEPENDE NT AU DI TO R' S R E PORT C ON TI N UE D
4. We have nothing to report on going concern
4. We have nothing to report on going concern
We are required to report to you if:
We are required to report to you if:
— we have anything material to add or draw attention to in
— we have anything material to add or draw attention to in
relation to the directors’ statement in the Report of
relation to the directors’ statement in the Report of
Directors on the use of the going concern basis of
Directors on the use of the going concern basis of
accounting with no material uncertainties that may cast
accounting with no material uncertainties that may cast
significant doubt over the Group and Company’s use of
significant doubt over the Group and Company’s use of
that basis for a period of at least twelve months from
that basis for a period of at least twelve months from
the date of approval of the financial statements; or
the date of approval of the financial statements; or
— the related statement under the Listing Rules set out on
— the related statement under the Listing Rules set out on
page 47 is materially inconsistent with
page 47 is materially inconsistent with
our audit knowledge.
our audit knowledge.
We have nothing to report in these respects.
We have nothing to report in these respects.
5. We have nothing to report on the other information in
5. We have nothing to report on the other information in
the Annual Report
the Annual Report
The directors are responsible for the other information
The directors are responsible for the other information
presented in the Annual Report together with the financial
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated
express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.
below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial
doing so, consider whether, based on our financial
statements audit work, the information therein is materially
statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or
misstated or inconsistent with the financial statements or
our audit knowledge. Based solely on that work we have
our audit knowledge. Based solely on that work we have
not identified material misstatements in the other
not identified material misstatements in the other
information.
information.
Strategic report and directors’ report
Strategic report and directors’ report
Based solely on our work on the other information:
Based solely on our work on the other information:
— we have not identified material misstatements in the
— we have not identified material misstatements in the
strategic report and the directors’ report;
strategic report and the directors’ report;
— in our opinion the information given in those reports for
— in our opinion the information given in those reports for
the financial year is consistent with the financial
the financial year is consistent with the financial
statements; and
statements; and
— in our opinion those reports have been prepared in
— in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
accordance with the Companies Act 2006.
Directors’ remuneration report
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
accordance with the Companies Act 2006.
Disclosures of principal risks and longer-term viability
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw
statements audit, we have nothing material to add or draw
attention to in relation to:
attention to in relation to:
— the directors’ confirmation within the Viability Statement
— the directors’ confirmation within the Viability Statement
(page 41) that they have carried out a robust
(page 41) that they have carried out a robust
assessment of the principal risks facing the Group,
assessment of the principal risks facing the Group,
including those that would threaten its business model,
including those that would threaten its business model,
future performance, solvency and liquidity;
future performance, solvency and liquidity;
— the Principal Risks disclosures describing these risks
— the Principal Risks disclosures describing these risks
and explaining how they are being managed and
and explaining how they are being managed and
mitigated; and
mitigated; and
— the directors’ explanation in the Viability Statement of
— the directors’ explanation in the Viability Statement of
how they have assessed the prospects of the Group,
how they have assessed the prospects of the Group,
over what period they have done so and why they
over what period they have done so and why they
considered that period to be appropriate, and their
considered that period to be appropriate, and their
statement as to whether they have a reasonable
statement as to whether they have a reasonable
expectation that the Group will be able to continue in
expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the
operation and meet its liabilities as they fall due over the
period of their assessment, including any related
period of their assessment, including any related
disclosures drawing attention to any necessary
disclosures drawing attention to any necessary
qualifications or assumptions.
qualifications or assumptions.
Under the Listing Rules we are required to review the
Under the Listing Rules we are required to review the
Viability Statement. We have nothing to report in this
Viability Statement. We have nothing to report in this
respect.
respect.
Corporate governance disclosures
Corporate governance disclosures
We are required to report to you if:
We are required to report to you if:
— we have identified material inconsistencies between the
— we have identified material inconsistencies between the
knowledge we acquired during our financial statements
knowledge we acquired during our financial statements
audit and the directors’ statement that they consider
audit and the directors’ statement that they consider
that the annual report and financial statements taken as
that the annual report and financial statements taken as
a whole is fair, balanced and understandable and
a whole is fair, balanced and understandable and
provides the information necessary for shareholders to
provides the information necessary for shareholders to
assess the Group’s position and performance, business
assess the Group’s position and performance, business
model and strategy; or
model and strategy; or
— the section of the annual report describing the work of
— the section of the annual report describing the work of
the Audit Committee does not appropriately address
the Audit Committee does not appropriately address
matters communicated by us to the Audit Committee.
matters communicated by us to the Audit Committee.
We are required to report to you if the Corporate
We are required to report to you if the Corporate
Governance Statement does not properly disclose a
Governance Statement does not properly disclose a
departure from the eleven provisions of the UK Corporate
departure from the eleven provisions of the UK Corporate
Governance Code specified by the Listing Rules for our
Governance Code specified by the Listing Rules for our
review.
review.
We have nothing to report in these respects.
We have nothing to report in these respects.
70
PHOTO-ME INTERNATIONAL PLC 6. We have nothing to report on the other matters on
which we are required to report by exception
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
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.
We have nothing to report in these respects.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page
65, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give
a true and fair view; such internal control as they determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error; assessing the Group and
parent Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and using the going concern basis of accounting unless
they either intend to liquidate the Group or the parent
Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or other
irregularities (see below), or error, and to issue our opinion
in an auditor’s report. Reasonable assurance is a high level
of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can
arise from fraud, other irregularities or error and are
considered material if, individually or in aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
Irregularities – ability to detect
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the
financial statements from our sector experience, through
discussion with the directors and other management (as
required by auditing standards), and from inspection of the
group’s regulatory and legal correspondence.
We had regard to laws and regulations in areas that directly
affect the financial statements including financial reporting
(including related company legislation) and taxation
legislation. We considered the extent of compliance with
those laws and regulations as part of our procedures on the
related financial statement items.
With the exception of any known or possible non-
compliance, and as required by auditing standards, our work
in respect of these was limited to enquiry of the directors
and other management and inspection of regulatory and
legal correspondence.
We communicated identified laws and regulations
throughout our team and remained alert to any indications
of non-compliance throughout the audit.
As with any audit, there remained a higher risk of non-
detection of non-compliance with relevant laws and
regulations, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override
of internal controls.
8. The purpose of our audit work and to whom we owe
our responsibilities
This report is made solely to the Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the
Company’s members, as a body, for our audit work, for this
report, or for the opinions we have formed.
Steve Masters (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Forest Gate
Brighton Road
Crawley
RH11 9PT
10th July 2018
71
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements 72
P H O T O - M E I N T E R N AT I O N A L P L C
FINANCIAL
STATEMENTS
F
i
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
A N N U A L R E P O R T 2 0 1 8
73
Strategic ReportCorporate GovernanceFinancial StatementsStrategic ReportCorporate Governance
GRO UP STATEME NT OF COM PR EHE NS I VE I NC OM E
For the year ended 30 April 2018
Revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses
Share of post-tax profits from associates
Operating profit
Analysed as:
Operating profit before Specific items
Profit on sale of land & buildings
Restructuring costs
Operating profit after Specific items
Other gains
Finance revenue
Finance cost
Profit before tax
Total tax charge
Profit for the 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 gains/(losses) 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 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
2018
£’000
2017
£’000
229,814
214,653
(168,070)
(156,427)
61,744
1,686
58,226
2,203
(17,518)
(13,818)
14
194
196
46,106
46,807
4
4
4
6
6
7
46,416
2,320
(2,630)
46,106
3,708
658
(297)
50,175
(9,889)
40,286
16
(12)
4
150
(23)
127
131
40,417
46,807
–
–
46,807
–
1,488
(256)
48,039
(12,901)
35,138
1,862
1,058
2,920
(48)
21
(27)
2,893
38,031
40,134
34,991
152
147
40,286
35,138
40,205
37,799
212
232
40,417
38,031
10
10
10.64p
10.60p
9.30p
9.27p
The notes on pages 80 to 139 are an integral part of these consolidated financial statements.
74
PHOTO-ME INTERNATIONAL PLC
STATE MENTS OF FINANC IAL POSI TI ON
For the year ended 30 April 2018
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
Deferred tax liabilities
Trade and other payables
Current liabilities
Financial liabilities
Provisions
Current tax
Trade and other payables
Notes
Group
2018
£’000
2017
£’000
Company
2018
£’000
2017
£’000
11
11
12
13
14
14
15
15
24
16
17
16
18
20
21
22
24
25
21
23
25
13,435
13,960
92,556
676
1,583
–
1,710
4,286
1,935
2,116
132,257
22,902
20,613
4,480
58,657
106,652
–
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
–
67
13,691
–
35
47,614
974
4,074
945
–
67,400
2,170
30,148
35
11,500
43,853
–
–
230
9,330
–
400
47,437
973
–
1,835
–
60,205
1,865
35,347
–
11,535
48,747
96
238,909
196,994
111,253
109,048
1,887
10,366
13,193
117,811
143,257
1,553
144,810
27,540
5,524
2,671
224
35,959
6,139
196
8,307
43,498
58,140
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
1,887
10,366
2,064
67,798
82,115
–
82,115
–
–
–
–
–
1,882
8,999
1,887
72,101
84,869
–
84,869
–
–
–
–
–
–
–
1,541
27,597
29,138
–
–
1,021
23,158
24,179
Total equity and liabilities
238,909
196,994
111,253
109,048
Photo-Me International plc is registered in England and Wales under Company registration number 00735438. These accounts were
approved by the Board on 10 July 2018 and signed on its behalf by:
Serge Crasnianski
Chief Executive Officer
John Lewis
Non-executive Chairman
The notes on pages 80 to 139 are an integral part of these consolidated financial statements.
75
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements GRO UP STATEME NT OF CASH F LOW S
For the year ended 30 April 2018
Notes
2018
£’000
2017
£’000
Cash flow from operating activities
Profit before tax
Finance cost
Finance revenue
Other gains
Operating profit
Share of post tax profit from associates
Amortisation of intangible assets
Depreciation of property, plant and equipment
Profit on sale of property, plant and equipment
Exchange differences
Other items
Changes in working capital:
Inventories
Trade and other receivables
Trade and other payables
Provisions
Cash generated from operations
Interest paid
Taxation paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired
Investment in associates
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
Purchase of available for sale investments
Dividends received from financial instruments held at FVTPL
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 in borrowings
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
50,175
297
(658)
(3,708)
46,106
(194)
2,768
22,301
(2,361)
(836)
(318)
(2,613)
(927)
(1,064)
(1,905)
60,957
(297)
(8,318)
52,342
(1,398)
–
–
(3,218)
201
(40,378)
4,689
(134)
285
144
304
(39,505)
1,372
(118)
(3,695)
26,382
687
(26,478)
(1,850)
10,987
47,505
165
58,657
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
(41,567)
848
(173)
(1,630)
693
(29)
(32,629)
(32,920)
(25,459)
71,005
1,959
47,505
9
18
The notes on pages 80 to 139 are an integral part of these consolidated financial statements.
76
PHOTO-ME INTERNATIONAL PLC COMPANY STATEM ENT OF CA S H F LOW S
For the year ended 30 April 2018
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
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
Notes
2018
£’000
2017
£’000
24,587
49,623
(2)
(4,297)
(16,497)
3,791
–
3,873
(2,330)
115
(305)
5,199
4,439
–
69
(373)
(40,084)
9,235
866
3,574
(96)
68
(142)
(30,373)
(7,216)
(10)
Cash generated from/(used in) operations
14,782
(24,094)
Interest paid
Taxation paid
Net cash generated from/(used in) 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
Dividends received from financial instruments held at FVTPL
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
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
2
(1,057)
13,727
–
–
–
–
(8,239)
2,498
285
–
16,801
11,345
1,372
–
(1)
(26,478)
(25,107)
(69)
(1,656)
(25,819)
(3,069)
356
(410)
5,037
(5,382)
957
–
60
40,363
37,912
848
(15,615)
(2)
(32,629)
(47,398)
(35)
(35,305)
11,535
11,500
46,840
11,535
9
18
The notes on pages 80 to 139 are an integral part of these consolidated financial statements.
