Photo Me International : Interim Results

11 December 2017

Photo-Me International plc
('Photo-Me' or 'the Group')

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 OCTOBER 2017

Solid first half as laundry remains primary growth accelerator

Photo-Me International plc ('Photo-Me' or 'the Group'), the instant service equipment group, announces its results for the six-month period ended 31 October 2017.

Results Highlights

For constant currency comparatives, average rates of exchange used were £/€ 1.13 (H1 2017: 1.20), £/Yen 145 (H1 2017: 139)

Refer to the note 3 to the financial statements for the reconciliation of EBITDA to PBT

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

Financial Highlights

· Revenue was up 10.5% to £122.2 million (up 7.8% at constant currency)

· Reported EBITDA was up 11.4% and EBITDA margin expanded to 36.7%, up 300bpts, including £2.3 million profit on the sale of property and £0.9 million one-off costs in relation to the UK retail estate

· Reported profit before tax was £32.9 million, up 6.1% (up 3.1% at constant currency)

· Net cash was £47.1 million, reflecting a total of £68.6 million in higher dividend payments (£34.6 million) and investments in future growth (£34.0 million) since 31 October 2016, up £7.9 million from £39.2 million at 30 April 2017

· Interim dividend increased by 20.1% to 3.71 pence per Ordinary share, in line with the stated progressive dividend policy

· Total laundry revenues up 75% to £17.3 million (H1 2017: £9.9 million)

Operational Highlights

· Continued strong performance led by Continental Europe in all three key business areas: identification, laundry and printing kiosks.

· Further progress in the deployment of ID security technology:

· Continued rollout of encrypted passport photo ID upload technology in Ireland.

· In the UK, positive conclusion of discussions with Her Majesty's Passport Office and of the testing of the new online passport service; E-passport photobooths being rolled out across the UK, from mid December 2017.

· Laundry remains the primary growth driver of the Group:

· Manufacturing capacity increased in H2 2018 in support of growth target.

· B2B services extended through acquisitions, with further opportunities under review.

· Action taken to boost profitability of UK digital printing business:

· Photo-Me Retail operations being refocused to provide unattended digital printing kiosk activities, with the phased closure of manned retail outlets

· This will result in a total one-off restructuring cost of £2.0 million in the current financial year, of which £0.9 million has been accounted for in the period ended 31 October 2017.

· Continued investment in innovation for future growth focused on:

· Complementary products and technologies with multiple applications, such as a banking front-end application for the Group's booths.

· Ongoing upgrade to support market leading position.

Commenting on the results, Serge Crasnianski, Chief Executive Officer, said:

'The Group has once again performed strongly, with good operational progress made against our strategy to diversify operations.

In the first half, further excellent progress was achieved in the deployment of laundry operations, a key growth driver for the Group. As a result, the Board anticipates that laundry revenue will become an increasing proportion of total Group revenue as we get closer to achieving our mid-term deployment targets.'

ENQUIRIES:

An interview with Serge Crasnianski, CEO, and Gabriel Pirona, CFO, commenting on the interim results is available to view atwww.photo-me.comandwww.brrmedia.co.uk/event/161041

An audio webcast of the analyst and investor presentation will be available to download later today atwww.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 more than 47,300 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

· Kiosks: high-quality digital printing

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

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 fully-listed on the London Stock Exchange since 1962.

CHAIRMAN'S STATEMENT

Results

The Group continues to perform in line with expectations, delivering strong reported revenue growth and further operational progress in the first half.

The increase in revenues reflects expansion both through acquisitions as well as the continued extension of our laundry business, particularly in Continental Europe. This reflects our strategy to invest consistently in future growth. Furthermore, given the international nature of the business, with 80% of profits generated from operations outside of the United Kingdom, the Group has benefited from favourable currency movements.

Reported revenue increased by 10.5% to £122.2 million. The rapid growth in our automated laundries and the unattended digital photo printing kiosks have largely mitigated lower photobooth takings in the UK and Japan.

