Innovation &
diversification
ANNUAL REPORT 2020
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
About Photo-me
W E A R E …
O U R V I S I O N …
O U R M I SS I O N …
an international market leader
in automated instant-service
equipment, with approximately
44,500 unattended vending units
across 17 countries.
is to realise shareholder value as
the go-to provider for multiple
instant-vending services, located
in the most convenient locations,
and to focus on Laundry growth
and to offer multi-service
vending equipment.
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.
Contents
STRATEGIC REPORT
2020 in Summary
Business at a Glance
Chairman’s Statement
Business Model
Our Business: Identification
Our Business: Laundry
Our Business: Kiosks
Innovation & Diversification
Chief Executive’s Report
Business Review
Review of Performance by Geography
Key Performance Indicators
Financial Review
Section 172(1) Statement
Principal Risks
Corporate Responsibility Statement
Viability Statement
04
05
06
10
12
14
16
18
20
20
26
29
30
34
38
40
49
CORPORATE GOVERNANCE
Board of Directors and Company Secretary
Report of Directors
Corporate Governance
Statement of Directors’ Responsibilities
Remuneration Report
Annual Statement
Remuneration Policy Report
Annual Report on Remuneration
FINANCIAL STATEMENTS
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 Advisers
Shareholder Information
52
54
60
67
68
70
75
86
92
93
95
96
97
98
99
158
160
161
1
ANNUAL REPORT 2020
Strategic
report
2
PHOTO-ME INTERNATIONAL PLC 04
2020 IN SUMMARY
10
BUSINESS MODEL
20
CHIEF EXECUTIVE’S
REPORT
38
PRINCIPAL RISKS
05
BUSINESS AT
A GLANCE
12
OUR BUSINESS
30
FINANCIAL
REVIEW
40
CORPORATE
RESPONSIBILITY
STATEMENT
06
CHAIRMAN’S
STATEMENT
18
INNOVATION &
DIVERSIFICATION
34
SECTION 172(1)
STATEMENT
49
VIABILITY
STATEMENT
3
ANNUAL REPORT 2020
2020 in summary
The 2020 financial year end was extended from 30 April 2020
to 31 October 2020 due to challenges related to the COVID-19
pandemic. Going forward, all subsidiary companies in the
Group will align their accounting reference dates (or equivalent)
to 31 October.
R E P O R T E D R E V E N U E
£186.3m1,6
£232.2m – 12 months ended 31 October 20196
£310.2m – 18 months ended 31 October 2020
£228.1m – 12 months ended 30 April 2019
A D J U S T E D P R O F I T
B E F O R E TA X
£(26.0)m1,6
£45.9m – 12 months ended 31 October 20196
£2.5m – 18 months ended 31 October 20204
£44.1m – 12 months ended 30 April 2019
E A R N I N G S P E R S H A R E
( D I L U T E D )
n/a1,6
n/a – 12 months ended 31 October 20196
(0.62)p – 18 months ended 31 October 2020
8.26p – 12 months ended 30 April 2019
R E P O R T E D E B I T DA 2
£41.4m1,6
C A S H G E N E R AT E D
F R O M O P E R AT I O N S
£51.8m1,6
TOTA L O R D I N A R Y
D I V I D E N D P E R S H A R E
n/a1,6
£76.5m – 12 months ended 31 October 20196
£87.3m – 18 months ended 31 October 2020
£69.7m – 12 months ended 30 April 2019
£68.9m – 12 months ended 31 October 20196
£92.8m – 18 months ended 31 October 2020
£63.9m – 12 months ended 30 April 2019
n/a – 12 months ended 31 October 20196
0.00p – 18 months ended 31 October 2020
8.44p – 12 months ended 30 April 2019
R E P O R T E D P R O F I T
B E F O R E TA X
£(27.8)m1,3,6
£44.9m – 12 months ended 31 October 20196
£0.5m – 18 months ended 31 October 2020
£42.6m – 12 months ended 30 April 2019
N E T C A S H 5
£21.9m1,6
£25.2m – 12 months ended 31 October 20196
£21.9m – 18 months ended 31 October 2020
£16.3m – 12 months ended 30 April 2019
1 12 months ended 31 October 2020
2 EBITDA is Reported profit before tax- total depreciation and
amortization – other net gain-Finance cost and revenue.
3 Includes impairments and provisions resulting directly and
indirectly of the pandemic, see breakdown below.
4 Adjusted profit before tax for the 18 months to 31 October
2020 is profit before tax adjusted to exclude the loss on the
Group’s shareholding in Max Sight Group Holdings Limited
and restructuring costs.
5 Refer to note 19 for the reconciliation of Net Cash to Cash
and cash equivalents as per the financial statements.
6 12 months ended 31 October 2020 and 12 months ended
31 October 2019 are unaudited.
OPERATIONAL SUMMARY
COVID-19
Each area of the business was
severely impact by the pandemic,
particularly Identification and
children’s rides, due to significantly
lower consumer demand for the
Group’s services.
Laundry expansion
Continued expansion of Laundry
operations in the 12 months ended
31 October 2020, with 14.8% more
Revolution units in operation, and
Revolution revenue up 13.8%.
Continued diversification
New professional apple and
pineapple juice machines for
commercial use in restaurants
and hotels developed by R&D
team in France.
4
PHOTO-ME INTERNATIONAL PLC
S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
Business at a Glance
O U R P U R P O S E
To be the go-to provider of high-quality and innovative instant service
equipment, offering easy to use and value for money solutions for customers
and consumers, with a focus on long-term shareholder value.
CONTINENTAL EUROPE
UK & REPUBLIC OF IRELAND
ASIA
V E N D I N G U N I T S
44,500
3
Identification, Laundry, Kiosks, KIS Food,
Other vending equipment
Continental Europe, UK & the
Republic of Ireland, Asia
C O R E G E O G R A P H I E S
O P E R AT I O N S I N
17 countries
Austria, Belgium, China, France, Germany, Ireland,
Japan, Morocco, the Netherlands, Poland, Portugal,
Singapore, South Korea, Spain, Switzerland,
United Kingdom, Vietnam
THREE PRINCIPAL BUSINESS AREAS:
INNOVATION
Identification
An established,
international network
of photobooths across
17 countries and
the Group’s largest
business area.
Laundry
Expansion of Revolution
laundry operations
remains the primary
key gowth driver for
the Group.
Kiosks
High-quality, market-
leading digital
printing equipment in
six countries.
Innovation at the
core of our business
Three dedicated R&D
centres, supported by
a team of more than
60 engineers in France
(primarily facility), Vietnam,
Japan.
5
ANNUAL REPORT 2020
Despite the health crisis that has
affected all the countries in which we
are established, particularly in the
UK, our company has taken effective
measures and accelerated its
transformation and the rebalancing
of its portfolio of activities.
S I R J O H N L E W I S
Non-executive Chairman
The Group is pleased to report its financial results for the
18 months ended 31 October 2020 (18-month period) and
the 12 months ended 31 October 2020 (12-month period).
As previously announced, the Group’s financial year-end was
extended from 30 April 2020 to 31 October 2020 due to
challenges related to the pandemic. Going forward, to the extent
they have not already done so, all subsidiary companies in the
Group will align their accounting reference dates (or equivalent)
to 31 October.
Revenue for the 18-month period was £310.2 million. Overall, the
2020 financial performance was significantly hindered by the
onset of the COVID-19 pandemic and its unprecedented impact on
consumer activity across the globe. In the 12-month period revenue
declined by 19.7% and EBITDA fell by 45.9% year-on-year.
This performance reflected the sudden fall in Group operating
revenue (excluding B2B and sales) of -30% between February
and July 2020 compared with the same period in 2019, as
the pandemic impacted all countries of operation. In August to
October 2020, as lockdown restrictions were eased and activity
levels increased slightly, operating revenue was -14.8% on
average. Identification and children’s rides were the most severely
impacted services.
Despite this, the Group continued to make strategic progress
and further expanded laundry operations in key target markets in
Europe. Revolution units in operation grew to 3,437 at 31 October
2020, an increase of 14.8% compared with 31 October 2019.
Our Revolution operations were more resilient than other parts of the
business, with operating revenue up 13.8% in the 12-month period.
OUR RESPONSE TO COVID-19
As the scale of the outbreak became apparent and markets across
the globe went into lockdown, we took all appropriate measures to
protect the health and safety of employees and other stakeholders,
and to lessen the impact of the pandemic on our operations. We
followed (and continue to follow) the guidance of governments, the
World Health Organization, and other relevant authorities across
our regions of operation.
Decisive action was taken to preserve the Group’s cash position,
including reducing capital and other expenditure where feasible,
using government job retention schemes available to the Group to
Chairman’s
Statement
R E P O R T E D R E V E N U E
£186.3m
12 months ended 31 October 2020
N E T C A S H P O S I T I O N
£21.9m
at 31 October 2020
6
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
support payroll costs (amounting to £2.3 million), and cancellation
of the interim dividend payment due on 11 May 2020 (£14 million
retained within the business). The Group also secured €30 million
of additional debt funding and, with the agreement of lenders,
it deferred loan repayments. This loan is backed by the French
Government with 0% interest charged until and remain available
until June 2021 and more if needed.
In addition, the Board initiated restructuring programmes in the UK,
China, South Korea, and Continental Europe to realign the Group’s
operations to the changed market conditions and lower consumer
demand owing to the pandemic. An update on our restructuring is
set out in the Chief Executive’s Report.
OUR BUSINESS STRATEGY
The Group operates, sells and services a wide range of instant-
service equipment, primarily aimed at the end consumer. We
operate across 17 countries and are focused on three principal
business areas: Identification, Laundry, and digital Kiosks.
Before the outset of COVID-19, the Board saw growth
opportunities across all three principal business areas, with a focus
on the expansion of our Laundry operations. However, in light
of the pandemic, and the dramatic impact that it has had on the
growth drivers for our Identification and Kiosks business areas, the
Board has refined its strategy to align its ambitions to the current
and expected market dynamics in the short to medium term.
Going forward, the Group’s key investment priorities will be
Laundry expansion and the growth of KIS Food. The Board
expects that these two business areas will contribute an increasing
proportion of total Group revenue and profit which, over time, will
progressively compensate for lower Identification revenue.
units per month, subject to the easing of pandemic restrictions.
Capex in 2021 is expected to be £45 million as well and with a
focus on Revolutions.
KIS Food
The Group entered the self-service fresh fruit juice and equipment
market in April 2019, further diversifying our operations. Our R&D
team have since developed new professional juice machines
which further extend our product offering.
The Board maintains a focus on this area, with plans to
commercialise its new juice machine, when COVID-19 restrictions
allow, and believes this will become a key business area alongside
Identification, Laundry, and Kiosks, and become a significant part
of the Group’s future growth strategy.
Identification
The Board continues to see longer term opportunities in the
Identification market outside Europe (in countries where self-taken
ID photos are not permitted), particularly for the deployment of its
Identification security technology. Nonetheless, the market growth
drivers across all our countries of operation have been adversely
impacted by the pandemic. This includes ongoing travel restrictions
which impact consumer demand for our photobooths.
As a result, the Board does not currently anticipate that
Identification activity will return to pre-COVID-19 levels in the near
term and consequently machine capex in the foreseeable future
will be significantly reduced.
Kiosks
Digital kiosks are positioned in high footfall locations and therefore
demand has been hindered by lockdowns and similar restrictions.
Continued investment in Laundry expansion
The expansion of our Laundry operations will continue to be driven
by the installation of Revolution machines in target countries across
the UK & Republic of Ireland and Continental Europe.
The Group will continue to consider opportunities to extend the
services it offers through its machines network, as well as product
partnership within its existing territories. Nevertheless, investment
will remain low in the short to medium term.
The resilience of our Revolution operations during the pandemic
gives the Board confidence that over the next years our investments
will see Laundry revenue and profit increasingly compensate for
any decrease in our photobooths and children’s ride operations,
albeit it will take time and depend on the pace of Revolution
installations. The Group aims to install an average of 70 Revolution
FOCUS ON INNOVATION
New product innovation is at the core of Photo-Me. Our growth
strategy has been focused on diversifying our operations and
responding to consumer needs.
7
ANNUAL REPORT 2020 C H A I R M A N ’ S S TAT E M E N T C O N T I N U E D
Chairman’s Statement continued
Going forward, the Group’s
key investment priorities will
be Laundry expansion and
the growth of KIS Food.
S I R J O H N L E W I S
Non-executive Chairman
This strategy is supported by in-house R&D capabilities and a
team of more than 60 dedicated engineers. Our R&D centres
are in France (primary facility), Vietnam and Japan. In recent
years, our activities have been focused on the expansion of
our Laundry operations in Continental Europe, the UK, and the
Republic of Ireland, and deployment of our secure upload Photo ID
technology in our Identification business.
OUR CORPORATE RESPONSIBILITY
The Board recognises the Group’s 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. This is an area of increased
focus for all stakeholders. The Board is accountable for the Group’s
approach to corporate responsibility, led by Serge Crasnianski,
and believes that effective management of these areas can reduce
risks and help us identify business opportunities.
We are an international business and an equal opportunities
employer, committed to promoting diversity and encouraging
employee engagement across all our countries of operation. The
health and safety of our employees, customers and site owners is
of the utmost importance to us. To that end, we have a network of
dedicated engineers servicing our products and the Company is
an accredited contractor.
We are actively working to reduce our impact on the environment
as a business. We use highly concentrated washing liquid, free
of phosphates, colouring agents and preservatives, we monitor
water and power consumption of our equipment, and have
implemented initiatives to reduce our energy use and demand for
natural resources, such as photovoltaic installations on our Laundry
machines. Where possible we refurbish and re-sell our equipment.
UPDATE ON GOVERNANCE AND BOARD CHANGES
The composition of the Board changed during the period. Mr
Jean-Marc Janailhac joined the Group and the Board as a Non-
executive Director in July 2019. In July 2020, he was appointed an
Executive Director and Chair of the Strategic Committee, whose
members include the top five managers of the Group and the CEO.
This committee is responsible for reviewing and implementing
operational decisions across the Group. Mr. Janailhac is a
seasoned entrepreneur with a wealth of experience, including
being a senior adviser of Macquarie Capital (Europe) Limited and
a Non-executive Director of Athena Investments A/S.
Eric Mergui stepped down from his role as Executive Director and
Chief Operating Officer in July 2020.
The Board has been working for some time to refresh its
membership. Whilst this has been interrupted by the pandemic, the
Board expects to notify shareholders of its proposals in the near
future.
Photo-Me has an entrepreneurial and creative heritage which is
aligned to our business strategy. We are committed to nurturing
and growing talent within our teams.
OUR PEOPLE
The human cost of the pandemic has been extensive and has
touched many people around the world. This has been an
extremely challenging period for all our teams and on behalf
of the Board I’d like to thank them for their continued hard work
and commitment.
8
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
DIVIDEND
In March 2020, the Board felt it appropriate to cancel the
interim dividend due to be paid on 11 May 2020 in view of the
impact of the pandemic, thereby retaining £14 million of cash
within the business.
Our multi-country restructuring plans to improve profitability are
progressing as expected and the start of vaccination programmes
provides some encouragement. Nevertheless, the Board will
continue to closely review the make-up of the Group’s estate and
will act as required to best position the Group going forward.
Given the current COVID-19 pandemic situation, the Board feels it
remains the right decision not to recommend any other dividend in
respect of the 18- month period.
In addition, the terms of the French Government-backed PGE
scheme, under which Photo-Me has a €30 million credit facility,
require any loans under the scheme to be repaid before any
distributions are made to shareholders. We expect to benefit from
the PGE scheme for a period of two years more or convert the
French “PGE” to a traditional loan in June if we are proposed a
more interesting rate than the PGE loan.
The visibility on the market outlook for 2021 remains extremely
limited. Nevertheless, subject to the factors above, the Board looks
forward to achieving revenue of £175 million in FY21 (12 months to
31 October 2021), and profit before tax will be £9.0 million before
any exceptional items, and also expects that the Group will be
cash flow positive.
Having reviewed various scenarios, the Board believes that the
Group’s existing financial resources will be sufficient for the Group
to withstand the uncertain economic conditions which are currently
expected in 2021 and beyond.
Beyond this, the Board will continue to review the dividend policy
and align any future dividend payments to performance of the
business and its investment strategy, however no dividend will be
recommended until at least the PGE facility has been repaid.
In the near future, the Board’s strategy is to focus investment on the
expansion of the Group’s more resilient Laundry operations and its
plans to grow its KIS Food business will over time compensate for
lower demand for Identification and other vending equipment.
LOOKING AHEAD
The Board has acted, and continues to act, to mitigate the
impact of the current trading environment on the business and to
preserve cash.
As we have entered the 2021 financial year, we see ongoing and
ever-changing government lockdown measures in place across
Europe to combat virus infection rates.
S I R J O H N L E W I S
Non-executive Chairman
7 A P R I L 20 21
9
ANNUAL REPORT 2020 Business model
& strategy
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 LO GY
A N D I N N O VAT I O N
Development of proprietary solutions and continuous
focus on product diversification
2 LO N G -T E R M PA R T N E R S H I P S W I T H
H I G H - F O OT FA 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 territories
4 N E T WO 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 RY
S YS T E M
Sophisticated and tailored to Photo-Me’s
proprietary technology
6 I N D U S T RY
E X P E R T I S E
I D E N T I F I C AT I O N
L AU N D RY
Over 50 years working with regulatory bodies
K I OS KS
10
PHOTO-ME INTERNATIONAL PLC
S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
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 LY P R I C E D, H I G H - Q UA 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
C O N T I N U E D R O L LO U T O F
L A U N D RY S E R V I C E S A N D
E X PA N S I O N O F K I S F O O D S
These two business areas are expected to contribute
an increasing proportion of total Group revenue and profit
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 TA B L E C A S H F LO W S
Generated from existing network utilised to fund R&D
and support growth strategy
S H A R E H O L D E R VA L U E
Delivered through growth and dividends
Laundry expansion driven by
the installation of Revolution
machines across the UK
& Republic of Ireland and
Continental Europe
Expansion of KIS Food
through innovation and
commercialisation of new
fruit juice machines across
target markets
P R O D U C T I N N O VAT I O N
A N D D I V E R S I F I C AT I O N
To extend service offering through
existing networks
11
ANNUAL REPORT 2020 Our business:
Identification
We are a prominent international player in
the photobooth market, with an established
network of more than 27,000 photobooths
offering market-leading photographic quality
and technology across our operating regions.
These machines are typically located in high
footfall locations, such as travel hubs and
shopping centres.
The performance was severely impacted
by COVID-19 and government lockdown
restrictions, constraints on international travel
and social distancing.
PERFORMANCE
N U M B E R O F U N I T S I N O P E R AT I O N
27,1891
28,439 at 31 October 2019
R E V E N U E
£106.9m2
£145.1m – 12 months ended 31 October 2019
£183.4m – 18 months ended 31 October 2020
£147.7m – 12 months ended 30 April 2019
1 At 31 October 2020
2 12 months ended 31 October 2020
12
OUR OPER ATIONS
Our Identification operations are primarily aimed
at the consumer market with leading brands such
as Photo-Me, Photomaton, ProntoPhot, FOTO.FIX,
PRONTO PHOT, Foto-Já! and Nippon Auto Photo
INTEGRATED PROPRIETARY SOFTWARE
• We use integrated proprietary software across
our entire estate to ensure that all photographs
comply with International Civil Aviation
Organisation (ICAO) photo identification
regulations
S E C U R E D I G I TA L P H O T O I D
T E C H N O L O GY
• 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
S T 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 WO R K
• Our photobooth estate is supported, maintained
and upgraded by our 650-strong network of
skilled field engineers, and monitored 24/7 by
interconnected remote telemetry
PHOTO-ME INTERNATIONAL PLC
S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
IDENTIFIC ATION
R E P R E S E N T S
61%
C O N T R I B U T E S
57.4%
of total Group vending estate by units
(at 31 October 2020)
of total Group revenue
(12 months ended 31 October 2020)
S U P P O R T S I N V E S TM E N T I N
R&D and
diversification
growth strategy through cash flow
OUR STR ATEGY
• Restructure photobooth estate to remove
unprofitable machines
• Longer-term opportunities in Identification outside
of Europe
OUR STR ATEGY IN AC TION
Government demand for digital security ID solutions
for identification documents such as passports and
driving licences:
12,000+
P H OTO B O OT H S
with secure upload technology
This technology removes opportunity for official
photo ID to be manipulated
S U C E S S F U L LY D E P LOY E D I N
9 countries
France, the UK, Ireland, Germany, Georgia, Japan,
Switzerland, the Netherlands and China
Photobooths equipped with encrypted digital
Photo ID upload technology:
2020
2017
7,000
12,000
13
ANNUAL REPORT 2020
Our business:
Laundry
Launched in 2012, this is the Group’s highest
margin and fastest growing business area,
with 5,568 units deployed (owned, sold and
acquired) and continued growth momentum.
Revolution Laundry operations were more
resilient during the pandemic than the Group’s
other vending equipment.
PERFORMANCE
TOTA L L A U N D R Y U N I T S D E P LOY E D
5,5681
5,179 units – at 31 October 2019
TOTA L R E V E N U E F R O M
L A U N D R Y O P E R AT I O N S
2020 2
2019 2
£47.3m
£47.4m
£72.9m – 18 months ended 31 October 2020
£43.7m – 12 months ended 30 April 2019
N U M B E R O F R E V O L U T I O N
U N I T S I N O P E R AT I O N
2020 2
2019 2
3,437 units
2,995 units
2,732 units at 30 April 2019
TOTA L R E V E N U E F R O M
R E V O L U T I O N U N I T S
2020 2
2019 2
£31.1m
£52.8m – 18 months ended 31 October 2020
£27.6m – 12 months ended 30 April 2019
1 12 months ended 31 October 2020
2 12 months ended 31 October
£35.4m
14
OUR OPER ATIONS
R E VO L U T I O N U N AT T E N D E D
L AU N D RY S E R V I C E S
24-hour, outdoor self-service laundry units, providing
access to large-capacity, and energy saving, rapid
laundry services, typically situated on high-footfall
sites such as supermarkets, car parks and petrol
station forecourts
• Revolution units in operation 3,437
(at 31 October 2020)
• Operations in 8 countries: Belgium, France,
Germany, Ireland, the UK, Portugal, the
Netherlands, Spain
S E L F - S E R V I C E L AU N D E R E T T E S H O P S
Convenient and competitively priced large-capacity,
self-service laundry amenities, typically located near
town centres where there is limited laundry service
competition
• Operations in 5 countries: France, Ireland, Japan,
Portugal, the UK
B 2 B L AU N D RY S E R V I C E S
Distribution and lease of laundry and catering
equipment, targeting institutions such as hospitals,
care homes and universities
• Operations in the UK and Spain
PHOTO-ME INTERNATIONAL PLC
S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
RE VOLUTION M ACHINES
R E P R E S E N T S
7.7%
C O N T R I B U T E S
19%
of total Group vending estate by units
(at 31 October 2020)
of total Group revenue
(12 months ended 31 October 2020)
R E M A I N S A
key growth
driver
for the Group
OUR STR ATEGY
E X PA N S I O N I N T O N E W G E O G R A P H I E S
Extend partnerships with strategic site owners and identify and
expand into new high-demand markets, driven by deployment
of Revolution units
I N C R E A S E R E VO L U T I O N P R E S E N C E
Continue to deploy Revolution machines to significantly
increase presence in existing markets
M A X I M I S E O P E R AT I O N A L P R O F I TA B I L I T Y
Continued upgrade of units to maximise operational
efficiencies, customer experience and revenue opportunities
I N C R E A S E D P R O P O R T I O N O F T O TA L
G R O U P R E V E N U E
Laundry expected to contribute an increasing proportion of
total Group revenue in the medium-to-long-term
OUR STR ATEGY IN AC TION
Three years of Laundry growth through rollout
of laundry units across the Group’s established
network of high-footfall sites, and expansion
into new geographies. The Group’s aim post-
COVID-19 is to resume installation of 70 machines
each month.
R E V O L U T I O N O P E R AT I O N S
C O N T R I B U T E D R E V E N U E O F
£35.4m1
£31.1m – 12 months ended 31 October 2019
R E V O L U T I O N S U C C E S S F U L LY D E P LOY E D I N
9 countries
Belgium, France, Germany, Ireland, Japan, the UK,
Portugal, the Netherlands, Spain
1 12 months to 31 October 2020
15
ANNUAL REPORT 2020
Our business:
Kiosks
More than 5,300 digital printing kiosks
positioned in attractive, high-footfall locations
across the UK, France, Japan, Belgium,
Switzerland and the Netherlands.
OUR OPER ATIONS
L E A D I N G T E C H N O L O GY
Industry-leading technology offering a wide range
of printing formats and personalised products. Our
kiosks enable easy, competitively priced, high-quality
digital printing from smartphones
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 WO R K S
State-of-the-art kiosks are fully integrated with
major social media networks, providing consumers
convenient, easy-to-use, reliable and high-quality
services for a seamless customer experience
PERFORMANCE
N U M B E R O F U N I T S I N O P E R AT I O N
5,3041
5,508 at 31 October 2019
R E V E N U E
£11.4m2
£13.7m – 12 months ended 31 October 2019
£18.4m – 18 months ended 31 October 2020
£13.3m – 12 months ended 30 April 2019
1 At 31 October 2020
2 12 months ended 31 October 2020
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PHOTO-ME INTERNATIONAL PLC
S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
KIOSKS
R E P R E S E N T S
11.9%
C O N T R I B U T E S
6.1%
of total Group vending estate by units
(at 31 October 2020)
of total Group revenue
(12 months ended 31 October 2020)
OUR STR ATEGY
• Extend product partnerships into existing territories
• Consider opportunities to extend services of kiosk service
offerings to maximise revenue opportunity
OTHER VENDING UNITS
• Units are an extension of the Group’s product range at
sites where the Group has existing relationship with the
site owner and where the profitability benefits from the
synergies related to operating other equipment on the
same site
• During COVID-19, these machines, particularly
children’s rides, were impacted by a significant fall in
consumer demand and 966 units have been removed
from operation
OT H E R V E N D I N G U N I T S
8,539
Units include children’s rides, photocopiers
and other machines (amusement machines etc.)
17
ANNUAL REPORT 2020 Our business:
Innovation &
diversification
Innovation is at the core of Photo-Me,
supported in-house R&D capabilities in
France (primarily facility), Vietnam and
Japan and a team of more than 60 engineers.
Our growth strategy is focused on
diversifying our operations and responding
to customer needs.
OUR KIS FOOD STR ATEGY
• To replicate the B2B business model of Sempa
orange juice machines across the Group’s
countries of operation, starting with France
• The aim is to become a global leader in the
distribution of self-service fresh fruit and vegetable
juice machines, in the medium to long-term
KIS FOOD
KIS Food is our newest business area offering
self-service fresh juice equipment. KIS Food
is intended to become a significant part of the
Group’s growth strategy.
OUR STR ATEGY IN AC TION
Developing innovative new juicing technology:
Our R&D team in France have developed professional
apple juice and pineapple juice machines for
commercial use in restaurants and hotels
5,211
J U I C E R S I N U S E
(as at 31 October 2020)
Results from market testing of the first prototypes has been
promising, albeit immediate commercialisation has been
delayed by the pandemic
18
PHOTO-ME INTERNATIONAL PLC
S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
A N N U A L R E P O R T 2 0 2 0
19
Removal, relocation and
renegotiation were watchwords
in this difficult period. These
decisive measures were taken
quickly to deal with the severe
disruption to activity caused by
the pandemic.
S E R G E C R A S N I A N S K I
Chief Executive Officer & Deputy Chairman
The 18-month period ended 31 October 2020 can be split
in two parts. Before the onset of the pandemic, we made
good strategic progress as we further expanded our
Laundry operations and entered the self-service fruit juice
market, providing a new platform for growth. The Group
delivered a robust financial performance and was highly
cash generative despite challenging headwinds.
The second half of the financial period was dominated by
the significant and unprecedented impact of the COVID-19
pandemic on consumer activity across the globe, and the actions
taken by the Board to help navigate the Group through this period
of great uncertainty.
FINANCIAL PERFORMANCE
Results
Reported revenue for the 18-month period was £310.2 million. For
the 12-month period reported revenue was £186.3 million, 19.7%
lower than in the previous 12-month period to 31 October 2019,
reflecting the impact of the pandemic on consumer activity.
The Board estimates that the pandemic had more than a
£50.0 million negative impact on total Group revenue in the
period, mainly through lost revenue across Continental Europe,
and the UK & Republic of Ireland from March 2020, and through
lost revenue from operations in China from mid-January to October
2020. A breakdown of the impact of the pandemic on operating
revenue in each country is set out in the Review of Performance by
Geography on page 26.
Reported EBITDA (excluding associates) for the 18-month period
was £87.3 million. For the 12-month period, EBITDA fell by £35.1
million to £41.4 million (31 October 2019: £76.5 million), which
delivered an EBITDA margin of 22.2% (31 October 2019: 32.9%).
Reported profit before tax in the 18-month period, excluding
IFRS16 impact, but including £33.6 million of provisions and
impairment was £1.0 million. Reported loss before tax for the
12-month period was £27.4 million.
As previously announced, an in-depth review of the Group’s
operations was undertaken in response to COVID-19 and the
challenging trading environment. This resulted in a £33.6 million
impact from exceptional items, provisions, and impairment. For the
18-month period adjusted profit before tax was £2.5 million.
Chief
Executive’s
Report
R E P O R T E D R E V E N U E
£186.3m
12 months ended 31 October 2020
N E T C A S H P O S I T I O N
£21.9m
at 31 October 2020
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PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
In the 12-month period, the Group reported an adjusted loss
before tax of £26.0 million.
A reconciliation of reported profit before tax to adjusted profit
before tax and a breakdown of exceptional items, provisions and
impairment by region is set out in the Financial Review on page 30.
The Group was cash flow positive in the period. For the 18-month
period, the Group generated cash from operations of £92.9
million. For the 12-month period, the Group generated £51.8
million of cash from operations, compared with £68.9 million in
the prior 12-month period due to significantly reduced consumer
activity owing to the pandemic.
Capital expenditure in the 18-month period was £63.6 million
including IFRS16, and £47.1m excluding IFRS16. This mainly
related to our Identification business and the relocation of a
large number of photobooth machines as part of the restructuring
program which began in September 2020. Laundry capex was
lower than expected as the crisis significantly slowed down the
installations of units from March 2020 onwards.
FUNDING AND LIQUIDITY
As at 31 October 2020, the Group had gross cash of
£106.2 million, and a net cash balance of £21.9 million. The
Group continues to comply with its revised banking covenants. The
covenant on Photo-Me France’s loan from BNP has been waived
by the bank in response to the pandemic, and as long as the “PGE”
is in place.
The Group continues to use government support schemes across its
operating markets wherever it is possible.
The Board’s scenario planning indicates that the Group has sufficient
liquidity to navigate the current COVID-19 lockdown measures.
OVERVIEW OF PRINCIPAL BUSINESS AREAS
Below is an overview of the Group’s three principal business areas,
Identification, Laundry, and Kiosks, as well as its other vending equipment.
Identification
Photobooths and integrated biometric identification solutions
Number of units in
operation
Percentage of total
Group vending estate
(number of units)
Revenue
Capex
18months to
31 Oct 2020
12 months to
31 Oct 2020
Unaudited
12 months to
31 Oct 2019
Unaudited
12months to 30
April 2019
27,189
27,189
28,439
28,873
61%
61%
61%
61.5%
£183.4m £106.9m
£145.1m £147.7m
£11.1m
£5.7m
£11.2m
£9.7m
Photo-Me is a prominent international player in the photobooth
market, offering market-leading photographic quality and
technology across our operating regions.
In recent years, our photobooth offer has diversified to include
encrypted photo ID upload technology connected to government
organisations in the UK, France, Ireland, and the Netherlands.
Our well-established network of photobooths is situated in
attractive, high-footfall locations, such as travel hubs and shopping
centres. Before the onset of the pandemic, Identification revenue
in all regions, except for the UK, remained stable. Especially, both
France and Japan delivered a robust performance.
In the UK, the trading environment remained challenging. The
Government’s policy to accept photos taken at home for official
documents and passport identification resulted in lower consumer
demand and significantly eroded part of Photo-Me’s market
share for ID photos. Notably, European regulation does not permit
this method, and the Board hopes that at some stage official
documents in the UK will once again need to conform to ICAO
and ISO rules.
As the scale of COVID-19 became apparent, demand for our
photobooths was severely impacted by government lockdowns,
constraints on international travel, and social distancing rules
across our operations. This resulted in significantly lower consumer
demand for Identification across all our jurisdictions in the calendar
year 2020; Asia from January 2020 and Continental Europe, the
UK and the Republic of Ireland from March 2020.
Action being taken to remove, and in some cases relocate,
unprofitable machines to mitigate the impact of COVID-19 and
the continued challenging UK market conditions evident pre-
COVID, resulted in a significant reduction in the total number of
photobooths in operation.
Due to the above factors, revenue for the 12-month period declined
by 26.3% to £106.9 million. Revenue was down 36% in February to
July 2020 compared with the same month in 2019, with the greatest
decline seen in the UK which was down 52.4% in that period. In the
18-month period, Identification revenue was £183.4 million.
At 31 October 2020, 27,189 photobooths were in operation,
a reduction of -5.8% compared with 30 April 2019 and -4.4%
compared with 31 October 2019.
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ANNUAL REPORT 2020 C H I E F E X E C U T I V E ’ S R E P O R T C O N T I N U E D
Business Review continued
At 31 October 2020, Identification accounted for 61.0% of
vending units in operation. The number of photobooths has
declined mainly in the UK and Ireland (1,367 units), but also slightly
in Asia (253 units) and Europe (64 units). The Group plans to
remove a further 1,500 units from its estate by October 2021.
Revolution
Identification capex (18-month period) was £11.1 million. For the
12-month period, capex reduced from £11.2 million to £5.7 million
year-on-year, mainly due to the relocation of removed machines to
new sites instead of purchasing new machines.
Whilst the Board continues to believe that there are some longer-
term opportunities in the photo ID market and continues to install
photobooths in countries outside of the UK, it anticipates that short-
term demand for photo ID will be subdued and may not recover
fully to pre-COVID-19 levels.