77
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements GRO UP STATEME NT OF CHANG ES I N EQUI TY
For the year ended 30 April 2018
At 1 May 2016
Profit for the 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
Share options
Deferred tax on share options
Dividends
Total transactions with owners of the Parent
At 30 April 2017
At 1 May 2017
Profit for the year
Other comprehensive income/(expense)
Exchange differences
Tax on exchange
Translation reserve taken to income
statement on disposal of associate
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
Share options
Dividends
Total transactions with owners
of the Parent
At 30 April 2018
Share
capital
£’000
Share
premium
£’000
Other
reserves
£’000
Translation
reserve
£’000
Retained
earnings
£’000
Attributable
to owners
of the
Parent
£’000
Non-
controlling
interests
£’000
Total
£’000
1,877
–
8,156
–
1,874
–
8,633 101,101 121,641
34,991
34,991
–
1,109 122,750
35,138
147
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,192
1,058
–
–
3,192
1,058
85
–
3,277
1,058
–
(93)
(1,415)
–
–
93
(1,415)
–
–
–
–
–
(48)
21
(48)
21
–
–
–
–
(1,415)
–
(48)
21
(93)
(93)
2,835
2,835
66
35,057
2,808
37,799
85
232
2,893
38,031
5
–
–
–
5
1,882
1,882
–
843
–
–
–
843
8,999
8,999
–
–
–
–
–
–
1,781
1,781
–
–
–
–
–
–
848
–
296
296
6
6
(32,629)
(32,629)
(31,479)
(32,327)
11,468 103,831 127,961
11,468 103,831 127,961
40,134
40,134
–
–
–
–
–
–
848
296
6
(32,629)
(31,479)
1,341 129,302
1,341 129,302
40,286
152
–
–
–
–
–
–
–
5
–
–
–
–
–
–
–
–
–
1,367
–
–
–
–
–
–
–
–
–
–
–
–
158
(12)
(202)
–
–
–
158
(12)
60
–
218
(12)
(202)
–
(202)
–
–
150
(23)
150
(23)
–
–
150
(23)
(56)
127
(56) 40,261
71
40,205
60
212
131
40,417
–
–
–
–
197
(26,478)
1,372
197
(26,478)
–
–
–
1,372
197
(26,478)
5
1,887
1,367
10,366
–
1,781
–
(24,909)
(26,281)
11,412 117,811 143,257
–
(24,909)
1,553 144,810
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 80 to 139 are an integral part of these consolidated financial statements.
78
PHOTO-ME INTERNATIONAL PLC COMPANY STATEM ENT OF CH AN GES I N EQU ITY
For the year ended 30 April 2018
Share
capital
£’000
1,877
–
–
–
Share
premium
£’000
8,156
Other
reserves
£’000
1,660
–
–
–
At 1 May 2016
Profit for the year
Other comprehensive income
Total comprehensive income
Total comprehensive income for year
Transactions with owners of the Parent
Shares issued
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
At 1 May 2017
Profit for the year
Other comprehensive income
Total comprehensive income
Total comprehensive income
for the year
Transactions with owners
of the Parent
Shares issued
Share options
Capital contributions relating to share-
based payments (net of disposals)
Dividends
Total transactions with owners
of the Parent
At 30 April 2018
5
843
–
–
–
–
5
1,882
1,882
–
–
–
–
–
–
–
843
8,999
8,999
–
–
–
5
1,367
–
–
–
–
–
–
5
1,887
1,367
10,366
Retained
earnings
£’000
57,110
47,569
Total
£’000
68,803
47,569
–
–
47,569
47,569
–
69
(18)
–
848
69
(18)
227
(32,629)
(32,629)
(32,578)
72,101
72,101
22,155
(31,503)
84,869
84,869
22,155
–
–
22,155
22,155
–
20
–
1,372
20
177
(26,478)
(26,478)
(26,458)
67,798
(24,909)
82,115
–
–
–
–
–
–
227
–
227
1,887
1,887
–
–
–
–
–
177
–
177
2,064
Details of share capital and reserves are given in note 20.
The notes on pages 80 to 139 are an integral part of these consolidated financial statements.
79
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F INANCIAL STATE ME NTS
For the year ended 30 April 2018
AUTHO RISATI ON OF T HE F INA NCIA L STATEM E N TS A N D S TATEM E N T O F CO MP L IAN C E WI TH IFRSs
The Group and the Company financial statements of Photo-Me International plc (the “Company”) for the year ended 30 April 2018
were authorised for issue by the directors on 10 July 2018 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 the PHTM. The registered number of the Company is 735438 and its registered office is at
Unit 3B, Blenheim Rd, Epsom, KT19 9AP. The principal activities of the Group are shown on page 45.
The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and IFRS
Interpretation Committee interpretations as endorsed by the European Union (“EU”), and with those parts 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 P OLICIES
The principal accounting policies adopted in the preparation of the Group’s consolidated financial statements and the Company’s
individual financial statements are set out below. The policies have been consistently applied, unless otherwise stated, to all of the
statements presented. New standards adopted for this financial year are shown in note 2 on page 88.
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 following are the critical judgements, apart from those involving estimations (which are dealt with separately below), that the
directors have made in the process of applying the Group’s accounting policies and that have the most significant effect on the
amounts recognised in the financial statements.
1)
2)
Development costs – notes 1.4 and 11.
Management determine when the commercial viability of a project is capitalised as an intangible asset based on discounted
expected cash flows and the costs can be reliably measured. Judgement is required in determining the practice for capitalising
development costs and is required in assessing whether the development costs meet the criteria for capitalisation. This
judgement has been applied consistently year to year.
Taxation - note 1.17, 7 and 24
During the year, the Group implemented a new transfer pricing policy with the help of specialist external advisers.
In conjunction with the external advisers, management has determined that the transfer pricing policy will be deductible
as implemented in the current year.
The Group recognises deferred tax assets and liabilities based upon future taxable income and the expected recoverability of
the balance. The estimate will include assumptions regarding future income streams of the Group and the future movement in
corporation tax rates in the respective jurisdictions. The estimation of provisions in respect of current taxation depends on the
estimates and judgements in respect of taxation enquiries and the uncertainty surrounding resolution.
The following are the estimates and assumptions that the directors have made that have a significant risk of resulting in a material
adjustment to the carrying amounts of assets and liabilities within the next financial year.
80
PHOTO-ME INTERNATIONAL PLC
Group and Company
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)
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.
1.2 Basis of consolidation
The Group consolidates the financial statements of the Company and all of its subsidiaries, and includes associates under the equity
method, as at 30 April each year.
Subsidiaries
Subsidiaries are all entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to variable
returns 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 carrying value of the acquiror’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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NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
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 2018 and 2017.
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.
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PHOTO-ME INTERNATIONAL PLC The policies applied to the Group’s intangible assets are summarised as follows:
Useful lives
Amortisation
Research and
development costs
Finite
Straight-line basis,
with a maximum life
of four years from
commencement
of commercial
production, with no
residual value
Software
Finite
Straight-line basis,
with a maximum
life of three years,
with no residual value
Customer
related
Finite
Patents
and licences
Finite
Other
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
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:
When assets are leased out under a finance lease, the present value of the lease payments are recognised as a receivable. The
rental is allocated between finance income and repayment of capital in each accounting period using the actuarial method, such that
finance income will emerge as a constant rate of return on the lessor’s net investment in the lease.
Lease income on operating leases is recognised over the term of the lease on a straight-line basis and the asset is included in the
statement of financial position based on the nature of the asset.
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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 separately identifiable cash flows exist (cash-generating units) and the recoverable
amount is determined for the cash-generating unit. If necessary, the carrying value is reduced by charging an impairment loss in the
income statement.
Reversal of impairment
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its
recoverable amount, but so that it does not exceed the carrying amount that would have been determined had no impairment loss
been recognised. No impairment loss is reversed for goodwill.
1.9 Financial assets
Group
The Group classifies its financial assets on initial recognition in the following categories. The classification depends on the purpose
for which the financial assets were acquired.
(i)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market.
Such financial assets arise when the Group provides money, goods or services directly to a debtor with no intention of trading
the receivable. They are included in trade and other receivables in the statement of financial position. These assets are held at
amortised cost using the effective interest rate method.
(ii) Held to maturity financial assets
These financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturities that the
Group has the positive intention and ability to hold to maturity. These assets are held at amortised costs using the effective
interest rate method.
Included within these amounts are cash deposits that are subject to restrictions and are not freely available for use by the
Group until a future date.
(iii)
Financial assets at fair value through profit or loss
A financial asset is classified in this category if acquired principally for the purpose of trading or if so designated by
management. Assets held in this category are classified as current assets if expected to be settled within one year; otherwise
they are classified as non-current. Financial assets in this category are initially recorded and subsequently valued at fair value,
with changes in fair value recognised in the income statement.
(iv) Available-for-sale financial assets
Financial assets not classified in any of the above categories are shown as available-for-sale financial assets and are shown
as non-current assets, unless management intends to sell the financial assets within 12 months of the end of the financial year.
These assets are initially recognised at cost and are subsequently carried at fair value.
(v)
Recognition and measurement
For investments designated as financial assets at fair value through profit or loss or available-for-sale financial assets the
fair values of quoted investments are based on current bid prices. For unlisted investments the Group uses various valuation
techniques to determine fair values, including at cost less any provision for impairment, where appropriate.
At each year end date the Group assesses whether there is objective evidence that a financial asset, or group of financial
assets, has become impaired. Any impairment loss so recognised is reflected in the income statement. Indications of impairment
may include a reduction in the quoted price, a reduction in the underlying profitability of the investment and other factors
indicating that the value of the investment has fallen.
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to
offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and simultaneously settle the liability.
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PHOTO-ME INTERNATIONAL PLC
Company
In the Company statement of financial position, investments in subsidiaries and associates are stated at cost less impairment. The
Company reviews, at least annually, the carrying value of investments and performs an impairment exercise.
An impairment charge is made where there is evidence that the carrying value exceeds the future cash flows of the investment or
where its carrying amount will not be recovered from sale.
1.10 Inventories
Inventories are stated at the lower of cost and net realisable value. Cost includes costs incurred in bringing inventories to their present
location and condition. The cost of work-in-progress and finished goods includes an appropriate proportion of production overheads.
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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ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
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 fair value is expensed on a straight-line basis over the vesting period, based on management’s estimate
of the number of shares that will eventually 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.
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.
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PHOTO-ME INTERNATIONAL PLC 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 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 during the period including that held
in machines at the balance sheet 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 operating 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 and frequency. 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 providing a clear understanding of the
Group’s performance, as Specific items are by definition material, unusual and rare. Management consider their exclusion necessary
to provide a more clear understanding of the Group’s underlying performance.
For those years where Specific items are shown in the Group statement of Comprehensive Income an alternative earnings per share
is shown in the earnings per share note. Alternative earnings per share and alternative diluted earning per share are shown and are
calculated on earnings available to Ordinary shareholders excluding Specific items.
Underlying results are reported results adjusted to exclude the effect of Specific items.
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ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
2 NEW STANDARDS, AMENDMENTS A ND I N TE R P R E TATI ON S
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.
Disclosure Initiative (Amendments to IAS 7)
Recognition of Deferred Tax Assets for Unrealised Losses (Amendments to IAS 12)
Annual Improvements to IFRSs 2014–2016 Cycle – various standards (Amendments to IFRS 12)
Not adopted by the Group
The following are the significant new standards that have been issued by the International Accounting Standards Board but adoption
is not yet mandatory.
IFRS 9 Financial instruments
This standard is effective for accounting periods commencing on or after 1 January 2018.
Classification
IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which assets
are managed and their intrinsic cash flow characteristics.
IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, FVOCI and FVTPL and
eliminates the existing IAS 39 categories of held to maturity, loans and receivables and available-for-sale.
Based on its assessment, the Group does not believe that the new classification requirements will have a material impact on its
accounting for trade receivables, loans, investments in debt securities and investments in equity securities that are managed on a
fair value basis. At 30 April 2018, the Group had equity investments of £4,286,000 classified as available for sale that are held
to maximise cash flows through sale. Under IFRS 9, the Group intends on designating these investments as measured at FVTPL.
Consequently, all fair value gains and losses will be reported in the income statement.
Impairment of financial assets
IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a forward-looking ‘expected credit loss’ (ECL) model. This will require
considerable judgement about how changes in economic factors affect ECLs, which will be determined on a probability-weighted
basis.
The new impairment model will apply to financial assets measured at amortised cost or FVOCI, except for investments in equity
instruments, and to contract assets.
With 88.0% (2017: 90.9%) of the Group’s revenue consisting of prepaid vending activities with no inherent credit risk, the Group
does not believe that application of the IFRS 9 impairment model will result in additional impairment losses at 30 April 2018.
The ECL was calculated on the Group’s remaining revenue streams including equipment sales and its B2B laundry business. Based
on the 5 year average historic credit losses as a proportion of trade and other debtors compared to the total provision for bad
doubtful debts at 1 May 2018, the calculation showed that no ECL was required.
The calculation was prepared on a segmented basis with business units with a similar credit risk profile being segmented together.
Classification – Financial liabilities
IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities.
However, under IAS 39 all fair value changes of liabilities designated as at FVTPL are recognised in profit or loss, whereas under
IFRS 9 these fair value changes are generally presented as follows:
•
•
the amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in OCI; and
the remaining amount of change in the fair value is presented in profit or loss.
The Group has not designated any financial liabilities at FVTPL and it has no current intention to do so. The Group’s assessment did
not indicate any material impact regarding the classification of financial liabilities at 1 May 2018.
Disclosures
IFRS 9 requires extensive new disclosures, in particular regarding ECLs. The Group’s assessment included an analysis to identify data
gaps against current processes and the Group is in the process of implementing the system and controls changes that it believes will
be necessary to capture the required data.
