PHTM.L Regulatory News (PHTM)

18 Dec 2006 07:01

Photo-Me International PLC18 December 2006 Monday 18 December 2006 PHOTO-ME INTERNATIONAL PLC - INTERIM ANNOUNCEMENT PMI, the digital imaging company, announces results for the half year to 31October 2006 in line with the Company's announcement of 15 November 2006.Overall, a strong second half is anticipated as a result of a considerableimprovement in minilab manufacturing. Key Points - Financial •Revenue up 4.1% to £113.0m •Reported pre-tax profit (including exceptionals) of £12.1m (2005: £21.4m), adjusted pre-tax profit (excluding exceptionals) of £11.1m (2005: £15.9m) •Adjusted EBITDA of £25.3m (2005: £28.3m) •Net debt of £14.5m (30 April 2006: £16.7m) •Unchanged interim dividend per share of 1p Key Points - Commercial •As usual, Continental Europe accounted for over half of revenue and profit •The Vending Division increased its revenue by 1.0% to £80.3m, but a reduction in margins saw operating profit decrease to £13.8m (2005: £16.6m), mainly reflecting an increased depreciation charge •During the six month period, the total number of Vending sites worldwide increased by 3,300 (9%) to 38,500, following a 7,200 increase in the previous year, in accordance with PMI's policy of diversification •The Manufacturing Division increased its revenue by 12.8% to £32.7m. Pre-exceptional operating profit reduced to £0.2m (2005: £2.6m), principally reflecting sales of the last batch of the DKS15xx series minilabs being made at below-average margins and a delay in deliveries from a sub-contractor of the new third generation DKS 16xx and DKS 17xx series minilabs. However, the ramp-up in production of the third generation minilabs is now beginning to gain momentum Key Points - Strategy • The Board's review of the various options for returning a significant amount of surplus capital to shareholders is progressing well. The return will probably be on a pro rata basis and of a capital, rather than an income, nature. The final details are expected to be announced early in the New Year • The Board is also pursuing strategic options for the three individual businesses - Vending, minilab manufacturing and wholesale lab manufacturing - having regard to their different nature, as highlighted by the Strategic Review process Serge Crasnianski, Chief Executive, stated: "In the second half, Vending, whichcontinues to trade solidly, is expected to make a significantly smaller profitthan in the first half, due to normal seasonality. Manufacturing is expected tomake a substantial profit, mainly as a result of a considerable increase in thenumber of minilabs manufactured and sold. Overall, a strong second half isanticipated. Further out, Vending should benefit from the planned substantial replacement ofearly digital photobooths by April 2008, from regulatory developments helpful toits photobooth business, and from the increasing maturity of its digital mediakiosk business. Manufacturing should benefit from the high potential of PMI'sthird generation minilabs, in particular in the USA, from the very strong marketposition of its wholesale lab business, and from the recent successful launch ofthe Photobook Pro (a machine producing photo albums)." Legal Disclaimer: This announcement contains statements that are or may be forward-lookingstatements with respect to the financial condition, operations and businesses ofPMI. All statements other than statements of historical facts included in thisannouncement may be forward-looking statements. These forward-looking statements involve known and unknown risks, uncertaintiesand other factors which may cause the actual performance or achievements of PMI,or industry results, to be materially different from any performance orachievements expressed or implied by such forward-looking statements. Theseforward-looking statements are based on numerous assumptions regarding thepresent and future business strategies of PMI and the environment in which itwill operate in the future which are not necessarily indicative of futureoutcomes or the financial performance of PMI and should not be considered inisolation. Presentation: A presentation to investors and brokers' analysts will be given from 09.00 to10.00 today at Regus, CityPoint, 1 Ropemaker Street, London EC2 (approximately200 yards from Moorgate Station). Enquiries: Photo-Me International 01372-453 399Vernon Sankey (Chairman)Serge Crasnianski (CEO)Jean-Luc Peurois (GFD)Bankside Consultants Charles Ponsonby 020-7367 8851 / 07789-202 312 CHIEF EXECUTIVE'S STATEMENT In line with the announcement of 15 November 2006, profit before exceptionalitems and tax for the half year to 31 October 2006 is below the 2005 level. Thisprincipally reflects a reduction in Vending margins and, in Manufacturing, acombination of