Laundry
Unattended Revolution laundry services, launderettes, business to
business laundry services
18months to
31 Oct 2020
12 months to
31 Oct 2020
Unaudited
12 months to
31 Oct 2019
Unaudited
12 months to
30 Apr 2019
Total Laundry units
deployed
(owned, sold & acquisitions)
Total revenue from
Laundry operations
Revolution
(excludes Laundrettes & B2B)
– Number of Revolutions
in operation
– Percentage of total
Group vending estate
(number of units)
Total revenue from
Revolutions
5,568
5,568
5,179
4,876
£72.9m
£47.3m
£47.4m
£43.7m
Revolution is our 24-hour, outdoor, self-service laundry unit which is
typically located on busy sites such as supermarket car parks and
petrol station forecourts.
3,437
3,437
2,995
2,732
Our strategy is to continue to expand our operations through
partnerships with strategic site owners and identify and expand
into new high-demand markets.
7.7%
7.7%
6.4%
5.8%
£52.8m
£35.4m
£13.1m
£27.6m
In the period, the rollout of Revolution units across Continental
Europe and the UK & Republic of Ireland continued, with a focus
on installing machines in Germany and the UK.
– Revolution capex
£20.9m
£14.4m
£13.1m
£10.9m
* There were 3,216 full-time units in operation during the 12 months ended 31 October 2020
compared with 2,761 in 12 months ended 31 October 2019.
Our owned and operated Laundry business was launched in
2013. We now have a presence in 12 countries, with operations
primarily located in France, the UK, Ireland and Portugal.
In total the Group had deployed (owned, sold and acquired)
5,568 Laundry units at 31 October 2020, up 14.2% in the
18-month period and up 7.5% in the 12-month period.
Total revenue from Laundry operations grew to £72.9 million for
the 18-month period to 31 October 2020. In the 12-month period
revenue was £47.3 million, down slightly year-on-year reflecting at
the same time the good performance of the Revolution operation
and the collapse of activity in our B2B business during COVID.
Our Laundry business comprises three areas of operation:
Revolution, Launderette, and business-to-business laundry services.
In the 12-month period, the number of Revolution units grew by
14.8% to 3,437 machines. Revolutions accounted for 7.7% of the
Group’s total vending estate, up from 6.4% at 31 October 2019.
Prior to the onset of the pandemic, we deployed an average of 50
machines each month. However, the installation of machines was
significantly curtailed by country lockdowns, with a total of only 36
machines deployed between April and October 2020. We plan
to return to an average of 70 Revolution installations per month,
subject to lockdown restrictions being eased.
Total revenue from Revolution machines in the 12-month period
increased by 13.8% to £35.4 million. From February to October
2020, revenue grew by 10.0%, reflecting continued expansion
and the more resilient nature of our Laundry operations, which were
more accessible to consumers than photobooths during lockdown.
Total revenue from Revolution machines in the 18-month period
was £52.8 million.
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PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
Revolution capex increased by 10.1% to £14.4 million in the
12-month period.
Our investment in expanding our Revolution operations, primarily
in the UK, Ireland, Portugal and France, remains a key growth
driver for the Group. In addition, we are looking to further roll out
Revolution units in Germany and Austria.
Looking ahead, we continue to expect that Revolution operations will
contribute an increasing proportion of total Group revenue and profit
which will progressively compensate for the loss of Identification.
Launderette
These shops are typically situated in or near to town centres where
there is limited competition from other laundry services. Expansion
has been delivered through an owned-and operated model.
Due to COVID-19, the Group decided to postpone Launderettes’
installations except when very good acquisition opportunities arose.
The Group is also removing or selling machines in unprofitable
locations in Spain, UK, Belgium, Portugal and France.
Business-to-business (B2B) laundry services
Our B2B operations distribute and lease laundry and catering
equipment. Customers include institutions such as hospitals, care
homes, and universities.
Before the impact of COVID-19, the performance of the Group’s
Launderettes and B2B were stable. Nevertheless, in the six months
ended 31 October 2020, our B2B operations were adversely
impacted by COVID-19 and activity levels were extremely low.
As a result, the Group is closely monitoring the situation and may
decide to close its B2B activities if more normalised and profitable
trading conditions do not return in the near future.
Kiosks
High-quality digital printing services
Prior to the pandemic, our Kiosks business performed well, driven
by a strong performance in France with revenue in the country up
6.5% year-on-year in the 12 months to April 2020.
Nevertheless, in the 12-month period, Kiosk revenue fell 17.5%.
Between February and October 2020, revenue was down 24.0%
due to significantly lower demand due to pandemic lockdown
restrictions in the period.
Capex was reduced by 10.3% to £1.4 million in the 12-month
period. Revenue in the 18-month period was £18.4 million.
KIS Food (Fresh fruit and vegetable juice equipment)
Our medium to long-term goal is to become a global leader in the
distribution of self-service fresh fruit and vegetable juice machines.
We plan to replicate Sempa’s B2B business model for orange juice
machines across other geographies, notably Switzerland, Ireland
and the UK, by leveraging our existing network of field engineers
and new product development. Competition in this market is
relatively limited. We have already started with success in Belgium.
Our R&D team in France has developed professional apple juice
and pineapple juice machines for commercial use in restaurants
and hotels. Prototypes of these machines underwent market testing
in October at several locations across France and Belgium. The
results were promising, however, the roll out of these machines has
been delayed by the impact of the pandemic on key target end
markets, such as the hospitality sector.
The Group ceased trials of its B2C juice vending machines in Paris.
The trials did not perform as well as expected and the juice vending
machines have been removed.
In the 12-month period, revenue was £6.3 million and contributed
3.4% to Group revenue. In the 18-month period, B2B juice
machine operations contributed £9.8 million of revenue to the
Group and contributed 3.2% of the Group revenue.
18 months to
31 Oct 2020
12 months to
31 Oct 2020
Unaudited
12 months to
31 Oct 2019
Unaudited
12 months to
30 Apr 2019
Before the impact of COVID-19, the strategic progress and performance
of this business area was in line with the Board’s expectations.
Number of units in
operation
Percentage of total
Group vending estate
(number of units)
Revenue
Capex
5,304
5,304
5,508
5,487
11.9%
11.9%
12.0%
11.7%
£18.4m
£11.4m
£13.7m
£13.3m
£2.5m
£1.4m
£1.6m
£2.3m
Our estate of digital printing kiosks offers a wide range of
competitively priced print formats and personalized products.
Our key markets are France, where most machines are situated, the
UK, and Switzerland.
The number of kiosks in operation was 5,304, compared with
5,508 in October 2019, and represented 11.9% of the Group’s
total vending estate.
Our state-of-the-art machines – Speedlab cube and Speedlab
bio – are fully integrated with all major social media networks and
offer consumers a fast, high-quality printing service.
The Board remains confident in the long-term opportunities in this
market and expects that KIS Food will become an increasingly
important business area for the Group.
Other vending equipment
Alongside the business areas detailed above, we operate 8,539
other vending units. These units include 3,783 children’s rides,
3,392 photocopiers and 1,364 other miscellaneous machines.
These are typically an extension of our product range at sites
where we have an existing relationship with the site owner and
where the profitability benefits from the synergies related to
operating other equipment on the same site, for example field
engineers and maintenance.
2 3
ANNUAL REPORT 2020 contagion levels and restrictions in the countries we operate in
across the world.
We took immediate action to implement measures to protect our
employees. We encouraged all office workers to work from home
where possible and organised socially distanced working in our office
environments, with stringent sanitation measures and rules in place.
The measures implemented to protect the interests of our customers
and users of our equipment included: enhanced cleaning regimes
and an antimicrobial surface coating applied to machines which
enables the surface to self-disinfect (reapplied every 90 days);
mask wearing by engineers at all times while on site; and signage
for customers to wear face coverings and sanitise their hands
before using our equipment.
Throughout the year we have monitored the situation very closely to
ensure that Photo-Me complies with the safety recommendations
from the WHO and governments in all of the jurisdictions in which
it operates. It is thanks to these comprehensive measures, and also
the responsible actions taken by our individual employees, that we
were able to safely continue to provide instant services via a large
part of our vending estate.
In addition to health concerns, this difficult time put a financial
strain on many individuals and families. Therefore, despite the
economic challenges, as a responsible company we felt it our duty
wherever possible to support the continued financial wellbeing of
our colleagues. We accessed government job retention schemes
where available across our operations but unavoidably there were
some redundancies in the most impacted countries, such as the UK.
I am proud of how hard our teams have worked during this
time, despite the tremendous pressures and challenges. While
remaining vigilant to the virus, we have been able to continue
providing convenient and safe instant services to our customers
without compromising the safety of our colleagues or other
stakeholders, and I thank the whole team for their continued
commitment and hard work.
C H I E F E X E C U T I V E ’ S R E P O R T
Business Review continued
Government lockdowns and social distancing rules due to the
pandemic deeply impacted demand for this equipment across all
the Group’s countries of operation, most notably children’s rides of
which we have removed 966 units from operation. Revenue in this
business area was down 43.2% in February to October 2020.
At 31 October 2020, other vending equipment accounted for
19.2% of the Group’s total vending estate by number of units and
4.2% of the total Group revenue.
Further details on all our operations are provided in the Review of
Performance by Geography.
Update on restructuring programmes
The Board has refined and initiated its plans, announced in July
2020, to remove all unprofitable machines (primarily photobooths
and children’s rides) across the Group’s operations, and restructure
operations in the UK, China, South Korea and Continental Europe.
These restructuring programmes will address the significant loss
in Identification revenue due to the structural shift in the UK photo
ID market as well as reduced consumer demand and site footfall
due to the pandemic. The action being taken will better realign
our operations in these countries with the expected lower levels of
consumer activity in the short to medium term.
In total we plan to remove approximately 3,000 photobooths
from the UK (approximately 32% of machines in the UK) and 700
units from China (approximatively 57% of machines in China).
In South Korea, the Group has impaired 200 units (100% of
machines in South Korea). In Continental Europe (mainly France,
the Netherlands and Spain), approximately 1,000 machines will
be removed. The main part of this plan is realised to date.
When completed in April 2021, approximately 5,000 machines
will have been removed or relocated, reducing the total machines in
operation by approximately 7% compared with 31 October 2019.
Safeguarding our people, customers and the community at
large during the COVID-19 pandemic
Our workforce is our most valuable asset and the driving force
behind Photo-Me’s success. Over the years we have attracted an
incredibly talented team of highly skilled innovators and engineers
worldwide. Looking after their wellbeing is a fundamental
company priority.
In 2020 we were faced with the unprecedented challenge of
the COVID-19 pandemic. Our absolute priority was to ensure
minimal risk to our employees, customers and the wider community
while the spread of coronavirus accelerated and led to varying
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PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
A N N U A L R E P O R T 2 0 2 0
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C H I E F E X E C U T I V E ’ S R E P O R T C O N T I N U E D
Review of performance
by Geography
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’s 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.
KEY FINANCIALS
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.
REVENUE BY GEOGRAPHIC REGION
18 months to
31 Oct 2020
12 months to
31 Oct 2019
Unaudited
12 months to
31 Oct 2020
Unaudited
12 months to
30 Apr 2019
Continental Europe
£195.2m
£118.2m
£137.3m
£130.7m
UK & Republic of
Ireland
Asia
Total
£54.6m
£30.5m
£49.5m
£52.9m
£60.4m
£37.6m
£45.4m
£44.5m
£310.2m £186.3m £323.2m £228.1m
Revenue was deeply impacted by government lockdowns
and restrictions across the Group’s operations. As per the table
below, notably Identification revenue decreased significantly in
the 12-month period: -13.9% in Europe, -17.2% in Asia and up to
-38.3% in the UK & Ireland. The Group experienced similar impact
across its Kiosk activities. While Revolution revenue was impacted,
operations are more resilient, and partially offset the decrease
Identification and Kiosks revenue.
OPERATING PROFIT
18 months to
31 Oct 2020
12 months to
31 Oct 2020
Unaudited
12months to
31 Oct 2019
Unaudited
12 months to
30 Apr 2019
Continental Europe
£28.7m
£3.4m
£38.1m
£33.5m
UK & Republic of
Ireland
£(19.1)m
£(20.9)m
£4.3m
£7.1m
Asia
£4.5m
£1.1m
£6.6m
£4.7m
Corporate costs
£(10.8)m
£(9.3)m
£(3.0)m
£(2.6)m
Total
£(3.3)m £(25.7)m
£46.0m
£42.7m
* Adminitrative holding costs (£9.8m) have been reclassified in corporate costs instead of UK
& Republic of Ireland as was previously the case
The dramatic fall in operating profit for the 12-month period was a
combination of lower revenue due to the pandemic and inherent
provisions and impairments. Excluding provision and impairments
of £15.3 million in Continental Europe, £16.2 million in the UK &
Republic of Ireland and £2.1 million in Asia, adjusted operating
profit was £8.0 million.
The decrease in revenue in the 12-month period was £45.9 million,
which explains the difference of £38.8 million in operation
profit year-on-year. Adjusted operating profit in the 12-month
period was £8.0 million, compared to £46.0 million in the prior
12-month period.
2 6
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
OPERATING REVENUE EVOLUTION (LAST 12 MONTHS BY QUARTER)
The table below provides a detailed breakdown of operating revenue by geographic region and business area for the 12 months, compared
with the 12 months ended 31 October 2019.
Continental Europe
Nov 2019
to Jan 2020
Feb 2020
to Apr 2020
May 2020
to Jul 2020
12 months to
30 Apr 2019
Identification
Kiosks
Laundries
Other vending
Total
UK & Ireland
Identification
Kiosks
Laundries
Other vending
Total
Asia
Identification
Kiosks
Laundries
Other vending
Total
Total
Identification
Kiosks
Laundries
Other vending
Total
-7.5%
1.3%
22.7%
-4.7%
0.9%
-16.2%
-32.8%
20.5%
-9.4%
-7.7%
-4.9%
-12.7%
30.3%
54.9%
-2.5%
-8.2%
-3.7%
22.1%
1.0%
-1.7%
-35.3%
-36.8%
8.8%
-40.1%
-27.8%
-53.8%
-40.7%
24.3%
-28.3%
-40.3%
-12.5%
-16.6%
24.6%
-90.5%
-19.3%
-32.9%
-37.1%
12.8%
-52.1%
-28.7%
-34.9%
-17.6%
9.0%
-30.5%
-24.2%
-65.4%
-47.4%
0.0%
-96.3%
-56.6%
-29.4%
-32.4%
1.2%
920.3%
-27.4%
-38.2%
-20.8%
7.0%
-56.5%
-30.8%
-6.2%
-10.0%
9.6%
-27.0%
-3.6%
-68.6%
-48.8%
11.1%
-74.2%
-50.1%
-16.7%
-32.1%
19.1%
-29.1%
-17.2%
-19.0%
-14.2%
10.0%
-47.9%
-14.8%
TOTAL
-21.5%
-14.3%
12.3%
-25.2%
-13.7%
-52.4%
-41.4%
13.7%
-51.9%
-39.1%
-16.3%
-23.4%
16.8%
-34.8%
-17.0%
-25.6%
-17.5%
12.7%
-38.6%
-19.6%
2 7
ANNUAL REPORT 2020 C H I E F E X E C U T I V E ’ S R E P O R T C O N T I N U E D
Review of performance by geography continued
VENDING UNITS IN OPERATIONS
At 31 October 2020
At 31 October 2019
At 30 April 2019
Number of units
% of total estate
Number of units
% of total estate
Number of units
% of total estate
Continental Europe
UK & Republic of Ireland
Asia
Total
25,097
9,499
9,955
44,551
56.3%
21.3%
22.3%
100%
25,436
11,357
10,061
46,854
54.3%
24.2%
21.5%
100%
25,230
11,701
10,025
46,956
53.8%
24.9%
21.3%
100%
As at 31 October 2020, the Group’s estate comprised 44,551
units, a decline of 5.1% in the 18-month period and 4.9 % in the
12-month period. This was mainly due to implementation of the
restructuring programme and removal of approximately 3,000
unprofitable machines, primarily photobooths in the UK and
children’s rides across the estate to mitigate the impact of the
pandemic and structural changes to the UK photobooth market.
Continental Europe
Continental Europe is the largest region of operation by both
machine volume and contribution to Group revenue.
The region remained profitable despite the unprecedented
challenges of the pandemic. This performance was driven by
a less significant reduction in photobooth revenue in France
compared with other countries (excluding Japan), and a good
performance of Laundry operations in general.
Revenue for the 18-month period was £195.2 million. In the
12-month period, revenue fell by 13.9% to £118.2 million,
reflecting the sudden loss of most of the expected revenue from
March 2020 onwards due to COVID-19. Laundry operations
were resilient and grew by 12.3%, however operating revenue for
the other business areas were severely impacted: Identification
(-21.5%), Kiosks (-14.3%) and Other Vending (-25.2%).
Operating profit for the 12-month period fell by 90.9% to
£3.4 million.
As at 31 October 2020, there were 25,097 units in operation in
the region, which represented 56.3% of the Group’s total estate.
The region contributed 62.9% of total Group revenue.
UK & Republic of Ireland
As previously disclosed, the performance of this region was
impacted by two factors. First of all, challenging photobooth
market conditions due to the UK government’s decision to permit
home-taken photographs for photo ID; and then the impact of
COVID-19 from March 2020 onwards and the disruption caused
by lockdown measures which severely reduced demand for our
products, particularly photobooths and children’s rides.
Nevertheless, we expanded our Laundry operations and now
operate 641 laundry units in the region, most of which are located
in Ireland. Whilst Revolution machines delivered a resilient
performance, this was not enough to offset the significant loss in
revenue in our photobooth business.
In both Ireland and the UK, Revolution units performed extremely
well in the 12-month period (including the COVID period) with an
average revenue of £11,000 per unit. The Group now operates
416 Revolutions in Ireland and 299 in the UK, where, post year-
end 20 machines a month were deployed.
Revenue for the 18-month was £54.6 million. In the 12-month
period revenue declined by 38.3% to £30.5 million. The UK
photobooth market was already challenging and this along with the
impact of the pandemic from March 2020 onwards, resulted in a
52.4% reduction in operating revenue year-on-year, and children’s
rides were down 51.9% year on year. However, operating revenue
from Revolution units grew by 13.7% year-on-year.
There was an operating loss of £19.1 million in the 18-month
period and a loss of £20.9 million in the 12-month period.
Excluding the £16.2 million provision, operating profit declined to
£(4.7) million.
At 31 October 2020, 9,499 units were located in the UK &
Republic of Ireland, which represented 21.3% of the Group’s total
units in operation.
2 8
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
Asia
Before the impact of COVID-19, trading in the region was robust,
driven by a strong performance in Japan. Japan is the largest
contributor in Asia and was almost resilient to COVID-19,
with a 13.4% revenue decrease between May and October
2020 as the country continued to benefit from highly effective
turnaround plans implemented in 2018 which returned the country
to profitability.
Nonetheless, this performance was not sustainable during the
pandemic and more than offset by the sudden decline in revenue
across our Asian operations (particularly in China) from the
second half of January 2020. All business, except for Laundry, was
significantly impacted year-on-year from February to October 2020;
Identification -30.0%, Kiosks -22.8% and Other Vending -52.0%.
Revenue for the 18-month period was £60.4 million. In the
12-month period, revenue declined by 17.2% to £37.6 million.
Nevertheless, the region remained profitable, with reported
operating profit for the 12-month period of £1.1 million. Operating
profit for the 18-months was £4.5 million.
At 31 October 2020, 9,955 units were situated in Asia,
representing 22.3% of the Group’s total units in operation.
KEY PERFORMANCE INDICATORS (KPI’S)
The Group measures its performance using different types of indicators. The main objective of these KPIs is to monitor the Group’s cash
generation, long-term profitability, preservation of the value of its assets, and of returns to shareholders.
TOTA L G R O U P R E V E N U E
£186.3m1,4
E B I T DA M A R G I N
22.2%1,4
I N C R E A S E I N N U M B E R O F
L A U N D R Y U N I T S 2
3891,4
£232.2m – 12 months ended 31 October 20194
£310.2m – 18 months ended 31 October 2020
£228.1m – 12 months ended 30 April 2019
32.9% – 12 months ended 31 October 20194
28.1% – 18 months ended 31 October 2020
30.6% – 12 months ended 30 April 2019
N/A – 12 months ended 31 October 20194
692 – 18 months ended 31 October 2020
427 – 12 months ended 30 April 2019
G R O U P P R O F I T B E F O R E TA X
£(27.8)m1,4
£44.9m – 12 months ended 31 October 20194
£0.5m – 18 months ended 31 October 2020
£42.6m – 12 months ended 30 April 2019
G R O S S TA K I N G S 3
(19.6)%1,4
0.9% – 12 months ended 31 October 20194
N/A – 18 months ended 31 October 2020
(0.7)% – 12 months ended 30 April 2019
A D J U S T E D P R O F I T B E F O R E TA X
£(26.0)m1,4
£45.9m – 12 months ended 31 October 20194
£2.5m – 18 months ended 31 October 20203
£44.1m – 12 months ended 30 April 2019
I N C R E A S E I N N U M B E R O F
P H OTO B O OT H S
(1,250)1,4
N/A – 12 months ended 31 October 20194
(1,684) – 18 months ended 31 October 2020
(142) -12 months ended 30 April 2019
1 12 months ended 31 October 2020
2 Operated or sold.
3 Adjusted profit before tax for the 18 months to 31 October
2020 is profit before tax adjusted to exclude the loss on
the Group’s shareholding in Max Sight Group Holdings
Limited and restructuring costs.
4 12 months ended 31 Octovver 2020 and 12 months ended
31 October 2019 are unaudited.
2 9
ANNUAL REPORT 2020
Financial
Review
FINANCIAL PERFORMANCE
Revenue
EBITDA (excluding associates)
Operating profit (excluding associates)
Profit / (loss) before tax
Profit / (loss) after tax
The movements in turnover are outlined in the following table.
Turnover at 31 October 2019 (12 month)
Change in core business revenue:
Continental Europe
UK & Ireland
Asia
Turnover at 31 October 2020 (12 month)
The decline in the profit before tax can be explained as follows:
Profit before tax at 31 October 2019 (12 month)
Changes in revenue
Changes in costs
Restructuring costs
Increase in net finance income & other gains
Impact of exchange rates
Profit before tax 31 October 2020 (12 month)
3 0
18 months to
31 October 2020
12 months to
31 October 2020
Unaudited
12 months to
31 October 2019
Unaudited
12 months to
30 April 2019
£310.2m
£87.3m
£3.3m
£0.5m
£(2.4)m
£186.3m
£41.4m
£(25.7)m
£(27.8)m
£(24.9)m
£232.2m
£76.5m
£46.0m
£44.9m
£33.6m
£228.1m
£69.7m
£42.7m
£42.6m
£31.3m
£m
232.2
(19.1)
(18.9)
(7.8)
186.4
£m
44.9
(45.8)
(24.7)
(0.6)
(2.2)
(0.5)
(27.9)
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
REVIEW OF OPERATING COSTS
Operating costs were £80.2 million.
Staff costs were £28.4 million. The ratio of staff costs to revenue is 15.24% (31 October 2019: 13.4%).
Operations in the UK & Republic of Ireland received £1.5 million from government furlough schemes, and Continental Europe received
£755,000.
Staff costs
Inventory costs
Other operating costs
Depreciation and amortisation
Profit on disposal of fixed assets
Operating costs
12 months to
31 October 2020
Unaudited
12 months to
31 October 2019
Unaudited
12 months to
30 April 2019
£28.4m
£20.5m
£2.1m
£29.2m
£2.8m
£80.2m
£31.2m
£25.7m
£7.6m
£27.9m
£1.7m
£92.4m
£30.6m
£25.6m
£6.5m
£24.3m
£1.8m
£87.0m
EXCEPTIONAL ITEMS PROVISION AND IMPAIRMENT
Due to the significant impact of COVID-19 on consumer activity in all the Group’s end markets, the Group’s performance in the period was
significantly impacted. COVID-19 started to impact trading in Asia (especially China) in mid-January and by March all the Group’s end
markets were severely disrupted and the majority of expected revenue did not materialise as a result.
• COVID-19 has adversely impacted each business area: B2B, children’s rides and, to a lesser extent Identification, will be the most
challenging from which to recover.
• Identification was significantly impacted by the pandemic and ongoing challenging market conditions in the UK, due to the UK
government’s decision to allow home-taken photos for official documents such as passports.
The COVID-19 crisis has required an in-depth review of the Group’s operations and increased rigor to address the current trading
environment. This has led to a £33.6 million impact from exceptional items, provisions and impairment for the results for the 18-month period.
The largest elements are:
• The write down of the carrying value of non-profitable machines (mainly photobooths and children’s rides) due to the disruption caused
by the COVID-19 situation, and the likely slow recovery in consumer spending habits should social distancing measures remain in place
for the foreseeable future. Photo-Me expects that unprofitable machines will be removed or relocated in the UK, China, South Korea and
Continental Europe.
• The impairment of goodwill and investments, especially for the B2B companies in the UK.
• The impairment of R&D and other intangibles.
• This also includes a provision for bad debt, machines costs provision, such as dilapidation costs that will occur when leaving non profitable
sites, and stocks impairment. In addition, there are provisions for receivables from customer attrition or bankruptcy.
31
ANNUAL REPORT 2020 F I N A N C I A L R E V I E W C O N T I N U E D
The table below provides a breakdown of exceptional items, provisions and impairment by region:
Bad debt
Intangibles impairment
Machine costs provision
Machine impairment
R&D Intangible impairment
Stock impairment
Total
Asia
£’000
–
–
590
1,539
–
–
Europe
£’000
314
5,621
554
6,164
1,660
995
UK & Ireland
£’000
10
6,331
–
9,835
–
20
TOTAL
£’000
324
11,953
1,144
17,538
1,660
1,015
2,129
15,308
16,196
33,634
RECONCILIATION OF REPORTED PROFIT BEFORE TAX TO ADJUSTED PROFIT BEFORE TAX
Reported profit before tax1
Discontinued operations
– Profit on disposals of Stilla Tech
– Loss of Max Sight Holding investment
Fair value loss on financial instrument held at FVTPL
Exceptional items – restructuring costs
Adjusted profit before tax1
18 months to
31 October 2020
12 months to
31 October 2020
Unaudited
12 months to
31 October 2019
Unaudited
12 months to
30 April 2019
£0.5m
£(27.8)m
£44.9m
£42.6m
–
£0.4m
–
£1.5m
£2.5m
–
£0.4m
–
£1.3m
£(26.0)m
–
£(2.7)m
£2.9m
£0.8m
£45.9m
£(3.2)m
–
£2.9m
£1.8m
£44.1m
1 Profit before tax includes £33.6 million loss due to exceptional items, provisions and impairment due to COVID-19
EARNINGS PER SHARE
For the 18-month period, diluted earnings per share was (0.62)p. Basic earnings per share was (0.62)p.
TAXATION
The Group tax charge of £2.8 million corresponds to an effective tax rate of 578% (30 April 2019: 26.6%).
The effective tax rate is distorted due to the large amount of non-deductible impairments (goodwill).
STATEMENT OF FINANCIAL POSITION
Since the end of April 2020, the Group has secured additional debt funding to ensure that it has sufficient liquidity during this uncertain
period. A €30 million loan was agreed with three French banks (BNP, LCL and Credit du Nord which have always been extremely supportive
of Photo-Me) participating under the French government-backed “PGE” scheme and the funds were received in May and June, with the
loan now drawn down in full. The Group has the right to repay the loan between one and five years without penalty. As long as the loan is
outstanding (in whole or part), Photo-Me cannot distribute dividends to shareholders.
Photo-Me remains in line with its statement Photo-Me and BNP have agreed in principle to waive the existing gross cash to debt covenant, to
give Photo-Me more flexibility in the current environment.
3 2
PHOTO-ME INTERNATIONAL PLC
S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
The Group balance sheet can be summarised as follows:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net cash
Total equity
Minority interests
Total shareholders’ funds
Non-current assets detailed are outlined in the following table:
Goodwill
Other intangible assets
Plant and machinery
Investment property
Financial instruments
Deferred tax assets
Trade and other receivables
Total non-current assets
31 October 2020
31 October 2019
Unaudited
30 April 2019
Restated
£127.5m
£139.8m
£53.0m
£100.4m
£106.2m
£112.2m
£1.7m
£113.9m
£162.0m
£130.2m
£69.3m
£88.4m
£84.8m
£132.8m
£1.6m
£134.4m
£151.1m
£128.7m
£66.8m
£69.2m
£84.6m
£142.0m
£1.9m
£143.8m
31 October 2020
31 October 2019
Unaudited
30 April 2019
Restated
£13.8m
£19.0m
£90.3m
£0.7m
£1.9m
£0m
£1.8m
£27.1m
£14.6m
£114.2m
£0.6m
£2.5m
£0.9m
£1.7m
£18.4m
£31.3m
£95.4m
£0.7m
£2.4m
£0.9m
£1.8m
£127.5m
£162.0m
£151.2m
Transfer from goodwill to intangible assets (£10.6m) and increase of goodwill (£2.4 m) due to SEMPA investment retreatments according to
IFRS3.
Transfer from Other intangibles assets to Property, plant & equipment of IFRS16 NBV according to IFRS16.
3 3
ANNUAL REPORT 2020
Section 172(1) statement
Directors are required to act in the way they consider, in good faith, would
most likely promote the success of the company for the benefit of its members
as a whole, whilst also having regard, amongst other matters, to the factors
listed in Section 172(1) of the Companies Act 2006.
C O N S U M E R S
How we engage
Senior management considers the needs of the consumer and how
to provide the best in class service for the most completive price.
C U STO M E R S
How we engage
Continual contact with customers through customer relation
managers.
How this engagement influenced Board discussions and decision-making
A number of the changes we have made to our products are in response to consumer needs.
In making its decisions, the Board pays regard to the need to balance consumer needs
with customer and commercial outcomes. Some examples of the product changes include
Photobooths that are designed to allow easy access and use for persons with disability.
How this engagement influenced Board discussions and decision-making
Feedback can be shared with the executive directors and the Board.
The last 18 months have seen many communications from management to employees to
provide guidance and protection against COVID-19, not just for the benefit of employees but
also consumers, customers and the public at large.
E M P LOY E E S
How we engage
How this engagement influenced Board discussions and decision-making
• Regular briefings from UK management as to how the
Company is doing both through personal meetings and through
email inviting questions from employees
The last 18 months have seen many communications from management to employees to
provide guidance and protection against COVID-19, not just for the benefit of employees but
also consumers, customers and the public at large.
• Regular HR briefings in the UK
• Updates and newsletters
• Whistleblowing service
The Company is a small one, and therefore the Executive Directors and the CFO* have
regular weekly briefings with senior management and through the medium of these meetings
are able to learn about employee concerns and views so that they can be taken into account
in making decisions which are likely to affect their interests.
Current consultation on variation to working hours. Employee representatives’ involvement.
Open forums for staff to come forward with any queries. Consultations required by law are
complied with (e.g. in cases of redundancy).
The company operates an executive share option scheme, and rewards senior management
with bonuses.
A common awareness on the part of all employees of the financial and economic factors
affecting the performance of the Company is achieved through the regular meetings referred
to above.
The board has ensured job survival where possible; an example is a reduction of hours was
proposed as opposed to further redundancies.
* Although the CFO is a not a statutory director of the Company, he regularly attends board meetings and
interacts closely with the Board, particularly the audit committee.
3 4
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
PA R T N E R S A N D S U P P L I E R S
How we engage
How this engagement influenced Board discussions and decision-making
The Executive members of the Board plus the CFO (and where necessary the Non-executive
Directors) review and approve material contracts with suppliers and partners, joint ventures
and acquisitions.
Regular engagement with suppliers and partners, including
through our
• Supplier/procurement processes engage at the time of
appointment
• and during the relationship
• Regular monitoring and reviews of financial and
operating resilience
• Reporting on payment of suppliers
T H E C O M M U N I T Y A N D E N V I R O N M E N T
How we engage
How this engagement influenced Board discussions and decision-making
The Board relies on regular updates from senior management
who in turn rely on direct or indirect feedback from colleagues and
customers, as well as general observation on current best practices
and individual customer recommendations. These provide useful
insights and guides to help shape the Group’s activities.
The Company supported NHS staff and other key workers by providing them with a “Free
Fridays” offering in the summer where selected Revolution laundry machines were made
available to them free of charge; this was in response to the COVID-19 epidemic.
Green Awareness
The Group is actively work to decrease energy use and demand for natural resources.
Recycling Policy
The Group aims at recovering, refurbishing and re-selling its electrical equipment.
Monitoring Power Consumption
• Automatic shutdown of units when not in use
• Remote telemetry reduces the number of service visits and consumables
• Use of low-energy lamps
• Use of energy-efficient flat screen technology
Products
The development, use, and disposal of the Group’s products represent a main area of both
risk and opportunity. The Group ensures that its 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.
3 5
ANNUAL REPORT 2020 S E C T I O N 172(1) S TAT E M E N T C O N T I N U E D
T H E C O M M U N I T Y A N D E N V I R O N M E N T
How we engage
How this engagement influenced Board discussions and decision-making
The Revolution Units are eco-friendly
• The built-in washing liquid pump provides the ideal quantity for each washing cycle and
reduces waste
• The highly concentrated washing liquid, free of phosphates, colouring agents and
preservatives, meets the French OCERT standard. Ecological, effective low-temperature
and without allergen, this washing liquid naturally perfumes the linen
• The boiler only heats the water when the dryer is not in operation
• The energy-saving dryer reduces power consumption
• LED lights use less energy than standard lighting
• The launderette only requires 13KW (compared with 30KW for a classical launderette)
They are also user-friendly
• The launderettes comply with CE standards and the new decree N°2012-412 practical
since 1st July 2012
• Accessibility for our disabled customers has been a priority in the design of this launderette
from the outset. The machines and touchpads are located at the legally required height,
thus combining a beautiful design with easy access for our customers
• As an added service to the customer, a built-in pump releases a specially designed neutral
and mild washing liquid with a pleasant fragrance. This also helps ensure the machines are
kept clean and tidy
• Equipped with high capacity professional washing machines (8 and 18kg), the user can
wash and dry large or heavy loads such as duvets, blankets and pillows in a record time of
30 minutes per washing cycle
• Customers can enter their mobile number at the point of payment and an SMS will be sent
to alert them 5 minutes before the end of the cycle
• This free service is convenient for customers who might use this waiting time for shopping
• Thanks to the touch screen, the payment station is easy to use by following the on-screen
instructions
• Besides the coin and bill acceptor, the credit card payment is available as an option. It is a
service which facilitates the use of the launderette and thus increases its use
3 6
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
T H E C O M M U N I T Y A N D E N V I R O N M E N T
How we engage
How this engagement influenced Board discussions and decision-making
They are also buyer-friendly
• Floor space used is less than 5m² – relatively little for a new innovative service
• Low installation cost
• The launderette is delivered fully assembled and cabled, and can be installed in half a day
• Thinner power cables (due to low power), thus cheaper
In consideration of global concerns regarding the disposal of waste and increasing metal
prices and landfill costs, we have focused more attention on the re-use and recycling of our
retired products. Currently, more than 90% by weight of the materials used in our photobooths,
mostly steel and other metals, is recycled at the end of their product lifecycle. In light of our
concerns regarding increased energy costs and man-made impact on climate change, we
have embraced technological advances by investing in energy-saving improvements to our
products, which are explained further under “Environment” below.
