Photo-Me develops sell-off plans as profits slide

British photo booth firm Photo-Me International said it was looking to split and sell off some of its businesses as it reported a 43 per cent drop in first-half profit as margins fell at its vending division.

Pretax profit fell to £12.1 million in the six months to October 31 from 21.4 million a year ago.

Photo-Me, which operates around 22,000 instant photo booths, mainly in Britain, Ireland, France and Japan, cited a reduction in vending margins and a combination of below-average manufacturing margins on its older mini-labs and delays in deliveries of the new next-generation mini-labs.

The company said it was looking at options for the three parts of its business - vending, mini-lab manufacturing and wholesale lab manufacturing.

Photo-Me ended takeover talks in November but said at the time it could break itself up and sell the separate chunks, while it also vowed to return over £100 million to investors.

It said that any return of cash would probably be on a pro-rata basis and of capital, rather than income.

The firm's chairman, Vernon Sankey, told Reuters that the vending division, which sells photo booths and children's rides, could be the first part of the business to be sold.

"The vending side is more obviously of interest to more people, so that it is more likely to have a bigger attraction initially... We have no doubt we will find people interested, but the question is at what price."

Mr Sankey gave no time scale for the sale but said that any buyer would probably already have a large sales force, which could take on selling the booths and then reduce costs by slashing the division's existing number of sales people.

He added that its wholesale labs division, which makes $1.3 million machines used by firms that do the printing for online photo websites, may also be sold off without too much trouble.

"It would be relatively easy to find a buyer, but again the question is price."

The photographic printing industry is still struggling to comes to terms with the digital revolution. It has been decimated as people opt to keep their snaps on computer and camera memories rather than print them out. The ability to view pictures instantly has also slashed the number of photos printed as people now print only the photos they want rather than developing an entire 35mm roll of film.

As a result, a number of big name firms including Kodak and Agfa have pulled out of making the small printing labs used in high street stores. Their exits have left a flood of cut price machines on the market.

But cheaper online and instore developers and new printing options are now beginning to draw back customers.

Mr Sankey said that as a result of the recent turmoil it was unlikely that the company would find a buyer willing to pay the kind of money it would want for its mini-lab division.