Interim Results - six months ended 31 October 2018

 

10 December 2018

Photo-Me International plc

("Photo-Me" or "the Group")

 

                   INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2018

                                                                                

Continued strong Laundry performance

 

Photo-Me International plc (PHTM.L), the instant-service equipment group, announces its results for the six months ended 31 October 2018.

 

Results summary

 

	Reported			At constant currency
	Six months ended 31 Oct 2018	Six months ended 31 Oct 2017	Change	Six months ended 31 Oct 20171	Change1
Revenue	£119.8m	£122.2m	-2.0%	£121.9m	-1.7%
Underlying Revenue	£119.8m	£116.9m	+2.5%	£116.6m	+2.7%
EBITDA	£39.1m	£44.7m	-12.9%	£44.7m	-12.5%
Profit Before Tax3	£26.0m	£32.9m	-21.0%	£32.7m	-20.4%
Adjusted Profit Before Tax3	£26.7m	£29.0m	-7.9%	£28.9m	-7.6%
Cash Generated from Operations	£36.1m	39.9m	-9.5%
Net Cash2	£32.4m	£47.1m	-31.2%
EPS (diluted)	5.33p	6.40p	-16.7%
Adjusted EPS	5.47p	5.64p	-3.0%
Interim dividend per Ordinary share	3.71p	3.71p	-

 

¹ For constant currency comparatives, average rates of exchange used were £/€ 1.139 (H1 2018: 1.129), £/Yen 146.057 (H1 2018: 145.173)

² Refer to the note 8 to the financial statements for the reconciliation of Net Cash to Cash and cash equivalents as per the financial statements

³ The breakdown of profit before tax to adjusted profit before tax is presented in the table on page 4.

 

Financial summary

 

·     Underlying revenue was up 2.5% to £119.8m, excluding the impact of restructuring Photo-Me Retail in the comparative period.

 

·     Adjusted profit before tax was down 7.9%, when adjusted for one-off items in H1 2018 and H1 2019.

 

·     The Group remains highly cash generative with £36.1 million of cash generated from operations in the period (2017: £39.9m).

 

·     Net cash position of £32.4 million, (2017: £47.1m) following distribution of £28.8 million to shareholders in dividend payments and £33.4 million of investments made in the last 12 months.

 

·     Interim dividend maintained at 3.71 pence per Ordinary share in line with stated dividend policy for 2019

 

Operational summary

 

·     Operations in Japan have recovered faster than expected, with underlying Asia operating profit up 15%, excluding the cost of restructuring operations in Japan.

 

·     Continued expansion of Laundry operations, with over 30% more Revolution units in operation at the period end and total revenue from Revolution up 28.5%.

 

·     Identification revenue growth increased 2%, reflecting further diversification of services and successful deployment of secure photo ID upload technology.

 

Innovation update

 

·     After the period end in November 2018, the first banking booths which provide front-end retail banking services to customers were launched in Paris.

 

Outlook

 

·     The Group maintains its guidance for the FY2019 and expects to report profit before tax of £44 million, net of restructuring costs in Japan and excluding any movement in the value of Max Sight Holdings.

 

·     The Group's ability to meet guidance will be reliant on normalised trading conditions in its key markets.

 

Serge Crasnianski, CEO, said:

 

"In the last six months, the expansion of Laundry operations and deployment of photobooth identification solutions continued in line with our plan.  Revolution Laundry units in operation and revenue from these machines were up 30.4% and 28.5% respectively in H1 2019. In additional we continue to diversify our identification business offering.

 

"The Board expects to meet its previously stated guidance for FY 2019, with profit before tax of £44 million, net of restructuring costs in Japan and excluding movements in the value of the Group's investment in Max Sight Holdings. The Group's ability to meet guidance remains subject to the economic environment, foreign exchange movements and consumer sentiment, which could affect performance."

 

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

  

 

Enquiries:

Photo-Me International plc	+44 (0) 1372 453 399 / [email protected]
Serge Crasnianski, CEO
Stéphane Gibon, CFO
Hudson Sandler	+44 (0) 20 7796 4133
Wendy Baker/ Emily Dillon/ Nick Moore	[email protected]

 

An audio webcast of the analyst and investor conference call will be available to download later today at www.photo-me.com.

 

NOTES TO EDITORS

Photo-Me International plc (LSE: PHTM) operates, sells and services a wide range of instant-service vending equipment, primarily aimed at the consumer market.

