I N N O V A T I O N A N D D I V E R S I F I C A T I O N
A N N U A L R E P O R T 2 0 19
F U R T H E R I N F O R M AT I O N
For more information go to our website:
photo-me.com/investor-relations
C O N T E N T S
ST R AT E G I C R E P O R T
2019 in Summary
Business at a Glance
Chairman’s Statement
Business Model
Our Business
Identification
Laundry
Kiosks
Innovation & Diversification
Chief Executive’s Report
Business Review
Review of Performance by Geography
Key Performance Indicators
Financial Review
Principal Risks
Corporate Responsibility Statement
Viability Statement
04
05
06
08
10
12
14
16
16
18
27
28
30
34
41
C O R P O R AT E G OV E R N A N C E
Board of Directors and Company Secretary
Report of Directors
Corporate Governance
Remuneration Report
Annual Statement
Remuneration Policy Report
Annual Report on Remuneration
Statement of Directors’ Responsibilities
F I N A N C I A L STAT E M E N TS
Independent Auditor’s Report
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
Notes to the Financial Statements
Five-Year Summary
Company Information and Advisors
Shareholder Information
44
45
48
52
54
59
65
68
74
75
76
77
78
79
80
143
145
146
A B O U T P H O T O - M E
W E A R E ...
an international market leader in
automated instant-service equipment,
with approximately 47,000 unattended
vending units across 18 countries.
O U R V I S I O N ...
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.
O U R M I SS I O N . ..
is to extend the suite of services
available through our established
network and relationships through
investment in technological innovation
and the diversification of our operations
in existing and new geographies.
S T R A T E G I C R E P O R T
04
2019 IN SUMMARY
05
BUSINESS AT A GLANCE
06
CHAIRMAN'S STATEMENT
08
BUSINESS MODEL
28
FINANCIAL REVIEW
10
OUR BUSINESS
30
PRINCIPAL RISKS
18
BUSINESS REVIEW
34
CORPORATE
RESPONSIBILITY STATEMENT
2019 I N
S U M M A RY
F I N A N C I A L H I G H L I G H TS
E X PA N S I O N
REPORTED
REVENUE
£228.1m
2018: £229.8m
2017: £214.7m
REPORTED EBITDA
(excluding associates)
£69.7m
2018: £71.0m
2017: £69.0m
REPORTED
PROFIT BEFORE TAX
£42.6m
2018: £50.2m
2017: £48.0m
UNDERLYING
PROFIT BEFORE TAX¹
£44.1m
2018: £46.8m
2017: £46.6m
CASH GENERATED
FROM OPERATIONS
£63.9m
2018: £61.0m
2017: £61.3m
NET
CASH
£16.3m
2018: £26.7m
2017: £39.2m
EARNINGS PER SHARE
(DILUTED)
TOTAL ORDINARY
DIVIDEND PER SHARE
8.26p
2018: 10.60p
2017: 9.27p
8.44p
2018: 8.44p
2017: 7.03p²
¹ Underlying profit before tax is 2019 profit before tax adjusted
to exclude the gain on the disposal of the Group’s interest in
Stilla Technologies SA (£3.2m), the fair value loss on the Group’s
shareholding in Max Sight Group Holdings Limited (-£2.9m) and
restructuring costs incurred in the Group’s Japanese subsidiary
(-£1.8m). 2018 profit before tax is adjusted to exclude the gain on the
Group’s shareholding in Max Sight Group Holdings Limited (£3.7m),
the profit on disposal of the former head office building (£2.3m), and
restructuring fees relating to Photo-Me Retail (-£2.6m).
Continued expansion of Laundry
operations, with 18% more Revolution
units in operation
Total revenue from Revolution units
up by more than 30%
R E A D M O R E
P 12
I N N OVAT I O N
Continued deployment of secure
photo ID upload technology
November 2018: First banking
booths launched in Paris
R E A D M O R E
P 1 6
D I V E R S I F I C AT I O N F O R
F U T U R E G R OW T H
Entry into growing fresh fruit and
vegetable juice market through the
acquisition of SEMPA, the leader in
France for the commercialisation of
self-service fresh juice equipment in
April 2019
² Excludes special dividend of 2.851p per share
R E A D M O R E
P 17
4
PHOTO-ME INTERNATIONAL PLC B U S I N E SS
AT A G L A N C E
85%
OF OUR PROFITS
ARE GENERATED
OUTSIDE THE UK
C O N T I N E N TA L
E U R O P E
U K
& R E P U B L I C O F I R E L A N D
AS I A
46,956
VENDING UNITS
o Identification
o Laundry in operation
o Kiosks
o Other vending equipment
O U R B U S I N E SS E S
18
COUNTRIES
Austria, Belgium, China, France, Germany,
Italy, Ireland, Japan, Morocco
the Netherlands, Poland, Portugal,
Singapore, South Korea, Spain,
Switzerland, United Kingdom, Vietnam
3
CORE GEOGRAPHIES
o Continental Europe
o UK & the Republic of Ireland
o Asia
I D E N T I F I C AT I O N
L A U N D RY
K I O S KS
AN ESTABLISHED, INTERNATIONAL
NETWORK OF PHOTOBOOTHS
ACROSS 18 COUNTRIES
CONSUMER AND B2B LAUNDRY
OPERATIONS REMAIN THE PRIMARY
KEY GROWTH DRIVER FOR THE GROUP
HIGH-QUALITY, MARKET-LEADING
DIGITAL PRINTING EQUIPMENT IN
SIX COUNTRIES
R E A D M O R E
P 1 0
R E A D M O R E
P 1 2
R E A D M O R E
P 1 4
O U R ST R AT E G Y
O U R ST R AT E G Y
O U R ST R AT E G Y
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
Increase presence on high-footfall
sites through multi-service offering
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
Extend product partnerships into
new territories
Capitalise on market-leading
position and competitor landscape
5
ANNUAL REPORT 2019STRATEGIC REPORT C H A I R M A N ' S
STAT E M E N T
The Group remains cash
generative, with £63.9 million of
cash generated from operations
in the period. This supports the
Group’s ongoing investment in
innovation and its future growth.
S I R J O H N L E W I S
Non-executive Chairman
REPORTED REVENUE
£228.1m
NET CASH POSITION
£16.3m
6
In the 2019 financial year, the Group continued
to make progress on its growth strategy, led by
the expansion of our self-service Laundry operations.
Total revenues from Laundry operations increased by 19.0% and
revenue from Revolution increased by 30.2%. This growth was
achieved despite a decrease in B2B Laundry revenue and aided by
the first-year contribution from La Wash laundry services. In line with
our plan, revenue from Laundry activity has continued to increase as a
proportion of the Group’s total revenue.
Identification declined by 1.1%, reflecting challenging market
conditions in the UK. Excluding the UK operations, Identification
revenue grew by 0.7%
Revenue from Kiosks declined by 19.1% following the restructuring of
Photo-Me Retail, which happened in financial year 2018 and resulted
in a lower number of kiosks in the Group’s portfolio.
R E S U LTS
Our operations in Continental Europe and Asia continued to perform in
line with our expectations. As previously announced, overall trading in
the UK became more challenging than expected as consumer activity
slowed, owing to uncertainty around the UK’s exit from the European
Union. This resulted in lower revenues from business-to-business and
machine sales activity due to delays in order decisions, albeit we
expect part of these revenue delays to be recovered during the 2020
financial year.
Reported revenue reduced by 0.7% to £228.1 million and by 0.8% at
constant currency. Adjusted revenue increased by 2.1%, excluding a
£6.3 million revenue contribution from Photo-Me Retail in the prior year.
Reported EBITDA (excluding associates) was £69.7 million (2018:
£71.0 million), resulting in an EBITDA margin of 31.4%. Excluding the
impact of one-off items detailed below, EBITDA margin was 32.0%.
Adjusted profit before tax was 6.0% lower at £44.1 million when
adjusted for one-off items in the financial year 2019 and the prior
financial year. A reconciliation of Reported profit before tax to Adjusted
profit before tax is detailed in the table below.
R E C O N C I L I AT I O N O F R E P O R T E D P R O F I T B E F O R E TA X
TO A D J U ST E D P R O F I T B E F O R E TA X
Profit before tax
Adjustments to exclude:
– Gain on disposal of Stilla Technologies SA
– Fair value loss on financial instrument held
at FVTPL
– Gains on available for sale financial
instruments
– Profit on sale of land & buildings
– Restructuring costs
Underlying profit before tax
– Favourable commercial litigation
– Exchange gain
Adjusted profit before tax
2019
£m
42.6
(3.2)
2.9
–
–
1.8
44.1
–
–
44.1
2018
£m
50.2
–
–
(3.7)
(2.3)
2.6
46.8
(1.6)
(0.9)
44.3
PHOTO-ME INTERNATIONAL PLC
The Group remains highly cash generative, with £63.9 million of
cash generated from operations in the period (2018: £61.0 million).
This continues to support the ongoing investment in innovation and
its future growth.
per share, this brings the total dividend for the year ended 30 April
2019 to 8.44 pence per share (2018: 8.44 pence per share). This will
be paid on 8 November 2019 to shareholders listed on the register on
18 October 2019. The ex-dividend date will be 17 October 2019.
Capital expenditure in the year was £30.3 million (2018: £43.6
million). This reflects lower trading in the UK and our strategy to reduce
the level of capex and focus on the expansion of our Laundry business,
through deploying Revolution machines only at high-footfall locations.
Our net cash position at 30 April 2019 was £16.3 million, compared
with net cash of £26.7 million at 30 April 2018. This net cash position
reflects the distribution of dividends amounting to £31.9 million during
the financial year and £36.4 million of net cash outflow on investing
activities. Investing activities includes the net cash outflow on the
acquisition of La Wash (£4.2 million) and Sempa SARL (£9.3 million),
and ongoing investment in the growth of Photo-Me’s existing business.
ST R AT E G Y
Photo-Me operates, sells and services a wide range of instant-service
equipment, primarily aimed at the end consumer. Our operations are
focused on the three principal business areas of Identification, Laundry
and digital Kiosks. We currently operate across 18 countries.
Our growth strategy is focused on diversifying our operations by
developing new technologies with multiple applications that can be
speedily deployed, at a relatively low cost to the business, across new
and existing geographies and provide a rapid return on investment.
We have R&D centres in France (primary facility), Portugal, Vietnam and
Japan. Our capabilities in this area are supported by a team of more than
60 dedicated engineers.
In recent years, our activities have been focused on the development
and deployment of our secure upload Photo ID technology in our
Identification business.
AC Q U I S I T I O N O F S E M PA S A R L (“ S E M PA”)
In line with our strategy to grow Photo-Me through product diversification
and innovation, the Group acquired Sempa in April 2019, for a gross
consideration of €20.64 million, funded by a new debt facility of €20.0
million. Sempa’s net cash position upon acquisition was more than €9.8
million, resulting in net cash outflow of approximately €10.8 million.
Sempa is the leader in France for the commercialisation of self-service
fresh fruit juice equipment and operates 2,788 units. This acquisition
was an important strategic development for Photo-Me and marked
the Group’s entry into the fresh fruit and vegetable juice market, which
is estimated to be worth $154 billion¹ globally, and the platform to
develop a new business area for the Group.
Sempa has already achieved considerable success in France and
we look forward to replicating this via our existing network and
commercial relationships across Photo-Me’s international markets,
with our initial focus being on Europe. The rollout of the new juice
estate will leverage our existing network of regional field engineers
and our sales team, alongside Sempa’s industry experience, at low
incremental cost to the Group.
D I V I D E N D S
Photo-Me is committed to creating value for its shareholders. Subject
to approval at the Annual General Meeting, the Board is proposing a
final dividend payment of 4.73 pence per share (2018: 4.73 pence
per share). When combined with the interim dividend of 3.71 pence
For the current financial year ending 30 April 2020, the Board intends
to maintain a total dividend of 8.44 pence per ordinary share.
T H E B OA R D
During the last few years, having regard to the substantial changes
being made to the businesses of the Group, the Board has been
mindful of the importance of maintaining stability, and continuity.
Nevertheless, it is conscious of the need to bring in new Directors to
take the Group forward and will continue to review the composition of
the Board accordingly. The first steps have been taken following the
recent decision to appoint a new non-executive director to the Board.
C O L L E AG U E S
On behalf of the Board, I would like to thank all our team members
across the world for their ongoing hard work and continued
commitment throughout the year, supported by our country managers.
I would also like to welcome our new colleagues from Sempa into the
Group as we look ahead to building an exciting new business together.
C U R R E N T T R A D I N G A N D O U T LO O K
Our Laundry business will remain the core growth driver for the
Group, accounting for an increasing proportion of the Group’s total
revenue in the medium-term. We will continue to progress our rollout
of Identification products for governments that support our strong
presence in the Identification market.
Our entry into the growing fresh fruit and vegetable juice market will
enable us to further diversify our operations. We plan to replicate the
success of this business in France across other geographies in which
we operate. In addition, we are investing in new product development
to expand the products offered to the end consumer, such as an
apple and pineapple juice machine. The intention is for this business
to become a significant part of the Group’s growth strategy and in
the financial year ending 2020, we will report fresh juice activities
separately, alongside our current business areas of Identification,
Laundry and Kiosks.
This new business presents an exciting new opportunity for Photo-Me
and steps have been taken to introduce patents and innovations to
allow us to further penetrate the fresh juice market.
While consumer uncertainty continues to weigh on our business in the
UK, we remain confident that overall the Group will continue to perform
well in the current financial year and beyond.
S I R J O H N L E W I S
Non-executive Chairman
17 July 2019
¹ Source: Global Fruit and Vegetable Juice Market Research 2018-2025; Grand
View Research.
7
ANNUAL REPORT 2019STRATEGIC REPORT B U S I N E SS M O D E L
I N P U TS
AC T I V I T I E S
O U T P U TS
1 T E C H N O L O G Y
A N D I N N O V A T I O N
Development of proprietary solutions and
continuous focus on product diversification
2 L O N G - T E R M P A R T N E R S H I P S W I T H
H I G H - F O O T F A L L S I T E O W N E R S
Supermarkets, shopping malls, public transport
and public administration buildings
3 B R A N D S
R E C O G N I T I O N
Leading brands and household names
in key geographies
4 N E T W O R K O F S K I L L E D
F I E L D E N G I N E E R S
Supporting growth across business
areas at limited cost
5 T E L E M E T R Y
S Y S T E M
Sophisticated and tailored to Photo-Me’s
proprietary technology
6 I N D U S T R Y
E X P E R T I S E
Over 50 years working with
regulatory bodies
8
I D E N T I FI C AT I O N
L AU N D RY
K I OS KS
PHOTO-ME INTERNATIONAL PLC Our business model supports
our growth strategy
O U T P U TS
G R OW T H ST R AT E G Y
C O M P E T I T I V E L Y P R I C E D , H I G H - Q U A L I T Y
S E R V I C E S F O R C O N S U M E R S
Meeting increasing demand for instant services on-the-go
A D D I T I O N A L S E R V I C E S F O R S I T E O W N E R S
Supporting customer needs and footfall
S E C U R E S O L U T I O N S F O R G O V E R N M E N T S
Encrypted photo upload technology rolled out with
governments for official identification documents
S T A B L E C A S H F L O W S
Generated from existing network utilised to fund R&D
and support growth strategy
CONTINUED ROLLOUT OF
DIGITAL IDENTIFICATION
TECHNOLOGY AND
LAUNDRY SERVICES
To increase presence in existing
and new geographies
PRODUCT INNOVATION
AND DIVERSIFICATION
S H A R E H O L D E R V A L U E
Delivered through growth and dividends
To extend service offering through
existing networks
9
ANNUAL REPORT 2019STRATEGIC REPORT O U R B U S I N E SS
I D E N T I F I C AT I O N
AN ESTABLISHED NETWORK OF MORE
THAN 28,000 PHOTOBOOTHS SPANNING
18 COUNTRIES, PRIMARILY AIMED AT THE
CONSUMER MARKET.
IDENTIFICATION REPRESENTS
62%
of the Group’s total vending estate
(at 30 April 2019)
O U R O P E R AT I O N S
Our Identification business
delivers high cash flow that
supports the Group’s
investment in R&D and
overall growth strategy.
I N T E G R AT E D P R O P R I E TA RY S O F T WA R E
We use integrated proprietary software across our
entire estate to ensure that all photographs comply with
International Civil Aviation Organisation (ICAO) photo
identification regulations.
We are a prominent
international player in the
photobooth market, with leading
brands across all our operating
regions: Photo-Me, Photomaton,
ProntoPhot, FOTO.FIX,
PRONTO PHOT and Foto-Já!
AG R E E M E N TS I N P L AC E
W I T H G OV E R N M E N TS
Governments are seeking to improve and digitalise
security ID to combat fraud and security threats. We have
agreements in place with governments for the direct and
secure upload of photographs from our photobooths to their
servers for official documents.
ST R O N G S U P P O R T A N D
M A I N T E N A N C E N E T W O R K
Our photobooth estate is supported, maintained and
upgraded by our 700-strong network of skilled field
engineers, and monitored 24/7 by interconnected
remote telemetry.
10
PHOTO-ME INTERNATIONAL PLC ST R AT E G Y I N AC T I O N
Maintaining incremental revenue growth through
the continued extension of services offered via our
photobooth network, including the continued rollout
of encrypted photo ID upload technology for
documents such as passports and driving licences
in partnership with governments.
More than 12,000 photobooths are now connected to government
organisations and are enabled with encrypted photo ID upload
technology. This technology removes the opportunity for photo ID for
official documents to be manipulated.
To date, our government ID security solutions have been successfully
deployed in France, the UK, Ireland, Germany, Georgia, Japan,
Switzerland, the Netherlands and China.
T E C H N O LO G Y I N AC T I O N
UK passport renewal
1
PHOTO & SIGNATURE
ARE CAPTURED
2
Customer is given a photo
with a unique code
2
PHOTO-ME SERVER
Data transferred
to a secure server
4
WEB
REQUEST
5
AUTOMATIC
DATA TRANSFER
6
PHOTO DISPLAYED
ON THE ONLINE
APPLICATION
3
Customer inputs unique code during the
online application on the HMPO website
HMPO
GOVERNMENT
SERVER
URL creation
Checks and validation
7
Passport delivered to customer
11
ANNUAL REPORT 2019STRATEGIC REPORT O U R B U S I N E SS
L A U N D RY
PHOTO-ME’S HIGHEST MARGIN AND FASTEST
GROWING BUSINESS AREA, WITH OVER
4,800 UNITS DEPLOYED (OWNED, SOLD AND
ACQUIRED) AND CONTINUED STRONG
GROWTH MOMENTUM.
REVOLUTION MACHINES
IN OPERATION REPRESENTS
6%
of the total Group vending estate
(at 30 April 2019)
O U R O P E R AT I O N S
R E V O L U T I O N U N AT T E N D E D
L A U N D RY S E R V I C E S
o 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
o More than 2,700 Revolution units in France, the UK, Ireland,
Belgium and Portugal
S E L F - S E R V I C E L A U N D E R E T T E S H O P S
o Convenient and competitively priced large-capacity,
self-service laundry amenities, typically located near
town centres
o We operate launderettes in France, Spain, Portugal,
Ireland and the UK
B 2 B L A U N D RY S E R V I C E S
o B2B laundry services located in the UK and Spain
o Distribution and leasing of laundry and catering equipment,
targeting hospitals, care homes and universities
12
PHOTO-ME INTERNATIONAL PLC
ST R AT E G Y I N AC T I O N
Expansion of the Laundry business remains integral to Photo-Me’s growth strategy, with these activities
comprising an increasing proportion of the Group’s total revenue in the medium- to long-term.
E X PA N S I O N I N TO
N E W G E O G R A P H I E S
Rapid rollout of units across the Group’s established
network of high-footfall sites, and expansion into
new geographies for the Laundry business, with an
immediate focus on Germany and Austria.
M A X I M I S E O P E R AT I O N A L
E F F I C I E N C Y
Continued upgrade of units to maximise
operational efficiencies, customer experience
and revenue opportunities.
N U M B E R O F U N I TS I N C R E AS E D
U P G R A D E
The number of Revolution units in the 2019
financial year increased by 18%, with installations
increasing from 50 to 80 units per month at 30
April 2019.
1,957 units were upgraded to include detergent
dispensers at an additional cost to the customer
of €1 per wash.
Y E A R - O N -Y E A R G R OW T H
2019
2018
+9.4%
4,876
4,449
TOTAL LAUNDRY UNITS DEPLOYED
(owned, sold and acquisitions)
2019
2018
+19.0%
£43.70m
£36.7m
TOTAL REVENUE FROM LAUNDRY OPERATIONS
2019
2018
+18.1%
2,732
2,313
2019
2018
+30.2%
£27.6m
£21.2m
NUMBER OF REVOLUTION
UNITS IN OPERATION
TOTAL REVENUE FROM
REVOLUTION UNITS
13
ANNUAL REPORT 2019STRATEGIC REPORT O U R B U S I N E SS
K I O S KS
MORE THAN 5,400 DIGITAL PRINTING
KIOSKS POSITIONED IN ATTRACTIVE,
HIGH-FOOTFALL LOCATIONS ACROSS
THE UK, FRANCE, JAPAN, BELGIUM,
SWITZERLAND AND THE NETHERLANDS.
KIOSKS REPRESENTS
12%
of the total Group vending estate
(at 30 April 2019)
O U R O P E R AT I O N S
L E A D I N G T E C H N O LO G Y
Industry-leading technology enabling easy, competitively
priced, high-quality digital printing from smartphones, with a
wide range of printing formats and personalised products.
F U L LY I N T E G R AT E D W I T H M A J O R
S O C I A L M E D I A N E T W O R KS
Kiosks are fully integrated with major social media networks,
providing consumers with convenient, easy-to-use, reliable and
high-quality services for a seamless customer experience.
U P G R A D E S A N D I N N OVAT I O N
We carry out ongoing upgrades of kiosk technology and
introduce innovative software, enabling us to maximise
opportunities from digitally driven consumer trends, and to
profit from growing demand.
F O C U S O N D I V E R S I F I C AT I O N
Continued focus on diversification of kiosk service offerings
to maximise revenue opportunity.
14
PHOTO-ME INTERNATIONAL PLC OT H E R V E N D I N G E Q U I P M E N T
REPRESENTS
21%
of the total Group vending
estate (at 30 April 2019)
The remainder of our estate includes a variety of unattended
vending equipment, including children’s rides, amusement machines
and photocopiers.
C R O SS - S A L E E X T E N S I O N
This equipment offers a cross-sale extension to existing services within our established
footprint, where relationships with site owners already exist.
M A X I M I S E SY N E R G I E S A N D O P E R AT I N G M A R G I N S
The highly profitable machines are serviced by our network of skilled field engineers,
and provide additional services in locations alongside existing Photo-Me units. This
leverages the Group’s existing presence on high-footfall sites, maximising synergies and
operating margins.
O P P O R T U N I T I E S
The Group will continue to opportunistically rollout “Other” vending equipment where
suitable opportunities arise.
I N C R E AS I N G T H E O F F E R F O R S I T E OW N E R S
By grouping units offering different services together at one site, Photo-Me creates
a “destination” for customers, benefitting the site owner and Photo-Me by driving
additional footfall.
15
ANNUAL REPORT 2019STRATEGIC REPORT O U R B U S I N E SS
I N N OVAT I O N &
D I V E R S I F I C AT I O N
INVESTMENT IN INNOVATION REMAINS AT THE CORE OF THE BUSINESS
We are focused on technological innovation and new product development, upgrading our service offering
to meet changing consumer demand, and extending our suite of services.
Focus on three key areas:
1.
The refurbishment
and upgrade of
Photo-Me’s estate
2.
Further development and rollout
of proprietary security biometric
and Identification solutions
3.
Complementary
products and services
Our R&D capabilities are supported by a dedicated team of 60 engineers, across France, Portugal, Vietnam and Japan. The team explores and
identifies new market opportunities and carries out small-scale product manufacturing and testing.
At the Group’s primary R&D centre, in Echirolles (France), the team is focused on new product development and technological innovation.
16
P H O T O - M E I N T E R N AT I O N A L P L C
STRATEGIC REPORT
E N T RY I N TO T H E I N STA N T
F R E S H J U I C E S E L F - S E R V I C E
E Q U I P M E N T M A R K E T
E N T E R E D T H E $154 B N ¹ F R E S H F R U I T A N D
V E G E TA B L E J U I C E M A R K E T
through the acquisition of SEMPA Sarl, the leader in France for the
commercialisation of self-service fresh fruit juice equipment.
L A U N C H I N G R O L LO U T O F S E L F - S E R V I C E
F R E S H J U I C E E Q U I P M E N T
across Photo-Me’s geographic network, with the initial focus
on Europe.
P L A N S TO D E V E LO P I N N OVAT I V E N E W J U I C I N G
T E C H N O LO G Y
supported by Photo-Me’s R&D capabilities and Sempa’s
industry expertise.
In line with its strategy to diversify its instant service offering,
in April 2019 the Group acquired SEMPA Sarl (“Sempa”), the
leader in France for the commercialisation of self-service fresh
fruit juice equipment.
Photo-Me is now focused on developing a new growth business area in
fresh fruit juice.
The established Sempa business will give Photo-Me a strong foothold from which to
launch the expansion of this business across the Group’s geographic network, with the
initial rollout planned in Europe.
With Sempa’s expert team, Photo-Me’s R&D engineers will
develop additional self-service fresh fruit juice equipment to meet
the needs of these new markets for the juice business.
The Group is investing in new product development to expand
the products offered to the end consumer, such as an apple and
pineapple juice.
The intention is for this business to become a significant part of the
Group’s growth strategy in the financial year ending 2020.
Photo-Me’s R&D
engineers will
develop additional
self-service fresh fruit
juice equipment.
1 Source: Global Fruit and Vegetable Juice Market Research 2018-2025; Grand View Research.
A N N U A L R E P O R T 2 019
17
B U S I N E SS R E V I E W
C H I E F E X E C U T I V E ' S
R E P O R T
Our strategy is to grow our
business through ongoing
investment in new technologies
and complementary products
and services.
S E R G E C R A S N I A N S K I
Chief Executive Officer
& Deputy Chairman
KEY READS IN THE
BUSINESS REVIEW SECTION:
P19 OVERVIEW BY PRINCIPAL BUSINESS AREA
P22 REVIEW OF PERFORMANCE BY GEOGRAPHY
P27 KEY PERFORMANCE INDICATORS (KPIS)
P28 FINANCIAL REVIEW
18
The 2019 financial year saw macro headwinds
and uncertainty in the UK, resulting in a slowdown
in consumer activity and delays to B2B orders. This
put pressure on our financial performance, and
resulted in a £6.3 million negative revenue impact.
As a result, Group revenues declined by 0.7%, and
underlying profit before tax by 5.8%.
Across our other geographies, the Group performed well and in line
with our expectations. Overall, profit before tax was slightly ahead of
our revised expectations.
We continued to make progress on our strategy to expand our
Laundry services business and we achieved strong results with a 9.4%
increase in total laundry machines deployed, translating to a 19%
increase in Laundry revenue in the financial year, while total revenue
from Revolution laundry units increased by 30.2%.
G R OW T H ST R AT E G Y T H R O U G H P R O D U C T
D I V E R S I F I C AT I O N A N D I N N OVAT I O N
Investment in innovation remains at the core of the business. Photo-
Me’s growth strategy to deploy new products and technologies, with
multiple applications across our vending estate, is underpinned by an
ongoing focus on R&D and product diversification.
We have in-house research and development capabilities in
France, Portugal, Vietnam and Japan, and we employ a team of 60
dedicated and highly experienced engineers.
Our team specialises in new product and software development,
focused on three key areas: (i) the refurbishment and upgrade of our
estate; (ii) further development and rollout of our proprietary security
biometric identification solutions; and (iii) complementary products
and services.
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.
The expansion of our Laundry business, currently present in Ireland,
Portugal, the UK, France, Belgium and the Netherlands, remains a
core pillar of the Group’s long-term growth strategy, with significant
potential across territories where Photo-Me operates.
Expansion is funded by cash generated from our Identification
business, which represents a global market-leading estate of hi-tech
photobooths offering multiple instant-vending services.
Essentially, our growth strategy is 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.
PHOTO-ME INTERNATIONAL PLC We are continually looking for opportunities to enhance our product
offering and leverage our established long-term relationships with site
owners and our network of 700 dedicated field engineers.
D E V E LO P M E N T O F A F R E S H F R U I T A N D V E G E TA B L E
J U I C E P R O D U C T O F F E R I N G
As part of our diversification and innovation approach, we entered
the growing fresh fruit and vegetable juice market with the acquisition
of Sempa in April 2019.
The business operates via a lease model, whereby Sempa sells fresh
fruit juice equipment to customers through lease finance agreements.
It receives payment upon the sale of the equipment and the lease
finance contracts are then subject to renewal every 12 months (on
average). Sempa’s customers include retail, office and work spaces,
and small businesses.
The growing importance people place on their health and well-being
makes it an exciting time to enter this market, with the health benefits
of juice driving its popularity and potential.