Reported EBITDA increased by 11.4% to £44.9 million, resulting in a 300 bpts improvement in reported EBITDA margin to 36.7% of revenue. Profit before tax increased by 6.1% to £32.9 million. At constant currency, revenue increased by 7.8 % and profit before tax increased by 3.1%. Those results include the profit of £2.3 million on the sale of the head-office building in Bookham, as well as a one-off charge of £0.9 million in relation to the UK retail estate.

The Group remains highly cash generative, with cash generated from operations of £39.9 million. The Group's net cash position as at 31 October 2017 was £47.1 million, compared with net cash of £68.0 million as at 31 October 2016, following dividend payments and investments of £34.6 million and £34.0 million respectively, in the last 12 months, reflecting the progressive dividend policy, and our ongoing investment in the expansion of existing services and new product innovation. Compared to 30 April 2017, net cash increased by £7.9 million, from £39.2 million, while in the same period £18.6 million was invested in future growth and £11.6 million paid out as dividends.

Update on Photo-Me Retail

As previously announced, the Group has undertaken a review of the progress of its Photo-Me Retail operations, the business resulting from the acquisition of the UK Photo Division of Asda Stores in November 2016, in order to reshape the digital printing operations and boost profitability.

In line with the Board's strategy to improve profitability, the Photo-Me Retail business is being refocused to provide online and unattended digital printing kiosks services, as the manned retail outlets are being progressively closed. This action will result in a one-off charge of £2.0 million, of which £0.9 million has been accounted for in the period to 31 October 2017.

The Board is confident the action taken will improve the future profitability of these operations.

Strategy

The Group remains focused on three market segments: identification, laundry and digital kiosks, currently operating across 18 countries.

The Board is committed to diversifying operations and developing new technologies with multiple applications, which can be rapidly deployed across new and existing geographies, to provide a rapid return on investment.

This strategy is based on expanding the number of units in operation, increasing the yield per unit, and minimising production and operational costs to the Group.

During the first half, we continued to expand the laundry business, increased the breadth of our identification solutions and invested further in research and development. Details of our strategic progress are set out in the Business and Financial Review.

Dividends

The Board is declaring an interim dividend of 3.71 pence per Ordinary Share, an increase of 20.1% compared with the interim dividend of 3.09 pence per ordinary share paid last year.

This increase is in line with the Group's progressive dividend policy and the Board's pledge in 2016 to increase the ordinary dividend by 20% for the financial years ending 30 April 2017 and 30 April 2018. Since 1 May 2016, the Group has returned £44.3 million to shareholders by way of dividends.

The interim dividend will be paid on 11 May 2018 to shareholders on the register on 6 April 2018. The ex-dividend date will be 5 April 2018.

Outlook

The Group's performance in the first half was in line with the Board's expectation, notwithstanding the challenges of the macroeconomic environment.

Good operational progress has been made, particularly in the identification and laundry businesses in Continental Europe. The expansion of the Group's estate of automated laundries has continued apace. Sales of laundry equipment have increased according to expectations and the Board is actively looking for further business-to-business laundry acquisition opportunities in Europe. In the medium term, it is anticipated that laundry revenue will grow significantly as a proportion of the total Group revenues and satisfactory progress is being made towards our target of 6,000 total laundry units (owned and sold) deployed by the end 2020.

In the second half, the Group will benefit from the enhanced profitability of Photo-Me Retail's operations once the refocus of activities towards unattended services is complete.

Whilst remaining mindful of the macroeconomic environment, foreign exchange movements and consumer sentiment, the Board remain confident about the Group's prospects.

CHIEF EXECUTIVE'S BUSINESS AND FINANCIAL REVIEW

The Group has performed strongly in the first half. As at 31 October 2017, the Group's estate comprised 47,325 units, an increase of 1.2% compared with the prior year period. Units were added principally in the laundry business (up 47.1%) and in digital kiosks (up 5.6%), while some 800 unprofitable amusement machines were retired, mainly in Asia.

