Photo-Me warns of limited recovery as losses widen

The troubled photo booth operator Photo-Me International warned yesterday that a recovery looked "limited" this year as it reported losses had widened dramatically.

Serge Crasnianski, the chief executive, said: "Recovery in the current year is likely to be limited and to be dependent on a strong second half for [the company's] manufacturing [business]."Furthermore, he predicted Photo-Me's UK business would not return to profit "for at least two years" after competitors turned up the heat.

"This [the outlook for the UK business] reflects the effect of competitor action (which the company believes to be unsustainable in the medium term) on margins and turnover," he said.

Shares in Photo-Me dropped 3.25p, or 18 per cent, to 14.75p. The stock had traded as high as 436.5p during the peak of the internet boom in early 2000.

The latest dose of bad news came as the company reported a pre-tax loss of £10m, including £12.5m of exceptional items, compared with a £396,000 loss a year earlier. Sales were £186.9m down from £208.8m. Photo-Me had already warned investors in March, in its second profits alert of the year, that it would make a "material loss" for the 12-month period.

Excluding exceptional items, Photo-Me produced a pre-tax profit of £2.5m. That, however, was still well beneath the pre-exceptional profit of £23.7m recorded a year earlier.

"2001-02 was a most disappointing year. None of Photo-Me's principal business segments performed well," Mr Crasnianski said.

Turnover from the operation of its 20,000 photo booths and other vending equipment worldwide fell 10 per cent to £147.1m.

Turnover in Japan, where the company operates 3,600 booths, dropped 16 per cent. Sales in the UK and the Republic of Ireland, where it has about 5,900 photo booths, fell 9 per cent and sales in France, with 5,700 photo booths, dropped 3 per cent.

The picture was not any rosier at its manufacturing business either. Turnover from the France-based division, which makes digital photoprocessing minilabs, fell 12.5 per cent to £39.8m. But despite the poor performance of the company across the board, Mr Crasnianski said: "Further out, both parts of Photo-Me's business have significant potential." In particular, he said he had high hopes for its manufacturing business, estimating the minilabs market to be worth as much as £5bn.

Once the latest version of its minilab, the DKS 2, comes into volume production later this year, the company said its manufacturing business could generate "significant" returns. The DK2 can churn out 1,500 prints an hour compared with the 650 prints from its current model.