Our intention is for Photo-Me to become the global leader in
self-service fresh fruit juice machines and to replicate the success
Sempa has seen in France by rolling out the equipment across our
European network.
The Group will open a fruit juice dedicated R&D department at our
facility in France, with the aim of launching a new and innovative fruit
juice machine by the calendar year end.
L A U N C H O F F I R ST B A N K I N G B O OT H
In November 2018 in Paris, the Group launched its first banking
booth, which provides front-end retail banking services to customers,
in partnership with Anytime, a Belgian Fintech business.
The technology allows customers to open a personal or professional
bank account and scan in supporting documents. It then takes two
days for a new account to be opened once compliance checks have
been completed. The new client receives a credit card by post within
two days of the account opening. In the long-term, customers will be
able to deposit cheques and cash in the booths and speak directly to
bank specialists through the screen. A 10-machine pilot is underway
in Paris with the support of Anytime.
OV E R V I E W BY P R I N C I PA L B U S I N E SS A R E A
IDENTIFICATION
(PHOTOBOOTHS AND INTEGRATED BIOMETRIC IDENTIFICATION SOLUTIONS)
Photo-Me is the world’s largest operator of photobooths with
market-leading photographic quality and technology, operating a
well-established network of photobooths. Identification accounts for
61.5% of vending units in operation.
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 geographies. In
particular, we remain focused on deploying our proven identification
security technology.
The increasing appetite from governments for improved and digitalised
security ID underpins our growth strategy in this business area.
Number of units in operation
Percentage of total
Group vending estate
(number of units)
Revenue
Capex
30 April
2019
28,873
61.5%
30 April
2018
29,015
62.0%
% change
-0.50%
-0.8%
£147.7m
£149.3m
£9.7m
£13.4m
-1.1%
-27.6%
Excluding the UK, Identification revenue grew by 0.7% and the
number of units in operation increased by 0.9%.
Overall Identification revenue declined by 1.1% due to a more
challenging trading environment in the UK and continued
uncertainty around the UK’s European Union exit negotiations.
Consumer activity slowed and footfall in retail locations was lower
year-on-year. In addition, the UK Government’s decision to allow
photo ID taken on a smart device or camera at home to be used
for passport photo ID has impacted Identification volumes and 178
machines were removed from the UK estate, and will be relocated,
due to rising operational costs.
19
ANNUAL REPORT 2019STRATEGIC REPORT C H I E F E X E C U T I V E ' S R E P O R T
B U S I N E SS R E V I E W C O N T I N U E D
Elsewhere, we continued to see a resilient performance aided by the
diversification of our photobooth services, including the rollout of our
encrypted photo ID upload technology with governments in the UK,
France, Germany, Ireland and the Netherlands. In total, the Group has
more than 12,000 photobooths connected to government organisations
for the secure upload of photo ID. The Board anticipates that this number
will continue to grow as discussions with governments progress.
Capex for Identification reduced in the period as we prioritised
expenditure on the installation of Revolution machines, only in
high-footfall locations.
We will continue to invest in advanced identification technology and
innovative solutions. A photobooth capable of delivering photo ID
for babies and young children – the “first of its kind” – is currently
in development.
LAUNDRY
(UNATTENDED LAUNDRY SERVICES, LAUNDERETTES, B2B SERVICES)
The Group owns and operates laundry units and has a presence in 12
countries, with operations primarily in France, the UK, Ireland, Belgium
and Portugal. The expansion of our Laundry business, organically and
by acquisition, remains the primary growth driver for the Group.
Total Laundry units deployed
(owned, sold and acquisitions)
Total revenue from Laundry
operations
30 April
2019
4,876
30 April
2018
4,449
% change
+9.4%
£43.7m
£36.7m
+19.0%
REVOLUTIONS (EXCLUDES LAUNDERETTES AND B2B):
Number of Revolutions
in operation*
Percentage of total Group vending
estate (number of units)
Total revenue from Revolutions
Revolution capex
2,732
2,313
+18.1%
5.8%
5.0%
+16.0%
£27.6m
£10.9m
£21.2m
£15.2m
+30.2%
-28.3%
* There were 2,522 full-time units in operation during FY2019 compared with 2,031 in
FY2018.
20
Total Laundry revenue grew by 19.0% year-on-year, despite a
decrease in B2B Laundry revenue (-£3.6m), and represented 19.2%
of total Group revenue in FY2019, up from 16.0% in the prior year
and 10.0% in FY2017.
This reflects the continued expansion of our Laundry operations,
with 427 new units installed in the 2019 financial year, generating
stable revenues. During the period we installed 45 units per month on
average (including sales).
The key geographies for growth continue to be the UK, Ireland,
Portugal, France and Spain. The Group is looking to expand its
presence in Germany (currently 20 units) and Austria (two units).
We anticipate approaching 6,000 owned, sold and acquired
laundry units by the calendar year 2020, subject to macro-economic
factors outside of the Group’s control. And we continue to expect
this business to contribute an increasing proportion of total Group
revenue and profits.
Our Laundry business comprises three areas of operation: Revolution,
Launderette and business-to-business 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
and petrol station forecourts. Our strategy is to expand the estate
through our partnerships with strategic site owners globally and
identify and expand into new high-demand markets.
The number of Revolution units in operation increased by 18.1%, with
2,732 machines operating as at 30 April 2019 (2018: 2,313).
Total revenue from Revolution units increased by 30.2% year-on-year,
and now represents 12.1% of our total vending estate compared with
9.2% in 2018, an increase of 2.9 percentage points.
Revolution capex reduced year-on-year, reflecting the lower cost
of production as well as the Group’s focus and discipline around
identifying high-footfall locations where the Revolution units will
be highly profitable, rather being wholly focused on the number of
units deployed.
PHOTO-ME INTERNATIONAL PLC
These Speedlab units were transferred to Photomaton in France,
were refurbished and then redeployed across the country to replace
previous generation machines.
The decrease in revenue is due to the removal of 491 kiosks related
to the Photo-Me Retail restructuring programme in FY2018. Excluding
this, Kiosks revenue has increased by 1.6%.
OT H E R V E N D I N G E Q U I P M E N T
The Group operates 9,621 (2018: 9,829) other vending units such
as children’s rides (4,749 units), photocopiers (3,391 units) and
amusement machines (455 units).
These are typically an extension of our product range at sites where
we have an existing relationship with the site owner.
While 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.
Launderette shops are typically situated in or near to town centres
where there is limited competition from other laundry services. Our
aim is to continue to expand our launderette presence through an
owned-and-operated model.
La Wash, our Spanish laundrettes franchise company, which the
Group acquired in May 2018, contributed revenue of £3.8 million
and a profit before tax of £0.9 million, in accordance with our
expectations. We are looking to build on our presence in Spain.
Business-to-business (B2B) laundry services provides the
distribution and leasing of laundry and catering equipment. Our
B2B customers include institutions such as hospitals, care homes and
universities. The growth strategy is to extend our presence both in the
UK and into new territories through acquisitive growth.
The Group’s B2B operations are currently focused in the UK, where
overall trading became more challenging in the second half of
the 2019 financial year. Year-on-year revenue declined 39.0%
to £5.8 million (2018: £9.5 million), while underlying loss before
tax declined to -£0.1m (2018: underlying profit before tax of
£1.4 million). As previously announced, due to economic uncertainty,
the Group experienced delays in orders that significantly affected the
performance of this business. We believe this is a timing issue and that
these orders will be recovered in FY2020.
KIOSKS
(HIGH-QUALITY DIGITAL PRINTING SERVICES)
Our digital printing kiosks offer a wide range of print formats and
personalised products that 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.
Our key geographic markets are France, the 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 geographies.
Number of units in operation
Percentage of total
Group vending estate
(number of units)
Revenue
Capex
30 April
2019
5,487
11.7%
30 April
2018
5,416
% change
+1.3%
11.6%
+0.9%
£13.3m
£2.3m
£16.5m
£3.4m
-19.1%
-32.4%
Our kiosk business is profitable and the number of units in operation
is growing.
At the period end, the number of kiosks in operation had increased
by 1.3%, following the completion of the relocation of kiosks from
Photo-Me Retail shops in the UK as part of the 2018 restructuring
programme. Upon relocation in France, revenue from these units
increased by at least 15.0%.
21
ANNUAL REPORT 2019STRATEGIC REPORT
C H I E F E X E C U T I V E ' S R E P O R T
R E V I E W O F
P E R F O R M A N C E
BY G E O G R A P H Y
Commentary on the Group’s financial performance
is set out below, in line with the segments as
operated by the Board and the management of
Photo-Me. These segmental breakdowns are
consistent with the information prepared to support
the Board decision-making. Although the Group
is not managed around product lines, some
commentary below relates to the performance of
specific products in the relevant geographies.
Performance by geography
Continental Europe
UK & Republic of Ireland
Asia
Corporate costs
Segment revenue
Year to 30 April
2018
£m
121.1
63.7
45.0
229.8
Change²
%
+7.9%
-16.9%
-1.0%
-0.7%
2019
£m
130.7
52.9
44.5
228.1
2018¹
£m
120.6
63.7
45.7
230
Segment operating profit
Year to 30 April
2018
£m
31.9
10.4
5.4
47.7
(1.8)
45.9
Change²
%
+5.0%
-32.2%
-13.5%
-1.9%
+148.8%
7.0%
2019
£m
33.5
7.1
4.7
45.3
(2.6)
42.7
2018¹
£m
32.0
10.0
5.5
47.5
(1.6)
45.9
¹ 2018 trading results of overseas subsidiaries converted at 2019 exchange rates
² Refers to change compared to reported results
3 Operating profit excludes results of associate
Segment revenue
Year to 30 April 2019
£228.1m
Segment operating profit
Year to 30 April 2019
£42.7m
Continental
Europe
£130.7m
+7.9%
2018: £121.1m
2018¹: £120.6m
UK & Republic
of Ireland
£52.9
-16.9%
2018: £63.7m
2018¹: £63.7m
Asia
£44.5m
-1.0%
2018: £45.0m
2018¹: £45.7m
Continental
Europe
£33.5m
+5.0%
2018: £31.9m
2018¹: £32.0m
UK & Republic
of Ireland
£7.1m
-32.2%
2018: £10.4m
2018¹: £10.0m
Asia
£4.7m
-13.5%
2018: £5.4m
2018¹: £5.5m
150
120
90
60
30
2018
20181
2019
2018
20181
2019
2018
20181
2019
2018
20181 2019
2018
20181 2019
2018 20181 2019
¹ 2018 trading results of overseas subsidiaries converted at 2019 exchange rates.
2 Refers to change compared with reported results.
3 Operating profit excludes results of associate
22
PHOTO-ME INTERNATIONAL PLC
K E Y F I N A N C I A L S
The Group reports its financial performance based on three
geographic regions of operation: (i) Continental Europe; (ii) the UK &
Republic of Ireland; and (iii) Asia.
In Continental Europe, revenue grew by 7.9% and operating profit
by 5.0%. The performance in the UK and Republic of Ireland was
impacted by macro headwinds in the UK, which resulted in a
revenue decline of 16.9% and a 32.2% decline in operating profit.
The turnaround in Asia continued and, while revenue was down
marginally, operating profit decreased by 13.5% including the impact
of restructuring fees of £1.8m relating to the Japanese business.
V E N D I N G U N I TS I N O P E R AT I O N S
In Continental Europe, machine units increased by 2.8% with
266 laundry units, 193 photobooths and 67 kiosks.
In the UK, 225 unprofitable photobooths were removed and
an additional 85 Revolution machines were in operation at the
period end.
Following the restructuring programme, the number of units in
Asia stabilised.
Number of vending units in operation
Continental Europe
UK & Republic of Ireland
Asia
At 30 April 2019
At 30 April 2018
No of units
25,230
11,701
10,025
46,956
% of total
53.8
24.9
21.3
100
No of units
24,550
12,055
10,105
46,710
% of total
52.6
25.8
21.6
100
Change
year-on-year
Change %
+2.8%
-2.9%
-0.8%
+0.5%
Number of vending units in operation
Year ended to 30 April 2019
46,956
Percentage of total vending units in operation
Year ended to 30 April 2019
Continental
Europe
25,230
+2.8%
2018: 24,550
UK & Republic
of Ireland
11,701
-2.9%
2018: 12,055
Asia
10,025
-0.8%
2018: 10,105
Continental
Europe
UK & Republic
of Ireland
Asia
53.8%
24.9%
21.3%
23
ANNUAL REPORT 2019STRATEGIC REPORT C H I E F E X E C U T I V E ' S R E P O R T
R E V I E W O F P E R F O R M A N C E BY G E O G R A P H Y C O N T I N U E D
C O N T I N E N TA L E U R O P E
F I N A N C I A L P E R F O R M A N C E
Continental Europe remains the largest revenue
contributor to the Group. As at 30 April 2019,
53.8% of the Group’s total units in operation were
situated in Continental Europe, compared with
52.6% in the prior year.
Reported Revenue
Year to 30 April 2019
£130.7m
+7.9%
Operating profit
Year to 30 April 2019
£33.5m
+5.0%
This region contributed 57.3% of Group revenues for
the year (2018: 52.7%) and 74.1% of Group operating
profit before Corporate costs (2018: 66.9%).
Looking forward, the acquisition of Sempa is expected
to be earnings enhancing in the financial year ending
30 April 2020 and thereafter. In the financial year
ending 30 April 2020, it is expected to contribute profit
before tax of approximately £3.2 million at current
exchange rates.
ST R AT E G I C P R O G R E SS
The Group remains in discussions with the French
Government regarding the extension of its secure photo
ID transfer technology to include photo ID for new
passports and identification cards (91% of photobooths
are enabled). Advanced discussions continued with
the Dutch Government regarding the deployment
of this technology for use in driving licences in the
Netherlands, with 70 photobooths already upgraded
with this technology.
The Laundry business continued to perform well,
including a first-time contribution from La Wash Group,
which was acquired in May 2018 for a consideration
of £4.4 million. The profit before tax of La Wash was
£0.9 million in FY2019. The expansion of Revolution
laundry operations in Portugal, France and Spain has
continued and the Group is looking at the viability of
the German and Austrian markets.
The acquisition of Sempa during the period marks
a significant new opportunity for the division, as
Photo-Me becomes the leading player in the French
self-service fresh juice equipment market, with plans to
expand this offer into other countries in Europe via the
Group’s existing commercial network.
24
PHOTO-ME INTERNATIONAL PLC U K & R E P U B L I C O F I R E L A N D
F I N A N C I A L P E R F O R M A N C E
( I N C L U D I N G C O R P O R AT E )
The performance of this division was impacted by the
macro environment, which generated ongoing consumer
uncertainty during the financial year, in relation to the
UK’s European Union exit negotiations and the tough
trading conditions faced by retailers.
Reported Revenue
Year to 30 April 2019
£52.9m
-16.9%
Operating profit
Year to 30 April 2019
£7.1m
-32.2%
A slowdown in consumer spending had a significant effect on
earnings in the UK, which affected performance at a Group level.
UK revenues in the first half were also temporarily impacted by
the restructuring of Photo-Me Retail in the UK market in H2 2018.
Photo-Me Retail now operates 241 kiosks, which generate very high
revenue levels and the business is profitable.
In Ireland the continued rollout of Laundry has delivered 64
new Revolutions, and revenue in the country increased significantly
by 19.0% in FY2019.
The UK & Republic of Ireland division contributed 23.2% of Group
revenue in the 2019 financial year (2018: 27.7%), and 15.6% of
operating profit before corporate costs (2018: 21.8%).
Revenue was £52.9 million, representing a decline of 16.9%
compared with the prior year. Operating profit was £7.1 million,
down 32.2%.
As at 30 April 2019, 24.9% of the Group’s total units in operation
were situated in the UK and the Republic of Ireland (2018: 25.8%).
ST R AT E G I C P R O G R E SS
In its Identification business, the Group continued to focus on the
rollout of secure digital upload technology for Irish Online Passport
renewal and British passport renewals. In total, 51.0% of the
photobooths are now enabled for UK passport renewals.
Laundry continued to grow apace in the Republic of Ireland, with
64 units deployed in the period. Laundry revenues now account for
77.4% of the country’s total revenue (2018: 72.2%).
25
ANNUAL REPORT 2019STRATEGIC REPORT C H I E F E X E C U T I V E ' S R E P O R T
R E V I E W O F P E R F O R M A N C E BY G E O G R A P H Y C O N T I N U E D
AS I A
F I N A N C I A L P E R F O R M A N C E
The Group’s turnaround plan implemented in H2 2018,
to address the significant challenges in the Japanese
market, identified in the 2018 financial year, has proven
highly effective. The business has recovered faster than
initially expected and is performing well.
Reported Revenue
Year to 30 April 2019
£44.5m
-1.0%
Operating profit
Year to 30 April 2019
£4.7m
-13.5%
Trading in the other countries in Asia remains strong. Asia contributed
19.5% of Group revenue (2018: 19.6%) and 10.3% of Group
operating profit excluding corporate costs (2018: 11.3%).
At constant currency, revenue was down marginally (-0.8%)
and operating profit decreased by 13.5%, including the costs of
restructuring the Japanese business.
The restructuring programme in Japan was completed in the period,
at a total cost of £1.8 million. Excluding this one-off cost, operating
profit in Asia was £6.5 million compared to £5.4 million in FY2018,
an increase of 20.2%.
As at 30 April 2019, 21.3% of the Group’s total units in operation
were situated in Asia, compared with 21.6% in the prior year.
ST R AT E G I C P R O G R E SS
While the photo identification market in Japan remains highly
competitive, the Board continues to believe that there are growth
opportunities, given Photo-Me’s dominant market position in the
country. As a result, the Group intends to commence the deployment
of its new units, which have a significantly lower production cost
than the units deployed previously and will offer a 35.0% faster
return on investment.
26
PHOTO-ME INTERNATIONAL PLC K E Y P E R F O R M A N C E
I N D I C ATO R S ( K P I s)
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
Total Group revenue at actual rate
of exchange
Group profit before tax
Underlying profit before tax
EBITDA margin
The EBITDA margin is a good indicator
of improved profitability
Gross takings
(including Photo-Me Retail)
Gross takings is an important indicator
of the trend in our core vending business
Performance
30 April 2019
30 April 2018
£228.1m
£229.8m
£42.6m
£50.2m
£44.1m
£46.8m
31.4%
32.0%
-0.7%
+3.9%
Increase in number of photobooths
The increase in number of photobooths is a constant
priority and a main driver for growth
-142
+474
Increase in number of Laundry units
(operated or sold)
The increase in number of laundry units measures our
penetration in markets where there is a significant
potential for growth and strong profits
+427
+1,198
F U T U R E P R O S P E C TS
The Group will remain focused on driving profitability from its existing
estate and investing in new and complementary products to extend
the suite of services available through its established instant-service
equipment network. There will be a strong focus on R&D, particularly
as it relates to the Group’s fresh fruit juice offering and its entry into this
highly attractive new market for the Group. We remain confident for
the future.
O U R T E A M
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.
This year the business has met with both challenges and successes. I
would like to take this opportunity to specifically thank the teams who
have worked so successfully on the recovery of our Japan operations
to deliver strong results that give us real confidence in the future of this
business. I would also like to acknowledge the ongoing hard work of
our teams, which continue to meet the challenges of the UK market.
In addition, I would like to welcome the Sempa team to Photo-Me.
We look forward to replicating the success they have already
achieved in France across the territories that Photo-Me operates,
through the sharing of technological and industry expertise.
27
ANNUAL REPORT 2019STRATEGIC REPORT
F I N A N C I A L R E V I E W
The Group delivered a stable performance
despite significant headwinds in the UK market,
which impacted the financial performance of
the UK and the Republic of Ireland region.
Reported revenue declined by 0.7% to £228.1 million, supported
by the continued growth of our Laundry operations in Europe and a
strong recovery in Asia.
R E V I E W O F O P E R AT I N G C O STS
Operating costs were £185.5 million:
Operating profit also declined by 7.0%.
Staff costs were £48.9 million. The ratio of staff costs to revenue is
21.4% (2018: 22.5%).
April 2019
£m
48.9
April 2018
£m
51.7
19.5
89.9
158.3
27.0
0.2
185.5
23.6
85.9
161.2
25.1
(2.4)
183.9
April 2018
(constant
rate)
£m
51.7
23.6
86.3
161.6
25.1
(2.4)
184.3
Staff costs
Inventory costs
Other operating costs
Depreciation & amortisation
Profit on disposal of fixed assets
Operating costs
E A R N I N G S P E R S H A R E
Diluted earnings per share were 8.26 pence (2018: 10.60 pence),
a decrease of 22.1%. Basic earnings per share were 8.27 pence
(2018: 10.64 pence).
TA X AT I O N
The Group tax charge of £11.3 million corresponds to an effective
tax rate of 26.6% (2018: 19.7%). The increase in the effective tax rate
over last year is attributable to a one off catch up deferred tax charge
in the Group’s French operations.
The Group undertakes business in 18 countries worldwide, with
most of the tax charge arising in France, Japan and the UK. 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, ensuring compliance with the
Group’s tax policy and guidelines.
D I V I D E N D S
During the year, the Group paid dividends totalling £31.9 million,
in respect of the interim and final dividends for the year ended
30 April 2018.
The interim dividend for the year ended 30 April 2019 was
3.71 pence per share (2018: 3.71 pence), which was paid to
shareholders on the register on 5 April 2019.
Revenue
EBITDA (excluding associates)
Operating profit (excluding associates)
Profit before tax
Profit after tax
April 2019
£m
228.1
April 2018
£m
229.8
69.7
42.7
42.6
31.3
The movements in turnover are outlined in the following table:
Turnover at 30 April 2018
Change in core business revenue:
Continental Europe
The UK & Ireland
Asia
Impact of exchange rates
Turnover at 30 April 2019
71.0
45.9
50.2
40.3
£m
229.8
10.1
(10.8)
(1.2)
0.2
228.1
The decline in the profit before tax can be explained as follows:
Profit before tax at 30 April 2018
Effect of acquisitions
Changes in revenue
Changes in costs
Restructuring costs
Profit on sale of former head office
Increase in net finance income & other gains
(Max sight gain, £3.7m)
Impact of exchange rates
Profit before tax at 30 April 2019
£m
50.2
0.9
(5.5)
2.8
0.8
(2.3)
(4.2)
(0.1)
42.6
28
PHOTO-ME INTERNATIONAL PLC STAT E M E N T O F F I N A N C I A L P O S I T I O N
The Group balance sheet can be summarised as follows:
C AS H F LOW A N D N E T C AS H P O S I T I O N
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 2019
£m
142.3
April 2018
£m
130.6
44.1
(11.1)
(47.8)
16.3
143.8
(1.9)
141.9
48.0
(8.4)
(52.0)
26.7
144.9
(1.6)
143.3
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 2019
£m
26.7
April 2018
£m
39.2
63.9
(6.2)
57.7
(36.4)
(31.7)
(10.4)
–
(10.4)
16.3
61.0
(8.3)
52.7
(39.9)
(25.1)
(12.3)
(0.2)
(12.5)
26.7
Following the payment of dividends of £31.9 million, shareholders’
funds at 30 April 2019 amounted to £141.9 million, a decrease of
£1.4 million compared with the previous financial year-end.
Non-current assets detailed are outlined in the following table:
The net cash generated from operations improved by 9.5% in
FY2019. The net cash used in investing activities decreased to £36.4
million (2018: £39.9 million). Closing net cash was £16.3 million.
Outstanding debt of £69.3 million (2018: £33.7 million) was
deducted from the closing net cash balance at 30 April 2019.
Total cash and cash equivalents at 30 April 2019 were £84.6 million
(2018: £58.7 million).
At the end of April 2019, the Group’s net cash was £16.3 million
(2018: £26.7 million), and could be split as follows:
April 2019
£m
26.6
April 2018
£m
13.4
6.1
9.1
81.8
10.4
3.2
0.7
6.5
7.5
80.8
9.5
2.3
0.7
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
137.9
120.7
1.7
0.9
1.8
5.9
1.9
2.1
Balance at 30 April 2018
Cash flow
Non-cash movements
Total non-current assets (excl. deposits)
142.3
130.6
Balance at 30 April 2019
S E R G E C R A S N I A N S K I
Chief Executive Officer
& Deputy Chairman
17 July 2019
Cash and
deposits
£m
60.4
25.9
(0.7)
85.6
Borrowings
£m
(33.7)
Net cash
£m
26.7
(35.2)
(0.4)
(69.3)
(9.3)
(1.1)
16.3
29
ANNUAL REPORT 2019STRATEGIC REPORT
P R I N C I PA L R I S KS
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; it therefore 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.
E C O N O M I C
NATURE OF THE RISK
DESCRIPTION AND IMPACT
MITIGATION
Global economic conditions
Volatility of foreign exchange rates
Economic growth has a major influence
on consumer spending. A sustained
period of economic recession could lead
to a decrease in consumer expenditure in
discretionary areas.
The majority of the Group's revenue and
profit is generated outside the UK, and
the Group results could be adversely
impacted by an increase in the value of
sterling relative to those currencies.
The Group focuses on maintaining the
characteristics and affordability of its
needs-driven products.
The Group hedges its exposure to
currency fluctuations on transactions,
as relevant. However, by its nature, in
the Board's opinion, it is very difficult
to hedge against currency fluctuations
arising from translation in consolidation in
a cost-effective manner.
R E G U L AT I O N S
NATURE OF THE RISK
DESCRIPTION AND IMPACT
MITIGATION
Centralisation of the production
of ID photos
In many European countries where the
Group operates, if governments were to
implement centralised image capture for
biometric passport and other applications,
or widen the acceptance of self-made
or home-made photographs for official
document applications, the Group’s
revenues and profits could be affected.
The Group has developed new systems
that respond to this situation, leveraging
3D technology in ID security standards,
and securely linking our booths to the
administration repositories. (Solutions are
in place in France, Ireland, Germany,
Switzerland and the UK; discussions in
Belgium and the Netherlands).
Furthermore, the Group also ensures that
its ID products remain affordable and of
a high quality.
30
PHOTO-ME INTERNATIONAL PLC NATURE OF THE RISK
DESCRIPTION AND IMPACT
MITIGATION
Brexit
The UK’s referendum decision to leave the
European Union (EU) (“Brexit”) will most
probably lead to changes in regulations
in the UK as well as to modifications to
numerous arrangements between the UK
and other members of the EU, affecting
trade and customs conditions, taxation,
movements of resources, etc.
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 EU.
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.
Business rates
Since early 2015, the Valuation Office
Authority has been issuing significantly
increased assessments for some of the
Company’s estate, mainly photobooths
and printing kiosks, and in some instances
applying rates that the Company
considers unreasonable. The census
campaign led by the government is
part of the well-publicised strategy to
systematically increase the amount of
tax collected through business rates.
The business tax risk is limited to the
Company’s operations in the UK. The
Company has expensed the cost of the
tax charge as reasonably estimated.
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.
31
ANNUAL REPORT 2019STRATEGIC REPORT ST R AT E G I C
NATURE OF THE RISK
DESCRIPTION AND IMPACT
MITIGATION
Identification of new
business opportunities
The failure to identify new business areas
may impact the ability of the Group to
grow in the long-term.
Inability to deliver anticipated benefits
from the launch of new products
The realisation of long-term anticipated
benefits depends mainly on the continued
growth of the laundry business and the
successful development of integrated
secure ID solutions.
Management teams constantly review
demand in existing markets and potential
new opportunities. The Group continues
to invest in research in new products and
technologies.
The Group regularly monitors the
performance of its entire estate of
machines. New technology-enabled
secure ID solutions are heavily trialled
before launch, and the performance of
operating machines is continually monitored.
M A R K E T
NATURE OF THE RISK
DESCRIPTION AND IMPACT
MITIGATION
Commercial relationships
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.
The Group continues to monitor the situation
in both the French and the UK markets.
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.
To maintain its performance, the Group
needs to have the ability to continue
trading in good conditions in France and
the UK, taking into account the situation in
these two countries.
O P E R AT I O N A L
NATURE OF THE RISK
DESCRIPTION AND IMPACT
MITIGATION
Reliance on foreign manufacturers
The Group sources most of its products
from outside the UK. Consequently, the
Group is subject to risks associated with
international trade.
Extensive research is conducted into
quality and ethics before the Group
procures products from any new country
or supplier. The Group also maintains
very close relationships with both its
suppliers and shippers to ensure that risks
of disruption to production and supply
are managed appropriately.
32
PHOTO-ME INTERNATIONAL PLC O P E R AT I O N A L ( C O N T I N U E D )
NATURE OF THE RISK
DESCRIPTION AND IMPACT
MITIGATION
Reliance on one single supplier
of consumables
Reputation
The Group currently buys all its paper
for photobooths from one single
supplier. The failure of this supplier could
have a significant adverse impact on
paper procurement.
The Board has decided to hold a
strategic stock of paper, allowing
for 6–10 months’ worth of paper
consumption, to allow enough time to put
in place alternative solutions.
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 our customer base.
The protection of the Group’s brands in its
core markets is sustained by products with
certain unique features. The appearance
of the machine is subject to high
maintenance standards. Furthermore, the
reputational risk is diluted as the Group
also operates under a range of brands.