 

The Group operates approximately 47,000 vending units across 18 countries and its technological innovation is focused on three principal areas:

 

·     Identification: photobooths and integrated biometric identification solutions

·     Laundry: unattended laundry services, launderettes, B2B services

·     Kiosks: high-quality digital printing

 

In addition, the Group operates vending equipment such as children's rides, amusement machines and business service equipment.

 

Whilst the Group both sells and services this equipment, the vast majority of units are operated and maintained by Photo-Me. Photo-Me pays the site owner a commission based on turnover, which varies depending on the country and location of the machine.

 

The Group has built long-term relationships with major site owners and its equipment is generally sited in prime locations in areas of high footfall such as supermarkets, shopping malls (indoors and outdoors) and public transport venues. The equipment is maintained and serviced by an established network of 700 field engineers.

 

The Company's shares have been listed on the London Stock Exchange since 1962.

 

 

CHAIRMAN'S STATEMENT

 

Results

 

During the period, Group profit before tax has been impacted by reduced B2B revenue and machine sales activity, especially in the UK, where we have suffered from large order lags. Due to the extent of our B2B customer relationships, we expect this to recover in the second half of the year.

 

Our strong performance in Japan and the continued positive momentum of our high margin Laundry business gives the Board continued confidence in re-iterating its previously stated profit before tax guidance of £44 million for FY 2019, net of restructuring costs in Japan and any movement on the Group's investment in Max Sight Holdings.

 

Excluding the impact of the restructuring costs, investments adjustments, exchange gains and a favourable commercial litigation outcome, results for the first half year were down 7.5% compared with the corresponding period in the prior year (H1 2018).

 

Underlying revenue increased by 2.5% against the comparative period, excluding a £5.3 million reduction in revenue from Photo-Me Retail in H1 2018 due to the restructuring programme. On a reported basis, the restructuring of Photo-Me Retail in H2 2018 had a negative impact on total revenue (2.0% decline) when compared with the comparative period.  

 

Expansion of laundry operations remained a key growth driver, with total revenue from Revolution machines up 28.5%. Revenue from Identification grew by 1% and revenue from Kiosks reduced by 27% to £6.6 million.

 

Reported EBITDA was £39.1 million, resulting in an EBITDA margin of 32.6% (H1 2018: 36.7%, but was 34.7% when excluding the impact of the one-off items listed below.

 

Adjusted profit before tax was down 7.9% when adjusted for one-off items in H1 2019 and H1 2018, reflecting the lag in B2B revenue and machines sales activity due which is expected to recover in the second half. A reconciliation of Reported profit before tax to adjusted profit before tax is noted in the below.

 

Reconciliation of Reported Profit Before Tax to Adjusted Profit Before Tax

 

	Six months to 31 October 2018	Six months to 31 October 2017
Profit before tax	£26.0m	£32.9m
Discontinued operations
-     Profit on disposal of Stilla Technologies SA	£(3.2)m
-     Loss of Max Sight Holding investment	£2.7m
Property gain		£(2.3)m
Exceptional items - restructuring costs	£1.2m	£0.9m
Underlying profit before tax	£26.7m	£31.5m
H1 2018 one off gains:
-     Favourable commercial litigation		£(1.6)m
-     Exchange gain		£(0.9)m
Adjusted profit before tax	£26.7m	£29.0m

 

 

In H1 2018, the Group reported two exceptional items - a property gain (£2.3 million) and the associated restructuring costs for Photo-Me Retail (£0.9 million). The Group also benefited from a one off favourable litigation outcome (£1.6 million) and a one-off exchange gain (£0.9 million).

 

In H1 2019, the Group recorded a gain on the sale of its investment holding in Stilla Holdings (£3.2 million) and a loss on its shareholding in Max Sight Group Holdings Limited (£2.7 million). During the period, the Group was also impacted by the cost of restructuring its Japanese operations (£1.2 million). On a reported basis, in H1 2019 Profit Before Tax declined by 21.0%, with the Group's Adjusted Profit Before Tax declining by 7.9%. 

 

The Group remains highly cash generative, with £36.1 million of cash generated from operations in the period.