Vending units in operation

Laundry units

The growth strategy for the laundry business, which was launched in 2012, is predicated on leveraging our well-established relationship with site owners to access prime locations, mainly where we already operate other instant service equipment, such as photobooths.

Average calculated on mature estate (machines in France, Ireland and Portugal with at least one month full month takings)

Further progress has been achieved by the Group in the laundry business, with total laundry revenues across the Group up 74.7% to £17.3 million compared with the prior year period (H1 2017: £9.9 million).

The revenue relating to our operated laundry estate increased by 54.2% to £11.1 million in the period (H1 2017: £7.2 million), due to 47.7% increase in the size of our owned and operated laundry machines estate and a 7.7% increase in average takings per unit to €1,508.

Investment programme

A key part of our strategy is the ongoing investment in new technologies to develop new and complementary products and services, to support future growth and create shareholder value.

Cashflow from our operations has remained strong at £39.9 million. This has enabled the Board to invest £18.7 million in the first half of the financial year, primarily in the roll-out of Revolution laundries and the purchase of launderette shops in Europe, while in the same period, a total of £11.6 million was returned to shareholders through dividend payments.

Strategic progress

Photo identification(photobooths and integrated biometric identification solutions)

We have continued to expand our services in Ireland through the deployment of our encrypted photo ID upload technology in our photobooths for Online Passport Applications. Since the Irish Government launched the new system in April 2017, approximately 200 photobooths have been enabled with secure digital upload technologies. We are on track to upgrade a total of 300 units by the end of the financial year.

As previously announced, in the UK, discussions with Her Majesty's Passport Office regarding the new online passport service and testing have concluded positively. The service is being rolled out to photobooths across the UK from mid December 2017.

The progressive rollout of secure and direct data transfer technologies in photobooths in Germany has continued with approximately 20 photobooths upgraded.

Laundry(unattended laundry services)

The owned and operated laundry segment remains a key driver of growth for the Group, with revenues from laundry expected to represent half of total Group revenue in the medium term.

In the first half, the Group delivered strong growth from its laundry operations, with additional units deployed across all regions.

During the period, our manufacturing partner transferred production of the Revolution machine from Hungary to a new facility in Poland. Whilst this transition resulted in a short term slowdown in production, the new facility has the capacity to support production of 150 Revolution units per month from the second half of the financial year. This increase in production volumes will enable the Group to accelerate deployment in the longer term.

The Group remains on track to reach its target to deploy 6,000 (owned and sold) units by the end of 2020.

The Group made good progress on expanding its presence in the launderette market through the acquisition of underperforming launderette businesses in attractive locations. There are currently 66 outlets in operation, including six shops in Japan. Japan is a particularly attractive market where the lifestyle and laundry market dynamics offer significant opportunities for growth.

As part of the strategy to complement its laundry offering, the Group is expanding its activities in the business to business laundry services through acquisitions. Further to the October 2015 acquisition of Fowler (UK) Limited, in July 2017, the Group acquired Inox Equip Limited and Tersus Limited. These UK based B2B laundry operations provide bespoke professional design, procurement and installation of laundry and catering facilities for blue chip companies and institutions such as care homes and hospitals. In line with its strategy, the Group continues to actively seek out further bolt-on acquisitions in this area. The revenues of the B2B laundry services amounted to £4.1 million for the six months to 31 October 2017.

Kiosks(High quality digital printing)

The Group has continued to invest in the further deployment of digital kiosks. Compared to the same period last year, a global net total of 311 digital printing kiosks were deployed, mainly in the UK leveraging the Group's presence across the Asda network via the Photo-Me Retail business.

The Group is pleased with the performance of the new equipment, achieving average monthly gross takings per unit of £800 across the estate and reaching £1,500 in the UK.

The Group will pursue its strategy to further expand the roll-out of the SpeedLab Cube and SpeedLab Bio released last year, offering both the latest state-of -the art digital printing technology and a significantly enhanced consumer experience, creating potential for further growth.