The Group continues to invest in its
existing estate to ensure that it remains
contemporary, and in constant product
innovation to meet customer needs. The
Group also has a programme in place to
regularly train its technicians.
Product and service quality
The Board recognises that the quality and
safety of both its products and services is
of critical importance and that any major
failure will affect consumer confidence.
T E C H N O LO G I C A L
NATURE OF THE RISK
DESCRIPTION AND IMPACT
MITIGATION
Failure to keep up with advances
in technology
The Group operates in fields where
upgrades to new technologies are
mission-critical.
The Group mitigates this risk by
continually focusing on R&D.
Cyber risk: Third party attack on
secure ID data transfer feeds
The Group operates an increasing
number of photobooths capturing ID data
and transferring these data directly to
government databases.
The Group performs an ongoing assessment
of the risks and ensures that the infrastructure
meets the security requirements.
33
ANNUAL REPORT 2019STRATEGIC REPORT CORP ORATE RESPO NSI BI LI T Y STAT E M ENT
H I G H L I G H TS
P R O D U C TS
ISO
CERTIFIED
ISO International Standards ensure
that products and services are safe,
reliable and of good quality.
ECO
-FRIENDLY
The Revolution
OUR APPROACH TO CORPORATE RESPONSIBILITY
The Group recognises its responsibilities to the
community and the environment and believes
that health, safety and environmental issues
are integral and important components of
best practice in business management. Our
management of corporate responsibility can
influence our ability to create long-term
financial and non-financial value, and impacts
on our relationship with shareholders and
other stakeholders.
P R I N C I PA L AC T I V I T I E S
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:
o legal requirements and future policy trends;
o customer, employee and investor preferences for corporate
responsibility; and
o cost savings and business efficiency
USER
-FRIENDLY
Laundrettes
EQUAL
OPPORTUNITIES
AND DIVERSITY
o Fair and equitable policies
and procedures for all
o Support for employees
who develop a disability
– Retraining
– Redeployment
o Gender diversity
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 Companies Act 2006. This duty is
based on the principle of ‘enlightened shareholder value’.
E M P LOY E E S
H OW W E M A N AG E C O R P O R AT E R E S P O N S I B I L I T Y
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.
EMPLOYEE
ENGAGEMENT
o Business networking
o Notification of vacancies and
policy updates
o Monthly operational meeting for
business leaders
34
PHOTO-ME INTERNATIONAL PLC
P R O D U C TS
H E A LT H & S A F E T Y
DEDICATED
EXPERTS
o Network of trained
service operators
o Periodic safety inspections
and tests
o Call centres provide customer
assurance and within
24-hour service
o 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
o Safe Contractor accreditation
managed by Alcumus and Altius
o Assured award
BUYER
-FRIENDLY
Equipment
E M P LOY E E S
E N V I R O N M E N T
EQUAL
OPPORTUNITIES
AND DIVERSITY
o Fair and equitable policies
and procedures for all
o Support for employees
who develop a disability
– Retraining
– Redeployment
o Gender diversity
GREEN
AWARENESS
We actively work to decrease energy
use and demand for natural resources.
MONITOR
POWER
CONSUMPTION
o Automatic shut down of units when
not in use
o Remote telemetry reduces
the number of service visits
and consumables
o Use of low-energy lamps
o Use of energy-efficient flat
screen technology
RECYCLING
POLICY
We recover, refurbish and re-sell
our electrical equipment.
35
ANNUAL REPORT 2019STRATEGIC REPORT
C O R P O R AT E R E S P O N S I B I L I T Y STAT E M E N T C O N T I N U E D
PRODUCTS
THE DEVELOPMENT, USE AND DISPOSAL OF OUR
PRODUCTS REPRESENT A MAIN AREA OF BOTH
RISK AND OPPORTUNITY. WE ENSURE THAT OUR
PRODUCTS AND SERVICES ARE DESIGNED TO MEET
EXISTING LEGISLATION AND INCREASED CUSTOMER
EXPECTATIONS, INCLUDING ENVIRONMENTAL,
HEALTH AND SAFETY, AND ACCESSIBILITY ISSUES.
To ensure products manufactured by KIS SAS (the
Group’s manufacturing subsidiary, based in France, which
subcontracts this function to third parties) consistently satisfy
our stringent quality requirements, ISO 9001 standard
certification has been achieved.
T H E R E V O L U T I O N U N I TS A R E E C O - F R I E N D LY:
o The built-in washing liquid pump provides the ideal quantity
for each washing cycle and reduces waste
o 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
o The boiler only heats the water when the dryer is not in operation
o The energy-saving dryer reduces power consumption.
o LED lights use less energy than standard lighting
o The launderette only requires 13KW (compared with 30KW for a
classical launderette)
T H E Y A R E A L S O U S E R - F R I E N D LY
o The launderettes comply with CE standards and the new decree
N°2012-412 practical since 1st July 2012
o 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
o 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
o 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
o 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
o This free service is convenient for customers who might use this
waiting time for shopping
o Thanks to the touch screen, the payment station is easy to use by
following the on-screen instructions
o 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
36
T H E Y A R E A L S O B U Y E R - F R I E N D LY
o Floor space used is less than 5m² – relatively little for a new
innovative service
o Low installation cost
o The launderette is delivered fully assembled and cabled, and can be
installed in half a day
o 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.
PHOTO-ME INTERNATIONAL 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.
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:
o business networking tools to encourage synergies among
colleagues and businesses, sharing ideas and best practices;
o internal notification of vacancies and policy updates; and
o monthly operational meetings for business leaders across the Group
to engage with colleagues, providing business and local updates.
Encouraging 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 Q U A L O P P O R T U N I T I E S A N D D I V E R S I T Y
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.
G E N D E R D I V E R S I T Y
The table below shows the gender diversity of the Group’s employees
at 30 April 2019 with corresponding figures for the previous year:
AS AT 3 0 A P R I L 2018
Total
Male
Female
The Board of Photo-Me
6
5
Senior managers in the
Group (excluding directors
of Photo-Me)
Employees
(excluding above)
Total
18
17
1,106
1,130
922
944
1
1
184
186
AS AT 3 0 A P R I L 2019
Total
Male
Female
The Board of Photo-Me
7
6
Senior managers in the
Group (excluding directors
of Photo-Me)
Employees
(excluding above)
Total
17
14
1,116
1,140
932
952
1
3
184
188
37
ANNUAL REPORT 2019STRATEGIC REPORT
C O R P O R AT E R E S P O N S I B I L I T Y STAT E M E N T C O N T I N U E D
HEALT H AN D SAFE T Y
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.
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.
38
PHOTO-ME INTERNATIONAL PLC E NVIRONMENT
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:
o consistently reducing, in previous years, the amount of waste
produced, although in recent years our UK operations saw an
increase in packaging waste due to the acquisition of the ASDA
Photo Centre business;
o 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.
G R E E N H O U S E G AS ( G H G ) E M I SS I O 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.
o 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.
o the use of remote telemetry systems to minimise the number of service
visits and reduce wastage of consumables;
o 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
o 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 2019
Year ended 30 April 2018
Tonnes of CO2e
Tonnes of CO2e
3,513.50
2,895.21
618.29
20,761.34
20,350.90
410.44
4,547.14
4,048.94
498.20
18,938.35
18,515.86
422.49
24,274.84
23,485.49
Per number of units of operating equipment
0.51592
0.50227
39
ANNUAL REPORT 2019STRATEGIC REPORT C O R P O R AT E R E S P O N S I B I L I T Y STAT E M E N T C O N T I N U E D
ASS E SS M E N T PA R A M E T E R S
CONSOLIDATION
APPROACH
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.
BOUNDARY SUMMARY
The Group has included vending estates which are owned by the Group even though it does not directly
control the operational use (i.e. period of operation) for these assets.
EMISSION FACTOR
SOURCE
Department of Business, Energy & Industrial Strategy, 2016 GHG Conversion Factors for Company Report
(2016: DEFRA 2014).
METHODOLOGY
The Company followed the Greenhouse Gas Protocol Corporate Standard.
MATERIALIT Y
THRESHOLD
As mentioned above, subsidiary companies with less than 50 units of operating equipment have been
excluded, as have depots and other property units where the total amount spent on heating, lighting and
power is less than £50,000 per annum per site.
INTENSIT Y RATIO
As explained below.
S C O P E 1 E M I SS I O N S
The main components of these emissions are:
o Emissions from motor vehicles operated by the Group, including
service and installation personnel (servicing and maintaining the
operational estate etc.) and administrative staff
o Natural gas consumption on the Group’s premises
S C O P E 2 E M I SS I O N S
The main components of these emissions are:
o 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
o 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
PHOTO-ME INTERNATIONAL PLC VIABILIT Y
STATEM ENT
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 2022
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.
D E L M A N S I
Company Secretary
17 July 2019
41
ANNUAL REPORT 2019STRATEGIC REPORT C O R P O R A T E G O V E R N A N C E
44
BOARD OF DIRECTORS
AND COMPANY SECRETARY
45
REPORT OF DIRECTORS
48
CORPORATE
GOVERNANCE
52
REMUNERATION
REPORT
65
STATEMENT OF
DIRECTORS’ RESPONSIBILITIES
B OA R D O F D I R E C TO R S A N D C O M PA N Y S E C R E TA RY
1
Sir John Lewis OBE
Non-executive Chairman
3
Eric Mergui
Chief Operating Officer
5 Françoise Coutaz-Replan
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. Until early 2019, a
Consultant to Eversheds Sutherland
LLP (as now is), and currently 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.
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.
4
Yitzhak Apeloig
Non-executive Director
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.
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.
7
Emmanuel Olympitis
Non-executive Director
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, he served as
interim Company Secretary from
April to July 2008. Appointed
Group General Counsel in 2009,
a role retained on being appointed
Company Secretary in May 2013.
7
2
4
8
3
1
5
6
44
P H O T O - M E I N T E R N AT I O N A L P L C
R E P O R T O F D I R E C TO R S
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 2019.
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.
P R I N C I PA L AC T I V I T I E S
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 138 to 139. The Group entered the
self-service fresh fruit juice equipment market in April 2019, with the
acquisition of SEMPA Sarl. The Board believes this will become a key
business area alongside Identification, Laundry and Kiosks, and be a
significant part of the Group’s future growth strategy.
R E S U LTS A N D D I V I D E N D S
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 4.73 p per ordinary share which, if approved at the
Annual General Meeting (AGM) on 3 October 2019, will be paid
on 8 November 2019 to shareholders listed on the register at the
close of business on 18 October 2019. The ex-dividend date will be
17 October 2019. This, together with the interim dividend of 3.71p
paid on 10 May 2019, makes a total dividend for the year of 8.44p
per ordinary share.
R E V I E W O F B U S I N E SS A N D F U T U R E D E V E LO P M E N TS
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.
R E S E A R C H A N D D E V E LO P M E N T
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 M P LOY E E S
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 R P O R AT E R E S P O N S I B I L I T Y
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 2019, can be found in the Corporate Responsibility Statement
on pages 34 to 40.
B OA R D O F D I R E C TO R S A N D T H E I R I N T E R E STS
The current directors of the Company are:
Sir 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
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.
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 2019CORPORATE GOVERNANCE R E P O R T O F D I R E C TO R S C O N T I N U E D
D I R E C TO R S ’ A N D O F F I C E R S ’ L I A B I L I T Y I N S U R A N C E
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.
S U B STA N T I A L S H A R E H O L D E R S
As of 5 July 2019, 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
Nature
of holding
Serge Crasnianski (Director)
84,546,951
22.38 Direct*/Indirect
Schroders plc
–
14.0471
Dan David Foundation
42,742,775
FIL Investment International
38,053,255
11.32
10.07
Indirect
Direct
Indirect
* Except for 63,750 ordinary shares held in his 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
S H A R E C A P I TA L
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.
R E P O R T O F D I R E C TO R S ’ C O N T I N U E D A U T H O R I T Y
TO P U R C H AS E S H A R E S
Pursuant to a resolution passed at its 2018 AGM, the Company is
authorised to purchase its own shares in the market. The Company
will seek approval at the 2019 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 that 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 and adopted by the European Commission under Article
5 (6) of the EU Market Abuse Regulation 2014. This authority will
expire on the earlier of 15 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 2019.
A D D I T I O N A L I N F O R M AT I 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 that 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.
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.
46
PHOTO-ME INTERNATIONAL PLC 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 terminated by the site
owners following a change of control of the Company.
G O I N G C O N C E 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.
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
that are essential to its business which ought to be disclosed in this
Report of the Directors.
D I S C LO S U R E O F I N F O R M AT I O N TO T H E A U D I TO R
The directors who held office at the date of approval of this Report
of the Directors confirm that: As far as they are each aware, there is
no relevant audit information of which the Company’s auditor (Grant
Thornton UK 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.
R E L AT E D - PA R T Y T R A N S AC T I O N S
Details of related-party transactions are set out in note 28 to the
financial statements.
F I N A N C I A L I N ST R U M E N TS
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.
A N N U A L G E N E R A L M E E T I N G
The Company’s AGM this year will be held at noon on 3 October 2019
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. Hard copies of this Annual Report are
sent only to shareholders who have requested or request a copy.
P O L I T I C A L D O N AT I O N S
No member of the Group made any political donations during the
year ended 30 April 2019.
By order of the Board
D E L M A N S I
Company Secretary
17 July 2019
47
ANNUAL REPORT 2019CORPORATE GOVERNANCE C O R P O R AT E G OV E R N A N C E
STAT E M E N T O F C O M P L I A N C E W I T H T H E U K
C O R P O R AT E G OV E R N A N C E C O D E
The Financial Conduct Authority requires listed companies
incorporated in the UK to include in their annual financial report:
(i) a statement of how they have applied the main principles set
out in the UK Corporate Governance Code (the “Code”); and
(ii) a statement as to whether they have complied throughout the
accounting period with all relevant provisions set out in the Code.
The directors consider that the Company has, throughout the
year ended 30 April 2019, complied with those provisions of the
September 2016 edition of the Code that are applicable to it,
except for the following, which is dealt with in more detail below:
Ms Coutaz-Replan is a member of the Audit Committee, although
she is not considered to be independent. 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.
T H E G R O U P ’S B U S I N E SS M O D E L A N D ST R AT E G Y
The Group’s business model and strategy are summarised in the
strategic report, 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 H E B OA R D
B OA R D C O M P O S I T I O N
Throughout the year under review, the Board comprised 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 with the Company,
namely Françoise Coutaz-Replan. Ms Coutaz-Replan resigned as
an employee of the Group in August 2015. On 2 May 2018, Mr Eric
Mergui was appointed to the Board as Chief Operating Officer; he
is not considered independent.
P H OTO - M E G R O U P B O A R D
AUDIT
COMMITTEE
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
T H E C H A I R M A N
The Chairman has the overall responsibility for managing the Board.
The Chief Executive Officer has responsibilities for strategy, operations
and results. The Chief Operating Officer has responsibility for the
day-to-day operation of the Group and routinely reports to the Chief
Executive Officer. A 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, Sir John
Lewis served as Chairman and Serge Crasnianski served as Chief
Executive Officer and Deputy Chairman. In the Board’s opinion, even
though Sir John Lewis has been a Director since 2008 and Chairman
since 2010, it is proposed that he remain in place for the time being.
D I R E C TO R I N D E P E N D E N C E
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. Although Mr Olympitis has been a Director since
December 2009, he is considered by the Board as independent on
the basis that he continues to demonstrate total independence in his
behaviour and in his interaction with the rest of the Board.
In the case of Mr Apeloig, he is an experienced non executive
director and a qualified accountant. He is also managing partner of
ATE Technology Equipment b.v., a controlling shareholder in The Dan
David Foundation which is a substantial shareholder in the Company.
The Board considers him to be independent because he continues to
demonstrate independence in his behaviour and in his interaction with
the rest of the Board.
T H E S E N I O R I N D E P E N D E N T D I R E C TO R
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. However,
with a view to complying with the requirements of the 2018 edition of
the Corporate Governance Code (to whose provision the Company
became subject as of 1 May 2019), at this year’s annual general
meeting, all directors will stand for re-election.
D I R E C TO R S ’ C O N F L I C TS O F I N T E R E ST
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.
B OA R D E VA L U AT I O N
The Chief Executive Officer and the Chairman review the performance
of other Executive Directors. The Chairman reviews the performance of
the Chief Executive, Chief Operating Officer and each Non-executive
48
PHOTO-ME INTERNATIONAL PLC Director. The Non-executive Directors, led by the Senior Independent
Non-executive Director, evaluate the performance of the Chairman,
taking into account the views of the Executive Directors. During the
year, the Chairman met with the Non-executive Directors without the
Executive Directors being present.
An internal process to assess the effectiveness of the Board was
undertaken during the year, consisting of a confidential survey. Areas
that were identified in which there was considered to be room for
improvement will be addressed by the Board during the current year.
The Board had five meetings during the year under review.
The attendance of directors at those meetings and meetings of Board
Committees is set out below.
N U M B E R O F M E E T I N G S H E L D
J Lewis
S Crasnianski
E Mergui
Y Apeloig
F Coutaz-Replan
J-M Denis
E Olympitis
BOARD
AUDIT
COMMITTEE
REMUNERATION
COMMITTEE
NOMINATION
COMMITTEE
5
5(5)
5(5)
5(5)
5(5)
5(5)
5(5)
5(5)
7
7(7)
n/a
n/a
7(7)
7(7)*
7(7)*
7(7)
1
1(1)
n/a
n/a
n/a
n/a
1(1)
1(1)
1
1(1)
n/a
n/a
n/a
n/a
1(1)
1(1)
O P E R AT I O N O F T H E B OA R D
The Board is normally scheduled to meet in person four or five times
a year, with ad hoc meetings (including by way of conference calls)
convened to deal with urgent matters. The Board has a formal schedule
of matters reserved to it for decision. These include the 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 met once in the year under review
in connection with a proposed new appointment to the Board). The
Committees 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 that are available on the
Company’s website (www.photo-me.co.uk). Decision-making relating
to operational matters is delegated to the Chief Operating Officer and
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.
Regular communication between the directors also takes place
outside the formal forum of Board/Committee meetings.
B OA R D C O M M I T T E E S
T H E A U D I T C O M M I T T E E
The Audit Committee consists entirely of non-executive directors. For
the whole of the year under review, Jean-Marcel Denis (Committee
Chairman), Emmanuel Olympitis (Senior Independent Director) and
Sir John Lewis (Chairman of the Board) served on the Committee;
Françoise Coutaz-Replan (the Group’s former Finance Director)
and Yitzhak Apeloig (who is a qualified accountant) were appointed
to the Committee on 20 October 2016. The composition of the
Committee was compliant with the Code, to the extent the Code
permits a smaller company’s Chairman to be a member of the Audit
Committee providing he was considered independent on appointment
as Chairman, however, it was not Code-compliant to the extent that Ms
Coutaz-Replan is not independent. Nonetheless, the Board considers
Ms Coutaz-Replan an invaluable support, given her knowledge of
the systems and processes gained when she was the Group’s Finance
Director from September 2009 until August 2015. 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.
Meetings are normally held at least twice a year. Seven 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.
E X T E R N A L A U D I TO R
The Audit Committee meets with the external auditor, without executive
directors present, at least twice 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 the audit and
non-audit fees are provided in note 4 to the financial statements.
49
ANNUAL REPORT 2019CORPORATE GOVERNANCE C O R P O R AT E G OV E R N A N C E C O N T I N U E D
Grant Thornton UK LLP has been the external auditor of the Group since
the Annual General Meeting in October 2018. The Audit Committee
is satisfied with the effectiveness, objectivity and independence of
the external auditor. Accordingly, a resolution will be proposed at the
forthcoming Annual General Meeting for Grant Thornton UK LLP’s
re-election as auditor for the coming year. The Board is committed to
putting the audit contract out to tender at least once every 10 years. It
conducted a tender process for the external audit role in 2018 in which
it invited three firms to tender for the role of external auditor; Grant
Thornton UK LLP was the successful tenderer.
K E Y M AT T E R S C O N S I D E R E D
During the last financial year, the Committee conducted a tender of
the external audit function, as described above. It also met to review
the interim 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 2019. In July 2019, 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:
o The integrity, completeness and consistency of financial reporting,
including the adequacy, clarity and appropriateness of disclosures
o The areas where significant judgments and estimates are required in
the financial statements
o 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
o The materiality level to apply to the audit
o 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:
o The carrying value of the GBP-denominated goodwill in
connection with the Japanese subsidiary and the potential
impairment of this asset
How this was addressed: The determination of whether or not goodwill
has to be impaired requires a review of the value in use of the asset.
The main judgments in relation to the review were considered to be
the achievability of the budget, the discount rate being applied to
projected future cash flows and the potential impact of the volatility of
the Japanese yen. The calculation of the value in use was undertaken
in April 2017 and the Committee considered the conclusions and
sensitivity calculations that had been undertaken as part of the review.
o The appropriateness and valuation of provisions
How this was addressed: Provisions for termination of employment: The
main judgments were considered to be the average potential claim per
person and the period of lapse for the claims. The Committee reviewed
all the legal documentation and the methodology of calculation.
Provision for litigation: The main judgments were considered to be
the probable outcome of claims, including the potential exposure.
The Committee has reviewed the arguments contained in the
documents initiating the legal processes and the correspondence
with the lawyers.
o 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 and 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.
T H E R E M U N E R AT I O N C O M M I T T E E
During the year under review, the Remuneration Committee
comprised Emmanuel Olympitis (Committee Chairman), Jean-
Marcel Denis (Chairman of the Audit Committee) and Sir 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 or she was considered independent on his or her appointment
as chairman, which was the case.
The Committee meets at least once per year. It met once in the year
ended 30 April 2019.
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 30 to 42 provides details of how the
Committee applies the directors’ remuneration principles of the Code.
T H E N O M I N AT I O N C O M M I T T E E
During the year under review, the Nomination Committee comprised
Sir 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 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.
50
PHOTO-ME INTERNATIONAL PLC I N T E R N A L C O N T R O L A N D R I S K M A N AG E M E N T I N
R E L AT I O N TO T H E F I N A N C I A L R E P O R T I N G P R O C E SS
The Group has a thorough assurance process in place in respect of the
preparation, verification and approval of periodic financial reports.
This process includes:
o The involvement of qualified, professional employees with an
appropriate level of experience (both in Group finance and
throughout the business)
o Formal sign-offs from appropriate business segment Managing
Directors and Finance Directors
o Comprehensive review and, where appropriate, challenge from key
internal Group functions
o A transparent process to ensure full disclosure of information to the
external auditor
o Engagement of a professional and experienced firm as
external auditor
o Oversight by the Audit Committee, involving (amongst others):
(i) A detailed review of key financial reporting judgments that 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, plus 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, provides 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.
S H A R E H O L D E R C O M M U N I C AT I O N
A N D E N G AG E M E N T
The Chief Executive Officer has regular meetings with the Company’s
major institutional shareholders to help ensure, amongst others,
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.
AC C O U N TA B I L I T Y A N D I N T E R N A L C O N T R O L
The Board is ultimately responsible for the Group’s systems of
internal control and risk management, and for reviewing their
effectiveness. This is effected by receiving reports from the Audit
Committee following its review. The Board confirms that it has
reviewed the effectiveness of the systems of internal control and
risk management for the year under review. The Board is generally
satisfied that such systems have operated adequately throughout
the period.
The system of internal control is designed to manage, rather than
eliminate, the risk of failure to achieve business objectives. Such a
system can, however, provide only reasonable and not absolute
assurance against material misstatement or loss.
The Group has in place processes for identifying, evaluating and
managing the significant risks that are applicable to the business. The
Board regularly reviews these processes.
The Chief Executive Officer is ultimately responsible for risk
management. Executive Managers of individual Group companies
are responsible for the identification, evaluation and management of
the key risks applicable to their areas of responsibility. The risks are
assessed on a regular basis.
The Managers of Group companies are aware of their responsibility
to operate systems of internal control that are effective and efficient
for their businesses, to provide reliable financial information and to
ensure compliance with local laws and regulations.
The Group has a comprehensive budgeting system, with an annual
budget approved by the Board. Actual results are reported monthly
through the Group’s financial systems, and variances are reviewed.
The Audit Committee receives reports from both the internal auditor
and the external auditor and reports its conclusions to the Board.
A whistle-blowing procedure by which staff may raise concerns
about possible improprieties in matters of financial reporting or other
matters, was in place throughout the year. The whistle-blowing policy
can be found on the Company’s website.
51
ANNUAL REPORT 2019CORPORATE GOVERNANCE
A N N U A L STAT E M E N T
D I R E C TO R S ’
R E M U N E R AT I O N R E P O R T
Dear Shareholder,
I am pleased to present the Directors’ Remuneration Report for
the year ended 30 April 2019, which has been prepared by the
Remuneration Committee (“the Committee”) and approved by
the Board.
This report has been prepared in line with all relevant legal
requirements, including the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008 (as amended).
T H E R E P O R T I S D I V I D E D I N TO T H R E E S E C T I O N S :
o This Annual Statement, which summarises remuneration outcomes
in 2018/19 and how the Remuneration Policy will be operated in
2019/20
o 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
o The Annual Report on Remuneration, which discloses details of the
Committee, how the Remuneration Policy was implemented in the
year ended 30 April 2019, and how the policy will operate for the
year ending 30 April 2020
As no changes are being proposed to the Remuneration Policy,
only the Annual Statement and Annual Report on Remuneration will
be subject to a vote at the forthcoming 2019 AGM. This will be an
advisory vote.
R E M U N E R AT I O N O U TC O M E S I N 2018/ 19
The performance of the Group is summarised on pages 4 to 41 and
in the financial statements, on pages 74 to 142.
In light of this year’s results, the Committee has determined that no
annual bonus should be payable to the CEO or COO in respect of
the financial targets. While no bonus was awarded to the CEO in
respect of performance against his personal/strategic targets, the
COO was awarded a bonus of 63% of salary for the year just ended,
based on performance against personal/strategic targets set by the
CEO (noting that the COO was appointed to the Board following the
start of the 2018/19 financial year and that subsequent bonus targets
will be set by the Committee). Further details of the bonus award and
targets are set out in the Annual Report on Remuneration.
Based on EPS performance over the three years to 30 April 2019,
27.92% of the share options granted to the COO in 2016 will vest this
month. No such awards were granted to the CEO.
The Committee takes an active
interest in shareholder views on
our executive Remuneration Policy
and is mindful of the concerns of
shareholders and other stakeholders.
E M M A N U E L O L Y M P I T I S
Chairman of the Remuneration Committee
52
PHOTO-ME INTERNATIONAL PLC I M P L E M E N TAT I O N O F T H E R E M U N E R AT I O N
P O L I C Y F O R 2019/20
The Committee proposes to operate the Remuneration Policy for the
CEO and COO for the year ending 30 April 2020 as follows:
U S E O F D I S C R E T I O N
In determining remuneration outcomes for the year ended
30 April 2019, the Committee has not exercised discretion
(positive or negative).
o Following a review of the Executive Directors’ salaries, the CEO’s
annual base salary was increased for the current year by 2.05%
in line with inflation. There will be no increase to the COO’s salary.
As such, the current base salary levels for the CEO and COO are
£551,960 and £474,946, respectively
o Benefit and pension provision will be in line with the approved
Remuneration Policy
o 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 and a number of key personal/strategic targets for a
minority of the bonus. The bonus targets and performance against
those targets will be disclosed retrospectively in next year’s Directors’
Remuneration Report
o The Committee is intending to grant an award of share options over
150% of salary to both the CEO and the COO with vesting, subject
to three-year EPS performance targets and continued service. While
the Committee did consider scaling back award levels in light of
share price performance over the past year, the Committee does
not feel that this is necessary or appropriate in light of the relatively
modest award level (noting that these awards are structured as
market-value options rather than nil or nominal cost awards) and
noting that no awards were granted to the COO in 2018
S H A R E H O L D E R E N G AG E M E N T
The Committee takes 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 (approval of the current
Remuneration Policy) and the 2018 AGM (Annual Statement and
Remuneration Report), with both resolutions supported by a significant
majority of shareholders.
In conclusion, the Committee believes that the Company’s
Remuneration Policy continues to be aligned with the Company’s
strategic objectives of delivering shareholder value and supporting
the long-term success of the Company. That said, as the current
Remuneration Policy will reach the end of its three-year term
next year, the Committee will carry out a detailed review of the
Remuneration Policy in advance of the 2020 AGM.
E M M A N U E L O L Y M P I T I S
Chairman of the Remuneration Committee
17 July 2019
In light of this year’s results, the
Committee has determined that no
annual bonus should be payable to
the CEO or COO in respect of the
financial targets.
53
ANNUAL REPORT 2019CORPORATE GOVERNANCE R E M U N E R AT I O N P O L I C Y R E P O R T
THE POLICY SET OUT BELOW WAS APPROVED BY
SHAREHOLDERS AT THE 2017 AGM AND WILL REMAIN IN
FORCE 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 that prevents it from
taking into account ESG matters, nor do these remuneration structures
encourage inappropriate operational risk-taking.