The needs of all our customers are important to us. This drives a continual review of our
products and the development of solutions to meet these needs. For example, we have
improved services offered to customers with disabilities, and complied with the Equality
Act 2010 by introducing on-screen instructions within our photobooths for hard-of-hearing
customers, and voice instructions and carefully selected screen colours and font sizes for
customers with visual impairments. In addition, the development of the universal photobooth
enables access for wheelchair users.
Carbon footprint reduction – fleet :
• Cars are regularly serviced to ensure efficiency
• All drivers are asked to check tyre pressure once a week (properly inflated tyres can boost
car mileage)
• Generally cars are leased for no more than 48 months, newer cars are more fuel efficient
• One of the criteria for new car orders is it’s CO₂ emission
• Our regions are divided into specific areas, engineers must live within their area of work.
This ensures that driving to service machines is kept to absolute minimum
• Other groups of drivers, such as commercial team plan their journey ahead in order to
cover their territory efficiently
I N V E STO R S
How we engage
How this engagement influenced Board discussions and decision-making
Comprehensive investor relations programme including formal
presentations to investors and analysts on the half-year and full-
year results; formal investor roadshows in the UK; and an ongoing
at, one-to-one meetings and group meetings with institutional
investors, fund managers and analysts
The Remuneration Committee consulted with major investors and external remuneration
specialists before introducing and then updating any changes to the implementation of the
remuneration policy for The Board reviews the Group’s dividend policy, and following the
outbreak of the COVID-19 pandemic, the Board suspended its interim dividend, and is not
recommending a final dividend for the year. In making this decision, the Board considered this
to be in the long-term interest of shareholders.
• Meetings which relate to governance are attended by the
Involvement of the Chairman highlights the importance of governance from the top down.
Chairman or another Non-Executive Director
• Annual Report and Annual General Meeting
• Corporate website and market announcements
Usually, the AGM in particular provides a convenient forum for shareholders to question the
Board, give useful feedback and make helpful suggestions. It is normally very well attended
and constructive. This will not be the case this year owing to the restrictions in place due to
COVID-19.
• Active consultation on remuneration framework and policies
The remuneration committee takes advice from external remuneration consultants to ensure
that it is up to date with market trends, expectations, and best practises.
The Board relies on regular updates from senior management who in turn rely on direct or indirect feedback
from colleagues and customers, as well as general observation on current best practices and individual customer
recommendations. These provide useful insights and guides to help shape the Group’s activities.
37
ANNUAL REPORT 2020 Principal risks
Similar to any business, the Group faces
risks and uncertainties that could impact the
achievement of the Group’s strategy.
These risks are accepted as inherent to the Group’s business.
The Board recognises that the nature and scope of these risks can
change; 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 risk
Description and impact
Mitigation
COVID-19
The COVID-19 pandemic has and may continue
to cause major disruption to worldwide markets
and supply chains, including those that Photo-
Me operates within. Widespread governmental
lockdown measures, such as travel bans and
restrictions on the movement of people, have
significantly impacted the Group’s business areas,
particularly Identification and children’s rides due to
significantly lower consumer demand for its products
and services. In addition, lockdown has restricted the
ability of the Group’s field engineers to service and
replenish machines.
Global economic
conditions
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 Group has exercised a number of measures to protect the business and preserve
cash during the COVID-19 crisis, including but not limited to:
Focusing on the health and safety of employees, other stakeholders and the public
at large, stringent measures have been implemented across the Group’s businesses
in line with guidance of governments, the World Health Organization and other
relevant authorities across the territories in which the Group operates. Measures
taken include providing employees with face shields, surgical masks, gloves, hand
sanitizer and a disinfectant to safely clean the Group’s equipment.
Reducing capital and other expenditure including loan repayment deferrals,
obtaining additional credit facilities and government job retention schemes.
The Group continues to monitor the COVID-19 situation closely and continually
reviews operational practices, updating its practices in line with in line with
government guidance and other relevant guidance.
The Group focuses on maintaining the characteristics and affordability of its needs-
driven products.
Volatility of foreign
exchange rates
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 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 risk
Description and impact
Mitigation
Centralisation of
the production of
ID photos
Brexit
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 UK left the EU on 31 January 2020. This will
lead to changes in UK regulations as modifications
to numerous arrangements between the UK and
other members of the EU and EEA, affecting trade
and customs conditions, taxation, movements of
resources, among other things.
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 The Netherlands).
Furthermore, the Group also ensures that its ID products remain affordable and of a
high-quality.
The Board is continually reviewing the potential impact on the Group’s operations of
the UK’s leaving the EU.
Any potential developments, including new information and policy indications
from the UK Government and the EU, will be scrutinized with a view to enhancing
the Group’s ability to take appropriate action targeted at managing and, where
possible, minimising adverse repercussions of Brexit.
The specific impact of Brexit on the Group will depend on the details of any potential
renegotiation of the Brexit deal between the UK and the EU.
The business carried out post- transition impact assessments to include all customs
documentation, licences, permits, consents, certificates, rules of origin, commodity
codes, and delays at the borders.
The Board foresees that in the short-term the negative impact of the
uncertainty overshadowing the general UK economy could spill over into the
Group’s UK operations.
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PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
ST R AT E G I C
Nature of risk
Description and impact
Mitigation
Identification of
new business
opportunities
Inability to deliver
anticipated
benefits from
the launch of
new products
M A R K E T
The failure to identify new business areas may impact
the ability of the Group to grow in the long-term.
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 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.
The Group regularly monitors the performance of its entire estate of machines. New
technology-enabled secure
ID solutions are heavily trialed before launch and the performance of operating
machines is continually monitored.
Nature of risk
Description and impact
Mitigation
Commercial
relationships
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 2% 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.
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.
O P E R AT I O N A L
Nature of 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.
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.
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.
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.
Product and
service quality
The Board recognises that the quality and safety of
both its products and services is of critical importance
and that any major failure will affect consumer
confidence.
The 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.
T E C H N O LO G I C A L
Nature of risk
Description and impact
Mitigation
Failure to keep up
with advances in
technology
Cyber risk: Third
party attack on
secure ID data
transfer feeds
The Group operates in fields where upgrades to new
technologies are mission-critical.
The Group mitigates this risk by continually focusing on R&D.
The Group operates an increasing number of
photobooths capturing ID data and transferring these
data it directly to government databases.
The Group performs an ongoing assessment of the risks and ensures that the
infrastructure meets the security requirements.
3 9
ANNUAL REPORT 2020 Corporate
responsibility
statement
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.
PRINCIPAL ACTIVITIES
We believe that effective management of corporate responsibility
can reduce risks and help us identify business opportunities.
We prioritise our corporate responsibility activities based on three
main drivers:
• legal requirements and future policy trends;
• customer, employee and investor preferences for corporate
responsibility; and
• cost savings and business efficiency
We aim to ensure that our approach is consistent with the directors’
duty to promote the success of the Company, a legal requirement
included in the Companies Act 2006. This duty is based on the
principle of ‘enlightened shareholder value’.
HOW WE MANAGE CORPORATE RESPONSIBILITY
The Board is ultimately accountable for corporate responsibility.
The Chief Operating Officer has specific responsibility for risk
management and health, safety and environmental matters, with
delegated authority through line management.
The Group operates in highly differentiated national markets
with differing national laws, preferences and cultures. As a
result, operational direction and management of corporate
responsibility lie primarily with national business managers, who
are best placed to ensure compliance with national legislation
and market expectations.
The Group’s internal audit programme operates a risk-based
assessment process, including corporate responsibility issues.
The Board reviews Group-wide performance on corporate
responsibility within the assessment and review process. Where
necessary, Group-wide policies are developed or revised to
address specific risks, opportunities, or new information.
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PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
K E Y A R E AS O F F O C U S
P R O D U C T S
ISO certified
ISO International Standards ensure that products
and services are safe, reliable and of good quality.
Eco friendly
The Revolution
S E E PAG E 42
User friendly
Laundrettes
Buyer friendly
Equipment
We are also reducing their
environmental impact
H E A LT H & S A F E T Y
Dedicated experts
• Network of trained service operators
• Periodic safety inspections and tests
S E E PAG E 4 4
CE marking
Confirms that our products comply with all health, product safety and
environmental protection.
• Call centres provide customer assurance and within 24-hour service
• New product assessments
Photobooths:
CE Marking (RoHS2) Children’s rides:
BACTA CE Marking (RoHS2)
Accredited contractor
• Safe Contractor accreditation managed by Alcumus and Altius
• Assured award
E M P LOY E E S
S E E PAG E 4 3
Equal opportunities
and diversity
• Fair and equitable policies and procedures
for all
• Support for employees who develop
a disability
–
–
Retraining
Redeployment
• Gender diversity
Employee engagement
• Business networking
• Notification of vacancies and policy updates
• Monthly operational meeting for business
leaders
E N V I R O N M E N T
S E E PAG E 4 5
Green awareness
We actively work to decrease energy use and demand
for natural resources.
Recycling policy
We recover, refurbish and re-sell
our electrical equipment.
Monitor power consumption
• Automatic shut-down of units when not in use
• Remote telemetry reduces the number of service visits and consumables
• Use of low-energy lamps
• Use of energy-efficient flat screen technology
41
ANNUAL REPORT 2020 C O R P O R AT E R E S P O N S I B I L I T Y S TAT 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.
REVOLUTION LAUNDRY UNITS ARE ECO-FRIENDLY
• The built-in washing liquid pump provides the ideal quantity for
each washing cycle and reduces waste
• The highly concentrated washing liquid, free of phosphates,
colouring agents and preservatives, meets the French OCERT
standard. Ecological, effective low-temperature and without
allergen, this washing liquid naturally perfumes the linen
• Thanks to the touch screen, the payment station is easy to use
by following the on-screen instructions
• Besides the coin and bill acceptor, contactless credit card
payment is available as an option, which facilitates the use of
the launderette and thus increases its use
• Measures were taken to safeguard the interests of customers
and the community at large during the pandemic, including
enhanced cleaning regimes and customer signage (further
details set on our page 24)
THEY ARE ALSO BUYER-FRIENDLY
• Floor space used is less than 5m² – relatively little for a new
• The boiler only heats the water when the dryer is not in
innovative service
operation
• The energy-saving dryer reduces power consumption
• Low installation cost
• The launderette is delivered fully assembled and cabled, and
• LED lights use less energy than standard lighting
can be installed in half a day
• The launderette only requires 13KW (compared with 30KW
• Thinner power cables (due to low power), thus cheaper
for a classical launderette)
THEY ARE ALSO USER-FRIENDLY
• The launderettes comply with CE standards and the new
decree N°2012-412 practical since 1st July 2012
• Accessibility for our disabled customers has been a priority
in the design of launderette from the outset. The machines
and touchpads are located at the legally required height,
thus combining a beautiful design with easy access for our
customers
• As an added service to the customer, a built-in pump releases
a specially designed neutral and mild washing liquid with a
pleasant fragrance. This also helps ensure the machines are
kept clean and tidy
• Equipped with high-capacity professional washing machines
(8 and 18kg), the user can wash and dry large or heavy loads
such as duvets, blankets and pillows in a record time of 30
minutes per washing cycle
• Customers can enter their mobile number at the point of
payment and an SMS will be sent to alert them five minutes
before the end of the cycle
• This free service is convenient for customers who might use this
waiting time for shopping
WE ARE ALSO REDUCING THEIR
ENVIRONMENTAL IMPACT
• 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
RESPONDING TO CUSTOMER NEEDS
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.
4 2
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
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:
GENDER DIVERSITY
The table below shows the gender diversity of the Group’s
employees at 31 October 2020 with corresponding figures at 30
April 2019:
Total
7
Male
6
Female
1
17
1,116
1,140
14
932
952
3
184
188
Total
7
Male
6
Female
1
13
1,036
1,056
12
854
873
Nil
182
183
• business networking tools to encourage synergies among
AS AT 30 APRIL 2019
colleagues and businesses, sharing ideas and best practices;
• internal notification of vacancies and policy updates; and
The Board of Photo-Me
Senior managers in the Group
(excluding directors of Photo-Me)
Employees (excluding above)
Total
AS AT 31 OCTOBER 2020
The Board of Photo-Me
Senior managers in the Group
(excluding directors of Photo-Me)
Employees (excluding above)
Total
• 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.
EQUAL OPPORTUNITIES AND DIVERSITY
The Company is an equal opportunities employer and is
committed to ensuring equal career opportunities for all its
employees without discrimination, and pursuing fair and equitable
policies and procedures for recruitment, training and development.
Full consideration is accorded to all applications from persons with
disabilities, with due regard to their aptitudes and abilities.
The Company ensures that, wherever possible, employees who
develop a disability during their engagement can continue their
employment through a supportive mechanism of retraining,
redeployment and reasonable adjustments where practicable,
enabling them to remain within the Group. Opportunities for
training, career development and progression into and within the
Group do not operate to the detriment of persons with disabilities.
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ANNUAL REPORT 2020 C O R P O R AT E R E S P O N S I B I L I T Y S TAT E M E N T C O N T I N U E D
Health & safety
We are committed to ensuring that customers, site owners and
employees are free from risk from products operated by the group.
In addition to these moral and ethical considerations, we believe
that the effective management of health and safety is an essential
ingredient for successful business performance.
Our commitment to the safety of our customers and business
partners is achieved through a network of trained service
operatives who routinely service installed equipment on customers’
sites as well as conducting periodic safety inspections and tests.
Customers and site owners can raise any safety concerns directly
through our call centres, which immediately inform management
and direct an operative to the site within 24 hours.
New products from external suppliers are assessed to ensure that
they meet relevant safety standards before being launched in the
market. We work with our suppliers where appropriate, sharing the
benefit of our many years’ experience of developing products to
the highest standard of safety.
Photobooth security is managed by a multipoint locking system
with either one or two security padlocks depending on the model.
Our photobooths meet current electrical standards through a
declaration of conformity (DOC) and Conformité Européene
(CE) marking confirming Restriction of Hazardous Substances
(RoHS2) product compliance. Our experienced engineers also
test equipment regularly to ensure it meets both Portable Appliance
Testing (PAT) and Amusement Device Inspection Procedures
Scheme (ADIPS) standards.
Children’s rides manufactured by Jolly Roger (Amusement Rides)
Limited, a Group subsidiary company in the UK, are produced
in accordance with industry guidance issued by the British
Amusement and Catering Trades Association (BACTA) and
conform to CE marking confirming RoHS2 product compliance.
This supplements the various British, European and International
standards that apply to children’s rides and ensures a minimum
standard of quality and safety. The Company is also a registered
inspection body within the UK of ADIPS Scheme administered by
BACTA and enables its qualified operatives to inspect children’s
rides and issue the required safety certification.
Within the UK, the general manager fully supports the health and
safety policy and ensures there is provision on the agenda of
regular senior executive meetings to address health and safety
matters. Policies and procedures developed over the years continue
to be reviewed and adjusted as part of the process of continual
improvement and keeping pace with legislative advances. Risk
assessments are regularly undertaken for any new tasks and all are
reviewed every 12 months.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 following the introduction of an alternative on line training
system supplied by Essential Skillz in 2014 to teach and refresh
employee skills as required..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.
Throughout the pandemic in 2020, Photo-Me s introduced
measures to protect customers and colleagues. We have acquired
new cleaning products for our machines including SD90 – a high
performance self-disinfectant coating for up to 90 days, whose
application now forms part of our routine service visits to reduce the
risk of cross contamination between customers.
Where possible our employees are working from home and
all those that do not are provided with appropriate PPE and
measures such as lone working to reduce the risk of transmission.
Risk assessments for this are reviewed at regular intervals and are
updated as appropriate following government guidelines.
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.
For more on how the Company has acted to safeguard
employees, please see page 24.
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PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
Environment
The Company recognises its responsibility towards the
environment and the impact of its business activities.
The main risks to the business in this area arise from increased
legislation and the rising cost of waste disposal. The Company has
mitigated its exposure to these risks, and the emissions which the
business generates, by:
• aiming at reducing 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;
• the recovery, refurbishment and resale of electrical equipment
such as children’s rides which promote the principle embodied
in recent legislation of reuse before recycling. This not only
generates cost savings but also creates a source of income.
Where possible, we endeavour to embrace technological
advances to reduce the impact of our operations on the
environment. Such initiatives include:
• the ability to automatically shut down (and restart) photobooths
during closing hours which saves approximately 30% of power
consumption on site;
• the use of remote telemetry systems to minimise the number of
service visits and reduce wastage of consumables;
• the substitution of old-technology lighting with new low-energy
lamps in all photobooths. The latest generation Photobooth
by Starck uses the latest LED lighting which also eliminates the
hazardous waste associated with fluorescent tubes;
• instalment of low energy LED lights in place of old-technology
lighting in Photo-Me's factories;
• upgrades to certain of Photo-Me's offices through installing
upgraded windows, doors and roofing to improve insulation
and energy efficiency, as well as upgrading air conditioning
and heating systems as a step towards lower energy usage;
and
• the replacement of most old CRT monitors with new flat screen
technology which is more energy-efficient and eliminates
associated hazardous waste
Although we are not presently exposed to material risks related to
climate change, we are taking 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. This green fleet policy, and the
above measures, constitute the principal measures taken by the
Company during the reporting period to increase the Company’s
energy efficiency.
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ANNUAL REPORT 2020 C O R P O R AT E R E S P O N S I B I L I T Y S TAT E M E N T C O N T I N U E D
Environment continued
GREENHOUSE GAS (GHG) AND ENERGY EMISSIONS
Reporting of GHG emissions
In accordance with the disclosure requirements for listed companies, the table below shows the Group’s greenhouse gas emissions for the
current and preceding financial year.
The Group is required to report the emissions it is responsible for (as defined below), and to provide at least one ‘intensity ratio’ together with
an explanation of methodology used.
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.
A S S E S S M E N T PA R A M E T E R S
C O N S O L I DAT I O N
A P P R O AC H
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. This is
because it would not be practicable for the Company to include those subsidiary companies in the data.
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.
B O U N DA R Y S U M M A R Y
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.
E M I S S I O N FAC TO R
S O U R C E
Department of Business, Energy & Industrial Strategy, 2016 GHG Conversion Factors for Company Report
(2016: DEFRA 2014).
M E T H O D O LO G Y
The Company followed the Greenhouse Gas Protocol Corporate Standard.
M AT E R I A L I T Y T H R E S H O L D
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.
I N T E N S I T Y R AT I O
As explained below.
4 6
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
In the tables 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.
DATA FOR ALL OF THE GROUP’S BUSINESS (INCLUDING UK)
Scope 1:
The main components of these emissions are:
• Emissions from motor vehicles operated by the Group, including service and installation
personnel (servicing and maintaining the operational estate etc.) and administrative staff
• Natural gas consumption on the Group’s premises
4,287.99
18,392,324.21
3,513.50
18 months ended
31 October 2020
Tonnes of CO₂e
18 months ended
31 October 2020
kWh²
12 months ended
30 April 2019
Tonnes of CO₂e
Scope 2:
The main components of these emissions are:
• Purchased electricity for use on the Group’s premises. This is mainly for heating and
lighting. The Group’s property estate largely consists of administrative offices and
storage depots. Most manufacturing of vending equipment and products are outsourced
to third parties. In those instances, emissions are controlled by third parties
• Emissions from vending equipment
Total emissions
Intensity ratio per number of units of operation¹
DATA FOR THE GROUP’S UK BUSINESS²
Scope 1:
The main components of these emissions are:
• Emissions from motor vehicles operated by the Group, including service and installation
personnel (servicing and maintaining the operational estate etc.) and administrative staff
• Natural gas consumption on the Group’s premises
Scope 2:
The main components of these emissions are:
• Purchased electricity for use on the Group’s premises. This is mainly for heating and
lighting. The Group’s property estate largely consists of administrative offices and
storage depots. Most manufacturing of vending equipment and products are outsourced
to third parties. In those instances, emissions are controlled by third parties
• Emissions from vending equipment
Total emissions
Intensity ratio per number of units of operation¹
28,278.37
121,293,495.31
32,566.35
139,685,819.52
0.7065
3 030.4556
20,761.34
24,274.84
0.51592
18 months ended
31 October 2020
Tonnes of CO₂e
18 months ended
31 October 2020
kWh³
468.10
2,007,793.52
3,191.52
13,689,282.49
3,659.61
15,697,076.01
0.3700
1,587.1664
1 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.
2 As this is the first reporting period where the Group has broken out its UK data, it was not practicable for the Group to identify comparative UK data for CO₂ emissions from the prior annual report.
3 This is the first reporting period where the Group has reported kWh and therefore no comparative data has been provided.
4 7
ANNUAL REPORT 2020 C O R P O R AT E R E S P O N S I B I L I T Y S TAT E M E N T C O N T I N U E D
Environment continued
Methodology used:
• The data detailed in the table above represents the emissions and energy used for which Photo-Me is responsible and is incorporated by
reference in the Director Report on pages 54 to 58
• Data based on actual utilities invoices for Head Office consumption
• Kilometres travelled by cars, multiplied by the CO₂ emissions (by kilometre) for every car in the Group fleet
• Theoretical consumption by machines, multiplied by average number of machines for each country of operation
• Disclosure period is the 18 months ended 31 October 2020, compared with the 12 months ended 30 April 2019
NON-FINANCIAL INFORMATION STATEMENT
We are pleased to set out below where you can find information relating to non-financial matters in our Strategic Report, as required under
sections 414CA and 414CB of the Companies Act 2006.
N O N - F I N A N C I A L I N F O R M AT I O N STAT E M E N T
Information
Section/Policy
Environmental matters (including the impact of the company’s
business on the environment)
This is found above in the Corporate Responsibility Statement
The company’s employees
Social matters
Respect for human rights
This is found above in the Corporate Responsibility Statement.
This is found above in the Corporate Responsibility Statement.
This is found above in the Corporate Responsibility Statement.
Anti-corruption and anti-bribery matters
The Company operates an anti-bribery and corruption policy.
4 8
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
Viability statement
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 March 2024.
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
31 M A R C H 20 21
4 9
ANNUAL REPORT 2020 Corporate
Governance
5 0
PHOTO-ME INTERNATIONAL PLC 52
BOARD OF DIRECTORS &
COMPANY SECRETARY
54
REPORT OF
DIRECTORS
68
DIRECTORS'
REMUNERATION
REPORT
67
STATEMENT OF
DIRECTORS’
RESPONSIBILITIES
75
ANNUAL REPORT ON
REMUNERATION
60
CORPORATE
GOVERNANCE
70
REMUNERATION
POLICY REPORT
51
ANNUAL REPORT 2020
Board of directors &
Company Secretary
1
4
7
2
5
8
3
6
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PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
1
S I R J O H N L E W I S O B E
Non-executive Chairman
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
S E R G E C R A S N I A N S K I
Chief Executive Officer & Deputy Chairman
Appointed to the Board in 2009. Previously
served on the Board from 1990 to 2007;
until 1994 as a Non-executive Director,
from 1994 as an Executive Director and as
Chief Executive Officer from 1998 to 2007.
Founded KIS in 1963.
3
J E A N - M A R C J A N A I L H AC
Executive Director
Mr Janailhac joined the Board in 2019. He
is currently a senior adviser of Macquarie
Capital (Europe) Limited, which he joined in
2016. In October 2010, he was appointed
a Non-executive Director of Athena
Investments A/S, a Danish company
dedicated to renewable energy (wind and
solar) listed on Nasdaq Copenhagen and
included in the OMX Copenhagen Small
Cap Index, a role he retains. Mr Janailhac
was designated executive director in July
2020, and appointed chairman of the
newly formed Strategic Committee that is
responsible for reviewing and implementing
operational decisions across the Group.
From his original appointment in July 2019
until 9 December 2020, he was a member
of the Audit and Remuneration Committees,
resigning from both as of that latter date.
4
Y I T Z H A K A P E LO I G
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.
5
F R A N Ç O I S E C O U TA Z- R E P L A N
Non-executive Director
Appointed to the Board in 2009. Retired
from her executive role as Group Finance
Director on 27 August 2015, continuing
as a Non-executive Director. Joined KIS in
1991. Appointed to the Audit Committee
on 20 October 2016.
6
J E A N - M A R C E L D E N I S
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
E M M A N U E L O LYM P I T I S
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
D E L M A N S I
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.
5 3
ANNUAL REPORT 2020
Report of
the Directors
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 18-month period ended 31 October 2020.
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.
RESEARCH AND DEVELOPMENT
The Group is committed to its research and development
programme in order to maintain its introduction of innovative
products to the market. The expenditure incurred on the
development of new products is shown in notes 4 and 11 of the
financial statements.
PRINCIPAL ACTIVITIES
The principal activities of the Group continue to be the operation,
sale, and servicing of a wide range of instant-service equipment.
The Group operates coin-operated automatic photobooths
for identification and fun purposes, and a diverse range of
vending equipment, including digital photo kiosks, amusement
machines, business service equipment, and laundry machines. The
Company’s subsidiary and associated undertakings are shown
on pages 155 to 156. 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.
RESULTS AND DIVIDENDS
The results for the year are set out in the Group Statement of
Comprehensive Income on page 92. The directors are not
recommending a final dividend this financial period. No interim
dividend was paid for this financial period.
REVIEW OF BUSINESS AND FUTURE
DEVELOPMENTS
The Strategic Report describes the activities of the business during
the 18-month period ended 31 October 2020, recent events
(including any important events affecting the Group which have
occurred since the end of that period), 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.
EMPLOYEES
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 pages 40 to 48,
and which is deemed to form part of this report.
EMPLOYEE ENGAGEMENT
The senior management team has held several internal
consultations, and released internal memoranda outlining the
movement of the business throughout each quarter including
financial updates, customer movements, benefit renewals, and
guidance on support, wellbeing, whistleblowing and zero
tolerance. These gatherings also help to achieve a common
awareness on the part of all employees of the financial and
economic factors affecting the performance of the Company.
The Executive Directors have regular weekly meetings with all
managers. Since the outbreak of COVID-19, these meetings have
taken place by audio-visual conference calls. These meetings
provide an opportunity for the directors to learn of the views of the
employees at large, and to report back to the Board as a whole
so that in making any decisions affecting the employees, the
Board can take those views and any decisions made can take into
account those employee views.
5 4
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
The Company operates an executive share option scheme that
was introduced in 2014 (itself replacing an earlier similar scheme).
Senior members of staff receive annual bonuses depending on
personal performance and the Group’s performance.
• Workers are provided with clear and consistent instructions
not to come to work if they have symptoms or someone in
their household has symptoms, and that they should follow
government guidelines and self-isolate.
The above sets out how directors have engaged with employees.
The Company has introduced the following measures to protect
employees against COVID-19:
• For those who may have to commute on public transport,
working from home has been encouraged.
• A new office layout has been implemented, with distancing
measures introduced between work stations.
• The use of hot desking arrangements has been removed
where possible.
• Hand sanitiser has been provided at multiple locations
around the site to promote good hygiene with notices asking
employees to use them.
• The use of shared cutlery and crockery has been stopped and
the use of storage of such in communal areas has been restricted.
• Signage and posters have been placed around site reminding
workers to maintain hygiene standards and maintain their
distance.
• Meetings where possible are held remotely. Where this is
not possible the meeting rooms are set up with tape marked
to promote social distancing. Hand sanitiser is provided in
meeting rooms. Objects such as stationery are not to be shared
and meetings are to be kept as short as possible with only key
attendees being present.
• Workers are asked to limit face-to-face communication and
where possible use telephones and messaging.
• First aid needs have been reviewed with new measures put in
place to ensure any first aid treatment is Covid-safe, such as:
where possible assist from a safe distance and if the patient is
capable asking them to do things for you. Only delivering CPR
by chest compressions.
• The Company will continue to comply with government
guidelines; this currently involves where possible all staff
working remotely.
See below under ‘Engagement with Suppliers and Others’ to see
protective measures introduced for field staff.
The Board’s understands the importance of considering the views
of all stakeholders, including its employees. The Executive Directors
meet with all managers weekly (via audio video conference).
These meetings provide a platform for managers to feedback and
their teams’ views. The Executive Directors then report back to the
entire Board and this feedback is considered as part of the Board’s
decision making process.
ENGAGEMENT WITH SUPPLIERS AND OTHERS
The Executive Directors (and where necessary the Non-executive
Directors) meet suppliers, customers and major shareholders, as do
senior management. This gives them an opportunity to learn of their
desires and concerns, thereby providing information to which they
can have regard when making strategic and other decisions.
Since the outbreak of COVID-19, these are some of the measures
taken to safeguard the interests of customers and the community at
large:
• Machine touch screens have notices installed recommending
customers to wash their hands before and after use;
• Machines are coated in SD90 which creates an antimicrobial
surface which enables the surface to become self-disinfecting
for 90 days – this is reapplied within every 90-day period.
• Within our Revolution launderettes, social distancing notices
have been placed around the stores as well as signage
requesting customers to sanitise before entry. Signage upon
entry also asks customers to wear face coverings when in store
to reduce transmission risk.
5 5
ANNUAL REPORT 2020 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
• Enhanced cleaning regimes have been introduced on
the machines, with DEW disinfectant to be used at each
maintenance visit by the Company’s engineers.
• Stickers notifying customers of the use of SD90 have been
applied to machines.
• Signage is placed on machines when maintenance is being
carried out telling surrounding guests to keep their distance
whilst the machine is undergoing maintenance.
• Engineers wear face masks whilst on sites at all times.
• Engineers are issued with hand sanitiser to promote good
hygiene standards which in turn reduces the risk of cross-
contamination.
CORPORATE RESPONSIBILITY
A summary of the Company’s approach to corporate social
responsibility and environmental matters, including a report on
the Group’s greenhouse gas emissions for the 18 months ended
31 October 2020, can be found in the Corporate Responsibility
Statement on pages 40 to 48.
BOARD OF DIRECTORS AND THEIR INTERESTS
The current directors of the Company are:
S I R J O H N L E W I S O B E
Chairman, member of the Audit and Remuneration Committees,
and Chairman of the Nomination Committee
S E R G E C R A S N I A N S K I
Chief Executive Officer and Deputy Chairman
J E A N - M A R C J A N A I L H AC
Executive director and chairman of the Strategic Committee that is
responsible for reviewing and implementing operational decisions
across the Group. He is also chairman of the Strategic Committee
and was a member of the audit and remuneration committees from
his appointment in July 2019 until December 2020.
E M M A N U E L O LYM P I T I S
Senior Independent Non-executive Director, Chairman of the
Remuneration Committee and a member of the Nomination and
Audit Committees
F R A N Ç O I S E C O U TA Z- R E P L A N
Non-executive Director and a member of the Audit Committee
J E A N - M A R C E L D E N I S
Chairman of the Audit Committee and a member of the
Nomination and Remuneration Committees
Y I T Z H A K A P E LO I G
Non-executive Director and member of the Audit Committee
Further details, together with a brief biography of each director,
can be found on page 53.
These are the directors who served during the year, with their
periods of tenure.
From 1 May 2019 to 21 July 2019
Sir John Lewis, Serge Crasnianski, Eric Mergui, Emmanuel
Olympitis, Françoise Coutaz-Replan, Jean-Marcel Denis,
and Yitzhak Apeloig
From 22 July 2019 to 12 July 2020
Sir John Lewis, Serge Crasnianski, Eric Mergui, Emmanuel
Olympitis, Françoise Coutaz-Replan, Jean-Marcel Denis,
Yitzhak Apeloig, and Jean-Marc Janailhac
From 13 July 2020 to date
Sir John Lewis, Serge Crasnianski, Emmanuel Olympitis,
Françoise Coutaz-Replan, Jean-Marcel Denis, Yitzhak Apeloig,
and Jean-Marc Janailhac
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 68 to 83.
5 6
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE
The Company maintained directors’ and officers’ liability insurance
cover throughout the 18-month period ended 31 October 2020.
This insurance cover extends to directors and officers of subsidiary
undertakings and remains in force. Article 191 of the Company’s
Articles of Association allows the indemnification of directors of
the Company and associated companies and of directors of a
company that is the trustee of an occupational pension scheme for
employees of the Company or an associated company against
liability incurred by them in certain situations, and would, if granted,
constitute a “qualifying indemnity provision” within the meaning of
Section 236 (1) of the Companies Act 2006. No such indemnities
have been granted.
SUBSTANTIAL SHAREHOLDERS
As of 31 March 2021, the Company had been notified of the
following disclosable interests in the ordinary shares of the
Company:
MAJOR SHAREHOLDERS’ INFORMATION
Shareholder Name (Director¹)
Serge Crasnianski*
Schroders PLC
Fidelity International
FPCI Montefiore Investment IV
Dan David Foundation
Premier Milton Group
% Voting Rights
27.80
Amount
105,637,410
13.68
51, 721,009
10
9.6
8.49
2.15
37,801,163
36,304,265
32,111,186
8,141,080
1
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 PTE LTD, and Mr Crasnianski’s
interest in those remaining shares is indirect. Except for the
above, the Company had not been advised of any
shareholders with interests of 3% or more in the issued
ordinary share capital of the Company as at such date
SHARE CAPITAL
The issued share capital of the Company, plus details of the
movements in the Company’s issued share capital during the year,
is shown in note 20 of the financial statements. Each ordinary
share of the Company carries one vote at general meetings of the
Company.