Investment in innovation

Investment in new technologies and products has continued, particularly focused on offering technology via our photobooth network to provide customers with front-end retail banking services and proprietary 3D Capture and enrolment technologies. The Group believes that those new self-service banking front-end booths address the need from financial institutions to find additional, cost effective platforms to support their traditional network, especially in the context of the rationalisation of the banking industry.

Once again, the Group showcased selected new products at TRUSTECH, a large event dedicated to Trust Based Technology in Cannes (France) which took place in November.

At this year's event, The Group's banking booth technology won the 2017 Sesames Award for Best eTransactions Solution, and its 3D Enrolment Kiosk product was a finalist. The Awards are given in recognition of the best innovations in payments, identification, digital security and wireless technology.

Registered office

In July 2017, the Group completed the sale of its head office buildings in Bookham, Surrey. The freehold was sold to Shanly Homes Limited (SHL) for a consideration of £2.5 million. The book value of the assets sold was £0.1 million and therefore the profit on the sale amounts to approximately £2.3 million, taking into account ancillary costs amounting to £0.1 million.

This disposal was part of the Group's review of the property portfolio and consolidated its head office and UK operations into one location. This strategy has rationalised the Group's property footprint and has enabled it to achieve further efficiencies in its UK operations.

The Group's new registered office is Unit 3B Blenheim Road, Epsom, KT19 9AP.

REVIEW OF PERFORMANCE BY GEOGRAPHY

The commentaries on the financial performance of the business are set out below in line with the segments as operated by the Board and the management of Photo-Me and consistently 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 principal geographic areas of operation; Continental Europe, UK & Republic of Ireland and Asia & the Rest of the World.

For constant currency comparatives, average rates of exchange used were £/€ 1.13 (2016: 1.20), £/Yen 145 (2016: 139)

Continental Europe

Continental Europe continued to perform extremely strongly in the first half across all business areas. The division, which operates in ten countries, remains the largest contributor to the Group's performance representing 54.1% of total Group revenue (H1 2017: 55.2%) and 68.3% of operating profit (H1 2017: 73.1%).

As at 31 October 2017, the Group had a total of 24,229 units in operation in Continental Europe (H1 2017: 23,605), representing 51% of the total estate sited in the division. This 2.6% increase was driven by the continued roll out of the Group's laundry operations in this region.

France, which is the largest contributor to the Continental Europe segment, performed strongly with revenue (in local currency) up 3.2%, and gross takings from the estate of automated Revolution laundries and the launderette outlets increased by 40.4%.

In Portugal, the success of the laundry deployment is evidenced by the shift in the product mix over the last three years. Between 2015 and 2017, revenue from laundry operations has increased from nil in 2015 to €0.7 million for the same period this year. Laundry revenues now represent 63% of revenue in the country. The profit before tax and excluding group fees increased by 118% in the same period.

At constant currency, revenues for the segment increased by 2.3%, primarily driven by a 39.4% increase in takings from our operated laundry machines, as well as the recent upgrades to the photobooth estate with digital security features and roll out of further kiosks.

UK & Republic of Ireland (including Corporate)

The UK & Republic of Ireland contributed 27.4% of Group revenue in the first six months (H1 2017: 24.0%), and 24.0% of operating profit (H1 2017: 14.6%). The division's increased contribution to Group revenue and operating profit reflects continued expansion in laundry in Ireland and the UK, and the successful roll-out of the secure digital upload technology for the Irish Online Passport Service.

Ireland has been a focus for the laundry roll out programme and the country has seen revenues from laundry operations increase from € 0.1 million in the six months ended 31 October 2015 to €2.1 million during the same period this year. Laundry revenues now account for 70% of the country's total revenue. The profit before tax (excluding group fees) increased by 835% reflecting the speed of shift in product mix since the deployment programme commenced.

As at 31 October 2017, 27% of the Group's estate was sited in this region, the same as prior year. The estate increased by 2.8% to 12,951 machines, reflecting the expansion in the laundry business as well as the roll-out of the new SpeedLab Bio and SpeedLab Cube digital printing kiosks.

As previously mentioned, there has been some softening in the UK market due to consumer disposable income constraints. This resulted in lower revenue from the UK's photo identification operations in the first half, with slightly reduced demand for photo identification. This backdrop will be mitigated by actions to improve operational efficiencies in the business and maximise profitability in the UK. Price rises from £5 to £6 have been successfully implemented across the UK photobooth estate.

The restructuring of Photo-Me Retail to focus on unattended digital printing kiosks (detailed above) will improve the profitability of the business segment in the second half of the financial year, although there will be a negative impact on revenue in this geography.

Revenue was £33.5 million, an increase of 31.9% (acquisitions contribute £8.2 million). Operating profit in this segment was £7.9 million (H1 2017: £4.3 million), with acquisitions accounting for £0.7 million, and this also includes a profit of £2.3 million on the sale of the head office building in Bookham, as well as a one-off charge of £0.9m relating to the first phase of the restructuring of the Photo-Me Retail Business.

Asia & Rest of the World

Asia and the Rest of the World contributed 18.5% of Group revenue (H1 2017: 21.8%) and 7.7% of operating profit (H1 2017: 12.3%). Japan remaining the largest business in the region.

At 31 October 2017, 22% of the Group's estate was sited in Asia and the Rest of the World (H1 2017: 23%) comprising 10,145 machines. This represents a decrease of 3.9%, mainly due to the retirement of some 800 unprofitable amusement machines.

Revenues in this region were £22.6 million, a decline of 6.2%, mainly reflecting the impact of currency exchange rates. At constant rates of exchange, the year on year decrease of 3.0% reflected more challenging market conditions and a lower contribution from the Japan My Number ID card programme, compared with the prior year period.

In Japan, the largest of the Group's operations in the region, the Group sees future growth mainly arising from the investment in launderette shops. There are six shops now open.

Photo identification competition has remained high with new entrants looking to capitalise on the longer-term opportunity presented by the Japanese government's My Number initiative which is expected to be made compulsory in the medium term.

Statement of Financial Position

Shareholders' equity as at 31 October 2017 totalled £126.8 million (30 April 2017: £128.0 million), equivalent to 33.7 pence (30 April 2017: 34.0 pence) per share.

The Group's net financial position remains strong, with a net cash balance of £47.1 million as at the 31 October 2017 (30 October 2016: £68.0 million, 30 April 2017: £39.2 million), reflecting £18.7 million of investments and £11.6 million distributed to shareholders through dividend payments.

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.

GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 31 October 2017

GROUP CONDENSED STATEMENT OF COMPREHENSIVE INCOME (continued)

for the six months ended 31 October 2017

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

NOTES

1. Corporate information

The condensed consolidated interim financial statements of Photo-Me International plc (the 'Company') for the six months ended 31 October 2017 ('the Interim Report') were approved and authorised for issue by the Board of Directors on 8 December 2017. These condensed consolidated interim financial statements comprise the Company and its subsidiaries (together the 'Group') and are presented in pounds sterling, rounded to the nearest thousand.

The Company is a public limited company, incorporated and domiciled in England, whose shares are quoted on the London Stock Exchange, under symbol PHTM. Its registered number is 735438 and its registered office is at Unit 3B, Blenheim Rd, Epsom, KT19 9AP.

Photo-Me's principal activity is the operation of non-food unattended vending equipment aimed primarily at the consumer market. The largest part of the estate comprises photobooths and digital printing kiosks, with the remainder including laundry units, amusement machines and business service equipment. The Group manages these on a geographical basis with the principal operations of the Group in the United Kingdom and Ireland, Continental Europe, and Asia.

2. Basis of preparation and accounting policies

This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU. The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. As required by the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, the condensed set of financial statements has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 30 April 2017.

The condensed consolidated interim financial statements comprise the unaudited financial information for the six months ended 31 October 2017 and 31 October 2016, together with the audited results to 30 April 2017. They do not include all of the information and disclosures required for full annual financial statements, and should be read in conjunction with the Group's financial statements for the year ended 30 April 2017. The condensed financial statements do not constitute statutory accounts within the meaning of section 434 of the UK Companies Act 2006.