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PHOTO-ME INTERNATIONAL PLC Transition
Changes in accounting policies resulting from the adoption of IFRS 9 will generally be applied retrospectively, except as
described below:
•
•
The Group will take advantage of the exemption allowing it not to restate comparative information for prior periods with
respect to classification and measurement (including impairment) changes. Differences in the carrying amounts of financial
assets and financial liabilities resulting from the adoption of IFRS 9 will generally be recognised in retained earnings and
reserves as at 1 May 2018.
The following assessments have to be made on the basis of the facts and circumstances that exist at the date of
initial application.
– The determination of the business model within which a financial asset is held.
–
The designation and revocation of previous designations of certain financial assets and financial liabilities as measured
at FVTPL.
– The designation of certain investments in equity instruments not held for trading as at FVOCI.
IFRS 15 Revenue from contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces
existing revenue recognition guidance, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer
Loyalty Programmes.
Vending revenue
It is the Group’s assessment that revenue arising from vending operations will be recognised at the same point under IFRS 15
as IAS 18.
Sales of equipment, spare parts, consumables & services
Sales of equipment, spare parts, consumables & services comprised 11.9% of Group revenue in the year ended 30 April 2018
(2017: 9.0%). Revenue is currently recognised when the goods are delivered to the customers’ premises, which is taken to be the
point in time at which the customer accepts the goods and the related risks and rewards of ownership transfer. Revenue is recognised
at this point provided that the revenue and costs can be measured reliably, recovery of the consideration is probable and there is no
continuing management involvement with the goods.
Under IFRS 15, revenue will be recognised when a customer obtains control of the goods.
The Group’s assessment indicates that revenue and associated costs will be recognised at the same point as under IAS18 with no
impact on revenue, receivables or retained earnings arising from the application of IFRS 15.
Construction contracts
Revenue derived under construction, installation and related contracts comprised 4.1% of total revenue (2017: 1.7%). Contract
revenue currently includes the initial amount agreed in the contract plus any agreed variations, and to the extent probable is currently
recognised on a percentage of completion basis when the outcome can be measured reliably. When a claim or variation is
recognised, the measure of contract progress or contract price is revised and the cumulative contract position is reassessed at each
reporting date.
Under IFRS 15, percentage of completion recognition of revenue is no longer permitted, with revenue only recognisable when a
legally enforceable right to receive funds has been crystallised.
Though the recognition of revenue will be different under IFRS 15, due to the quantum of revenue derived under such contracts
relative to the Group's other activities; the duration and size of those contracts, the Group does not expect the application of IFRS 15
to have a significant impact on its consolidated financial statements.
Transition
The Group plans to adopt IFRS 15 using the cumulative effect method, with the effect of initially applying this standard recognised
at the date of initial application (i.e. 1 May 2018). As a result, the Group will not apply the requirements of IFRS 15 to the
comparative period presented.
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ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements
NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
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 replacement 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.
3 SEGMENTAL ANALYSIS
IFRS 8 requires operating segments to be identified, based on information presented to the Chief Operating Decision Maker
(CODM) in order to allocate resources to the segments and monitor performance. The Group reports its segments on a geographical
basis, Asia, Continental Europe and United Kingdom & Ireland. 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, being the
CODM, believe that the economic characteristics of the European operations, together with the fact that they are similar in terms
of operations, use common systems and the nature of the regulatory environment allow them to be aggregated into one reporting
segment.
The CODM monitors performance at the underlying operating profit level before Specific items, interest and taxation.
In accordance with IFRS 8, no segment information is provided for assets and liabilities in the disclosures below, as this information is
not regularly provided to the Chief Operating Decision Maker.
The segment results are as follows:
Asia
£’000
Continental
Europe
£’000
United Kingdom
& Ireland
£’000
Corporate
costs
£’000
2018
Total revenue
Inter segment sales
Revenue from external customers
EBITDA
44,979
131,064
(6)
(9,930)
44,973
10,289
121,134
45,967
Depreciation and amortisation
(4,879)
(14,027)
Underlying operating profit
Specific items
Operating profit excluding associates
Share of post-tax profits
from associates
5,410
–
5,410
31,940
–
31,940
65,432
(1,725)
63,707
16,194
(5,794)
13,030
(2,630)
10,400
Operating profit
Other gains
Finance revenue
Finance costs
Profit before tax
Tax
Profit for year
–
–
–
(1,469)
(369)
(4,158)
2,320
(1,838)
45,912
Total
£’000
241,475
(11,661)
229,814
70,981
(25,069)
46,222
(310)
194
46,106
3,708
658
(297)
50,175
(9,889)
40,286
43,677
Capital expenditure
5,248
26,429
11,410
590
90
PHOTO-ME INTERNATIONAL PLC 2017
Total revenue
Inter segment sales
Revenue from external customers
EBITDA
Depreciation and amortisation
Underlying operating profit
Operating profit excluding associates
Share of post-tax profits from
associates
Operating profit
Finance revenue
Finance costs
Profit before tax
Tax
Profit for year
Asia
£’000
Continental
Europe
£’000
United Kingdom
& Ireland
£’000
Corporate
costs
£’000
49,472
124,739
53,870
(128)
(13,069)
49,344
12,340
(3,940)
8,400
8,400
111,670
46,978
(13,038)
33,940
33,940
(231)
53,639
12,349
(5,041)
7,308
7,308
–
–
–
(2,633)
(404)
(3,037)
(3,037)
Total
£’000
228,081
(13,428)
214,653
69,034
(22,423)
46,611
46,611
196
46,807
1,488
(256)
48,039
(12,901)
35,138
Capital expenditure
7,227
20,125
15,301
820
43,473
There were no Specific items in the year ended 30 April 2017 above operating profit.
Inter segment revenue mainly relates to sales of equipment.
The Parent Company is domiciled in the UK. Total revenue from external customers is as follows:
Total revenue from external customers
Asia and rest of the world
Europe
UK
Total revenue from external customers
Sales of equipment
Sales of spare parts, consumables & services
Other sales
Vending revenue
Total revenue
Group
2018
£’000
44,975
127,050
57,789
229,814
2018
£’000
16,967
10,363
285
27,615
202,199
229,814
2017
£’000
49,344
115,738
49,571
214,653
2017
£’000
9,971
9,249
331
19,551
195,102
214,653
91
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
4 PROFIT FOR TH E 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
Operating lease rentals
– property
– plant and equipment
Inventory cost
Cost of inventories recognised as an expense
Inventory provision 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
2018
£’000
1,824
944
2,768
2017
£’000
1,692
787
2,479
22,150
19,763
151
181
22,301
19,944
700
244
944
2018
£’000
686
1,225
1,911
24,299
(694)
23,605
2018
£’000
302
(311)
(137)
(664)
(2,361)
–
864
(77)
787
2017
£’000
613
1,025
1,638
14,674
(1,188)
13,486
2017
£’000
181
(2,987)
(170)
(3,142)
(887)
84
92
PHOTO-ME INTERNATIONAL PLC Audit and non-audit services
The following fees for audit and non-audit services were paid or are payable to the Company’s auditor, KPMG 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
2018
£’000
86
243
26
355
2018
£’000
45
2017
£’000
86
183
21
290
2017
£’000
40
In order to maintain the independence of the external auditors, the Board has determined policies as to what non-audit services
can be provided by the Company’s external auditors and the approval processes related thereto. This function is performed by the
Audit Committee. Such services will only be approved if there are clear efficiencies and added value benefits to the Company.
Fees paid to KPMG LLP and its associates for non-audit services to the Company itself are not disclosed individually, as they are
included above.
In addition to the audit fees payable to KPMG LLP and its associates, certain Group subsidiaries are audited by other firms.
The following shows the fees payable to those firms:
Audit fees
Other services
Summary
Total fees paid or payable to all of the Groups’ auditors for audit and other services were
Other operating income
Other operating income
2018
£’000
105
101
206
2018
£’000
561
2018
£’000
1,686
2017
£’000
101
–
101
2017
£’000
391
2017
£’000
2,203
Other operating income principally includes rental income from investment property (note 13).
Other gains
Other gains and losses comprises profits arising on financial assets classified as available for sale. They have been disclosed
separately in order to improve a reader’s understanding of the financial statements and are not disclosed within operating profit as
they are non-trading in nature.
Other gains
Gains on financial instruments classified as available for sale
3,708
–
The gain of £3,708,000 (2017: £nil) relates to the gain on the disposal of the Group's interest in Max Sight Limited and Fullwise
Limited as described in note 14.
Group
2018
£’000
2017
£’000
93
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
Specific items
Profit on sale of land & buildings
Restructuring costs
Group
2018
£’000
2,320
(2,630)
(310)
2017
£’000
–
–
–
Profit on sale of land relates to the profit realised following the sale of the former head office building in Bookham. Restructuring costs
relate to the refocusing of Photo-Me Retail Limited's operations to unattended digital printing kiosk activities and the closure of manned
retail outlets.
Reconciliation of profit before tax to underlying profit before tax
Underlying profit before tax
Profit before tax
Adjustments to exclude:
Gains on financial instruments classified as available for sale
Profit on sale of land & buildings
Restructuring costs
Translation reserve taken to profit and loss on disposal of subsidiary
Underlying profit before tax
There were no Specific items in the year ended 30 April 2017 above operating profit.
2018
£’000
2017
£’000
50,175
48,039
(3,708)
(2,320)
2,630
-
46,777
-
-
-
(1,415)
46,624
5 EMPLOYEES
Staff costs, including costs relating to the Group’s key management personnel, who comprise the directors of the parent company,
during the year, amounted to:
Wages and salaries
Social security costs
Share options granted to directors and employees
Post-employment benefit costs
– defined benefit schemes
– defined contribution schemes
– other post-employment costs
Group
2018
£’000
42,372
8,596
197
212
293
–
2017
£’000
40,658
8,402
296
220
289
278
51,670
50,143
94
PHOTO-ME INTERNATIONAL PLC
Directors’ emoluments
Full details of directors’ remuneration and share options are given in the Remuneration Report on pages 52 to 64.
The average number of employees during the year (including executive directors) comprised:
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 REVENUE AND COST S
Finance revenue
Bank interest
Other interest
Dividends received from investments
Other financial income
Finance costs
Bank loans and overdrafts at amortised cost
Other loans at amortised cost and finance leases
Group
2018
number
1,167
204
1,371
474
49
522
28
171
127
2017
number
975
418
1,393
296
257
518
35
161
126
1,371
1,393
2018
£’000
2017
£’000
5
138
285
230
658
286
11
297
69
7
–
1,412
1,488
241
15
256
95
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
7 TAXATION EXPENSE
Tax charges/(credits) in the statement of comprehensive income
Taxation
Current taxation
UK Corporation tax
– current year
– prior years
Overseas taxation
– current year
– prior years
Total current taxation
Deferred taxation
Origination and reversal of temporary differences
– current year: UK
– current year: overseas
Adjustments to estimated recoverable amounts of deferred tax assets arising in previous years
– UK
– Overseas
Impact of change in rate
Total deferred tax
Tax charge in the statement of comprehensive income
Tax relating to items charged to other components of comprehensive income
Corporation tax
Deferred tax
Tax (charge)/credit in other comprehensive income
2018
£’000
2017
£’000
5,517
(1,198)
4,319
3,230
1,302
4,532
8,851
934
19
–
–
85
1,038
9,889
2018
£’000
–
(12)
(12)
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
96
PHOTO-ME INTERNATIONAL PLC Reconciliation of total tax charge
The difference between the Group tax charge and the standard UK corporation tax rate of 19.0% (2017: 19.92%) is explained below:
Profit before tax
Tax using the UK corporation tax rate of 19.0% (2017: 19.9%)
Effect of:
– non–taxable items
– change in UK tax rates
– overseas tax rates
– income not assessable
– losses not recognised in deferred tax incurred/(relieved)
– adjustments to tax in respect of prior years
Total tax charge
Effective tax rate
2018
£’000
50,175
9,533
33
28
367
(711)
537
102
9,889
19.7%
2017
£’000
48,039
9,569
(254)
60
3,809
–
(1)
(282)
12,901
26.9%
The Group tax charge of £9.9m (2017: £12.9m) corresponds to an effective tax rate of 19.7% (2017: 26.9%).
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.
8 P ROFITS ATTRIBUTABLE TO M EMB ERS OF TH E PA R E N T CO MPAN Y
The profit for the year, after tax, dealt with in the financial statements of the Parent Company is £22,155,000
(2017: £47,569,000), including dividends received from subsidiaries.
9 DIVIDENDS PAID AND PROPOS ED
2018
2017
Pence per share
£’000
Pence per share
£’000
Interim
2017 paid on 11 May 2017
2016 paid on 12 May 2016
Final
3.090
–
11,633
–
2017 approved at AGM held on 25 October 2017
3.940
14,845
2016 paid 10 November 2016
Special
2016 paid 10 November 2016
–
–
–
–
7.030
26,478
–
2.575
–
3.285
2.815
8.675
–
9,669
–
12,365
10,595
32,629
Year ended 30 April 2018 – Proposed dividends not yet paid
The Board declared an interim dividend of 3.71p per share for the year ended 30 April 2018, amounting to £14,005,000, which
was paid on 11 May 2018. The Board proposes a final dividend for the year ended 30 April 2018 of 4.73p per share, which is
subject to shareholder approval at the Annual General Meeting to be held on 24 October 2018.
