Photo-me calls off vending sale

Turmoil in credit markets today forced photo booth operator Photo-Me International to abandon plans to break up the business.

The company had been looking to sell its vending business, which has 21,000 photo booths, in a strategic review under way since November last year.

But UK-based Photo-Me said initial interest in the division had “not translated into firm offers at an acceptable level”, reflecting turbulence in debt markets.

Disappointment over the termination of the sale process saw the company’s shares slump by as much as 16% today.

The firm recently agreed to the removal of its chairman and chief executive after a public battle with activist shareholders concerned over the group’s “unsatisfactory” performance.

The vending business, which also has around 3,500 digital media kiosks, accounts for nearly three-quarters of the group's revenues.

Its strong cash generative potential appealed to private equity bidders, but soaring borrowing costs in credit markets mean that the division’s sale has joined a host of other deals on the sidelines.

Around 80% of the firm’s photo booths are in the UK, Ireland, Japan and France.

Photo-Me said the division “possesses considerable fundamental strengths”, although a trading update accompanying the sale decision added that vending revenues were “marginally down” across its three core territories in the three months to the end of July.

The company said the division had been forced to contend with challenges including a weak retail market and the “unsettling effect” of recent boardroom turmoil.

Activist shareholders Cycladic and Principle Capital – which together own more than 19% of the business – forced the immediate resignation of chairman Vernon Sankey earlier this month, while chief executive Serge Crasnianski agreed to retire by November 30.

The rebel shareholders threatened to call an extraordinary general meeting citing concerns over the group’s “unsatisfactory” performance, the handling of the strategic review, and a lack of credibility among investors.

Photo-Me said overall group like-for-like revenues were 7% down on last year following tougher markets in minilab and wholesale manufacturing.

But it added that the first quarter was a traditionally quieter period and had an “insubstantial” impact on profits.

Seymour Pierce analyst Charles Peacock said: “It comes as little surprise to get confirmation that promising indicative offers failed to translate into acceptable firm offers.

“Nonetheless the shares may reflect some disappointment that the group has not been able to prove the substantial value that exists in the asset.”