below-average margins on sales of the last batch of the secondgeneration minilabs and the delay in deliveries from a sub-contractor of the newthird generation minilabs. However, the second quarter was much stronger thanthe first quarter and the ramp-up in production of the third generation minilabsis now beginning to gain momentum. In the second half, Manufacturing is expected to make a substantial profit.Accordingly, overall, a strong second half is anticipated. On 5 June 2006, in response to press speculation, PMI announced that it wasconducting a Strategic Review which may or may not lead to an offer being madefor the whole of the Company. On 15 November 2006, the Board announced that ithad terminated discussions with potential offerors as it had concluded thatalternative strategies would maximise value for shareholders. The Board alsoannounced that it had decided to effect a significant return of surplus capitalto shareholders. Further details of the new strategy are set out below. FINANCIAL REVIEW On revenue up 4.1% at £113.0m (2005: £108.5m), operating profit reduced to£12.4m (2005: £16.5m). If an exceptional £1.0m credit in 2006 resulting from areduction in the provision for restructuring is excluded, operating profit wouldbe £11.4m (2005: £16.5m, which, however, included a £3.3m one-off profit on theinsurance recovery for the Bookham warehouse fire). The operating margin, beforeexceptionals, was 10.1% (2005: 15.2%). After a net finance cost of £0.3m (2005: £0.6m), reported profit before taxreduced to £12.1m (2005: £21.4m). However, if the exceptional restructuringcredit in 2006 and a £5.4m exceptional non-operating profit on the insurancerecovery in 2005 are excluded, the adjusted pre-tax profit is £11.1m (2005:£15.9m), the quantum of the reduction being almost halved. Reflecting an increased effective tax rate of 36.5% (2005: 30.6%, benefitingfrom the limited tax impact of the non-operating exceptional credit), basicearnings per share reduced to 2.13p (2005: 3.99p). Adjusted basic earnings pershare, calculated by reference to earnings before exceptional items, were 1.94p(2005: 2.66p). Adjusted EBITDA totalled £25.3m (2005: £28.3m). Total shareholders' equity of £98.7m was lower than the 30 April 2006 figure of£104.6m as a result of £5.0m negative exchange differences (principally arisingfrom the strengthening of Sterling against the Euro, the Japanese Yen and theSwiss Franc), the payment of the previous year's £3.6m interim dividend and theprovision for the previous year's final dividend of £5.1m. The reduction intrade and other receivables to £34.7m from £53.4m at 30 April 2006 reflectedmainly the settlement in the period of a substantial receivable from a large UScustomer for minilabs supplied towards the year end. Net debt of £14.5m comparedwith £16.7m at 30 April 2006 and £9.3m at 31 October 2005. Consequently, gearing(defined as net debt as a percentage of total equity) was 14% (30 April 2006:16%; 31 October 2005: 9%). Cash generated from operations totalled £26.3m (2005: £19.3m), including a £0.3mpositive change in working capital (2005: £14.3m negative, £7.7m of it aninsurance debtor for the Bookham fire, paid shortly after the period end). Netcash generated from operating activities amounted to £24.5m (2005: £7.8m),reflecting additionally taxation paid of £0.4m (2005: £10.7m, an unusually highfigure occasioned by the substantial minilab profit made in the year to 30 April2005). Capital expenditure marginally reduced to £20.5m (2005: £21.2m), beingincurred principally in the areas of photobooths, for siting mainly in the UK,France and Japan, and digital media kiosks, for deployment mainly in France. INTERIM DIVIDEND An unchanged interim dividend per share of 1.0p has been declared. The dividendwill be paid on 3 May 2007 to shareholders on the register on 2 March 2007, withan ex-dividend date of 28 February 2007. BUSINESS REVIEW Geographical Analysis of Revenue and Operating Profit (by origin) Revenue Operating Profit * Half year to 31 Oct 2006 2005 2006 2005 £m £m £m £mContinental Europe 62.0 56.5 8.8 10.2UK & Republic of Ireland 35.6 34.9 1.1 4.4Asia & Australia 14.1 15.7 1.8 2.1USA 1.3 1.4 (0.3) (0.2)TOTAL 113.0 108.5 11.4 16.5* pre-exceptional items Continental Europe, which includes the great majority of Manufacturing revenue,contributed 55% (2005: 52%) of Group revenue and 78% (2005: 62%) of Groupoperating profit. Divisional Analysis of Revenue and Operating Profit Revenue Operating Profit * Half year to 31 Oct 2006 2005 2006 2005 £m £m £m £m Vending 80.3 79.5 13.8 16.6Manufacturing 32.7 29.0 0.2 2.6Group overheads - - (2.6) (2.7) 113.0 108.5 11.4 16.5* pre-exceptional items Vending accounted for 71% (2005: 73%) of Group revenue and 98% (2005: 86%) ofGroup operating profit (excluding