ME Group shares drop as sales growth underwhelms

(Sharecast News) - ME Group's share price tanked on Friday after the vending machine and self-service launderette company reported a softening in demand for laundry services in the second half, while photobooth sales were lower than last year. Meanwhile, the company, which in June confirmed that it was "exploring strategic options to enhance shareholder value" including a potential sale, said the process was still ongoing, but didn't give any more details.

Shares were down 6.2% at 177.8p by 0901 GMT.

Total revenues for the fiscal year to 31 October are expected to be between £311m and £318m, with pre-tax profits tipped to be a record £76m to £79m. That's up from £307.9m and £73.4m the previous year, respectively.

The Wash.ME laundry service, the company's fastest growing business, delivered 10% revenue growth over the year, though the unseasonably warm weather had "some impact" on demand during the second half.

The company was still able to install a record 1,145 net machines during the period, representing a 27.2% increase over last year.

Photo.ME revenues fell 4%, reflecting the ending of a UK contract the previous year and a printer supplier issue in the first half. Meanwhile, in Germany, regulatory changes have meant that passport photos need to be taken in the citizens' office or by certified photographers, which hit revenues in the second half.

"As the group enters its new financial year, the board remains focused on delivering the group's long-term strategy to grow its core laundry and photobooth activities, leveraging its key strengths and significant competitive advantages," ME Group said in a statement.

"Whilst the macro-economic backdrop is still uncertain, the group remains well-positioned to deliver continued revenue and profit growth in the year ahead."