Year ended 30 April 2017 – Paid after 30 April 2017
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 proposed a final dividend for the year ended 30 April 2017 of 3.94p per share, which
was approved by shareholders at the Annual General Meeting held on 25 October 2017.
97
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements
NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
1 0 EARNINGS P ER SH AR E
Basic earnings per share amounts are calculated by dividing net earnings attributable to shareholders of the Parent of £40,134,000
(2017: £34,991,000) 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:
2018
Weighted
average
number of
shares
‘000
Earnings
£’000
Basic earnings per share
40,134
377,190
Effect of dilutive share options
1,555
Diluted earnings per share
40,134
378,745
2017
Weighted
average
number of
shares
‘000
Earnings
£’000
34,991
376,141
1,321
34,991
377,462
Earnings
per share
pence
9.30
(0.03)
9.27
Earnings
per share
pence
10.64
(0.04)
10.60
Potential shares (for example, arising from exercising share options) are treated as dilutive only when their conversion to shares would
decrease basic earnings per share or increase loss per share from continuing operations.
Alternative earnings per share
The table below reconciles earnings per share (EPS) and diluted earnings per share (DPS) before and after Specific items.
Profit for the year attributable to
owners of the Parent
Specific items net of tax
Gain on financial assets
classified as available for sale
Earnings after specific items
2018
Earnings
per share
pence
Diluted
earnings per
share
10.64
(0.05)
(0.98)
9.61
10.60
(0.05)
(0.98)
9.57
£’000
40,134
(190)
(3,708)
36,236
2017
Earnings
per share
pence
9.30
(0.38)
-
8.92
Diluted earnings
per share
9.27
(0.37)
-
8.90
£’000
34,991
(1,415)
-
33,576
Details of Specific items are set out in note 4.
98
PHOTO-ME INTERNATIONAL PLC
1 1 GOODWILL AND OT HER IN TAN GIB LE A S S ET S
Goodwill
Group
Cost:
At 1 May 2016
Exchange differences
At 30 April 2017
At 1 May 2017
Exchange differences
Additions
At 30 April 2018
Impairment charges:
At 1 May 2016
Exchange differences
At 30 April 2017
At 1 May 2017
At 30 April 2018
Net book value:
At 30 April 2018
At 30 April 2017
At 30 April 2016
The addition to goodwill in 2018 and 2017 relates to the acquisition of operations in the United Kingdom.
Company
The Company has no goodwill.
£’000
11,903
207
12,110
12,110
69
1,554
13,733
297
1
298
298
298
13,435
11,812
11,606
99
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
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 nine (2017: eight) 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 - Photo-Me Ireland Limited
CGU 2 - Photo-Me Northern Ireland
CGU 3 - Jolly Roger (Amusement Rides) Limited
CGU 4 - Fowler UK.com Limited
CGU 5 - Inox Equip Limited and Tersus Equip Limited
Total UK & Ireland
Continental Europe
CGU 1 – Photomaton SAS
CGU 2 – Fotofix-Schnellphotoautomaten G.m.b.H.
CGU 3 – Copyphot SA
Total Continental Europe
Asia
CGU 1 – Nippon Auto-Photo Kabushiki Kaisha
Total Asia
Total
Total
2018
£’000
154
14
317
1,273
1,554
3,312
315
2,021
542
2,878
2017
£’000
154
14
317
1,273
–
1,758
301
1,934
574
2,809
7,245
7,245
13,435
7,245
7,245
11,812
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% (2017: 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.
Exchange rate
Goodwill arising on the Group's interest in Nippon Auto-Photo Kabushiki Kaisha arose before 1 May 2004, was not retrospectively
adjusted to comply with IFRS and is therefore denominated in Sterling. As a result the exchange rate used to convert cash flows
denominated in Japanese Yen into Sterling is a key assumption.
Discount rate 6.9%–8.31% (2017: 6.5%–7.8%)
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 8.3%, (2017:7.7%), Ireland 7.9% (2017: 7.6%), France 7.8% (2017: 7.5%), Germany 7.5%
(2017:6.9%), Switzerland 6.9% (2017: 6.5%) and Japan 6.9% (2017: 6.5%). 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 reasonably 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 2018 (2017: none).
100
PHOTO-ME INTERNATIONAL PLC Other intangible assets
Group
Cost:
At 1 May 2016
Exchange differences
Additions
– Internally generated
– External
Disposals
Reclassifications
At 30 April 2017
At 1 May 2017
Exchange differences
Additions
– Internally generated
– External
Disposals
At 30 April 2018
Amortisation:
At 1 May 2016
Exchange differences
Provided during year
Disposals
Reclassifications
At 30 April 2017
At 1 May 2017
Exchange differences
Provided during year
Disposals
At 30 April 2018
Net book value:
At 30 April 2018
At 30 April 2017
At 30 April 2016
Research &
development
costs
£’000
Other
intangible
assets
£’000
6,113
364
2,390
–
(984)
–
7,883
7,883
142
2,510
–
(493)
8,000
513
–
4,296
(165)
13
12,657
12,657
174
–
708
(476)
Total
£’000
14,113
877
2,390
4,296
(1,149)
13
20,540
20,540
316
2,510
708
(969)
10,042
13,063
23,105
1,431
61
1,692
(984)
–
2,200
2,200
45
1,824
(493)
3,576
6,466
5,683
4,682
3,976
269
787
(156)
13
4,889
4,889
11
944
(275)
5,569
7,494
7,768
4,024
5,407
330
2,479
(1,140)
13
7,089
7,089
56
2,768
(768)
9,145
13,960
13,451
8,706
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 £3,478,000 corresponding to droit au bail (2017: £3,216,000
and 2016: £2,343,000).
Droit au 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 carried at 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
101
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
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 the fair value is less than their carrying value, an impairment loss is recognised and charged to cost of
sales. Management believes that no reasonably possible change in the basis of this assessment would cause the carrying value of
these rights to exceed their recoverable value.
Also included in other intangible assets is £2,549,500 (2017: £2,846,000) relating to the licence which grants the right to use
space in Asda stores following the acquisition of the Photo Division of Asda Stores Limited in the financial year ending 30 April
2017. The useful life of this intangible asset is finite and is being amortised over the term of the licence agreement (10 years) to
October 2026. The amortisation charge is included within cost of sales. The Group tests the carrying value of the Asda licence
annually for impairment, or more frequently if there are indications of impairment.
For the purpose of impairment testing, the recoverable amount of the cash generating unit was measured on the basis of its value in
use, by applying cash flow projections based on financial forecasts covering the period to October 2026. The key assumptions for
the value in use calculation were those regarding the discount rates, growth rates and expected changes to selling prices and direct
costs during the forecast period. The estimated growth rates were based on past performance and expectation of future changes
in the market. The growth rate used was 2% (2017: 2%) and the pre-tax rate used to discount the forecast cash flows was 5.93%
(2017: 5.93%).
Company
Cost:
At 1 May 2016
Additions
– Internally generated
– External
Disposals
– Internal
– External
At 30 April 2017
At 1 May 2017
Disposals
At 30 April 2018
Amortisation:
At 1 May 2016
Provided during year
Disposals
– Internal
– External
At 30 April 2017
At 1 May 2017
Provided during year
Disposals
At 30 April 2018
Net book value:
At 30 April 2018
At 30 April 2017
At 30 April 2016
102
Research &
development
costs
£’000
Other
intangible
assets
£’000
Patents &
trade marks
£’000
Total
£’000
1,457
1,285
5,506
8,248
376
–
(1,833)
–
–
–
–
–
243
314
(557)
–
–
–
–
–
–
–
–
1,214
–
34
(431)
(108)
780
780
(4)
776
630
275
(247)
(108)
550
550
163
(4)
709
67
230
655
–
–
376
34
(5,506)
(7,770)
–
–
–
–
–
(108)
780
780
(4)
776
1,652
277
2,525
866
(1,929)
(2,733)
–
–
–
–
–
–
–
–
(108)
550
550
163
(4)
709
67
230
3,854
5,723
PHOTO-ME INTERNATIONAL PLC 1 2 PROPERTY, PLANT AND EQU IPM ENT
Group
Cost:
At 1 May 2016
Exchange differences
Additions
– Internal
– External
Reclassifications
Disposals
At 30 April 2017
Exchange differences
Acquired with new subsidiary
Additions
– Internal
– External
Disposals
At 30 April 2018
Depreciation
At 1 May 2016
Exchange differences
Provided during year
Reclassifications
Disposals
At 30 April 2017
Exchange differences
New subsidiary
Provided during year
Disposals
At 30 April 2018
Net book value:
At 30 April 2018
At 30 April 2017
At 30 April 2016
Land &
Buildings
£’000
Photobooths
and vending
machines
£’000
Plant,
machinery,
furniture,
fixtures
and motor
vehicles
£’000
Total
£’000
5,059
331
–
515
–
(284)
5,621
66
–
–
814
(180)
188,310
12,247
25,471
1,804
218,840
14,382
1,381
32,406
(77)
(15,984)
218,283
2,569
–
1,424
34,164
(14,765)
–
2,485
77
(1,700)
28,137
1,067
49
–
4,057
(627)
1,381
35,406
–
(17,968)
252,041
3,702
49
1,424
39,035
(15,572)
6,321
241,675
32,683
280,679
3,767
278
92
–
(138)
3,999
43
–
165
(138)
138,642
20,337
162,746
8,732
18,673
(15)
(14,334)
151,698
1,243
–
20,693
(12,731)
1,430
1,164
15
(1,591)
21,355
820
20
1,427
(471)
10,440
19,929
–
(16,063)
177,052
2,106
20
22,285
(13,340)
4,069
160,903
23,151
188,123
2,252
1,622
1,292
80,772
66,585
49,668
9,532
6,782
5,134
92,556
74,989
56,094
Internal additions for photobooths and vending machines of £1,424,000 (2017: £1,381,000) relate to own work capitalised,
being equipment produced by the subsidiaries and capitalised by the group companies.
103
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
Included within Group property, plant and equipment on page 103 are assets held under finance leases, as follows:
Net book value
Additions/reclassifications
Depreciation charge
2018
2017
Photobooths
and vending
machines
£’000
Plant, machinery,
furniture, fixtures
and motor
vehicles
£’000
Photobooths
and vending
machines
£’000
Plant, machinery,
furniture, fixtures
and motor
vehicles
£’000
–
–
–
392
81
151
–
–
–
473
135
181
The Group tests all operating equipment asset classes with a carrying value of £150,000 or more for impairment annually, or more
frequently if there are indications of impairment. Impairment reviews on operating equipment are conducted on a value in use basis.
For the purpose of impairment testing, the recoverable amount of the CGU was measured on the basis of its value in use, by
applying cash flow projections based on financial forecasts covering a period of up to eight years. The key assumptions for the value
in use calculation were those regarding the discount rates, growth rates and expected changes to selling prices and direct costs
during the forecast period. The estimated growth rates were based on historic performance trends and budgets. The growth rate
used to extrapolate cash flow projections beyond the period covered by the financial forecasts ranged from 0% to 3% (2017: 0%-
3%). A conservative pre-tax discount rate of 10% (2017: 10%) was applied to the cash flows. No impairment losses were identified
(2017: £nil).
104
PHOTO-ME INTERNATIONAL PLC Company
Cost:
At 1 May 2016
Additions
– internal
– external
Disposals
– internal
– external
At 30 April 2017
Additions
– internal
– external
Disposals
– external
At 30 April 2018
Depreciation
At 1 May 2016
Provided during year
Disposals
– internal
– external
At 30 April 2017
Provided during year
Disposals
– external
At 30 April 2018
Net book value:
At 30 April 2018
At 30 April 2017
At 30 April 2016
Land &
Buildings
£’000
Photobooths
and vending
machines
£’000
Plant, machinery,
furniture, fixtures
and motor
vehicles
£’000
Total
£’000
100
36,809
1,063
37,972
–
–
–
(92)
8
–
–
–
8
100
–
–
(92)
8
–
–
8
–
–
–
4,788
396
(41)
(3,630)
38,322
6,120
1,502
(3,412)
42,532
28,495
3,540
(5)
(2,849)
29,181
3,643
(3,296)
29,528
13,004
9,141
8,314
–
198
(130)
(716)
415
–
617
(92)
940
994
34
(81)
(721)
226
68
(41)
253
687
189
69
4,788
594
(171)
(4,438)
38,745
6,120
2,119
(3,504)
43,480
29,589
3,574
(86)
(3,662)
29,415
3,711
(3,337)
29,789
13,691
9,330
8,383
Internal additions for photobooths and vending machines of £6,120,000 (2017: £4,788,000) 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.