REPORT OF DIRECTORS’ CONTINUED AUTHORITY
TO PURCHASE SHARES
Pursuant to a resolution passed at its 2019 AGM, the Company is
authorised to purchase its own shares in the market. The Company
will seek approval at the 2020 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 18-month period financial period ended 31 October 2020.
ADDITIONAL INFORMATION
Where not provided elsewhere in the Report of the Directors, the
following provides the additional information required to be disclosed
in the Report of the Directors. The structure of the Company’s share
capital, including the rights and obligations attaching to the shares, is
set out within note 20 to the financial statements.
No person holds securities carrying special rights with regards to
control of the Company.
There are no restrictions on the transfer of ordinary shares in the
capital of the Company other than certain restrictions 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
57
ANNUAL REPORT 2020 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
stated in Article 81 of the Company’s Articles of Association). Any
notice of general meeting issued by the Company will specify
deadlines for exercising voting rights and in appointing a proxy
or proxies in relation to resolutions to be passed at the general
meeting. All proxy votes are counted and the numbers for, against
or withheld in relation to each resolution are announced at the
general meeting and published on the Company’s website after
the meeting. Proxy appointments and voting instructions must be
received by the Company’s registrars not less than 48 hours before
a general meeting.
Under its Articles of Association, unless the Board otherwise
determines, no member shall be entitled to vote in respect of any
share unless all calls or other sums presently payable by them in
respect of that share shall have been paid. The Company is not
aware of any agreements between shareholders that may result in
restrictions on the transfer of shares or on voting rights.
The rules governing the appointment of directors are set out in
the Corporate Governance Statement on pages 60 to 66. 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.
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.
RELATED-PARTY TRANSACTIONS
Details of related-party transactions are set out in note 27 to the
financial statements.
FINANCIAL INSTRUMENTS
Details of the financial risk management objectives and policies
of the Group and exposure of the Group to foreign exchange
risk, interest rate risk and liquidity risk are given in note 15 to the
financial statements.
POLITICAL DONATIONS
No member of the Group made any political donations during the
18-month period ended 31 October 2020.
GOING CONCERN
Having reviewed forecasts, cash flow, financial resources and
financing arrangements and after making enquiries, the directors
consider that the Company and the Group have adequate
resources to remain in operation for the foreseeable future.
Accordingly, the directors continue to adopt the going concern
basis in preparing the financial statements.
DISCLOSURE OF INFORMATION TO THE AUDITOR
The directors who held office at the date of approval of this Report
of the Directors confirm that: As far as they are each aware, there
is no relevant audit information of which the Company’s auditor
(Mazars 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.
ANNUAL GENERAL MEETING
The Company’s AGM this year will be held at 10 a.m on 30
April 2021 at the offices of Baker McKenzie LLP, 100 New
Bridge Street, London EC4V 6JA. 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.
IMPORTANT NOTICE
In light of the Covid-19 pandemic, there are significant changes
to the usual arrangements for the AGM this year and regrettably,
shareholders cannot attend the AGM in person. Shareholders are
strongly encouraged to appoint the Chair of the meeting as their
proxy to ensure that their vote is counted.
By order of the Board
D E L M A N S I
Company Secretary
7 A P R I L 20 21
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Corporate governance
Statement of compliance with the
UK Corporate Governance Code.
Explanations of how the principles have been applied and the
provisions complied with, are set out on the table on page 50.
THE GROUP’S BUSINESS MODEL AND STRATEGY
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.
THE BOARD
B OA R D C O M P O S I T I O N
At the start of the year under review until 22 July 2019, the Board
comprised seven directors; from 22 July 2019, following the
appointment of Mr Janailhac, until 12 July 2020, the Board
comprised eight directors: the Non-executive Chairman; the
Chief Executive Officer; the Chief Operating Officer; and five
Non-executive Directors, four of whom the Board considered
to be independent, namely Emmanuel Olympitis, Jean-Marcel
Denis, Yitzhak Apeloig, and Mr Janailhac; and one whom the
Board considered 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 12 July 2020, Mr Mergui left the Board on
12 July 2020 (and the Company on 4 September 2020), and
on 17 July 2020 Mr Janailhac was designated an executive
director. The Board still consider Messrs Apeloig and Olympitis
to be independent (in each case with the relevant induvial not
participating in that assessment.
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. Whislt with the Group, the Chief Operating
Officer had responsibility for the day-to-day operation of the
Group and routinely reported 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, in order to provide for
stability and continuity, and to avoid destabilising the Board, the
directors have unanimously decided not to comply with the Code’s
recommendation that all directors seek annual 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.
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The Financial Reporting Council 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
18-month period ended 31 October 2020, complied with those
provisions of the September 2018 edition of the Code that are
applicable to it, except for the following:
Point of non-compliance with Code
Reason for non-compliance
For engagement with the workforce, one or a combination of the
following methods should be used:
• a director appointed from the workforce;
• a formal workforce advisory panel;
• a designated non-executive director.
There is no annual re-election of all directors.
The Executive Directors meet regularly with the general managers of the group. This enables
both sides to raise any matters of interest to either side. The Non-executive Directors are
always available should anyone not be comfortable in dealing the executive director about
anything. Also, the whistle-blowing policy is in place as a further avenue should anyone wish.
Therefore, the Board believes that given the size of the Group and its resources, is appropriate
and additional measures to engage are unnecessary and overly cumbersome.
The Board thinks this would distract the Board from its business, and that continuity enables
people with deep knowledge of the Company to make more informed, effective and
considered judgements.
Chairman has been in office for more than nine years.
Sir John Lewis is considered by the Board to be an effective and engaged chair. He has the full
approval and confidence of the Board.
Open advertising and/or an external search consultancy should
generally be used for the appointment of the chair and non-
executive directors.
No open advertising or external search consultancy was used when Mr Janailhac was
appointed to be an Executive Director, however, the Board had by then been able to make a
judgment on his abilities and valued contributions to the Group.
Mr Janailhac was a member of the Audit and Remuneration
Committees although he is an Executive Director
Non-executive Director to liaise with work force.
Mr Janailhac resigned from those Committees prior to either of those Committees meeting
after his appointment as an Executive Director. He resigned from the Audit and Remuneration
Committees in December 2020. There was little activity in those Committees during the time
he became an Executive Director until he resigned his membership of those Committees.
After due consideration, the Board concluded that it was preferable to authorise the former
COO as the contact person. This is because the former COO regularly visited all divisions
and was more visible. If anyone felt uncomfortable, for whatever reason, about liaising with
the COO, there was recourse to the rest of the Board including the Non-executive Directors,
as well as through the whistleblowing process. Since the former COO’s departure from the
Group and with the outbreak of COVID-19, no further action has been taken.
Ms Coutaz-Replan is a member of the audit committee even
though the Code states that the Board should establish an audit
committee of independent non-executive directors.
The Board considers Ms Coutaz-Replan an invaluable support, given her knowledge of the
systems and processes gained when she was Group Finance Director from September 2009
until August 2015.
Mr Olympitis’s independence despite not meeting the criteria
set out by the Code which raises a presumption against
independence where a director has served on the Board for more
than nine years from the date of their first appointment.
Sir John Lewis is a member of the Audit Committee.
The Remuneration Committee should have delegated
responsibility…for Senior management. It should review workforce
remuneration and related policies and the alignment of incentives
and rewards with culture, taking these into account when setting
the policy for executive director remuneration.
Despite having been a director for more than nine years, Mr Olympitis 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.
Under the predecessor to the Code, there was no restriction on the Chairman of the Board
being a member of the Audit Committee and such membership in the case of Sir John Lewis
did not impede that committee’s functioning but enhanced it.
The Remuneration Committee thinks it is advisable that the Executive Directors address
remuneration of the senior management and workforce pay polices in general as the former
have most interaction with them and are therefore best placed to make meaningful and
equitable assessments their performance and remuneration levels.
Did not self-evaluate
Did not evaluate auditor
As a result of the coronavirus, the Board did not conduct its usual annual self-assessment. This
was not considered a priority in the circumstances. No external evaluation takes place.
As a result of the coronavirus, the Audit Committee did not conduct its usual annual assessment
of the external auditor. This was not considered a priority in the circumstances particularly as
this was Mazars LLP first audit, plus the challenges posed by the outbreak of COVID-19.
The Code and associated guidance are available on the Financial Reporting Council website at
https://www.frc.org.uk/getattachment/88bd8c45-50ea-4841-95b0-d2f4f48069a2/2018-UK-Corporate-Governance-Code-FINAL.pdf.
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B OA R D E VA L U AT I O N
Normally, the following occurs. The Chief Executive Officer and
the Chairman would review the performance of other Executive
Directors. The Chairman would review the performance of
the Chief Executive, Chief Operating Officer and each Non-
executive Director. The Non-executive Directors, led by the
Senior Independent Non-executive Director, would evaluate the
performance of the Chairman, taking into account the views of the
Executive Directors. During the year, the Chairman would meet with
the Non-executive Directors without the Executive Directors being
present. As mentioned, none of these took place this year.
Normally, the Board would undertake an internal process to
assess the effectiveness of the Board during each financial year,
consisting of a confidential survey. Areas identified in which there is
considered to be room for improvement are usually addressed by
the Board during the current year. As mentioned, this process did
not take place this year.
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
The Board had nine meetings during the year under review.
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. It did not meet
this year). 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.com).
Decision-making relating to operational matters was delegated to
the Chief Operating Officer (whilst still with the Group) 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 and Committee meetings.
The attendance of directors at those meetings and meetings of Board Committees is set out below.
J Lewis
S Crasnianski
E Mergui
Y Apeloig
F Coutaz-Replan
J-M Denis
E Olympitis
J-M Janailhac
Audit
committee
6(6)
Remuneration
committee
2(2)
Nomination
committee
Nil
6(6)
6(6)
6(6)
6(6)
2(2)
2(2)
Nil
Nil
Board
9(9)
9(9)
6(9)¹
9(9)
9(9)
9(9)
9(9)
8(9)¹
1 These represent full attendance for those meetings held whilst the respective individuals were members of the Board.
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BOARD COMMITTEES
T H E A U D I T C O M M I T T E E
For the whole of the 18-month period ended 31 October 2020,
Jean-Marcel Denis (Committee Chairman), Emmanuel Olympitis
(Senior Independent Director) and Sir John Lewis (Chairman of
the Board), Françoise Coutaz-Replan (the Group’s former Finance
Director), Yitzhak Apeloig (who is a qualified accountant) served
on the Committee; Mr Jean-Marc Janailhac was appointed to
the Committee when he joined the Board on 22 July 2019, and
resigned in December 2020. The composition of the Committee
was not Code-compliant to the extent that (i) for part of the time,
Mr Janailhac was a member until standing down in December
2020, Sir John Lewis remains a member, and 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 Group 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. Six meetings were
held during the 18-month period ended 31 October 2020 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.
Mazars LLP has been the external auditor of the Group since the
Annual General Meeting in October 2019. The audit partner
is David Herbinet. 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 Mazars 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 ten years. It
conducted a tender process for the external audit role in 2019 in
which it invited three firms to tender for the role of external auditor;
Mazars LLP was the successful tenderer.
Apart from (i) a technical breach of the Ethical Standard as
highlighted in Mazars’ earlier communication to the Audit
Committee (services delivered to PMI Poland for payroll and
outsourcing services, between 1 May 2019 and the date of
Mazars’ appointment as auditor), (ii) and authorised non-
audit work in connection with a potential acquisition that was
subsequently aborted (such work costing £20,000) the Audit
committee is not aware of Mazars’ having carried out any other
non-audit work.
K E Y M AT T E R S C O N S I D E R E D
In March 2021,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:
• Risk of fraud in revenue recognition (presumed to be
a significant risk on all audits due to the potential to
inappropriately shift the timing and basis of revenue
recognition as well as the potential to record fictitious revenues
or fail to record actual revenues). There is a presumption under
the International Auditing Standards that there is a significant
risk of fraud in the timing of revenue recognition leading to
the material misstatement of revenue overall. This is because
revenue is an area of particular focus by users of financial
statements and can be subject to judgements as to when the full
risk and reward of the ownership of an asset has passed.
• Takings are an exact reflection of the cash received at the
bank. A daily double reconciliation between the cash
recorded and the machine counters (cash and statistics) is
carried out.
• A cut-off calculation of the takings is made per machine and
enables the most accurate possible turnover to be recorded
each month. This calculation has been unchanged for more
than 15 years and has been tested by successive audits over
this time.
• Management override of controls (a mandatory significant
risk on all audits due to the unpredictable way in which such
override could occur). Management at various levels within
an organisation are in a unique position to perpetrate fraud
because of their ability to manipulate accounting records and
prepare fraudulent financial statements by overriding controls
that otherwise appear to be operating effectively.
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• Unpredictable way in which such override could occur there is
1. The risk of error arising from the appropriateness of the
a risk of material misstatement due to fraud on all audits.
• Management has a read-only access in the operational and
accounting systems of the Group. In no circumstances can a
member of management be allowed to make any payment
whatsoever. There is a strict segregation of duties between
the payment preparing, the validation and then the (double)
payment signing. In total, each payment involves four people.
• Recognition and valuation of other intangible assets
(significant). There is a risk that intangible assets don’t meet the
recognition criteria to be recognised as intangible assets. Due
to its complex nature, there is a further risk over the valuation of
the intangible assets.
• The other intangible assets mainly resulted from French law
(droit au bail) which allows to recognize a right of use (literally
a right to rent). The recognition policy and measurement of the
fair value of these intangible assets are deemed as risky area
by the audit team.
• Valuation of Defined Benefit Obligations. Define benefit
obligations contain significant judgements and valuations due
to the complex nature of actuarial assumptions.
• Valuation, allocation and Impairment of Goodwill. The
Goodwill recognition is deemed as judgemental area by the
audit team.
judgements and assumptions used in the impairment test of
goodwill in particular discount rate, long term growth rate (in a
context of COVID 19), and country risk adjustment.
2. Goodwill allocation on SEMPA (recent acquisition). There is a
risk that goodwill is held at a value materially different from its
realisable value or value in use.
3. Every year, goodwill is subject to impairment tests. This
year, goodwill of Rev Max Ltd, Jolly Roger(Amusement
Rides) Limited and Global Networks Investment, SL were
fully impaired. Regarding the Sempa acquisition, it was
considered in a very large part as intangible assets (brand,
customer relationships, and contract-related assets distributor
agreement), which we have decided to depreciate over seven
years which is a long period for the Group because we think
we could accrue benefit and can forecast with reasonable
certainty. The residual amount was booked as goodwill, not
amortised.
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 18-month period ended 31 October 2020, the
Remuneration Committee comprised Emmanuel Olympitis
(Committee Chairman), Jean-Marcel Denis (Chairman of the
Audit Committee), Sir John Lewis (Chairman of the Board), and Mr
Jean-Marc Janailhac who was appointed to the committee when
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he joined the Board on 22 July 2019. Thus, the composition of the
Committee was not 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. Mr
Janailhac resigned from the Committee in December 2020.
The Committee meets at least once per year. It met twice in the
18 months ended 31 October 2020.
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 and the
Group’s Executive Directors, 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 68 to 83 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 18-month period ended 31 October 2020, 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.
ST R AT E G I C C O M M I T T E E
Mr Janailhac chairs the Strategic Committee with the top five
managers of the Group and the CEO.
The Strategic committee met formally six times since the beginning
of 2020 but more recently three times including a three-day session
in early October 2020. There is an on-going process between the
chairman of the Strategic committee and its other members. The
Committee focuses on, amongst other things, strategy and future
developments/ new products / new joint ventures, communication
and marketing, commercial, sales force and training, maintenance
productivity quality and training.
SHAREHOLDER COMMUNICATION AND
ENGAGEMENT
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.
In normal circumstances, 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. This will not be the case this year
owing to the restrictions in place due to COVID-19. Shareholders
are given the opportunity to vote on each separate issue. The
number of proxy votes lodged is given at the meeting after the vote
on a show of hands for each resolution and is published on the
Company’s website after the meeting.
ACCOUNTABILITY AND INTERNAL CONTROL
The Board is ultimately responsible for the Group’s systems of
internal control and risk management, and for reviewing their
effectiveness. This is effected by receiving reports from the Audit
Committee following its review. The Board confirms that it has
reviewed the effectiveness of the systems of internal control and
risk management for the year under review. The Board is 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.
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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.
INTERNAL CONTROL AND RISK MANAGEMENT
IN RELATION TO THE FINANCIAL REPORTING
PROCESS
The Group has a thorough assurance process in place in respect
of the preparation, verification and approval of periodic financial
reports.
This process includes:
• The involvement of qualified, professional employees
with an appropriate level of experience (both in Group
finance and throughout the business)
• Formal sign-offs from appropriate business segment
Managing Directors and Finance Directors
• Comprehensive review and, where appropriate,
challenge from key internal Group functions
• A transparent process to ensure full disclosure of
information to the external auditor
• Engagement of a professional and experienced firm as
external auditor
• Oversight by the Audit Committee, involving (amongst
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.
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Statement of directors’
responsibilities
The Directors of the Company, who are named
on page 53, are responsible for preparing the
Annual Report, the report of the directors and
the group and company financial statements
in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for the Group and the Company for each financial year.
Under that law, the directors are required to prepare the Group
financial statements in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union
and applicable law and have elected to prepare the Company’s
financial statements on the same basis.
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and the Company and of their
profit or loss for that period. In preparing each of the Group and the
Company’s financial statements, the directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgments and accounting estimates that are reasonable
and prudent;
• state whether they have been prepared in accordance with
IFRS as adopted by the European Union; and
• prepare the financial statements on the going-concern basis
unless it is inappropriate to presume that the Group and the
Parent Company will continue in business
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and the Group and enable
them to ensure that their financial statements and the Directors’
Remuneration Report comply with the Companies Act 2006 and
as regards the Group’s financial statements, Article 4 of the IAS
Regulation. They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the
Group and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report, Directors’ Report,
Directors’ Remuneration Report and Corporate Governance
Statement that comply with that law and those regulations.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN
RESPECT OF THE ANNUAL FINANCIAL REPORT
Each of the directors of the Company, whose names and functions are
listed on page 53, confirms that, to the best of his or her knowledge:
• the financial statements, prepared in accordance with IFRS as
adopted by the European Union, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation
taken as a whole; and
• the Strategic Report, which is incorporated into the Report of
the Directors, includes a fair review of the development and
performance of the business and the position of the Company
and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
FAIR, BALANCED AND UNDERSTANDABLE
In accordance with the principles of the UK Corporate
Governance Code, the directors have arrangements in place to
ensure that the information presented in the Annual Report is fair,
balanced and understandable; these are described on pages 65
and 66.
The Board considers, on the advice of its Audit Committee,
that the Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for
shareholders to assess the Company’s and the Group’s position
and performance, business model and strategy.
SIGNIFICANT ACCOUNTING POLICIES, CRITICAL
ESTIMATES AND KEY JUDGMENTS
Our significant accounting policies are set out on pages 99 to 106
of the consolidated financial statements and conform to IFRS as
adopted by the European Union. These policies and applicable
estimation techniques have been reviewed by the directors who
have confirmed them to be appropriate for the preparation of the
2019/2020 consolidated financial statements.
By order of the Board
S I R J O H N L E W I S O B E
Non-executive Chairman
7 A P R I L 20 21
67
ANNUAL REPORT 2020 In the 18 months ended
31 October 2020, the Committee’s
work has largely been focused
on addressing challenges arising
as a result of the global pandemic,
and developing our new
Remuneration Policy for approval
at the forthcoming 2020 AGM.
E M M A N U E L O LYM P I T I S
Chairman of the Remuneration Committee
• The Annual Report on Remuneration, which discloses details of
the Committee, how the Remuneration Policy was implemented
in the 18-month period ended 31 October 2020, and how the
policy will operate for the year ending 31 October 2021
As such, the new Remuneration Policy will be subject to a binding
shareholder vote and the Annual Statement and Annual Report on
Remuneration will be subject to an advisory shareholder vote at the
AGM on 26 April 2021.
WORK OF THE COMMITTEE DURING THE
18 MONTHS ENDED 31 OCTOBER 2020
The Committee’s main activities during the period were as follows:
• Agreeing the performance against the targets for the 2018/19
annual bonus awards;
• Setting the targets for the 2019/2020 annual bonus;
• Agreeing the performance against the targets for the 2016
ESOS awards and determining vesting levels;
• Considering the impact of the year end change on the 2017
ESOS awards and the EPS performance targets;
• Agreeing the award levels and performance targets for the
2019 ESOS awards;
• Agreeing the remuneration arrangements for joiners and
leavers; and
• Agreeing the Chairman’s fee and Executive Directors’ base
salaries for 2019/2020.
In addition, the Committee has sought to ensure that the current and
proposed Policy and practices are consistent with the six factors set
out in Provision 40 of the 2018 UK Corporate Governance Code:
Clarity – The current and proposed Policy is understood by our
senior executive team and we have sought to articulate it clearly to
our shareholders and representative bodies (both on an ongoing
basis and during consultation when changes are being made).
Simplicity – The Committee is mindful of the need to avoid overly
complex remuneration structures which can be misunderstood and
deliver unintended outcomes. Therefore, a key objective of the
Committee is to ensure that our executive remuneration policies
and practices are straightforward to communicate and operate.
Directors’
remuneration
report
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.
Dear Shareholder,
On behalf of the board, I am pleased to present our Directors’
Remuneration Report which covers the 18 months ended
31 October 2020. The 18-month period results from the change
of our year-end from 30 April to 31 October to avoid difficulties
that might otherwise have affected the audit owing to the limitations
imposed on the movement of people as a consequence of
COVID-19.
This report has been prepared in line with the provisions of the
Companies Act 2006 and Schedule 8 of the Large and Medium-
sized Companies and Groups (Accounts and Reports) Regulations
2008 (as amended).The report has also been prepared in line with
the recommendations of the 2018 UK Corporate Governance
Code and the requirements of the UKLA Listing Rules.
THE REPORT IS DIVIDED INTO THREE SECTIONS:
• This Annual Statement, which summarises the work of the
Committee, remuneration outcomes in 2019/20 and how the
Remuneration Policy will be operated in 2020/21
• The Remuneration Policy Report, which details the Company’s
proposed policy for the remuneration of Executive and Non-
executive directors. As the current policy was last approved by
shareholders at the 2017 AGM, a new policy which has been
updated for developments in remuneration governance will be
put to a shareholder vote at the 2020 AGM
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F I N A N C I A L S TAT E M E N T S
Risk – Our Policy has been designed to ensure that inappropriate
risk-taking is discouraged and will not be rewarded via: (i) the
balanced use of both short and market value options which employ
a blend of financial, non-financial and share price targets; (ii) the
significant role played by equity in our incentive plans; and (iii)
malus/clawback provisions.
Predictability – Our incentive plans are subject to individual caps,
with our share plans also subject to market standard dilution limits.
Proportionality – There is a clear link between individual
awards, delivery of strategy and our long-term performance.
Alignment to culture – Our executive pay policies are aligned
to culture through the use of metrics in both the annual bonus and
share options that measure how we perform against our KPIs and
the long-term performance of the share price.
REMUNERATION OUTCOMES IN 2019/20
The performance of the Group is summarised on pages 4 to 39,
and in the financial statements on pages 92 to 159.
In light of this year’s results, the Committee has determined that
no annual bonus should be payable to the CEO or the former
COO, Mr Mergui, in respect of financial targets or performance
against personal/strategic targets. Mr Janailhac was not eligible to
participate in the annual bonus for 2019/20.
The directors unanimously agreed to a salary/fee reduction of
20% as from 1 July 2020; this voluntary reduction is still applicable
as of today and is being kept under review.
Mr Mergui left the Board on 12 July 2020, and the Group on 4
September 2020. Details of his termination payments are set out
in the Annual Report on Remuneration and are available on the
Company’s website. Shareholder approval will be sought for the
amount for the overpayment at this year’s AGM.
IMPLEMENTATION OF THE REMUNERATION
POLICY FOR 2020/21
The Committee proposes to operate the Remuneration Policy
for the CEO and Mr Janailhac for the 12 months ending
31 October 2021 as follows:
• Following a review of the Executive Directors’ salaries, it was
decided not to make any changes for the year to 31 October
2021. As such, before any voluntary reductions, the current
base salary levels for the CEO and Mr Janailhac are £560,211
and c.£180,000 (Mr Janailhac’s salary will continue to be
delivered in two parts, namely £45,000 and €150,000).
• Benefit and pension provisions will be in line with the approved
Remuneration Policy although it should be noted that Mr
Crasnianski’s pension contribution will be aligned to that
offered to the general workforce from 1 January 2023.
• The annual bonus for the year ending 31 October 2021 will
continue to be capped at 150% of salary, with targets based on
pre-tax profit growth (80% of the bonus) and a number of key
personal/strategic targets (20% of the bonus). The bonus targets
are currently considered to be commercially sensitive and as such,
the targets and performance against the targets will be disclosed
retrospectively in next year’s Directors’ Remuneration Report. As
described in the Notice of AGM, we are seeking shareholder
approval of the payments to Mr Mergui in respect of his departure
from the Board.
• In light of the continuing impact of COVID-19, the Committee
is not intending to grant any share option awards to Executive
Directors at the current time but will review this in the months to
come.
THE PROPOSED REMUNERATION POLICY FOR
THE 2020 AGM
As a result of the current Directors’ Remuneration Policy nearing the
end of its three-year shareholder- approved term, the Committee
carried out a detailed review of the Remuneration Policy. This year,
on the recommendation of the Remuneration Committee and
subject shareholders’ approval at the next AGM, the following
changes will be made to the Remuneration Policy to reflect recent
developments in best practice.
• The maximum pension contribution rate of 15% of salary will
be removed. Going forwards, pension provision for new
employees promoted to the Board and, from 1 January 2023,
for Mr Crasnianski, will be aligned, in percentage of salary
terms, to the general workforce contribution rate; and
• A post-cessation shareholding guideline will be introduced.
Going forward, Executive Directors will need to retain shares
equal to 100% of the in-post shareholding guideline up until
the second anniversary of cessation.
Assuming these changes are approved, the Committee believes
that the Directors’ 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.
USE OF DISCRETION
In determining remuneration outcomes for the 18-month period ended
31 October 2020, the Committee has not exercised discretion.
SHAREHOLDER ENGAGEMENT
The Committee takes an active interest in shareholder views on
our executive Directors’ 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 and 2019 AGMs
(Annual Statement and Remuneration Report), with relevant
resolutions supported by a significant majority of shareholders.
Yours faithfully,
E M M A N U E L O LYM P I T I S
Chairman of the Remuneration Committee
7 A P R I L 20 21
6 9
ANNUAL REPORT 2020 Remuneration
policy report
The Remuneration Policy will be put to shareholders for approval at
the AGM to be held on 26 April 2021.
The proposed changes to the Remuneration Policy which was
approved by shareholders at the 2017 AGM, which are being
made to reflect recent developments in best practice, are as follows:
• The maximum pension contribution rate of 15% of salary will
be removed. Going forwards, pension provision for new
employees promoted to the Board and, from 1 January 2023,
for Mr Crasnianski, will be aligned, in percentage of salary
terms, to the general workforce contribution rate; and
• A post cessation shareholding guideline will be introduced.
Going forward, Executive Directors will need to retain shares
equal to 100% of the in-post shareholding guideline up until
the second anniversary of cessation.
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.
S A L A RY
Purpose and link to strategy
Operation
Maximum
Performance measures
Reflects the value of the individual and
their role
Normally reviewed annually,
effective 1 May
Reflects skills and experience over
time
Provides an appropriate level of basic
fixed income, avoiding excessive risk
arising from over-reliance on variable
income
Normally paid in cash; pensionable
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
N/A
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).
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B E N E F I TS
Purpose and link to strategy
Operation
Maximum
Performance measures
Provides insured benefits to support
the individual and their family during
periods of ill health or death
Gives allowances to support
individuals in their relevant roles
Includes company car 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
A N N U A L B O N U S
Benefits will not normally be
provided with a value per executive
director in excess of £75,000 p.a.
N/A
Purpose and link to strategy
Operation
Maximum
Performance measures
Incentivises delivery of specific
Company, divisional and personal
annual goals
Maximum bonus only payable for
achieving specified targets
Normally payable in cash; non-
pensionable
Committee has the discretion to defer
up to 50% of the bonus in shares for
three years
Up to 150% of base salary p.a.
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
New Executive Directors:
Workforce aligned
N/A
Mr Crasnianski: Workforce aligned
from 1 January 2023
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
Operation
Maximum
Performance measures
Aligns executive directors’ interests
with those of shareholders
Annual awards of market value
options may be granted
Up to 150% of base salary p.a.
Retention
The Committee reviews the quantum
of awards annually and monitors
the continuing suitability of the
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
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
Provides alignment of interests
between executive directors and
shareholders
In employment: 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
Post cessation: Executive Directors
will be required to retain a
shareholding for two years post
cessation of employment.
In employment: 200% of salary
N/A
Post cessation: 100% of the in-
employment guideline (or actual
shareholding if lower) excluding:
(i) own shares purchased/shares
currently held; and (ii) shares vesting
from any share award granted prior
to the 2021 AGM
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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
Operation
Maximum
Performance measures
Provides fees reflecting time
commitments and responsibilities, in
line with those provided by similarly
sized companies
Cash fee paid on a monthly basis;
fees are reviewed annually
Not entitled to participate in any
Group pension scheme. No awards
to be granted under the annual
bonus or ESOS
No Non-executive Director receives
any benefits in kind (other than in
respect of the expenses relating to
the performance of that individual’s
duties, such as travel to/from Board
meetings)
The Committee is guided by market
rates, time commitments and
responsibility levels
N/A
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
CHOICE OF PERFORMANCE MEASURES
The Committee has given careful consideration to the performance
measures applicable to both the annual bonus and the 2014
Executive Share Option Scheme.
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.
HOW EMPLOYEES’ PAY IS TAKEN INTO ACCOUNT
The Committee is aware of the general pay and conditions
in the Group as a whole when determining the directors’
Remuneration Policy and its implementation. However, reflecting
standard practice, employees are not consulted in the formulation
of the policy.
HOW THE EXECUTIVE DIRECTORS’ REMUNERATION
POLICY RELATES TO THE GROUP
The Remuneration Policy described above provides an overview of
the structure that operates for most senior executives in the Group.
Employees below executive level have a lower proportion of their
total remuneration made up of incentive-based remuneration, with
remuneration driven by market comparators and the impact of the
role of the employee in question. Long-term incentives are reserved
for those judged as having the greatest potential to influence the
Group’s earnings’ growth and share-price performance.
CEO
1600
1400
1200
1000
800
600
400
200
0
£1,505k
£1,505k
56%
56%
Annual Bonus
Salary, pension and benefits
£1,084k
39%
44%
44%
61%
£664k
100%
Maximum with
share price growth
Maximum
On-target
Minimum
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F I N A N C I A L S TAT E M E N T S
400
300
200
100
0
Executive Director
500
£450k
60%
£450k
60%
Annual Bonus
Salary, pension and benefits
£315k
43%
40%
40%
57%
£180k
100%
Maximum with
share price growth
Maximum
On-target
Minimum
Assumptions:
Fixed Pay: Based on current base salary and estimated pension and benefit provision
(where relevant)
Annual Bonus: Based on minimum: no bonus, on-target: 50% of max bonus and maximum/
maximum with share price growth: 100% of max bonus.
In light of the contiuning impact of COVID-19, the Committee is not intending to
grant any share option awards to Executive Directors at the current time but will review this
in the months to come. As such, no values for share options are presented.
HOW SHAREHOLDERS’ VIEWS ARE TAKEN INTO
ACCOUNT
The Committee continues to take an active interest in shareholder
views on our executive Remuneration Policy and is mindful of the
concerns of shareholders and other stakeholders. This is reflected in
the voting result at the 2017 AGM, with over 99.86% shareholder
support in respect of the Directors’ Remuneration Policy.
APPROACH TO RECRUITMENT AND PROMOTIONS
The remuneration package for a new executive director would
be set in accordance with the terms of the Company’s prevailing
approved Remuneration Policy at the time of appointment and
takes into account the skills and experience of the individual, the
market rate for a candidate of that experience and the importance
of securing the relevant individual.
Service contracts will be subject to any mandatory provisions
of foreign laws where such laws govern a director’s contract
of employment providing that the use of such foreign law is not
deliberately used to circumvent this policy.
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 as amended, 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.
APPROACH TO LEAVERS
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 other Executive Directors, 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.
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
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ANNUAL REPORT 2020 R E M U N E R AT I O N P O L I C Y R E P O R T C O N T I N U E D
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.
SERVICE CONTRACTS
Details of the CEO’s and the other Executive Director’s service
contracts are as follows:
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.
Executive director
Serge Crasnianski¹
Jean-Marc Janailhac²
Date of contract
01/05/2010
19/06/2020
and
12/12/2019
Notice period
12 months
Six 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:
EXTERNAL APPOINTMENTS
The Board may allow Executive Directors to accept appropriate
outside commercial Non-executive Director appointments
provided the aggregate commitment is compatible with their
duties as 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.
Non-executive director
Sir John Lewis3
Yitzhak Apeloig4
Françoise Coutaz-Replan5
Jean-Marcel Denis6
Emmanuel Olympitis
Appointment letter date
26/07/2010
Year of last election
2018
Expected year of expiry
of current
2021
08/03/2012
27/08/2015
01/03/2012
11/11/2009
2018
2018
2018
2019
2021
2021
2021
2022
1 Mr Crasnianski’s contract is with Photo-Me Limited, a wholly-owned subsidiary of the Company. Mr Crasnianski’s services are also made available under a consultancy agreement with Photo-Me
Limited and a third party that makes Mr Crasnianski’s services available to the Company
2 First appointed to the Board on 22 July 2019 as a Non-executive Director, becoming an Executive Director on 17 July 2020. Mr Janailhac provides his services under two a contracts, each being
between a third party, Photo-Me Limited, and Mr Janailhac.
3 First appointed to the Board on 3 July 2008.
4 First appointed to the Board on 8 March 2012. Mr Apeloig’s contract is with Photo-Me Limited, a wholly-owned subsidiary of the Company.
