CHIEF EXECUTIVE'S REPORT

 

BUSINESS REVIEW

 

We are pleased to report a record financial performance in FY 2023. Photo.ME and Wash.ME have continued to drive the overall Group performance as photo ID and laundry services remain in high demand across our key territories, and the Group continued to deliver against its long-term growth strategy.

 

Our continued focus on technological innovation and diversification, underpinned by our in-house R&D capabilities, enables us to meet the needs of end-users internationally. This, alongside the global footprint of our operations, well positions us on the international stage as a leading operator in instant service vending.

 

Financial performance

 

Total revenue increased by 14.6% to £297.7 million (2022: £259.8 million), with strong growth delivered in each of our geographic regions.

 

By geography, our largest region, Continental Europe, reported revenue growth of 15.4%, due to  a continued strong performance in France. In the UK & Republic of Ireland, revenue was up 14.8%, and in Asia Pacific operating revenue was up 11.0%.

 

Each of our principal business areas delivered operating revenue growth year-on-year compared with the same period in FY 2022. Our laundry operations performed particularly strongly, up 32.0%, photobooth operations grew by 11.8%, digital printing by 5.6% and Other Vending Equipment and Feed.ME operating revenue was up 30.8% on FY 2022.

 

As a result of the above, EBITDA (excluding associates) was £106.6 million, an increase of 15.6%, which delivered an EBITDA margin of 35.8%. Reported profit before tax was up 25.7% to £67.1 million (2022: £53.4 million), with all regions reporting growth.

 

The Group's corporation tax charge for the year was £16.4 million, resulting in an effective tax rate of 24.4%. Tax charge for the prior year was £14.6 million, an effective tax rate of 27.4%.

 

Capital expenditure was £53.5 million, primarily related to laundry (£24.7 million), photobooths (£8.9 million), kiosks (£3.1 million), plant, machinery and vehicles (£6.3 million) and the acquisition of a photobooth business in Japan (£4.8 million).

 

The Group remains well capitalised and in a strong financial position, with net cash of approximately £33.9 million.

 

During the year ended 31 October 2023, the Group repurchased 1,260,534 of its ordinary shares and also paid dividends totalling £23.4 million (comprising the interim dividend for 2022 of £9.8 million, the final dividend for 2022 of £11.3 million and a special dividend for 2022 of £2.3 million). In November 2023, the Company paid its announced interim dividend for 2023, totalling £11.2 million.

 

Further details of the Group's performance by business area and geographic region are set out below.

 

Overview of principal business areas

 

Below is an overview of the Group's four principal business areas: photobooth (Photo.ME), digital printing (Print.ME), laundry (Wash.ME) and food (Feed.ME). In addition, the Group operates Other Vending Equipment.

 

 

Photo.ME - Photobooths and secure integrated biometric photo ID solutions

 

	12 months ended 31 October 2023	12 months ended 31 October 2022
Number of units in operation	30,762	27,625
Percentage of total group vending estate (number of units)	64.7%	62.9%
Revenue	£172.5m	£154.3m
Capex	£8.9m	£3.0m
EBITDA	£61.8m	£54.2m

 

Our photobooth operations, our largest business area by number of units, revenue and EBITDA contribution, continued to perform strongly throughout the financial year.

 

Revenue increased by 11.8% to £172.5 million (2022: £154.3 million). This performance was supported by continued demand of official photo ID, the continued expansion of the estate both organically and through acquisition, and annualised benefits of FY 2022 price increases implemented in certain locations, particularly France, Germany and Austria. The average revenue per machine (excluding VAT) increased to £5,908 per year (2022: £5,586 per year).

 

Subsequently, EBITDA was up 14.0% at £61.8 million and represented 58.0% of total Group EBITDA. EBITDA was 35.8% of photobooth revenue during the Period.

 

Capex increased from £3 million to £8.9 million, reflecting investment in the rollout of next generation photobooths, with 547 installed in France and Germany in FY 2023. While deployment of the machines was slower than initially expected, due to supplier delays, these short-term challenges have been resolved. At the year-end we were installing approximately 180 next-generation units per month. In addition, a programme to upgrade our existing photobooth estate with new proprietary software and functionalities is underway.