The consolidated financial statements of the Group for the year ended 30 April 2017 are available at www.photo-me.com or upon request from the Company's registered office at Unit 3B, Blenheim Rd, Epsom, KT19 9AP.

The Interim Report is unaudited but has been reviewed by the auditors and their report to the Company is included in the Interim Report. The comparative figures for the financial year ended 30 April 2017 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditors and delivered to the Registrar of Companies. The report of the auditors (i) was unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Accounting policies and estimates

The accounting policies applied by the Group in this Interim Report are the same as those applied in the Group's financial statements for the year ended 30 April 2017, except as indicated below.

New standards adopted in the period:

There are a number of new and revised standards and interpretations, not all of which are applicable to the Group, which have been issued and are effective for the year 2018 and future reporting periods. The most significant standards and interpretations which are likely to have a more material impact on the Group's financial statements were listed in the Group's 2017 Annual Report. The effect of adopting new standards for the 2018 year end has not had a material impact on this Interim Report.

Estimates and significant judgements

The preparation of the condensed consolidated financial information requires management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and the disclosure of contingent liabilities at the date of the condensed consolidated financial information. Such estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable in the circumstances and constitute management's best judgement at the date of the financial statements. In future, actual experience may deviate from these estimates and assumptions, which could affect the financial statements as the original estimates and assumptions are modified, as appropriate, in the period in which the circumstances change.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were in the same areas as those that applied in the consolidated financial statements as at and for the year ended 30 April 2017.

Use of non-GAAP profit measures

The Group measures performance using earnings before interest, tax, depreciation and amortisation ('EBITDA'). EBITDA is a common measure used by a number of companies, but is not defined in IFRS.

The Group measures cash on a net cash basis as explained in note 8.

Risks and uncertainties and cautionary statement regarding forward looking statements

The principal risks and uncertainties affecting the business activities of the Group are set out in the 'Risks and Uncertainties' section of the Interim Management Report, contained within this Interim Report. The cautionary statement regarding forward looking statements is shown below.

Going Concern

The Annual Report for the year ended 30 April 2017 provided a full description of the Group's business activities, its financial position, cash flows, funding position and available facilities together with the factors likely to affect its future development, performance and position. It also detailed risks associated with the Group's business. This interim report provides updated information on these subjects for the six months to 31 October 2017.

The Group has at the date of this Interim Report, sufficient financing available for its estimated requirements for at least the next twelve months. Together with the proven ability to generate cash from its trading performance, this provides the Directors with confidence that the Group is well placed to manage its business risks successfully in the context of the current financial conditions and the general outlook in the global economy.

After reviewing the Group's annual budgets, plans and financing arrangements, the Directors consider that the Group has adequate resources to continue operating for the foreseeable future and that it is therefore appropriate to continue to adopt the going concern basis in preparing this Interim Report.

3. Segmental analysis

IFRS8 requires operating segments to be identified based on information presented to the Chief Operating Decision Maker (CODM), in order to allocate resources to the segments and monitor performance.

The Group monitors performance at the adjusted operating profit level before special items, interest and taxation.

In accordance with IFRS8, no segment information is provided for assets and liabilities in the disclosures below, as this information is not regularly provided to the Chief Operating Decision Maker.

Seasonality of operations

Historically, the first half of the financial year is seasonally the strongest for the Group in terms of profits, and this is expected to be the case again for the current year ending 30 April 2018.

Reconciliation of EBITDA

4. Taxation

The tax charge in the Group Income Statement is based on management's best estimate of the full year effective tax rate based on expected full year profits to 30 April 2018.

The UK 2016 Finance Act was enacted in September 2016 and confirmed the basic rate of UK Corporation tax at 19% for the financial years ending 30 April 2018 and 30 April 2019 and 17% for the financial year ending 30 April 2020.