PERFORMANCE
MEASURES
N/A
S A L A RY
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)
B E N E F I TS
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 and
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
54
PHOTO-ME INTERNATIONAL PLC
A N N U A L B O N U 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 three years
PERFORMANCE
MEASURES
Performance is assessed
on an annual basis, based
on the achievement of
objectives relating to financial
performance, progress of
strategic priorities and/or
personal targets. The specific
measures used in the bonus
and their weighting may vary
each year depending on
business context and strategy
Clawback provisions are
operated
P E N S I O N
PURPOSE AND LINK
TO STRATEGY
OPERATION
MAXIMUM
PERFORMANCE
MEASURES
Provides competitive retirement
benefits
Defined contribution executive
directors may be offered cash
in lieu of pension
Up to 15% of base salary p.a.
N/A
E X E C U T I V E S H A R E O P T I O N S C H E M E (“ E S 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
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
55
ANNUAL REPORT 2019CORPORATE GOVERNANCE
S H A R E OW N E R S H I P G U I D E L I N E S
PURPOSE AND LINK
TO STRATEGY
OPERATION
MAXIMUM
PERFORMANCE
MEASURES
At least 200% of base salary
N/A
Provides alignment of interests
between executive directors
and shareholders
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
N O N - E X E C U T I V E D I R E C TO R S
PURPOSE AND LINK
TO STRATEGY
Provides fees reflecting
time commitments and
responsibilities, in line with
those provided by similarly
sized companies
OPERATION
MAXIMUM
PERFORMANCE
MEASURES
Cash fee paid on a monthly
basis; fees are reviewed
annually
The Committee is guided by
market rates, time commitments
and responsibility levels
N/A
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)
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 or 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
56
PHOTO-ME INTERNATIONAL PLC
C H O I C E O F P E R F O R M A N C E M E AS U R E S
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
while 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.
H OW E M P LOY E E S ’ PAY I S TA K E N I N TO AC C O U N T
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 consulted in the formulation of the policy.
H OW T H E E X E C U T I V E D I R E C TO R S ’ R E M U N E R AT I O N
P O L I C Y R E L AT E S TO T H E G R O U 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 S H A R E H O L D E R S ’ V I E W S A R E TA K E N
I N TO AC C O U N 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 voting result at the 2017 AGM, with over 99.86% shareholder
support in respect of the Directors’ Remuneration Policy.
A P P R OAC H TO R E C R U I T M E N T A N D P R O M OT I O N 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 takes into
account the skills and experience of the individual, the market rate for
a candidate of that experience and the importance of securing the
relevant individual.
The 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.
A P P R OAC H TO L E AV E R S
No executive director has the benefit of provisions in his or her
service contract for the payment of predetermined compensation in
the event of a 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 and COO, 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
prorated for time served and paid at the normal pay-out date.
57
ANNUAL REPORT 2019CORPORATE GOVERNANCE 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 prorating is inappropriate.
The Company has the power to enter into settlement agreements with directors and to pay compensation to settle potential legal claims.
In addition, and consistent with market practice, in the event of the termination of an executive director, the Company may make a
contribution towards that individual’s legal fees and fees for outplacement services as part of a negotiated settlement. Any such fees will be
disclosed as part of the detail of termination arrangements. For the avoidance of doubt, the policy does not include an explicit cap on the cost of
termination payments.
S E R V I C E C O N T R AC TS
Details of the CEO's and COO’s service contracts are as follows:
EXECUTIVE DIRECTOR
Serge Crasnianski1
Eric Mergui2
DATE OF CONTRACT
01/05/2010
10/09/2009
NOTICE PERIOD
12 months
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, and in the case of the chairman, six months’ fees. The relevant appointment letter and term dates of the non-executive directors are
set out below:
NON-EXECUTIVE DIRECTOR
Sir John Lewis3
APPOINTMENT LETTER DATE
26/07/2010
YEAR OF LAST ELECTION
2018
EXPECTED YEAR OF EXPIRY OF CURRENT
2021
Yitzhak Apeloig
Françoise Coutaz-Replan4
Jean-Marcel Denis
Emmanuel Olympitis
08/03/2012
27/08/2015
01/03/2012
11/11/2009
2018
2018
2018
2016
1. Mr Crasnianski’s contract is with Photo-Me Limited, a wholly-owned subsidiary of the Company
2. First appointed to the Board on 2 May 2018, Mr Mergui’s contract is with Photo-Me Limited, a wholly-owned subsidiary of the Company
3. First appointed to the Board on 3 July 2008
4. First appointed to the Board as Group Finance Director on 24 September 2009, and resigned as Executive Director on 27 August 2015
2021
2021
2021
2019
E X T E R N A L A P P O I N T M E N TS
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 an executive director. Whether or not the executive director 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.
58
PHOTO-ME INTERNATIONAL PLC A N N U A L R E P O R T O N R E M U N E R AT I O N
Implementation of the Remuneration Policy for the year ending 30 April 2020
B AS E S A L A RY
The base salary for each executive director is reviewed annually by the Committee and the current applicable base salaries are as follows:
EXECUTIVE DIRECTOR
Serge Crasnianski
Eric Mergui
1 MAY 2019 £
551,960
474,9462
1 MAY 20181 £
540,887
474,9462
% INCREASE
2.05
0
1. Or appointment if later
2. Eric Mergui’s base salary is denominated in euros (€550,800). Exchange rate: 1.159711 GBP/€
P E N S I O N A N D B E N E F I TS
Mr Crasnianski will continue to receive a pension contribution equal to 15% of base salary in the form of a salary supplement. Mr Mergui does
not receive a pension contribution.
B E N E F I TS
Benefit provision will continue to be in line with the approved Remuneration Policy.
A N N U A L B O N U S
The annual bonus will continue to be capped at 150% of salary, with the majority of the bonus (80% of potential for the CEO and 51% of
potential for the COO) based on financial targets as follows:
Group pre-tax profit less than prior year
% OF BASE SALARY
CEO
Nil
COO
Nil
Group pre-tax profit between 100% and 105% of prior year
Committee discretion depending on year-on-year growth
Group pre-tax profit 5% more but less than 10% higher than that of prior year
Group pre-tax profit 10% or more than prior year
60%
120%
38.25%
76.5%
Twenty per cent of the CEO’s bonus (30% of salary) will be based on personal/strategic targets linked to (i) driving the expansion of the Group’s
activities with particular emphasis on identifying acquisition targets and subsequent negotiations; (ii) devising and implementing succession
management for senior colleagues. 49% of the COO’s bonus (73.5% of salary) will be based on personal/strategic targets linked to (i)
identifying and handling strategic acquisitions including post-integration management; (ii) managing the main Group subsidiary companies; and
(iii) co-ordinating the international network.
The bonus targets and performance against those targets will be disclosed retrospectively in next year’s Directors’ Remuneration Report.
LO N G - T E R M I N C E N T I V E S
The Committee is intending to grant an award of share options over 150% of salary to both the CEO and the COO with vesting, subject to three-
year EPS performance targets and continued service. These EPS targets have yet to be agreed but they will be disclosed in the associated RNS
announcement issued post grant. While the Committee did consider scaling back award levels in light of the share price performance over the
past year, the Committee does not feel that this is necessary or appropriate in light of the relatively modest award level (noting that these awards
are structured as market-value options rather than nil or nominal cost awards) and noting that no awards were granted to either the CEO or the
COO in 2018.
N O N - E X E C U T I V E D I R E C TO R S
The fees for non-executive directors are reviewed at least once every three years; the current applicable fee levels for the roles below are as follows:
NON-EXECUTIVE DIRECTOR
Sir John Lewis
Emmanuel Olympitis
Françoise Coutaz-Replan
Jean-Marcel Denis
Yitzhak Apeloig
ROLE
Chairman
COMMITTEE CHAIRMAN
Chair of Nomination Committee
Senior Independent Director
Chair of Remuneration Committee
Non-executive Director
Non-executive Director
Non-executive Director
–
Chair of Audit Committee
–
30 APRIL 2019 £
30 APRIL 2018 £
132,000
55,000
44,000
49,500
44,000
132,000
55,000
44,000
49,500
44,000
59
ANNUAL REPORT 2019CORPORATE GOVERNANCE S I N G L E TOTA L F I G U R E O F R E M U N E R AT I O N ( A U D I T E D )
The detailed emoluments received by the Executive and Non-executive Directors for the year ended 30 April 2019 are shown below:
EXECUTIVE DIRECTOR
Serge Crasnianski5
Eric Mergui8
NON-EXECUTIVE DIRECTOR
Sir John Lewis7
Yitzhak Apeloig
Françoise Coutaz-Replan6
Jean-Marcel Denis
Emmanuel Olympitis
YEAR
2019
2018
2019
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
SALARY/FEES
£
BENEFITS1
£
BONUS2
£
LTIS5
£
PENSION3
£
TOTAL
£
551,960
540,887
474,946
132,000
132,000
44,000
44,000
44,000
44,000
49,500
49,500
55,000
55,000
15,626
59,934
8,402
–
–
298,781
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0
–
–
–
–
–
76,619
–
–
–
–
82,794
81,133
–
–
–
–
–
–
–
–
–
–
–
650,380
681,954
782,129
132,000
132,000
44,000
44,000
44,000
44,000
49,500
49,500
55,000
55,000
1. Taxable benefits comprise the provision of a car or car allowance, private medical insurance and, where appropriate, an accommodation allowance
2. Bonus is that awarded in respect of performance in the relevant financial year. Details of the bonus award for 2018/19 is set out below
3. The pension payment to Serge Crasnianski in the year ended 30 April 2019 represented 15% of base salary
4.
The emoluments of Serge Crasnianski shown above include fees totalling £405,217 (2018: £394,144), payable to a third party in respect of making available the services of
Serge Crasnianski to the Company
5. Details of the share options held by Eric Mergui, which will vest shortly after the year-end and based on performance to 30 April 2019, are set out below
6. Françoise Coutaz-Replan stepped down as an Executive Director on 27 August 2015, and was appointed as a Non-executive Director on the same date
7. The emoluments of Sir John Lewis shown above include fees of £49,500 (2018: £49,500) paid to a third party in respect of making available the services of Sir John Lewis to the Company
8. The emoluments of Eric Mergui shown above include fees totalling £298,781, payable to a third party in respect of making available the services of Eric Mergui to the Company.
9. Exchange rate: 1.159711 GBP/€
A N N U A L B O N U S
For the year ended 30 April 2019, the maximum bonus opportunity for Serge Crasnianski and Eric Mergui was 150% of salary, with the majority (80% for
the CEO and 51% for the COO) based on financial performance and a minority (20% for the CEO and 49% for the COO) based on non-financial targets.
Details of the performance against the profit before tax targets for the 2019 annual bonus are set out below:
Group pre-tax profit less than prior year
Group pre-tax profit between 100% and 105% of prior year
Group pre-tax profit 5% more but less than 10% higher that of prior year
Group pre-tax profit 10% or more than prior year
Actual Profit Result –15.1% below prior year
Details of performance against the personal/strategic targets are as follows:
% OF BASE SALARY
CEO
Nil
COO
Nil
Committee discretion depending on year-on-year growth
60%
120%
0%
COO
38.25%
76.5%
0%
Maximum Bonus
Target 1
Target 2
Target 3
CEO
20% of bonus
(30% of salary)
Driving the expansion of the Company’s
business activities - with particular emphasis
on identifying and negotiating acquisitions
Devising and implementing succession
management for senior colleagues
n/a
49% of bonus
(73.5% of salary)
Identifying and handling strategic acquisitions including post acquisition management in
respect of delivering any planned synergies and operational benefits
Management of the main subsidiary companies
Co-ordination of the international network
Committee
Assessment of
performance
against the targets
While the Committee was satisfied that
significant progress was made in respect of
Target 1 and Target 2, the Chief Executive
asked that the Committee did not award a
bonus for this part of the annual incentive
plan. As such, no annual bonus was
awarded.
Although the bonus targets were originally set by the CEO at the point that the COO was a
below Board executive*, the Committee was satisfied that significant progress was made in
respect of Target 1 (managing acquisitions), Target 2 (managing the main subsidiary companies)
and Target 3 (coordinating the international network) when considered against the performance
of the Company and noting the rollout of the strategy to diversity vending operations, the
continued expansion of Laundry operations, the deployment of photobooth identification
solutions and the speed of the recovery in Japan.
Bonus Award - % of
max (% of salary)
0% of maximum
(0% of salary)
As such, the Committee accepted the judgment of the CEO that it was appropriate to award an
annual bonus of £298,781 in respect of performance for the year ended 30 April 2019.
42% of maximum
(63% of salary)
* The Committee accepted the judgment of the CEO that significant progress was made following the COO’s appointment to the Board. The Remuneration Committee now sets the
COO’s financial and personal/strategic annual bonus targets
The CEO received no bonus for the year. The COO received a bonus for the year of £298,781, the targets for which had been agreed
between him and the CEO before the former’s appointment to the Board.
60
PHOTO-ME INTERNATIONAL PLC
E X E C U T I V E S H A R E O P T I O N S C H E M E ( E S O S ) ( A U D I T E D )
The ESOS awards granted to Eric Mergui on 13 July 2016 completed their performance period on 30 April 2019 and accordingly have been
included in the 2019 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.
Performance condition
EPS FOR 2019
Below 8.0p
VESTING (% OF PARTICIPANT’S SALARY AT DATE OF GRANT)
None
8.0p
8.4p
8.8p
9.2p
9.6p
10.0p
25%
50%
75%
100%
125%
150%
Actual
Between 8.0p & 10.0p
8.26p
Pro rata between targets
41.88% of salary (27.92% of award)
Based on the above, 93,242 of 334,000 share options held by Eric Mergui will vest in July 2019. As these awards have an exercise price of
141.50 pence (i.e. significantly above the share price at 30 April 2019, resulting in no intrinsic gain at the year-end), the value in the single figure
for Eric Mergui has been shown as £nil.
S C H E M E I N T E R E STS AWA R D E D I N T H E Y E A R ( A U D I T E D )
The Company made no share option awards to executive directors during the year ended 30 April 2019.
D I R E C TO R S ’ I N T E R E STS I N S H A R E S ( A U D I T E D )
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 2019 and the date of signing the financial statements.
EXECUTIVE DIRECTOR
Serge Crasnianski
Eric Mergui
NON-EXECUTIVE DIRECTOR
Sir John Lewis
YitzhakApeloig
Beneficially owned at
30 APRIL 2019
84,610,7014
1 MAY2018
84,610,7014
–
–
–
–
–
–
Françoise Coutaz-Replan5
200,000
200,000
607,600
Jean-Marcel Denis
Emmanuel Olympitis
–
–
45,000
45,000
–
–
ESOS
AWARDS1
738,000
ESOS
AWARDS2
–
REQUIREMENT
(% OF SALARY)
200%
SHAREHOLDING
(% OF SALARY)3 GUIDELINE
Yes
13,965%
375,000
719,000
200%
0%
No
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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 2019, being 91.1p. The shareholding guideline is calculated using only beneficially owned shares
4. Of the shares beneficially owned by Serge Crasnianski, 79,719,900 shares (2018: 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
61
ANNUAL REPORT 2019CORPORATE GOVERNANCE D I R E C TO R S ’ I N T E R E STS I N S H A R E O P T I O N S ( A U D I T E D )
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 2019 and the date of signing the financial statements.)
DATE OF GRANT
Serge Crasnianski
9 July 2013
Eric Mergui
9 July 2015
13 July 2016
21 July 2017
738,000
375,000
334,000
385,200
Françoise Coutaz-Replan
13 Dec 2011
4 July 2012
9 July 2013
10 July 2014
9 July 2015
250,000
232,000
200,000
195,000
212,600
NUMBER OF OPTIONS
GRANTED
DURING
YEAR
AS AT
1 MAY
2018
EXERCISED
DURING
YEAR
LAPSED
DURING
YEAR
AS AT
30 APRIL
2019
EXERCISE
PRICE
DATE FROM
WHICH
EXERCISABLE
EXPIRY DATE
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
250,000
232,000
–
–
–
–
–
–
–
–
–
–
–
–
738,000
90.63p
9 July 2016
8 July 2020
375,000
334,000
385,200
133.33p
9 July 2018
8 July 2022
141.50p
13 July 2019
12 July 2023
157.00p
21 July 2020
20 July 2024
–
–
200,000
195,000
212,600
53.50p
13 Dec 2014
12 Dec 2018
39.17p
90.63p
4 July 2015
3 July 2019
9 July 2016
8 July 2020
145.33p
10 July 2017
9 July 2021
133.33p
9 July 2018
8 July 2022
R E L AT I V E I M P O R TA N C E O F T H E S P E N D O N PAY
The following table sets out the percentage change in distributions to shareholders and employee remuneration costs:
Employee remuneration costs (£’000)¹
Dividends (£’000)²
2019
39,888
31,873
2018
42,372
26,478
% CHANGE
-5.9
20.4
1. Based on the figure shown in note 5 to the Financial Statements
2. Based on the cash returned to shareholders in 2018 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 2019
P E R C E N TAG E I N C R E AS E I N T H E R E M U N E R AT I O N O F T H E C E O
The table below shows the change in the salary, benefits and annual bonus for the CEO between the current and previous financial years
compared with the change for a comparator group of selected employees of the Group.
ELEMENT OF REMUNERATION
Salary
Benefits
Annual bonus
CEO % CHANGE
2.05
EMPLOYEES % CHANGE¹
1.5
–73.9
Nil
Nil
Nil
62
PHOTO-ME INTERNATIONAL PLC P E R F O R M A N C E G R A P H
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 10 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.
TOTA L S H A R E H O L D E R R E T U R N
Photo-Me International plc
FTSE SmallCap
1500
1400
1300
1200
1100
1000
900
800
700
600
500
400
300
200
100
0
30 APRIL
2009
30 APRIL
2010
30 APRIL
2011
30 APRIL
2012
30 APRIL
2013
30 APRIL
2014
30 APRIL
2015
30 APRIL
2016
30 APRIL
2017
30 APRIL
2018
30 APRIL
2019
C E O R E M U N E R AT I O N
The table below shows the total remuneration for the CEO over the same 10-year period as the TSR chart above. All share awards are valued at
the date of vesting.
Source: Datastream (Thomson Reuters)
30 APRIL
2019
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 Crasnianski
Serge Crasnianski2
Thierry Barel3
TOTAL (£)
650,380
681,954
1,498,113
1,429,209
1,031,628
914,278
899,487
898,693
893,312
739,548
90,327
ANNUAL (% OF MAX)
0%
LONG-TERM INCENTIVES (% OF MAX)1
–
0%
100%
100%
100%
100%
100%
100%
100%
100%
0%
–
–
100%
–
–
–
–
–
–
–
1. Shows the number of share options that vested as a percentage of the maximum number of share options that could have vested. For the years ended 30 April 2011 to 30 April
2019 (but excluding 2016), Serge Crasnianski did not have any outstanding share option awards that could have vested in the relevant years
2. Serge Crasnianski was appointed to the role of CEO on 3 July 2009, having previously served as a Non-executive Director from 6 May 2009. The total remuneration figure
shown includes all payments received following his appointment as CEO but excludes any fees paid (£5,429) for performing the role of Non-executive Director
3. Thierry Barel resigned from the role of CEO on 3 July 2009. The total remuneration figure shown includes all payments received prior to his resignation as CEO, but excludes a
termination payment of £92,800
63
ANNUAL REPORT 2019CORPORATE GOVERNANCE PAYM E N TS F O R LO SS O F O F F I C E / PAST D I R E C TO R S
No payments were made for loss of office, and no payments were made to past directors.
C O M M I T T E E R O L E A N D M E M B E R S H 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); Sir 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
Emmanuel Olympitis
Sir John Lewis
Jean-Marcel Denis
POSITION
Committee Chairman
APPOINTMENT DATE
11 November 2009
NUMBER OF MEETINGS ATTENDED (MAXIMUM POSSIBLE)
1(1)
Non-executive Chairman
Non-executive Director
3 July 2008
1 March 2012
1(1)
1(1)
It remains the Committee’s policy that it shall meet on an ad hoc basis when the needs of the Company require it. At the invitation of the Chairman,
the CEO and COO may attend meetings of the Committee, except when their own remuneration is under consideration. No director is involved
in determining his or her own remuneration. The Company Secretary acts as the Secretary to the Committee. The members of the Committee can,
where they judge it necessary to discharge their responsibilities, obtain independent professional advice at the Company’s expense.
The Committee’s terms of reference are published in the “Investor Relations” section of the Company’s website at www.photo-me.com.
A D V I S E R S
FIT Remuneration Consultants LLP advised the Committee during the year ended 30 April 2019 in respect of the preparation of this Remuneration
Report. Fees paid to FIT in this respect totalled £4,000 (exclusive of VAT). The Committee is satisfied that the advice provided by FIT is objective
and independent and fees were charged based on time and material.
The Committee also receives advice from the CEO in relation to the remuneration of the COO and certain senior executives, but not in relation
to his own remuneration.
STAT E M E N T O F S H A R E H O L D E R V OT I N G
The table below shows the advisory vote on the 2017/18 Directors’ Remuneration Report at the 2018 AGM Remuneration Report and the last
binding vote on the Remuneration Policy, which was at the 2017 AGM.
RESOLUTION
Directors’ Remuneration
Report (excluding the
Remuneration Policy)
Directors’ Remuneration
Policy
VOTES CAST IN
FAVOUR
VOTES CAST
AGAINST
%
TOTAL VOTES CAST (EXCLUDES
WITHHELD VOTES)
%
%
VOTES WITHHELD¹
314,930,872
99.63
98,604
0.032
319,556,053
100
1,074,156
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
E M M A N U E L O L Y M P I T I S
Chairman of the Remuneration Committee
17 July 2019
64
PHOTO-ME INTERNATIONAL PLC STAT E M E N T O F D I R E C TO R S ’
R E S P O N S I B I L I T I E S
THE DIRECTORS OF THE COMPANY, WHO ARE NAMED ON
PAGE 44, ARE RESPONSIBLE FOR PREPARING THE ANNUAL
REPORT, THE REPORT OF THE DIRECTORS AND THE GROUP
AND COMPANY FINANCIAL STATEMENTS IN ACCORDANCE
WITH APPLICABLE LAW AND REGULATIONS.
Company law requires the directors to prepare financial statements
for the Group and the Company for each financial year. Under
that law, the directors are required to prepare the Group financial
statements in accordance with International Financial Reporting
Standards (IFRS) as adopted by the European Union and applicable
law and have elected to prepare the Company’s financial statements
on the same basis.
Under company law, the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and the Company and of their
profit or loss for that period. In preparing each of the Group and the
Company’s financial statements, the directors are required to:
o select suitable accounting policies and then apply them consistently;
o make judgments and accounting estimates that are reasonable
and prudent;
R E S P O N S I B I L I T Y STAT E M E N T O F T H E D I R E C TO R S I N
R E S P E C T O F T H E A N N U A L F I N A N C I A L R E P O R T
Each of the directors of the Company, whose names and functions
are listed on page 44, confirms that, to the best of his or her
knowledge:
o the financial statements, prepared in accordance with IFRS as
adopted by the European Union, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and the
undertakings included in the consolidation taken as a whole; and
o 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.
FA I R , B A L A N C E D A N D U N D E R STA N D A B L E
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.
o state whether they have been prepared in accordance with IFRS as
adopted by the EU; and
o prepare the financial statements on the going-concern basis unless it
is inappropriate to presume that the Group and the Parent Company
will continue in business
The 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.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them to
ensure that their financial statements and the Directors’ Remuneration
Report comply with the Companies Act 2006 and as regards the
Group’s financial statements, Article 4 of the IAS Regulation. They
have general responsibility for taking such steps as are reasonably
open to them to safeguard the assets of the Group and to prevent
and detect fraud and other irregularities.
S I G N I F I C A N T AC C O U N T I N G P O L I C I E S , C R I T I C A L
E ST I M AT E S A N D K E Y J U D G E M E N TS
Our significant accounting policies are set out on pages 82 to 88
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 2018/2019
consolidated financial statements.
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.
By order of the Board
S I R J O H N L E W I S
Non-executive Chairman
17 July 2019
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 2019CORPORATE GOVERNANCE F I N A N C I A L S T A T E M E N T S
68
INDEPENDENT
AUDITOR'S REPORT
74
GROUP STATEMENT OF
COMPREHENSIVE INCOME
75
STATEMENTS OF
FINANCIAL POSITION
76
GROUP STATEMENT
OF CASH FLOWS
77
COMPANY STATEMENT
OF CASH FLOWS
78
GROUP STATEMENT OF
CHANGES IN EQUITY
79
COMPANY STATEMENT
OF CHANGES IN EQUITY
80
NOTES TO THE
FINANCIAL STATEMENTS
143
FIVE YEAR
SUMMARY
145
COMPANY
INFORMATION & ADVISORS
146
SHAREHOLDER
INFORMATION
I N D E P E N D E N T A U D I TO R ’S R E P O R T
TO T H E M E M B E R S O F P H OTO - M E I N T E R N AT I O N A L P LC
F O R T H E Y E A R E N D E D 30 A P R I L 2019
O P I N I O N
O U R O P I N I O N O N T H E F I N A N C I A L STAT E M E N TS
I S U N M O D I F I E D
We have audited the financial statements of Photo-Me
International plc (the ‘Company’) and its subsidiaries (the
‘Group’) for the year ended 30 April 2019 which comprise the
Group Statement of Comprehensive Income, the Statements
of Financial Position, the Group and Statement of Cash Flows,
the Group and Company Statements of Changes in Equity
and notes to the financial statements, including a summary
of significant accounting policies. The financial reporting
framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union and, as regards the
Company financial statements, as applied in accordance with
the provisions of the Companies Act 2006.
In our opinion:
o the financial statements give a true and fair view of the state of
the Group’s and of the Company’s affairs as at 30 April 2019
and of the Group’s profit for the year then ended;
o the Group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
o the Company financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
o 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.
B AS I S F O R O P I N I O N
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the ‘Auditor’s
responsibilities for the audit of the financial statements’ section of
our report. We are independent of the Group and the Company
in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
C O N C L U S I O N S R E L AT I N G TO P R I N C I PA L R I S KS ,
G O I N G C O N C E R N A N D V I A B I L I T Y STAT E M E N T
We have nothing to report in respect of the following information
in the annual report, in relation to which the ISAs (UK) require us to
report to you whether we have anything material to add or draw
attention to:
o the disclosures in the annual report set out on page 30 to 33
that describe the principal risks and explain how they are being
managed or mitigated;
o the directors’ confirmation, set out on page 30 of the annual report
that they have carried out a robust assessment of the principal risks
facing the Group, including those that would threaten its business
model, future performance, solvency or liquidity;
o the directors’ statement, set out on page 47 of the financial
statements about whether the directors considered it appropriate
to adopt the going concern basis of accounting in preparing the
financial statements and the directors’ identification of any material
uncertainties to the Group and the Company ’s ability to continue
to do so over a period of at least twelve months from the date of
approval of the financial statements;
o whether the directors’ statement relating to going concern required
under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is
materially inconsistent with our knowledge obtained in the audit; or
o the directors’ explanation, set out on page 41 of the annual report
as to how they have assessed the prospects of the Group, over
what period they have done so and why they consider that period
to be appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period of
their assessment, including any related disclosures drawing attention
to any necessary qualifications or assumptions.
OV E R V I E W O F O U R A U D I T A P P R OAC H
o Overall materiality: £1,577,000, which represents 3.7% of the
Group’s profit before tax;
o Key audit matters were identified as:
— Impairment of goodwill;
— Impairment of property, plant and equipment; and
— Impairment of other intangible assets.
o We have performed full scope audit procedures on the
financial statements of the Company, and on the financial
information of 9 other components.
68
PHOTO-ME INTERNATIONAL PLC K E Y A U D I T M AT T E R S
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud)
that we identified. These matters included those that had the greatest
effect on: the overall audit strategy; the allocation of resources in
the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key Audit Matters – Group and Company
How the matter was addressed in the audit – Group
Impairment of goodwill
The Group has goodwill recorded in the financial statements of
£26.6m (Company – £nil).
As explained in Note 11 management has undertaken an
annual impairment assessment for goodwill in accordance
with the requirements of International Accounting Standard
(IAS) 36 ‘Impairment of Assets’. The process for measuring and
recognising impairment under IAS 36 is complex and requires
significant judgment.
Goodwill has been allocated for management’s impairment testing
to eleven (2018: nine) cash-generating units (“CGUs”), allocated
between geographical areas and activity.
Key assumptions used by management include future growth and
discount rates of each CGU.
We have therefore identified the impairment of goodwill as a
significant risk, which was one of the most significant assessed risks
of material misstatement.
Impairment of property, plant and equipment
The Group has property, plant and equipment (“PPE”) recorded in
the financial statements of £95.4m (Company - £14.5m).
The carrying value of photo booths and vending machines is
numerically significant. There is a risk of impairment of these assets
due to a number of factors such as changes in the regulatory
environment, technology and consumer preference.
