Institutions demand a boardroom clear-out at Photo-Me

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The Independent Online

Institutional shareholders in Photo-Me International, the crisis-hit photo-booth group, are demanding wholesale changes to the company's board following its shock profits warning on Thursday.

Institutional shareholders in Photo-Me International, the crisis-hit photo-booth group, are demanding wholesale changes to the company's board following its shock profits warning on Thursday.

Shareholders are looking for the resignation of Dan David, the 71-year-old chairman, and all the other non-executive directors. "We need a chairman who can harness the enthusiasm of the board," one shareholder said. The comments come after Photo-Me issued a dire profits warning due to an accounting irregularity related to an acquisition last year, forcing the shares into freefall.

There is now almost certain to be a stock-exchange investigation into director share dealings earlier this year. Serge Crasnianski, the chief executive, sold 7 million shares at 400p, worth £28m, in January. Daniel Amar, a non-executive director, sold shares worth £16m at the same time. Mr David sold shares worth £27m worth last September. The shares fell a further 15p to 97.5p yesterday, having sunk by 30 per cent on Thursday.

Photo-Me said yesterday that its full-year results, which were due on Monday, were now likely to be postponed until the following week. It would not comment on any changes to the board, but said: "The company acknowledges that there are certain matters that have to be put right." Institutions said they were happy for Mr Crasnianski to stay on as chief executive as his technological experience is thought crucial to the company. However, they were critical of his performance. One senior fund manager said: "Is management credibility shot to bits? Yes. But he [Mr Crasnianski] is crucial to the business."

Mr Crasnianski, a nuclear physicist by background, controls the rights to more than 100 patents. These include digital technology being installed in Photo-Me's new generations of internet-enabled booths.

The Frenchman became a non-executive director of Photo-Me in 1990. But the key move came four years later when Photo-Me acquired Kis, his French company, which makes photo-booths and photo processing equipment. He became an executive director at that point, moving up to chief executive in October 1998.

The profit warning related to a failure properly to account for profits related to the buyout of Photo-Me's minority stake in Nippon Auto Photo, a Japanese booth company. Photo-Me paid for the deal with £2.5m cash and 4,625 old photo-booths. The minority shareholder was Automax, a company controlled by Philippe Wahl, a non-executive at Photo-Me. Automax is an investment company which sells photo-booths to countries such as Spain, Italy and Israel.

Photo-Me booked a profit of £10.4m on the deal in the profit and loss account. However, the technical committee of Ernst & Young decided it should have been treated as goodwill in the balance sheet.

Institutional shareholders said they were pleased with the gradual changes to Photo-Me's adviser team. Menzies, a Surrey-based accountant, will no longer be joint auditor with Ernst & Young. Cazenove has replaced Greig Middleton as Photo-Me's broker.

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