Group overheads). Vending Vending principally comprises the operation of photobooths, kiddie rides,digital media kiosks and amusement machines. During the period, in accordancewith PMI's policy of diversification, the total number of Vending sitesworldwide increased by 3,300 (9%) to 38,500 (30 April 2006: 35,200), following a7,200 increase in the previous year. PMI's Vending business is global, operating in some 20 industrialised countries.However, 85% of sites are located in three territories - the UK & Ireland,France, and Japan. By area, Continental Europe accounted for 16,100 (2005:14,400) sites; the UK & Ireland for 15,500 (2005: 13,100) sites; Asia &Australia for 6,400 (2005: 5,000) sites; and the USA for 500 (2005: 700) sites. Photobooths The number of photobooths sited increased to 21,400 (2005: 20,400), of whichContinental Europe 9,400 (2005: 9,300), the UK & Ireland 5,800 (2005: 5,600),Asia & Australia 5,700 (2005: 4,900) and the USA 500 (2005: 600). Photobooths are an efficient and competitively-priced provider of ID photographsand represent a stable and cash generative business. In the UK, operatingmargins reduced but PMI reinforced its strong market position by the winningback in February 2006 of the Post Office(R) contract. France performed less wellthan usual as a result of higher depreciation charges and problems encounteredin its older digital photobooths meeting ICAO (International Civil AviationOrganization) standards for biometric passports; this will be resolved by theirreplacement with new generation dry process Easybooths (which additionally offera digital media photographic printing facility). Japan benefited, on the onehand, from its recent reduction in the workforce and related investment inmodern digital photobooths; on the other hand, it suffered from a weaker Yen andhigher depreciation charges. Digital Media Kiosks The number of digital media kiosks sited increased to 4,500 (2005: 2,300). Ofthese, Continental Europe accounted for 3,700 (2005: 1,800), with France by farthe principal territory with 2,800 (2005: 1,600), followed by Switzerland with400 (2005: 100). Digital media kiosks generate photographic prints from most digital cameras andcameras phones. They provide vending machine convenience, do not require thirdparty assistance, and can be sited at PMI's installed network of locationsworldwide or at third party retail locations. In the period, digital mediakiosks continued to progress, albeit new sitings in France are increasingly insecondary locations. Other Vending Equipment Units of other vending equipment sited increased to 12,600 (2005: 10,500), ofwhich 5,700 (2005: 5,900) were kiddie rides, the balance comprising mainlyamusement machines, copiers and card machines. The vast majority of kiddie ridesare sited in the UK & Ireland, where many benefit from being located alongsidephotobooths and serviced by the same personnel, resulting in operationalefficiencies; accordingly, a useful contribution was made to the Vending resultin that area. Manufacturing Manufacturing revenue primarily derives from the sale to third parties ofphoto-processing equipment manufactured by PMI or by sub-contactors in low costterritories on its behalf. PMI has a unique and comprehensive range covering allmarket segments, from wholesale labs, to minilabs, to end-consumer kiosks. Inoutputting terms, processing equipment ranged from 250 to 20,000 prints perhour. Wholesale Labs The Group's wholesale lab business, Imaging Solutions, based near Zurich inSwitzerland, is involved in the development, manufacture, sale and technicalsupport of equipment and systems for high volume photo-finish laboratories (upto 20,000 prints per hour). In November 2005, Imaging Solutions acquired theAgfaPhoto wholesale lab business, thereby extending its customer base. Imaging Solutions generated a similar profit to the first half of last year,again making a meaningful contribution to the Manufacturing result. Minilabs During the period, PMI experienced the transition from the second generation DKS15xx series, manufactured by the sub-contractor Flextronics in Poland, to thethird generation DKS 16xx and DKS 17xx series, manufactured by thesub-contractor Solectron in Singapore. Manufacture of the second generationminilabs ended in June, with sales of the last batch of the DKS 15xx seriesbeing made at below-average margins, primarily to fulfil a large contract. Thefirst third generation models were manufactured in August (behind schedule),with numbers increasing only gradually by the period end. As a consequence,significantly fewer units were manufactured in the period than might have beensold. In the year to 30 April 2006, the minilab market was experiencing a period oftransition, as a result of certain major photographic brands