The Investment Column: Digital camera revolution is giving Photo-Me a picture-perfect future

Tribal needs more time to prosper - Debt-free Halma is still worth holding on to
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If ever a company was keen to turn its back on the past then it's Photo-Me.

If ever a company was keen to turn its back on the past then it's Photo-Me.

The photo booth company has a chequered history with profits warnings, missed product launches and an abandoned dividend. Its chief executive, Serge Crasnianski, is infamous for offloading £28m of shares at £4 each at the height of the internet boom when investors thought the company's booths offered the potential for internet-on-the-hop and would prove a licence to print money.

But the group has turned the corner and is starting to reap the benefits of the digital camera revolution that has swept the nation.

The novelty of storing zillions of pictures on our memory cards has worn off. We have wised up, too, to the fact that printing photographs at home is at best costly and at worst produces lousy images. So now we are all ready to embrace all of Photo-Me's new self-service kiosks.

The company started rolling out its digital media kiosks in May 2004 and has so far has sold 1,600 of the 3,000 it has had manufactured. The real break-through will come in the next 18 months when more than 5,000 new low-cost booths come into play. These are being made in China for a fraction of the price of the old French ones, shortening the payback time for each machine to just three months from 12.

This vending division will get a further boost by 48 million French people getting photographed for new personal national health cards to be introduced next year in France, where it controls 90 per cent of the market. In Japan, where it controls about half of the market, it is looking forward to the introduction of new passports from next March.

Meanwhile Photo-Me is also making a new generation of mini-labs for retailers who want to offer digital photo development.

Photo-Me controls 17 per cent of the global digital photo-processing equipment market and hopes to improve this to 25 per cent within the next three to five years. The main risks are its giant competitors, Japan's Fujifilm and Novitsu. But with so much to play for it's worth sticking a few more shares in your album.

Tribal needs more time to prosper

It is a classic pattern. An ambitious company in a sexy new area of business comes to the stock market, sees its shares race to a high valuation and uses them to make a string of acquisitions which are never properly integrated, triggering a horrible profits warning or three and forcing a restructuring.

Tribal Group, led by the ever-bullish Henry Pitman, has assembled a collection of consultancies operating in local government. Its activities span a wide range, from public relations and recruitment to technology and architectural advice. This diversity will be a strength in due course, but Mr Pitman is far from persuading the City it all hangs together internally.

This is still a high-debt, high-risk business. Yesterday's grim annual results were peppered with examples of the opportunities available to Tribal, which are manifold, given the Government's determination to invite in the private sector. Tribal has one contract to operate new NHS treatment centres, but does not have the reputation here that it has in other areas.

We have lost faith with Tribal and while it is tempting to think this might be the right moment to gamble again, it would be prudent to give it more time.

Debt-free Halma is still worth holding on to

Where has all the growth gone, one investment bank opined in the title of its most recent piece of research on Halma. It is a fair question, and there wasn't really a satisfactory answer yesterday, when the health and safety products company posted its lacklustre annual results.

Halma's line to the City has been that ever-tightening regulatory requirements on health and safety guarantee a growing market for its products. These range from sensors for keeping lift doors from chopping people in half, to high-power electrical resistors, to water-leak detection systems, to fire and smoke alarms. The group boasts of its high margins on these products, the result of its scale and its dominant positions in many markets, but it would appear that these are under continual competitive pressure.

Although profits were up 22 per cent at the pre-tax level, this was because last year's figures were depressed by a loss on a disposal. Operating profits fell.

Andrew Williams, the company veteran who was promoted to chief executive in February, is trying to get the nuts and bolts right, including scrapping some uneconomic contracts in the resistors business, where rising steel prices have sapped profits.

But the City will need a clearer vision of where this business will look for growth, and it may require disposals and some bold acquisitions in more specialist areas. Recent deals taking the company into medical tests show some promise. The company has no debt and plenty of options, and a decent dividend justifies holding on.

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