105
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
1 3 INVESTMENT PROPERTY
Group
Cost:
At 1 May 2016
Exchange differences
At 30 April 2017
Exchange differences
At 30 April 2018
Depreciation
At 1 May 2016
Exchange differences
Provided during year
At 30 April 2017
Exchange differences
Provided during year
At 30 April 2018
Net book value:
At 30 April 2018
At 30 April 2017
At 30 April 2016
£’000
11,866
908
12,774
573
13,347
11,237
860
15
12,112
543
16
12,671
676
662
629
The investment property is freehold and is stated at cost.
The property was valued by an independent professional valuer in April 2018, with a value of €7.7m based on a market value for
similar properties.
The Group sold the rights to the future rental stream on the property for the period up to April 2019 in the year ended 30 April
2011, receiving €9.2m (£8.2m) in respect of this. The associated liability of €644,000 ( £566,000) is reflected in accruals and
deferred income (note 25).
Rental income from the investment property was £1,093,000 (2017: £1,038,000) (note 4) and finance costs were £7,000
(2017: £21,000).
The Group will continue to act as a cash collection agent for the underlying lease agreement.
The non-cancellable future minimum rentals receivable on this basis are as follows:
No later than one year
After one year but no more than five years
Company
The Company has no investment property.
2018
£’000
1,101
–
1,101
2017
£’000
1,033
1,033
2,066
106
PHOTO-ME INTERNATIONAL PLC 1 4 INV ESTMENTS IN A SSOCIATES AN D S UB SI D IA R IE S
Investment in associates
Group
Cost:
At 30 April 2016
Exchange differences
Additions
Share of profits
Dividends
At 30 April 2017
Exchange differences
Deemed disposal on Max Sight Limited and Fullwise Limited
Share of profits
Dividends
At 30 April 2018
£’000
1,713
104
361
196
(279)
2,095
(2)
(400)
194
(304)
1,583
On 28 February 2018, Max Sight Group Holdings Limited was listed on the Hong Kong Growth Enterprise Market. In preparation
for the listing, Max Sight Limited and Fullwise Limited (included in ‘Other’ below) were merged with certain other companies to form
an enlarged group (Max Sight Group Holdings Limited), resulting in a dilution of Photo-Me’s shareholding. Following the listing,
Photo-Me’s interest in Max Sight Group Holdings Limited was approximately 13.75% of the total issued share capital and voting
rights. As a result, Max Sight Limited and Fullwise Limited ceased to be associates and accordingly, Max Sight Limited and Fullwise
Limited were de-recognised as associated entities resulting in a deemed disposal. The amounts shown below in respect of Max Sight
Limited are the Group’s share of revenue and profit for the period in which Max Sight Limited and Fullwise Limited were associates.
The summarised financial information of the principal associates, relating to the Group’s share, is set out below. All associated
companies are unlisted.
Name
At 30 April 2017
Max Sight Ltd
Photo Direct Pty Ltd
Stilla Technologies SA
Other associates
At 30 April 2018
Max Sight Ltd
Photo Direct Pty Ltd
Stilla Technologies SA
Other associates
Country of
incorporation
Assets
£’000
Liabilities
£’000
Revenue
£’000
Share of profit
£’000
Interest
%
Hong Kong
Australia
France
Hong Kong
Australia
France
604
418
1,178
91
2,291
–
445
1,178
62
1,685
79
74
–
43
196
–
83
–
19
102
777
886
–
107
1,770
394
943
–
107
1,444
33.33
26.95
50.00
–
26.95
50.00
163
30
–
3
196
94
96
–
4
194
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.
107
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
Company
Costs:
At 1 May 2016
Additions
Capital increase relating to share-based payment (net)
Disposals
At 30 April 2017
Capital increase relating to share-based payment (net)
Disposals
At 30 April 2018
Provision:
At 1 May 2016
Decrease
At 30 April 2017
Decrease
At 30 April 2018
Net book value:
At 30 April 2018
At 30 April 2017
At 30 April 2016
Associated
undertakings
£’000
Subsidiary
undertakings
£’000
Total
£’000
45,712
3,069
227
(771)
45,305
3,069
227
(771)
47,830
48,237
177
(21)
177
(390)
47,986
48,024
843
(450)
393
(21)
372
850
(450)
400
(25)
375
47,614
47,437
44,462
47,649
47,837
44,862
407
–
–
–
407
–
(369)
38
7
–
7
(4)
3
35
400
400
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.
Included in the Company's investment in subsidiary undertakings is £33,843,000 (2017: £33,843,000) relating to the Company's
investment in Nippon Auto-Photo Kabushiki Kaisha.
The details of all the Group’s subsidiaries and associates are given in note 29.
1 5 FINANCIAL INST RU MENTS
Group Treasury
The Group has a centralised treasury function. 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 Group’s Treasury 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 Treasury
Company 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 monitors the performance of the Treasury function and is responsible for making changes to the personnel and limits of
authority of Treasury personnel.
The Board has provided written principles for overall risk management of the 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).
108
PHOTO-ME INTERNATIONAL PLC Liquidity risk
Liquidity risk is the risk that the Group will face in meeting its 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.
The Group maintained a strong net cash position throughout the year and preceding year as a result of cash generation from
the business.
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 the Treasury 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 its carrying value where cash is repayable on demand. For short-term
cash deposits and other items not repayable on demand, fair value is estimated at the present value of future cash flows, discounted
at the market rate of interest at the balance sheet date.
Interest-bearing borrowings
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest
at the balance sheet date. For finance leases the market rate of interest is determined by reference to similar lease agreements.
Trade and other payables
The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of
interest at the balance sheet date if the effect is material.
IFRS 13 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)
Level 3 – inputs for assets or liabilities that are not based on observable market data
The Group’s financial instruments are fair valued at level 3 with the exception of the investment in Max Sight Group Holdings Ltd,
which as a listed investment is valued at level 1.
109
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
Financial instruments by category
The tables below show financial instruments by category.
At 30 April 2018
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 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
Loans and
receivables
£’000
Available
for sale
£’000
1,710
–
17,676
58,657
78,043
–
4,286
–
–
4,286
Other financial
liabilities at
amortised cost
£’000
Loans and
receivables
£’000
2,389
–
17,080
47,505
66,974
33,325
354
40,736
74,415
Available
for sale
£’000
–
81
–
–
81
Other financial
liabilities at
amortised cost
£’000
10,238
444
39,486
50,168
Total
£’000
1,710
4,286
17,676
58,657
82,329
Total
£’000
33,325
354
40,736
74,415
Total
£’000
2,389
81
17,080
47,505
67,055
Total
£’000
10,238
444
39,486
50,168
110
PHOTO-ME INTERNATIONAL PLC 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:
Credit risk
(i)
(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.
(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 £1,612,000 (30 April 2017: £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.
111
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
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
2018
£’000
282
7
(137)
(8)
144
2017
£’000
420
33
(170)
(1)
282
2018
£’000
607
–
–
–
607
2017
£’000
591
–
16
–
607
At 30 April 2018, trade receivables of £3,392,000 (2017:£2,913,000) 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 current trade 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
2018
£’000
7,085
1,400
433
1,559
3,392
10,477
2017
£’000
8,475
545
382
1,986
2,913
11,388
2018
£’000
642
64
10
101
175
817
2017
£’000
804
18
6
91
115
919
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 £26,164,000 (2017:£33,272,000) are all current.
112
PHOTO-ME INTERNATIONAL PLC (ii) Liquidity risk
The Group’s liquidity risk management involves maintaining sufficient cash and cash equivalents and the availability of funding
through an adequate amount of committed credit facilities. Trading forecasts indicate that the current facilities provide more than
sufficient liquidity headroom to support the business for the foreseeable future. The net cash position at 30 April 2018 and 30 April
2017 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 2018 and 30 April 2017, 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 2018 and 30 April 2017 based on contractual undiscounted payments.
Group contractual cash flows
At 30 April 2018
Interest bearing loans and borrowings
and interest free loans
Finance leases
Rental payments
Trade and other payables
At 30 April 2017
Interest bearing loans and borrowings
and interest free loans
Finance leases
Rental payments
Trade and other payables
Company contractual cash flows
At 30 April 2018
Trade and other payables
Interest bearing group balances
including interest
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
6,406
6,363
6,321
6,278
4,207
5,025
34,600
133
139
39,945
46,484
–
55
–
22
–
4
–
–
–
353
39,945
6,502
6,376
6,300
4,211
5,025
74,898
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
Within one
year
£’000
27,001
–
27,001
22,375
–
22,375
Year 2
£’000
Year 3
£’000
Year 4
£’000
Year 5
£’000
Over
5 years
£’000
Total
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
27,001
–
27,001
–
22,375
–
–
–
22,375
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.
113
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
(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.
Financial instruments classified as available for sale
Included in financial instruments classified as available for sale is the Group’s and Company’s interest in Max Sight Group Holdings
Limited, which at 30 April 2018 amounted to £4,074,000 (30 April 2017: £nil). Max Sight Group Holdings Limited is listed and
is thus subject to variations in the quoted price. The Group’s other investments in equity securities are not listed, are not material thus
the Group does not have any significant exposure to price risk on these equity investments.
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.
2018
Profit for the year
Total equity
2017
Profit for the year
Total equity
Reported
£’000
10% increase
£’000
10% decrease
£’000
40,286
144,810
35,138
129,302
40,601
145,125
35,388
129,537
40,028
144,552
34,815
128,998
Borrowings
At 30 April 2018 and 30 April 2017 the Group had no borrowings which were not denominated in the functional currency of the
Group company concerned.
114
PHOTO-ME INTERNATIONAL PLC Analysis of net cash by currency
Group
2018
Sterling
Euro
Swiss Franc
US Dollar
Japanese yen
Other currencies
2017
Sterling
Euro
Swiss Franc
US Dollar
Japanese yen
Other currencies
Interest rate risk
Net cash
Mainly non-interest bearing current accounts:
– Cash at bank and in hand
Deposit accounts – generally interest bearing:
– Bank deposit accounts
– Restricted deposit accounts
Other items
Interest free and interest bearing loans
Interest bearing finance leases
Bank
£’000
13,573
35,006
2,820
139
4,669
2,450
Financial
assets
£’000
974
728
8
–
–
–
–
(33,325)
–
–
–
–
58,657
1,710
(33,325)
12,940
23,972
4,045
135
5,200
1,213
973
692
724
–
–
–
–
(9,545)
–
–
(693)
–
47,505
2,389
(10,238)
Loans
£’000
Leases
£’000
Total
£’000
(28)
(21)
–
–
(305)
–
(354)
(50)
(23)
–
–
(371)
–
(444)
14,519
2,388
2,828
139
4,364
2,450
26,688
13,863
15,096
4,769
135
4,136
1,213
39,212
2018
£’000
2017
£’000
58,050
47,094
607
1,710
(33,325)
(354)
26,688
411
2,389
(10,238)
(444)
39,212
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 2018 and 30 April 2017.
IFRS 7 sensitivity analysis
With current low interest rates and the Group’s 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 2018 of £33,325,000, of which £33,325,000 (30 April
2017 of £9,445,000) is subject to a fixed interest rate of 1.2%. An increase of 1% in the fixed rate of interest would result in an
extra £400,000 (30 April 2017: £95,000) of interest expense.
115
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
Terms and debt repayment schedule
The table below shows the maturity profile and interest rates of the Groups borrowings at 30 April 2018 and 30 April 2017.
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 2018 (2017: none).
Group
Status
Finance leases
Fixed rate
Loans
Loans
Fixed rate
Fixed rate
Currency
Various
Euro
JPY
Interest rate
Year of maturity
2018
Carrying amount
£’000
2017
Carrying amount
£’000
0.0% -7.2%
1.20%
1.48%
2023
2025
2018
354
33,325
–
444
9,545
693
33,679
10,682
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.
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
2018
£’000
58,657
(33,679)
24,978
2017
£’000
47,505
(10,682)
36,823
144,810
129,302
The Group has various borrowings and available facilities that contain certain external capital requirements (covenants) that are
considered normal for these types of arrangements. The Group remains comfortably within all such covenants.
15(d) Other financial assets held to maturity and available for sale
Group
Non-current
Assets held
to maturity
2018
£’000
Assets available
for sale
2018
£’000
1,710
1,710
212
212
Assets held
to maturity
2017
£’000
2,389
2,389
Assets available
for sale
2017
£’000
81
81
Assets held to maturity consist of restricted bank deposit accounts – see note 19.
116
PHOTO-ME INTERNATIONAL PLC Assets available for sale consist of short-term monetary funds of £nil (2017: £nil) and investments in listed and unlisted entities, net of
impairment provisions. Included in investments available for sale for the Group and Company at 30 April 2018 is the investment in
Max Sight Ltd of £4,074,000 (note 14).
Company
Non-current
Assets held
to maturity
2018
£’000
Assets available
for sale
2018
£’000
Assets held
to maturity
2017
£’000
Assets available
for sale
2017
£’000
974
974
–
–
973
973
–
–
Assets held to maturity consist of restricted bank deposit accounts – see note 19.