exiting the marketand Fuji announcing its intention to do so, other than in association withNoritsu. As such, it was particularly weak. During the period, a smallimprovement in the state of the market was perceived. Importantly for the future, PMI has established a high reputation for thequality of its minilabs; the third generation series offers attractive featuresin terms of maximum productivity, maximum format and minimum footprint;production is in the low cost territory of Singapore; and the substantialcompetition is limited to the Noritsu/Fuji association. Digital Media Kiosks Digital media kiosks are manufactured for PMI by a sub-contractor in China.Whilst most digital media kiosks are destined for operation by PMI, some aresold to third parties, at a useful profit. STRATEGY On 15 November 2006, the Board announced its intention, following the StrategicReview which it had conducted, to return a significant amount of surplus capitalto shareholders. The Board also indicated that it was reviewing, with itsadvisors, the various options for returning capital. This process is progressing well. The Company is in dialogue with banks to secure the necessary facilities torefinance the business and enable the return of capital. The Board considers that a pro rata method of return is likely. Whilst the Grouphas substantial balance sheet reserves, the shortage of distributable reserveswithin the Company limits the options available with regard to the method ofreturn, which will probably be of a capital, rather than an income, nature. Thepresent intention is to return a significant amount to shareholders by way of aCourt approved corporate restructuring, the final details of which are expectedto be announced early in the New Year, whereupon a circular will be dispatchedto shareholders. The Board is also pursuing strategic options for the three individual businesses- Vending, minilab manufacturing and wholesale lab manufacturing - having regardto their different nature, as highlighted by the Strategic Review process. OUTLOOK In the second half, Vending, which continues to trade solidly, is expected tomake a significantly smaller profit than in the first half, due to normalseasonality. Manufacturing is expected to make a substantial profit, mainly as aresult of a considerable increase in the number of minilabs manufactured andsold, a high proportion of them being repeat business with a large US customer,as announced on 15 November 2006. Overall, a strong second half is anticipated. Further out, Vending should benefit from the planned substantial replacement ofearly digital photobooths by April 2008, from regulatory developments helpful toits photobooth business (notably the introduction of biometric passports and,from 2008, tobacco cards and pension cards in Japan; and of biometric passportsand, from autumn 2007, National Health cards in France) and from the increasingmaturity of its digital media kiosk business. Manufacturing should benefit fromthe high potential of PMI's third generation minilabs, in particular in the USA(where negotiations are in progress with several major chains), from the verystrong market position of its wholesale lab business, and from the recentsuccessful launch of the Photobook Pro (a machine producing photo albums). Serge CrasnianskiChief Executive Officer 18 December 2006 GROUP INCOME STATEMENT (unaudited) for the six months ended 31 October 2006 6 months to 6 months to Year to 31 October 31 October 30 April 2006 2005 2006 Notes £'000 £'000 £'000 Revenue 2 112,957 108,470 230,031Cost of sales (90,511) (84,640) (182,037)Gross profit 22,446 23,830 47,994Other operating income 480 567 1,268Profit on insurance recovery 3 - 3,331 3,331Administrative expenses (11,594) (11,219) (24,833)Share of post-tax profits from 59 14 151associatesOperating profit before 2 11,391 16,523 27,911exceptional itemsRestructuring costs 3 1,019 - (3,158)Operating profit after 12,410 16,523 24,753exceptional itemsNon-operating profit - insurance 3 - 5,441 5,441recoveryProfit before finance items and 12,410 21,964 30,194taxFinance revenue 4 1,099 298 592Finance cost 4 (1,401) (879) (2,325)Profit before tax 12,108 21,383 28,461Taxation expense - UK (1,671) (2,033) (2,286)Taxation expense - overseas (2,749) (4,518) (5,198)Total tax charge 5 (4,420) (6,551) (7,484) Profit for the period - from continuing operations 7,688 14,832 20,977 Attributable to:- Equity shareholders of the 10 7,763 14,531 20,158Parent- Minority interests 10 (75) 301 819 7,688 14,832 20,977 DividendsProposed dividend (£'000) 6 3,646 3,644 8,751Proposed dividend per share 6 1.00p 1.00p 2.40p Paid in the period (£'000) 6 3,646 - 4,373Paid in the period per share 6 1.00p - 1.20p Earnings per share (total and continuing operations)Basic earnings per