5 First appointed to the Board as Group Finance Director on 24 September 2009, and resigned as Executive Director on 27 August 2015
6 First appointed to the Board on 1 March 2012. Mr Denis’s contract is with Photo-Me Limited, a wholly-owned subsidiary of the Company..
74
PHOTO-ME INTERNATIONAL PLC
S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
Annual report
on remuneration
Implementation of the Remuneration Policy for the year ending 31 October 2021
The following section provides the details of how the Remuneration Policy will be implemented during the year ended 31 October 2021.
BASE SALARY
The base salary for each Executive Director is reviewed annually by the Committee and the current applicable base salaries (shown before any
voluntary reductions) are as follows:
Executive director
Serge Crasnianski1
Jean-Marc Janailhac2
1 November 2020
£560,211
£180,000
1 May 2019
£551,960
–
% Increase
1.49
–
1 Or appointment if later
2 Mr Janailhac was originally appointed to the Board in July 29019 as a Non-executive Director on a fee of £45,000 p.a. When he was appointed an Executive Director on 17 July 2020, it was agreed
that he would continue to receive the £45,000 plus an additional amount of €150,000 p.a. The salary is shown using a conversion rate as at 1 November 2020 of €1:£0.9.
PENSION AND BENEFITS
Mr Crasnianski will continue to receive a pension contribution equal to 15% of base salary in the form of a salary supplement although it
should be noted that Mr Crasnianski’s pension contribution will be aligned to that offered to the general workforce from 1 January 2023. To
the extent Mr Janailhac gets any pension contribution for 2020/2021, it will aligned with that of the work force.
BENEFITS
Benefit provision will continue to be in line with the approved Remuneration Policy.
ANNUAL BONUS
The annual bonus for the year ending 31 October 2021 will continue to be capped at 150% of salary, with targets based on pre-tax profit
growth (80% of the bonus) and a number of key personal/strategic targets (20% of the bonus). The bonus targets are currently considered
to be commercially sensitive and as such, the targets and performance against the targets will be disclosed retrospectively in next year’s
Directors’ Remuneration Report.
LONG-TERM INCENTIVES
In light of the contiuning impact of COVID-19, the Committee is not intending to grant any share option awards to Executive Directors at the
current time but will review this in the months to come.
NON-EXECUTIVE DIRECTORS
The fees for Non-executive Directors are reviewed at least once every three years; the current applicable fee levels for the roles below (shown
before any voluntary reductions) are as follows:
Non-executive director
Sir John Lewis
Emmanuel Olympitis
Role
Chairman
Committee chairman
Chair of Nomination Committee
1 November 2020 £
132,000
1 May 2019 £
132,000
Senior Independent Director
Chair of Remuneration Committee
Françoise Coutaz-Replan
Non-executive Director
–
Jean-Marcel Denis
Yitzhak Apeloig
Non-executive Director
Chair of Audit Committee
Non-executive Director
–
55,000
44,000
49,500
44,000
55,000
44,000
49,500
44,000
75
ANNUAL REPORT 2020 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 C O N T I N U E D
SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED)
The detailed emoluments received by the Executive and Non-executive Directors for the 18 months ended 31 October 2020 and the
12 months ended 30 April 2019 are shown below:
Executive Director
Serge Crasnianski4
Year Months
18
2020
Eric Mergui7,8
Jean-Marc Janailhac9]
2019
2020
2019
2020
2019
12
18
12
18
12
Non-executive Director
Sir John Lewis6
Year Months
18
2020
Yitzhak Apeloig10
Françoise
Coutaz-Replan5
Jean-Marcel Denis11
2019
2020
2019
2020
2019
2020
2019
Jean-Marc Janailhac9 2020
Emmanuel Olympitis
2019
2020
2019
12
18
12
18
12
18
12
18
12
18
12
Salary/Fees
£
830,035
551,960
599,742
474,946
52,703
–
Salary/Fees
£
189,200
132,000
66,000
44,000
110,31712
44,000
70,950
49,500
43,885
–
78,834
55,000
Benefits1
£
32 555
15,626
13,724
Bonus2
£
–
–
9,057
298,781
–
–
–
–
LTIS5
£
–
Pension3
£
123,965
Total
£
986,554
Total
fixed
remuneration
986,535
Total
variable
remuneration
0
82,794
650,380
650,380
613,466
613,467
0
0
–
–
–
–
782,784
484,003
298,781
52,703
52,703
–
–
0
–
–
–
–
–
–
Benefits1
£
–
Bonus2
£
–
LTIS5
£
–
Pension3
£
–
Total
£
189,200
Total
fixed
remuneration
189,200
Total
variable
remuneration
0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
132,000
132,000
66,000
44,000
66,000
44,000
0
0
0
110,317
63,067
47,250
44,000
44,000
70,950
70,950
49,500
43,885
–
49,500
43,885
–
78,834
78,834
55,000
55,000
0
0
0
0
0
0
0
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. No bonus was awarded in the 18 months ended 31 October 2020.
3 The pension payment to Serge Crasnianski in the financial period ended 31 October 2020 represented 15% of base salary.
4 The emoluments of Serge Crasnianski shown above for the 18 months ended 31 October 2020 include fees totalling £608,952 (2019: £405,968 for 12 months), payable to a third party in respect of
making available the services of Serge Crasnianski to the Company. Although a reduction of 20% was applied to Mr Crasnianski (this is the voluntary reduction accepted owing to Covid), this reduction
was not applied due to an administrative oversight to the fees payable to Realin Ltd for Mr Crasnianski’s services. Realin Ltd will repay the overpayment thus made during the current financial year.
5 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.
6 The emoluments of Sir John Lewis shown above include fees of £70.8950) (2019: £49,500) paid to a third party in respect of making available the services of Sir John Lewis to the Company.
7 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.
8 Exchange rate: 1.1025 euro/GBP being the rate at close of business on 31 October 2020
9 Mr Janailhac was appointed Non-executive Director on 22 July 2019 and was subsequently appointed an Executive Director on 17 July 2020. The emoluments of Mr Janailhac shown above include
fees of £39,836 (2019: nil) paid to a third party in respect of making available the services of Mr Janailhac to the Company. Mr Janailhac’s fee/salary for the period was partially delivered in GBP
(£45,000 – reduced by 20% from 1 July 2020) and partially delivered in Euros (€150,000 p.a.). The Euro amount has been translated at an exchange rate using the same exchange rate mentioned
in note 8 above. Mr. Mr Janailhac has two contracts. The discount of 20% was only applied to one contract. There will be no reimbursement as regards payments made under the contract to which the
reduction was not applied.
10 The emoluments of Mr Apeloig shown above include fees of £11,000 (2019: nil) paid to a third party in respect of making available the services of Mr Apeloig to the Company. No reduction of 20%
was applied to Mr Apeloig’s fee due to an administrative oversight to the fees payable to Realin Ltd for Mr Crasnianski’s services. The over payment will be reimbursed to the Company during the current
financial year.
11 The emoluments of Mr Denis shown above include fees of £21,450 (2019: nil) paid to a third party in respect of making available the services of Mr Denis to the Company.
12 This includes Ms Coutaz-Replan’s ordinary director’s fees reduced by 20% from 1 July 2020 plus a consultancy fee of £47,250 for special services rendered to the group (not reduced by 20% as it was
for special project work agreed upon and completed before 1 July 2020).
76
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
ANNUAL BONUS
The Committee has determined that no annual bonus should be payable to the CEO or the former COO, Mr Mergui, in respect of financial
targets or performance against personal/strategic targets.
Details of the performance against the profit before tax targets for the 2020 annual bonus were as follows (noting that Mr Janailhac was not
entitled to participate):
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 – 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%
38.25%
76.5%
0%
Maximum Bonus
Target 1
Target 2
Target 3
Committee Assessment of performance
against the targets
CEO
20% of bonus (30% of salary)
COO
49% of bonus (73.5% 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
Given the impact of COVID-19 on the Company,
the Committee agreed that it would not be
appropriate to pay a bonus for the year ended 31
October 2020 and as such, no formal assessment
of performance against the personal/strategic
targets was carried out by the Committee
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
Following Mr Mergui’s leaving the Board, he was no
longer entitled to a bonus award and as such, no
assessment of performance against the target was
carried out by the Committee
Bonus Award – % of max (% of salary)
0% of maximum (0% of salary)
0% of maximum (0% of salary)
EXECUTIVE SHARE OPTION SCHEME (ESOS) (AUDITED)
The 2017 ESOS awards granted to Eric Mergui on 21 July 2017, over 385,200 shares with an exercise price of 150 pence, were due to
complete the EPS performance period on 30 April 2020. To reflect the change in year end and the Committee’s desire to assess performance
based on audited numbers, the Committee agreed to extend the EPS performance period to 31 October 2020. However, as a result of Eric
Mergui’s leaving the Company during the 18-month period ended 31 October 2020, the ESOS awards lapsed at cessation and no formal
assessment of the performance targets was carried out.
7 7
ANNUAL REPORT 2020 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 C O N T I N U E D
SCHEME INTERESTS AWARDED IN THE YEAR (AUDITED)
The Company granted the following share option awards to Executive Directors during the financial period ended 31 October 2020:
Executive Director
Serge Crasnianski
Eric Mergui2
Number of ESOS Awards
816,509
702,583
Basis
150% of salary
150% of salary
Face Value1
£827,940.13
£712,419.16
1 Based on a share price of £1.014 which was the average share price over the three days immediately prior to grant.
2 Awards lapsed on cessation of employment.
The EPS performance targets, with pro-rata vesting between targets, are as follows:
2022 EPS
Below 9.00p
9.00p
9.80p
10.20p
11.00p
Options exercisable to maximum percentage of salary
None
25% of Salary
75% of Salary
100% of Salary
150% of Salary
DIRECTORS’ INTERESTS IN SHARES (AUDITED)
According to the records kept by the Company, the directors had interests in the share capital of the Company, as shown below. Between 31
October 2020 and the date of this report, Mr Crasnianski and persons closely associated with him increased their interest to 105,637,410
ordinary shares of 0.5p of the Company.
Executive director
Serge Crasnianski
Eric Mergui
Jean-Marc Janailhac
Non-executive director
Sir John Lewis
Yitzhak Apeloig
Françoise
Coutaz-Replan5
Beneficially owned at
31 October
2020
105,105,381
30 April
2019
84,610,701
30 April 2019
ESOS Awards¹
–
ESOS Awards²
816,509
Requirement
(% of salary)
200%
Shareholding
(% of salary)³
9,331%
–
27,000
–
–
-6
–
- 6-
–
200%
200%
N/A
Nil %
Beneficially owned at
31 October
2020
–
–
30 April
2019
–
–
30 April 2019
ESOS Awards¹
–
–
200,000
200,000
407,600
ESOS Awards²
–
Requirement
(% of salary)
–
Shareholding
(% of salary)³
–
–
–
–
–
–
–
–
–
–
–
Jean-Marcel Denis
–
–
Emmanuel Olympitis
45,000
45,000
–
–
Guideline
Yes
N/A
No
Guideline
–
–
–
–
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 the last trading day in October (i.e. Friday, 30 October 2020) being 49p. The shareholding guideline is calculated using only beneficially owned
shares
4 Of the shares beneficially owned by Serge Crasnianski, 63,750 shares (2019: 63,750 ) were registered in his name, the balance in other names
5 Françoise Coutaz-Replan stepped down as an Executive Director on 27 August 2015, continuing as a Non-executive Director.
6 Mr Mergui’s options lapsed on his leaving the Group.
78
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
DIRECTORS’ INTERESTS IN SHARE OPTIONS (AUDITED)
Details of outstanding share awards held by Directors are set out below. No awards are held by Jean-Marc Janailhac.
Number of options
As at
1 May
2019
Granted
during
period
Exercised
during
period
Lapsed
during
period
As at 31
October
2020
Exercise
price
Exerciseable
from
Expiry
date
Executive director
Serge Crasnianski
9 July 2013
27 August 2019
Eric Mergui
9 July 2015
13 July 2016
21 July 2017
738,000
–
816,509
375,000
334,000
385,200
–
–
–
–
–
–
–
–
-
375,000
334,000
385,200
702,583
738,000
–
90.63p
9 July 2016
8 July 2020
816,509
101.4p
27 August 2022
27 August 2026
133.33p
141.50p
157.00p
9 July 2018
8 July 2022
13 July 2019
12 July 2023
21 July 2020
20 July 2024
101.40p
27 August 2022
27 August 2026
–
–
–
–
–
– 200,000
90.63p
9 July 2016
–
–
–
–
195,000
145.33p
10 July 2017
212,600
133.33p
9 July 2018
8 July 2020
9 July 2021
8 July 2022
27 August 2019
702,583
Françoise Coutaz-Replan
9 July 2013
10 July 2014
9 July 2015
200,000
195,000
212,600
–
–
–
RELATIVE IMPORTANCE OF THE SPEND ON PAY
The following table sets out the percentage change in distributions to shareholders and employee remuneration costs:
Executive director
Interim
2018 paid on 11 May 2019
2018 paid on 11 May 2018
Final
2018 approved at AGM held on 24 October 2018
2019 approved at AGM held on 25 October 2017
Wages and salaries
Social security costs
Share options granted to directors and employees
Post-employment benefit costs
– defined benefit schemes
– defined contribution schemes
– other post-employment costs
Pence per share
2020
£’000
Pence per share
2019
£’000
3.71
14,014
4.73
8.44
17,880
31,894
3.71
14,005
4.73
7.03
2020
£'000
44,279
8,930
171
351
656
–
17,868
26,478
Group
2019
£'000
39,548
8,361
141
212
327
–
54,387
48,589
1
Based on the figure shown in note 5 to the Financial Statements
2 Based on the cash returned to shareholders through dividends, as shown in note 9 to the Financial Statements. The Company did not undertake any buy-backs in the financial period ended 31 October
2020
7 9
ANNUAL REPORT 2020
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 C O N T I N U E D
PERCENTAGE INCREASE IN THE REMUNERATION OF THE MEMBERS OF THE BOARD
The table below shows the change in the salary, benefits and annual bonus for the members of the Board who served in both the period just
ended and the previous financial year in full, compared with the change in remuneration for the UK employee population.
Executive Directors
Serge Crasnianski
Jean-Marc Janailhac
Non-executive Directors
Sir John Lewis
Yitzhak Apeloig
Françoise Coutaz-Replan
Jean-Marcel Denis
Emmanuel Olympitis
UK Employee Population1
1 With the exception of Inox Equip Limited
Base salary
1.49%
N/A
0%
0%
0%
0%
0%
0%
Benefits
38.9
N/A
N/A
N/A
N/A
N/A
N/A
N/A
-1.24
16.68%
Annual bonus
0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
Nil
TSR PERFORMANCE GRAPH
The graph below shows the Company’s performance, measured by total shareholder return (TSR) (share price growth plus dividends
reinvested), compared with the performance of the FTSE SmallCap Index (calculated on the same basis) from 1 May 2010. As the Company
has been a constituent of the FTSE SmallCap Index for all of the relevant period, this index is considered an appropriate form of “broad equity
market index” against which the Company’s performance should be compared.
Total shareholder return
800
700
600
500
400
300
200
100
0
8 0
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
31 OCTOBER
2020
Source: Datastream (Thomson Reuters)
Photo-Me International plc
FTSE SmallCap
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
CEO REMUNERATION
The table below shows the total remuneration for the CEO over the same 10.5 year period as the TSR chart above. All share awards are
valued at the date of vest
2020 (18 months to 31 October 2020)
2019 (12 months to 30 April 2019)
2018 (12 months to 30 April 2018)
2017 (12 months to 30 April 2017)
2016 (12 months to 30 April 2016)
2015 (12 months to 30 April 2015)
2014 (12 months to 30 April 2014)
2013 (12 months to 30 April 2013)
2012 (12 months to 30 April 2012)
2011 (12 months to 30 April 2011)
CEO
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Serge Crasnianski
Total (£)
986,554
650,380
681,954
1,498,113
1,429,209
1,031,628
914,278
899,487
898,693
893,312
Annual
(% of max)
0%
0%
0%
100%
100%
100%
100%
100%
100%
100%
Long-term
incentives
(% of max)1
–
–
–
–
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
CEO PAY RATIO
The data shows how the CEO’s single figure remuneration for the period ending 31 October 2020 compares to equivalent single figure
remuneration for full-time equivalent UK employees, ranked at the 25th, 50th and 75th percentile. The salary and total pay and benefits data
has been annualised to aid with future year comparisons.
Period
2020
Period
2020
Method
Option A
25th % percentile
£14,410
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
44%
Salary
Median
£21,285
30%
24%
Total pay and benefits
75th percentile
25th percentile
£25,687
£14,825
Median
£21,824
75th percentile
£27,579
No components of pay and benefits have been omitted for the purpose of the above calculations. Option A was selected given that this method of calculation was considered to be the most robust
approach in respect of gathering the required data for 2020.
PAYMENTS FOR LOSS OF OFFICE/PAST DIRECTORS
Eric Mergui ceased to be a director of the Company on 12 July 2020. The Company has made the following remuneration payments to
Mr Mergui since that date.
• €550,800.00 (less legally required deductions) as a termination payment of 12 months’ salary under the terms of his global employment
contract.
• €80,961.36 (less legally required deductions) as salary in respect of the period from 13 July 2020 to 4 September 2020 under his global
employment contract (governed by Belgian law).
• €448,592.49 (less legally required deductions) as a statutory indemnity in lieu of notice (five months and 21 weeks) under Belgian law.
• €3,380.74 (less legally required deductions) as a pro-rated 13th month salary under Belgian law.
• €8,627.68 (less legally required deductions) as payment of 25 days of accrued but untaken holiday.
There was no entitlement to an annual bonus in respect of the 18 months ended 31 October 2020 and all options held under the Executive
Share Option Scheme lapsed cessation.
No other payments were made for loss of office, and no payments were made to past directors.
81
ANNUAL REPORT 2020 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 C O N T I N U E D
As the payment made to Eric Mergui for loss of office exceeded the amount payable under the existing remuneration policy, shareholder
approval will be sought for the payment of the overpayment at the next AGM on 30 April 2021. More information is given in the explanatory
notes to the Notice of AGM.
COMMITTEE ROLE AND MEMBERSHIP
The Remuneration Committee comprises three Non-executive Directors: Emmanuel Olympitis (Committee Chairman, member of the Audit
and Nomination Committees, and Senior Independent Director); 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 Denis to be independent, and Sir John Lewis to have
been independent on appointment as Chairman.
Biographies of the members of the Committee are set out on page 53. 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
Jean-Marc Janailhac1
Position
Committee Chairman
Appointment date
11 November 2009
Committee Member
3 July 2008
Committee Member
1 March 2012
Committee Member
22 July 2019
Number of
Meetings attended
(Maximum possible)
2(2)
2(2)
2(2)
2(2)
1 Mr Janailhac was a member of the Committee when he joined the Board as a Non-executive director albeit he subsequently resigned from the Committee following his appointment as an Executive
Director. His meeting attendance relates to the period before he became an Executive Director.
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 other Executive Directors 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.
8 2
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
ADVISERS
FIT Remuneration Consultants LLP advised the Committee during the period ended 31 October 2020 in respect of the treatment of outstanding
ESOS awards following the year end change and the preparation of this Remuneration Report. Fees paid to FIT in respect of the period ended
31 October 2020 totalled £7,580 (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 certain senior executives, but not in relation to his
own remuneration.
STATEMENT OF SHAREHOLDER VOTING
The table below shows the advisory vote on the 2018/19 Directors’ Remuneration Report at the 2019 AGM Remuneration Report and the last
binding vote on the Remuneration Policy at the 2017 AGM.
Resolution
Directors’ Remuneration Report
Votes cast in favour
306,027,992
%
98.11
Votes cast against
5,783,499
(excluding the Remuneration Policy)
319,144,977
99.86
445,370
Directors’ Remuneration Policy
27,000
–
–
%
1.89
0.14
–
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.
Total votes cast
(excludes
withheld votes)
305,927,923
319,590,347
%
100
100
Votes withheld1
100,069
1,165,003
200%
Nil %
No
By order of the Board
E M M A N U E L O LYM P I T I S
Chairman of the Remuneration Committee
7 A P R I L 20 21
8 3
ANNUAL REPORT 2020 Financial
statements
8 4
PHOTO-ME INTERNATIONAL PLC 86
INDEPENDENT
AUDITOR’S REPORT
95
GROUP STATEMENTS
OF CASH FLOWS
160
COMPANY
INFORMATION &
ADVISERS
92
GROUP STATEMENTS OF
COMPREHENSIVE INCOME
97
GROUP STATEMENTS OF
CHANGES IN EQUITY
93
GROUP STATEMENTS OF
FINANCIAL POSITION
99
NOTES TO THE
FINANCIAL STATEMENTS
161
SHAREHOLDER
INFORMATION
8 5
ANNUAL REPORT 2020 Independent auditor’s report
to the members of Photo-Me
International Plc
OPINION
We have audited the financial statements of Photo Me
International Plc (the ‘parent company’) and its subsidiaries (the
‘group’) for the 18-month period ended 31 October 2020 which
comprise the Group Statement of Comprehensive Income, the
Group and Company Statement of Financial Position, the Group
Statement of Cash Flows, the Company Statement of Cash
Flows, the Group Statement of Changes in Equity, the Company
Statement 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 accounting
standards in conformity with the requirements of the Companies Act
2006 and, as regards the group financial statements, international
financial reporting standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union.
In our opinion, the financial statements have been prepared in
accordance with the requirements of the Companies Act 2006
and:
• give a true and fair view of the state of the group’s and of the
parent company’s affairs as at 31 October 2020 and of the
group’s loss for the 18-month period then ended;
• the group financial statements have been properly prepared
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006
and international financial reporting standards adopted
pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union; and
• the parent company financial statements have been properly
prepared in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006, as applied in accordance with the
provisions of the Companies Act 2006.
BASIS FOR OPINION
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 parent
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 entities and public
interest entities, having duly considered the technical breach
described in the “Other matters that we are required to address”
below, 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.
CONCLUSIONS RELATING TO PRINCIPAL RISKS,
GOING CONCERN AND VIABILITY STATEMENT
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:
• the disclosures in the annual report set out on page 38 that
describe the principal risks and explain how they are being
managed or mitigated;
• the directors’ confirmation set out on page 49 in 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;
• the directors’ statement set out on page 99 in 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
parent 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;
• 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
• the directors’ explanation set out on page 49 in 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.
8 6
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
KEY AUDIT MATTERS
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) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. 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.
We summarise below the key audit matters in forming our audit
opinion above, together with an overview of the principal audit
procedures performed to address each matter and, where
relevant, key observations arising from those procedures.
These matters, together with our findings, were communicated to
those charged with governance through our Audit Completion
Report.
THE RISK
RECOGNITION, VALUATION AND IMPAIRMENT OF
INTANGIBLE ASSETS INCLUDING GOODWILL
Intangible assets, including goodwill are presented in note “11 –
Goodwill and other intangible assets” to the consolidated financial
statements.
Intangible assets including goodwill represented £41.8m at 30
April 2019 and £32.7m at 31 October 2020. In the 18-month
period to 31 October 2020, in accordance with IFRS 3 – Business
Combinations, the group remeasured the value of intangibles
arising from the acquisition of a subsidiary in April 2019 with the
allocation of £10.5m from goodwill to Other intangible assets.
In addition, in the context of the Covid-19 pandemic and the
consequential impacts on the group’s performance linked to
changes in consumer behaviour, intangible assets including
goodwill were impaired in the period by £12.1m.
Management performs impairment tests if there is an impairment
trigger and at least once a year for goodwill and other non-
amortisable intangible assets as described in note 1.4. Assets are
tested at the level of the cash generating units (“CGUs”) defined by
the group, being the operating companies. An impairment loss is
recognised if the carrying value of an asset or cash-generating unit
is higher than its recoverable value. The recoverable value is the
value in use, determined according to the discounted future cash
flow projections method (excluding interest on borrowings and
taxes) for each cash generating unit. The recognition of intangible
assets and the assessment of the recoverable value of these assets
is a key audit matter, given the significant potential of impairment
and the high degree of estimation and judgment required by
management for this assessment. The judgments include, in
particular, assumptions regarding the future evolution of trading, the
determination of infinite growth rates and discount rates applied to
the appropriate future cash flows.
Our response
• In connection with the recognition of other intangible assets,
management obtained an expert report to determine the
required purchase price adjustments. We engaged our
valuation experts to challenge the proposed adjustments,
including the methodology and key inputs used by
management.
• In connection with impairment charges, we reviewed
the impairment testing process implemented by group
management, in order to identify trigger events and proceed
to impairment testing, which is based on actual performance,
cash-flow forecasts from the budget and three-year plan
presented to the Board.
• Where impairment charges were caused by the cessation
of certain activities, we confirmed this to the plans approved
by the Board. Where impairment charges were caused by
expected future business underperformance, we undertook a
detailed risk assessment to identify which assumptions are most
sensitive to the projections.
• With the support of our valuation experts, we reviewed key
assumptions applied by the group management, such as the
discount rates.
• We assessed the sensitivity of the impairment test to these key
assumptions.
Key observations
Through the above procedures, we identified the need to restate
the opening balance due to the correction of a prior year error,
being the requirement under IFRS 3 to recognise a measurement
period adjustment.
The impairments recognised in the financial statements on
Intangible assets including goodwill are highly judgmental and
reflect a reasonably cautious approach to the future prospects of
the group during and post Covid-19. Overall, assumptions used by
management in arriving at impairment charge for the year deemed
reasonable and in line with IAS 36.
THE RISK
IMPAIRMENT OF PROPERTY, PLANT AND
EQUIPMENT
Property, Plant and Equipment (“PPE”) are presented in note “12
– Property, plant and equipment” to the consolidated financial
statements.
PPE represented £95.4m at 30 April 2019 and £90.3m at 31
October 2020. In the 18-month period to 31 October 2020, in
accordance with IFRS 16 – Leases, the group recognised Right of
Use assets of £18.6m at 1 May 2019. In addition, in the context
of the Covid-19 pandemic and the consequential impacts on the
group’s performance linked to changes in consumer behaviour,
PPE were impaired in the period by £17.5m.
Management performs impairment tests if there is an impairment
trigger as described in notes 1.5 and 1.8. Assets are tested at the
level of the cash generating units (“CGUs”) defined by the group,
being each vending machine. An impairment loss is recognised if
the net book value of an asset or cash-generating unit is higher than
its recoverable value.
In the context of Covid-19, the assessment of the recoverable value
of these assets is a key audit matter, given the significant potential
of impairment and the high degree of estimation and judgment
required by management for this assessment. The judgments
8 7
ANNUAL REPORT 2020 include, in particular, assumptions regarding the future evolution of
trading.
Our response
• In connection with the recognition of Right of Use assets, this is
described in the key audit matter below.
• In connection with impairment charges, we reviewed
the impairment testing process implemented by group
management, in order to identify trigger events and proceed
to impairment testing, based on both actual performance, and
future trading strategy.
• Where impairment charges were caused by the cessation
of certain activities, we confirmed this to the plans approved
by the Board. Where impairment charges were caused by
underperformance not expected to reverse, we verified the
consistency of these assumptions to business forecasts.
Key observations
The impairment charge recognised in the financial statements on
Property, Plant and Equipment is reasonable.
THE RISK
IMPLEMENTATION OF IFRS 16
As detailed within note “2 – New standards, amendments and
interpretation”, the group adopted a new accounting standard,
IFRS 16 ‘Leases’, effective from 1 May 2019. This standard has a
significant impact upon the group’s financial statements; the group
leases a significant number of sites to locate vending machines
and has a large number of arrangements which were previously
classified as operating leases under IAS 17 ‘Leases’ and held
off balance sheet. These are now recognised in accordance
with IFRS16. Upon transition to IFRS 16, the group recognised
an additional lease liability of £18.6m. Judgements involved in
ensuring all these leases subject to IFRS 16 are appropriately
reflected in the financial statements are complex, primarily due to
the large number of leases held by the group, and the significant
variation seen in the terms of individual lease contracts.
Our response
• We assessed the design and implementation of the key
controls relating to the implementation of IFRS 16, notably
regarding the applicability of the standard to the different types
of lease contracts in operation.
• We obtained a schedule of the right of use assets and lease
liability reconciling system outputs, and manual adjustments
to test the completeness of the lease data from the group’s
vending machine management system to the lease data
underpinning the IFRS 16 model.
• We engaged our specialists to assess the appropriateness of
the incremental borrowing rates used in the calculation.
• We assessed the accuracy of the lease data by testing the
lease data captured by management for a sample of leases
through the inspection of lease documentation.
• We performed recalculations based on the lease agreement
and compared to system calculations.
• We tested completeness of lease obligations through a review
of relevant expense accounts for any indication of underlying
leases.
Key observations
The lease liabilities and right of use assets recognised under IFRS
16 are appropriate. The incremental borrowing rates used by the
group to determine the IFRS 16 lease liability are reasonable.
OUR APPLICATION OF MATERIALITY
The scope of our audit was influenced by our application of
materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to
determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line
Overall materiality
How we determined it
Rationale for benchmark
applied
Performance materiality
Group
£2,750,000
Materiality has been determined with reference
to a benchmark of profit before tax adjusted
for one-off Covid-19 related impairments and
specific items (as shown in Note 3), of which it
represents 8%
We used profit before tax adjusted as described
above as, in our view, this is the most relevant
measure of the underlying financial performance
of the group
£1,650,000
On the basis of our risk assessments, together
with our assessment of the group’s overall control
environment, considering that this is a first-year
audit, our judgement was that performance
materiality was approximately 60% of our
financial statement materiality
Company
£2,000,000
Materiality has been determined with reference
to a benchmark of net assets, of which it
represents 3%.
We used net assets as, in our view, this is the
most relevant measure of the performance of the
company, being the parent company of the group
£1,200,000
On the basis of our risk assessments, together
with our assessment of the group’s overall control
environment, considering that this is a first-year
audit, our judgement was that performance
materiality was approximately 60% of our
financial statement materiality
8 8
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
items and disclosures and in evaluating the effect of misstatements,
both individually and on the financial statements as a whole. Based
on our professional judgement, we determined materiality for the
financial statements as a whole as follows:
the year. We also considered those other laws and regulations
that have a direct impact on the preparation of financial
statements, such as the Companies Act 2006 and UK and
international tax legislation.
We agreed with the Audit Committee that we would report to the
Board all audit differences in excess of £80,000 for the group
and £60,000 for the parent company, as well as differences
below those thresholds that, in our view, warranted reporting on
qualitative grounds. We also report to the Audit Committee on
disclosure matters that we identified during the course of assessing
the overall presentation of the financial statements.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT,
INCLUDING EXTENT TO WHICH THE AUDIT
WAS CONSIDERED CAPABLE OF DETECTING
IRREGULARITIES, INCLUDING FRAUD
As part of designing our audit, we determined materiality
and assessed the risk of material misstatement in the financial
statements, whether due to fraud or error, and then designed and
performed audit procedures responsive to those risks. In particular,
we looked at where the directors made subjective judgements such
as making assumptions on significant accounting estimates.
We tailored the scope of our audit to ensure that we performed
sufficient work to be able to give an opinion on the financial
statements as a whole. We used the outputs of a risk assessment,
our understanding of the group and parent company, its
environment, controls and critical business processes, to consider
qualitative factors in order to ensure that we obtained sufficient
coverage across all financial statement line items.
Our audit procedures were designed to respond to those identified
risks, including non-compliance with laws and regulations
(irregularities) and fraud that are material to the financial
statements.
In identifying and assessing risks of material misstatement in
respect to irregularities including non-compliance with laws and
regulations, our procedures included but were not limited to:
• at planning stage, we gained an understanding of the legal
and regulatory framework applicable to the group and parent
company, the structure of the group, the industry in which it
operates they operate and considered the risk of acts by
the group and parent company which were contrary to the
applicable laws and regulations;
• we discussed with the directors the policies and procedures in
place regarding compliance with laws and regulations;
• We discussed amongst the engagement team the identified
laws and regulations, and remained alert to any indications of
non-compliance; and
• during the audit, we focused on areas of laws and regulations
that could reasonably be expected to have a material effect
on the financial statements from our general commercial
and sector experience and through discussions with the
directors (as required by auditing standards), from inspection
of the parent company’s and group’s regulatory and legal
correspondence and review of minutes of directors’ meetings in
Our procedures in relation to fraud included but were not limited to:
• inquiries of management whether they have knowledge of any
actual, suspected or alleged fraud;
• gaining an understanding of the internal controls established to
mitigate risk related to fraud;
• discussion amongst the engagement team regarding risk of
fraud such as opportunities for fraudulent manipulation of
financial statements, and determined that the principal risks
were related to posting manual journal entries to manipulate
financial performance, management bias through judgements
and assumptions in significant accounting estimates; and
• addressing the risk of fraud through management override of
controls by performing journal entry testing.
The primary responsibility for the prevention and detection of
irregularities including fraud rests with both those charged with
governance and management. As with any audit, there remained
a risk of non-detection of irregularities, as these may involve
collusion, forgery, intentional omissions, misrepresentations or the
override of internal controls.
The risks of material misstatement that had the greatest effect on
our audit, including fraud and irregularities, are discussed under
“Key audit matters” within this report.
Our group audit scope included an audit of the group and parent
company financial statements of Photo Me International Plc.
Based on our risk assessment, the seven largest trading entities
within the group, representing 76% of the relevant materiality
benchmark (adjusted profit before tax), were subject to full scope
audit which was performed by the group audit team for two entities
and by component auditors for the other entities. Where we relied
on component auditors, we reviewed component audit files and
exercised group oversight. For all entities not in full scope audit,
we performed specified audit procedures including but not limited
to: obtaining third party confirmations, , obtaining confirmatory
evidence for all account balances higher than our financial
statement materiality, obtaining an understanding of account
balances through analytical review and reconciling the opening
balances to locally audited financial statements where a local
statutory audit is performed.
At the parent level we also tested the consolidation process and
carried out analytical procedures to confirm our conclusion that
there were no significant risks of material misstatement of the
aggregated financial information.
OTHER INFORMATION
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.
8 9
ANNUAL REPORT 2020 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 this 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:
• Fair, balanced and understandable set out on page
67 – 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
• Audit committee reporting set out on page 63 – the
section describing the work of the audit committee does
not appropriately address matters communicated by us
to the audit committee or is materially inconsistent with our
knowledge obtained in the audit; or
• Directors’ statement of compliance with the UK
Corporate Governance Code set out on page 60 – the
parts of the directors’ statement required under the Listing
Rules relating to the parent company’s 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.