There is inherent uncertainty involved in the forecasting of future cash
flows which impacts the estimated recoverable amount of PPE.
Our audit work included, but was not restricted to:
o assessing the Group’s accounting policy and disclosures for
compliance with IAS 36;
o testing the arithmetical accuracy and integrity of the underlying data
used by management in their impairment assessment, by confirming
the consistency of formulae used and agreeing inputs to supporting
documentation including historic profit and loss data and individual
market results;
o using our in-house valuation specialists as an auditor’s expert to
assess the reasonableness of the discount rate applied to cash
flows for each CGU;
o challenging management’s assumptions concerning forecast cash
flows, based on historical trends, knowledge of country-specific
markets and any changes in customer preferences and regulations;
o evaluating historical accuracy of forecasting and discount rate by
comparing to actual performance; and
o assessing management’s sensitivity analysis on the key
assumptions used.
The Group’s accounting policy on Impairment of goodwill is
shown in notes 1.4 and 1.8 to the financial statements and related
disclosures are included in note 11.
Key observations
Based on the results of our work, we determined the impairment of
goodwill to be reasonable.
Our audit work included, but was not restricted to:
o assessing the Group’s accounting policy and disclosures for
compliance with the financial reporting framework IFRS;
o evaluating the design and implementation of key controls by
management to identify impairments of PPE;
o testing the arithmetical accuracy and integrity of the underlying data
used by management in their impairment reviews, by checking the
consistency of formulae used and agreeing inputs to supporting
documentation including historic profit and loss data and individual
market results;
69
ANNUAL REPORT 2019FINANCIAL STATEMENTS I N D E P E N D E N T A U D I TO R ’S R E P O R T C O N T I N U E D
TO T H E M E M B E R S O F P H OTO - M E I N T E R N AT I O N A L P LC
F O R T H E Y E A R E N D E D 30 A P R I L 2019
Key Audit Matters – Group and Company
How the matter was addressed in the audit – Group
There is also a risk that depreciation rates applied to specific
Groups of assets do not truly reflect the useful economic lives
(‘UEL’) of these assets and therefore that the asset valuation may
be overstated.
o assessing and challenging management’s assumptions used in their
impairment assessment including forecast cash flows, historical
trends, knowledge of country-specific markets and any changes in
customer preferences and regulations;
We have therefore identified the recoverability of PPE as a
significant risk, which was one of the most significant assessed risks
of material misstatement.
Impairment of property, plant and equipment
Impairment of other intangible assets
Other intangible assets as recorded in the financial statements
predominantly include capitalised development costs, software,
patents and licenses amounting to £15.2m (Company £nil).
These assets have a combination of finite and indefinite useful
economic lives. In accordance with the requirements of IAS
36 , management must assess intangible assets for indicators of
impairment at the reporting date and test annually for impairment
where the asset has an indefinite useful life.
The estimated recoverable amount associated with this assessment
is subjective due to the high inherent uncertainty involved in
forecasting and discounting future cash flows.
We have therefore identified the impairment of other intangible
assets as a significant risk, which was one of the most significant
assessed risks of material misstatement.
o for assets with indications of impairment but assessed by
management otherwise, challenging their assumptions of
the achievability of the country-specific plans, based on our
understanding and research of the relevant market and its
competitive environment;
o focussing on management’s impairment assessments in relation
to the Group’s Spanish and UK components, based on the
loss-making nature of the current Spanish market and the impact
of regulatory factors in the UK have led to a fall in revenues,
respectively; and
o assessing the appropriateness of UELs determined for these
assets in relation to their type, based on market expectations and
consideration of past performance.
The Group’s accounting policy on measurement and impairment of
PPE is shown in notes 1.5 and 1.8 to the financial statements and
related disclosures are included in note 12.
Key observations
Based on the results of our work, we identified no issues in relation to
the recoverability of PPE.
Our audit work included, but was not restricted to:
o assessing the accounting policy and disclosures for compliance
with the financial reporting framework IFRS;
o testing the arithmetical accuracy and integrity of the underlying data
used by management, by checking the consistency of formulae
used and agreeing inputs to supporting documentation including
historic profit and loss data and individual market results;
o using our in-house valuation specialists as an auditor’s expert to
assess the reasonableness of the discount rate applied to cash
flows for each intangible asset;
o challenging management’s assumptions around forecast cash flows,
based on historical trends, knowledge of country specific markets
and any changes in customer preferences and regulations;
o assessing historical accuracy of forecasting and discount rate by
comparing to actual performance; and
o performing a sensitivity analysis on the key assumptions used.
The Group’s accounting policy on Impairment is shown in notes
1.4 and 1.8 to the financial statements and related disclosures are
included in note 11.
Key observations
Based on the results of our work, we determined the impairment of
other intangible assets to be reasonable.
70
PHOTO-ME INTERNATIONAL PLC O U R A P P L I C AT I O N O F M AT E R I A L I T Y
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed
or influenced. We use materiality in determining the nature, timing
and extent of our audit work and in evaluating the results of that work.
Materiality was determined as follows:
Materiality measure
Group
Company
Financial statements as a whole
£1,577,000 which was calculated as 3.7%
of the Group’s profit before tax.
£366,000 which is 1% of the
Company’s revenue.
Performance materiality used to drive the
extent of our testing
Specific materiality
This benchmark is considered the most
appropriate because this is a key measure
reported to investors on the Group’s
financial performance.
This benchmark is considered the most
appropriate due to the Company being a
trading entity.
60% of financial statement materiality.
60% of financial statement materiality.
We determined a lower level of specific
materiality for certain areas such as directors'
remuneration and related party transactions.
We determined a lower level of specific
materiality for certain areas such as directors'
remuneration and related party transactions.
Communication of misstatements to the audit
committee
£78,850 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
£17,500 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
A N OV E R V I E W O F T H E S C O P E O F O U R A U D I T
Our audit approach was based on a thorough understanding of the
Group’s business and is risk based, undertaking substantive testing on
significant transactions and material account balances, and included:
o evaluation by the Group audit team of identified components to
assess the significance of that component and to determine the
planned audit response based on a measure of materiality. For
example, significance as a percentage of the Group’s total assets,
revenues and profit before tax;
o full scope and targeted audit procedures accounted for 79% of
Group revenue and 84% of Group profit before tax. Targeted audit
procedures accounted for 7% of Group revenue and 2% of Group
profit before tax. The remaining 14% of Group revenue and 14% of
Group profit before tax is represented by 34 reporting components,
none of which individually represented more than 5% of any of
Group revenue, Group profit before tax or total Group assets. For
these 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 components;
o of the Group’s 47 reporting components, we subjected 10 to full
scope audit procedures and 3 to specified 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 – for example, interim
visit, evaluation the Group’s internal controls environment including its
IT systems and controls;
o the Group audit team instructing 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
determined the component materialities, which ranged from
£35,000 to £946,000, having regard to the mix of size and risk
profile of the Group across the components. The work on 5 of the 10
full scope components was performed by component auditors and
the rest, including the audit of the Company, was performed by the
Group audit team; and
o the Group Engagement Partner visiting 2 component locations
in France and Japan, to assess the audit risk and strategy being
adopted by the component auditors. Telephone conference
meetings were held with the component auditors, including planning
calls and post reporting calls, where the findings reported to the
Group audit team were discussed in more detail and any further
work required of the component auditor by the Group audit team
was discussed.
71
ANNUAL REPORT 2019FINANCIAL STATEMENTS I N D E P E N D E N T A U D I TO R ’S R E P O R T C O N T I N U E D
TO T H E M E M B E R S O F P H OTO - M E I N T E R N AT I O N A L P LC
F O R T H E Y E A R E N D E D 30 A P R I L 2019
E X P L A N AT I O N AS TO W H AT E X T E N T T H E A U D I T
WAS C O N S I D E R E D C A PA B L E O F D E T E C T I N G
I R R E G U L A R I T I E S , I N C L U D I N G F R A U D
The objectives of our audit are to identify and assess the risks of material
misstatement of the financial statements due to fraud or error; to obtain
sufficient appropriate audit evidence regarding the assessed risks of
material misstatement due to fraud or error; and to respond appropriately
to those risks. Owing to the inherent limitations of an audit, there is an
unavoidable risk that material misstatements in the financial statements
may not be detected, even though the audit is properly planned and
performed in accordance with the ISAs (UK).
In identifying and assessing risks of material misstatement in respect
of irregularities, including fraud and non-compliance with laws and
regulations, our procedures included the following:
o we obtained an understanding of the legal and regulatory frameworks
applicable to the Company and the Group and industry in which they
operate. We determined that the following laws and regulations were
most significant: IFRS, Companies Act 2006, UK Corporate governance
code, taxation laws and pension laws.
o we understood how the Company and the Group are complying
with those legal and regulatory frameworks by, making inquiries to the
management, those responsible for legal and compliance procedures
and the company secretary. We corroborated our inquiries through our
review of board minutes and papers provided to the Audit Committee.
o we assessed the susceptibility of the Company’s and Group’s financial
statements to material misstatement, including how fraud might occur.
Audit procedures performed by the Group engagement team and
component auditors included:
— identifying and assessing the design effectiveness of controls
management has in place to prevent and detect fraud
— understanding how those charged with governance considered and
addressed the potential for override of controls or other inappropriate
influence over the financial reporting process
— challenging assumptions and judgments made by management in its
significant accounting estimates;
— identifying and testing journal entries, in particular any journal entries
posted with unusual account combinations;
— assessing the extent of compliance with the relevant laws and
regulations as part of our procedures on the related financial
statement item.
o we communicated relevant laws and regulations identified at Group
level to the component auditors and both the Group engagement
team and component auditors performed the audit procedures as
above. Any instances of non-compliance with laws and regulations
were communicated by/to components and considered in our audit
approach, if applicable.
o we did not identify any key audit matters relating to irregularities,
including fraud.
OT H E R I N F O R M AT I O N
The directors are responsible for the other information. The other
information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of the other
information, we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our
responsibility to specifically address the following items in the other
information and to report as uncorrected material misstatements of the
other information where we conclude that those items meet the following
conditions:
o fair, balanced and understandable set out on page 65 – the statement
given by the directors that they consider the annual report and financial
statements taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Group’s performance, business model and strategy, is materially
inconsistent with our knowledge obtained in the audit; or
o audit committee reporting set out on page 49 - the section describing
the work of the audit committee does not appropriately address matters
communicated by us to the audit committee; or
o directors’ statement of compliance with the UK Corporate Governance
Code set out on page 48 – the parts of the directors’ statement required
under the Listing Rules relating to the Company compliance with the
UK Corporate Governance Code containing provisions specified for
review by the auditor in accordance with Listing Rule 9.8.10R(2) do
not properly disclose a departure from a relevant provision of the UK
Corporate Governance Code.
O U R O P I N I O N S O N OT H E R M AT T E R S
P R E S C R I B E D BY T H E C O M PA N I E S AC T 20 06
A R E U N M O D I F I E D
In our opinion, the part of the directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
o the information given in the strategic report and the report of the
directors for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
o the strategic report and the report of the directors have been
prepared in accordance with applicable legal requirements.
72
PHOTO-ME INTERNATIONAL PLC O U R O P I N I O N S O N OT H E R M AT T E R S P R E S C R I B E D
BY T H E C O M PA N I E S AC T 2006 A R E U N M O D I F I E D
In our opinion, the part of the directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
o the information given in the strategic report and the report of the
directors for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
o the strategic report and the report of the directors have been
prepared in accordance with applicable legal requirements.
M AT T E R S O N W H I C H W E A R E R E Q U I R E D TO R E P O R T
U N D E R T H E C O M PA N I E S AC T 2006
In the light of the knowledge and understanding of the Group and the
Company and its environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report or the
report of the directors.
M AT T E R S O N W H I C H W E A R E R E Q U I R E D TO R E P O R T
BY E XC E P T I O N
We have nothing to report in respect of the following matters in
relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
o adequate accounting records have not been kept by the Company,
or returns adequate for our audit have not been received from
branches not visited by us; or
o the 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
o certain disclosures of directors’ remuneration specified by law are
not made; or
o we have not received all the information and explanations we
require for our audit.
R E S P O N S I B I L I T I E S O F D I R E C TO R S F O R T H E
F I N A N C I A L STAT E M E N TS
As explained more fully in the statement of directors’ responsibilities
set out on page 65, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true
and fair view, and for such internal control as the directors determine
is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
A U D I TO R ’S R E S P O N S I B I L I T I E S F O R T H E A U D I T
O F T H E F I N A N C I A L STAT E M E N TS
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 error, and to issue an auditor’s
report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of
our auditor’s report.
OT H E R M AT T E R S W H I C H W E A R E R E Q U I R E D
TO A D D R E SS
Following the recommendation of the Audit Committee, we were
appointed by the Board of Directors on 6 March 2019 to audit
the financial statements for the year ended 30 April 2019 and
subsequent financial periods.
The non-audit services prohibited by the FRC’s Ethical Standard were not
provided to the Group or the Company and we remain independent of
the Group and the Company in conducting our audit.
Our audit opinion is consistent with the additional report to the
Audit Committee.
U S E O F O U R R E P O R T
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.
In preparing the financial statements, the directors are responsible
for assessing the Group’s and the 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 the
directors either intend to liquidate the Group or the Company or to
cease operations, or have no realistic alternative but to do so.
M A R K H E N S H A W
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
17 July 2019
73
ANNUAL REPORT 2019FINANCIAL STATEMENTS F I N A N C I A L STAT E M E N TS
G R O U P STAT E M E N T O F
C O M P R E H E N S I V E I N C O M E
F O R T H E Y E A R E N D E D 30 A P R I L 2019
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 and losses
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 (losses)/gains in defined benefit obligations and other
post-employment benefit obligations
Deferred tax on remeasurement gains/(losses)
Total items that will not be classified to profit and loss
Other comprehensive (loss)/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.
The notes on pages 80 to 142 are an integral part of these consolidated financial statements.
74
Notes
2019
£’000
2018
£’000
3
4
14
4
4
4
6
6
7
10
10
228,118
229,814
(164,637)
(168,070)
63,481
1,601
61,744
1,686
(22,393)
(17,518)
50
42,739
194
46,106
44,564
–
(1,825)
42,739
361
20
(527)
42,593
(11,314)
31,279
(860)
3
(857)
(216)
42
(174)
(1,031)
30,248
31,226
53
31,279
30,228
20
30,248
8.27p
8.26p
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
40,134
152
40,286
40,205
212
40,417
10.64p
10.60p
PHOTO-ME INTERNATIONAL PLC STAT E M E N TS O F
F I N A N C I A L P O S I T I O N
AS AT 30 A P R I L 2019
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
Financial instruments held at amortised cost
Other financial assets - available for sale
Financial instruments held at FVTPL
Deferred tax assets
Trade and other receivables
Current assets
Inventories
Trade and other receivables
Current tax
Cash and cash equivalents
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
Total equity and liabilities
Group
2019
£’000
Company
2018
£’000
2019
£’000
2018
£’000
Notes
11
11
12
13
14
14
15
15
15
15
24
16
17
16
18
20
21
22
24
25
21
23
25
26,594
15,222
95,353
648
415
–
–
982
–
1,387
912
1,764
13,435
13,960
92,556
676
1,583
–
1,710
–
4,286
–
1,935
2,116
143,277
132,257
22,339
20,917
876
84,591
128,723
272,000
1,889
10,588
12,369
117,131
141,977
1,870
143,847
53,385
5,635
5,430
–
64,450
15,850
218
6,753
40,882
63,703
272,000
22,902
20,613
4,480
58,657
106,652
238,909
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
238,909
–
–
14,493
–
35
47,747
–
975
–
1,176
670
–
65,096
3,857
21,613
–
3,162
28,632
93,728
1,889
10,588
2,197
35,791
50,465
–
50,465
–
–
–
–
–
–
67
13,691
–
35
47,614
974
–
4,074
–
945
–
67,400
2,170
30,148
35
11,500
43,853
111,253
1,887
10,366
2,064
67,798
82,115
–
82,115
–
–
–
–
–
–
–
1,197
42,066
43,263
93,728
–
–
1,541
27,597
29,138
111,253
The notes on pages 80 to 142 are an integral part of these consolidated financial statements.
The company recognised a loss after tax for the year of £141,000 (2018: profit after tax of £22,155,000).
The accounts were approved by the Board on 17 July 2019 and signed on its behalf by:
Serge Crasnianski
Chief Executive Officer
John Lewis
Non-executive Chairman
75
ANNUAL REPORT 2019FINANCIAL STATEMENTS F I N A N C I A L STAT E M E N TS
G R O U P STAT E M E N T O F
C AS H F LOW S
F O R T H E Y E A R E N D E D 30 A P R I L 2019
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
Loss/(profit) on sale of property, plant and equipment
Exchange differences
Other items
Changes in working capital:
Inventories
Trade and other receivables
Trade and other payables
Provisions
Cash generated from operations
Interest paid
Taxation paid
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired
Proceeds from disposal of associate
Repayment of loans advanced to associates
Investment in intangible assets
Proceeds from sale of intangible assets
Purchase of property, plant and equipment
Payment of deferred consideration
Proceeds from sale of property, plant and equipment
Purchase of available for sale investments
Dividends received from for sale investments
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 gain on cash and cash equivalents
Cash and cash equivalents at end of year
The notes on pages 80 to 142 are an integral part of these consolidated financial statements.
76
Notes
2019
£’000
2018
£’000
42,593
527
(20)
(361)
42,739
(50)
2,992
24,024
165
(707)
354
511
(597)
(5,604)
108
63,935
(527)
(6,223)
57,185
(13,528)
4,437
1,612
(2,167)
155
(28,169)
(225)
2,282
–
–
18
36
(35,549)
224
(167)
(8,397)
43,748
741
(31,873)
4,276
25,912
58,657
22
84,591
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
4
4
30
19
19
19
19
9
18
PHOTO-ME INTERNATIONAL PLC C O M PA N Y STAT E M E N T O F
C AS H F LOW S
F O R T H E Y E A R E N D E D 30 A P R I L 2019
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
Cash generated from operations
Interest paid
Taxation paid
Net cash generated from / (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Dividends received from for sale investments
Dividends received from associates and subsidiaries
Net cash generated from investing activities
Cash flows from financing activities
Issue of Ordinary shares to equity shareholders
Increase in assets held to maturity
Dividends paid to owners of the Parent
Net cash utilised in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
2019
£’000
2018
£’000
184
–
2,861
(2,239)
806
67
3,897
(22)
7
(1,687)
8,535
14,469
26,072
–
(359)
25,713
(5,127)
451
–
2,275
(2,401)
224
(1)
(31,873)
(31,650)
(8,338)
11,500
3,162
24,587
(2)
(4,297)
(16,497)
3,791
163
3,711
(2,330)
115
(305)
5,198
4,439
14,782
2
(1,057)
13,727
(8,239)
2,498
285
16,801
11,345
1,372
(1)
(26,478)
(25,107)
(35)
11,535
11,500
9
18
77
ANNUAL REPORT 2019FINANCIAL STATEMENTS F I N A N C I A L STAT E M E N TS
G R O U P STAT E M E N T O F
C H A N G E S I N E Q U I T Y
F O R T H E Y E A R E N D E D 30 A P R I L 2019
At 1 May 2017
Profit for year
Other comprehensive income/(expense)
Exchange differences
Tax on exchange
Translation reserve taken to income
statement on disposal of subsidiaries
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
At 1 May 2018
Profit for year
Other comprehensive
income/(expense)
Exchange differences
Tax on exchange
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
Acquisition of non-controlling interest
Total transactions with owners
of the Parent
At 30 April 2019
Share
capital
£’000
1,882
–
Share
premium
£’000
8,999
–
Other
reserves
£’000
1,781
–
Translation
reserve
£’000
11,468
–
Retained
earnings
£’000
103,831
40,134
Attributable
to owners of
the Parent
£’000
127,961
40,134
Non-
controlling
interests
£’000
1,341
152
Total
£’000
129,302
40,286
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
158
(12)
(202)
–
–
–
158
(12)
60
–
218
(12)
(202)
–
(202)
–
–
150
(23)
150
(23)
–
–
150
(23)
(56)
(56)
127
40,261
71
40,205
60
212
131
40,417
5
–
–
5
1,887
1,887
–
1,367
–
–
1,367
10,366
10,366
–
–
–
–
–
1,781
1,781
–
–
–
–
–
11,412
11,412
–
–
197
(26,478)
(26,281)
117,811
117,811
31,226
1,372
197
(26,478)
(24,909)
143,257
143,257
31,226
–
–
–
–
1,553
1,553
53
1,372
197
(26,478)
(24,909)
144,810
144,810
31,279
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
222
–
–
–
–
–
–
–
–
–
–
–
–
–
(827)
3
–
–
(827)
3
(33)
–
(860)
3
–
–
(216)
42
(216)
42
–
–
(216)
42
(824)
(174)
(998)
(33)
(1,031)
(824)
31,052
30,228
20
30,248
–
–
–
–
–
141
(31,873)
224
141
(31,873)
–
–
–
–
–
297
224
141
(31,873)
297
2
1,889
222
10,588
–
1,781
–
10,588
(31,732)
117,131 141,977
(31,508)
297
(31,211)
1,870 143,847
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 and the interests not acquired following the Group's acquisition of a 96% interest in Sempa SARL as
described in note 30.
The notes on pages 80 to 142 are an integral part of these consolidated financial statements.
Details of share capital and reserves are given in note 20.
78
PHOTO-ME INTERNATIONAL PLC C O M PA N Y STAT E M E N T O F
C H A N G E S I N E Q U I T Y
F O R T H E Y E A R E N D E D 30 A P R I L 2019
At May 1 2017
Profit for year
Other comprehensive income
Total comprehensive income for 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
At May 1 2018
Loss for year
Other comprehensive income
Total comprehensive income for 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
Share
capital
£’000
1,882
Share
premium
£’000
8,999
Other
reserves
£’000
1,887
–
–
5
–
–
–
5
1,887
1,887
–
–
2
–
–
–
2
–
–
1,367
–
–
–
1,367
10,366
10,366
–
–
222
–
–
–
222
–
–
–
–
177
–
177
2,064
2,064
–
–
–
–
133
–
133
Retained
earnings
£’000
72,101
22,155
Total
£’000
84,869
22,155
22,155
22,155
–
20
–
(26,478)
(26,458)
67,798
67,798
(141)
1,372
20
177
(26,478)
(24,909)
82,115
82,115
(141)
(141)
(141)
–
7
–
224
7
133
(31,873)
(31,873)
(31,866)
(31,509)
At 30 April 2019
1,889
10,588
2,197
35,791
50,465
Details of share capital and reserves are given in note 20.
79
ANNUAL REPORT 2019FINANCIAL STATEMENTS F I N A N C I A L STAT E M E N TS
N OT E S TO T H E F I N A N C I A L STAT E M E N TS
F O R T H E Y E A R E N D E D 30 A P R I L 2019
A U T H O R I S AT I O N O F T H E F I N A N C I A L STAT E M E N TS
A N D STAT E M E N T O F C O M P L I A N C E W I T H I F R SS
The Group and the Company financial statements of Photo-Me
International plc (the “Company”) for the year ended 30 April 2019
were authorised for issue by the directors on 17 July 2019 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 the symbol 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.
1 AC C O U N T I N G P O L I C I E S
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 87.
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 B AS I S O F P R E PA R AT I O N
The consolidated financial statements have been prepared under
the historical cost convention except for certain derivative financial
instruments, financial instruments held at FVTPL and available-for-sale
financial assets that are measured at fair value.
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) Development costs – notes 1.4 and 11
Management determine when the criteria for capitalisation
of development costs have been met including commercial
viability and ability to reliably measure costs 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.
2)
Taxation – note 7
During the previous 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.
The Group recognises deferred tax assets and liabilities based
upon management’s judgement of 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 management’s judgements
in respect of taxation enquiries and the uncertainty surrounding
resolution.
Group and Company
The following are areas of estimation uncertainty:
Going concern
The financial statements of the Group and the Company have been
prepared on the going concern basis.
1)
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.
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.
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PHOTO-ME INTERNATIONAL PLC
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. The carrying value
for significant asset classes of operating equipment is tested
annually for impairment based on a value in use calculation.
Key sensitivities in the value in use calculation include
revenue, volumes, selling prices operating costs and discount
rates. Other key factors in determining value in use include
technological developments and regulatory changes.
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.
2)
3)
Taxation – notes 1.17, 7 and 24
The Group recognises deferred tax assets and liabilities based
upon management’s judgement of 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 management’s judgements in respect of taxation enquiries
and the uncertainty surrounding resolution.
1.2 B AS I S O F C O N S O L I D AT I O N
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 assessing
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
If the business combination is achieved in stages, the carrying
value of the acquirer’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.
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.
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ANNUAL REPORT 2019FINANCIAL STATEMENTS
1 AC C O U N T I N G P O L I C I E S C O N T I N U E D
1.3 F O R E I G N C U R R E N C Y T R A N S L AT I O N
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.
1.4 I N TA N G I B L E ASS E TS
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.
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 2019 or 2018.
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.
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 and Development costs are accounted for in line with
all relevant criteria as mandated by IAS 38. Research expenditure
is expensed as incurred. Costs incurred in developing projects
are capitalised as intangible assets when it is considered that the
commercial viability of the project will be a success based on
discounted expected cash flows, and the costs can be reliably
measured. Other development costs are expensed and are not
recognised as assets.
Other intangible assets
Intangible assets (including research and development) acquired
as part of a business combination are capitalised at fair value at the
date of acquisition. Other intangibles are capitalised at cost.
The policies applied to the Group’s intangible assets are summarised as follows:
Research and
development costs
Useful lives
Amortisation
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
Droit au Bail
Finite
Indefinite
Not amortised, but
subject to impairment
testing
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
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
Internally generated
Acquired
Acquired
Acquired
Acquired
82
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC
1. 5 P R O P E R T Y, P L A N T A N D E Q U I P M E N T
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
2% – 5% straight-line
Leasehold improvements
Photobooths and vending
machines
Plant, machinery, furniture,
fixtures and motor vehicles
over the life of the lease on a
straight-line basis
10% – 33.33% straight-line
12.5% – 33.33% straight-line or
reducing balance. Capitalised
assets held under finance lease
are depreciated 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 I N V E ST M E N T P R O P E R T Y
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 L E AS E S
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, including any fixed element of site agreements are
classified as operating leases and rentals are expensed over the
period of the lease on a straight-line basis.
Where a Group company acts as a lessor the lease is classified as
finance or operating lease and accounted for as follows:
When assets are leased out under a finance lease, the present value
of the lease payments are recognised as a receivable. The rental
is allocated between finance income and repayment of capital in
each accounting period using the actuarial method, such that finance
income will emerge as a constant rate of return on the lessor’s net
investment in the lease.
Lease income on operating leases is recognised over the term of the
lease on a straight-line basis and the asset is included in the statement
of financial position based on the nature of the asset.
1.8 I M PA I R M E N T
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 (CGU). 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 F I N A N C I A L I N ST R U M E N TS
Group
Policy applicable from 1 May 2018
(i)
Trade receivables
Trade receivables are initially measured at fair value, and
subsequently at their amortised cost as reduced by appropriate
allowances for estimated irrecoverable amounts.
(ii)
Financial assets held at amortised cost
These assets are subsequently measured at amortised cost using
the effective interest method. The amortised cost is reduced by
impairment losses. Interest income, foreign exchange gains and
losses and impairment are recognised in profit or loss. Any gain
or loss on derecognition is recognised in profit or loss.
83
ANNUAL REPORT 2019FINANCIAL STATEMENTS
1 AC C O U N T I N G P O L I C I E S C O N T I N U E D
(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) 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.
(v) Trade and other payables
Trade payables are initially recorded at fair value and
subsequently recorded at amortised cost using the effective
interest rate method.
Recognition and measurement
For investments designated as financial assets at fair value through
profit or loss are based on current bid prices. For unlisted investments
the Group uses various valuation techniques to determine fair values.
Classification of financial assets
Financial instruments are designated in accordance with the business model
under which the instrument is held. Changes to the classification of financial
instruments on transition are shown in note 32.
Impairment of financial assets
The Group calculates the expected credit loss (ECL) as mandated by
IFRS 9 on the Group’s trade and other receivable balances outstanding
at the reporting date. This includes receivables arising from equipment
sales and the Group’s B2B laundry business but excludes vending
revenue. The ECL is 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 the reporting date, with business
units bearing a similar credit risk profile segmented together.
No ECL was required at 1 May 2018 or 30 April 2019.
Policy applicable until 30 April 2018
(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) 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.
(vi) Trade and other payables
Trade payables are initially recorded at fair value and
subsequently recorded at amortised cost using the effective
interest rate method.
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.
84
FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC
1.10 I N V E N TO R I E S
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.
1.12 C AS H A N D C AS H E Q U I VA L E N TS
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 S H A R E C A P I TA L
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 E M P LOY E E B E N E F I TS
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 with defined benefits being based upon the
employee’s length of service and final pensionable salary. The
Company also operates a defined contribution pension scheme.
Defined benefit scheme
The Group also has defined benefit pension schemes as noted in
note 22.