1 6 TRADE AND OT HER RECEIVA B LES
Non-current assets
Trade receivables – external
Other receivables
Prepayments and accrued income
Current assets
Trade receivables
Trade receivables – related parties
Amounts due from subsidiaries
Amounts due from associated undertakings
Other receivables
Prepayments and accrued income
Group
2018
£’000
1,599
472
45
2,116
2017
£’000
–
1,977
48
2,025
10,476
11,388
492
–
1,120
3,516
5,009
–
–
1,015
2,700
3,439
Company
2018
£’000
2017
£’000
–
–
–
–
–
–
–
–
817
–
919
–
26,164
33,272
–
406
2,761
–
79
1,077
35,347
20,613
18,542
30,148
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.
1 7 INV ENTORIES
Raw materials and consumables
Work-in-progress
Finished goods
Group
Company
2018
£’000
15,399
347
7,156
22,902
2017
£’000
15,223
118
4,077
19,418
2018
£’000
1,426
–
744
2,170
2017
£’000
1,267
–
598
1,865
The replacement value of inventories is not materially different from that stated above.
117
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
1 8 CASH AND CASH EQU IVALENTS
Group
2018
£’000
2017
£’000
Company
2018
£’000
2017
£’000
Cash at bank and in hand
58,050
47,094
11,500
11,515
Deposit accounts (excluding restricted deposits)
607
411
–
20
Cash and cash equivalents per statement of
financial position
Cash and cash equivalents per cash flow
58,657
58,657
47,505
47,505
11,500
11,500
11,535
11,535
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.
1 9 NET CASH
Cash and cash equivalents per statement of
financial position
Financial assets – held to maturity
Non-current borrowings
Current borrowings
Non-current finance leases
Current finance leases
Notes
18
15
21
21
21
21
The Company’s net cash excludes inter-group financing.
Group
2018
£’000
2017
£’000
Company
2018
£’000
2017
£’000
58,657
1,710
(27,319)
(6,006)
(221)
(133)
47,505
11,500
11,535
2,389
(7,894)
(2,344)
(298)
(146)
974
973
–
–
–
–
–
–
–
–
26,688
39,212
12,474
12,508
At 30 April 2018, £1,710,000 of the total net cash (2017: £2,389,000) 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 current and non-current borrowings outstanding.
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.
118
PHOTO-ME INTERNATIONAL PLC 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.
1 May
£’000
Exchange
differences
£’000
Other
movements
£’000
Cash flow
£’000
30 April
£’000
2017/18
Cash and cash equivalents per statement of
financial position and cash flow
Financial assets held to maturity
Non-current loans
Current loans
Leases
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
47,505
2,389
(7,894)
(2,344)
(444)
39,212
165
8
(354)
(46)
47
(180)
71,005
1,959
2,253
(8,866)
(1,515)
(462)
165
(678)
(116)
(32)
62,415
1,298
Other movements for finance leases relates to new finance leases during the year.
Company
2017/18
Cash and cash equivalents per statement of financial position and cash flow
Financial asset held to maturity
2016/17
–
–
7,311
(7,311)
(75)
(75)
–
–
1,650
(1,650)
(123)
(123)
10,987
(687)
58,657
1,710
(26,382)
(27,319)
3,695
118
(6,006)
(354)
(12,269)
26,688
(25,459)
47,505
(29)
–
937
173
2,389
(7,894)
(2,344)
(444)
(24,378)
39,212
1 May
£’000
Cash flow
£’000
30 April
£’000
11,535
973
12,508
(35)
1
(34)
11,500
974
12,474
Cash and cash equivalents per statement of financial position and cash flow
46,840
(35,305)
11,535
Financial asset held to maturity
971
2
973
47,811
(35,303)
12,508
119
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
2 0 SHARE CAPITAL AND RESE RV ES
Share capital
Group and Company
Allotted, issued and fully paid:
Ordinary shares of 0.5p each
At 1 May
Issued in year – share options
At 30 April
2018
Number
2017
Number
2018
£’000
2017
£’000
376,474,871
375,478,778
1,024,766
996,093
377,499,637
376,474,871
1,882
5
1,887
1,877
5
1,882
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:
Date options
granted
At
30 April
2017
Granted
during
year
Lapsed or
forfeited
during
year
12 Jul 2010
15,000
4 Jul 2011
105,000
13 Dec 2011
250,000
4 Jul 2012
262,000
9 Jul 2013
1,098,000
11 Jul 2014
1,331,700
9 Jul 2015
1,347,600
15 Dec 2015
57,400
13 Jul 2016
1,123,300
–
–
–
–
–
–
–
–
–
Exercised
during
year
(15,000)
At
30 April
2018
Exercise
price
Date from
which
exercisable
Last date
on which
exercisable
–
36.33p
12 Jul 2013
11 Jul 2017
(60,000)
45,000
65.25p
4 Jul 2014
3 Jul 2018
–
–
250,000
53.50p
13 Dec 2014 12 Dec 2018
262,000
39.17p
4 Jul 2015
3 Jul 2019
(100,000)
998,000
90.63p
9 Jul 2016
8 Jul 2020
(846,700)
485,000 145.33p
11 Jul 2017
10 Jul 2021
–
–
–
–
–
–
(156,934)
(3,066)
1,187,600 133.33p
9 Jul 2018
8 Jul 2022
–
(220,000)
–
–
–
57,400 153.25p 15 Dec 2018 14 Dec 2022
903,300 141.50p
13 July 2019
12 July 2023
705,200 157.00p
21 Jul 2020
21 Jul 2024
21 Jul 2017
–
985,200
(280,000)
5,590,000
985,200
(656,934) (1,024,766)
4,893,500
Date options
granted
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
Granted
during
year
Lapsed or
forfeited
during
year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(30,000)
–
–
Exercised
during
year
(44,093)
At
30 April
2017
Exercise
price
Date from
which
exercisable
Last date
on which
exercisable
–
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
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
13 Jul 2016
– 1,123,300
5,492,793 1,123,300
(30,000)
(996,093)
5,590,000
Full details of directors’ share options are given in the Remuneration report on pages 52 to 64.
120
PHOTO-ME INTERNATIONAL PLC 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 2018 is 121.2p (2017: 120.1p) and the weighted average
exercise price of options exercisable at 30 April 2018 is 91.9p (2017: 74.7p).
The weighted average share price for options exercised during the year ended 30 April 2018 was 133.7p (30 April 2017: 162.8p).
The weighted average remaining years for options outstanding at the year end date is 4 years (2017: 4.3 years).
121
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
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 2018 and 30 April 2017:
Date of grant
Vesting period
Share price volatility
Share price on date of grant
Option price
Expected term
Dividend yield
Risk free interest rate
Fair value
Date of grant
Vesting period
Share price volatility
Share price on date of grant
Option price
Expected term
Dividend yield
Risk free interest rate
Fair value
Date of grant
Vesting period
Share price volatility
Share price on date of grant
Option price
Expected term
Dividend yield
Risk free interest rate
Fair value
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
12 July 2010
3 years
52.80%
10.75p
10.92p
3 years
69.10%
35.50p
36.37p
3 years
70.10%
38.00p
36.33p
3.25years
3.25years
3.25years
0.00%
2.52%
4.693p
0.70%
2.27%
16.36p
3.29%
1.27%
15.95p
04 July 2011
13 December 2011
04 July 2012
3 years
65.40%
64.00p
65.25p
3 years
63.20%
50.25p
53.50p
3 years
58.30%
38.00p
39.17p
3.25years
3.25years
3.25years
3.13%
1.32%
24.46p
4.48%
0.50%
16.38p
6.58%
0.46%
10.23p
09 July 2013
11 July 2014
9 July 2015
3 years
48.50%
94.00p
90.63p
3 years
39.10%
141.00p
145.33p
3 years
30.70%
113.50p
133.33p
3.25 years
3.25 years
3.25 years
3.83%
0.62%
26.20p
2.66%
1.28%
32.20p
4.02%
0.82%
21.00p
15 December 2015
13 July 2016
21 July 2017
3 years
26.16%
154.00p
153.25p
3 years
26.35%
146.75p
141.50p
3 years
36.00%
159.00p
157.00p
3.25 years
3.25 years
3.25 years
3.32%
0.90%
21.78p
3.99%
0.11%
19.72p
4.00%
0.62%
30.61p
The charge for share-based payments is £197,000 (2017: £296,000) and for the Company the charge is £20,000 (2017: £69,000).
Share price volatility is based on historical data.
122
PHOTO-ME INTERNATIONAL PLC 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 2018 and 30 April 2017 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 (2017: £201,000) arising on the redemption of the deferred shares and
£1,864,000 (2017: £1,687,000) relating to the fair value of options granted to employees of Group undertakings.
2 1 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
2018
£’000
27,319
221
27,540
6,006
133
6,139
2017
£’000
7,894
298
8,192
2,344
146
2,490
Company
2018
£’000
2017
£’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 (2017: four) years (note 12). The total finance lease creditor at 30 April 2018 is £354,000, of which £133,000 is due
within one year and the remaining £221,000 due between two and five years, (2017: total finance lease creditor £444,000,
£146,000 due within one year and £298,000 due within two to five years).
2 2 PO ST-EMPLOYMENT BENEF I T OB LIGATION S
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.
123
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
The Group’s and the Company’s policy is to recognise actuarial gains and losses immediately each year in the statement of changes
in equity, under other comprehensive income. These comprise the impact on the defined benefit liability of changes in demographic
and financial assumptions compared with the start of the year, actual experience being different to those assumptions and the return
on plan assets above the amount included in net pension interest.
Defined contribution 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:
Overseas employment benefit obligations
Overseas defined benefit scheme
Group
2018
£’000
4,592
932
5,524
2017
£’000
4,441
1,015
5,456
Company
2018
£’000
–
–
–
2017
£’000
–
–
–
Photo-Me International plc defined benefit pension scheme
The Company operates a final salary defined benefit scheme in the UK for some long-serving employees, which is funded by
contributions from the Company and by members of the scheme. This pension scheme (the Photo-Me International plc Pension and
Life Assurance Fund) is closed to new entrants. The defined benefits are based upon the employee’s length of service and final
pensionable salary.
The actuarial valuation of the scheme has revealed a surplus at 30 April 2018, 30 April 2017, 30 April 2016 and 30 April 2015.
This surplus has not been recognised as an asset, in accordance with IFRIC 14, 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.
The Fund is administered by a corporate Trustee, with Trustee Directors, which is legally separate from the Company. The Trustee
Directors include representatives of both the Company and Fund members. The Trustee Directors are required by law to act in
the interest of all relevant beneficiaries and are responsible for the investment policy with regard to the assets plus the day to day
administration of the benefits.
The level of benefits provided by the Fund depends on a member’s length of service and salary at date of leaving or retiring from the
Fund. Annual pension increases between leaving the Fund and retirement are linked to increases in the Retail Prices Index (RPI). After
retirement, annual pension increases are at 3.0% pa for pension accrued before April 1997 and in line with increases in the RPI, up
to a maximum of 5.0% pa, for pension accrued from April 1997.
The benefit payments are from a trustee administered fund containing assets held in trust and governed by UK regulations and
practice. The amount of Company contributions is decided jointly by the Trustee Directors and the Company.
The Fund's investment strategy is decided by the Trustee Directors, in consultation with the Company. The Trustee Directors exercise
their powers of investment (or delegation where these powers have been delegated to a fund manager) in a manner calculated to
ensure the security, quality, liquidity and profitability of the portfolio as a whole. In order to avoid an undue concentration of risk a
spread of assets is held. The diversification is both within and across asset classes. The assets are invested in a manner appropriate
to the nature and duration of the expected future retirement benefits payable under the Fund. Day to day selection of stocks is
delegated to fund managers appointed by the Trustee Directors. As regards the review and selection of their fund managers, the
Trustee Directors take expert advice.
UK legislation requires that pension schemes are funded prudently. The most recent triennial funding valuation of the Fund was carried
out by a qualified actuary with an effective date of 1 June 2015. At this date the Fund had a funding level of 104% and a surplus of
approximately £0.3 million on a technical provisions basis. This basis uses actuarial assumptions adopted by the Trustee Directors of
the Fund that are consistent with the Fund continuing on an ongoing basis with support from the Company.
124
PHOTO-ME INTERNATIONAL PLC Risks associated with the Fund
The fund exposes the Company to a number of risks, the most significant of which are described below.
Risk
Asset volatility
Changes in bond yields
Inflation risk
The liabilities are calculated using a discount rate set with reference to corporate bond yields; if assets
underperform this yield, this will create a deficit.
A decrease in corporate bond yields will increase the value placed on the Fund's liabilities for IAS 19,
although this will be partially offset by an increase in the value of the Fund’s bond holdings and insurance
policies backing pensions in payment.
Some of the Fund’s benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities
(although, in most cases, caps on the level of inflationary increases are in place to protect against extreme
inflation). The majority of the assets are either unaffected by or only loosely correlated with inflation, meaning
that an increase in inflation will also increase the deficit.
Life expectancy
The majority of the Fund’s obligations are to provide benefits for the life of the member, so increases in life
expectancy will result in an increase in the liabilities.
