Photo-Me confident despite struggles in UK market

Instant service equipment group Photo-Me International updated the market on its trading for the period from 1 May to 30 September on Monday, reporting that it had continued to make strategic and operational progress in line with its strategy to diversify its range of products and services.

The London-listed firm said that was driven by the expansion of its laundry business, and the acquisition of SEMPA, as announced in April.

It said that, in the period ended 30 September, overall group trading was in line with expectations, underpinned by continued growth in continental Europe and Asia, led by the laundry business, despite trading in the identification division in the UK remaining “challenging”.

That had been due to continued uncertainty around the UK's European Union exit negotiations, leading to lower consumer activity, and the UK government's decision to allow for photos taken on a smart device or camera at home to be used for passport photo identification.

Excluding the UK, the group's identification revenue was said to be stable year-on-year, driven by “continued solid performance” in France and Japan.

Total reported identification revenue in the period to 30 September declined by 3.8%, reflecting the decrease in activity in the UK photobooth market.

In total, the group said it now had more than 12,000 photobooths connected to government organisations for the secure upload of photo ID in the UK and continental Europe, and it expected that the number would continue to grow as discussions with governments to deploy the technology progress.

The board said the expansion of laundry operations remained a “key driver” of growth for the group, with further good progress has been made during the period, as revenue grew 23%.

It said the rollout of ‘Revolution’ machines in its key geographies of the UK, Ireland, Portugal and Spain had continued at an average rate of 50 machines per month.

Photo-Me said it had also continued to build its laundry presence in newer markets such as Germany, Austria and Switzerland.

In the UK, there had been an “improving trend” in business-to-business activity, although the board said that was at an early stage of recovery, and it still expected to report growth for the full year.

As anticipated, year-on-year, the laundry business had continued to contribute an increasing proportion of the group's revenue and profits.

The kiosk division of the business had continued to perform as expected, with the majority of operations in France.

Photo-Me said the capital expenditure on the kiosk business had been restricted to premium sites, as it focussed on delivering growth in the laundry business.

In food, following the acquisition of Sempa, which marked the group's entry to the fresh fruit and vegetable juice market, the group had formed the new ‘food’ segment.

“Going forward, this segment will be a significant part of the group's future growth strategy, alongside identification and laundry,” the board said in its statement.

“In the financial year to date, this business has performed in line with expectations.”

Photo-Me's said its intention was to become the global leader in the distribution of self-service fresh fruit juice machines, and its strategy to achieve that is two-fold, aimed at the business-to-business and business-to-consumer markets.

In the business-to-business market, the group said it was selling self-service juice machines to organisations such as restaurants, hotels, supermarkets, offices and small businesses.

The majority of those machines were sold under lease finance contracts, with approximately 70% of those lease agreements renewing every 12 months on average.

For the business-to-consumer market, the group sold fruit juice drinks direct to consumers via self-service juice vending machines, in locations such as railway stations.

In September, Photo-Me acquired 150 juice vending machines from L'Orangerie de Paris, enabling it to run a larger scale trial to test the market prior to deploying vending machines across other geographies.

Those machines would be refilled and maintained by Photo-Me's existing network of field engineers.

In the business-to-consumer market, the group said it was initially offering fresh orange juice, though its intention was to extend the product range over time.

The development of machines for apple juice and pineapple juice was underway, the board said, and those were expected to be rolled out in the 2021 financial year.

Competition within the self-service juice market was said to be relatively limited and, by leveraging the group's existing network of field engineers, the board said it believed the market presented a “significant growth opportunity” for the group in the medium to long term.

“While consumer uncertainty continues to weigh on our business in the UK, we remain confident that overall the group will continue to perform well, and in line with market expectations in the current financial year,” the board said of its outlook.

Photo-Me said it expected to announce its interim results for the six months ended 31 October on 10 December.

As at 1115 GMT, shares in Photo-Me International were down 4.03% at 85.7p.