The net obligation for the Group’s defined benefit pension schemes
is calculated for each scheme separately by estimating the future
benefit that employees have earned in the current and prior periods,
discounting that amount and deducting the fair value amount of
plan assets. The calculation is performed by independent actuaries
using the projected unit credit actuarial method. If this calculation
results in a potential asset for the Group, this asset is only recognised
to the present value of the economic benefits available in the form
of a refund of contributions paid to the fund or reductions in future
contributions. In calculating the present value of any economic
benefit consideration is given to any minimum funding requirements.
Re-measurement of the net liability, which comprises actuarial gains
and losses, the return on plan assets (excluding interest) and the
effects of any asset ceiling, are recognised in other comprehensive
income. The Group determines the net interest expense (income) on
the net liability (asset) for the period by applying the discount rate
used to measure the defined benefit obligation at the beginning of
the period to the then net defined liability(asset), taking into account
changes in the period as a result of contributions and pension
benefits paid. Other expenses are charged to profit and loss.
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.
Defined contribution scheme
Contributions to defined contribution schemes are expensed as
incurred.
Other post-employment benefits
In addition to the pension schemes noted above, contracts of
employment in certain Group companies require provision to be
made 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.
85
ANNUAL REPORT 2019FINANCIAL STATEMENTS
1 AC C O U N T I N G P O L I C I E S C O N T I N U E D
1.15 P R OV I S I O N S
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.
1.16 TA X AT I O N
Tax expense for the current period comprises current and deferred tax
and is recognised in the income statement, except to the extent that it
relates to items recognised in other comprehensive income or equity.
The current tax charge is calculated on the basis of the laws enacted
or substantively enacted at the balance sheet date in the countries
where the Group operates.
Deferred tax is provided in full on temporary differences arising
between the tax base of assets and liabilities and their carrying value
in the accounts.
Deferred tax is measured on an undiscounted basis at the tax rates
that are expected to apply in future periods in which the temporary
difference will reverse, based on tax rates and laws enacted or
substantively enacted at the year end.
Deferred tax assets are recognised to the extent that it is probable
that the future taxable profit, against which the deductible temporary
differences can be utilised, will be available.
Deferred tax is provided, or an asset recognised, on taxable
temporary differences arising on investments in subsidiaries and
associates, except where the timing of the reversal of the temporary
difference can be controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
Current tax assets and liabilities are measured at the amounts
expected to be recovered from, or paid to, the taxation authorities,
based on tax rates and laws that are enacted or substantively
enacted at year end.
1.17 S E G M E N T R E P O R T I N G
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.
1.18 R E V E N U E R E C O G N I T I O N
Revenue is is recognised at the point in time when value and control
is transferred to the customer to the extent that the Group fulfils its
contractual obligations and is recognised when it is probable that
the Group will collect the related consideration. Revenue is the fair
value of consideration received or receivable and is measured net of
discounts, VAT and other sales-related taxes.
Vending revenue from the operation of photo booths, laundries, kiddy
rides and kiosks is recognised when the services are provided which
is when payment is received. Vending revenue is total consideration
received during the period including that held in machines at the
balance sheet date. There are no vending transactions requiring
unbundling of components.
Revenue from the sale of equipment, spare parts and consumables is
recognised upon delivery of products and acceptance, if applicable,
by the customer. Equipment, spare parts and consumables are sold
on their own and on unbundling required for accounting purposes.
Revenue from the provision of services, principally maintenance
contracts, is recognised evenly over the period in which the service
is available to the customer. Services are sold on their own as stand
alone products with no unbundling required.
1.19 OW N W O R K C A P I TA L I S E D
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.
1.20 D I V I D E N D D I ST R I B U T I O N S
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.
1.21 G OV E R N M E N T G R A N TS
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.
1.22 C O M PA N Y I N V E ST M E N TS
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.
86
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 1. 23 S P E C I F I C I T E M S
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.
2 N E W STA N D A R D S , A M E N D M E N TS A N D
I N T E R P R E TAT I O N 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.
IFRS 9 Financial Instruments
IFRS 15 Revenue from contracts with Customers.
IFRS 9 Financial instruments
The Group adopted IFRS 9 Financial Instruments on 1 May 2018.
Adoption of IFRS 9 did not have a material impact on the Group’s
financial position or performance; therefore, no restatement of the
comparative figures has been required.
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.
The adoption of IFRS 9 Financial Instruments has not had a material
impact on the 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 with a carrying value of £4,286,000 classified as
available for sale that are held to maximise cash flows through sale.
On 1 May 2018, Under IFRS 9, the Group has designated 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 requires considerable
judgement about how changes in economic factors affect ECLs,
which will be determined on a probability-weighted basis. The new
impairment model applies to financial assets measured at amortised
cost or FVOCI, except for investments in equity instruments.
88.1% (2018: 88.0 %) of the Group’s revenue consists of prepaid
vending activities with no inherent credit risk.
The ECL was calculated with reference to the Group’s current
provision for doubtful debts as a proportion of trade receivables at
year end compared to the 5 year average profit and loss charge in
respect of bad debts as a proportion of average debtors. Historical
loss rates are adjusted to reflect current and forward-looking
information on macroeconomic factors affecting the ability of the
customers to settle the receivables of which the current state of the
economy (such as Brexit, market interest rates or growth rates) and
particular industry issues in the countries in which it sells its goods are
judged to be the most relevant factors, and accordingly adjusts the
historical loss rates based on expected changes in these factors. The
ECL calculation was prepared on a segmented basis with business
units with a similar credit risk profile segmented together.
Based on the above calculation, the Company and the Group’s
existing provisions were sufficient to cover the ECL 1 May 2018 and
30 April 2019.
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:
o 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
o 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. Adoption of IFRS 9 did not indicate
any material impact on the classification of financial liabilities at
1 May 2018.
Changes to the classification of financial assets on transition are
shown in note 32.
87
ANNUAL REPORT 2019FINANCIAL STATEMENTS IFRS 15 Revenue from contracts with customers
IFRS 15 Revenue from contracts with customers was adopted on
1 May 2018. Adoption of IFRS 15 Revenue from contracts with
customers did not have a material impact on the Group’s financial
position or performance; and therefore, no restatement of the
comparative figures has been required.
No other new standards, amendments or interpretations to
standards effective for the first time for the financial year beginning
on 1 May 2019 have had a material impact on our financial
position or performance, nor the disclosures in these consolidated
financial statements.
Not adopted by the Group
Certain new accounting standards and interpretations have been
published that are not mandatory for the year ended 30 April 2019
and have not been early adopted.
With the exception of IFRS 16 Leases, none of the accounting
standards issued but not yet effective are expected to have a
significant impact on our annual financial statements, including
IFRIC 23 Uncertainty over Income Tax Treatments.
IFRIC 23 clarifies how to apply the recognition and measurement
requirements in IAS 12 Taxes when there is uncertainty over income
tax treatments. In particular, the interpretation addresses whether
uncertain tax treatments should be considered separately or together
with one or more other uncertain tax treatments, and addresses the
assumptions an entity makes about the examination of tax treatments
by taxation authorities. IFRIC 23 is effective from 1 January 2019.
IFRS 16 Leases
The Group adopted IFRS 16 on 1 May 2019.
IFRS 16 mandates the recognition of a right-of-use asset and a
corresponding liability for all arrangements that meet the criteria
of a lease and do not qualify for an exemption. The right-of-use
(ROU) asset is depreciated over the term of the lease with the liability
amortising over the life of the lease with a resulting interest charge.
IFRS 16 defines a lease as a contract, or part of a contract, that conveys
the right to use and enjoy substantially all the economic benefits of an
identified asset, for a period of time in exchange for a consideration.
The Group has arrangements across a number of categories that may
meet the definition of a lease under IFRS 16. These include:
Site agreements: The Group operates approximately 47,000
vending units. These units are deployed under a fee paying
agreement with the site occupier. These agreements vary widely in
their terms and conditions. The Group is examining, on an individual
basis, the degree to which these agreements meet the definition of
a lease under IFRS 16, with particular regard to the presence of an
identified asset with no substitution rights. While the standard sets
out the definition of a lease, judgement is required in assessing the
degree to which those criteria are met, particularly with regard to the
presence of an identified asset with no substitution rights.
Property and motor vehicles: The Group occupies a number
of buildings and utilises a number of motor vehicles under rental
agreements. Following an examination of the agreements, the Group
has determined that these arrangements qualify as leases under IFRS 16.
IFRS 16 will be adopted on the modified retrospective basis, meaning
that the carrying amount of the initial right-of-use assets will equal the
respective lease liabilities for all leases entered into before 1 May 2019;
with no restatement of prior year comparatives required. The impact
of the change in accounting standard on each line item in the financial
statements will be provided.
The following practical expedients will be applied:
o the Company will apply a single discount rate to lease arrangements
for assets with similar characteristics;
o the Company will exclude other initial direct costs from the
measurement of the ROU asset for all asset classes (Site agreements,
Property and Motor vehicles);
o the Company will apply the use of hindsight to determine the
lease term;
o the Company will conduct impairment testing immediately before the
date of initial application; and
o the Company will elect to not to recognise right-of-use assets
and lease liabilities for short-term leases that have a lease term of
12 months or less. The lease payments associated with these leases is
recognised as an expense on a straight-line basis over the lease term.
For arrangements meeting the definition of a lease, costs will be
recognised in the form of depreciation of the right-of-use asset
and interest on the lease liability, which may impact the phasing of
operating profit and profit before tax, compared to the cost profiles
and presentation in the income statement under IAS 17. This will also
impact the classification of associated cash flows in the Consolidated
Cash Flow Statement.
Except for IFRS 16 as noted above, the Directors do not currently
anticipate that the adoption of any other standard or interpretation
that has been issued but is not yet effective will have a material
impact on the financial statements of the Group in future periods.
88
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 3 S E G M E N TA L A N A LYS I S
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 of the segments 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:
2019
Total revenue
Inter segment sales
Revenue from external customers
EBITDA
Depreciation and amortisation
Underlying operating profit
Specific items (see note 4)
Operating profit excluding associates
Share of post-tax profits from associates
Operating profit
Other gains
Finance revenue
Finance costs
Profit before tax
Tax
Profit for year
Capital expenditure
Asia
£’000
Continental
Europe
£’000
United
Kingdom &
Ireland
£’000
Corporate
costs
£’000
Total
£’000
44,538
138,935
–
(8,274)
44,538
130,661
9,350
49,267
(4,673)
(15,727)
6,502
(1,825)
4,677
33,540
–
54,962
(2,043)
52,919
13,167
(6,119)
7,048
–
–
–
–
238,435
(10,317)
228,118
(2,079)
69,705
(497)
(27,016)
(2,576)
44,514
–
(1,825)
33,540
7,048
(2,576)
42,689
2,755
19,893
7,493
379
50
42,739
361
20
(527)
42,593
(11,314)
31,279
30,520
89
ANNUAL REPORT 2019FINANCIAL STATEMENTS 3 S E G M E N TA L A N A LYS I S C O N T I N U E D
Asia
£’000
Continental
Europe
£’000
United
Kingdom &
Ireland
£’000
Corporate
costs
£’000
Total
£’000
2018
Total revenue
Inter segment sales
Revenue from external customers
EBITDA
Depreciation and amortisation
Underlying operating profit
Specific items (see note 4)
Operating profit excluding associates
Share of post-tax profits from associates
Operating profit
Other gains
Finance revenue
Finance costs
Profit before tax
Tax
Profit for year
Capital expenditure
44,979
131,064
(6)
(9,930)
44,973
10,289
121,134
45,967
(4,879)
(14,027)
5,410
31,940
–
–
5,410
31,940
65,432
(1,725)
63,707
16,194
(5,794)
13,030
(2,630)
10,400
–
–
–
241,475
(11,661)
229,814
(1,469)
70,981
(369)
(25,069)
(4,158)
2,320
(1,838)
46,222
(310)
45,912
194
46,106
3,708
658
(297)
50,175
(9,889)
40,286
43,677
5,248
26,429
11,410
590
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, spare parts & consumables
Sales of services
Other sales
Vending revenue
Total revenue
There were no key customers in the year ended 30 April 2019 (2018: none).
90
Group
2019
£’000
44,538
130,601
52,979
228,118
2019
£’000
22,347
4,595
244
27,186
200,932
228,118
2018
£’000
44,975
127,050
57,789
229,814
2018
£’000
22,964
4,366
285
27,615
202,199
229,814
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC
4 P R O F I T F O R T H E Y E A R
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 and investment property
– 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
– land and buildings
– other
Inventory cost
Cost of inventories recognised as an expense
Inventory provision reversed
Inventory provision reversed relates to provisions made in previous years.
During the year the Group provided £215,000 in respect of obsolete stock (2018: £1,661,000).
Other items
Research and development current year expenditure, not capitalised
Own work capitalised
Trade receivables impairment (note 15)
Net foreign exchange gains
Loss/(gains) on sale of property, plant and equipment
Direct expenses for investment properties generating rental income
2019
£’000
1,959
1,033
2,992
2018
£’000
1,824
944
2,768
23,865
159
22,150
151
24,024
22,301
787
246
1,033
2019
£’000
506
1,126
1,632
700
244
944
2018
£’000
686
1,225
1,911
20,760
(1,220)
19,540
24,299
(694)
23,605
2019
£’000
2018
£’000
392
–
128
(550)
165
26
302
(311)
(137)
(664)
(2,361)
–
91
ANNUAL REPORT 2019FINANCIAL STATEMENTS N OT E S TO T H E F I N A N C I A L STAT E M E N TS C O N T I N U E D
F O R T H E Y E A R E N D E D 30 A P R I L 2019
4 P R O F I T F O R T H E Y E A R C O N T I N U E D
Audit and non-audit services
The following fees for audit and non-audit services were paid or are payable to the Company’s auditor, Grant Thornton UK LLP (2018: KPMG
LLP) and its associates.
Audit fee of the company
Audit fees of the subsidiaries
Total audit fees
Audit related services – interim review
2019
£’000
2018
£’000
95
194
289
20
309
86
243
329
26
355
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 the Group’s auditor
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 the Group’s auditor 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
Other operating income principally includes rental income from investment property (note 13).
2019
£’000
74
75
149
2019
£’000
–
2018
£’000
105
101
206
2018
£’000
561
2019
£’000
1,601
2018
£’000
1,686
92
FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC Other gains and losses
Other gains and losses in the current year comprises profits arising on financial instruments held at FVTPL and profit on disposal of associate;
and in the prior year 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 and losses
Gain on disposal of Stilla Technologies SA
Fair value loss on financial instrument held at FVTPL
Gains on available for sale financial instruments
Group
2019
£’000
3,258
(2,897)
–
361
2018
£’000
–
–
3,708
3,708
Year ended 30 April 2019
The gain of £3,258,000 in the current year relates to the disposal of the Group’s interest in Stilla Technologies SA, previously an associated
undertaking (see note 14).
The fair value loss of £2,897,000 on the financial instrument held at FVTPL relates to the mark to market adjustment on the Group’s interest in
Max Sight Group Holdings Limited (see note 14).
Year ended 30 April 2018
The gain of £3,708,000 relates to the gain on the deemed disposal of the Group’s interest in Max Sight Limited and Fullwise Limited as
described in note 14.
Specific items
Specific items
Profit on sale of land & buildings
Restructuring costs
Group
2019
£’000
–
(1,825)
(1,825)
2018
£’000
2,320
(2,630)
(310)
Year ended 30 April 2019
Restructuring costs relate to the re-alignment the Group’s Japanese operations to current market conditions which included streamlining of
administrative functions, relocation and removal of low revenue and unprofitable units to better locations.
Year ended 30 April 2018
Profit on sale of land in 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 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:
Gain on disposal of Stilla Technologies SA
Fair value loss on financial instrument held at FVTPL
Gains on available for sale financial instruments
Profit on sale of land & buildings
Restructuring costs
Group
2019
£’000
2018
£’000
42,593
50,175
(3,258)
2,897
–
–
1,825
44,057
–
–
(3,708)
(2,320)
2,630
46,777
93
ANNUAL REPORT 2019FINANCIAL STATEMENTS N OT E S TO T H E F I N A N C I A L STAT E M E N TS C O N T I N U E D
F O R T H E Y E A R E N D E D 30 A P R I L 2019
5 E M P LOY E E S
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
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 F I N A N C E R E V E N U E A N D C O STS
Finance income
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
94
Group
2019
£’000
39,888
8,361
141
212
297
48,899
2018
£’000
42,372
8,596
197
212
293
51,670
Group
2019
number
957
149
1,106
229
9
567
33
161
107
1,106
2019
£’000
1
19
–
–
20
481
46
527
2018
number
1,167
204
1,371
474
49
522
28
171
127
1,371
2018
£’000
5
138
285
230
658
286
11
297
FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 7 TA X AT I O N E X P E N S E
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
Impact of change in rate
Total deferred tax
Tax charge in the statement of comprehensive income
Tax relating to items (credited)/charged to other components of comprehensive income
Corporation tax
Deferred tax
Tax (credit)/charge in other comprehensive income
2019
£’000
2018
£’000
5,274
186
5,460
2,512
193
2,705
8,165
505
2,570
74
3,149
11,314
2019
£’000
(3)
(42)
(45)
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
95
ANNUAL REPORT 2019FINANCIAL STATEMENTS Reconciliation of total tax charge
The difference between the Group tax charge and the standard UK corporation tax rate of 19% (2018: 19%) is explained below:
Profit before tax
Tax using the UK corporation tax rate of 19% (2018: 19.9%)
Effect of:
– non-taxable items
– change in UK tax rates
– overseas tax rates
– income not assessable
– losses not recognised in deferred tax (relieved)/incurred
– adjust deferred tax opening/closing balances to average current tax rate
– adjustments to tax in respect of prior years
– Foreign exchange movements
Total tax charge
Effective tax rate
2019
£’000
42,593
8,093
(396)
75
2,369
(624)
–
1,175
652
(30)
11,314
26.6%
2018
£’000
50,175
9,533
33
28
367
(711)
537
–
102
–
9,889
19.7%
The Group tax charge of £11.3m (2018: £9.9m) corresponds to an effective tax rate of 26.6% (2018: 19.7%).
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 R O F I TS AT T R I B U TA B L E TO M E M B E R S O F T H E PA R E N T C O M PA N Y
The loss for the year, after tax, dealt with in the financial statements of the Parent Company is £141,000 (2018: profit after tax £22,155,000),
including dividends received from subsidiaries.
9 D I V I D E N D S PA I D A N D P R O P O S E D
Interim
2018 paid on 11 May 2018
2017 paid on 11 May 2017
Final
2018 approved at AGM held on 24 October 2018
2017 approved at AGM held on 25 October 2017
Pence per
share
2019
£’000
Pence per
share
2018
£’000
3.710
14,005
3.090
11,633
4.730
17,868
8.440
31,873
3.940
7.030
14,845
26,478
Year ended 30 April 2019 – Proposed dividends not yet paid
The Board declared an interim dividend of 3.71p per share for the year ended 30 April 2019, which was paid on 11 May 2019. The Board
proposes a final dividend for the year ended 30 April 2019 of 4.73p per share which is subject to shareholder approval at the Annual General
Meeting to be held on 3 October 2019.
Year ended 30 April 2018 – Paid after 30 April 2018
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 proposed a final dividend for the year ended 30 April 2018 of 4.73p per share, amounting to £17,868,000 which
was approved by shareholders at the Annual General Meeting held on 24 October 2018 and paid on 9 November 2018.
96
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 10 E A R N I N G S P E R S H A R E
Basic earnings per share amounts are calculated by dividing net earnings attributable to shareholders of the Parent of £31,226,000 (2018:
£40,134,000) by the weighted average number of shares in issue during the year.
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 being 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:
2019
Weighted
average
number
of shares
‘000
Earnings
£’000
31,266
377,662
190
31,266
377,852
Earnings per
share
pence
8.27
(0.01)
8.26
2018
Weighted
average
number
of shares
‘000
377,190
1,555
Earnings
£’000
40,134
40,134
378,745
Earnings per
share
pence
10.64
(0.04)
10.60
Basic earnings per share
Effect of dilutive share options
Diluted earnings per share
Potential shares (for example, arising from exercising share options) are treated as dilutive only when their conversion to shares would decrease
basic earnings per share or increase loss per share from continuing operations.
Alternative earnings per share
The table below reconciles earnings per share (EPS) and diluted earnings per share (DPS) before and after Specific items.
Alternative earnings per share
Profit for the year attributable to owners
of the Parent
Specific items net of tax
Gains on financial instruments classified as
available for sale
Earnings after specific items
Details of Specific items are set out in note 4.
£’000
31,226
1,825
(361)
32,690
2019
Earnings
per share
pence
Diluted
earnings
per share
pence
8.27
0.48
(0.10)
8.65
8.26
0.48
(0.10)
8.64
2018
Earnings
per share
pence
Diluted
earnings
per share
pence
10.64
(0.05)
10.60
(0.05)
(0.98)
9.61
(0.98)
9.57
£’000
40,134
(190)
(3,708)
36,236
97
ANNUAL REPORT 2019FINANCIAL STATEMENTS
11 G O O D W I L L A N D OT H E R I N TA N G I B L E ASS E TS
Goodwill
Group
Cost:
At 1 May 2017
Exchange differences
Additions
At 30 April 2018
At 1 May 2018
Exchange differences
Additions (see note 30)
At 30 April 2019
Impairment charges:
At 1 May 2017
At 30 April 2018
At 1 May 2018
At 30 April 2019
Net book value:
At 30 April 2019
At 30 April 2018
At 30 April 2017
The addition to goodwill in 2019 relates to acquisitions in Spain and France and in 2018 to acquisitions in the United Kingdom.
Company
The Company has no goodwill.
£’000
12,110
69
1,554
13,733
13,733
(71)
13,230
26,892
298
298
298
298
26,594
13,435
11,812
98
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC
The table below shows the allocation of goodwill acquired through business combinations between segments.
Goodwill has been allocated for impairment testing purposes to eleven (2018: nine) 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
CGU 4 – LaWash Group
CGU 5 – Sempa SARL
Total Continental Europe
Asia
CGU 1 – Nippon Auto-Photo Kabushiki Kaisha
Total Asia
Total
Total
2019
£’000
154
14
317
1,273
1,554
3,312
309
1,982
558
2,528
10,660
16,037
7,245
7,245
2018
£’000
154
14
317
1,273
1,554
3,312
315
2,021
542
–
–
2,878
7,245
7,245
26,594
13,435
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. Cash flows include a forecast period of five years, based on
actual operating results, budgets and economic market research with a terminal value based on a long term growth rate applied thereafter.
Key assumptions
Growth rate 1%-3% (2018: 3%)
The growth rate has been determined based on a conservative basis for expected annual growth in EBITDA for each CGU and takes into
account revenue, volumes, selling prices and operating costs. It is based on past experience and expected future developments in markets and
operations.
Discount rate 6.5%–7.5% (2018: 6.9%–8.3%)
The pre-tax discount rates applied to the cash flow forecasts for the CGUs are derived from the pre-tax weighted average cost of capital for the
Group adjusted for economic and political risks for the specific country concerned.
The rates used are: United Kingdom 7.2%, (2018:8.3%), Ireland 7.7% (2018: 7.9%), France 7.7% (2018: 7.8%), Germany 6.5% (2018:7.5%),
Spain 6.95% (2018: n/a), Switzerland 7.1% (2018: 6.9% ) and Japan 7.5% (2018: 6.9%). The Board is confident, overall, that these discount
rates reflect the circumstances in each region, and are in accordance with IAS 36.
99
ANNUAL REPORT 2019FINANCIAL STATEMENTS 11 G O O D W I L L A N D OT H E R I N TA N G I B L E ASS E TS C O N T I N U E D
Sensitivity to changes in assumptions
There is significant headroom for each CGU and management believes that no reasonable possible change in any of the above assumptions
would cause the carrying value of those CGUs to exceed their recoverable amount. Consequently, no impairment losses were recognised in
2019 (2018: none).
Other intangible assets
Group
Cost:
At 1 May 2017
Exchange differences
Additions
– Internally generated
– External
Disposals
At 30 April 2018
At 1 May 2018
Exchange differences
Additions
– Subsidiaries acquired
– Internally generated
– External
Disposals
At 30 April 2019
Amortisation:
At 1 May 2017
Exchange differences
Provided during year
Disposals
At 30 April 2018
At 1 May 2018
Exchange differences
Subsidiaries acquired
Provided during year
Disposals
At 30 April 2019
Net book value:
At 30 April 2019
At 30 April 2018
At 30 April 2017
Capitalised
development
costs
£’000
Other
intangible
assets
£’000
Total
£’000
7,883
142
12,657
20,540
174
316
2,510
–
(493)
10,042
10,042
(51)
–
708
(476)
13,063
13,063
(53)
–
2,555
1,631
–
(774)
10,848
2,200
45
1,824
(493)
3,576
3,576
(48)
–
1,959
(774)
4,713
6,135
6,466
5,683
–
536
(2,681)
13,420
4,889
11
944
(275)
5,569
5,569
7
12
1,033
(2,288)
4,333
9,087
7,494
7,768
2,510
708
(969)
23,105
23,105
(104)
2,555
1,631
536
(3,455)
24,268
7,089
56
2,768
(768)
9,145
9,145
(41)
12
2,992
(3,062)
9,046
15,222
13,960
13,451
Capitalised research and development expenditure is amortised over a maximum of four years, with no residual value.
100
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC Included in the net book value of other intangible assets is £3,447,000 corresponding to droit au bail (2018: £3,478,000).
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 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 £2,212,000 (2018: £2,549,500) 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% (2018: 2%) and the pre-tax rate used to discount the forecast cash flows was 10% (2018: 5.93%).
Company
Cost:
At 1 May 2017
Disposals
– External
At 30 April 2018
At 1 May 2018
At 30 April 2019
Amortisation:
At 1 May 2017
Provided during year
Disposals
– External
At 30 April 2018
At 1 May 2018
Provided during year
At 30 April 2019
Net book value:
At 30 April 2019
At 30 April 2018
At 30 April 2017
Other
intangible
assets
£’000
Total
£’000
780
780
(4)
776
776
776
550
163
(4)
709
709
67
776
–
67
230
(4)
776
776
776
550
163
(4)
709
709
67
776
–
67
230
101
ANNUAL REPORT 2019FINANCIAL STATEMENTS 12 P R O P E R T Y, P L A N T A N D E Q U I P M E N T
Group
Cost:
At 1 May 2017
Exchange difference
Additions
– new subsidiaries
– internal
– external
Disposals
At 30 April 2018
Exchange difference
Additions
– new subsidiaries
– internal
– external
Disposals
At 30 April 2019
Depreciation
At 1 May 2017
Exchange difference
New subsidiary
Provided during year
Disposals
At 30 April 2018
Exchange difference
New subsidiary
Provided during year
Disposals
At 30 April 2019
Net book value:
At 30 April 2019
At 30 April 2018
At 30 April 2017
Land &
Buildings
£’000
Photobooths
and vending
machines
£’000
Plant,
machinery,
furniture,
fixtures and
motor vehicles
£’000
Total
£’000
5,621
218,283
66
2,569
28,137
1,067
252,041
3,702
–
–
814
(180)
–
1,424
34,164
(14,765)
49
–
4,057
(627)
49
1,424
39,035
(15,572)
6,321
241,675
32,683
280,679
(8)
(610)
(513)
(1,131)
1,002
–
466
(231)
40
1,383
23,555
274
93
1,316
1,476
2,856
26,877
(13,935)
(1,465)
(15,631)
7,550
252,108
33,928
293,586
3,999
151,698
21,355
177,052
43
–
165
(138)
1,243
–
20,693
(12,731)
820
20
1,427
(471)
2,106
20
22,285
(13,340)
4,069
160,903
23,151
188,123
(1)
127
203
(35)
(370)
23
22,081
(12,333)
(402)
147
(773)
297
1,724
24,008
(1,054)
(13,422)
4,363
170,304
23,566
198,233
3,187
2,252
1,622
81,804
80,772
66,585
10,362
9,532
6,782
95,353
92,556
74,989
Internal additions for photobooths and vending machines of £1,383,000 (2018: £1,424,000) relate to own work capitalised, being equipment
produced by the subsidiaries and capitalised by the group companies.
102
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC Included in the above are assets held under finance leases, as follows:
Net book value
Additions/reclassifications
Depreciation charge
2019
Plant,
machinery,
furniture,
fixtures and
motor vehicles
£’000
401
184
159
2018
Plant,
machinery,
furniture,
fixtures and
motor vehicles
£’000
392
81
151
The Group tests all significant operating equipment asset classes for impairment annually, or more frequently if there are indications of
impairment. Impairment reviews on operating equipment are all conducted on a value in use basis.
For the purpose of impairment testing, the recoverable amount of the CGUs 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, in line with the useful economic life of the asset class. 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% (2018: 0%- 3%). A
conservative pre-tax discount rate of 8.3% (2018: 10%) was applied to the cash flows. No impairment losses were identified and consequently
no impairment losses were recognised in 2019 (2018: none).