 

At 31 October 2023, the number of photobooths in operation was 30,762, an 11.4% increase on the prior year (2022: 27,625), reflecting the ongoing expansion programme as we continue to rollout units in existing and new territories. This represents 64.7% of the Group's total vending units.

 

Growth strategy and progress

 

We believe that there are a number of long-term growth drivers in place which underpin our continued expansion. Demand for photo ID for the use in official documentation, including driving licences and passports, Government requirements for digitalised photo ID and security to combat fraud, and consumers increasingly requesting multi-functional instant services are all factors underpinning the continued growth of Photo.ME. There continues to be a compelling case for the Group to grow its photobooth business and benefit from industry trends and widespread consumer demand.

 

Our next-generation photobooth was developed by the Group's in-house R&D team and offers range of new functionalities, focused around enhancing the user experience. These new features include 'Mobile to Print', user personalisation services using AI and photo filters. The Group expects other new functions will be added over time. The Group aims to install 3,000 next-generation machines in FY 2024, and approximately 8,000 next-generation photobooths by the end of FY 2025.

 

At the same time, the Group is modernising the hardware of its existing photobooth estate and intends to install its new proprietary software at a rate of around 200 machines per month. This proprietary software enables the Group's engineers to quickly and cost-effectively upgrade each machine, remotely rather than needing to physically visit the machines.

 

In October 2023, the Company's Japanese subsidiary, ME Group Japan K.K., acquired the automated-photobooth business owned and operated by two subsidiaries of FUJIFILM Corporation (formerly FUJIFILM Co., Ltd) in Japan for an initial consideration of £4.8 million (Japanese Yen 873 million), funded by a local loan facility. This added 3,548 traditional photobooths, located in high-footfall locations such as travel hubs and shopping centres throughout Japan, delivering official photo ID for consumers, including for the government's social security and taxation photo ID card scheme. The acquired photobooths were fully integrated into the Group's operations in Japan in October 2023 and will benefit from operational synergies under the Group's ownership. Further details of the Japan acquisition are detailed in the Review of Performance by Geography section.

 

Following the Group's entry into the Australian market through a small acquisition in 2021, the Group is trialling 11 photobooths in across Sydney and Melbourne, as part of our ongoing diversification strategy as we build our presence in both new and existing markets. Whilst this is at an early stage in terms of building out the market, the Group is exploring how best to drive forward expansion and remains excited by the prospects for the Australian market.

 

The Board continues to believe that there are longer-term opportunities in the photo ID market across both existing and new geographic markets.

 

Planned photobooth investment in FY 2024 is between £15 million and £20 million, with a target return on investment in approximately 18 months.

 

 

Wash.ME - Unattended Revolution laundry services and laundrettes

 

	12 months ended 31 October 2023	12 months ended 31 October 2022
Total Laundry units deployed (owned, sold and acquisitions)	6,870	5,924
Total revenue from Laundry operations	£81.6m	£61.8m
Total Laundry EBITDA	£39.5m	£29.1m
Revolution
- Number of Revolutions in operation	5,533	4,754
- Percentage of total group vending estate (number of units)	11.6%	10.8%
- Total revenue from Revolutions	£76.1m	£56.7m
- Revolution capex	£24.7m	£20.2m

 

Total revenue from our laundry operations grew by 32.0% to £81.6 million as we continued to expand our estate of Revolution laundry units, generating a higher level of turnover from this business. At 31 October 2023, the total number of laundry units deployed (owned, sold) was up 16.0% to 6,870. Total laundry EBITDA increase by 35.7% to £39.5 million.

 

Growth of Revolution laundry operations

 

The total number of Revolution units in operation grew 16.4% to 5,533, as the Group continued to roll out new machines at a rate of 65 per month, with more than 780 machines installed during the year. Revolution laundry machines accounted for 11.6% of the Group's total estate by number of machines (2022: 10.8%).