OPINIONS ON OTHER MATTERS PRESCRIBED BY
THE COMPANIES ACT 2006
In our opinion, the part of the directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the
audit:
• the information given in the Strategic Report and the
Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial
statements and those reports have been prepared in
accordance with applicable legal requirements;
• the information about internal control and risk management
systems in relation to financial reporting processes and about
share capital structures, given in compliance with rules 7.2.5
and 7.2.6 in the Disclosure Guidance and Transparency Rules
sourcebook made by the Financial Conduct Authority (the FCA
Rules), is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements;
and
• information about the parent company’s corporate
governance code and practices and about its administrative,
management and supervisory bodies and their committees
complies with rules 7.2.2, 7.2.3 and 7.2.7 of the FCA rules.
MATTERS ON WHICH WE ARE REQUIRED TO
REPORT BY EXCEPTION
In light of the knowledge and understanding of the group and the
parent company and its environment obtained in the course of the
audit, we have not identified material misstatements in:
• the Strategic Report or the Directors’ Report; or
• the information about internal control and risk management
systems in relation to financial reporting processes and about
share capital structures, given in compliance with rules 7.2.5
and 7.2.6 of the FCA Rules.
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:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the parent company financial statements and the part of
the directors’ remuneration report to be audited are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit; or
• a corporate governance statement has not been prepared by
the parent company.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement
set out on page 67, 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.
In preparing the financial statements, the directors are responsible
for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group
or the parent company or to cease operations, or have no realistic
alternative but to do so.
9 0
PHOTO-ME INTERNATIONAL PLC S T R AT E G I C R E P O R T
C O R P O R AT E G O V E R N A N C E
F I N A N C I A L S TAT E M E N T S
USE OF THE AUDIT REPORT
This report is made solely to the parent 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 parent 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 parent company
and the parent company’s members as a body for our audit work,
for this report, or for the opinions we have formed.
David Herbinet (Senior Statutory Auditor)
for and on behalf of Mazars LLP
Chartered Accountants and Statutory Auditor
London
7 A P R I L 20 21
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF
THE FINANCIAL STATEMENTS
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.
OTHER MATTERS WHICH WE ARE REQUIRED TO
ADDRESS
Following the recommendation of the audit committee, we were
appointed by the directors on 3 September 2019 to audit the
financial statements for the 18-month period ended 30 April 2020
and subsequent financial periods. The financial period was later
extended by the parent company to 31 October 2020. This is
therefore our first audit of the group and parent company financial
statements.
The non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the group or the parent company with the
exception of the following covering the period prior to our formal
appointment:
– between 1 May 2019 and August 2019, a Mazars member
firm in Poland provided payroll and bookkeeping services
to KIS Poland s.p.z.o.o. The fees received for these services
during this period were £2,000.
Our assessment, which has been shared and agreed with the
directors, is that these services do not impact our independence
considering that they are insignificant to both the group and
to Mazars, that they were discontinued by the time of our
appointment as auditor, and that KIS Poland s.p.z.o.o. is not a
significant component of the group. We therefore concluded that
we remain independent of the group and the parent company in
conducting our audit.
Our audit opinion is consistent with the additional report to the
audit committee.
91
ANNUAL REPORT 2020
Group Statements of Comprehensive Income
For the 18 months ended 31 October 2020
18 months to
31 October
2020
£’000
Notes
3
4
14
4
4
6
6
7
310,245
(255,258)
54,987
910
(52,580)
–
3,317
4,852
(1,535)
3,317
(283)
51
(2,593)
492
(2,844)
(2,352)
3,948
(3)
3,945
340
(65)
275
4,220
1,869
(2,305)
(47)
(2,352)
1,888
(19)
1,869
12 months to
30 April
2019
£’000
228,118
(164,637)
63,481
1,601
(22,393)
50
42,739
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
10
10
(0.62)p
(0.62)p
8.27p
8.26p
Revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses
Share of post-tax profits from associates
Operating profit/(loss)
Analysed as:
Operating profit/(loss) before specific items
Restructuring costs
Operating profit/(loss) after specific items
Other gains and losses
Finance revenue
Finance cost
Profit/(loss) before tax
Total tax (charge)/credit
(Loss)/Profit for the period
Other comprehensive income
Items that are or may subsequently be classified to profit and loss:
Exchange differences arising on translation of foreign operations
Taxation on exchange differences
Total items that are or may subsequently be classified to profit and loss
Items that will not be classified to profit and loss:
Remeasurement gains/(losses) in defined benefit obligations and other post-employment benefit obligations
Deferred tax on remeasurement (losses)/gains
Total items that will not be classified to profit and loss
Other comprehensive income/(loss) for the period net of tax
Total comprehensive income/(loss) for the period
Loss for the period 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 99 to 159 are an integral part of these consolidated financial statements.
9 2
PHOTO-ME INTERNATIONAL PLC Group Statements of Financial Position
As at 31 October 2020
Assets
Goodwill
Other intangible assets
Property, plant & equipment
Investment property
Investment in associates
Financial instruments held at amortised cost
Financial instruments held at FVTPL
Deferred tax assets
Trade and other receivables
Non-current assets
Inventories
Trade and other receivables
Current tax
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Share premium
Translation and other reserves
Retained earnings
Equity attributable to owners of the Parent
Non-controlling interests
Total Shareholders’ funds
Financial liabilities
Post-employment benefit obligations
Deferred tax liabilities
Trade and other payables
Non-current liabilities
Financial liabilities
Provisions
Current tax
Trade and other payables
Current liabilities
Total equity and liabilities
The notes on pages 99 to 159 are an integral part of these consolidated financial statements.
Group
31 October
2020
£’000
Notes
11
11
12
13
14
15
15
24
16
17
16
18
20
21
22
24
25
21
23
25
13,767
18,972
90,285
652
57
984
960
–
1,799
127,477
16,611
16,740
217
106,193
139,760
267,237
1,889
10,599
15,245
84,448
112,181
1,689
113,870
40,937
5,973
6,058
–
52,968
54,516
1,262
4,909
39,712
100,399
267,237
30 April
2019
(restated)
£’000
18,419
31,281
95,353
648
415
982
1,387
912
1,764
151,161
22,339
20,917
876
84,591
128,723
279,884
1,889
10,588
12,369
117,131
141,977
1,870
143,847
53,385
5,635
7,808
–
66,828
15,850
218
6,753
46,388
69,209
279,884
9 3
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
Company Statements of Financial Position
As at 31 October 2020
Assets
Property, plant & equipment
Investment in associates
Investment in subsidiaries
Financial instruments held at amortised cost
Financial instruments held at FVTPL
Deferred tax assets
Non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Current assets
Total assets
Equity
Share capital
Share premium
Translation and other reserves
Retained earnings
Total Shareholders’ funds
Liabilities
Financial liabilities
Non-current liabilities
Financial liabilities
Current tax
Trade and other payables
Current liabilities
Total equity and liabilities
Company
31 October
2020
£’000
Notes
12
14
14
15
15
24
17
16
18
20
21
21
25
8,755
35
45,496
976
745
670
56,677
1,263
24,909
4,903
31,075
87,752
1,889
10,599
2,207
45,632
60,327
995
995
873
1,196
24,361
26,430
87,752
30 April
2019
£’000
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
–
–
–
1,197
42,066
43,263
93,728
The notes on pages 99 to 159 are an integral part of these consolidated financial statements.
The company recognised a profit after tax for the period of £41,632,000 (2019: loss after tax of £141,000).
The accounts were approved by the Board on 7 April 2021 and signed on its behalf by:
S e r g e C r a s n i a n s k i
Chief Executive Officer
J o h n L e w i s
Non-executive Chairman
Registration number: 00735438
94
PHOTO-ME INTERNATIONAL PLC Group Statements of Cash Flows
For the period ended 31 October 2020
Cash flow from operating activities
Profit before tax
Finance cost
IFRS– 16 Right of Use Interest
Finance revenue
Other gains
Operating profit
Share of post-tax profit from associates
Amortisation and impairments of intangible assets including goodwill
Depreciation and impairments 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 and acquisition of non-controlling interest
Proceeds from disposal of associate
Repayment of loans advanced to associate
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
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 the period
Exchange gain on cash and cash equivalents
Cash and cash equivalents at end of the period
The notes on pages 99 to 159 are an integral part of these consolidated financial statements.
31 October
2020
£’000
Notes
492
791
1,801
(51)
283
3,317
–
18,939
64,610
–
(2,597)
43
5,728
4,177
(1,170)
(112)
92,935
(2,594)
(4,688)
85,653
(786)
357
–
(2,326)
50
(44,782)
–
1,474
259
(184)
(45,938)
11
(286)
(17,097)
30,964
–
(31,894)
(18,302)
21,585
84,591
17
106,193
4
4
30
19
19
19
19
9
30 April
2019
£’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
9 5
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE Company Statements of Cash Flows
For the period ended 31 October 2020
31 October
2020
£’000
Notes
30 April
2019
£’000
41,632
285
250
975
43,142
186
1,597
5,970
8,000
(51)
(2)
2,594
(3,296)
(17,705)
–
40,435
(284)
–
40,151
(7,603)
1,085
(8)
–
(6,526)
11
(1)
(31,894)
(31,884)
1,741
3,162
4,903
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
9
18
Cash flow from operating activities
Profit before tax
IFRS– 16 Right of Use Interest
Finance revenue & other revenue
Other gains
Operating profit
Amortisation of intangible assets
Depreciation of property, plant and equipment (IFRS– 16)
Depreciation of property, plant and equipment
COVID-19 impairments
Loss/(profit) on sale of property, plant and equipment
Movement in investment provisions and other items
Changes in working capital:
Inventories
Trade and other receivables
Trade and other payables
Provisions
Cash generated from operations
Interest paid
Taxation paid
Net cash (utilised in)/generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Interest received
Dividends received from investments, 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/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
The notes on pages 99 to 159 are an integral part of these consolidated financial statements.
9 6
PHOTO-ME INTERNATIONAL PLC
Group Statements of Changes in Equity
For the period ended 31 October 2020
At 1 May 2018
Loss for the period
Exchange differences
Tax on exchange
Remeasurement gains 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
Shares issued in the period
Share options
Dividends paid
Acquisition of minority
Total transactions with the Parent
At 30 April 2019
At 1 May 2019
Loss for the period
Other comprehensive
(expense)/income
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/income
Total comprehensive (expense)/income
Transactions with owners of the Parent
Shares issued in the period
Share options
Dividends
Disposal of minority
Total transactions with owners
of the Parent
Share
capital
£’000
1,887
Share
premium
£’000
10,366
Other
reserves
£’000
Translation
reserve
£’000
Retained
earnings
£’000
Attributable
to owners
of the
Parent
£’000
Non-
controlling
interests
£’000
Total
£’000
1,781
11,412
117,811 143,257
1,553
144,810
–
–
–
–
–
–
–
2
–
–
–
2
1,889
1,889
–
–
–
–
–
–
–
222
–
–
–
222
10,588
10,588
–
–
–
–
–
–
–
–
–
–
–
–
–
(827)
31,226
–
31,226
(827)
53
(33)
31,279
(860)
3
–
–
(824)
(824)
–
3
(216)
42
(174)
(216)
42
(998)
–
–
–
3
(216)
42
(33)
(1,031)
31,052
30,228
20
30,248
–
–
–
–
–
–
141
224
141
(31,873)
(31,873)
–
–
(31,732)
(31,508)
–
–
–
297
297
224
141
(31,873)
297
(31,211)
1,781
1,781
10,588
117,131
141,977
1,870
143,847
10,588
117,131
141,977
1,870
143,847
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11
–
–
–
11
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,305)
(2,305)
(47)
(2,352)
3,948
(3)
–
–
3,945
3,945
–
–
–
–
–
-
-
3,948
(3)
340
(65)
275
(2,030)
340
(65)
4,220
1,915
–
–
–
–
–
(47)
3,948
(3)
340
(65)
4,220
1,868
–
172
11
172
(31,894)
(31,894)
–
–
–
11
172
(31,894)
–
–
(134)
(134)
(31,722)
(31,711)
(134)
(31,845)
At 31 October 2020
1,889
10,599
1,781
14,533
83,379
112,181
1,689
113,870
The notes on pages 99 to 159 are an integral part of these consolidated financial statements.
9 7
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE Total
£’000
82,115
(141)
(141)
224
7
133
(31,873)
(31,509)
50,465
50,465
41,632
103
12
(2)
113
41,745
11
(31,894)
(31,883)
60,327
(141)
(141)
–
7
–
(31,873)
(31,866)
35,791
35,791
41,632
103
–
–
103
41,735
–
(31,894)
(31,894)
45,632
Company Statements of Changes in Equity
For the period ended 31 October 2020
Share
capital
£’000
1,887
Share
premium
£’000
10,366
Other
reserves
£’000
2,064
Retained
earnings
£’000
67,798
At May 1 2019
Loss for the period
Other comprehensive income
Total comprehensive income for the period
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 2019
At May 1 2019
Profit for the period
Other comprehensive expense
Remeasurement losses in defined benefit pension scheme
and other post-employment benefit obligations
Deferred tax on remeasurement losses
Total other comprehensive income
Total comprehensive expense for the period
Transactions with owners of the Parent
Shares issued
Dividends paid
Total transactions with owners of the Parent
–
–
2
–
–
–
2
1,889
1,889
–
–
–
–
–
–
–
–
–
–
222
–
–
–
222
10,588
10,588
–
–
–
–
–
11
–
11
–
–
–
–
133
–
133
2,197
2,197
–
12
(2)
10
10
–
–
–
At 31 October 2020
1,889
10,599
2,207
9 8
PHOTO-ME INTERNATIONAL PLC Notes to the Financial Statements
For the period ended 31 October 2020
As previously announced, the Group’s financial year-end was
extended from 30 April 2020 to 31 October 2020 due to
challenges related to the pandemic. Going forward, to the extent
they have not already done so, all subsidiary companies in the
Group will align their accounting reference dates (or equivalent)
to 31 October.
Authorisation of the financial statements and statement of
compliance with IFRSs
The Group and the Company financial statements of Photo-
Me International plc (the “Company”) for the period ended
31 October 2020 were authorised for issue by the directors on
29 March 2021 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 5.
The financial statements have been prepared in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006, and they are prepared
in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the European Union.
The comparative information has been adjusted retrospectively to
reflect the fair value increase of intangibles offset by a decrease
in goodwill (including resultant deferred tax implications). The
restatement was only a reclassification between Goodwill and
other intangible assets (note 11) and Deferred Taxation (note 24)
with no impact on Equity or Total Comprehensive Income.
It should be noted that the measurement period adjustment was
inappropriately recorded as a current year item in 31 October
2019 and 30 April 2020 interims as opposed to adjusting
retrospectively as required under IFRS 3. The adjustment has been
appropriately treated in these financial statements for both the
current and comparative period.
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
period are shown in note 2 on page 106.
1.1 BASIS OF PREPARATION
The consolidated financial statements have been prepared under
the historical cost convention except for certain financial instruments
held at FVTPL and available-for-sale financial assets that are
measured at fair value.
Going concern
The financial statements of the Group and the Company have
been prepared on the going concern basis.
In reaching this conclusion, management has reviewed detailed
budgets, which reflect, where applicable, the current economic
conditions, with regard to the level of demand for the Group’s
manufactured products, the level of consumer confidence including
the potential impact of the COVID 19 pandemic, cash flow
forecasts for the next financial year and high level projections
thereafter. Brexit impact was considered by management to have
no significant impact on the business of the Group.
As a result, the cash flow projections indicate that the Group and
the Company will remain within their available banking facilities.
Additional information on these facilities is provided in note 15.
A review of the business activity, future prospects and financial
position of the Group are covered in the Chairman’s Statement and
the Strategic Report.
Critical accounting estimates and key judgements
The following are the critical judgements, apart from those
involving estimations (which are dealt with separately below), that
the directors have made in the process of applying the Group’s
accounting policies and that have the most significant effect on the
amounts recognised in the financial statements.
1) 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.
9 9
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
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
2) Taxation – note 7
The Group continues to follow the transfer pricing policy
implemented in the previous years. 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:
1)
Goodwill and other intangible assets – notes 1.4, 1.8 and 11.
The recoverable amount of cash generating units (CGUs) has
been determined by management 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. The
value of these assets has been significantly impaired during
this period because of the ongoing COVID 19 pandemic
and the consequent impacts on business. The carrying value
of goodwill and intangible assets at the period end was
£13,767,000 and £18,972,000 respectively.
For both Goodwill and intangible assets, we have used for
impairment tests the discounted cash flows method to evaluate
the asset value. The normative cash flow was calculated as
the sum of discounted cash flows in the last 5 years multiplied
by the growth rate 1%. The WACC used was for UK entities
11% and for the Spain entity 11,96%. The terminal value is the
normative cash flow divided by the WACC minus growth rate.
Moreover the Pandemic has enforced us to fundamentally
review the valuation of our “droit au bail” in France. Their value,
given the plethora of available and free shops, has become nil.
As a precautionary measure we have therefore decided to fully
impair these assets.
2)
Impairment of property, plant and equipment – notes 1.5,
1.8, 12 and 13.
Management make estimates of the useful life of capitalised
development costs and property, plant and equipment
as disclosed below in notes 1.4 and 1.5. Technological
developments and regulatory changes can impact on the
lives of the vending estate. Management consider these
factors in assessing the useful lives of the assets. Due to the
recent pandemics and its impact on the business, there were
significant indications that machines should be impaired.
Consequently, impairment tests were performed leading to
significant impairment on property plan and equipment.
The group has calculated the EBITDA of each individual unit
during the pandemic. The Group has impaired fully each unit
showing nill or negative EBITDA, as it estimates the recovery of
these assets was not possible.
The carrying value of property, plant and equipment at the
period end was £90,285,000.
1.2 BASIS OF CONSOLIDATION
The Group consolidates the financial statements of the Company
and all of its subsidiaries, and includes associates under the equity
method, as at each period end.
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 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.
10 0
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
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.
1.3 FOREIGN CURRENCY TRANSLATION
The consolidated financial statements and the Company’s own
financial statements are presented in Sterling being the functional
and presentational currency of the Parent Company and all values
are shown in £’000 except where indicated.
Transactions in foreign currencies are translated into the respective
functional currencies of the Group’s subsidiaries at the exchange
rate ruling on the date the transaction is recorded. Monetary assets
and liabilities denominated in foreign currencies are translated
using the exchange rates ruling at 31 October. 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 2020 or 2019.
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 statements of financial position are translated
at the exchange rate ruling at 31 October. 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.
1.4 INTANGIBLE ASSETS
Goodwill
Goodwill represents the excess of cost of an acquisition of a
subsidiary or associate over the fair value of the Group’s share
of net identifiable assets at the date of acquisition. Goodwill on
acquisition of associates is included in investment in associates and
impairments thereof in administrative expenses in the SOCI.
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.
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 Intangible Assets.
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.
101
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 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
Other intangible assets
Intangible assets (including research and development) acquired as part of a business combination are capitalised at fair value at the date of
acquisition. Other intangibles are capitalised at cost.
The policies applied to the Group’s intangible assets are summarised as follows:
Useful lives
Amortisation
Research and
development costs
Finite
Straight-line basis,
with a maximum life
of four years from
commencement of
commercial
production, with no
residual value
Software
Finite
Customer related
Patents and licences
Droit au Bail
Finite
Finite
Indefinite
Straight-line basis,
with a maximum life
of three years, with
no residual value
The majority of
customer related
intangible assets are
depreciated over
their useful lives of
between three and
ten years on a
Straight-line basis
with no residual
value
Not amortised
regularly, but subject
to impairment testing
Most patents are
depreciated over a
period of 10 years or
less with no residual
value on a straight
line basis
Internally generated or acquired
Internally generated Acquired
Acquired
Acquired
Acquired
1.5 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is shown at cost, less accumulated
depreciation and any impairment.
Subsequent expenditure on property, plant and equipment is
capitalised, either as a separate asset, or included in the cost of the
asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the
cost can be measured reliably. The carrying amount of any parts of
the assets that are replaced are derecognised. All other costs are
recognised in the income statement as an expense as incurred.
Freehold land is not depreciated. Other assets are depreciated on
a straight-line basis, or occasionally on a reducing balance basis,
to reduce cost to the estimated residual value over the estimated
useful life of the asset at the following rates:
Freehold buildings
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.
Capitalised lease assets 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.
1.6 INVESTMENT PROPERTY
Certain of the Group’s properties are classified as investment
properties; being held for long-term investment and to earn rental
income. Investment properties are stated at cost and the building
element is depreciated to reduce cost to its estimated residual value
at rates between 3.33% and 8.33% on a straight-line basis.
1.7 LEASES
Leases of property, plant and equipment where the Group has
substantially all the risks and rewards of ownership, are classified
as finance leases. Finance leases are capitalised at the inception
of the lease at the lower of the fair value of the leased asset and
the present value of lease payments discounted at the interest rate
implicit in the lease. The interest element in the lease payment is
expensed at a constant interest rate, whereas the obligation net of
the interest element is included in other payables.
All other leases were classified until 30 April 2019 as operating
leases and rentals were expensed over the period of the lease on
a straight-line basis. However, since 1 May 2019, some of those
leases were recognised according to IFRS-16 (Note 2 “IFRS16
Leases”). But some do not meet the criteria (eg variable rent, site
owners have the control on the machine location or Photo-Me can
stop a contract with a short period notice at any time) and are de
facto accounted for as operating costs.
1.8 IMPAIRMENT
For goodwill and intangible assets with indefinite lives, the carrying
value is reviewed annually for impairment or more frequently if
events or changes in circumstances indicate that the carrying
amounts may be impaired.
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.
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
10 2
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC 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 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.
Classification of financial assets
Financial instruments are designated in accordance with the
business model under which the instrument is held.
1.10 INVENTORIES
Inventories are stated at the lower of cost and net realisable
value. Cost includes costs incurred in bringing inventories to their
present location and condition. The cost of work-in-progress and
finished goods includes an appropriate proportion of production
overheads.
Finished goods also include 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.
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.
These impairments are shown under “Administrative expenses” on
the Statement of Comprehensive income.
Reversal of impairment
Where an impairment loss subsequently reverses, the carrying
amount of the asset is increased to the revised estimate of its
recoverable amount, but so that it does not exceed the carrying
amount that would have been determined had no impairment loss
been recognised. No impairment loss is reversed for goodwill.
1.9 FINANCIAL INSTRUMENTS
(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.
(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
10 3
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
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
1.12 CASH AND CASH EQUIVALENTS
Cash and cash equivalents are carried in the statements of financial
position at cost. Bank overdrafts are included within borrowings
in current liabilities in the statements of financial position. For
the purposes of the statements of cash flows, cash and cash
equivalents comprises cash on hand, unrestricted deposits held
at banks with less than three months’ notice and other highly liquid
investments with an original maturity of three months or less, less
bank overdrafts.
1.13 SHARE CAPITAL
Shares of the Company are classified as equity.
Where the Company acquires its own equity share capital
(treasury shares), the consideration paid, including any directly
attributable incremental costs (net of tax relief), is deducted from
equity attributable to the Company’s equity shareholders until the
shares are either cancelled or subsequently reissued. The amount is
shown in equity as treasury shares. Where such shares (the treasury
shares) are subsequently reissued, any consideration received, net
of any directly attributable incremental transaction costs and the
related income tax effects, is included in equity attributable to the
Company’s equity holders.
1.14 EMPLOYEE BENEFITS
Pension obligations
Group companies have various pension schemes in accordance
with local conditions and practices in the countries in which
they operate.
The Company operates a defined benefit pension scheme, which
is closed to new entrants, with contributions made by employees
and the Company 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.
10 4
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC Short-term employee benefits
The Group recognises a liability and an expense for short-term
employee benefits (such as holiday pay, bonuses and profit
sharing) where these obligations contractually arise (for example,
as a result of employment contracts) or where a constructive
obligation has arisen from past practice.
1.15 PROVISIONS
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable that
an outflow of resources will be required to settle the obligation and
a reliable estimate can be made. Provisions are discounted where
the effect of the time value of money is material.
1.16 TAXATION
Tax expense for the current period comprises current and deferred
tax and is recognised in the income statement, except to the extent
that it relates to items recognised in other comprehensive income
or equity. The current tax charge is calculated on the basis of the
laws enacted or substantively enacted at the statement of financial
position 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 SEGMENT REPORTING
Operating segments are reported in a manner consistent with
internal reporting provided to the Chief Operating Decision Maker
as required by IFRS 8 Operating Segments. Details of the segments
are shown in note 3.
1.18 REVENUE RECOGNITION
There are 3 types of revenue considering by the Group:
• Vending revenue from the operating machines 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
statement of financial position date. There are no vending
transactions requiring unbundling of components. Revenue is
the fair value of consideration received or receivable and is
measured net of discounts, VAT and other sales-related taxes.
• 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 on unbundling required.
1.19 DIVIDEND DISTRIBUTIONS
Dividends to the Company’s shareholders are recognised as a
liability and deducted from shareholders’ equity in the period in
which the shareholders’ right to receive payment is established.
1.20 GOVERNMENT GRANTS
Grants that compensate the Group for expenses incurred are
recognised in the Statement of Comprehensive Income as a
deduction of expenses on a systematic basis in periods in which the
expenses are recognised, provided the terms of the grant are satisfied.
1.21 SPECIFIC ITEMS
The presentation and use of Specific items is a non-GAAP measure
and the use of this measure may not be comparable to similarly
titled measures used by other companies. Specific items are those
that in management’s judgement need to be disclosed separately
by virtue of their size, nature and frequency. Management
determines whether an item is specific and warrants separate
disclosure by considering both qualitative and quantitative factors,
such as the frequency or predictability of occurrence. This is
consistent with the way operating performance is presented and
reported to management.
The directors believe that the presentation of the Group’s results in
this way is relevant to providing a clear understanding of the Group’s
performance, as Specific items are by definition material, unusual and
rare. Management consider their exclusion necessary to provide a
more clear understanding of the Group’s underlying performance.
10 5
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 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
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 earnings 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.
1.22 COMPANY INVESTMENTS
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.
2 N E W STA N DA 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.
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
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 owner. These agreements vary widely in
their terms and conditions. The Group examines, 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 has been adopted on the modified retrospective basis from
1 May 2019, so has not restated comparatives for the prior year, as
permitted under the specific transitional provisions in the standard.
The reclassifications and the adjustments arising from the new
leasing rules are therefore recognized in the opening statement of
financial position from 1 May 2019.
On adoption of IFRS 16, the group recognized lease liabilities
in relation to leases which had previously been classified as
‘operating leases’ under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining lease
payments, discounted using the lessee’s incremental borrowing
rate as of 1 May 2019. The discount rate per country is the sum of
the Group incremental borrowing rate, the country risk adjustment,
the entity size premium adjustment and the Term-adjustment.
For the first year, the Incremental Borrowing Rates used range between
6.099% and 19.64%, depending on the nature and location of the
assets. The weighted average of the rates used is 7.02%.
The Group assesses whether a contract is or contains a lease at
inception of the contract. The Group recognizes a right-of-use
asset and corresponding lease liability at the lease commencement
date, except for short term leases and leases of low value. For
these leases, the lease payments are recognized as an operating
expense on a straight-line basis over the term of the lease.
The right-of-use asset is initially measured at cost, which comprises
the initial amount of the lease liabilities adjusted for any lease
payments made at or before the commencement date, plus any
initial costs incurred. The right-of-use assets are subsequently
measured at cost less accumulated depreciation and impairment
losses. The right-of-use assets are from the commencement date
depreciated over the shorter period of lease term and useful life
of the underlying asset. The estimated useful lives of right-of-use
assets are determined on the same basis as those of property and
equipment. In addition, the right-of-use assets are periodically
reduced by impairment losses, if any, and adjusted for certain
re-measurements of the lease liabilities, e.g. revised discount
rate, change in the lease term or change in future lease payments
resulting from a change in an index.
The lease liabilities are initially measured at the present value of
the lease payments that are not paid at the commencement date,
discounted using the interest rate determined by the Group’s
borrowing rate.
10 6
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC Other new and amended standards
The following amendments to existing standards are effective for the period ended 31 October 2020; however they have not a material
impact on the Group:
Amendments to IAS 19
Amendments to IAS 28
Amendments to IFRS 9
IFRIC 23
Annual Improvements to IFRS Standards 2015-2017 Cycle
Plan Amendment, Curtailment or Settlement
Long-term Interests in Associates and Joint Ventures
Prepayment Features with Negative Compensation
Uncertainty over Income Tax Treatments
Certain new accounting standards and interpretations have been published that are not mandatory for the current period and have not been
early adopted by the Group. These new standards and interpretations, which are not expected to have a material effect on the Group, are set
out below.
Description
Amendments to References to Conceptual Framework in IFRS Standards
Definition of a Business (Amendments to IFRS 3)
Definition of Material (Amendments to IAS 1 and IAS 8)
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)
COVID-19-Related Rent Concessions (Amendment to IFRS 16)
Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)
Annual Improvements to IFRS Standards 2018-2020
Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)
Reference to the Conceptual Framework (Amendments to IFRS 3)
Classification of liabilities as current or non-current (Amendments to IAS 1)
Date required to be
adopted by the Group
1 November 2020
1 November 2020
1 November 2020
1 November 2020
1 November 2021
1 November 2021
1 November 2021
1 November 2021
1 November 2021
1 November 2021
1 November 2022
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.
EBITDA (Earnings before Interest Tax Depreciation and Amortisation) presented in the following table already includes specific items but
specific items are then shown in the reconciliation to underlying operating profit and operating profit excluding associates.
10 7
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE Total
£’000
319,060
(8,815)
310,245
87,313
(51,649)
(32,347)
4,852
(1,535)
3,317
3,317
(284)
51
(2,593)
491
(2,844)
(2,353)
47,108
127,477
3 S E G M E N TA L A N A LYS I S C O N T I N U E D
The segment results are as follows:
18 months to 31 October 2020
Total revenue
Inter segment sales
Revenue from external customers
EBITDA
Depreciation and amortisation
Impairment
Underlying operating profit/loss
Specific items (included in EBITDA)
Operating profit/loss excluding associates
Operating profit
Other losses
Finance Revenue
Finance costs
Profit before tax
Tax
Loss for the period
Asia
£’000
Continental
Europe
£’000
60,394
202,297
(2)
60,392
13,222
(6,741)
(1,981)
5,232
(731)
4,501
(7,067)
195,230
75,486
(32,130)
(14,606)
28,882
(133)
United
Kingdom
& Ireland
£’000
56,369
(1,746)
54,623
7,923
(11,278)
(15,760)
(18,444)
(671)
Corporate
£’000
–
–
–
(9,319)
(1,500)
–
(10,818)
–
28,750
(19,115)
(10,818)
Capital expenditure (excluding IFRS16)
Non-current assets
4,972
20,023
31,797
85,369
9,855
18,154
484
3,931
10 8
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
Asia
£’000
Continental
Europe
£’000
44,538
138,935
–
44,538
9,350
(4,673)
6,502
(1,825)
4,677
(8,274)
130,661
49,267
(15,727)
33,540
–
United
Kingdom
& Ireland
£’000
54,962
(2,043)
52,919
13,167
(6,119)
7,048
–
Corporate
£’000
–
–
–
(2,079)
(497)
(2,576)
–
33,540
7,048
(2,576)
12 months to 30 April 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 the period
Capital expenditure(excluding IFRS16)
Non-current assets
Inter-segment revenue mainly relates to sales of equipment.
2,755
22,632
19,893
89,448
7,493
28,591
379
4,984
The Parent Company is domiciled in the UK. Total revenue from external customers is as follows:
Total
£’000
238,435
(10,317)
228,118
69,705
(27,016)
44,514
(1,825)
42,689
50
42,739
361
20
(527)
42,593
(11,314)
31,279
30,520
145,655
Total revenue from external customers
Asia and rest of the world
Europe
UK
Group
18 months
ending
31 October
2020
£’000
60,392
195,230
54,623
310,245
12 months
ending
30 April
2019
£’000
44,538
130,601
52,979
228,118
10 9
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
3 S E G M E N TA L A N A LYS I S C O N T I N U E D
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 period ended 31 October 2020 (2019: none).
4 P R O F I T F O R T H E P E R I O D
Costs and overhead items charged/(credited) in arriving at profit for the period, include the following:
Amortisation, depreciation and impairment
Amortisation of previously capitalised research and development expenditure
Amortisation of intangible assets other than research and development
Impairment of previously capitalised research and development expenditure
Impairment of intangible assets other than research and development
Impairment of goodwill
Depreciation of property, plant and equipment and investment property
– owned
– leased
Depreciations of Right of Use asset
Impairment of property, plant and equipment and investment property – owned
Amortisation of previously capitalised research and development expenditure
– 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
18 months
ending
31 October
2020
£’000
23,761
5,599
239
29,599
280,646
310,245
12 months
ending
30 April
2019
£’000
22,347
4,595
244
27,186
200,932
228,118
18 months
ending
31 October
2020
£’000
12 months
ending
30 April
2019
£’000
4,031
3,516
1,660
5,290
5,143
1,959
1,033
–
–
–
19,640
2,992
39,152
–
7,400
15,794
62,346
4,031
794
271
5,096
23,865
159
–
–
24,024
–
787
246
1,033
110
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
Short term and low value leases
– property
– plant and equipment
Inventory cost
Cost of inventories recognised as an expense
Inventory provision reversed
Inventory provision reversed relates to provisions made in prior years.
During the period the Group provided £809,000 in respect of obsolete stock (2019: £215,000).
Other items
Research and development current period expenditure, not capitalized
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
18 months
ending
31 October
2020
£’000
774
1,436
2,210
20,450
–
20,450
12 months
ending
30 April
2019
£’000
506
1,126
1,632
20,760
(1,220)
19,540
18 months
ending
31 October
2020
£’000
12 months
ending
30 April
2019
£’000
913
324
(346)
402
26
392
128
(550)
165
26
Audit and non-audit services
The following fees for audit and non-audit services were paid or are payable to the Company’s auditor, Mazars (2019: Grant Thornton UK
LLP) and its associates.