share 7 2.13p 3.99p 5.53pAdjusted basic earnings per 7 1.94p 2.66p 4.77pshare Diluted earnings per share 7 2.11p 3.93p 5.47pAdjusted diluted earnings per 7 1.93p 2.63p 4.72pshare GROUP BALANCE SHEET (unaudited) as at 31 October 2006 31 October 31 October 30 April 2006 2005 2006 Notes £'000 £'000 £'000 AssetsNon-current assetsGoodwill 8 9,673 9,583 10,677Other intangible assets 8 24,015 17,953 20,485Property, plant and equipment 8 80,784 74,612 77,334Investment property 8 3,373 3,903 3,745Investments in associates 343 192 335Financial assets - held to - 346 -maturity- available for sale 109 58 113Deferred tax asset 351 455 277Trade and other receivables 1,723 1,382 1,398 120,371 108,484 114,364Current assetsInventories 35,718 26,768 41,113Trade and other receivables 34,650 42,958 53,374Financial assets - held to 344 6 356maturity- derivative financial assets - 15 -- available for sale 7 7 7Current tax 650 907 3,034Cash and cash equivalents 9 31,059 26,615 25,838 102,428 97,276 123,722Total assets 222,799 205,760 238,086 EquityTotal shareholders' equity 10 98,706 97,792 104,577Minority interests 10 2,570 1,482 2,734Total equity 101,276 99,274 107,311LiabilitiesNon-current liabilitiesFinancial liabilities 11 22,017 14,806 17,932Post-employment benefit 2,752 3,368 2,994obligationsProvisions 25 67 33Deferred tax liability 11,163 9,425 13,379Derivative financial 650 - 1,300liabilitiesTrade and other payables 1,701 2,665 2,694 38,308 30,331 38,332Current liabilitiesFinancial liabilities 11 24,538 22,146 25,597Provisions 2,590 1,102 5,985Current tax 7,257 5,499 3,980Trade and other payables 48,830 47,408 56,881 83,215 76,155 92,443Total equity and liabilities 222,799 205,760 238,086 GROUP CASH FLOW STATEMENT (unaudited) for the six months ended 31 October 2006 6 months to 6 months to Year to 31 October 31 October 30 April 2006 2005 2006 Notes £'000 £'000 £'000 Cash flows from operatingactivitiesOperating profit 12,410 16,523 24,753Non-operating exceptional item - 5,441 5,441Share of post-tax profits from (59) (14) (151)associatesAmortisation, impairment and depreciation 13,917 11,799 25,418Profit on sale of property, plant and equipment (22) (241) (189)Exchange differences (434) (220) 131Other items 158 312 352Changes in working capital 345 (14,266) (19,103)Cash generated from operations 26,315 19,334 36,652Interest paid (1,401) (856) (1,935)Taxation paid (429) (10,707) (11,810)Net cash generated from operating activities 24,485 7,771 22,907Cash flows from investingactivitiesAcquisition of subsidiaries, net of cash acquired - (613) (1,354)Purchase of intangible assets (3,295) (3,613) (9,525)Purchase of property, plant and (17,251) (17,591) (28,297)equipmentProceeds from sale of property, plantand equipment 1,607 640 989Purchase of associated undertakings - - (35)Purchase of available for sale investments - - (56)Proceeds from sale of available forsale investments - - 3Interest received 449 247 551Dividends received from associate 37 47 47Net cash utilised in investing activities (18,453) (20,883) (37,677)Cash flows from financingactivitiesIssue of Ordinary shares to equity shareholders 1 115 182Purchase of treasury shares - - (878)Repayment of capital element of finance leases (86) - (48)Proceeds from borrowings 23,856 2,731 15,369Repayment of borrowings (17,473) (5,604) (12,639)(Increase)/decrease in monetary funds (5) 8,806 8,978Dividends paid to equity shareholders (3,646) - (4,373)Dividends paid to minority interests - - (7)Net cash generated from financing activities 2,647 6,048 6,584Net increase/(decrease) in cash andcash equivalents 8,679 (7,064) (8,186)Cash and cash equivalents atbeginning of the period 14,143 22,022 22,022Exchange (loss)/gain on cash andcash equivalents (679) (99) 307Cash and cash equivalents at endof the period 9 22,143 14,859 14,143 GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE (unaudited) for the six months ended 31 October 2006 6 months to 6 months Year to 31 October to 30 April 2006 31 October 2006 £'000 2005 £'000 £'000 Income and expense recogniseddirectly in equityActuarial gain on defined benefitpension scheme - - 362Exchange differences (5,128) (684) 1,026 (5,128) (684) 1,388Transfers to the income statementCash flow hedge - (41) (56)Taxation on items taken directly to ortransferred from equityTax on actuarial loss on defined benefit scheme - - (109)Tax on cash flow hedge - 15 20Net (expense)/income recogniseddirectly in equity (5,128) (710) 1,243Profit for the period 7,688 14,832 20,977Total recognised income and expensefor the period 2,560 14,122 22,220 Attributable to:- Equity shareholders of the Parent 2,724 13,828 21,390- Minority interests (164) 294 830 2,560 14,122 22,220 NOTES TO THE INTERIM REPORT 1 Basis of preparationThe Group's interim report as at 31 October 