 

Revenue increased by 34.2% to £76.1 million, which represented 25.6% of Group revenue, driven by a combination of higher demand and more machines in operation. The average revenue per machine (excluding VAT) was £14,793 per year (2022: £12,816 per year).

 

EBITDA was £39.5 million and contributed 37.1% of Group EBITDA. EBITDA from Revolution was 48.4% of revenue.

 

Wash.ME remains our fastest growing and highest margin business area and we continued to invest to deliver our expansion plans. As a result, Revolution capex increased to £24.7 million (2022: £20.2 million) reflecting the continued rollout of units across our core territories. Furthermore, the Group has entered a period of machine refurbishment and maintenance, the first since laundry operations were launched in 2012.

 

Growth strategy and progress

 

A key part of our growth strategy for the laundry business is expanding operations through new and existing partners in target territories, as a means of meeting consumer demand by offering convenient, competitively priced and high-capacity laundry services. We announced a new strategic partnership with leading supermarket chain Co-op, in the UK, to position Revolution units at sites in selected parts of the country. The partnership will allow us to position laundry services at an increasing number of high footfall locations across the UK, offering convenient laundry services to consumers at those sites. We see this as a mutually beneficial relationship where we build a destination for consumers looking for high-capacity laundry facilities while shopping.

 

As well as entering new market segments through strategic partnerships, the Group continues to deliver innovative solutions to drive forward the service offering available under Wash.ME. Alternative machine formats continue to prove popular with different types of users. We see good potential for our 'Flex' units, a compact format that can fit into smaller spaces, and believe there to be a long-term opportunity to address the domestic market and at-home laundry needs. Whilst this is at an early stage, we will continue to monitor the opportunity and update in due course. 

 

In June, the Group began rolling out a new consumer App aimed at laundry services as a means of improving the user experience as well as providing better marketing insights on the Group's end-consumers. It remains a focus for us to improve the App and work towards rolling this out more widely across our operations.

 

The Group plans to install an average of 80-90 laundry machines per month in FY 2024. In addition, photovoltaic solar panels on being installed on Revolution laundry machines rollout across key territories, including France and the United Kingdom.

 

Planned laundry investment in FY 2024 will be £22.0 million to £30.0 million, with a with a target return on investment in approximately 18 months.

 

Print.ME - High-quality digital printing services

 

	12 months ended 31 October 2023	12 months ended 31 October 2022
Number of units in operation	4,734	4,785
Percentage of total group vending estate (number of units)	10.0%	10.9%
Revenue	£11.3m	£10.7m
Capex	£3.1m	£1.3m
EBITDA	£4.2m	£3.6m

 

Our estate of digital printing kiosks offers a wide range of competitively priced print formats and personalised products. Our key markets are France, where most machines are situated, the UK and Switzerland.

 

At 31 October 2023 the Group had 4,734 kiosks in operation, a reduction of 1.1% compared with the prior year. These accounted for 10.0% of the total number of vending units in operation.

 

Revenue increased to £11.3 million from £10.7 million in the prior year, reflecting increased demand from new digital kiosks, replacing 413 old machines.  Revenue represented 4.1% of Group revenue.

 

The average revenue per machine (excluding VAT) was £2,374 per year (2022: £2,279).

 

EBITDA was £4.2 million which represented 3.9% of Group EBITDA. EBITDA was 37.2% of Print.ME revenue in the period.

 

Capex was £3.1 million, a significant increase on the prior year reflecting an investment programme to replace some existing machines, and deployment of 500 new kiosks.

 

Growth strategy and progress

 

In recent years, we have focused more investment towards the Print.ME business as demand for high-quality digital printing services remains robust. This, paired with the increasing use of smartphones and demand for social media sharing, presents a long-term opportunity for our digital printing services. The Group is forecasting c.£3.0 million of capex in FY 2024. As part of the growth strategy for this business area, the Group continues to explore opportunities to extend the services offered through its wider vending estate including digital printing services. