PHTM.L Regulatory News (PHTM)

25 Jun 2007 07:02

Principle Capital Holdings S.A.25 June 2007 PRINCIPLE CAPITAL HOLDINGS S.A. REQUISITION OF SHAREHOLDER MEETING - PHOTO-ME INTERNATIONAL PLC Principle Capital Holdings S.A. makes the following announcement on behalf ofits subsidiary company, Principle Capital Fund Managers Limited: "Requisition Principle Capital Fund Managers Limited ("Principle Capital"), on behalf ofPrinciple Capital Investment Trust plc, Principle Capital, L.P. and QVTFinancial LP ("QVT), holding between them 36,643,213 shares representing 10% ofthe outstanding share capital of Photo-Me International Plc (the "Company"), hasdelivered a requisition to the Board of Directors (the "Board") of the Companyto call an Extraordinary General Meeting ("EGM") of the Company. The requisitioncalls for a meeting to allow shareholders to vote on the following resolutions: i) the immediate removal of Dan David as a director of the Company ii) the immediate removal of Francis Raymond Wahl as a director of the Company iii) the immediate removal of Riccardo Costi as a director of the Company iv) the immediate removal of Francois Giuntini as a director of the Company v) the immediate cessation of the Strategic Review announced by the Company on 5 June 2006 save in respect of any corporate reorganisation required in order to effect a substantial return of capital to shareholders as set out in the Company's announcement of 2 March 2007 and the immediate cessation of any talks the Company may be holding with regard to the sale of any of its businesses or business divisions. Rectifying the Company's Board Structure There are significant issues facing the Board, in particular, the Company'scontinued poor performance and the lack of management succession as SergeCrasnianski, Chief Executive and also a 20% shareholder in the Company, nearsretirement age. We believe it is critical that the Board contains sufficient,independent non-executive directors to make critical decisions for the Company'sfuture and represent the interests of all the shareholders of the Company. TheBoard currently consists of no fewer than eleven directors, six of whom areeither executive directors or who, by virtue of their history with the Company,are not deemed independent for the purposes of the Combined Code. Not only isthis unwieldy in the extreme, it also permits an agenda to be pursued that maynot be in the interests of all the shareholders of the Company. PrincipleCapital has tried to work with the existing management team to effect anappropriate restructuring of the Board without the disruption of an EGM but,after a succession of broken assurances and failures to meet agreed deadlines,this is the only option available. The Company is at a crossroads We believe the Company is at a crossroads in its development and needs to takesignificant steps to address the real threat of long-term destruction ofshareholder value by the Company as a result of: •operational underperformance; •corporate governance failures; •low quality management information; and •poor management of investor expectations. In addition to an independent Board that complies with the Combined Code, webelieve the Company also needs to: 1. Immediately stop the Strategic Review and stop any sale of either division ofthe business We do not believe that a sale process will allow the Company to realise thevalue inherent in either of the Company's two divisions given the poor qualityof management information available, the negative impact on market valueresulting from the highly protracted sale process and the poor recent financialperformance of each division. The time has come to abandon the Strategic Reviewand focus on the operational performance of the businesses with a view to makingthem better run and more profitable before any sale process is considered. There are easily achievable gains which a well run company could achieve beforeany sale process is contemplated, such as: i) Manufacturing: addressing the Company's poor credibility with major customersas a result of the management team's negotiating track record and improving thesales and service infrastructure. As the producer of the cheapest minilabmachine which has won industry awards for its quality and with only one otherremaining competitor, the Company's market share is significantly lower than itshould be. ii) Vending: addressing the operational inefficiencies suffered by the divisionas a result of a lack of management information and an apparent lack of interestin the division by the existing management team. We believe that by addressing these issues ahead of any sales process, it willstrengthen the businesses and make it possible to achieve a premium ratingthereby delivering enhanced value to shareholders. 2. Immediately announce a timetable for the retirement of the Chief Executiveand the appointment of his successor The Company's stakeholders are aware that the Chief Executive has beenconsidering his retirement for some time. This has created an atmosphere ofuncertainty within the Company beyond the destabilising effects of the lengthyStrategic Review process. We do not believe that it will be possible for theCompany to recruit a high quality replacement whilst the Strategic Review iscontinuing given that it may lead to the sale of over 50% of the business. Oncethe Strategic Review is stopped, the Company should announce a short timetablefor the Chief Executive's retirement and the appointment of a replacement. 3. Continue to restructure the Company into separate business units Whilst stopping the Strategic Review will take the 'For Sale' sign down from theCompany, the Company should continue and complete as quickly as possible itscorporate reorganisation announced on 2 March 2007. This will allow the Companyto return meaningful amounts of capital to shareholders (see below) and be in aposition to sell one or other of its divisions in the future, if shareholdervalue can be created by such disposals, once the businesses have been placed ona proper footing. It is not, however, a pre-requisite of any such reorganisationthat the Company remain under formal "Strategic Review". 4. Return capital to shareholders Despite the Company's public statement in November 2006 that significant capitalwould be returned to shareholders, the level of the share buy-back programmehas, in our opinion, been inadequate with only 1.6 million shares (0.4%)purchased since that date. We believe that once the Company has beenrestructured, significant capital (in excess of £100m) should be returned toshareholders by means of an enhanced share buy-back programme in order toimprove the efficiency of the balance sheet. Conclusion Principle Capital and QVT believe that with an invigorated management team, anindependent Board and an efficient capital structure, the Company will be ableto deliver significant returns for shareholders. We remain committed, long-termshareholders of the Company and would urge other shareholders to vote in favourof the resolutions as the first step along the Company's road to recovery and apotentially much more valuable future." Commenting on the announcement, Brian Myerson, Chief Executive Officer ofPrinciple Capital said "In nearly 20 years of active involvement in the UKmarkets I have never seen such a poorly constructed Board, especially in lightof the great advances made by UK companies to embrace the Combined Code and theconcept of good corporate governance. Only with a properly constituted Board anda revitalised management team without the distraction of a Strategic Review,will the Company be able to concentrate on maximising shareholder value." For further information, shareholders should contact: Principle Capital Anne Dalen, Investor Relations Tel: +44 207 240 3222 Bell Pottinger Olly Scott Tel: +44 207 861 3232 This information is provided by RNS The company news service from the London Stock Exchange