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 gains on fund liabilities arising in demographic assumptions
Actuarial (gains)/losses from changes in financial assumptions
Actuarial gains on liabilities from experience
Benefits paid
Present value of defined benefit obligation at end of year
Reconciliation of the movement in the fair value of plan assets
Fair value of plan assets at beginning of year
Interest income on fund assets
Remeasurement (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 surplus
Effect of limit of recognition of an asset
Amount recognised in statement of financial position
2018
£’000
6,639
8
162
–
(296)
(139)
(87)
(340)
5,947
2018
£’000
7,223
176
(409)
7
–
(340)
6,657
2018
£’000
5,947
(6,657)
(710)
710
–
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
–
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 (2017: loss of £1,375,000) in respect of the
Company’s defined benefit scheme. This has been charged to retained earnings.
125
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
Amount recognised in profit and loss and other comprehensive income
2018
£’000
2017
£’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 below/(in excess of) that recognised in net interest
Actuarial (gains)/losses due to changes in financial assumptions
Actuarial gains due to changes in demographic assumptions
Actuarial gains on liabilities arising from experience
Adjustment due to the asset ceiling
Total income amount recognised in other comprehensive income
Total expense amount recognised in comprehensive income
8
–
8
8
409
(139)
(296)
(87)
112
(1)
7
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:
Bonds
Insurance policies
Other
2018
2017
£’000
3,914
2,730
13
6,657
%
59
41
–
100
£’000
4,090
3,133
–
7,223
9
–
9
9
(653)
607
(62)
(49)
157
–
9
%
57
43
–
100
There were no financial instruments of the Company included in the plan assets (2017: none) and there were no property assets
occupied by the Company (2017: none).
126
PHOTO-ME INTERNATIONAL PLC Principal actuarial assumptions
Discount rate for scheme liabilities
Rate for increase in salaries
Price inflation
Pension increases
30 April 2018
30 April 2017
2.70
1.50
3.20
3.00
2.50
1.50
3.30
3.00
The mortality tables used for 2018 are SAPS S2N Light tables for males and S2N all lives for females, with CMI 2014 projections
and a long term rate of improvement of 1.5% pa. The mortality tables used for 2017 are S2NXA Light tables with CMI 2014
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
2018
2017
23.4 years (age 88.4)
24.1 years (age 89.1)
24.3 years (age 89.3)
25.3 years (age 90.3)
25.0 years (age 90.0)
26.2 years (age 91.2)
26.1 years (age 91.1)
27.5 years (age 92.5)
Fair value of defined benefit obligation
Fair value of assets
Surplus
Experience (losses)/gains on fund assets
Experience (losses)/gains on plan liabilities
2018
£’000
5,947
6,657
710
2018
£’000
(409)
(87)
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
The liabilities for 2018, 2017, 2016, 2015 and 2014 relate 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 2018
As reported
Following a 0.1% decrease in the
discount rate
Following a 0.1% pa increase 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
8
8
8
8
–
–
–
–
8
8
8
8
Plan
assets
£’000
6,657
Defined
benefit
obligation
£’000
5,947
Surplus
£’000
710
6,681
6,015
666
6,660
5,964
696
6,928
6,277
651
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.
127
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
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 2018 and 30 April 2017.
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
2018
1.45%
1.75%
2017
1.35%
2.00%
61–63 years
62–64 years
1.75%
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 2018
and 30 April 2017.
The movement on these schemes is as follows:
At 1 May
Exchange differences
Utilised and other movements
At 30 April
2018
£’000
4,441
59
92
4,592
2017
£’000
3,833
304
304
4,441
Utilised and other movements for 2018 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 2018 and 30 April
2017 by independent actuaries.
Reconciliation of the movement in the present value of the defined benefit obligation
Present value of defined benefit obligation at 1 May
Exchange differences
Contribution by members
Current service cost
Interest cost
Remeasurement losses on plan liabilities
Prepaid risk premiums
Benefits deposited/(paid)
Administration costs
2018
£’000
4,062
(218)
45
196
25
(131)
(56)
(99)
2
2017
£’000
3,526
317
42
203
20
186
(63)
(171)
2
Present value of defined benefit obligation at 30 April
3,826
4,062
128
PHOTO-ME INTERNATIONAL PLC Reconciliation of the movement in the fair value of plan assets
Fair value of plan assets at 1 May
Exchange difference
Contributions by company and members
Expected return on plan assets
Remeasurement gain on plan assets
Benefits (paid)/deposited
Prepaid risk premiums
Fair value of plan assets at 30 April
Amount to be recognised in the statement of financial position
Net liability at 1 May
Exchange difference
Increase/(decrease) in liability
Net liability at 30 April
Amounts recognised in comprehensive income
Amount recognised in profit and loss
Amounts recognised in comprehensive income
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
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
2018
£’000
3,047
(165)
226
19
(78)
(99)
(56)
2017
£’000
2,604
234
211
14
218
(171)
(63)
2,894
3,047
2018
£’000
1,015
(53)
(30)
932
2017
£’000
922
83
10
1,015
2018
£’000
2017
£’000
196
2
6
204
78
(131)
(53)
151
203
2
6
211
(218)
186
(32)
179
%
2
68
30
100
30 April 2018
%
30 April 2017
%
0.70
n/a
1.20
0.00
0.60
n/a
2.00
0.00
2018
2017
£’000
69
1,955
870
2,894
%
2
68
30
100
£’000
51
2,077
919
3,047
The normal retirement age for males is between 60 – 65 years and for females between 59 – 64 years for both 2018 and 2017.
129
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
The mortality tables used in 2018 and 2017 were the BVG 2015 GT tables; 2016, 2015 and 2014 used the BVG 2010
GT tables.
History of assets, liabilities and actuarial gains and losses
Present value of defined benefit obligation
Fair value of assets
Deficit
Experience gains/(losses) 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
2018
£’000
3,826
2,894
(932)
2018
£’000
131
3%
(78)
(3%)
2017
£’000
4,062
3,047
(1,015)
2017
£’000
(186)
2016
£’000
3,526
2,604
(922)
2016
£’000
(107)
2015
£’000
3,381
2,491
(890)
2015
£’000
(571)
(5%)
3%
(17%)
218
168
7%
6%
94
3%
2014
£’000
2,529
2,205
(324)
2014
£’000
78
3%
1
0%
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
3,826
4,006
3,659
3,792
3,858
3,883
3,766
–
180
(167)
(34)
32
57
(60)
The Group’s best estimate for contributions to be paid by the company next year to the scheme is £204,000 (2017: £189,000).
The amount recognised in the income statement for this scheme was £211,000.
130
PHOTO-ME INTERNATIONAL PLC 2 3 PROVISIO NS
Group
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
At 30 April 2017
Exchange differences
Utilised and other movements
Charged to income statement
At 30 April 2018
Amount shown as non-current liability
Amount shown as current liability
Employee
related claims
£’000
Product
warranties
£’000
895
103
(88)
(861)
49
–
49
49
49
10
(52)
4
11
–
11
11
75
7
(1)
(37)
44
–
44
44
44
2
–
82
128
–
128
128
Other
£’000
3,143
307
(493)
(978)
1,979
–
1,979
1,979
1,979
70
(1,992)
–
57
–
57
57
Total
£’000
4,113
417
(582)
(1,876)
2,072
–
2,072
2,072
2,072
82
(2,044)
86
196
–
196
196
Employee related claims
Certain overseas Group undertakings have made provision for claims made by former employees.
Other provisions
Other provisions include provisions for potential legal claims against certain Group companies. During the year, Management
determined that certain provisions were no longer required and were therefore released.
2 4 DEFERRED TAXATION
Deferred tax comprises:
Timing differences relating to property, plant and
equipment
Other timing differences in recognising revenue and
expense items in other periods for taxation purposes:
– research and development
– post-employment benefit provisions
– losses
– other short term temporary differences
The closing balance comprises:
Deferred tax assets
Deferred tax liabilities
Group
2018
£’000
2017
£’000
Company
2018
£’000
2017
£’000
3,605
1,025
(701)
(1,465)
344
(645)
(209)
(2,359)
736
(1,935)
2,671
736
572
(1,796)
(220)
(135)
(554)
(3,641)
3,087
(554)
–
–
–
–
–
–
(244)
(945)
(370)
(1,835)
(945)
(1,835)
–
–
(945)
(1,835)
131
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
The movements on deferred taxation during the year were as follows:
Opening balance
Exchange differences
Acquired on acquisition of subsidiary
Group
2018
£’000
(554)
250
2
2017
£’000
Company
2018
£’000
2017
£’000
(2,329)
(1,835)
(2,227)
75
25
–
–
–
–
Charge/(Credit) for the year in income statement
1,038
1,702
890
374
Amounts (credited)/charged to other
comprehensive income
Closing balance
–
736
(27)
(554)
–
(945)
18
(1,835)
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 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 £1,249,000 (2017: £1,220,000) arising on temporary differences of £5,114,000
(2017: £5,052,000), in respect of unrelieved tax losses and other temporary differences have not been recognised, as their future
economic benefit is uncertain.
The expiry dates of unrelieved tax losses are as follows:
Expiring in less than one year
Expiring between two and 20 years
No expiry date
Group
2018
£’000
–
251
998
1,249
2017
£’000
–
228
992
1,220
In addition, the Group has an unrecognised deferred tax asset on gross capital losses of £3,756,000 (2017: £3,756,000), of
which £3,627,000 (2017: £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
There will be a reduction in the corporation tax rates in two of the major jurisdictions in which the Group operates, in the UK to 17%
from 2020 and in France to 25% from 2022 respectively. 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.
132
PHOTO-ME INTERNATIONAL PLC 2 5 TRADE AND OT HER PAYABL ES
Amounts shown as non-current liabilities
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
2018
£’000
224
–
224
2017
£’000
1,500
810
2,310
27,309
24,650
–
2,988
6,883
6,318
–
2,700
5,785
6,741
Company
2018
£’000
–
–
–
4,257
21,462
596
504
778
2017
£’000
–
–
–
3,585
17,496
783
395
899
43,498
39,876
27,597
23,158
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.
2 6 OPERATING LEA SES AND S ITE A GR EEMEN TS
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
2018
£’000
1,032
2,060
709
3,801
1,769
2,002
–
3,771
2,801
4,062
709
7,572
10,383
21,196
3,067
2017
£’000
742
1,197
177
2,116
1,172
1,991
–
3,163
1,914
3,188
177
5,279
5,263
7,743
2,538
34,646
15,544
Company
2018
£’000
208
684
709
1,601
738
789
–
2017
£’000
25
–
–
25
633
1,165
–
1,527
1,798
946
1,473
709
3,128
1,635
1,158
58
2,851
658
1,165
–
1,823
1,399
1,381
–
2,780
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.
133
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
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 examining the extent to which commission arrangements meet the
definition of a lease under IFRS 16.
2 7 CAPITAL COMMITMENT S A ND CONT ING E N T LI A BI L ITI E S
Capital commitments
The table below shows the amount of capital commitments with third parties for property, plant and equipment and the amounts
placed with the Group’s procurement companies for vending equipment.
Amounts with third parties
For supply of property, plant & equipment – mainly
vending equipment
Amounts with Group companies
Amount of vending equipment contracted by the
Group’s operating Companies with the Group’s
procurement companies
Group
2018
£’000
2017
£’000
Company
2018
£’000
–
4,496
–
669
–
–
2017
£’000
–
669
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 therefore consider
that no contingent liability for litigation exists.
The Group has no contingent liabilities with regard to its interest in the associated undertakings (2017: none).
2 8 RELATED PART IES
The following transactions were carried out with related parties:
Directors’ compensation
Salaries and other short-tem employee benefits excluding
long-term incentives and pension contributions
Post-employment benefits
Share– based payments – charge
Group
2018
£’000
682
–
–
682
2017
£’000
1,647
81
40
1,768
Company
2018
£’000
–
–
–
–
2017
£’000
1,647
81
40
1,768
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 52 to 64. 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 in respect of this was £nil (2017: £nil). No director who served during the year was a
member of the Company’s defined benefit pension scheme (2017: none).
Directors of the Company control 22.41% of the Ordinary shares of the Company. The interests of the directors are shown on page
61 of the Remuneration report.
134
PHOTO-ME INTERNATIONAL PLC Sales of goods and services, purchases and year end balances
Sales of goods and services
Associates
Trade and other receivable balances
Associates
Group
2018
£’000
97
97
1,612
1,612
2017
£’000
166
166
1,015
1,015
Company
2018
£’000
2017
£’000
–
–
–
–
–
–
–
–
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 £1,612,000 (30 April 2017:
£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
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
2018
£’000
43
2018
£’000
101
7,887
26,164
21,462
–
–
–
6,716
–
6,120
2017
£’000
44
2017
£’000
159
9,103
33,272
17,496
5
69
7,832
2,763
85
4,788
–
5,037
16,497
40,084
2018
£’000
304
2017
£’000
279
135
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
2 9 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, and the effective percentage of equity shares held) at 30 April 2018 is
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
Fowler UK.Com Limited
Jolly Roger (Amusement Rides)
Limited
Principal
Activity
Group
interest
Registered office address
Country of
incorporation
Operations
Production
100%
100%
Unit 3B, Blenheim Road, Epsom, KT19 9AP
Unit 3B, Blenheim Road, Epsom, KT19 9AP
MgInvest Investments Limited
Investment
100%*
Unit 3B, Blenheim Road, Epsom, KT19 9AP
Photo-Me (2016) Limited
Photo-Me (Retail) Limited
Photo-Me Limited
Photo-Me Trustees Limited
Power-Me Limited
Xpand Investments Limited
Inox Equip Limited
Tersus Equip Limited
Dormant
Operations
Corporate
Dormant
Dormant
Investment
Operations
Operations
Impact (Web Services) Limited
Dormant
100%
100%
100%
100%
100%
100%
100%
100%
100%
Photo-Me Ireland Limited
Operations
100%
Continental Europe
Prontophot Austria G.m.b.H.