 

The Group's net cash position as at 31 October 2018 was £32.4 million, compared with £47.1 million as at 31 October 2017, following distribution of £28.8 million to shareholders via dividend payments and £33.4 million of investments in the last 12 months. Compared with 30 April 2018, net cash increased by £5.7 million, from £26.7 million. In H1 2019, the Group invested £14.1 million in future growth, made £4.2 million of acquisitions and paid out £14.0 million as dividends to the Group's shareholders.

 

Strategy update

 

The Group's strategy remains unchanged, and the Board continues its commitment to further diversifying its operations and developing new technologies with multiple applications, which can be deployed across new and existing geographies, and will be expected to provide a rapid return on investment. 

 

In the last six months, the expansion of Laundry operations and deployment of photobooth identification solutions continued in line with our plan.

 

In addition, the Board rapidly addressed performance issues in Japan and realigned operations to the more challenging and competitive market conditions in the country. The benefit of the restructuring programme is already evident, and the Group remains confident that this business will return to growth in FY 2019.

 

Details of strategic progress by business area are set out in the Business Review.

 

Dividends

 

The Board is declaring a maintained interim dividend of 3.71 pence per Ordinary Share (H1 2018: 3.71 pence per share).

 

This is line with the Board's intention to maintain a total dividend of 8.44 pence per ordinary share for the current financial year ending 30 April 2019.  

 

The interim dividend will be paid on 10 May 2019 to shareholders on the register on 5 April 2019. The ex-dividend date will be 4 April 2019.

 

Outlook

 

Expansion of the Group's Laundry operations remains a key priority for the Group in the second half of the year, building on the growth in the number of Revolution laundry units in operation and revenue from Revolution machines which were up 30.4% and 28.5% respectively in H1 2019. In line with the Group's strategy, Laundry operations will continue to make up an increasing proportion of the Group's total revenue in the medium term. In addition, diversification of identification solutions will continue to be the driver of revenue growth in this business area

 

The Board expects to meet its previously stated guidance for the 2019 financial year, with profit before tax of £44 million, net of restructuring costs in Japan and excluding any movement in the value of the Group's investment in Max Sight Holdings, This guidance remains subject to the economic environment, foreign exchange movements and consumer sentiment, which could affect performance.

 

  

 

CHIEF EXECUTIVE'S BUSINESS AND FINANCIAL REVIEW

 

BUSINESS REVIEW

 

The Group has three principal areas of business; Identification, Laundry and Kiosks.

 

In addition, the Group operates other vending equipment such as children's rides, photocopiers and amusement machines. Whilst this is not one of our three principal business areas, these machines are profitable and benefit from synergies relating to other areas of the business, such as our network of field engineers.

 

In the first half, the Group remained focused on the expansion of its Laundry operations and deployment of secure photo ID upload technology in its identification business.

 

 

Identification

Photobooths and integrated biometric identification solutions

	31 October 2018	31 October 2017	Change
Number of units in operation	28,421	28,211	+1%
Percentage of total Group vending estate (number of units)	61%	60%	+1%
Revenue	£79.1m	£78.3m	+1%
Capex	£3.9m	£4.9	-19%

 

Identification revenue increased by 1%, with a 1% growth in the number of units in operation. This resilient performance gives us confidence for the future and reflects the successful diversification of photobooth services, including the extension of our encrypted photo ID upload for documents such as passports and driving licences.

 

In total, the Group has more than 10,000 photobooths connected to government organisations for the secure upload of photo ID. The Board anticipates that this number will continue to grow as discussion with governments progress.

 

New services have been introduced to a small number of photobooths in the UK & Republic of Ireland and France, enabling customers to scan and copy documents. We are monitoring customer response and, if successful, further photobooths will be enabled with these services during the second half.

 

Capex reduced in the period, following significant capex in H1 2018 as part of the ongoing maintenance and renewal cycle.

 

 

Laundry

Unattended Revolution laundry services, launderettes, business-to-business laundry services

	31 October 2018	31 October 2017	Change
Total laundry units deployed (owned, sold and acquisitions)	4,636	3,850	+20.0%
Total revenue from laundry operations	£21.9m	£17.3m	+26.0%
Revolution (excludes Launderettes and B2B):
Number of Revolutions in operation	2,527	1,937	+30.4%*
Percentage of total Group vending estate (number of units)	5%	4%
Total revenue from Revolutions	£13.9m	£10.8m	+28.5%
Revolution capex	£4.3m	£6.6m	-35.0%

*There were 2,232 full time units in operation during H1 2019 compared with 1,937 in H1 2018.