Audit fees to Group auditors
Audit fees of the subsidiaries
Total audit fees
Audit related services – interim review
12 months
ending
30 April
2019
£’000
95
194
289
20
309
111
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
4 P R O F I T F O R T H E P E R I O D C O N T I N U E D
Fees for the audit of the company and the group – Mazars LLP
Fees for the audit of the subsidiaires – other Mazars
Audit related services – Mazars
Non audit related services – Mazars
Fees for the audit of the subsidiaries – Other firms
Fees for the audit of the prior year incurred in the year – other firms
18 months
ending
31 October
2020
£’000
263
102
124
25
310
27
851
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.
In addition to the audit fees payable to the Group’s auditor and its associates, certain Group subsidiaries are audited by other firms.
Other operating income
Other operating income
18 months
ending
31 October
2020
£’000
910
12 months
ending
30 April
2019
£’000
1,601
Other operating income principally includes rental income from investment property (note 13).
Other gains and losses
Other gains and losses comprise of profits arising on financial instruments held at FVTPL, profit on disposal of associate and losses on financial
instrument 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
investment in associate
Fair value gain/(loss) on financial instrument held at FVTPL
Loss on available for sale financial instruments
18 months
ending
31 October
2020
£’000
140
7
(431)
(284)
12 months
ending
30 April
2019
£’000
3,258
(2,897)
–
361
Period ended 31 October 2020
The gain of £140,000 relates to the disposal of the Group’s interest in Photo Direct, previously an associated undertaking (see note 14).
112
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
Specific items
Specific items
Restructuring costs
18 months
ending
31 October
2020
£’000
12 months
ending
30 April
2019
£’000
(1,535)
(1,535)
(1,825)
(1,825)
Period ended 31 October 2020
Restructuring costs relate to the re-alignment the Group’s UK and Japanese operations to current market conditions which included
streamlining of administrative functions, relocation and removal of low revenue and unprofitable units to better locations.
Period ended 30 April 2019
Restructuring costs relate to the refocusing of Japanese operations, the closure of manned retail outlets and removal of low revenue and
unprofitable units to better locations.
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
Loss on available for sale financial instruments
Restructuring costs
5 E M P LOY E E S
Employment costs
Wages and salaries
Social security costs
Share options granted to directors and employees
Post-employment benefit costs
– defined benefit schemes
– defined contribution schemes
18 months
ending
31 October
2020
£’000
12 months
ending
30 April
2019
£’000
492
42,593
–
–
431
1,535
2,457
18 months
ending
31 October
2020
£’000
56,605
9,634
171
(3,258)
2,897
–
1,825
44,057
12 months
ending
30 April
2019
£’000
39,888
8,361
141
351
656
212
327
67,417
48,899
113
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
5 E M P LOY E E S C O N T I N U E D
Directors’ emoluments
Full details of directors’ remuneration and share options are given in the Remuneration Report on pages 70 to 76.
Number of employees
The average number of employees during the period (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
Employees by category
Senior managers in the Group (excluding directors of Photo-Me)
Employees– Sales
Employees-Administration
Employees-Operating
Total
18 months
ending
31 October
2020
£’000
12 months
ending
30 April
2019
£’000
932
124
1,056
186
5
605
37
141
82
991
149
1,140
263
9
567
33
161
107
1,056
1,140
As at
31 October
2020
13
70
115
858
As at
30 April
2019
17
65
106
952
1,056
1,140
114
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
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
Interest on lease liabilities
Other loans at amortised cost and finance leases
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 period
– prior periods
Overseas taxation
– current period
– prior periods
Total current taxation
Deferred taxation
Origination and reversal of temporary differences
– current period – UK
– current period – overseas
Impact of change in rate
Total deferred tax
Tax charge in the statement of comprehensive income
18 months
ending
31 October
2020
£’000
12 months
ending
30 April
2019
£’000
–
–
56
(5)
51
(794)
(1,801)
2
(2,593)
1
19
–
–
20
481
–
46
527
18 months
ending
31 October
2020
£’000
12 months
ending
30 April
2019
£’000
700
–
700
4,209
–
4,209
4,909
(175)
(1,890)
–
(2,065)
2,844
5,274
186
5,460
2,512
193
2,705
8,165
505
2,570
74
3,149
11,314
115
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
7 TA X AT I O N E X P E N S E C O N T I N U E D
Tax relating to items (credited)/charged to other components of comprehensive income
Corporation tax
Deferred tax
Tax (credit)/charge in other comprehensive income
18 months
ending
31 October
2020
£’000
(3)
(65)
(68)
Reconciliation of total tax charge
The difference between the Group tax charge and the standard UK corporation tax rate of 19% (2019: 19%) is explained below:
Profit before tax
Tax using the UK corporation tax rate of 19% (2019: 19%)
Effect of:
– non-taxable items
– change in UK tax rates
– overseas tax rates
– income not assessable
– losses not recognised in deferred tax (relieved)/incurred
– non-deductible impairment
– adjustments to tax in respect of prior periods
– foreign exchange movements
Total tax charge
Effective tax rate
18 months
ending
31 October
2020
£’000
492
93
–
–
157
–
–
2,378
215
–
2,844
578.0%
12 months
ending
30 April
2019
£’000
(3)
(42)
(45)
12 months
ending
30 April
2019
£’000
42,593
8,093
(396)
75
2,369
(624)
–
1,175
652
(30)
11,314
26.6%
The Group tax charge of £2.8m (2019: £11.3m) corresponds to an effective tax rate of 578.0% (2019: 26.6%). The distorted ETR is due to the
non-deductibility of goodwill impairment.
The corporation tax rate for the period ended 31 October 2020 was 19%. The Corporation Tax rate of 19% was enacted with effect from
1 April 2017 and the Finance Act 2016 legislated the UK Corporation Tax rate to decrease to 17% from 1 April 2020. However, on the
17th March 2020, using the Provisional Collection of Taxes Act 1968, the UK Government cancelled the proposed drop in Corporation Tax
rate to 17%.
The Group undertakes business worldwide.
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 profit for the period, after tax, dealt with in the financial statements of the Parent Company is £41,632,000 (2019: Loss £141,000),
including dividends received from subsidiaries.
116
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC 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
2019 paid on 11 May
2018 paid on 11 May
Final
2019 approved at AGM held on 24 October 2018
2018 approved at AGM held on 25 October 2017
31 October 2020
30 April 2019
Pence
per share
£’000
Pence
per share
£’000
3.71
14,014
4.73
17,880
8.44
31,894
3.71
14,005
4.73
8.44
17,868
31,873
Period ended 31 October 2020 – Proposed dividends not yet paid
The Board declared a dividend of 0.00p per share for the period ended 31 October 2020. This is due to the recent COVID 19 pandemic
and the consequent impact on the business.
Period ended 30 April 2019 – Paid after 30 April 2019
The Board declared an interim dividend of 3.71p per share for the period ended 30 April 2019, amounting to £14,014,000 which was paid
on 11 May 2019. The Board proposed a final dividend for the period ended 30 April 2019 of 4.73p per share, amounting to £17,880,000
which was approved by shareholders at the Annual General Meeting held on 24 October 2019 and paid on 9 November 2019.
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 (£2,352,000)
(2019: £31,226,000) by the weighted average number of shares in issue during the period.
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 period 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:
31 October 2020
30 April 2019
Weighted
average
number
of shares
‘000
Earnings
£’000
(2,352)
377,749
–
765
(2,352)
378,514
Earnings
per share
pence
(0.62)
–
(0.62)
Earnings
£’000
31,226
0.00
31,226
Weighted
average
number
of shares
‘000
377,662
190
377,852
Earnings
per share
pence
8.27
0.00
8.27
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.
117
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
10 E A R N I N G S P E R S H A R E C O N T I N U E D
Alternative earnings per share
The table below reconciles earnings per share (EPS) and diluted earnings per share (DPS) before and after Specific items.
31 October 2020
30 April 2019
Earnings
£’000
(2,352)
1,535
(284)
(1,101)
Earnings
per share
Pence
Diluted
earnings
per share
Pence
(0.62)
0.41
(0.08)
(0.29)
(0.62)
0.41
(0.08)
(0.29)
Earnings
£’000
31,226
1,825
(361)
32,690
Earnings
per share
Pence
8.27
0.48
(0.1)
8.65
Profit for the period attributable to
owners of the Parent
Specific items net of tax
Other (losses)/gains
Earnings after specific items
Details of Specific items are set out in note 4.
11 G O O DW I L L A N D OT H E R I N TA N G I B L E ASS E TS
Goodwill Group period ended 31 October 2020
Cost:
At 1 May 2018
Exchange differences
Additions
At 30 April 2019
IFRS remeasurement
At 30 April 2019 (restated)
At 1 May 2019
Exchange differences
Additions
At 31 October 2020
Impairment charges:
At 1 May 2018
At 30 April 2019
At 1 May 2019
Exchange differences
Impairment charge in the period
At 31 October 2020
Net book value:
At 30 April 2019
At 30 April 2019 (restated)
At 31 October 2020
The movement to goodwill in 2020 is further explained below.
Company
The Company has no goodwill.
118
Diluted
earnings
per share
Pence
8.26
0.48
(0.1)
8.64
£’000
13,733
(71)
13,230
26,892
(8,175)
18,717
18,717
65
464
19,246
298
298
298
37
5,143
5,478
26,594
18,419
13,767
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC Goodwill by segments
The table below shows the allocation of goodwill acquired through business combinations between segments.
The amount of impairment losses is recognised in the lines “Costs of sales” and “Administrative costs”.
Goodwill has been allocated for impairment testing purposes to ten (2019: ten) cash-generating units (CGUs); allocated between
geographical areas and activity in accordance with impairment testing in the prior period:
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 – LaWash Group
CGU 4 – Sempa
Others
Total Continental Europe
Asia
CGU 1 – Nippon Auto-Photo Kabushiki Kaisha
Total Asia
Total
31 October
2020
£’000
154
14
–
–
–
168
322
2,068
604
3,360
–
6,354
7,245
7,245
13,767
30 April
2019
(restated)
£’000
154
14
317
1,273
1,554
3,312
309
1,982
2,528
2,896
147
7,862
7,245
7,245
18,419
119
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 11 G O O DW 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
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. The recoverable amount of all CGUs has been determined on a value in use basis.
We depreciated CGU 3, CGU 4, CGU 5 for UK & Ireland fully and CGU 3 in Continental Europe partially (£2.0m).
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% (2019: 1%-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, and for the current period taking into account in particular the COVID-19 pandemic which has significantly impacted the
Group’s end-markets, as described further in note 30.
Discount rate 10.42%-11.96% (2019: 6.5%-7.5%)
The post-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 11.00%, (2019:7.2%), Ireland 11.24% (2019: 7.7%), France 10.90% (2019: 7.7%), Germany 10.42%
(2019:6.5%), Spain 11.96% (2019: 6.95%)and Japan 11.10% (2019: 7.5%). The Board is confident, overall, that these discount rates reflect
the circumstances in each region, and are in accordance with IAS 36.
Impairment charge
Due to the recent pandemics and its impact on the business, there were significant indications that goodwill should be impaired.
Consequently, impairment tests were performed on the carrying value of the Group’s goodwill leading to significant impairment on the
goodwill on some CGUs.
Other intangible assets
The amount of impairment losses is recognised in the lines “Costs of sales” and “Administrative expenses”:
• “Droit au bail”: £3,621k
• Photo-Me (Retail) Ltd: £1,759k
12 0
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC Group
Cost:
At 1 May 2018
Exchange differences
Additions
– Subsidiaries acquired
– Internally generated
– External
Disposals
At 30 April 2019
IFRS 3 remeasurement
Other adjustment of Opening balance
At 30 April 2019 (restated)
At 1 May 2019
Exchange differences
Additions external
Disposals
At 31 October 2020
Amortisation:
At 1 May 2018
Exchange differences
Subsidiaries acquired
Provided during the period
Disposals
At 30 April 2019
At 1 May 2019
Exchange differences
Provided during the period
Disposals
At 31 October 2020
Net book value:
At 30 April 2018
At 30 April 2019
At 30 April 2019 (restated)
At 31 October 2020
Capitalised
development
costs
£’000
Other
intangible
assets
£’000
Total
£’000
10,042
13,063
(51)
(53)
23,105
(104)
–
1,631
–
(774)
10,848
–
–
10,848
10,848
487
2,296
(712)
12,919
2,555
–
536
(2,681)
13,420
10,553
5,506
29,479
29,479
466
150
(1,553)
28,542
2,555
1,631
536
(3,455)
24,268
10,553
5,506
40,327
40,327
953
2,446
(2,265)
41,461
3,576
5,569
9,145
(48)
–
1,959
(774)
4,713
4,713
207
5,038
(715)
9,243
6,466
6,135
6,135
3,676
7
12
1,033
(2,288)
4,333
4,333
1,659
8,758
(1,504)
(41)
12
2,992
(3,062)
9,046
9,046
1,866
13,796
(2,219)
13,246
22,489
7,494
9,087
25,146
15,296
13,960
15,222
31,281
18,972
The closing balance for other intangibles 2019 was restated by £5,506,000 with a reclassification to Trade Payables. Capitalised research
and development expenditure is amortised over a maximum of four years, with no residual value.
Included in the net book value of other intangible assets is £nil corresponding to droit au bail (2019: £3,447,000).
121
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 11 G O O DW 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
Droit au bail, which occur in France, are payments made for the right to occupy a space to site vending equipment. Although the Group has
no intention of selling these rights, a value can be attached to them. These assets are carried at cost, being the payments made for the right
to occupy the space, less provision for impairment. 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 Group 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.
A result of the COVID-19 pandemic and the significant impact that it has had on the sites, the Group has made a provision of £3,447,000 in
the current period to reflect the reduced expected return from these sites.
Also included in other intangible assets is £nil (2019: £2,212,000) relating to the licence which grants the right to use space in Asda stores
following the acquisition of the Photo Division of Asda Stores Limited in the financial year ending 30 April 2017. The useful life of this intangible
asset is finite and was previously being amortised over the term of the licence agreement (10 years) to October 2026.
In the current period, due to the COVID-19 pandemic and also the current market situation in the UK, the Group has fully written down the
value of this licence.
As at 31 October 2020, other intangible assets relate mostly to Intangible assets arising from the acquisition of Sempa – refer to note 29.
Other
intangible
assets
£’000
776
776
776
776
709
67
776
776
776
67
–
–
Company
Cost:
At 1 May 2018
At 30 April 2019
At 1 May 2019
At 31 October 2020
Amortisation:
At 1 May 2018
Provided during year
At 30 April 2019
At 1 May 2019
At 31 October 2020
Net book value:
At 30 April 2018
At 30 April 2019
At 31 October 2020
12 2
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
12 P R O P E R T Y, P L A N T A N D E Q U I PM E N T
Own work capitalised
Some of the Group’s subsidiaries manufacture vending equipment, which is then sold to the Group’s operating companies and capitalised by them
as fixed assets. The amount capitalised includes direct costs associated with the manufacture of such items together with applicable overheads, but
excluding general overheads and administration costs. When relevant, profits made by the selling company are eliminated on consolidation.
Group
Cost:
At 30 April 2018
Exchange difference
Additions
– new subsidiaries
– internal
– external
Disposals
At 30 April 2019
Exchange difference
Additions
Right of Use assets
Additions internal
Additions external
Disposals
At 31 October 2020
Depreciation
At 30 April 2018
Exchange difference
New subsidiary
Provided during the period
Disposals
At 30 April 2019
Exchange difference
Right of Use assets
Provided during the period
Impairments
Disposals
At 31 October 2020
Net book value:
At 30 April 2018
At 30 April 2019
At 31 October 2020
Land &
Buildings
£’000
Photobooths
and vending
machines
£’000
Plant,
machinery,
furniture,
fixtures and
motor vehicles
£’000
Total
£’000
6,321
(8)
1,002
–
466
(231)
7,550
336
16,533
(4)
785
(75)
25,125
4,069
(1)
127
203
(35)
4,363
220
6,846
421
–
(41)
11,809
2,252
3,187
13,316
241,675
(610)
32,683
(513)
280,679
(1,131)
40
23,555
1,383
(13,935)
252,108
8,150
–
36,540
1,895
(19,893)
278,800
160,903
(370)
23
22,081
(12,333)
170,304
7,502
–
35,740
17,538
(17,804)
213,280
80,772
81,804
65,520
274
93
2,856
(1,465)
33,928
443
–
783
5,900
(3,081)
37,973
23,151
(402)
147
1,724
(1,054)
23,566
270
–
4,065
–
(1,377)
26,524
9,532
10,362
11,449
1,316
1,476
26,877
(15,631)
293,586
8,929
16,533
37,319
8,580
(23,049)
341,898
188,123
(773)
297
24,008
(13,422)
198,233
7,992
6,846
40,226
17,538
(19,222)
251,613
92,556
95,353
90,285
Internal additions for photobooths and vending machines of £36,540,000 (2019: £23,555,000) relate to own work capitalised, being
equipment produced by the subsidiaries and capitalised by the group companies.
12 3
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 12 P R O P E R T Y, P L A N T A N D E Q U I PM E N T
Included in the above are assets previously held under finance leases, as follows:
Net book value
Additions/reclassifications
Depreciation charge
Plant, machinery, furniture, fixtures
and motor vehicles
30 April 2019
£’000
401
184
159
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% (2019: 0%– 3%).
A conservative pre-tax discount rate of 11% (2019: 8.3%) was applied to the cash flows.
Company
Cost:
At 30 April 2018
Additions
– internal
– external
Disposals external
At 30 April 2019
Additions
– internal
– external
Right of Use assets
Disposals external
At 31 October 2020
Depreciation
At 30 April 2018
Provided during the period
Disposals external
At 30 April 2019
Right of Use assets
Provided during the period
Disposals external
At 31 October 2020
Net book value:
At 30 April 2018
At 30 April 2019
At 31 October 2020
12 4
Land &
Buildings
£’000
Photobooths
and vending
machines
£’000
Plant,
machinery,
furniture,
fixtures and
motor vehicles
£’000
Total
£’000
8
–
–
(8)
–
–
–
3,392
–
3,392
8
–
(8)
–
1,597
–
–
1,597
–
–
1,796
42,532
940
43,480
3,374
1,421
(4,371)
42,956
3,521
3,656
–
(7,603)
42,530
29,528
3,807
(4,012)
29,323
–
15,411
(6,525)
38,209
13,004
13,633
4,321
–
332
(157)
1,115
–
426
–
(100)
1,441
253
90
(88)
255
–
187
(41)
400
687
860
1,041
3,374
1,753
(4,536)
44,071
3,521
4,082
3,392
(7,703)
47,363
29,789
3,897
(4,108)
29,578
1,597
15,598
(6,566)
40,207
13,691
14,493
7,158
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
Internal additions for photobooths and vending machines of £3,521,000 (2019: £3,374,000) relate to new equipment produced by
subsidiaries and equipment previously capitalised by the Group’s subsidiaries and sold to the parent.
The Company tests all significant operating equipment assets 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.
13 I N V E STM E N T P R O P E R T Y
Group
Cost:
At 30 April 2018
Exchange differences
At 30 April 2019
Exchange differences
At 31 October 2020
Depreciation
At 30 April 2018
Exchange differences
Provided during the period
At 30 April 2019
Exchange differences
Provided during the period
At 31 October 2020
Net book value:
At 30 April 2018
At 30 April 2019
At 31 October 2020
£’000
13,347
(259)
13,088
572
13,660
12,671
(247)
16
12,440
545
23
13,008
676
648
652
The investment property is freehold and is stated at cost. The directors are satisfied that the fair value of the Investment property is not less than
its net book value.
Rental income from the investment property was £480,995 (2019: £1,106,000) (note 4) and finance costs were £2,500 (2019: £2,000).
Company
The Company has no investment property.
12 5
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 14 I N V E S TM 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 2018
Exchange differences
Disposal of Stilla Technologies SA (see note 4)
Share of profits
Dividends
At 30 April 2019
Exchange differences
Disposal (see note 4)
Dividends
At 31 October 2020
£’000
1,583
(4)
(1,178)
50
(36)
415
16
(374)
–
57
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.
In May 2020, the group sold its shares in PHOTO DIRECT Pty Ltd, an Australian base associate.
Name
At 30 April 2019
Photo Direct Pty Ltd
Other associates
At 31 October 2020
Other associates
Country of
incorporation
Assets
£’000
Liabilities
£’000
Revenue
£’000
Share of profit
£’000
Dividends
received
Australia
446
69
515
69
69
72
28
100
12
12
782
8
790
0
0
49
(1)
48
0
0
36
–
36
–
0
Interest
%
26.95
12 6
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
Company
Costs:
At 30 April 2018
Capital contribution relating to share-based payment (net)
At 30 April 2019
At 1 May 2019
Addition
At 31 October 2020
Provision:
At 30 April 2018
At 30 April 2019
Impairement
At 31 October 2020
Net book value:
At 30 April 2018
At 30 April 2019
At 31 October 2020
Associated
undertakings
£’000
Subsidiary
undertakings
£’000
Total
£’000
48,024
133
48,157
48,157
–
47,986
133
48,119
48,119
–
48,119
48,157
372
372
2,251
2,623
47,614
47,747
45,496
375
375
2,251
2,626
47,649
47,782
45,534
38
–
38
38
3
41
3
3
–
3
35
35
38
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.
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.
12 7
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 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 period and preceding periods as a result of cash generation from
the business.
During the current period and prior period 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 period ending 31 October 2020 (30 April 2019: 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 LU 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 statement of financial position 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 statement of financial position 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 statement of financial position 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 statement of financial position 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
statement of financial position date. For finance leases the market rate of interest is determined by reference to similar lease agreements.
12 8
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC 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
statement of financial position date if the effect is material.
IFRS 13 requires an analysis of financial instruments carried at fair value by valuation method as follows:
Level 1 – quoted prices in active markets for identical assets or liabilities.
Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as process)
or indirectly (that is derived from process).
Level 3 – inputs for assets or liabilities that are not based on observable market data.
The investment in Max Sight Group Holdings Ltd, which as a listed investment, is valued at level 1. We own 109,972,500 Max Sight Group
Holdings Ltd’s shares valuated at 0,068 HKD at the end of October 2020 (£744,995).
The group also own 49% of Proclé Bastille (£81k) and LX Repair (£134K), reported at Level 3.
Financial instruments by category
The tables below show financial instruments by category for the Group
At 31 October 2020
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 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
Loans and
receivables
£’000
Financial
instruments
£’000
984
–
18,539
106,193
125,716
–
960
–
–
960
Total
£’000
984
960
18,539
106,193
126,676
Other financial
liabilities at
amortised cost
£’000
Total
£’000
95,030
95,030
424
39,712
135,166
424
39,712
135,166
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
12 9
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 15( A ) FA I R VA LU 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 31 October 2020
Assets per statement of financial position
Financial assets – held at amortised cost
Financial assets held at FVTPL
Trade and other receivables
Cash and cash equivalents
Liabilities per statement of financial position
Borrowings
Trade and other payables excluding non – financial liabilities
At 30 April 2019
Assets per statement of financial position
Financial assets – held at amortised cost
Financial assets 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
13 0
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
Financial
instruments
£’000
–
–
24,909
4,903
29,812
976
745
–
–
1,721
Other financial
liabilities at
amortised cost
£’000
1,868
24,361
26,229
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
976
745
24,909
4,903
31,533
Total
£’000
1,868
24,361
26,229
Total
£’000
982
1,176
19,394
3,202
24,754
Total
£’000
41,608
41,608
41,608
41,608
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-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
(ii) Liquidity risk
(iii) Market risk
Credit risk is the risk of financial loss to the Group and the Company if a customer or counterparty to a financial instrument fails to meet its
contractual obligations. It mainly arises on trade and other receivables and bank balances.
Liquidity risk arises from the Group and the Company having insufficient cash resources to meet its obligations as and when they fall due
for payment.
Market risk arises from changes in market prices, such as exchange rates, interest rates and equity prices that will impact on the Group’s and
the Company’s income statement or the value of its holding of financial instruments.
Listed below are details of these risks, the Group’s objectives, policies and processes for measuring and monitoring risks and the Group’s
management of capital.
Risk Management Framework
The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential risks for
the Group. Information has been disclosed relating to the Parent Company only where material risk exists.
There is a continuous process for identifying, evaluating and managing the key financial risks faced by the Group in line with changing market
conditions and the Group’s strategy. If necessary, the Group’s internal audit function may assist in monitoring and assessing the effectiveness of
controls and procedures. The Board retains responsibility for ensuring the adequacy of systems for identifying and assessing significant risks,
that appropriate control systems and other mitigating actions are in place and that residual exposures are consistent with the Group’s strategy
and objectives. Assessments are conducted for all material entities.
The Group may use derivatives to manage exchange or interest rate risk. Approval for their use is given by the Board and the position is
monitored constantly.
With regard to management of interest rate risk, the objectives are to lessen the impact of adverse interest rate movements on earnings and
shareholders’ funds and to ensure no breach of covenants. This is mainly achieved by reviewing the mix of fixed and floating rate borrowings.
The Group’s liquidity risk management involves maintaining sufficient cash and cash equivalents and the availability of funding through an
adequate amount of committed credit facilities.
(i) Credit risk
The Group has no significant concentrations of credit risk. Credit risk arises from cash and cash equivalents and deposits with banks and
financial institutions, and on outstanding trade and other receivables. Cash deposits are limited to high credit quality financial institutions. The
Group has policies in place to ensure that sales of products and services are made to customers with an approved credit history.
131
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 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
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.
The ageing of net current trade receivables is as follows:
Current
Past due
– overdue 1-30 days
– overdue 31-60 days
– overdue 61 days
Total past due
Total trade receivables
Group
Company
31 October
2020
£’000
7,828
835
113
709
1,657
9,485
30 April
2019
£’000
6,377
778
1,313
1,844
3,935
10,312
31 October
2020
£’000
42
–
–
–
–
42
30 April
2019
£’000
65
–
–
90
90
155
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.
13 2
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
(ii) Liquidity risk
The Group’s liquidity risk management involves maintaining sufficient cash and cash equivalents and the availability of funding through
an adequate amount of committed credit facilities. Trading forecasts indicate that the current facilities provide more than sufficient liquidity
headroom to support the business for the foreseeable future. The net cash position at 31 October 2020 and 30 April 2019 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
31 October 2020 and 30 April 2019, the Group and the Company have comfortably complied with such requirements.
The table below summarises the maturity profile of the Group’s and Company’s financial liabilities (including trade and other payables) at
31 October 2020 and 30 April 2019 based on contractual undiscounted payments.
Group contractual cash flows
At 31 October 2020
Interest bearing loans and borrowings
and interest free loans
Finance leases
Trade and other payables
At 30 April 2019
Interest bearing loans and borrowings
and interest free loans
Finance leases
Trade and other payables
Company contractual cash flows
At 31 October 2020
Interest bearing loans and borrowings
and interest free loans
Trade and other payables
At 30 April 2019
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
49,817
15,624
13,635
8,706
5,768
1,479
95,029
151
39,712
115
–
92
–
54
–
12
–
–
–
424
39,712
89,680
15,739
13,727
8,760
5,780
1,479
135,165
15,471
14,864
15,019
12,896
7,955
2,464
68,669
133
47,412
139
–
55
–
22
–
4
–
–
–
353
47,412
63,016
15,003
15,074
12,918
7,959
2,464
116,434
Within
one year
£’000
873
24,361
25,234
41,549
Year 2
£’000
Year 3
£’000
Year 4
£’000
Year 5
£’000
Over
5 years
£’000
Total
£’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
873
24,361
25,234
–
41,549
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.
13 3
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 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
(iii) Market risk
Foreign exchange risk
The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the local functional
currency. In addition, the Group faces currency risks arising from monetary financial instruments held in non-functional currencies. The income
statement reflects the impact of realised and unrealised exchange differences on trading items and monetary financial instruments (note 4).
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. The main currency
translation risk relates to foreign operations whose functional currency is the Euro, Swiss Franc or Japanese Yen. The investments are not
hedged. The translation reserve reflects the exchange differences arising on translation of the opening net assets and results of the foreign
operation (note 20).
Operational foreign exchange exposure
Where possible, the Group tries to invoice in the local currency of the respective entity. If this is not possible, to mitigate exposure, the Group
endeavours to buy from suppliers and sell to customers in the same currency. The exposure relating to receivables and payables denominated
in the non-functional currency is normally less than 3 months as this is the normal settlement period for these items.
Subject to the requirements of Group Treasury, as noted above, where possible, the Group tries to hold the majority of its cash and cash
equivalent balances in the local currency of the respective entity.
Monetary assets/liabilities
The Group continues to monitor exchange rates and buy or sell currencies in order to minimise the open exposure to foreign exchange risk.
The Group may use derivative financial instruments mainly to reduce the risk of foreign exchange exposure on trading items (sales or
purchases in currencies other than the domestic currency of the company concerned) and interest rate movements. The Group does not hold
or issue derivative financial instruments for financial trading purposes.
Borrowings
At 31 October 2020 and 30 April 2019 the Group had no borrowings which were not denominated in the functional currency of the Group
company concerned.
13 4
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC Analysis of net cash by currency
Group
31 October 2020
Sterling
Euro
Swiss Franc
US Dollar
Japanese yen
Other currencies
30 April 2019
Sterling
Euro
Swiss Franc
US Dollar
Japanese yen
Other currencies
Net cash 2020 include £10,153,000 of IFRS 16 liabilities.
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
17,828
72,838
4,417
28
8,391
2,692
26,270
48,426
2,278
29
5,409
2,179
84,591
Financial
assets
£’000
Loans
£’000
Leases
£’000
Total
£’000
975
–
9
–
–
–
(1,868)
(89,038)
(1,183)
–
(2,916)
(25)
–
(424)
–
–
–
–
974
–
(5)
(67,393)
(1,490)
–
–
–
–
–
–
(347)
–
(1,842)
982
(67,393)
–
8
–
–
–
16,935
(16,624)
3,243
28
5,475
2,667
11,725
27,239
(20,457)
2,286
29
5,062
2,179
16,338
106,193
984
(95,029)
(424)
31 October
2020
£’000
30 April
2019
£’000
105,235
83,646
958
984
945
982
(95,029)
(424)
11,724
(67,393)
(1,842)
16,338
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.
13 5
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 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
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 31 October 2020 of £95,030,000 (30 April 2019 of £67,393,000), of which
£49,817,000 (30 April 2019 of £67,393,000) is subject to a fixed interest rate of 1.2%. An increase of 1% in the fixed rate of interest would
result in an extra £500,000 (30 April 2019: £600,000) of interest expense.
Terms and debt repayment schedule
The table below shows the maturity profile and interest rates of the Groups borrowings at 31 October 2020 and 30 April 2019.Floating
rate interest borrowings (loans and overdrafts) are based on LIBOR, EURIBOR or equivalent rates in other countries plus a margin (generally
between 0.45% and 1.0%).
Group
Finance leases
Loans
Status
Fixed rate
Fixed rate
Currency
Various
Euro
Interest Rate
Year of maturity
0.0% – 7.2%
2025
0.49% – 1.2%
2022-2026
2020
Carrying
amount
£’000
424
95,029
95,453
2019
Carrying
amount
£’000
1,842
67,393
69,235
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 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 period.
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 period.
Subsidiary companies
Subsidiary companies are funded by share capital and retained earnings, and where applicable local borrowings by the subsidiaries in
appropriate currencies.
13 6
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
The capital structure of the Group is presented below.
Cash and cash equivalents
Borrowings
Net cash (excluding restricted deposits)
Equity
31 October
2020
£’000
106,193
(95,029)
20,889
113,870
30 April
2019
£’000
84,591
(69,235)
15,356
143,847
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 period ended 31 October 2020 the Group increased its net borrowings by £30,964,000 (30 April 2019: £35,556,000) in
order to take advantage of historically low interest rates, to reduce the Group’s weighted average cost of capital, to increase the Group’s
capacity to invest in product offerings as it continues to evaluate potential acquisitions and to secure enough liquidity should the COVID-19
pandemic go on for longer or its impact on the business becomes bigger than expected.
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 SA L E
Group
Non-current
Financial
instruments
held at
amortised cost
31 October
2020
£’000
Financial
instruments
held at
FVTPL
31 October
2020
£’000
Financial
instruments
held at
amortised cost
30 April
2019
£’000
984
960
982
Financial
instruments
held at
FVTPL
30 April
2019
£’000
1,387
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.
Financial assets held at amortised cost, financial instruments held at FVTPL, Assets held to maturity and assets available for sale consist of short-
term monetary funds of £nil (2019: £nil) and investments in listed and unlisted entities, net of impairment provisions.
Company
Non-current
Financial
instruments
held at
amortised cost
31 October
2020
£’000
Financial
instruments
held at
FVTPL
31 October
2020
£’000
Financial
instruments
held at
amortised cost
30 April
2019
£’000
976
745
975
Financial
instruments
held at
FVTPL
30 April
2019
£’000
1,176
Financial assets held at amortised cost and assets held to maturity consist of restricted bank deposit accounts – see note 19.
137
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 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
Other receivables
Prepayments and accrued income
Current assets
Trade receivables
Amounts due from subsidiaries
Other receivables
Prepayments and accrued income
Group
Company
31 October
2020
£’000
30 April
2019
£’000
31 October
2020
£’000
30 April
2019
£’000
1,799
–
1,799
7,828
–
7,959
953
16,740
1,742
22
1,764
10,312
–
–
–
41
–
24,725
5,747
4,858
20,917
143
–
24,909
–
–
–
155
16,503
1,851
3,104
21,613
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
Company
31 October
2020
£’000
14,650
–
1,961
16,611
30 April
2019
£’000
14,157
346
7,836
22,339
31 October
2020
£’000
864
–
399
1,263
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
Company
31 October
2020
£’000
91,963
14,230
106,193
106,193
30 April
2019
£’000
83,646
945
84,591
84,591
31 October
2020
£’000
4,903
–
4,903
4,903
30 April
2019
£’000
1,858
–
1,999
3,857
30 April
2019
£’000
3,162
–
3,162
3,162
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.
