Photo-Me shares collapse 30% on surprise profit warning

Shares in Photo-Me International, the photo-booth operator, plunged by more than 30 per cent yesterday after the company issued a calamitous profit warning related to an accounting error.

Shares in Photo-Me International, the photo-booth operator, plunged by more than 30 per cent yesterday after the company issued a calamitous profit warning related to an accounting error.

The news comes just six months after the company's chief executive sold £28m of shares in the company. Serge Crasnianski sold 7 million shares at 400p per share in January. Daniel Amar, a non-executive director, netted £16m from selling shares at the same time. Yesterday the shares closed down 56.5p at 112.5p.

The cause of the accounting error relates to a deal in July last year in which Photo-Me bought out the minority shareholder in Japanese group Nippon Auto Photo.

The deal was valued at £25.2m with £2.5m paid in cash. The remaining £22.7m was paid in "old technology" photo-booths which Photo-Me no longer wanted but the Japanese company was willing to have.

There was a profit on book value of £10.4m on the booths which Photo-Me included in its profit and loss account as an exceptional item.

However, the company's joint auditors, Ernst & Young and Menzies, a Surrey-based firm, discovered earlier this week that the sum should have been taken as a reduction of goodwill in the balance sheet.

Contacted in France yesterday Mr Crasnianski said he had no plans to resign. "I don't think we are at fault but that is a matter for the board."

Asked about the timing of his share sale he said: "It was a very small part of my total holding and 400p was a good price. We remain confident of the future."

The impact of yesterday's revelations is that Photo-Me will now report full-year profits of £20m compared to market expectations of £32m.

Photo-Me has been forced to delay its results which were due to be reported on Monday.

The company also included £4.5m of the photo-booth profit in its operating profit figure for its half-year results for the six months to October.