 

Laundry operations continue to be the primary growth driver for the Group, with an average of 50 new machines installed each month, mainly in Continental Europe. In the second half, the Group expects that this will increase to an average of 80 machines per month.

 

Total revenue from Laundry operations increased by 26%. The rollout of Revolution machines continues apace, with the estate increased by 30.4% as at 31 October 2018. Total revenue from Revolution was up by 28.5%, which was achieved against a 15.2% increase in machines in full time operation throughout H1 2019.

 

Revolution machines have been redesigned to reduce the cost of manufacturer and provide a faster return on investment. The first Batch of the new machines is due to be delivered in December 2018. New functionality has been installed, including fabric softener, which will increase the yield per machine. When tested via existing machines, the softener has increased revenues by 15%.

 

The level of capex in the period reflects the Group's focus and discipline around identifying high footfall locations where the Revolution units will be highly profitable rather being wholly focused on the number of units deployed.

 

The UK, Ireland, Portugal, France and Spain remain key geographies for growth and the Group is looking to extend operations into Germany and Austria.

 

The Group is still on track to deploy its target of 6,000 units (owned and sold) by the end of the Group's 2020 financial year.

 

 

Kiosks

 

High-quality digital printing services

 

	31 October 2018	31 October 2017	Change %
Number of units in operation	5,533	5,918	-7%
Percentage of total Group vending estate (number of units)	12%	13%
Revenue	£6.6m	£9.1m	-27%
Capex	£1.8m	£0.5m	243%

 

The number of kiosks in operation reduced primarily due to the restructuring of Photo-Me Retail, which resulted in the removal of machines located in shops which were closed.  These Speedlab units were transferred to Photomaton in France and have been refurbished prior to being deployed to replace previous generation machines in the country. This explains the decline in revenue and significant increase in capex in the period whilst the machines have improved revenue following relocation in France, there was a period of time when the machines were not operational.

 

 

Investment in innovation

 

After the period end in November 2018, the first banking booth, which provides front-end retail banking services to customers, was launched in partnership with Anytime ("Anytime"), a Belgian Fintech company.

 

The first ten enabled booths were unveiled in Paris, allowing customers to open a personal or professional bank account and scan in supporting documents. It then takes two days for a new account to be opened once compliance checks have been completed. The new client will receive a credit card by post within two days of the account opening.

 

Photo-Me has an extensive network of booths throughout Europe. "Anytime" believe that Photo-Me's technology will enable it to address a new market and that in the future the booth will offer further banking services to its clients. In the long-term, customers will be able to deposit cheques and cash in the booths and speak directly to bank specialists through the screen.

 

  

REVIEW OF PERFORMANCE BY GEOGRAPHY

 

Commentary on the Group's financial performance are set out below in line with the segments as operated by the Board and the management of Photo-Me. These segmental breakdowns are consistent with the information prepared to support the Board decision process. 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 areas of operation: (i) Continental Europe; (ii) UK & Ireland; and (iii) Asia. 

 

Whilst reported revenue declined by 2.0%, primarily due to restructuring in the UK, underlying revenue grew by 2.5%.

 

	Revenue				Operating profit
	Six months ended 31 October				Six months ended 31 October
	2018 £m	2017 £m	20175 £m	Change	2018 £m	2017 £m	20175 £m	Change
Continental Europe	70.4	66.1	65.9	7%	20.7	22.5	22.6	-8%
UK & ROI	27.5	33.5	33.5	-18%	4.6	7.3	7.6	-37%
Asia	21.9	22.6	22.5	-3%	1.5	2.4	2.4	-37%
Corporate costs					(1.1)	0.6	0.3
Total	119.8	122.2	121.9	-2%	25.7	32.8	32.9	-22%

 

⁵ For constant currency comparatives, average rates of exchange used were £/€ 1.139 (H1 2018: 1.129), £/Yen 146.057 (H1 2018: 145.173)

 

Excluding the French commercial litigation outcome (H1 2018), the operating profit for Continental Europe is stable.

 

Excluding an exchange gain in H1 2018 (£0.9 million), the UK operating profit is down (-28%), due to large order lags in B2B and third-part sales activities which will be widely recovered in the second half.

 

Underlying Asian operating profit before restructuring is up 14.5% (H1 2019: £2.7 million compared with H1 2018: £2.4 million up 15%).