Operations
100%
Unit 3B, Blenheim Road, Epsom, KT19 9AP
Unit 3B, Blenheim Road, Epsom, KT19 9AP
Unit 3B, Blenheim Road, Epsom, KT19 9AP
Unit 3B, Blenheim Road, Epsom, KT19 9AP
Unit 3B, Blenheim Road, Epsom, KT19 9AP
Unit 3B, Blenheim Road, Epsom, KT19 9AP
Unit 3B, Blenheim Road, Epsom, KT19 9AP
Unit 3B, Blenheim Road, Epsom, KT19 9AP
Unit A4, Alexander House, Tallaght Cross East,
Tallaght, Dublin 24
Republic of
Ireland
Unit A4, Alexander House, Tallaght Cross East,
Tallaght, Dublin 24
Republic of
Ireland
Viktor Kaplan Strasse 9B, 2201 Gerasdorf bei
Wien
Austria
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Prontophot Belgium NV
Operations
100%
Boulevard Paepsem 8a, 1070 Anderlecht
Belgium
Dormant
100%*
Husova 2117, 256 01 Benešov
Czech Republic
Photo-Me Czech Republic s.p.o.l.
s.r.o.
KIS SAS
Photomaton SAS
Photo-Me France SAS
SCI du Lotissement d’Echirolles
Investment
Property
100%
61%*
Trading
100%*
7 Rue Jean-Pierre Timbaud, 38130 Echirolles
Operations
100%*
4 Rue de la Croix Faron, 93217 La Plaine
Saint-Denis
7 Rue Jean-Pierre Timbaud, 38130 Echirolles
2110 Avenue Du Général De Gaulle, 38130
Echirolles
SCI Immobilière du 21
Property
100%*
7 Rue Jean-Pierre Timbaud, 38130 Echirolles
Stilla Technologies SA (associated)
Biotechnology
50%
1, Mail du Professeur Georges Mathé, 94800
Villejuif
France
France
France
France
France
France
Fotofix-Schnellphotoautomaten
G.m.b.H.
Operations
100%
Medienstrasse 4, 47807 Krefeld
Germany
Kis Italia Srl
Dormant
100%
Via Tiziano 32, 20145 Milano
Italy
136
PHOTO-ME INTERNATIONAL PLC Company name
Prontophot Holland B.V
KIS Poland s.p.z.o.o.
Animate Fotofixe Limitada
Principal
Activity
Operations
Operations
Operations
Group
interest
100%
100%
100%
KIS Automatic Services SL
Operations
100%
Registered office address
Loonseweg 14, 5527 AC Hapert
ul. Targowa 46/5, 03-733 Warszawa
Rua Sto António do Zaire, n°138, 2685-492
Camarate
Calle Freixa 26-28, Planta Bj, 08021
Barcelona
Copyphot SA
Operations
100%*
Sonnentalstrasse 5, 8600 Dübendorf
Prontophot (Schweiz) AG
Operations
100%
Sonnentalstrasse 5, 8600 Dübendorf
Country of
incorporation
Netherlands
Poland
Portugal
Spain
Switzerland
Switzerland
Asia & ROW
Photo Direct Pty Ltd (associated)
Sales &
Servicing
26.95%
Unit 4, 109 Whitehorse Rd, Blackburn, Victoria
3130
Australia
Photo-Me (Shanghai) Co Limited
Operations
100%*
Photo-Me Beijing Co Limited
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
Photomaton Maroc SARL (associated) Operations
Nippon Auto-Photo Kabushiki
Kaisha
Operations
50%
100%
Photo-Me Korea Company Limited
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
Photomatico (Singapore) Pte Limited
Operations
100%
26 Sin Ming Lane, Singapore 573971
KIS (Thailand) Limited
Dormant
49%
53/3, 4th Floor, Unit 4, Goldenland Bldg,
Soi Mahardlekluang 1, Badmiri Rd, Lumpini
Phathumwan, 10330 Bangkok
Morocco
Japan
Korea
Singapore
Thailand
* Investments in subsidiaries not owned directly by Photo-Me International plc.
Photo-Me CR.s.p.o.l.s.r.o. is owned 20% by Photo-Me International plc and 80% by Prontophot Austria G.m.b.H.
Photo-Me International plc owns 49% common shares in KIS (Thailand), 51% preferred stock is owned by other shareholders.
The results of the Group’s subsidiaries and associates are consolidated for the year ended 30 April. Certain subsidiaries and
associates have a different statutory year end, sometimes due to legal requirements in the country concerned.
The following subsidiaries and associates have year ends which are not 30 April:
SCI du Lotissement d’Echirolles
Photo-Me Beijing Co Limited
Photo-Me Shanghai Co Limited
KIS Technolgy Company Limited
Stilla Technologies SA
Photo Direct Pty Ltd
31 December
31 December
31 December
31 March
31 December
30 June
137
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements NOTES TO THE F I NA NC I AL S TAT EMEN T S CO N TI NUED
For the year ended 30 April 2018
3 0 BUSINESS COMBINAT IONS
Business Combinations
Current year
In July 2017, the Group acquired 100% of the voting rights and share capital of Inox Equip Limited (Inox) and Tersus Equip Limited
(Tersus), both UK based business to business laundry operations which provide bespoke professional design, procurement and
installation of laundry and catering equipment for blue chip companies and institutions such as care homes and hospitals. This
acquisition was in line with the Group’s strategy to expand its business to business laundry capabilities.
Results of these companies have been consolidated from 1 August 2017.
The table below shows the provisional fair value of net assets acquired and the consideration paid and payable.
Intangible assets
Property, plant and equipment
Inventory
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Deferred tax liabilities
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 assets
Cost of investment
Contingent consideration
Cash consideration
Net cash acquired with subsidiaries
Net cash consideration per Group statement of cash flows
£’000
28
28
404
1,158
155
1,717
1,745
(2)
(1,249)
(45)
(1,296)
449
294
1,554
2,003
2,003
(450)
1,553
(155)
1,398
Contingent consideration
Up to a further £450,000 is payable to the vendors contingent on earnings performance in the 12 months ending 31 July 2018
and 31 July 2019. The Directors consider it likely that the performance conditions will be met and have therefore recognised the
maximum amounts payable.
138
PHOTO-ME INTERNATIONAL PLC Goodwill
The goodwill of £1,554,000 arising from the acquisition is attributable to the value of the assembled workforce and the ability of the
senior staff to generate future business.
Acquired receivables
The provisional fair value of receivables acquired was £1,158,000. The gross contractual amounts receivable were £1,233,000
and at the acquisition date, £75,000 of contractual cashflows are not expected to be received.
The following amounts have been included in the Group’s post acquisition results in respect of the acquired businesses:
Revenue
Profit before tax
£’000
5,638
817
If the acquisition had been completed on 1 May 2017, the following results would have been included in the Group's results in
respect of the acquired businesses:
Revenue
Profit before tax
£’000
7,517
1,089
3 1 E VENTS AFTER BALANCE S HEET DAT E
On 23 May 2018, the Group acquired the entire issued share capital of La Wash Group, consisting of Global Network Investment
SL and Smart Real Estate & Refurbishment SL, for a consideration of €4.75 million, obtaining control of the group on that date. The
La Wash Group is a leader in the Spanish business-to-business laundry services market based in Barcelona.
The acquisition was funded from the Group’s cash resources.
Due to the proximity of the transaction to the reporting date, the purchase price allocation accounting has not been finalised.
Provisional details of the acquisition accounting will be provided in the interim report for the period ending 31 October 2018.
139
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements FI VE YEAR SUMM ARY
Income statement (unaudited)
Revenue
UK & Ireland
Continental Europe
Asia
Total revenue
2018
£’000
2017
£’000
2016
£’000
2015
£’000
2014
£’000
63,707
53,639
121,134
111,670
44,973
49,344
45,783
93,712
44,499
44,652
94,345
38,205
44,927
102,932
38,739
229,814
214,653
183,994
177,202
186,598
Operating profit after special items before finance costs
46,106
46,807
39,734
38,370
30,266
Net finance (cost)/income & Other gains
4,069
1,232
372
126
(173)
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.
50,175
48,039
40,106
38,496
30,093
(9,889)
(12,901)
(10,907)
(10,452)
(8,514)
40,286
35,138
29,199
28,044
21,579
40,134
34,991
29,066
27,900
21,422
152
147
133
144
157
40,286
35,138
29,199
28,044
21,579
10.64p
10.62p
3.71p
4.73p
–
9.30p
9.27p
3.09p
3.94p
–
8.04p
7.03p
7.77p
7.72p
2.575p
3.285p
2.815p
8.675p
7.49p
7.43p
2.34p
2.54p
–
4.88p
5.77p
5.70p
1.80p
1.95p
2.00p
5.75p
140
PHOTO-ME INTERNATIONAL PLC 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
2018
£’000
27,395
93,232
1,583
10,047
2017
£’000
25,263
75,651
2,095
8,136
2016
£’000
20,312
56,723
1,713
8,092
2015
£’000
16,687
48,721
848
7,486
2014
£’000
15,687
47,045
620
8,474
106,652
85,753
103,382
82,474
86,680
–
96
96
–
705
238,909
196,994
190,318
156,216
159,211
1,887
10,366
1,882
8,999
1,877
8,156
1,866
7,131
1,859
6,521
131,004
117,080
111,608
94,510
94,734
143,257
127,961
121,641
103,507
103,114
1,553
1,341
1,109
904
1,119
144,810
129,302
122,750
104,411
104,233
35,959
58,140
19,045
48,647
17,656
49,912
7,549
44,256
8,713
46,265
238,909
196,994
190,318
156,216
159,211
26,688
39,212
62,415
60,669
63,111
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
2018
2017
2016
2015
2014
35,588
33,787
19,402
18,287
17,327
2,510
70,981
30.9
2,390
69,034
32.2
2,935
56,530
30.7
2,560
55,087
31.1
1,125
47,642
25.5
47,000
48,000
45,500
44,600
43,850
141
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements COM PANY INF ORMATION & A DVI S OR S
Registered in England and Wales
Number 735438
Registered Office
Unit 3B
Blenhiem Road
KT19 9AP
Tel: +44 (0)1372 453399
Fax: +44 (0)1372 459064
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
25 Charterhouse Square
London
EC1M 6AE
Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
142
PHOTO-ME INTERNATIONAL PLC SHA REH OLDER INFORM ATI ON
Analysis of registered shareholding at 25 June 2018
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
1,860
398
47
7,275,709
345,254,754
24,969,174
2,305
377,499,637
1,123
817
213
89
25
38
549,548
2,524,291
6,984,281
22,123,604
17,517,075
327,800,838
2,305
377,499,637
1.92
91.46
6.62
100.00
0.15
0.67
1.85
5.86
4.64
86.83
100.00
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
143
ANNUAL REPORT 2018Strategic ReportCorporate GovernanceFinancial Statements SHAREHOLDE R INF OR MATI O N CO NT I NUED
Transfer office and registration services
Link 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:
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
BR3 4TU
Tel: 0871 664 0300
Overseas Tel: 00 44 208 639 3399
Fax: 0871 644 0399
Link Asset Services also offer a range of shareholder information online at www.signalshares.com
The Register of directors’ interests is maintained at the Registered Office in Epsom, details of which are shown below.
Copies of the Annual Report should be requested from:
Photo-Me International plc
Unit 3B Blenheim Road
Epsom
Surrey KT19 9AP
Tel: +44 (0)1372 453399
Fax: +44 (0)1372 459064
e-mail: ir@photo-me.co.uk
Financial calendar
Annual General Meeting
Half year results
(to 31 October 2018)
Full year results
(to 30 April 2019)
Dividend
Final (year to 30 April 2018) – ex dividend date
Final (year to 30 April 2018) – record date
Final (year to 30 April 2018) – payment date
24 October 2018
Announcement in December 2018
Announcement in July 2019
18 October 2018
19 October 2018
9 November 2018
144
PHOTO-ME INTERNATIONAL PLC Designed and produced by Invicomm
www.invicomm.com +44(0)207 205 2586
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PHOTO-ME INTERNATIONAL PLC
Unit 3B Blenheim Road
Epsom
KT19 9AP
T: +44(0)1372 453399
F: +44(0)1372 451044
W: www.photo-me.com