103
ANNUAL REPORT 2019FINANCIAL STATEMENTS 12 P R O P E R T Y, P L A N T A N D E Q U I P M E N T C O N T I N U E D
Company
Cost:
At 1 May 2017
Additions
– internal
– external
Disposals
– external
At 30 April 2018
Additions
– internal
– external
Disposals
– external
At 30 April 2019
Depreciation
At 1 May 2017
Provided during year
Disposals
– external
At 30 April 2018
Provided during year
Disposals
– external
At 30 April 2019
Net book value:
At 30 April 2019
At 30 April 2018
At 30 April 2017
Land &
Buildings
£’000
Photobooths
and vending
machines
£’000
Plant,
machinery,
furniture,
fixtures and
motor vehicles
£’000
Total
£’000
8
–
–
–
8
–
–
(8)
–
8
–
–
8
–
(8)
–
–
–
–
38,322
415
38,745
6,120
1,502
(3,412)
42,532
3,374
1,421
–
617
(92)
940
–
332
6,120
2,119
(3,504)
43,480
3,374
1,753
(4,371)
42,956
(157)
1,115
(4,536)
44,071
29,181
3,643
(3,296)
29,528
3,807
(4,012)
29,323
13,633
13,004
9,141
226
68
(41)
253
90
(88)
255
860
687
189
29,415
3,711
(3,337)
29,789
3,897
(4,108)
29,578
14,493
13,691
9,330
Internal additions for photobooths and vending machines of £3,374,000 (2018: £6,120,000) relate to new equipment produced by
subsidiaries and equipment previously capitalised by the Group’s subsidiaries and sold to the parent.
104
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 13 I N V E ST M E N T P R O P E R T Y
Group
Cost:
At 1 May 2017
Exchange differences
At 30 April 2018
Exchange differences
At 30 April 2019
Depreciation
At 1 May 2017
Exchange difference
Provided during year
At 30 April 2018
Exchange differences
Provided during year
At 30 April 2019
Net book value:
At 30 April 2019
At 30 April 2018
At 30 April 2017
£’000
12,774
573
13,347
(259)
13,088
12,112
543
16
12,671
(247)
16
12,440
648
676
662
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.
Rental income from the investment property was £1,106,000 (2018: £1,093,000) (note 4) and finance costs were £2,000 (2018: £7,000).
Company
The Company has no investment property.
105
ANNUAL REPORT 2019FINANCIAL STATEMENTS 14 I N V E ST M E N TS I N ASS O C I AT E S A N D S U B S I D I A R I E S
Investment in associates
Group
Cost:
At 30 April 2017
Exchange differences
Deemed disposal of Max Sight Limited and Fullwise Limited
Share of profits
Dividends
At 30 April 2018
Exchange differences
Disposal of Stilla Technologies SA (see note 4)
Share of profits
Dividends
At 30 April 2019
£’000
2,095
(2)
(400)
194
(304)
1,583
(4)
(1,178)
50
(36)
415
On 1 August 2018, the Group disposed of its interest in Stilla Technologies SA, a French company specialising in universal and flexible digital
PCR (dPCR) genetic testing, for €5,000,000, resulting in a gain of £3,258,000 (see note 4). The Group’s interest in Stilla Technologies SA was
held by MGInvest Investments Limited, a subsidiary of Photo-Me International.
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 for the year ended 30 April 2018 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.
Country of
incorporation
Assets
£’000
Liabilities
£’000
Revenue
£’000
Share of
profit
£’000
Dividends
received
Interest
%
Name
At 30 April 2018
Max Sight Ltd
Hong Kong
Photo Direct Pty Ltd
Australia
Stilla Technologies SA
France
Other associates
At 30 April 2019
Photo Direct Pty Ltd
Australia
Other associates
–
445
1,178
62
1,685
446
69
515
–
83
–
19
102
72
28
100
394
943
–
107
1,444
782
8
790
94
96
–
4
194
49
1
50
269
35
–-
–
304
36
–
36
–
26.95
50.00
26.95
There were no items of other comprehensive income in the year ended 30 April 2019 (2018: nil).
106
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC Company
Costs:
At 1 May 2017
Capital increase relating to share-based payment (net)
Disposals
At 30 April 2018
Capital increase relating to share-based payment (net)
At 30 April 2019
Provision:
At 1 May 2017
Decrease
At 30 April 2018
At 30 April 2019
Net book value:
At 30 April 2019
At 30 April 2018
At 30 April 2017
Associated
undertakings
£’000
Subsidiary
undertakings
£’000
Total
£’000
407
–
(369)
38
–
38
7
(4)
3
3
35
35
400
47,830
48,237
177
(21)
177
(390)
47,986
48,024
133
133
48,119
48,157
393
(21)
372
372
400
(25)
375
375
47,747
47,614
47,437
47,782
47,649
47,837
The net capital increase relating to share-based payments relates to share options in the parent company, Photo-Me International plc, 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 (2018: £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.
15 F I N A N C I A L I N ST R U M E N TS
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. 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). 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.
107
ANNUAL REPORT 2019FINANCIAL STATEMENTS 15 F I N A N C I A L I N ST R U M E N TS C O N T I N U E D
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 satisfactory 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 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. No derivatives or swaps have been used in the year ending 30 April 2019 (30 April 2018: none). With a
satisfactory 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 ) FA I R VA L U E S O F F I N A N C I A L I N ST R U M E N TS BY C L ASS
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 at fair value through profit and loss (FVTPL), amortised cost, to maturity, available-for-sale financial assets and derivatives
The fair value is based on quoted prices at the reporting 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 reporting 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
reporting 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 reporting 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
reporting 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
reporting date if the effect is material.
108
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC IFRS 13 requires an analysis of financial instruments carried at fair value, which are classified as financial instruments held at FVTPL (2018: Other
financial assets – available for sale) 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
At 30 April 2019, the Group held financial instruments amounting to £1,387,000 (2018: £4,286,000). These amounts included the Group's
interest in Max Sight Group Holdings Limited of £1,176,000 (2018: £4,074,000) which is a listed investment valued at level 1. Other financial
instruments of £211,000 (2018: £212,000) are valued at level 3.
Financial instruments by category
The tables below show financial instruments by category
Group
At 30 April 2019
Assets per statement of financial position
Financial instruments held at amortised cost
Financial instruments held at FVTPL
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 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
Loans and
receivables
£’000
Financial
instruments
£’000
982
–
17,800
84,591
103,373
–
1,387
–
–
Total
£’000
982
1,387
17,800
84,591
1,387
104,760
Other
financial
liabilities at
amortised
cost
£’000
67,393
1,842
37,366
Total
£’000
67,393
1,842
37,366
106,601
106,601
Loans and
receivables
£’000
Available
for sale
£’000
1,710
–
–
4,286
17,676
58,657
78,043
–
–
4,286
Total
£’000
1,710
4,286
17,676
58,657
82,329
109
ANNUAL REPORT 2019FINANCIAL STATEMENTS 15( A ) FA I R VA L U E S O F F I N A N C I A L I N ST R U M E N TS BY C L ASS C O N T I N U E D
Liabilities per statement of financial position
Borrowings
Leases
Trade and other payables excluding non – financial liabilities
Company
At 30 April 2019
Assets per statement of financial position
Financial instruments – held at amortised cost
Financial instruments – held at FVTPL
Trade and other receivables
Cash and cash equivalents
Liabilities per statement of financial position
Trade and other payables excluding non - financial liabilities
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
Trade and other payables excluding non - financial liabilities
110
Other
financial
liabilities at
amortised
cost
£’000
33,325
354
40,736
74,415
Loans and
receivables
£’000
Financial
instruments
£’000
–
–
19,394
3,202
22,596
982
1,176
–
–
2,158
Other
financial
liabilities at
amortised
cost
£’000
Total
£’000
33,325
354
40,736
74,415
Total
£’000
982
1,176
19,394
3,202
24,754
Total
£’000
41,608
41,608
41,608
41,608
Loans and
receivables
£’000
Available
for sale
£’000
974
–
27,386
11,500
39,860
–
4,074
–
–
4,074
Other
financial
liabilities at
amortised
cost
£’000
Total
£’000
974
4,074
27,386
11,500
43,934
Total
£’000
26,819
26,819
26,819
26,819
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC
15( B ) F I N A N C I A L STAT E M E N T R I S K M A N AG E M E N T
Financial risk factors and financial risk management
Overview
The Group and the Company are exposed to the following risks arising from financial instruments:
(i) Credit risk
Liquidity risk
(ii)
(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.
111
ANNUAL REPORT 2019FINANCIAL STATEMENTS 15( B ) F I N A N C I A L STAT E M E N T R I S K M A N AG E M E N T C O N T I N U E D
(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. Other receivables and prepayments
and accrued income are interest free.
Trade receivables and contract assets are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the group, and a failure to make
contractual payments for a period of greater than 120 days past due or an impairment amount being required under the ECL model mandated
by IFRS 9.
Impairment losses on trade receivables and contract assets are presented as net impairment losses within operating profit. Subsequent
recoveries of amounts previously written off are credited against the same line item.
The Group does not require collateral in respect of trade and other receivables. The Group does not have trade receivable and contract assets
for which no loss allowance is recognised because of collateral.
The Directors have concluded that the credit risk of trade and other receivables has not increased significantly since initial recognition. The
Directors have come to this conclusion having considered micro and macro economic factors including Brexit, the Group’s knowledge of its
customers, payment history of the customers and industry trends.
Details of how the ECL is calculated are set out in note 2. No ECL was required following the adoption of IFRS 9 on 1 May 2018 or 30 April 2019.
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
2019
£’000
144
(1)
128
(14)
257
2018
£’000
282
7
(137)
(8)
144
2019
£’000
607
–
645
–
2018
£’000
607
–
–
–
1,252
607
112
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC At 30 April 2019, trade receivables of £3,935,000 (2018: £3,391,000) were past due and relate to a number of individual customers for
whom there is no recent evidence of default and therefore are not impaired.
The ageing of net trade current receivables is as follows:
Current
Past due
– overdue 1-30 days
– overdue 31-60 days
– overdue 61 days
Total past due
Total trade receivables
Group
2019
£’000
6,377
778
1,313
1,844
3,935
2018
£’000
7,085
1,399
433
1,559
3,391
Company
2019
£’000
65
–
–
90
90
10,312
10,476
155
2018
£’000
642
64
10
101
175
817
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 £16,503,000 (2018: £26,164,000) are all current.
(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 2019 and 30 April 2018 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 2019 and 30 April 2018, the Group and the Company have comfortably complied with such requirements.
113
ANNUAL REPORT 2019FINANCIAL STATEMENTS 15( B ) F I N A N C I A L STAT E M E N T R I S K M A N AG E M E N T C O N T I N U E D
The table below summarises the maturity profile of the Group’s and Company’s financial liabilities (including trade and other payables) at
30 April 2019 and 30 April 2018 based on contractual undiscounted payments.
Group contractual cash flows
At 30 April 2019
Interest bearing loans and borrowings and interest free
loans
Finance leases
Trade and other payables
At 30 April 2018
Interest bearing loans and borrowings and interest
free loans
Finance leases
Trade and other payables
Company contractual cash flows
At 30 April 2019
Trade and other payables
At 30 April 2018
Trade and other payables
Within
one year
£’000
Year 2
£’000
Year 3
£’000
Year 4
£’000
Year 5
£’000
Over
5 years
£’000
Total
£’000
15,471
14,864
15,019
12,896
7,955
2,464
68,669
133
47,412
139
–
55
–
22
–
4
–
–
–
353
37,412
63,016
15,003
15,074
12,918
7,959
2,464 116,434
6,406
6,363
6,321
6,278
4,207
5,025
34,600
133
39,945
139
–
55
–
22
–
4
–
–
–
353
39,945
46,484
6,502
6,376
6,300
4,211
5,025
74,898
Within
one year
£’000
41,549
27,001
Year 2
£’000
Year 3
£’000
Year 4
£’000
Year 5
£’000
Over
5 years
£’000
Total
£’000
–
–
–
–
–
–
–
–
–
41,549
–
27,001
Financial instruments held at amortised cost and held to maturity
These largely comprise of restricted bank deposit accounts where the cash acts as security against possible shortfalls in the funding required to
meet future payments in the course of business.
(iii) Market risk
Foreign exchange risk
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the local functional
currency. In addition, the Group faces currency risks arising from monetary financial instruments held in non-functional currencies. The income
statement reflects the impact of realised and unrealised exchange differences on trading items and monetary financial instruments (note 4).
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. The main currency
translation risk relates to foreign operations whose functional currency is the Euro, Swiss Franc or Japanese Yen. The investments are not hedged.
The translation reserve reflects the exchange differences arising on translation of the opening net assets and results of the foreign operation
(note 20).
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.
114
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC Monetary assets/liabilities
The Group continues to monitor exchange rates and buy or sell currencies in order to minimise the open exposure to foreign exchange risk.
The Group may use derivative financial instruments mainly to reduce the risk of foreign exchange exposure on trading items (sales or purchases
in currencies other than the domestic currency of the company concerned) and interest rate movements. The Group does not hold or issue
derivative financial instruments for financial trading purposes.
IFRS 7 sensitivity analysis
The following table shows the impact on profit and equity of a change of 10% in exchange rates, excluding translation risk, assuming all other
variables held constant. This analysis is for illustrative purposes only.
2019
Profit for the year
Total equity
2018
Profit for the year
Total equity
Reported
£’000
10% increase
£’000
10% decrease
£’000
31,279
143,847
29,046
141,614
33,106
145,674
40,286
144,810
40,601
145,125
40,028
144,552
Borrowings
At 30 April 2019 and 30 April 2018 the Group had no borrowings which were not denominated in the functional currency of the Group
company concerned.
115
ANNUAL REPORT 2019FINANCIAL STATEMENTS 15( B ) F I N A N C I A L STAT E M E N T R I S K M A N AG E M E N T C O N T I N U E D
Analysis of net cash by currency
Group
2019
Sterling
Euro
Swiss Franc
US Dollar
Japanese yen
Other currencies
2018
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
– Financial asset held at amortised cost/held to maturity
Other items
Interest free and interest bearing loans
Interest bearing finance leases
Bank
£’000
26,270
48,426
2,278
29
5,409
2,179
Financial
assets
£’000
Loans
£’000
Leases
£’000
Total
£’000
974
–
(5)
27,239
–
8
–
–
–
(67,393)
(1,490)
(20,457)
–
–
–
–
–
–
(347)
–
2,286
29
5,062
2,179
84,591
982
(67,393)
(1,842)
16,338
13,573
35,006
2,820
139
4,669
2,450
974
728
8
–
–
–
–
(33,325)
–
–
–
–
(28)
(21)
–
–
(305)
–
14,519
2,388
2,828
139
4,364
2,450
58,657
1,710
(33,325)
(354)
26,688
2019
£’000
2018
£’000
83,646
58,050
945
982
(67,393)
(1,842)
16,338
607
1,710
(33,325)
(354)
26,688
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.
116
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 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 2019 of £67,393,000 (30 April 2018 of £33,325,000), of which £67,393,000 (30 April 2018
of £33,325,000) is subject to fixed interest rates between 0.49% and 1.2%. An increase of 1% in the fixed rate of interest would result in an extra
£600,000 (30 April 2018: £400,000) of interest expense.
Terms and debt repayment schedule
The table below shows the maturity profile and interest rates of the Groups borrowings at 30 April 2019 and 30 April 2018. Floating rate
interest borrowings (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 2019 (2018: none).
Group
Finance leases
Loans
Status
Fixed rate
Fixed rate
Currency
Various
Euro
Interest
rate
0.0% –7.2%
Year of
maturity
2023
0.49%-1.20%
2022-2025
2019
Carrying
amount
£’000
1,842
67,393
69,235
2018
Carrying
amount
£’000
354
33,325
33,679
Price risk
The Group and the Company are exposed to changes in prices on raw materials, consumables and finished goods purchased from suppliers.
Wherever possible, price rises are passed on to customers via sales price increases to help manage this risk.
The Group’s and Company’s investment in Max Sight Group Holdings Limited, which at 30 April 2019 amounted to £1,176,000 (30 April 2018:
£4,074,000) and is listed and is thus subject to variations in the quoted price. The Group’s other investments in equity securities are not listed,
and are not material thus the Group does not have any significant exposure to price risk on these equity investments.
15( C ) C A P I TA L R I S K M A N AG E M E N T
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.
117
ANNUAL REPORT 2019FINANCIAL STATEMENTS 15( C ) F I N A N C I A L STAT E M E N T R I S K M A N AG E M E N T C O N T I N U E D
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
2019
£’000
84,591
(69,235)
15,356
143,847
2018
£’000
58,657
(33,679)
24,978
144,810
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.
During the year ended 30 April 2019 the Group increased its net borrowings by £35,556,000 (30 April 2018: £22,997,000) in order to
take advantage of historically low interest rates in order to reduce the Group’s weighted average cost of capital and to increase the Group’s
capacity to invest in product offerings as it continues to evaluate potential acquisitions.
15( D ) OT H E R F I N A N C I A L ASS E TS H E L D AT A M O R T I S E D C O ST, AT F V T P L ,
TO M AT U R I T Y A N D AVA I L A B L E F O R S A L E
Group
Non-current
Financial
assets
held at
amortised
cost
2019
£’000
982
982
Financial
instruments
held
at FVTPL
2019
£’000
1,387
1,387
Assets
held to
maturity
2018
£’000
1,710
1,710
Assets
available
for sale
2018
£’000
4,286
4,286
Financial assets held to maturity reclassified as Financial assets held at amortised cost following adoption of IFRS 9 consist of restricted bank
deposit accounts – see note 19.
Included in financial instruments held at FVTPL for the Group and the Company at 30 April 2019 is the Group’s interest in Max Sight Group
Holdings Limited of £1,176,000, which was previously classified as a financial asset available for sale with a a carrying value of £4,074,000 at
30 April 2018 (see note 14 and note 32).
Company
Non-current
Financial
assets
held at
amortised
cost
2019
£’000
975
975
Financial
instruments
held
at FVTPL
2019
£’000
1,176
1,176
Assets
held to
maturity
2018
£’000
974
974
Assets
available
for sale
2018
£’000
4,074
4,074
Financial assets held at amortised cost and assets held to maturity consist of restricted bank deposit accounts – see note 19.
118
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 16 T R A D E A N D OT H E R R E C E I VA B L E S
Non-current assets
Trade receivables – external
Other receivables
Prepayments and accrued income
Current assets
Trade receivables
– related parties
Amounts due from subsidiaries
Amounts due from associated undertakings
Other receivables
Prepayments and accrued income
Group
2019
£’000
1,607
135
22
1,764
2018
£’000
1,599
472
45
2,116
10,312
10,476
–
–
–
5,747
4,858
20,917
492
–
1,120
3,516
5,009
20,613
Company
2019
£’000
2018
£’000
–
–
–
–
155
–
–
–
–
–
817
–
16,503
26,164
–
1,851
3,104
21,613
–
406
2,761
30,148
All trade receivables arise from contracts with customers.
Non-current other receivables include deposits relating to operating sites and properties. Current other receivables include deposits relating to
operating sites and properties, indirect and other taxation and other receivables.
17 I N V E N TO R I E S
Raw materials and consumables
Work-in-progress
Finished goods
Group
2019
£’000
2018
£’000
14,157
15,399
346
7,836
347
7,156
22,339
22,902
Company
2019
£’000
1,858
–
1,999
3,857
2018
£’000
1,426
–
744
2,170
The replacement value of inventories is not materially different from that stated above.
18 C AS H A N D C AS H E Q U I VA L E N TS
Cash at bank and in hand
Deposit accounts (excluding restricted deposits)
Cash and cash equivalents per statement of financial position
Cash and cash equivalents per cash flow
Group
2019
£’000
2018
£’000
83,646
58,050
945
84,591
84,591
607
58,657
58,657
Company
2019
£’000
3,162
–
3,162
3,162
2018
£’000
11,500
–
11,500
11,500
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.
119
ANNUAL REPORT 2019FINANCIAL STATEMENTS
19 N E T C AS H
Cash and cash equivalents per statement of financial position
Financial instruments held at amortised cost / held to maturity
Non-current borrowings
Current borrowings
Non-current finance leases
Current finance leases
Notes
18
15
21
21
21
21
Group
2019
£’000
2018
£’000
84,591
58,657
982
(52,322)
(15,071)
(1,063)
(779)
1,710
(27,319)
(6,006)
(221)
(133)
Company
2019
£’000
3,162
975
2018
£’000
11,500
974
–
–
–
–
–
–
–
–
16,338
26,688
4,137
12,474
At 30 April 2019, £982,000 of the total net cash (2018: £1,710,000 ) 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 instruments held at amortised cost / 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.
The tables below, which are not currently required by IFRS, reconcile the Group’s net cash to the Group’s statement of cash flows. Management
believes the presentation of the tables will be of assistance to shareholders. Presentation of this information is recommended by the Financial
Reporting Council (FRC) as good practice as being of use to shareholders and analysts, in their Financial Lab Project, Net Debt Reconciliations.
Group
2018/19
Cash and cash equivalents per statement of financial
position and cash flow
Financial asset held at amortised cost
Financial assets - available for sale
Non-current loans
Current loans
Leases
2017/18
Cash and cash equivalents per statement of financial position
and cash flow
Financial asset held to maturity
Non-current loans
Current loans
Leases
1 May
£’000
Exchange
differences
£’000
Other
movements
£’000
Cash flow
£’000
30 April
£’000
58,657
1,710
–
(27,319)
(6,006)
(354)
26,688
47,505
2,389
(7,894)
(2,344)
(444)
39,212
22
13
–
532
117
(28)
656
165
8
(354)
(46)
47
(180)
–
–
–
25,912
84,591
(741)
–
982
–
18,213
(43,748)
(52,322)
(17,579)
(1,627)
8,397
(15,071)
167
(1,842)
(993)
(10,013)
16,338
–
–
7,311
(7,311)
(75)
(75)
10,987
58,657
(687)
(26,382)
3,695
118
1,710
(27,319)
(6,006)
(354)
(12,269)
26,688
Other movements for finance leases relates to new finance leases during the year.
120
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC
Company
2018/19
1 May
£’000
Cash flow
£’000
30 April
£’000
Cash and cash equivalents per statement of financial position and cash flow
11,500
(8,338)
Financial asset held at amortised cost
2017/18
Cash and cash equivalents per statement of financial position and cash flow
Financial asset held to maturity
Other movements for finance leases relates to new finance leases during the year.
974
1
12,474
(8,337)
3,162
975
4,137
11,535
973
12,508
(35)
1
(34)
11,500
974
12,474
121
ANNUAL REPORT 2019FINANCIAL STATEMENTS 20 S H A R E C A P I TA L A N D R E S E R V E S
Share capital
Company and Group
Allotted, issued and fully paid:
Ordinary shares of 0.5p each
At 1 May
Issued in year – share options exercised
At 30 April
2019
Number
2018
Number
2019
£’000
2018
£’000
377,499,637
376,474,871
1,887
482,000
1,024,766
2
377,981,637
377,499,637
1,889
1,882
5
1,887
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
4 Jul 2011
At
30 April
2018
45,000
13 Dec 2011
250,000
4 Jul 2012
9 Jul 2013
11 Jul 2014
262,000
998,000
485,000
9 Jul 2015
1,187,600
15 Dec 2015
13 Jul 2016
21 Jul 2017
Date
options
granted
12 Jul 2010
4 Jul 2011
57,400
903,300
705,200
4,893,500
At
30 April
2017
15,000
105,000
13 Dec 2011
250,000
4 Jul 2012
9 Jul 2013
262,000
1,098,000
11 Jul 2014
1,331,700
9 Jul 2015
1,347,600
15 Dec 2015
57,400
1,123,300
13 Jul 2016
21 Jul 2017
Granted
during
year
Lapsed or
forfeited
during year
Exercised
during
year
At
30 April
2019
Exercise
price
Date from
which
exercisable
Last date
on which
exercisable
(45,000)
–
(250,000)
–
–
65.25p
4 Jul 2014
3 Jul 2018
53.50p 13 Dec 2014 12 Dec 2018
–
–
–
(40,000)
(50,000)
–
(50,000)
–
(232,000)
30,000
39.17p
4 Jul 2015
3 Jul 2019
–
–
–
–
–
–
998,000
445,000
90.63p
9 Jul 2016
8 Jul 2020
145.33p
11 Jul 2017
10 Jul 2021
1,137,600
133.33p
9 Jul 2018
8 Jul 2022
57,400
153.25p 15 Dec 2018 14 Dec 2022
853,300
705,200
141.50p
13 July 2019 12 July 2023
157.00p
21 Jul 2020
21 Jul 2024
(185,000)
(482,000)
4,226,500
Granted
during
year
Lapsed or
forfeited
during year
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
262,000
53.50p 13 Dec 2014 12 Dec 2018
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
705,200
141.50p
13 July 2019 12 July 2023
157.00p
21 Jul 2020
21 Jul 2024
–
985,200
(280,000)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,590,000
985,200
(656,934)
(1,024,766)
4,893,500
Full details of directors’ share options are given in the Remuneration report on pages 52 to 64.
122
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-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 2019 is 129.0p (2018: 121.2p) and the weighted average exercise
price of options exercisable at 30 April 2019 is 118.5p (2018: 91.9p).
The weighted average share price for options exercised during the year ended 30 April 2019 was 46.6p (30 April 2018: 133.7p).
The weighted average remaining years for options outstanding at the year end date is 3.2 years (2018: 4 years).
Share-based payments
In accordance with IFRS 2 Share-based Payments, share options granted to senior management including directors after November 2002 have
been fair-valued and the Company has used the Black-Scholes option pricing model. This model takes into account the terms and conditions
under which the options were granted.
The following table lists the inputs to the model used for the years ended 30 April 2019 and 30 April 2018:
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
04 July 2011
13 December 2011
04 July 2012
3 years
65.40%
64.00p
65.25p
3.25years
3.13%
1.32%
24.46p
3 years
63.20%
50.25p
53.50p
3.25years
4.48%
0.50%
16.38p
09 July 2013
11 July 2014
3 years
48.50%
94.00p
90.63p
3.25years
3.83%
0.62%
26.20p
3 years
39.10%
141.00p
145.33p
3.25years
2.66%
1.28%
32.20p
3 years
58.30%
38.00p
39.17p
3.25years
6.58%
0.46%
10.23p
9 July 2015
3 years
30.70%
113.50p
133.33p
3.25 years
4.02%
0.82%
21.00p
123
ANNUAL REPORT 2019FINANCIAL STATEMENTS 20 S H A R E C A P I TA L A N D R E S E R V E S
C O N T I N U E D
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
15 December 2015
13 July 2016
21 July 2017
3 years
26.16%
154.00p
153.25p
3.25 years
3.32%
0.90%
21.78p
3 years
26.35%
146.75p
141.50p
3.25 years
3.99%
0.11%
19.72p
3 years
36.00%
159.00p
157.00p
3.25 years
4.00%
0.62%
30.61p
The charge for share-based payments is £141,000 (2018: £197,000) and for the Company the charge is £7,000 (2018: £20,000).
Share price volatility is based on historical data.
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 2019 and 30 April 2018 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 (2018: £201,000) arising on the redemption of the deferred shares and £1,997,000 (2018:
£1,864,000) relating to the fair value of options granted to employees of Group undertakings (note 14).
21 F I N A N C I A L L I A B I L I T I E S
Non-current liabilities
Non-current instalments due on bank loans
Finance lease creditors
Current liabilities
Current instalments due on loans
Finance lease creditors
124
Group
2019
£’000
52,322
1,063
53,385
15,071
779
15,850
2018
£’000
27,319
221
27,540
6,006
133
6,139
Company
2019
£’000
2018
£’000
–
–
–
–
–
–
–
–
–
–
–
–
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 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
(2018: four) years (note 12). The total finance lease creditor at 30 April 2019 was £1,842,000 of which £779,000 was due within one year
and the remaining £1,063,000 due between two and five years, (2018: total finance lease creditor £354,000, £133,000 due within one year
and £221,000 due within two to five years).
22 P O ST - E M P LOYM E N T B E N E F I T O B L I G AT I O N 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.
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
2019
£’000
4,578
1,057
5,635
2018
£’000
4,592
932
5,524
Company
2019
£’000
–
–
–
2018
£’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 then employee’s length of service and final pensionable salary.
The actuarial valuation of the UK Pension scheme has revealed a surplus at 30 April 2019, 30 April 2018, 30 April 2017 and 30 April 2016.
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.
125
ANNUAL REPORT 2019FINANCIAL STATEMENTS 22 P O ST - E M P LOYM E N T B E N E F I T O B L I G AT I O N S C O N T I N U E D
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, consistent with the projected unit basis required under IAS 19. 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.
Risks associated with the Fund
The fund exposes the Company to a number of risks, the most significant of which are described below.
Asset volatility
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.
Changes in bond yields
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.