 

 

Vending units in operation 

 

	As at 31 October 2018		As at 31 October 2017		Change year on year
	No of units	% of total	No of units	% of total
Continental Europe	24,787	53%	24,229	51%	+2%
UK & Republic of Ireland	11,909	26%	12,951	27%	-8%
Asia	10,037	21%	10,145	22%	-1%
	46,733	100%	47,325	100%	-1%

 

 

As at 31 October 2018, the Group's estate comprised 46,733 units, broadly flat compared with the same period last year due to several factors.

 

In Continental Europe, units in operation increased by 2%, reflecting continued Laundry expansion and the installation of photobooths.

 

In the UK & Republic of Ireland, the number of Revolution machines increased significantly whilst the overall number of units in operation decreased due to the removal of Speedlab kiosks related to the restructuring of Photo-Me Retail in H2 2018. These machines will be relocated to other geographies, and unprofitable photobooths and children's rides have also been removed and sold to third parties. This decline in units was partially offset by an increase in the installation of Revolution machines at highly profitable sites.

 

In Asia, operated units declined slightly compared with same period last year, due to the removal of certain unprofitable machines during the restructuring programme in Japan.

 

Continental Europe

 

Continental Europe remains our main revenue growth territory, up 7% compared with the same period last year, driven by the expansion of Laundry services. Excluding the favourable litigation outcome in H1 2018, operating profit was stable at £20.7 million in H1 2019 compared with £20.9 million in H1 2018. EBITDA was up 1%.

 

The Group remains in discussions with the French government regarding the extension of its secure photo ID transfer technology to include photo ID for new passports and identification cards. Advanced discussions continued with the Dutch government regarding deployment of this technology for use in driving licences in the Netherlands.

 

The Laundry business continued to perform well, including a first-time contribution from La Wash Group, which was acquired in May 2018 for a consideration of £4.75 million. Expansion of Revolution laundry operations in Portugal, France and Spain has continued and the Group continues to assess the German market.

 

At 31 October 2018, 53% of the Group's total units in operation were situated in Continental Europe (H1 2018: 51%).

 

UK & Republic of Ireland (including Corporate)

 

As expected, the restructuring of Photo-Me Retail in H2 2018 had a negative impact on revenue in this geography, which declined by £5.3 million. In addition, there was some impact on revenue from the removal of unprofitable children's rides in H1 2018.

 

Excluding the one-off operations (£3.3 million), operating profit was up 8.2%.

 

In this geography, the Group has successfully diversified its photobooth services with the roll out of secure digital upload technology for Irish Online Passport renewal and British Passport renewals. In total, 2,950 photobooths are now enabled for UK passport renewals with a target of 4,000 enabled photobooths by the end of December 2018.

 

The Group continues to increase its Laundry presence in the Republic of Ireland, with Laundry revenues now accounting for 75% of the country's total revenue (H1 2018: 70%). In the UK, the group continue to install Revolutions on very profitable sites (187 units).

 

At 31 October 2018, 26% of the Group's total units in operation were situated in the UK & Republic of Ireland (H1 2018: 27%).

 

Asia

 

Revenue in Asia reduced by 3%, which was a good performance given that the extent of the challenges in the Japanese market was not evident until H2 2018. The Board took swift action in H2 2018 to address the highly competitive market conditions. In line with the previously announced restructuring plan, administrative functions were streamlined, low revenue machines were relocated, and unprofitable units removed. The business has recovered faster than initially expected and is now performing well. Trading in the other countries in Asia remains strong.

 

Excluding the £1.2 million one-off restructuring cost incurred in H1 2019, operating profit increased by 14.5% to £2.7 million. In the second half, the Group will see the full benefit of this restructuring programme. In FY 2019, the total restructuring cost for Japan is expected to be between £1.5 to £2.0 million.

 

Whilst the photo identification market in Japan remains highly competitive, the Board continues to believe there are growth opportunities given Photo-Me's dominant market position in the country. As a result, the Group intends to commence the deployment of its new units which have a significantly lower production cost than the units deployed previously and will offer a 35% faster return on investment. 

 

At 31 October 2018, 21% of the Group's total units in operation were situated in Asia (H1 2018: 22%).

 

Statement of Financial Position

 

Shareholders' equity as at 31 October 2018 totalled £133.2 million (30 April 2018: £143.3 million), equivalent to 35.3 pence (30 April 2018: 37.9 pence) per share.

 

The Group's net financial position remains strong, with a net cash balance of £32.4 million as at the 31 October 2018 (31 October 2017: £47.1 million, 30 April 2018: £26.7 million). 

 

 

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 and so regularly reviews the risks faced by the Group as well as the systems and processes to mitigate them.

 

The table below sets out what the Board believes to be the principal risks and uncertainties, their impact, and actions taken to mitigate them.

 

 

Nature of the risk	Description and impact		Mitigation
Economic
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 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.
Regulations
Centralisation of production of ID photos	In many European countries where the Group operates, if governments were to implement centralised image capture, for biometric passport and other applications or widen the acceptance of self-made or home-made photographs for official document applications, the Group's revenues and profits could be affected.		The Group has developed new systems that respond to this situation, leveraging 3D technology in ID security standards, and securely linking our booths to the administration repositories (solutions in place in France, Ireland, Germany, Switzerland and the UK, discussions in Belgium and Holland). Furthermore, the Group also ensures that its ID products remain affordable and of high quality.
Brexit	The UK's referendum decision to leave the EU ("Brexit") will most probably lead to changes in regulations in the UK as well as modifications to numerous arrangements between the UK and other members of the EU, affecting trade and customs conditions, taxation, movements of resources, etc.		The Board is keeping the potential impacts of the referendum decision to leave the EU on all the Group's operations under review.   Any potential developments, including new information and policy indications from the UK government and the EU, will be looked at carefully on a continual basis with a view to enhancing the ability to take appropriate action targeted at managing and where possible minimising any adverse repercussions of Brexit.   The specific impact of Brexit on the Group will depend on the details of the conditions of the break-up to be negotiated between the UK and the European Union.   The Board foresees that in the short term the negative impact of the uncertainty overshadowing the general UK economy could also spill over into the Group's UK operations. In the long term, potential 're-nationalisation' of UK identity documents (including the conversion of the EU burgundy passports to the navy blue British version) as well as strengthened immigration regulations, could lead to increased requests for the Group's secure identification products.
Business rates	Since early 2015, the Valuation Office Authority has been issuing significantly increased assessments for some of the Company's estate, mainly photobooths and printing kiosks, and in some instances applying rates that the Company considers unreasonable. The census campaign led by the Government is part of the well-publicised strategy to systematically increase the amount of tax collected through business rates. The business tax risk is limited to the Company's operations in the UK. The Company has expensed the cost of the tax charge as reasonably estimated.		The Company has engaged advisers to reduce its exposure to business rates. The Company has received advice that the vast majority of the affected estate should not be subject to business rates, and therefore it has systematically appealed before the Valuation Tribunal the assessments received, while negotiating with the authorities to reduce that exposure. The Company believes that following the latest decision by the Upper Tribunal on 12 April 2017 in the ATM case, the risk should be capable of successful mitigation. Discussions are ongoing with the Valuation Office Agency on this matter.
Strategic
Identification of new business opportunities	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.
Inability to deliver anticipated benefits from the launch of new products	The realisation of long-term anticipated benefits depends mainly upon the continued growth of the laundry business and the successful development of integrated secure ID solutions.	The Group regularly monitors the performance of its entire estate of machines. New technology enabled secure ID solutions are heavily trialled before launch and the performance of operating machines is continually monitored.
Market
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 1% of Group turnover.		The Group's major key relationships are supported by medium-term contracts. We actively manage our site-owner relationships at all levels to ensure a high quality of service.
	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 continues to monitor the situation in both the French and UK markets.
Operational
Reliance on foreign manufacturers	The Group sources most of its products from outside the UK. Consequently, the Group is subject to risks associated with international trade.		Extensive research is conducted into quality and ethics before the Group procures products from any new country or supplier. The Group also maintains very close relationships with both its suppliers and shippers to ensure that risks of disruption to production and supply are managed appropriately.
Reliance on one single supplier of consumables	The Group currently buys all its paper for photobooths from one single supplier. The failure of this supplier could have a significant adverse impact on paper procurement.		The Board has decided to hold a strategic stock of paper, allowing for 6 to 10 months' worth of paper consumption, to allow enough time to put in place alternative solutions.
Reputation	The Group's brands are key assets of the business. Failure to protect the Group's reputation and brands could lead to a loss of trust and confidence. This could result in a decline in the customer base.		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.
Technological
Failure to keep up with advances in technology	The Group operates in fields where upgrades to new technologies are mission-critical.	The Group mitigates this risk by continually focusing on R&D.
Cyber risk: third party attack on our secure ID data transfer feeds	The Group operates an increasing number of photobooths capturing ID data and transferring these data it directly to governmental databases	The Group performs an ongoing assessment of the risks and ensures that the infrastructure meets the security requirements.

 

 

GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 31 October 2018
 

		Unaudited 6 months to 31 October 2018	Unaudited 6 months to 31 October 2017	Audited Year to 30 April 2018
		Total	Total	Total
	Notes	£ '000	£ '000	£ '000
Revenue	3	119,761	122,228	229,814
Cost of Sales		(84,587)	(84,387)	(168,070)
Gross Profit		35,174	37,841	61,744
Other Operating Income		788	748	1,686
Administrative Expenses		(10,309)	(5,822)	(17,518)
Share of Post-Tax Profits from Associates		30	136	194
Operating Profit	3	25,683	32,903	46,106
Analysed as:
Operating profit before specific items		26,890	31,504	46,416
Profit on sale of land & buildings		-	2,320	2,320
Restructuring costs		(1,207)	(921)	(2,630)
Operating profit after specific items		25,683	32,903	46,106
Other net gains	3	560	-	3,708
Finance Revenue		10	126	658
Finance Cost		(238)	(147)	(297)
Profit before Tax	3	26,015	32,882	50,175
Total Tax Charge	4	(5,808)	(8,589)	(9,889)
Profit for the year		20,207	24,293	40,286

 

  

GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME (continued)

for the six months ended 31 October 2018

 

 

		Unaudited 6 months to 31 October 2018	Unaudited 6 months to 31 October 2017	Audited Year to 30 April 2018
Other Comprehensive Income
Items that are or may subsequently be classified to Profit and Loss:
Exchange Differences Arising on Translation of Foreign Operations		1,482	629	16
Taxation on exchange differences		(11)	(2)	(12)
Total Items that are or may subsequently be classified to profit and loss		1,471	627	4
Items that will not be classified to profit and loss:
Remeasurement (losses)/gains in defined benefit obligations and other post-employment benefit obligations		-	-	150
Deferred tax on remeasurement (losses)/gains		-	-	(23)
Total Items that will not be classified to Profit and Loss		-	-	127
Other comprehensive income for the year net of tax		1,471	627	131
Total Comprehensive Income for the Year		21,678	24,920	40,417
Profit for the Year Attributable to:
Owners of the Parent		20,140	24,216	40,134
Non-controlling interests		67	77	152
		20,207	24,293	40,286
Total comprehensive income attributable to:
Owners of the Parent		21,593	24,784	40,205
Non-controlling interests		85	136	212
		21,678	24,920	40,417
Earnings per Share
Basic Earnings per Share	6	5.33p	6.43p	10.64p
Diluted Earnings per Share	6	5.33p	6.40p	10.60p

 

 

All results derive from continuing operations.

 

The accompanying notes form an integral part of these condensed consolidated financial statements.

 

 

 

GROUP CONDENSED STATEMENT OF FINANCIAL POSITION

as at 31 October 2018

 

		Unaudited	Unaudited	Audited
		31 October	31 October	30 April
		2018	2017	2018
	Notes	£'000	£'000	£'000
Assets
Non-current assets
Goodwill	7	17,962	13,415	13,435
Other intangible assets	7	13,815	14,030	13,960
Property, plant & equipment	7	93,895	81,223	92,556
Investment property	7	676	684	676
Investment in - associates		429	1,927	1,583
Financial instruments held at FVTPL		1,623	-	-
Financial assets held at amortised cost		982	-	-
Other financial assets - held to maturity	8	-	1,829	1,710
Other financial assets - available for sale		-	219	4,286
Deferred tax assets		1,706	3,670	1,935
Trade and other receivables		2,188	2,061	2,116
		133,276	119,058	132,257
Current assets
Inventories		20,355	22,684	22,902
Trade and other receivables		16,809	22,765	20,613
Current tax		-	3,691	4,480
Cash and cash equivalents	8	88,573	63,123	58,657
		125,737	112,263	106,652
Total assets		259,013	231,321	238,909
Equity
Share capital		1,888	1,884	1,887
Share premium		10,499	9,384	10,366
Translation and other reserves		14,646	13,817	13,193
Retained earnings		106,175	101,701	117,811
Equity attributable to owners of the Parent		133,208	126,786	143,257
Non-controlling interests		1,638	1,477	1,553
Total equity		134,846	128,263	144,810
Liabilities
Non-current liabilities
Financial liabilities	8	45,620	14,248	27,540
Post-employment benefit obligations		5,523	5,478	5,524
Deferred tax liabilities		2,741	3,729	2,671
Trade and other payables		-	1,725	224
		53,884	25,180	35,959
Current liabilities
Financial liabilities	8	11,518	3,620	6,139
Provisions		92	601	196
Current tax		4,708	10,634	8,307
Trade and other payables		53,965	63,023	43,498
		70,283	77,878	58,140
Total equity and liabilities		259,013	231,321	238,909

 

The accompanying notes form an integral part of these condensed consolidated financial statements.

 

 

 

GROUP CONDENSED STATEMENT OF CASH FLOWS

for the six months ended 31 October 2018

 

		Unaudited	Unaudited	Audited
		6 months to	6 months to	Year to
		31 October	31 October	30 April
		2018	2017	2018
	Notes	£'000	£'000	£'000
Cash flow from operating activities
Profit before tax		26,015	32,882	50,175
Finance cost		238	147	297
Finance revenue		(10)	(126)	(658)
Other gains		(560)	-	(3,708)
Operating profit		25,683	32,903	46,106
Share of post tax profit from associates		(30)	(136)	(194)
Amortisation of intangible assets		1,372	1,267	2,768
Depreciation of property, plant and equipment		12,059	10,698	22,301
Profit on sale of property, plant and equipment		8	(2,195)	(2,361)
Exchange differences		508	(689)	(836)
Other items		(90)	(34)	(318)
Changes in working capital:
Inventories		2,910	(2,376)	(2,613)
Trade and other receivables		2,714	(3,033)	(927)
Trade and other payables		(8,756)	5,070	(1,064)
Provisions		(267)	(1,579)	(1,905)
Cash generated from operations		36,111	39,896	60,957
Interest paid		(238)	(147)	(297)
Taxation paid		(4,808)	(4,948)	(8,318)
Net cash generated from operating activities		31,065	34,801	52,342
Cash flows from investing activities
Acquisition of subsidiaries net of cash acquired		(4,019)	(1,354)	(1,398)
Payment of deferred consideration		(225)	-	-
Cash received on disposal of associate		4,437	-	-
Repayment of loans advanced to associate		1,612	-	-
Investment in intangible assets		(1,314)	(1,581)	(3,218)
Proceeds from sale of intangible assets		1	-	201
Purchase of property, plant and equipment		(12,811)	(15,722)	(40,378)
Proceeds from sale of property, plant and equipment		770	2,799	4,689
Purchase of available for sale investments		-	(134)	(134)
Dividends received from investments held at FVTPL		-	-	285
Interest received		10	126	144
Dividends received from associates		12	304	304
Net cash generated from investing activities		(11,527)	(15,562)	(39,505)

 

 

GROUP CONDENSED STATEMENT OF CASH FLOWS (continued)

for the six months ended 31 October 2018

 

		Unaudited	Unaudited	Audited
		6 months to	6 months to	Year to
		31 October	31 October	30 April
		2018	2017	2018
	Notes	£'000	£'000	£'000
Cash flows from financing activities
Issue of Ordinary shares to equity shareholders		134	387	1,372
Repayment of borrowings		(3,617)	(1,961)	(3,695)
Repayment of capital element of finance leases		(86)	(87)	(118)
Increase in borrowings		26,679	8,795	26,382
Decrease in assets held to maturity		719	573	687
Dividends paid to owners of the Parent		(14,005)	(11,633)	(26,478)
Net cash utilised in financing activities		9,824	(3,926)	(1,850)
Net increase in cash and cash equivalents		29,362	15,313	10,987
Cash and cash equivalents at beginning of year		58,657	47,505	47,505
Exchange loss on cash and cash equivalents		554	305	165
Cash and cash equivalents at end of year	8	88,573	63,123	58,657

 

The accompanying notes form an integral part of these condensed consolidated financial statements