PHTM.L Regulatory News (PHTM)

23 Aug 2007 08:30

Principle Capital Holdings S.A.23 August 2007 REQUISITION OF SHAREHOLDER MEETING - PHOTO-ME INTERNATIONAL PLC Cycladic Capital LLP ("Cycladic") and Principle Capital Holdings S.A., on behalfof its subsidiary company, Principle Capital Fund Managers Limited ("PrincipleCapital"), make the following announcement: Requisition Cycladic and Principle Capital have today delivered a requisition to the boardof directors of Photo-Me International Plc ("Photo-Me" or the "Company") to callan extraordinary general meeting ("EGM") of the Company. The requisition callsfor a meeting to allow shareholders to vote on the following resolutions: i) the immediate removal of Vernon Sankey as a director of the Company; and ii) the immediate removal of Serge Crasnianski as a director of the Company. Cycladic and Principle Capital believe that a change of the senior leadership ofPhoto-Me is necessary if the Company is to create value for shareholders in thefuture. Under the current leadership the Company has suffered fromunsatisfactory operational performance, a badly managed strategic review processand a lack of credibility with investors. The requisition has been made by shareholders, including funds managed byCycladic and Principle Capital, holding in aggregate 65,518,393 shares,representing 18.2% of the total voting rights of the Company. However holders ofa further 28.2% of the Company's shares (either directly or through a CFDposition) have already expressed support for these resolutions to Cycladic andPrinciple Capital representing a total of 46.3% of the total voting rights ofthe Company in support of these resolutions. Cycladic and Principle Capital willseek incremental shareholder support and believe that over 50% of the Company'sshareholders will support these resolutions. Unsatisfactory operational performance Photo-Me's recent history of operational mismanagement has led to a profitwarning in each of the last two years. Specific examples include: * failure to manage the supply chain such that completion of CVS's initial minilab order was delayed. This led to the profit warning in January 2006 despite the Company assuring investors in December 2005 that delivery was on schedule;* failure to manage the supply chain during the production ramp-up of the new DKS3 machines leading to vastly reduced sales and the profit warning in March 2007;* failure to exploit opportunities from significant consolidation in the mini-lab industry;* failure to anticipate the need to upgrade the photo-booth estate to ensure the product complied with ICAO requirements; and* the ill-considered acquisition of Deith in January 2006 where a 60% stake was acquired for £1.5m and sold in April 2007 after losses of £2.2m. Strategic review process The Company first announced it was undergoing a strategic review in June 2006.In the 14 months that have since elapsed, Cycladic and Principle Capital believethat the Company has made insufficient progress and is only just at the stage ofhaving received interest for the vending division; the "significant" return ofcapital has yet to materialise and shareholders are still waiting for aconfirmed timetable for the corporate restructuring. Poor investor relations Photo-Me has a long history of poorly managing investor expectations includinginaccurate forecasts, overoptimistic assessments of the business' prospects andrepeated failures to deliver change in a reasonable timeframe. As a result,Cycladic and Principle Capital believe that the Chairman and Chief Executive'scredibility with shareholders is at such a low ebb that confidence in theCompany can only be restored by a change of senior leadership. Chief Executive Officer The Company's stakeholders have been aware for some time that the ChiefExecutive has been considering his retirement. This has created an atmosphere ofuncertainty within the Company beyond the destabilising effects of the lengthystrategic review process. Given the uncertainty over the timing of his departureand the size of his shareholding in the Company, Cycladic and Principle Capitalbelieve that it is impossible to find credible successors. In light of theoperational mismanagement outlined above, Cycladic and Principle Capital believethat it is imperative that the Chief Executive leaves the Company as soon aspossible so that the Company's turnaround can begin under new leadership. Chairman Since February 2005, when Mr. Sankey took over as Chairman of the Company'sboard of directors (the "Board"), the Company's total return to shareholders wasa negative return of 42%. Over the same period, the FTSE All Share Index's totalreturn was a positive return of over 39%. During his time as Chairman, he hasfailed to ensure that the Board complies with the requirements of the CombinedCode despite having originally been appointed to the Board in response toshareholder's concerns over the poor corporate governance at the Company.Furthermore, under his supervision in February 2007, two executive directorssold shares in the Company 10 days before a significant profit warning whichcaused the share price to fall by 32%. Concluding the strategic review It is imperative that the Company has credible senior leadership in order tomake the right decisions for shareholders and communicate more effectively withthe market. Cycladic and Principle Capital are encouraged that there issufficient interest from potential acquirers of the vending division at a pricethat is potentially acceptable to shareholders. Independent of any sale of thevending division however, Cycladic and Principle Capital believe that the Boardwould face a significant challenge in deciding how to create most value forshareholders in the absence of a Chief Executive who understands and can realisethe value from the businesses that will or should be retained. Future leadership Cycladic and Principle Capital have confidence in the abilities of theindependent non-executive directors to stabilise the Company, in the absence ofa Chairman and Chief Executive, and to begin the turnaround required for futuregrowth. If the requisitions are successful, Cycladic and Principle Capital wouldsupport the appointment of Martin Reavley, the current Senior IndependentDirector of the Company, as Interim Chairman of the Board. Further, Cycladic andPrinciple Capital are aware of a number of high quality and available candidateswho might be willing to become the new Chief Executive of the Company but whohave been reluctant to pursue their interest given the current Chief Executive'scontinued involvement. Once that obstacle is removed, Cycladic and PrincipleCapital believe the Board will be able to appoint a competent successor in avery short time-frame. Timing Whilst the Chairman is up for re-election at the annual general meeting onOctober 17th, Cycladic and Principle Capital believe that it is imperative thatthe issue of the Chief Executive's succession is considered at the same time asthe position of the Chairman and that this is done prior to a decision regardingthe sale of the vending division. Cycladic and Principle Capital have thereforebeen forced to requisition an EGM calling for the immediate removal of both theChairman and Chief Executive to protect the value of their investments and thoseof other shareholders. - Ends - For further information: Bell PottingerOlly Scott+44 78 12345 205 Cycladic CapitalGijs de Reuver+44 20 7529 1865 Principle CapitalAnne Dalen+44 20 7240 3222 Numis Securities as Nominated Adviser to Principle Capital Holdings S.A.Stuart Skinner+44 20 7260 1000 This information is provided by RNS The company news service from the London Stock Exchange