5. Dividends

Financial year ending 30 April 2018

Interim dividend for the six months ended 31 October 2017

The Board has declared an interim dividend of 3.71p per share for the six months ended 31 October 2017, to be paid on 11 May 2018 to shareholders on the register on 6 April 2018. The ex-dividend date will be 5 April 2017

Financial year ended 30 April 2017

The Board declared an interim dividend of 3.09p per share for the six months ended 31 October 2016, which was paid to shareholders on 11 May 2017.

The Board proposed a final dividend of 3.94p per share for the year ended 30 April 2017 which was approved by shareholders at the Annual General Meeting held on 25 October 2017. It is included in the amount shown as dividend in transactions with owners of the parent in the Group Statement of Changes in Equity and in current liabilities - trade and other payables in the Group Statement of Financial Position. This dividend was paid on 10 November 2017.

Financial year ended 30 April 2016

The interim dividend for 2016 of 2.575p per share was paid on 12 May 2016.

The final dividend for 2016 of 3.285p per share amounting to £12,365,000 was approved by the shareholders at the Annual General Meeting on 20 October 2016. It is included in the amount shown as dividend in transactions with owners of the parent in the Group Statement of Changes in Equity and in current liabilities -trade and other payables in the Group Statement of Financial Position. This dividend was paid on 10 November 2016.

In addition, the Board proposed a special dividend of 2.816p per share, £10,596,000 which was paid on 10 November 2016. This dividend is not shown in these consolidated financial statements.

6. Earnings per share

The earnings and weighted average number of shares used in the calculation of earnings per share are set out in the table below:

7. Non-current assets - intangibles, property, plant and equipment and investment property

Included in additions for property, plant & equipment are the following amounts under finance leases.

8. Net Cash

At 31 October 2017, £1,829,000 (31 October 2016: £2,440,000, 30 April 2017: £2,389,000) of the total net cash comprised bank deposit accounts that are subject to restrictions and are not freely available for use by the Group.

Cash and cash equivalents per the cash flow comprise cash at bank and in hand and short-term deposit accounts with an original maturity of less than three months, less bank overdrafts.

Net cash is a non-GAAP measure since it is not defined in accordance with IFRS but is a key indicator used by management in assessing operational performance and financial position strength. The inclusion of items in net cash as defined by the Group may not be comparable with other companies' measurement of net cash/debt. The Group includes in net cash: cash and cash equivalents and certain financial assets (mainly deposits), less instalments on loans and other borrowings.

The tables below, which are not currently required by IFRS, reconcile the Group's net cash to the Group's statement of cash flows. Management believes the presentation of the tables will be of assistance to shareholders.

Other movements for loans and finance leases for the period ended 31 October 2017, period ended 31 October 2016 and year ended 30 April 2017 include transfers between non-current and current and new finance leases taken out in the period.

9. Fair Values

Fair values of financial instruments by class

There is no difference between the fair values and the carrying value of financial assets and financial liabilities held in the Group's Statement of financial position.

Held to maturity, available-for-sale financial assets and derivatives

The fair value is based on quoted prices at the balance sheet date for quoted investments and other valuation techniques for unquoted investments. For restricted deposits accounts held to maturity, the fair value is estimated at the present value of future cash flows, discounted at the market rate of interest at the balance sheet date.

Trade and other receivables

The fair value of trade and other receivables is estimated at the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material.

Cash and cash equivalents

The fair value of cash and cash equivalents is estimated at its carrying value where cash is repayable on demand. For short-term cash deposits and other items not repayable on demand, fair value is estimated at the present value of future cash flows, discounted at the market rate of interest at the balance sheet date.

Interest bearing borrowings

Fair value is calculated based on the present value of future principal and interest cash flows discounted at the market rate of interest at the balance sheet date. For finance leases the market rate of interest is determined by reference to similar lease agreements.

Trade and other payables

The fair value of trade and other payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material.

FRS13 requires an analysis of financial instruments carried at fair value by valuation method as follows.

Level 1 Quoted prices in active markets for identical assets or liabilities

Level 2 Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as process) or indirectly (that is derived from prices).

Level 3 Inputs for asset or liability that are not based on observable market data.

The Group's financial instruments are fair valued at level 2 with the exception of other financial assets available for sale investments which are valued at level 3.