13 8
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC 19 N E T C AS H
Cash and cash equivalents per statement of
financial position
Financial assets restricted cash held to maturity
Non-current borrowings
Current borrowings
Non-current finance leases
Current finance leases
Group
Company
31 October
2020
£’000
30 April
2019
£’000
31 October
2020
£’000
Notes
18
15
21
21
21
21
106,193
984
(39,444)
(45,434)
(272)
(150)
21,877
84,591
982
(52,322)
(15,071)
(1,063)
(779)
16,338
4,903
976
(995)
(873)
–
–
4,011
30 April
2019
£’000
3,162
975
–
–
–
–
4,137
At 31 October 2020, £984,000 of the total net cash (2019: £982,000) comprised bank deposit accounts that are subject to restrictions and
are not freely available for use by the Group and Company. These amounts are shown under financial assets restricted cash/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 excluding IFRS-16 liability impact of £10,153,000.
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
18-months to 31 October 2020
Cash and cash equivalents per statement
of financial position and cash flow
Financial asset held at amortised cost
Non-current loans
Current loans
Leases
12-months to 30 April 2019
Cash and cash equivalents per statement
of financial position and cash flow
Financial asset held at amortised cost
Non-current loans
Current loans
Leases
1 May
£’000
Exchange
differences
£’000
Other
movements
£’000
Cash flow
£’000
31 October
£’000
84,591
982
(52,322)
(15,071)
(1,842)
16,338
58,657
1,710
(27,319)
(6,006)
(354)
26,688
17
2
–
–
(1,060)
44,902
(779)
(28)
(1,848)
(44,680)
1,713
(46)
22
13
532
117
(28)
656
–
–
18,213
(17,579)
(1,627)
(993)
21,585
106,193
–
(30,964)
(17,097)
(286)
7,432
25,912
(741)
(43,748)
8,397
167
(10,013)
984
(39,444)
(45,433)
(424)
21,877
84,591
982
(52,322)
(15,071)
(1,842)
16,338
13 9
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
19 N E T C AS H C O N T I N U E D
Company
18-months to 31 October 2020
Cash and cash equivalents per statement of financial position and cash flow
Financial instrument held at amortised cost/held to maturity
12-months to 30 April 2019
Cash and cash equivalents per statement of financial position and cash flow
Financial instrument held at amortised cost/held to maturity
Other movements for finance leases relate to new finance leases during the period.
20 S H A R E C A P I TA L A N D R E S E R V E S
1 May
£’000
Cash flow
£’000
31 October
£’000
3,162
975
4,137
1,741
1
1,742
4,903
976
5,879
£’000
£’000
£’000
11,500
974
12,474
(8,338)
1
(8,337)
3,162
975
4,137
Share Capital
Allotted, issued and fully paid:
Ordinary shares of 0.5p each
At the beginning of the period
Issued in year – share options exercised
At the end of the period
31 October
2020
Number
30 April
2019
Number
31 October
2020
£’000
30 April
2019
£’000
377,981,637 377,499,637
11,000
482,000
377,992,637 377,981,637
1,889
–
1,889
1,887
2
1,889
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 2012
9 Jul 2013
11 Jul 2014
9 Jul 2015
15-Dec-15
13-Jul-16
21-Jul-17
27-Apr-19
27-Aug-19
27-Apr-20
At
30 April
2019
30,000
998,000
445,000
1,137,600
57,400
853,300
705,200
1,000,000
–
–
Exercise
price
39.17p
90.63p
145.33p
133.33p
153.25p
141.50p
157.00p
93.30p
–
–
Lapsed or
forfeited
during year
30,000
998,000
445,000
276,000
–
230,584
350,700
-
–
–
5,226,500
2,330,284
Exercised
during year
At
31 October
2020
Exercise
price
Date
from which
exercisable
Last date
on which
exercisable
–
–
–
–
–
–
–
–
–
–
–
–
–
–
861,600
57,400
622,716
354,500
1,000,000
1,006,509
1,000,000
4,902,725
39.17p
4-Jul-2015
3-Jul-2019
90.63p
9-Jul-2016
8-Jul-2020
145.33p 11–Jul- 2017 10-Jul-2021
133.33p
09-Jul-18
08-Jul-22
153.25p
15-Dec-18
14-Dec-22
141.50p
157.00p
13-Jul-19
21-Jul-20
12-Jul-23
21-Jul-24
93.30p
27-Apr-22
26-Apr-26
101.40p
27-Aug-22
26-Aug-26
93.30p
27-Apr-23
26-Apr-27
Full details of directors’ share options are given in the Remuneration report on pages 68 to 83.
14 0
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-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 31 October 2020 is 113.42p (2019: 129.0p) and the weighted average
exercise price of options exercisable at 31 October 2020 is 124.55p (2019: 118.5p).
There was no options exercised during the period ended 31 October 2020 (30 April 2019: the weighted average share price for option
was 46.6p).
The weighted average remaining years for options outstanding at the period-end date is 3.2 years (2019: 3.2 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 31 October 2020 and 30 April 2019:
Date of grant
Vesting period
Share price volatility
Share price on date of grant
Option price
Expected term
Dividend yield
Risk free interest rate
Fair value
Date of grant
Vesting period
Share price volatility
Share price on date of grant
Option price
Expected term
Dividend yield
Risk free interest rate
Fair value
13 December
2011
3 years
63.20%
50.25p
53.50p
4 July
2012
3 years
58.30%
38.00p
39.17p
9 July
2013
3 years
48.50%
94.00p
90.63p
3.25 years
3.25 years
3.25 years
4.48%
0.50%
16.38p
11 July
2014
3 years
39.10%
141.00p
145.33p
6.58%
0.46%
10.23p
3.83%
0.62%
26.20p
9 July
2015
15 December
2015
3 years
30.70%
113.50p
133.33p
3 years
26.16%
154.00p
153.25p
3.25 years
3.25 years
3.25 years
2.66%
1.28%
32.20p
4.02%
0.82%
21.00p
3.32%
0.90%
21.78p
141
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 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
Date of grant
Vesting period
Share price volatility
Share price on date of grant
Option price
Expected term
Dividend yield
Risk free interest rate
Fair value
13 July
2016
3 years
26.35%
146.75p
141.50p
31 July
2017
3 years
36.00%
159.00p
157.00p
27 August
2019
3 years
32.5%
101.40p
103.00p
3.25 years
3.25 years
3.25 years
3.99%
0.11%
19.72p
4.00%
0.62%
30.61p
0.00%
0.00%
45.51p
27-Apr-19
27-apr-20
3 years
32.59%
92.80p
93.30p
3 years
31.64%
42.30p
93.30p
3.25 years
3.25 years
3.98%
0.00%
The charge for share-based payments is £171,000 (2019: £141,000) and for the Company the charge is £5,000 (2019: £77,000).
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 31 October 2020 and 30 April 2019 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 (2019: £201,000) arising on the redemption of the deferred shares and £2,450,000
(2019: £1,997,000) relating to the fair value of options granted to employees of Group undertakings (note 14).
14 2
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC 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
Group
Company
31 October
2020
£’000
30 April
2019
£’000
31 October
2020
£’000
30 April
2019
£’000
39,444
273
39,717
45,433
151
45,584
52,322
1,063
53,385
15,071
779
15,850
995
–
995
873
–
873
–
–
–
–
–
–
The above financial liabilities exclude £10,153,000 of IFRS 16 liabilities.
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 five
(2019: four) years (note 12). The total finance lease creditor at 31 October 2020 was £424,000 of which £151,000 was due within one
year and the remaining £273,000 due between two and five years, (2019: total finance lease creditor £1,842,000, £779,000 due within
one year and £1,063,000 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 GAT 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.
14 3
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
22 P O S T - E M P LOYM E N T B E N E F I T O B L I GAT I O N S C O N T I N U E D
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:
Employment benefit obligations
Defined benefit schemes
Group
Company
31 October
2020
£’000
4,793
1,179
5,973
30 April
2019
£’000
4,578
1,057
5,635
31 October
2020
£’000
30 April
2019
£’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 31 October 2020, 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.
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% per annum 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 2018. At this date the Fund had a funding level of 103% and a surplus of approximately
£0.3 million on a technical provisions basis. This basis uses actuarial assumptions adopted by the Trustee Directors of the Fund that are
consistent with the Fund continuing on an ongoing basis with support from the Company.
The last active member ceased employment with the Company in 2020 so contributions are no longer required in respect of the accrual of
benefits in the Fund.
14 4
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC Risks associated with the Fund
The fund exposes the Company to a number of risks, the most significant of which are described below.
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
Inflation risk
A decrease in corporate bond yields will increase the value placed on the Fund’s liabilities for IAS 19, although
this will be partially offset by an increase in the value of the Fund’s bond holdings and insurance policies
backing pensions in payment.
Some of the Fund’s benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities
(although, in most cases, caps on the level of inflationary increases are in place to protect against extreme
inflation). The majority of the assets are either unaffected by or only loosely correlated with inflation, meaning
that an increase in inflation will also increase the deficit.
Life expectancy
The majority of the Fund’s obligations are to provide benefits for the life of the member, so increases in life
expectancy will result in an increase in the liabilities.
Reconciliation of the movement in the present value of the defined benefit obligation
Present value of defined benefit obligation at beginning of the period
Current service cost
Interest cost
Actuarial gains on fund liabilities arising in demographic assumptions
Actuarial losses/(gains) from changes in financial assumptions
Actuarial losses on liabilities from experience
Benefits paid
Present value of defined benefit obligation at end of the period
Reconciliation of the movement in the fair value of plan assets
Fair value of plan assets at beginning of the period
Interest income on fund assets
Remeasurement gains on assets
Contributions by the Company
Benefits paid
Fair value of plan assets at end of the period
31 October
2020
£’000
5,940
9
206
23
523
67
(501)
6,267
31 October
2020
£’000
6,675
231
622
13
(501)
7,040
30 April
2019
£’000
5,947
7
156
(80)
242
(9)
(323)
5,940
30 April
2019
£’000
6,657
175
160
6
(323)
6,675
14 5
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
22 P O S T - E M P LOYM E N T B E N E F I T O B L I GAT I O N S C O N T I N U E D
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
31 October
2020
£’000
6,267
7,040
(773)
773
–
30 April
2019
£’000
5,940
(6,675)
(735)
735
–
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 £1,363,000 (2019: 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 that recognised in net interest
Actuarial losses due to changes in financial assumptions
Actuarial losses/(gains) due to changes in demographic assumptions
Actuarial losses/(gains) on liabilities arising from experience
Adjustment due to the asset ceiling
Total expense/(income) amount recognised in Other Comprehensive Income
Total expense amount recognised in Comprehensive Income
The amounts shown above are included in staff costs (note 5) and in administrative expenses.
An analysis of the assets of the plan is as follows:
31 October
2020
£’000
30 April
2019
£’000
9
–
9
9
(622)
523
23
67
12
3
12
7
–
7
7
(160)
242
(80)
(9)
6
(1)
6
%
60
40
–
100
Bonds
Insurance policies
Other
31 October 2020
30 April 2019
£’000
4,405
2,622
13
7,040
%
63
37
–
100
£’000
3,988
2,650
37
6,675
There were no financial instruments of the Company included in the plan assets (2019: none) and there were no property assets occupied by
the Company (2019: none).
14 6
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
Principal actuarial assumptions
Discount rate for scheme liabilities
Rate for increase in salaries
Price inflation
Pension increases
31 October
2020
30 April
2019
1.6
n/a
3.1
3.0
2.4
1.5
3.4
3.3
The mortality tables used for 2020 are S3NXA Light tables for males and S3NXA All lives for females, with CMI 2019 projections and a long-
term rate of improvement of 1.25% pa. The mortality tables used for 2019 are also S3NXA Light tables, but with CMI 2018 projections and a
long term rate of improvement of 1.25% 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
31 October 2020
23.3 years (age 88.3)
24.6 years (age 89.6)
24.5 years (age 89.5)
26.0 years (age 91.0)
30 April 2019
23.2 years (age 88.2)
24.4 years (age 89.4)
24.4 years (age 89.6)
25.8 years (age 90.8)
Fair value of defined benefit obligation
Fair value of assets
Surplus/(deficit)
Experience gains/(losses) on fund assets
Experience (losses)/gains on plan liabilities
2020
£’000
6,267
7,040
773
2020
£’000
622
(67)
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
Liabilities for 2020, 2019, 2018, 2017 and 2016 relate to gains/(losses) in respect of liability experience only, and excludes any change in
liabilities in respect of changes to the actuarial assumptions used.
Sensitivity to key assumptions
The key assumptions used for the IAS 19 valuation are: discount rate, inflation rate and mortality. If different assumptions were used, this could
have a material effect on the results disclosed. The table below shows the sensitivity to the key assumptions noted above.
Period ended 31 October 2020
As reported
Following a 0.1% decrease in the discount rate
Following a 0.1% increase in the inflation assumption
Following an increase in the life expectancy of one year
Service
cost
£’000
Net
Interest
£’000
Total profit
and loss
charge
£’000
9
9
9
9
–
–
–
–
9
9
9
9
Plan
assets
£’000
7,040
7,061
7,043
7,171
Defined
benefit
obligation
£’000
6,267
6,337
6,286
6,580
Surplus
£’000
773
724
757
591
The sensitivity information shown above has been prepared using the same method as adopted when adjusting the results of the latest
valuation to the statement of financial position data. This is the same approach as has been adopted in previous years.
14 7
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
22 P O S T - E M P LOYM E N T B E N E F I T O B L I GAT 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 31 October 2020 and 30 April 2019 by
independent actuaries.
Reconciliation of the movement in the present value of the defined benefit obligation
Present value of defined benefit obligation at start of the period
Exchange difference
Contribution by members
Current service cost
Past service cost
Interest cost
Remeasurement losses on plan liabilities
Prepaid risk premiums
Benefits paid
Administration costs
31 October
2020
£’000
4,144
481
69
282
(269)
43
93
(69)
(54)
3
30 April
2019
£’000
3,826
105
38
196
–
28
144
(38)
(157)
2
Present value of defined benefit obligation at end of the period
4,792
4,144
31 October
2020
£’000
3,087
361
306
53
(69)
(54)
(69)
3,615
31 October
2020
£’000
1,057
250
93
1,400
30 April
2019
£’000
2,894
81
190
21
96
(157)
(38)
3,087
30 April
2019
£’000
932
24
101
1,057
Fair value of plan assets at start of the period
Exchange difference
Contributions by company and members
Expected return on plan assets
Remeasurement gain on plan assets
Benefits paid
Prepaid risk premiums
Fair value of plan assets at end of the period
Net liability at start of the period
Exchange difference
Increase in liability
Net liability at end of the period
14 8
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
Amounts recognised in comprehensive income
Amount recognised in profit and loss
Amounts recognised in comprehensive income
Current service cost
Past 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
31 October
2020
£’000
30 April
2019
£’000
282
(269)
3
(10)
6
69
93
162
168
31 October 2020
30 April 2019
£’000
36
2,459
1,120
3,615
%
1
68
31
100
£’000
164
2,016
907
3,087
31 October
2020
%
0.20
n/a
1.20
0.00
196
–
2
7
205
(96)
144
48
253
%
5
65
29
100
30 April
2019
%
0.60
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 2020 and 2019.
The mortality tables used in 2020, 2019 and 2018 were the BVG 2015 GT tables.
The mortality tables used in 2017 and 2016 were the BVG 2010 GT tables.
14 9
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 22 P O S T - E M P LOYM E N T B E N E F I T O B L I GAT 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
2020
£’000
4,715
3,615
2019
£’000
4,144
3,087
2018
£’000
3,826
2,894
2017
£’000
4,062
3,047
2016
£’000
3,526
2,604
(1,100)
(1,057)
(932)
(1,015)
(922)
2020
£’000
(93)
2%
(69)
2%
2019
£’000
(144)
3%
96
3%
2018
£’000
131
3%
(78)
(3%)
2017
£’000
(186)
(5%)
218
7%
2016
£’000
(107)
3%
168
6%
The 2016 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
4,715
4,919
4,526
4,678
4,755
4,788
4,641
–
204
(189)
(37)
40
73
(74)
The Group’s best estimate for contributions to be paid by the company next year to the scheme is £169,000 (2019: £189,000).
The amount recognised in the income statement for this scheme was £6,000 (30 April 2019: £211,000).
15 0
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
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 31 October 2020 and 30 April 2019. 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
23 P R OV I S I O N S
Group
At 30 April 2018
Exchange differences
Utilised and other movements
Charged to income statement
At 30 April 2019
Amount shown as current liability
At 30 April 2019
Exchange differences
Reclassification
Charged to income statement
At 31 October 2020
Amount shown as current liability
31 October
2020
0.40%
1.75%
30 April
2019
1.20%
1.75%
61-63 years
61-63 years
1.75%
1.75%
TGH/TGF 05
TGH/TGF 05
Employee
related
claims
£’000
Product
warranties
£’000
11
–
13
86
110
110
110
–
–
239
349
349
128
(5)
(38)
23
108
108
108
12
–
(21)
99
99
Other
£’000
57
–
(300)
243
–
–
–
–
886
(72)
814
814
Total
£’000
196
(5)
(325)
352
218
218
218
12
886
146
1,262
1,262
151
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE 24 D E F E R R E D TA X AT I O N
Deferred tax comprises:
Temporary differences relating to property, plant and equipment
Other temporary 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
The movements on deferred taxation during the period were as follows:
Opening balance
Exchange differences
Arising on acquisition of subsidiary
Charge for the period in income statement
Amounts (credited)/charged to other comprehensive income
Group
Company
31 October
2020
£’000
18
16
–
30
2,378
3,616
6,058
–
6,058
6,058
30 April
2019
(restated)
£’000
3,279
101
(645)
(209)
2,959
1,411
6,896
(912)
7,808
6,896
31 October
2020
£’000
–
–
–
–
–
–
–
–
–
–
Group
Company
31 October
2020
£’000
6,896
1
–
(839)
–
6,058
30 April
2019
(restated)
£’000
736
42
3,011
3,149
(42)
6,896
31 October
2020
£’000
(670)
–
–
670
–
–
30 April
2019
£’000
(656)
–
–
–
–
(14)
(670)
(670)
–
(670)
30 April
2019
£’000
(945)
–
–
275
–
(670)
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.
15 2
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
Unrecognised deferred tax assets
Deferred tax assets amounting to £399,000 (2019: £1,220,000) arising on temporary differences of £2,065,000 (2019: £5,052,000), in
respect of unrelieved tax losses and other temporary differences have not been recognised, as their future economic benefit is uncertain.
The expiry dates of unrelieved tax losses are as follows:
Expiring in less than one year
Expiring between two and 20 years
No expiry date
Group
31 October
2020
£’000
–
2,065
399
2,465
30 April
2019
£’000
–
228
992
1,220
In addition, the Group has an unrecognised deferred tax asset on gross capital losses of £3,756,000 (2019: £3,756,000), of which
£3,627,000 (2019: £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 one of the major jurisdictions in which the Group operates, in France to 25% from 2022.
The deferred tax assets and liabilities have been recognised based on the respective corporation tax rates at which they are anticipated to
unwind in each jurisdiction.
25 T R A D E A N D OT H E R PAYA B L E S
Amounts shown as current liabilities
Trade payables
Amounts owed to subsidiaries
Other taxes and social security costs
Other payables
Accruals and deferred income
Group
Company
31 October
2020
£’000
30 April
2019
£’000
31 October
2020
£’000
30 April
2019
£’000
21,799
24,699
–
2,900
8,466
6,547
39,712
–
3,517
6,880
5,786
40,882
3,227
19,072
536
77
1,448
24,360
4,038
36,373
517
442
696
42,066
26 C A P I TA L C O M M I TM 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
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 (2019: none).
15 3
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
27 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 pages 52 and 53.
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 payment charge
Group
Company
31 October
2020
£’000
30 April
2019
£’000
31 October
2020
£’000
30 April
2019
£’000
2,212
171
2,383
1,433
61
1,494
–
–
–
–
–
–
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 70 to 74. 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 period in respect of this was £nil (2019: £nil). No director who served during the year was a member of the Company’s defined benefit
pension scheme (2019: none).
Directors of the Company control 26,64% of the Ordinary shares of the Company. The interests of the directors are shown on page 78 of the
Remuneration report.
Company
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
15 4
31 October
2020
£’000
–
1,096
23,466
19,072
30 April
2019
£’000
17
6,646
16,503
36,373
13,309
3,049
5,037
3,374
184
2,239
31 October
2020
£’000
30 April
2019
£’000
–
36
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
28 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.
Principal Activity
Company name
UK & Ireland
Operations
Revolution Max Ltd
Jolly Roger (Amusement Rides) Limited Production
Investment
MgInvest Investments Limited
Dormant
Photo-Me (2016) Limited
Operations
Photo-Me (Retail) Limited
Corporate
Photo-Me Limited
Dormant
Photo-Me Trustees Limited
Investment
Xpand Investments Limited
Dormant
Power-Me Limited
Operations
Inox Equip Limited
Dormant
Tersus Equip Limited
Operations
Photo-Me Ireland Limited
Group
interest
100%
100%
100%*
100%
100%
100%
100%
100%
100%
100%
100%
100%
Continental Europe
Prontophot Austria G.m.b.H.
Operations
100%
Prontophot Belgium NV
Photo-Me Czech Republic s.p.o.l. s.r.o.
KIS SAS
Photomaton SAS
Operations
Dormant
Production
Operations
100%
100%*
100%*
100%*
Sempa SARL
Operations
100%*
Photo-Me France SAS
SCI du Lotissement d’Echirolles
SCI Immobilière du 21
Fotofix-Schnellphotoautomaten
G.m.b.H.
Kis Italia Srl
Prontophot Holland B.V
KIS Poland s.p.z.o.o.
Animate Fotofixe Limitada
Corporate
Property
Property
Operations
Dormant
Operations
Operations
Operations
Operations
Global Network Investment SL
Smart Real Estate & Refurbishment SL Operations
Operations
Prontophot (Schweiz) AG
100%
61%*
100%*
100%
100%
100%
100%
100%
100%
100%
100%
Registered office address
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 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
Viktor Kaplan Strasse 9B, 2201 Gerasdorf bei
Wien
Boulevard Paepsem 8a, 1070 Anderlecht
Husova 2117, 256 01 Benešov
7 Rue Jean-Pierre Timbaud, 38130 Echirolles
4 Rue de la Croix Faron, 93217 La Plaine
Saint-Denis
73 D rue du Général Mangin, 38000
Grenoble
7 Rue Jean-Pierre Timbaud, 38130 Echirolles
2110 Avenue Du Général De Gaulle, 38130
Echirolles
7 Rue Jean-Pierre Timbaud, 38130 Echirolles
Medienstrasse 4, 47807 Krefeld
Via Tiziano 32, 20145 Milano
Loonseweg 14, 5527 AC Hapert
ul. Targowa 46/5, 03-733 Warszawa
Rua Sto António do Zaire, n°138, 2685-492
Camarate
Provença 385, entrelo. 2º, 08025 Barcelona
Provença 385, entrelo. 2º, 08025 Barcelona
Sonnentalstrasse 5, 8600Dübendorf
Country of
incorporation
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
UK
Republic of
Ireland
Austria
Belgium
Czech Republic
France
France
France
France
France
France
Germany
Italy
Netherlands
Poland
Portugal
Spain
Spain
Switzerland
15 5
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE Principal Activity
Group
interest
Registered office address
Country of
incorporation
28 G R O U P U N D E R TA K I N G S C O N T I N U E D
Company name
Asia & ROW
Photo-Me (Shanghai) Co Limited
Operations
100%*
Photo-Me Beijing Co Limited
Dormant
100%*
Nippon Auto-Photo Kabushiki Kaisha Operations
100%
Photo-Me Korea Company Limited
Operations
100%*
Photomatico (Singapore) Pte Limited Operations
KIS (Thailand) Limited
Dormant
100%
49%
* Investments in subsidiaries not owned directly by Photo-Me International plc.
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
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
China
China
Japan
Korea
Singapore
Thailand
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 period ended 31 October 2020. Certain subsidiaries and
associates have a different statutory year end, sometimes due to legal requirements in the country concerned. The following subsidiaries
are exempt from the requirements of the Companies Act 2006 relating to the audit of individual accounts by virtue of section 479A of the
Companies Act:
– Jolly Roger (Amusement Rides) Limited;
– Photo-Me (Retail) Limited;
– Revolution Max Ltd;
– Xpand Investments Limited;
– Inox Equip Limited; and
– Mginvest Investments Limited.
The business figures for 18 months of Fotofix-Schnellphotoautomaten G.m.b.H.are part of the consolidated financial statements of the
Company. Fotofix-Schnellphotoautomaten GmbH is exempted from local audit as of 30 April 2020.
By virtue of section 394A of the Companies Act 2006, the group companies below which are currently dormant are exempt from the
requirement to prepare individual accounts:
– Photo-Me (2016) Limited;
– Power-Me Limited;
– Photo-Me Trustees Limited;
– Tersus Equip Limited
The following subsidiaries and associates have year-ends which are not 31 October:
SCI du Lotissement d’Echirolles
Photo-Me Beijing Co Limited
Photo-Me Shanghai Co Limited
31 December
31 December
31 December
KIS Technology Company Limited
31 March
29 B U S I N E SS C O M B I N AT I O N S
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 segment alongside its Identification,
Laundry and Kiosk businesses.
15 6
Notes to the financial statements continuedFor the period ended 31 October 2020PHOTO-ME INTERNATIONAL PLC
The acquisition was financed with borrowings from the Group’s bankers.
Due to the proximity of the transaction to the prior period reporting date, the purchase price allocation, including determination of the fair
value of intangible assets recognised on consolidation, had not been finalised when the prior period financial statements were approved.
The Group has therefore during the period adjusted the provisional amounts that were recorded in the prior period financial statements by
increasing intangible assets by £10,553,000 and reducing goodwill by the same amount (see note 11).
As part of the purchase price allocation, Photo-Me has recognised ‘separately identifiable acquired intangible assets’ in accordance with
International Financial Reporting Standards, and had their fair values assessed by an independent expert. The fair values being attributed to
the intangible assets for the year ended 30 April 2020 are noted below.
The fair value adjustments in respect of acquired intangible assets are due to the recognition of €7.71m in respect of key customer relationships
that provide Sempa with recurring annual revenue; €2.03m in respect of the Sempa brand and related assets which commands more than
50% share of the juice press market in France; and, €2.97m in respect of a key supplier agreement which secures Sempa with exclusive rights
to distribute its key product offering throughout France. There is a small balance of residual goodwill that we believe is attributable to Sempa’s
acquired workforce. A deferred tax liability of £2,4m was recognised in connection to these intangible assets and reflected in goodwill.
In the current period, the Group increased its ownership of Sempa SARL by purchasing the remaining 4% of the issued share capital in
the company.
30 I M PAC T O F C OV I D -19
Due to the significant impact of COVID-19 on consumer activity in all the Group’s end markets, the Group’s performance in the period was
significantly impacted. COVID-19 started to impact trading in Asia (especially China) in mid-January 2020 and by March 2020 the entire
Group’s end markets were severely disrupted, and the majority of expected revenue did not materialise as a result.
• COVID-19 has severely impacted each business area: B2B, children’s rides and, laundry operations to a lesser extent. Identification will
be the most challenging to recover.
• Identification was significantly impacted by the pandemic and ongoing challenging market conditions in the UK, due to home-taken
photos being accepted for official documents such as passports.
The COVID-19 crisis has required an in-depth review of the Group’s operations to address the current trading challenges. This has led to a
£33.6 million impact on the results, from exceptional items to provisions and impairment for the 18 months ended 31 October 2020. The
largest elements being:
• The write down of the carrying value of non-profitable machines (mainly photo booths and children’s rides – see note 12) amounting
to over £17.5 million due to the disruption caused by the COVID-19 situation, and the likely slow recovery in consumer spending habits
should social distancing measures remain in place for the foreseeable future. A further £15.3 million on impairment of intangibles and
£2.1 million on provisions and relocation.
• The impairment of intangibles includes impairment of goodwill and investments, especially for the B2B companies in the UK as well as the
impairment of R&D and other intangibles (see note 11).
Provisions include the provision for bad debt, receivables from customer attrition or bankruptcy and machines costs provisions, such as
dilapidation costs that will be incurred on relocation from non-profitable sites and stocks impairment.
Decisive action was taken to preserve the Group’s cash position, including reducing capital and other expenditure where feasible, using
government job retention schemes available to the Group to support payroll costs (amounting to £2.3 million). This was shown as a deduction
of the related expenses.
31 E V E N TS A F T E R 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 DAT E
The group continues to expand with the recent acquisition of the Japanese ID photobooth business of Plaza Create Co. Ltd. The transaction
completed on the 1st of February 2021 by a Photo-Me international subsidiary in Japan (Nippon Auto-Photo) for a consideration of JPY
1,013,000,000.
UK subsidiary FOWLER UK.COM Ltd which had its name changed to REVOLUTION MAX Ltd in May 2020 merged with another UK
subsidiary INOX EQUIP ltd on 1 November 2020.
157
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE Notes to the financial statements continued
For the year ended 30 April 2020
32 T R A N S I T I O N TO I F R S 16 L E AS E S
The table below shows reclassification of assets and liabilities on transition to IFRS 16 and the initial effect at 01 May 2019
Assets
Non-current assets
Current assets
Total assets
Equity
Equity attributable to owners of the Parent
Non-controlling interests
Total equity
Liabilities
Non-current liabilities
Current liabilities
Total equity and liabilities
33 P E R I O D S U M M A RY
Income statement (unaudited)
01 May
2019
Before
£’000
143,277
128,723
272,000
141,977
1,870
143,847
64,450
63,703
272,000
IFRS-16
Impact
£’000
18,582
–
18,582
–
–
–
13,755
4,827
18,852
01 May
2019
After
£’000
161,859
128,723
290,582
141,977
1,870
143,847
78,205
68,530
290,582
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
2020
£’000
2019
£’000
2018
£’000
2017
£’000
2016
£’000
54,623
195,230
60,392
310,245
3,317
(2,825)
492
(2,844)
(2,352)
(2,305)
(47)
(2,352)
(0.62)p
(0.62)p
0.00p
0.00p
–
0.00p
52,919
130,661
44,538
228,118
42,739
(146)
42,593
(11,314)
31,279
31,226
53
31,279
8.27p
8.26p
3.71p
4.73p
–
8.44p
63,707
121,134
44,973
229,814
46,106
4,069
50,175
(9,889)
40,286
40,134
152
40,286
10.64p
10.60p
3.71p
4.73p
–
8.44p
53,639
111,670
49,344
214,653
46,807
1,232
48,039
(12,901)
35,138
34,991
147
35,138
9.30p
9.27p
3.09p
3.94p
–
7.03p
45,783
93,712
44,499
183,994
39,734
372
40,106
(10,907)
29,199
29,066
133
29,199
7.77p
7.72p
2.575p
3.285p
2.815p
8.675p
15 8
PHOTO-ME INTERNATIONAL PLC
Statements of financial position
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
2020
£’000
32,739
90,937
57
3,743
139,760
–
267,237
1,889
10,599
99,693
112,181
1,689
113,870
52,968
100,399
267,237
21,877
2019
£’000
41,816
95,353
415
5,693
128,723
–
272,000
1,889
10,588
129,500
141,977
1,870
143,847
64,450
63,703
272,000
16,338
2018
£’000
27,395
93,232
1,583
10,047
106,652
–
238,909
1,887
10,366
131,004
143,257
1,553
144,810
35,959
58,140
238,909
26,688
2017
£’000
25,263
75,651
2,095
8,136
85,753
96
196,994
1,882
8,999
117,080
127,961
1,341
129,302
19,045
48,647
196,994
39,212
2016
£’000
20,312
56,723
1,713
8,092
103,382
96
190,318
1,877
8,156
111,608
121,641
1,109
122,750
17,656
49,912
190,318
62,415
Note: The figures above have been extracted from the accounts for the relevant period and have not been adjusted for changes in accounting
policies as a result of adoption of new accounting standards.
Financial & operating statistics
Capital expenditure – photobooth & vending
machines £’000
Capital expenditure – research & development £’000
EBITDA £’000
EBITDA % of revenue
Number of vending sites
2020
2019
2018
2017
2016
38,435
2,296
87,313
28.1
44,500
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
15 9
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
Company Information & Advisers
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
25 Charterhouse Square
Barbican
London
EC1M 6AE
R E G I S T R A R S
Link Group
10th floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
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
44 (0)1372 453399
Tel:
Web: www.photo-me.co.uk
e-mail: ir@photo-me.com
AU D I TO R
Mazars LLP
Tower Bridge House
St Katharine’s Way
London
E1W 1DD
B R O K E R S
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
finnCap Limited
1 Bartholomew Close
London
EC1A 7BL
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
16 0
PHOTO-ME INTERNATIONAL PLC Shareholder Information
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 28 F E B R U A RY 2021
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
1,000,001 and above
Total
Number of
holdings
1,738
317
38
Number of
Ordinary shares
7,195,811
365,080,151
5,735,675
2,093
378,011,637
Number of
holdings
Number of
Ordinary shares
1,065
743
167
64
21
33
512,077
2,254,808
5,918,347
14,951,936
16,328,506
338,045,963
2,093
378,011,637
%
Ordinary
share capital
1.90%
96.58%
5.52%
100%
%
Ordinary
share capital
0.14%
0.61%
1.61%
4.22%
4.56%
88.90%
100%
C A P I TA L GA 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 S TO 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
161
ANNUAL REPORT 2020STRATEGIC REPORTFINANCIAL STATEMENTSCORPORATE GOVERNANCE
Shoreholder Information continued
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 Group act on behalf of the Company. All shareholder enquiries, notifications of change of address, dividend mandates, etc. should be
referred to them at:
Link Group
10th floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Tel:
Overseas Tel: 00 44 371 664 0391
0371 664 0300
Link Group also offer a range of shareholder information online at www.capitashareportal.com
The Register of directors’ interests is maintained at the Registered Office at Epsom.
Copies of the Annual Report should be requested from:
Photo-Me International plc
Unit 3B
Blenheim Road
Epsom
KT19 9AP
44 (0)1372 453399
Tel
e-mail: ir@photo-me.com
F I N A N C I A L C A L E N DA R
Annual General Meeting
Half year results
(to 30 April 2021)
Full year results
(to 31 October 2021)
30 April 2021
Announcement in July 2021
Announcement in February 2022
16 2
PHOTO-ME INTERNATIONAL PLC Designed and produced by Invicomm
www.invicomm.com
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