2006 was approved and authorised forissue by the Board of directors on 15 December 2006. The interim report has been prepared in accordance with International FinancialReporting Standards ("IFRSs") as adopted for use in the European Union ("EU").The interim report has been prepared in accordance with accounting policies thatare consistent with those followed in the preparation of the Group's annualfinancial statements for the year ended 30 April 2006. The interim report is unaudited but has been reviewed by the auditors; it doesnot comprise statutory financial statements within the meaning of Section 240 ofthe Companies Act 1985 (as amended). The comparative figures for the year ended30 April 2006 have been extracted from the 2006 annual financial statements,which have been filed with the Registrar of Companies. The auditor's report onthose financial statements was unqualified and did not contain an emphasis ofmatter paragraph or a statement under Section 237 (2) or (3) of the CompaniesAct 1985. Accounting policiesCertain figures reflected in the October 2005 interim report have beenre-classified to comply with the accounting treatment and presentation adoptedin the April 2006 financial statements. The Group will be adopting in its April 2007 financial statements those newstandards which are effective for accounting periods beginning on or after 1January 2006 and which have been endorsed by the EU. The Group does not expectthese to have a material effect on the Group's results and equity. 2 Segmental analysisThe Group's primary reporting segments are business divisions comprisingManufacturing and Vending, as the Group organises and manages its businesses inaccordance with these activities. Manufacturing comprises the manufacture and sale of photo-processing equipmentand vending equipment. The equipment is manufactured by Group subsidiaries or,increasingly, by sub-contractors located in low cost territories. Vendingcomprises the operation of photobooths and other vending equipment includingdigital media kiosks, children's rides and amusement machines. The segment results are as follows: Group Manufacturing Vending overheads Total £'000 £'000 £'000 £'000 Six months to 31 October 2006Total revenue 47,190 80,269 - 127,459Inter-segment sales (14,502) - - (14,502)Revenue 32,688 80,269 - 112,957 Operating profit beforeassociates and exceptional items 212 13,778 (2,658) 11,332Share of post-tax profits from associates 35 24 - 59Operating profit before 247 13,802 (2,658) 11,391exceptional itemsExceptional items 1,019 - - 1,019Operating profit after exceptional items 1,266 13,802 (2,658) 12,410Non-operating exceptional items - - - -Profit before finance items and taxation 1,266 13,802 (2,658) 12,410Finance costs - net (302)Profit before tax 12,108Taxation expense (4,420)Profit for the period 7,688 2 Segmental analysis (continued) Group Manufacturing Vending overheads Total £'000 £'000 £'000 £'000 Six months to 31 October 2005Total revenue 40,427 79,534 - 119,961Inter-segment sales (11,491) - - (11,491)Revenue 28,936 79,534 - 108,470Operating profit beforeassociates and exceptional items 2,620 16,551 (2,662) 16,509Share of post-tax profits from associates - 14 - 14Operating profit before 2,620 16,565 (2,662) 16,523exceptional itemsExceptional items - - - -Operating profit after 2,620 16,565 (2,662) 16,523exceptional itemsNon-operating profit - insurance recovery - - 5,441 5,441Profit before finance items and taxation 2,620 16,565 2,779 21,964Finance costs - net (581)Profit before tax 21,383Taxation expense (6,551)Profit for the period 14,832 Group Manufacturing Vending overheads Total £'000 £'000 £'000 £'000 Year to 30 April 2006Total revenue 102,428 146,455 - 248,883Inter-segment sales (18,852) - - (18,852)Revenue 83,576 146,455 - 230,031Operating profit beforeassociates and exceptional items 13,681 18,853 (4,774) 27,760Share of post-tax profits from associates 115 36 - 151Operating profit before 13,796 18,889 (4,774) 27,911exceptional itemsExceptional items (2,879) (279) - (3,158)Operating profit after exceptional items 10,917 18,610 (4,774) 24,753Non-operating profit - insurance recovery - - 5,441 5,441Profit before finance items and taxation 10,917 18,610 667 30,194Finance costs - net (1,733)Profit before tax 28,461Taxation expense (7,484)Profit for the period 20,977 3 Exceptional itemsProfits from insurance recoveries at 30 April 2006 and 31 October 2005.Following the destruction by fire of the Bookham warehouse and workshop inDecember 2004, agreement was reached on the resulting insurance claims inOctober 2005. The total settlement was for an amount of £17,700,000. The insurance policy was on a replacement cost basis for non-current assets andgave rise to a non-operating exceptional profit before tax of £5,441,000. Afurther profit before tax of £3,331,000, relating to insurance settlement forthe loss of inventory held to fulfil a major contract and for businessinterruption, was included in operating profit. The Group's insurers had paid £10,000,000 on account of the claims by April2005. The final settlement of £7,700,000 was received in November 2005. A deferred tax charge of £616,000 arose on the exceptional profit of £5,441,000.On the £3,331,000 profit, which was included in operating profit, a tax chargeof £999,000 arose, comprising deferred tax of £835,000 and current tax of£164,000. Restructuring costsThe restructuring costs for the year to 30 April 2006 related to provisions madefor restructuring in Continental Europe. Due to the introduction of new digitalphotobooths requiring less maintenance, and the use of sub-contractors tomanufacture equipment, the workforce was to be reduced. The provision at 30April 2006 gave rise to a tax credit of £1,097,000. Implementation of the reduction in the workforce planned at April 2006 hassubstantially been completed, resulting in a release of provision of £1,019,000in the period to 31 October 2006, giving rise to a tax charge of £340,000. 4 Finance revenue and costs 6 months to 6 months to Year to 31 October 31 October 30 April 2006 2005 2006 £'000 £'000 £'000 Finance revenueBank interest 426 51 111Interest from available for sale and other investments 6 226 432Other finance revenue 17 21 49Revaluation of put option over minority interest 650 - - 1,099 298 592 Finance costsBank loan and overdraft interest 1,351 833 1,843Other loan interest 24 25 47Finance lease interest 17 12 26Preference share dividend 9 9 19Other finance charges - - 390 1,401 879 2,325 5 TaxationIncome tax expense is recognised based on management's best estimate of the taxrate expected for the full financial year. The effective tax rate was asfollows: October 2006 36.5%, October 2005 30.6%, April 2006 26.3%. The change inrates is mainly due to the minimal tax charge on the non-operating exceptionalcredit relating to the insurance claim, in the six months to 31 October 2005 andthe full year to 30 April 2006. 6 Dividends 6 months to 6 months to Year to 31 October 31 October 30 April 2006 2005 2006 £'000 £'000 £'000 Dividends declared and paid during theperiodFinal dividend for the year ended 30April 2005 of 1.2p per share - - 4,373Interim dividend for the year ended 30April 2006 of 1.0p per share 3,646 - - 3,646 - 4,373Dividends declared but not approved -not recognised as a liabilityInterim dividend for the year ended 30April 2006 of 1.0p per share - 3,644 3,646Interim dividend for the year ending30 April 2007 of 1.0p per share 3,646 - - 3,646 3,644 3,646Dividends approved - recognised as aliabilityFinal dividend for the year ended 30April 2005 of 1.0p per share - 4,371 -Final dividend for the year ended 30April 2006 of 1.4p per share 5,105 - 5,105 5,105 4,371 5,105 The final dividends for the years ended 30 April 2006 and 30 April 2005were approved by shareholders at the Annual General Meetings held inSeptember and as such are liabilities at 31 October, each year. Theseamounts are included in current liabilities - trade and other payables inthe balance sheet. The directors have declared an interim dividend of 1.0p per share for the yearended 30 April 2007 to be paid on 3 May 2007 to shareholders on the register on2 March 2007. The proposed final dividend for the year ended 30 April 2006 was approved at theAnnual General Meeting held on 20 September 2006 and was paid on 2 November2006. The interim dividend for the year to 30 April 2006 was paid on 3 May 2006 toshareholders on the register on 3 March 2006. Between 1 November 2005 and 3March 2006, the Company issued further shares and thus the amount paid(£3,646,000) was higher than the amount proposed at 31 October 2005. The final dividend for the year ended 30 April 2005 was approved at the AnnualGeneral Meeting held on 28 September 2005 and was paid on 2 November 2005.Between 1 May and 7 October 2005, the Company issued further shares and thus theamount paid (£4,373,000) was higher than the amount proposed at 30 April 2005. 