Inflation risk
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
Actuarial gains on fund liabilities arising in demographic assumptions
Actuarial losses/(gains) from changes in financial assumptions
Actuarial (gains)/losses on liabilities from experience
Benefits paid
Present value of defined benefit obligation at end of year
126
2019
£’000
5,947
7
156
(80)
242
(9)
(323)
5,940
2018
£’000
6,639
8
162
(296)
(139)
(87)
(340)
5,947
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 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
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
2019
£’000
6,657
175
160
6
(323)
6,675
2019
£’000
5,940
(6,675)
(735)
735
–
2018
£’000
7,223
176
(409)
7
(340)
6,657
2018
£’000
5,947
(6,657)
(710)
710
–
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 (2018: loss of £1,375,000) in respect of the Company’s
defined benefit scheme. This has been charged to retained earnings.
Amount recognised in profit and loss
Amount recognised in profit and loss
Current service cost
Interest on net defined liability/(asset)
Total charge
Pension expense recognised in profit and loss
Remeasurement in Other Comprehensive Income
Return on Scheme assets (in excess of)/below that recognised in net interest
Actuarial (gains)/losses due to changes in financial assumptions
Actuarial (gains)/losses due to changes in demographic assumptions
Actuarial (gains)/losses on liabilities arising from experience
Adjustment due to the asset ceiling
Total (income)/expense amount recognised in Other Comprehensive Income
Total (income)/expense amount recognised in Comprehensive Income
The amounts shown above are included in staff costs (note 5) and in administrative expenses.
2019
£’000
2018
£’000
7
–
7
7
(160)
242
(80)
(9)
6
(1)
6
8
–
8
8
409
(139)
(296)
(87)
112
(1)
7
127
ANNUAL REPORT 2019FINANCIAL STATEMENTS 22 P O ST - E M P LOYM E N T B E N E F I T O B L I G AT I O N S C O N T I N U E D
An analysis of the assets of the plan is as follows:
Bonds
Insurance policies
Other
2019
2018
£’000
3,988
2,650
37
6,675
%
60
40
–
100
£’000
3,914
2,730
13
6,657
%
59
41
–
100
There were no financial instruments of the Company included in the plan assets (2018: none) and there were no property assets occupied by the
Company (2018: none).
Principal actuarial assumptions
Discount rate for scheme liabilities
Rate for increase in salaries
Price inflation
Pension increases
30 April
2019
30 April
2018
2.40
1.50
3.40
3.30
2.70
1.50
3.20
3.00
The mortality tables used for 2019 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 2018 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
Fair value of defined benefit obligation
Fair value of assets
Surplus/(deficit)
Experience (losses)/gains on fund assets
Experience gains/(losses)on plan liabilities
2019
2018
23.2 years (age 88.2)
23.4 years (age 88.4)
24.4 years (age 89.4)
24.3 years (age 89.3)
24.4 years (age 89.6)
25.0 years (age 90.0)
25.8 years (age 90.8)
26.1 years (age 91.1)
2019
£’000
5,940
6,675
735
2019
£’000
160
(9)
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)
Liabilities for 2019, 2018, 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.
128
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 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 2019
As reported
Following a 0.1% decrease in the discount rate
Following a 0.1% increase pa in the inflation assumption
Following an increase in the life expectancy of one year
Service
cost
£’000
Net
Interest
£’000
Total profit
and loss
charge
£’000
7
7
7
7
–
–
–
–
7
7
7
7
Plan
assets
£’000
6,675
6,697
6,678
6,823
Defined
benefit
obligation
£’000
5,940
6,007
5,959
6,217
Surplus
£’000
735
690
719
606
The sensitivity information shown above has been prepared using the same method as adopted when adjusting the results of the latest valuation
to the reporting date. This is the same approach as has been adopted in previous years.
Overseas post-employment benefit obligations
Provisions for obligations to make termination payments on retirement, to employees who are not members of the pension and retirement
schemes, are as follows:
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 2019 and 30 April 2018. 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
2019
1.20%
1.75%
2018
1.45%
1.75%
61-63 years
61-63 years
1.75%
1.75%
TGH/TGF 05 TGH/TGF 05
Management believes that the book value for retirement obligations in France fairly states the position at 30 April 2019 and 30 April 2018.
The movement on these schemes is as follows:
At 1 May
Exchange differences
Utilised and other movements
At 30 April
2019
£’000
4,592
26
(40)
2018
£’000
4,441
59
92
4,578
4,592
Utilised and other movements for 2019 include amounts reflected in other comprehensive income, amounts charged to profit and loss and
amounts paid to employees.
129
ANNUAL REPORT 2019FINANCIAL STATEMENTS 22 P O ST - E M P LOYM E N T B E N E F I T O B L I G AT I O N S C O N T I N U E D
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 2019 and 30 April 2018 by
independent actuaries.
Reconciliation of the movement in the present value of the defined benefit obligation
Present value of defined benefit obligation at 1 May
Exchange difference
Contribution by members
Current service cost
Interest cost
Remeasurement losses on plan liabilities
Prepaid risk premiums
Benefits deposited/(paid)
Administration costs
2019
£’000
3,826
2018
£’000
4,062
105
38
196
28
144
(38)
(157)
2
(218)
45
196
25
(131)
(56)
(99)
2
Present value of defined benefit obligation at 30 April
4,144
3,826
2019
£’000
2,894
81
190
21
96
(157)
(38)
2018
£’000
3,047
(165)
226
19
(78)
(99)
(56)
3,087
2,894
2019
£’000
932
24
101
1,057
2018
£’000
1,015
(53)
(30)
932
Fair value of plan assets at 1 May
Exchange difference
Contributions by company and members
Expected return on plan assets
Remeasurement gain on plan assets
Benefits (paid)/deposited
Prepaid risk premiums
Fair value of plan assets at 30 April
Net liability at 1 May
Exchange difference
Increase/(decrease) in liability
Net liability at 30 April
130
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 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
2019
£’000
2018
£’000
196
2
7
205
(96)
144
48
253
2019
2018
£’000
164
2,016
908
3,088
%
5
65
30
100
£’000
69
1,955
870
2,894
30 April
2019
%
0.60
n/a
1.20
0.00
196
2
6
204
78
(131)
(53)
151
%
2
68
30
100
30 April
2018
%
0.70
n/a
1.20
0.00
The normal retirement age for males is between 60 – 65 years and for females between 59 – 64 years for both 2019 and 2018.
The mortality tables used in 2019 and 2018 were the BVG 2015 GT tables; 2017, 2016 and 2015 used the BVG 2010 GT tables.
131
ANNUAL REPORT 2019FINANCIAL STATEMENTS 22 P O ST - E M P LOYM E N T B E N E F I T O B L I G AT I O N S C O N T I N U E D
History of assets, liabilities and actuarial gains and losses
Present value of defined benefit obligation
Fair value of assets
Deficit
Experience (losses)/gains on plan liabilities
– 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
2019
£’000
4,144
3,087
(1,057)
2019
£’000
(144)
3%
96
3%
2018
£’000
3,826
2,894
(932)
2018
£’000
131
3%
(78)
(3%)
2017
£’000
4,062
3,047
(1,015)
2017
£’000
(186)
(5%)
218
7%
2016
£’000
3,526
2,604
(922)
2016
£’000
(107)
3%
168
6%
2015
£’000
3,381
2,491
(890)
2015
£’000
(571)
(17%)
94
3%
The 2016, 2015 and 2014 figures in the table above represent actuarial gains on plan liabilities and plan assets.
Sensitivity to key assumptions
The key assumptions used for the IAS 19 valuation are: discount rate, inflation rate and mortality.
If different assumptions were used, this could have a material effect on the results disclosed.
The table below shows the sensitivity to the key assumptions noted above.
Defined benefit obligation as reported
Defined benefit obligation
– with discount rate – 0.25%
– with discount rate + 0.25%
– with salary decrease – 0.25%
– with salary increase + 0.25%
– with life expectancy + 1 year
– with life expectancy – 1 year
Defined benefit
obligation
£’000
Increase/(decrease)
in defined benefit
obligation
£’000
4,144
4,336
3,965
4,110
4,175
4,206
4,080
–
192
(179)
(34)
31
62
(64)
The Group’s best estimate for contributions to be paid by the company next year to the scheme is £189,000 (2018: £204,000).
The amount recognised in the income statement for this scheme was £211,000 (30 April 2018: £211,000).
132
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 23 P R OV I S I O N S
Group
At 30 April 2017
Exchange differences
Utilised and other movements
Charged to income statement
At 30 April 2018
Amount shown as current liability
At 30 April 2018
Exchange differences
Utilised and other movements
Charged to income statement
At 30 April 2019
Amount shown as current liability
Employee
related claims
£’000
Product
warranties
£’000
49
10
(52)
4
11
11
11
–
13
86
110
110
44
2
–
82
128
128
128
(5)
(38)
23
108
108
Other
£’000
1,979
70
Total
£’000
2,072
82
(1,992)
(2,044)
–
57
57
57
–
(300)
243
–
–
86
196
196
196
(5)
(325)
352
218
218
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.
24 D E F E R R E D TA X AT I O N
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:
– Capitalised development costs
– post-employment benefit provisions
– losses
– acquisition related intangibles
– other short term temporary differences
The closing balance comprises:
Deferred tax assets
Deferred tax liabilities
Group
2019
£’000
3,279
101
(645)
(209)
581
1,411
4,518
(912)
5,430
4,518
2018
£’000
3,605
344
(645)
(209)
–
(2,359)
736
(1,935)
2,671
736
Company
2019
£’000
(656)
–
–
–
–
(14)
(670)
(670)
–
(670)
2018
£’000
(701)
–
–
–
–
(244)
(945)
(945)
–
(945)
133
ANNUAL REPORT 2019FINANCIAL STATEMENTS 24 D E F E R R E D TA X AT I O N C O N T I N U E D
Deferred tax movements
Opening balance
Exchange differences
Arising on acquisition of subsidiary
Charge for the year in income statement
Amounts (credited)/charged to other comprehensive income
Closing balance
Group
Company
2019
£’000
736
42
633
3,149
(42)
4,518
2018
£’000
(554)
238
2
1,038
12
736
2019
£’000
(945)
–
–
275
–
(670)
2018
£’000
(1,835)
–
–
890
–
(945)
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 £1,220,000 (2018: £1,249,000) arising on temporary differences of £5,052,000 (2018: £5,114,000), 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
2019
£’000
–
228
992
1220
2018
£’000
–
251
998
1,249
In addition, the Group has an unrecognised deferred tax asset on gross capital losses of £3,756,000 (2018: £3,756,000), of which
£3,627,000 (2018: £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.
134
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 25 T R A D E A N D OT H E R PAYA B L E S
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
2019
£’000
–
–
–
2018
£’000
224
–
224
24,699
27,309
–
3,517
6,880
5,786
–
2,988
6,883
6,318
Company
2019
£’000
2018
£’000
–
–
–
4,038
36,373
517
442
696
–
–
–
4,256
21,463
596
504
778
40,882
43,498
42,066
27,597
26 O P E R AT I N G L E AS E S A N D S I T E AG R E E M E N 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
2019
£’000
1,872
3,548
1,025
6,445
1,641
1,210
–
2,851
3,513
4,758
1,025
9,296
6,609
6,002
–
12,611
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
34,646
Company
2019
£’000
305
648
711
2018
£’000
208
684
709
1,664
1,601
566
186
–
752
871
834
711
2,416
1,303
27
–
1,330
738
789
–
1,527
946
1,473
709
3,128
1,635
1,158
58
2,851
135
ANNUAL REPORT 2019FINANCIAL STATEMENTS 26 O P E R AT I N G L E AS E S A N D S I T E AG R E E M E N TS C O N T I N U E D
Lease arrangements
The Group and the Company have entered into operating lease agreements in respect of property, plant and machinery, the majority of which
are for motor vehicles.
Site owner agreements
The Group and the Company have entered into various commission agreements with site-owners enabling the Group and the Company to site
vending equipment for a number of years. The amounts shown in the table above represent the minimum fixed commission payable. Certain
agreements may, in addition, have clauses where additional commission is payable based on a percentage of revenue generated, above a
specified amount.
In January 2016 the IASB issued IFRS16 Leases which is effective for annual reporting periods beginning on or after 1 January 2019. Under this
standard all leases, both finance and operating will be included in the statement of financial position. 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.
27 C A P I TA L C O M M I T M E N TS A N D C O N T I N G E N T L I A B I L I T I 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
2017
£’000
–
–
–
–
Contingent liabilities
The Company and subsidiary undertakings have given guarantees in the normal course of business to third parties, including to the Group’s
bankers. 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 (2018: none).
136
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 28 R E L AT E D PA R T I E S
The Group’s related parties are its associated undertakings, subsidiary undertakings and its key management personnel, which comprises the
Board of Directors as set out on page 44.
The following transactions were carried out with related parties:
Directors’ compensation
Salaries and other short-term employee benefits excluding long-term
incentives and pension contributions
Share-based payments – charge
Group
2019
£’000
1,433
61
1,494
2018
£’000
682
–
682
Company
2019
£’000
–
–
–
2018
£’000
–
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 (2018: £nil). No director who served during the year was a member of the Company’s defined benefit pension scheme (2018: none).
Directors of the Company control 22.45% of the Ordinary shares of the Company. The interests of the directors are shown on page 61 of the
Remuneration report.
Transactions with subsidiaries
Sales
Purchases
Amounts owed by subsidiaries
Amounts owed to subsidiaries
Other items
Intercompany fees charged by subsidiaries
Property, plant and equipment
- acquired from subsidiaries
Dividend income
- from subsidiaries
Transactions with Associates
Dividends received from associates
2019
£’000
2018
£’000
17
6,646
16,503
36,373
101
7,887
26,164
21,462
3,049
6,716
3,374
6,120
2,239
16,497
36
304
137
ANNUAL REPORT 2019FINANCIAL STATEMENTS
29 G R O U P U N D E R TA K I N G S
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 2019 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
Principal
Activity
Group
interest
Registered office address
Country of
incorporation
Fowler UK.Com Limited
Operations
Jolly Roger (Amusement Rides) Limited 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
Xpand Investments Limited
Power-Me Limited
Inox Equip Limited
Tersus Equip Limited
Impact (Web Services) Limited
Dormant
Operations
Corporate
Dormant
Investment
Dormant
Operations
Operations
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
Unit A4, Alexander House,
Tallaght Cross East, Tallaght, Dublin 24
Prontophot Belgium NV
Operations
100%
Boulevard Paepsem 8a, 1070 Anderlecht
Belgium
Photo-Me Czech Republic s.p.o.l. s.r.o.
KIS SAS
Photomaton SAS
Operations
100%*
Dormant
Trading
100%*
Husova 2117, 256 01 Benešov
Czech Republic
100%*
7 Rue Jean-Pierre Timbaud, 38130 Echirolles
France
Viktor Kaplan Strasse 9B,
2201 Gerasdorf bei Wien
Austria
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Republic of Ireland
Republic of Ireland
Sempa SARL
Operations
96%*
Photo-Me France SAS
SCI du Lotissement d’Echirolles
Investment
Property
100%
61%*
4 Rue de la Croix Faron, 93217 La Plaine
Saint-Denis
73 D rue du Général Mangin, 38000,
Grenoble
France
France
7 Rue Jean-Pierre Timbaud, 38130 Echirolles
France
2110 Avenue Du Général De Gaulle,
38130 Echirolles
France
SCI Immobilière du 21
Property
100%*
7 Rue Jean-Pierre Timbaud, 38130 Echirolles
France
Fotofix-Schnellphotoautomaten
G.m.b.H.
Kis Italia Srl
Prontophot Holland B.V
KIS Poland s.p.z.o.o.
Operations
100%
Medienstrasse 4, 47807 Krefeld
Germany
Dormant
Operations
Operations
100%
100%
100%
Via Tiziano 32, 20145 Milano
Italy
Loonseweg 14, 5527 AC Hapert
Netherlands
ul. Targowa 46/5, 03-733 Warszawa
Poland
138
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC Company name
Animate Fotofixe Limitada
Principal
Activity
Operations
Group
interest
100%
Registered office address
Rua Sto António do Zaire, n°138,
2685-492 Camarate
Country of
incorporation
Portugal
KIS Automatic Services SL
Operations
100%
Global Network Investment SL
Smart Real Estate & Refurbishment SL
Prontophot (Schweiz) AG
Operations
Operations
Operations
100%
100%
100%
Calle Freixa 26-28, Planta Bj, 08021
Barcelona
Spain
Provença 385, entrelo. 2º, 08025 Barcelona Spain
Provença 385, entrelo. 2º, 08025 Barcelona Spain
Sonnentalstrasse 5, 8600 Dübendorf
Switzerland
Asia & ROW
Photo Direct Pty Ltd (associated)
Sales &
Servicing
26.95%
Unit 4, 109 Whitehorse Rd, Blackburn,
Victoria 3130
Photo-Me (Shanghai) Co Limited
Operations
100%*
Photo-Me Beijing Co Limited
Operations
100%*
Photomaton Maroc SARL (associated)
Operations
Nippon Auto-Photo Kabushiki Kaisha Operations
50%
100%
Photo-Me Korea Company Limited
Operations
100%*
Photomatico (Singapore) Pte Limited
KIS (Thailand) Limited
Operations
Dormant
100%
49%
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
131, Bd d’Anfa, Casablanca, 20250
Room 1302, Atlas Tower Roppongi,
Roppongi 7-7-13, Minato-Ku, 106 0032
Room #203-1, Daeryung techno town 1st,
Gasan Digital 2 ro 18, Geumcheon-gu,
Seoul, 08592
26 Sin Ming Lane, Singapore 573971
53/3, 4th Floor, Unit 4, Goldenland Bldg,
Soi Mahardlekluang 1, Badmiri Rd,
Lumpini Phathumwan, 10330 Bangkok
Australia
China
China
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
31 December
31 December
31 December
KIS Technolgy Company Limited
31 March
Photo Direct Pty Ltd
30 June
139
ANNUAL REPORT 2019FINANCIAL STATEMENTS 30 B U S I N E SS C O M B I N AT I O N S
La Wash Group
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 €5 million, obtaining control of the group on that date. Based in Barcelona, the La
Wash Group is a leader in the Spanish business-to-business laundry services market.
The acquisition was funded from the Group's cash resources.
Deferred consideration
A further £220,000 of consideration is payable to the vendor of the acquired businesses based on earnings in the year ended 30 April 2019.
Goodwill
The goodwill acquired of £2,570,000 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 contractual and fair value of trade receivables acquired was £284,000.
The following amounts have been included in the Group's post acquisition results in respect of the acquired businesses:
The fair values of the assets and liabilities acquired, cash outlay on acquisition and results of the acquired business included in Group results in
the year ended 30 April 2019 are shown in the table below.
Sempa
On 24 April 2019, the Group acquired 96% of the issued share capital of Sempa SARL for a consideration of €20,640,000 million, obtaining
control of the Company on that date. Sempa SARL is the French market leading provider of fresh fruit juice equipment. This acquisition is in line
with Photo-Me's strategy to diversify its vending operations and will develop a new product offering alongside its Identification, Laundry and
Kiosk businesses.
The acquisition was financed with borrowings from the Group’s bankers.
Due to the proximity of the transaction to the reporting date, the purchase price allocation, including determination of the fair value of intangible
assets recognised on consolidation has not been finalised.
Goodwill
The goodwill of £10,660,000 arising from the acquisition is attributable to the anticipated operational benefits and improvements to the
Group’s commercial offering, the value of the assembled workforce and the ability of the senior staff to generate future business.
Acquired receivables
The provisional fair value of trade receivables acquired was £512,000. The gross contractual amounts receivable were £559,000 which
£47,000 were not expected to be received.
No amounts have been included in the Group's post acquisition results in respect of the acquired business.
140
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC The fair values of the assets and liabilities acquired with La Wash and the provisional fair values of assets and liabilities acquired with Sempa are
shown below:
Intangible assets - Customer relationships
Intangible assets - Brand value
Intangible assets - Software
Property, plant and equipment
Total fixed assets
Inventory
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Trade and other payables
Deferred tax
Current tax
Total current liabilities
Borrowings
Total liabilities
Total identifiable net assets acquired excluding goodwill
Goodwill
Non-controlling interest
La Wash
Group
£’000
2,369
218
21
31
2,639
61
458
57
576
3,215
(595)
(633)
(167)
(1,395)
–
(1,395)
1,820
2,570
–
Sempa
SARL
£’000
–
–
1
1,001
1,002
120
580
8,497
9,197
10,199
(1,234)
–
(49)
(1,283)
(1,481)
(2,764)
7,435
10,660
(297)
Total
£’000
2,369
218
22
1,032
3,641
181
1,038
8,554
9,773
13,414
(1,829)
(633)
(216)
(2,678)
(1,481)
(4,159)
9,255
13,230
(297)
Total identifiable net assets acquired
4,390
17,798
22,188
Satisfied by
Cash
Deferred consideration to be paid
Total consideration
Cash consideration per cash flow
Cash consideration
Net cash acquired with subsidiaries
Initial cash outlay on purchase of subsidiaries
The following results were included in the Group’s results for the year ended 30 April 2019
Revenue
Profit before tax
4,170
220
4,390
4,170
(57)
4,227
17,798
21,968
–
220
17,798
22,188
17,798
(8,497)
9,301
21,968
(8,554)
13,528
£’000
3,784
943
£’000
–
–
£’000
3,784
943
141
ANNUAL REPORT 2019FINANCIAL STATEMENTS 31 E V E N TS A F T E R B A L A N C E S H E E T D AT E
On 4 May 2019 the Group acquired the 4% non-controlling interest in Sempa SARL for €860,000, taking its interest in Sempa SARL to 100%.
32 T R A N S I T I O N TO I F R S 9 F I N A N C I A L I N ST R U M E N TS
The table below shows reclassification of assets and liabilities on transition to IFRS 9 and the initial effect on equity at 1 May 2018.
Of which
Remeasurement
due to new
rules for
classification and
measurement
Effect on
equity
1 May
2018
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Financial assets
Equity investments
IAS 39
Classification at
30 April
2018
IFRS 9
Classification at
1 May
2018
Available for sale
Fair value through
profit and loss
Cash restricted in its use
Held to maturity
Amortised cost
Amortised cost
Trade and other receivables
(non current)
Trade and other receivables
(current)
Cash and cash equivalents
Loans and
receivables
Loans and
receivables
Loans and
receivables
IAS 39
Carrying
amount
30 April
2018
IFRS 9
Carrying
amount
1 May
2018
4,286
4,286
1,710
2,116
1,710
2,116
Amortised cost
20,613
20,613
Amortised cost
58,657
58,657
87,382
87,382
151,527
151,527
238,909
238,909
Total financial assets
Non-financial assets
Total assets
Financial liabilities
Loans and borrowings (non
current)
Trade and other payables (non
current)
Amortised cost
Amortised cost
(27,540)
(27,540)
Amortised cost
Amortised cost
(224)
(224)
Loans and borrowings (current) Amortised cost
Amortised cost
(6,139)
(6,139)
Trade and other payables
(current)
Total financial liabilities
Non-financial liabilities
Total liabilities
Amortised cost
Amortised cost
(43,498)
(43,498)
(77,401)
(77,401)
(16,698)
(16,698)
(94,099)
(94,099)
142
NOTES TO THE FINANCIAL STATEMENTS CONTINUEDFOR THE YEAR ENDED 30 APRIL 2019FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC 5 Y E A R S U M M A RY
I N C O M E STAT E M E N T ( U N A U D I T E D )
Revenue
UK & Ireland
Continental Europe
Asia
Total revenue
Operating profit after special items before finance costs
Net finance (cost)/income & Other gains
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
2019
£’000
2018
£’000
2017
£’000
2016
£’000
2015
£’000
52,919
130,661
44,538
228,118
42,739
(146)
42,593
(11,314)
31,279
63,707
121,134
44,973
53,639
111,670
49,344
45,783
93,712
44,499
44,652
94,345
38,205
229,814
214,653
183,994
177,202
46,106
4,069
50,175
(9,889)
40,286
46,807
1,232
48,039
(12,901)
35,138
39,734
38,370
372
40,106
(10,907)
29,199
126
38,496
(10,452)
28,044
31,226
40,134
34,991
29,066
27,900
53
152
147
133
144
31,279
40,286
35,138
29,199
28,044
8.27p
8.26p
3.71p
4.73p
–
8.44p
10.64p
10.60p
3.71p
4.73p
–
8.44p
9.30p
9.27p
3.09p
3.94p
–
7.03p
7.77p
7.72p
2.575p
3.285p
2.815p
8.675p
7.49p
7.43p
2.34p
2.54p
–
4.88p
143
ANNUAL REPORT 2019FINANCIAL STATEMENTS 5 Y E A R S U M M A RY C O N T I N U E D
STAT E M E N T O F F I N A N C I A L P O S I T I O N ( U N A U D I T E D )
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
2019
£’000
41,816
96,001
415
5,045
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
128,723
106,652
85,753
103,382
–
–
96
96
2015
£’000
16,687
48,721
848
7,486
82,474
–
272,000
238,909
196,994
190,318
156,216
1,889
10,588
129,500
141,977
1,870
1,887
10,366
131,004
143,257
1,553
143,847
144,810
64,450
63,703
272,000
16,338
35,959
58,140
238,909
26,688
1,882
8,999
117,080
127,961
1,341
129,302
19,045
48,647
196,994
39,212
1,877
8,156
111,608
121,641
1,109
122,750
17,656
49,912
190,318
62,415
1,866
7,131
94,510
103,507
904
104,411
7,549
44,256
156,216
60,669
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.
F I N A N C I A L & O P E R AT I N G STAT I ST I C S
Capital expenditure – photobooth & vending
machines £’000
Capital expenditure – research & development £’000
EBITDA £’000
EBITDA % of revenue
Number of vending sites
2019
2018
2017
2016
2015
24,938
1,631
69,705
30.6
47,000
35,588
2,510
70,981
30.9
47,000
33,787
2,390
69,034
32.2
48,000
19,402
2,935
56,530
30.7
45,500
18,287
2,560
55,087
31.1
44,600
144
FINANCIAL STATEMENTSPHOTO-ME INTERNATIONAL PLC C O M PA N Y I N F O R M AT I O N
& A D V I S O R S
R E G I ST E R E D I N E N G L A N D A N D WA L E S
Number 735438
R E G I ST E R E D O F F I C E
Unit 3B
Blenhiem Road
Epsom
KT19 9AP
Tel:
+44 (0)1372 453399
Fax: +44 (0)1372 459064
Web: www.photo-me.com
e-mail: ir@photo-me.co.uk
A U D I TO R
Grant Thornton UK LLP
30 Finsbury Square
London
EC2A 1AG
B R O K E R S
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
finnCap Limited
60 New Broad Street
London
EC2M 1JJ
B A N K E R S
Lloyds Bank plc
25 Gresham Street
London
EC2V 7HN
Santander UK plc
2 Triton Square
Regent’s Place
London
NW1 3AN
F I N A N C I A L P U B L I C R E L AT I O N S
Hudson Sandler LLP
29 Cloth Fair
London
EC1A 7NN
R E G I ST R A R S
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
145
ANNUAL REPORT 2019FINANCIAL STATEMENTS F I N A N C I A L STAT E M E N TS
S H A R E H O L D E R
I N F O R M AT I O N
A N A LYS I S O F R E G I ST E R E D S H A R E H O L D I N G S AT 5 J U LY 2018
Category:
Individuals
Nominees
Other corporate bodies
Total
Size of holding:
1-1,000
1,001-10,000
10,001 - 100,000
100,001 - 500,000
500,001 - 1,000,000
1,000,000 and above
Total
Number of
Holdings
Number of
Ordinary
Shares
% of Issued
Share Capital
1,822
396
39
7,393,779
366,921,563
3,696,295
1.96
97.06
0.98
2,257
378,011,637
100.00
1,096
806
205
89
27
34
532,542
2,505,164
6,952,117
22,729,293
19,540,091
325,752,430
2,257
378,011,637
0.14
0.66
1.83
6.01
5.16
86.18
100.00
C A P I TA L G A I N S TA X
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
I N V E STO R R E L AT I O N S W E B S I T E
Investor relations information, including share price, is available through the Company’s website www.photo-me.com
146
PHOTO-ME INTERNATIONAL PLC T R A N S F E R O F F I C E A N D R E G I ST R AT I O N S E R V I C E S
Link Asset Services 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
Kent
BR3 4TU
0871 664 0300
Tel:
Overseas Tel: 00 44 208 639 3399
Fax:
0871 644 0399
The Register of directors’ interests is maintained at the Registered Office at Bookham.
Copies of the Annual Report should be requested from:
Photo-Me International plc
Church Road
Bookham
Surrey
KT23 3EU
+44 (0)1372 453399
+44 (0)1372 459064
Tel:
Fax:
e-mail: ir@photo-me.co.uk
F I N A N C I A L C A L E N D A R
Annual General Meeting
Half year results
(to 31 October 2019)
Full year results
(to 30 April 2020)
Dividend
3 October 2019
Announcement in December 2019
Announcement in July 2020
Final (year to 30 April 2019) – ex dividend date
17 October 2019
– record date
– payment date
18 October 2019
8 November 2019
Designed and produced by Invicomm
www.invicomm.com +44(0)207 205 2586
I N N O V A T I O N A N D D I V E R S I F I C A T I O N
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