Acquisition - UK Photo Division of Asda Stores Ltd
23 August 2016
Photo-Me International plc
("Photo-Me" or the "Company" or the "Group")
Photo-Me acquires the UK Photo Division of Asda Stores Limited
Photo-Me, the instant-service equipment group, is pleased to announce that it has agreed to buy Asda Stores Limited's ("Asda") Photo Division (the "Photo Division") which is operated in Asda stores in the UK (the "Acquisition"). Completion of the Acquisition is currently expected to take place on 31 October 2016 ("Completion").
The Photo Division consists of 191 photo centres, as well as 172 self-service kiosk sites located in Asda stores. These businesses will be managed by Photo-Me under a ten-year concession. As part of the Acquisition the employees of the Photo Division will transfer across to the Group.
Besides those in-store locations, Photo-Me will also operate the Asda-branded online photo-processing offering for a minimum of 2.5 years.
This transaction strategically expands Photo-Me's estate in attractive locations offering convenience and high footfall, and enhances its online photo-processing offering. Photo-Me believes that it can increase its market share in the attractive digital photo-printing and consumer photo-merchandise markets. In addition, Photo-Me believes that under its management, the performance of the business could be significantly enhanced in the medium term.
The consideration for the Photo Division is £3.35 million, subject to downward adjustment in certain circumstances. Photo-Me has also agreed to buy the inventory available at each photo centre at the date of Completion, as well as central consignment stock, estimated at £2 million. The total consideration to be paid is currently estimated at £5.35 million and is capped at a maximum of £6 million.
Under the arrangements, Photo-Me will also pay Asda periodic commission payments, negotiated on commercial terms, based on the turnover, as well as business rates and costs of utilities.
In the calendar year 2015, the Photo Division generated unaudited sales of circa £19.3 million and made an unaudited loss of £3.4 million. The Group considers that the turnover can be raised materially by having a specialist like Photo-Me running the business, with its proven operational excellence and understanding of consumer needs in relation to instant services. The Group also expects that a combination of reconfiguration of layouts, upgrading of equipment, as well as the introduction of innovative concepts and designs into the sites will add to the appeal for customers and expand the profit performance going forward.
The Board anticipates that the Acquisition will be slightly dilutive to the earnings of the UK division in the current financial year ending 30 April 2017. Thereafter, the Board anticipates that the Acquisition will add material revenue growth to its UK-based operations, and expects it to be earnings-enhancing in the medium term. The Board believes that the impact of the dilution in the current financial year will be offset by favourable currency movements elsewhere in the Group, and therefore overall expectations for the year remain unchanged.
Other key features of the Acquisition are: (i) the consideration will be payable to Asda in cash: £1.1 million on Completion plus stock value shortly after Completion, and a further three instalments of £0.75 million each year over three years thereafter; (ii) break clauses are available to both parties on six months' notice (only exercisable after the first year in the Company's case, and after two years by either party in relation to the online site); if exercised by Asda, Asda will reimburse the Company for certain exit costs.
The Acquisition constitutes a Class 2 transaction for the purposes of the UK Listing Rules. The gross assets at 31 December 2015 were £6.5 million.
Commenting on the Acquisition, Serge Crasnianski, Chief Executive of Photo-Me, said:
"This is an interesting opportunity to significantly expand our UK business in a strong set of locations and increase our market share in the digital photo printing market, which we believe has growth potential in the digital age. Photo-Me is the leader in its field with a wide range of attractive and innovative products which we plan to introduce into the Asda stores as soon as possible, and we believe will improve the level of trading and overall performance over the next two years and beyond."
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No 596/2014.
This notification is made by Gabriel Pirona, CFO of Photo-Me.
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Enquiries: |
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Photo-Me International |
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IR focus/Neville Harris |
07909 976 044 |
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Media |
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Madano |
020 7593 4000 |
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Kimberley Richardson |
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This announcement may include "forward-looking statements" with respect to certain of Photo-Me's plans in relation to the Photo -Division and its current goals and expectations relating to its future financial condition, performance and results. These forward-looking statements sometimes contain words such as 'anticipate', 'target', 'expect', 'intend', 'plan', 'goal', 'believe', 'may', 'might', 'will', 'could' or other words of similar meaning. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to future events and circumstances which may be beyond Photo-Me's control, including, among other things, UK domestic and global economic and business conditions, market-related risks such as fluctuations in interest rates and exchange rates, the policies and actions of regulatory authorities, the impact of competition, the possible effects of inflation or deflation, the impact of tax and other legislation and regulations in the jurisdictions in which Photo-Me operates. As a result, Photo-Me's actual future financial condition, performance and results may differ materially from those expressed or implied by the plans, goals and expectations set forth in any forward-looking statements, and persons receiving this announcement should not place reliance on forward-looking statements.
Photo-Me expressly disclaims any obligation or undertaking (except as required by applicable law) to update the forward-looking statements made in this announcement or any other forward-looking statements it may make or to reflect any change in Photo-Me's expectation with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Forward-looking statements made in this announcement are current only as of the date on which such statements are made.
All oral or written forward-looking statements attributable to the Directors of Photo-Me or persons acting on their behalf are qualified in their entirety by these cautionary statements.
None of the statements in this announcement are, nor are any intended to be, a profit forecast and none should be interpreted to mean that the profits or earnings per share of Photo-Me in the current or any future financial period necessarily is or will be above or below the equivalent figure for any previous period.
This information is provided by RNS
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