Financial Instruments by category

The tables below show financial instruments by category

Included in liabilities trade and other payables at 31 October 2017 are deferred consideration payables of £2,800,000 (30 April 2017 £2,550,000 and 31 October 2016 £2,550,000) being contingent consideration relating to acquisitions made since September 2015.

10. Related parties

The Group's significant related parties are disclosed in the 2017 Annual Report and include its associates, its pension funds and the Company's Directors. During the 6 months ended 31 October 2017, there were no new related parties and no additional related party transactions have taken place that have materially affected the financial position or performance of the Group. In addition there were no material changes in the nature and relationship of transactions with related parties to those identified in the 2017 Annual Report.

11. Business combinations

In July 2017, the Group acquired 100% of the voting rights and share capital of Inox Equip Limited (Inox) and Tersus Equip Limited (Tersus), both UK based, business to business laundry businesses which provide bespoke professional design, procurement and installation of laundry and catering equipment facilities for blue chip companies and institutions such as care homes and hospitals. This acquisition was in line with the Group's strategy to expand its business to business laundry capabilities.

The results of these companies have been consolidated from 1 August 2017.

The table below shows the provisional value of net assets acquired and the consideration paid and payable.

Contingent consideration

A further £450,000 of consideration is payable to the vendors of the acquired businesses contingent on earnings performance in the 12 month periods ending 31 July 2018 and 31 July 2019. The directors consider it likely that the performance conditions will be met and have therefore recognised the maximum amounts payable.

Acquired receivables

The provisional fair value of receivables acquired was £1,158,000. The gross contractual amounts receivable was £1,233,000 and at the acquisition date, £75,000 of contractual cash flows were not expected to be received.

The following amounts have been included in the Group's post acquisition results in respect of the acquired businesses:

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEARLY FINANCIAL REPORT

We confirm that to the best of our knowledge:

· The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

· The Interim Management Report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board
John Lewis (Non-executive Chairman)
Serge Crasnianski (Chief Executive Officer and Deputy Chairman)

8 December 2017

INDEPENDENT REVIEW REPORT TO PHOTO-ME INTERNATIONAL PLC

Conclusion

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2017 which comprises the Group condensed statement of comprehensive income, the Group condensed statement of financial position, the Group condensed statement of cash flows, the Group condensed statement of changes in equity and the related explanatory notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 October 2017 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ('the DTR') of the UK's Financial Conduct Authority ('the UK FCA').

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Steve Masters

for and on behalf of KPMG LLP
Chartered Accountants

1 Forest Gate

Brighton Road

Crawley

RH11 9PT

8 December 2017

Note:

a) The maintenance and integrity of the Photo-Me International plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

CAUTIONARY STATEMENT AND DISCLAIMERS

This Interim Financial Report is addressed to the shareholders of Photo-Me International plc and has been prepared solely to provide information to them. This report is intended to inform the shareholders of the Group's performance during the 6 months to 31 October 2017. It has been prepared to provide additional information to shareholders to enable them to access the Group's strategies, performance and the potential for those strategies to succeed. It should not be relied upon for any other purpose.

This Interim Financial Report contains certain forward-looking statements which are subject to risk factors associated with, among other things, the economic and business circumstances occurring from time to time in the countries and markets in which the Group operates. It is believed that the expectations reflected in this report are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently expected. No assurances can be given that the forward looking statements in this Interim Financial Report will be realised. The forward-looking statements reflect the knowledge and information available at the date of preparation.

DISTRIBUTION OF REPORT

This Interim Report is released to the London Stock Exchange. It may be viewed and downloaded from the Company's Investor Relations section on the websitewww.photo-me.com.

Shareholders and others who require a copy of the report may obtain a copy by contacting the Company Secretary at the Company's registered office.

Photo-Me International plc

Unit 3B Blenheim Road

Epsom

KT19 9AP

Tel: +44 (0)1372 453399

Fax: +44 (0)1372 459064

e-mail:ir@photo-me.co.uk