7 Earnings per shareBasic earnings per share are calculated by dividing net profit attributable toOrdinary shareholders of the Parent by the weighted average number of Ordinaryshares in issue during the period excluding those held as treasury shares, whichare excluded from the calculation of earnings per share. Diluted earnings per share amounts are calculated by dividing the net profitattributable to Ordinary shareholders of the Parent by the weighted averagenumber of Ordinary shares outstanding during the period plus the weightedaverage number of Ordinary shares that would be issued on conversion of all thedilutive potential Ordinary shares into Ordinary shares. The Group has only onecategory of dilutive potential Ordinary shares: the share options granted tosenior staff, including directors, where the exercise price is less than theaverage market price of the Parent's Ordinary shares during the period. The earnings and weighted average number of shares used in the calculation areset out in the table below: 6 months 6 months Year to to to 30 April 31 October 31 October 2006 2006 2005 Basic earnings per share 2.13p 3.99p 5.53pDiluted earnings per share 2.11p 3.93p 5.47pEarnings available to ordinary 7,763 14,531 20,158shareholders (£'000)Weighted average number of shares inissue in the period- basic ('000) 364,630 364,326 364,711- including dilutive share options 367,982 369,724 368,229('000) The Group has decided to show on the face of the income statement those materialone-off items of income and expense which, because of their nature and expectedinfrequency of the event giving rise to them, merit separate disclosure to allowshareholders to understand better the elements of financial performance duringthe year and to facilitate comparison with prior periods. As a result, the Groupalso shows basic and diluted earnings per share on this adjusted basis. Adjusted earnings per share calculations 6 months to 6 months to Year to 31 October 31 October 30 April 2006 2005 2006 Adjusted basic earnings per share 1.94p 2.66p 4.77pAdjusted diluted earnings per share 1.93p 2.63p 4.72pUnadjusted earnings (£'000) 7,763 14,531 20,158Profit on insurance recovery (£'000) - (5,441) (5,441)Tax on insurance recovery (£'000) - 616 616Restructuring costs (£'000) (1,019) - 3,158Tax on restructuring costs (£'000) 340 - (1,097)Adjusted earnings (£'000) 7,084 9,706 17,394 8 Non-current assets - intangibles, property, plant and equipment andinvestment property Other Property, intangible plant and Investment Goodwill assets equipment property £'000 £'000 £'000 £'000 Net book value at 1 May 2006 10,677 20,485 77,334 3,745Exchange adjustment (54) (682) (2,462) (125)Additions- photobooths and vending machines - - 16,093 -- other external additions - 3,295 1,489 -- transfers - 4,510 - -Depreciation provided in the period - (3,593) (10,077) (247)Adjustments to prior year (950) - - -acquisitionsDisposals at net book value - - (1,593) -Net book value at 31 October 2006 9,673 24,015 80,784 3,373 The adjustment to goodwill on prior year acquisitions relates to a decrease indeferred consideration payable. Photobooths and vending additions include finance leased assets of £324,000. 9 Cash and cash equivalents 6 months to 6 months to Year to 31 October 31 October 30 April 2006 2005 2006 £'000 £'000 £'000 Cash at bank and in hand 27,475 25,652 23,815Deposit accounts 3,584 963 2,023Cash and cash equivalents per the 31,059 26,615 25,838balance sheetBank overdrafts (8,916) (11,756) (11,695)Cash and cash equivalents per thecash flow statement 22,143 14,859 14,143 10 Equity Share Share Treasury Other Retained capital premium shares reserves earnings Total £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 May 2006 2,029 4,862 (878) 832 97,732 104,577Exchange differences - - - (5,039) - (5,039)Shares issued in the period - 1 - - - 1Profit for the period - - - - 7,763 7,763Share options - - - - 155 155Transfers - - - 650 (650) -Dividends - - - - (8,751) (8,751)Balance at 31 October 2,029 4,863 (878) (3,557) 96,249 98,7062006 Share Share Treasury Other Retained capital premium shares reserves earnings Total £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1 May 2005 2,022 3,487 - 2,536 80,028 88,073Exchange differences - - - (677) - (677)Shares issued in the 1 114 - - - 115periodProfit for the period - - - - 14,531 14,531Share options - - - - 163 163Transfers - - - (1,486) 1,446 (40)Dividends - - - - (4,373) (4,373)Balance at 31 October 2,023 3,601 - 373 91,795 97,7922005 Minority interests 6 months to 6 months to 31 October 31 October 2006 2005 £'000 £'000 At 1 May 2,734 1,188Exchange differences (89) (7)Profit for the period (75) 301At 31 October 2,570 1,482 11 Financial liabilities 31 October 31 October 30 April 2006 2005 2006 £'000 £'000 £'000 Non-current liabilitiesNon-current instalments due on bank loans 21,075 13,877 17,147Finance lease creditors 351 292 165Preference shares 591 637 620 22,017 14,806 17,932Current liabilitiesBank overdrafts 8,916 11,756 11,695Current instalments due on bank loans 15,419 10,320 13,738Finance lease creditors 203 70 164 24,538 22,146 25,597 12 Copies of the interim reportCopies of the interim report will be mailed to shareholders by 10 January 2007and from that date will be available from the Company's Registered Office atChurch Road, Bookham, Surrey KT23 3EU (Tel: 01372-453 399). 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