Photo-Me stock dives 8 per cent after warning it will go into the red

Shares in the beleaguered Photo-Me International plummeted yesterday after the photo-booth operator reported a slump in first-half earnings and warned that it was unlikely to make a profit in the second half.

Photo-Me, which has been forced to replace its chairman and chief executive under pressure from shareholders, said adjusted pre-tax profits for the six months to 31 October fell 39 per cent to 7.3m, while turnover slipped 3 per cent to 107.1m.

The group added that it was monitoring the trend in some countries towards the centralisation of biometric data collection, involving finger and iris scans as well as digital images. Photo-Me said this had the potential to affect its vending business, which has 21,000 photo booths and generates three-quarters of the group's revenues.

It has been a difficult year for the company, which has seen its shares fall from a high of 90.5p in January to 36p yesterday when its shares fell 8 per cent.

Plans to sell off the company's vending machine division were shelved in September which Photo-Me put down to "the turbulence in the debt market".

Its chairman Vernon Sankey and chief executive Serge Crasnianski were both forced to step down early following pressure from two of its shareholders Principle Capital, which is controlled by the hedge fund investor Brian Myerson, and Cycladic Capital. The pair was unhappy with how the company was being run and in particular with the proposed sale of the vending division.

Mr Crasnianski, who founded Photo-Me's manufacturing business formerly known as KIS, was replaced by Thierry Barel, the former chief executive of the Swiss textile machinery manufacturer Staubli, at the beginning of this month. A French national, M. Barel joined Photo-Me in April to head its mini-lab business.

M. Barel said yesterday that taking up the reins at the company was "quite a challenge", and added "there are a few things to address, but I like the challenge".

The company's interim chairman David Young said there was 100 per cent support from shareholders for M. Barel.

Mr Crasnianski, who at the age of 65 was scheduled to retire, will continue to work with the company as a consultant.

The group had been faced "with the distraction engendered by the vending division disposal process and the proposed corporate restructuring", Mr Young said.

"It also had to contend with the unsettling effect on customers, staff and suppliers of the related uncertainty and also of the unsought prominence of the group's corporate affairs," he added.

"In these circumstances, the pre-exceptional result for the half year, whilst lower than that for the half year to 31 October 2006, is disappointing but understandable."

A number of candidates have been interviewed for the position of chairman and an announcement will be made in due course, Mr Young said.