In a world where everyone has a camera in their pocket, photo booths wouldn’t appear to be a growth industry. A pandemic-era shift to allow passport and driving licence applicants in the UK to use digital photos from their own phone or camera felt like the final death knell for the booths.
And yet the fortunes of the FTSE 250 ME Group suggest otherwise. Admittedly the company, once called Photo-Me, has diversified: it runs self-service laundry spots in the car parks of supermarkets, petrol stations and train stations, as well as fresh pizza and orange juice vending machines. But it still owns almost 31,000 photo booths, which provide more than half of ME’s revenues and are, in fact, growing in popularity: takings from them rose by 12 per cent to £172.5 million in the year to October 31, fuelled by the still-high demand for official photo ID, and hefty price hikes in France, Germany and Austria.
Each machine brought in an average of almost £6,000 over the year, and the firm is upgrading its estate with digital printing kiosks that allow printing from phones (plus artificial intelligence filters, no doubt to make customers look prettier or happier), and have proprietary software that allows engineers to fix any glitches remotely, cutting visits and lowering costs.
ME predicts that increased demand for digitalised photo ID — new, strict anti-fraud European regulation should cannibalise demand for Photo-ME’s biometrically compliant photo booths on the Continent — and more people wanting instant photo-printing services will be satisfied by the 8,000 new photobooths it wants to install by the end of 2025.
ME Group’s margins are strong — strongest, in fact, in its fastest-growing and most-profitable segment, laundries. This division, launched in 2012, enjoyed a 48 per cent underlying margin, against a 36 per cent group average. Its revenues grew by a third to £76 million last year and ME is expanding fast in this area, opening as many as 90 new washing machine facilities each month across the UK and France. A new consumer app launching soon, with features such as off-peak offers, should help smooth demand. Wash.Me is now the largest provider of laundry services in the UK.
Last year, ME Group’s pre-tax profit rose by 26 per cent to £67 million. Despite a hefty £53 million capital expenditure on new machines, the highly cash-generative firm’s total cash was up slightly at £34 million. The shares, up 30 per cent over the past year at 166p, are still well off analysts’ target prices (200p or over at Cavendish, Berenberg and Canaccord Genuity banks) and the price-earnings ratio, at 11.1 for this year, is considerably below the 18 level in 2022.
“The company is delivering operationally and its outlook remains attractive — yet this is not reflected in its recent share price performance and low valuation,” said Eleanor Spencer at Berenberg. Snap up ME Group.
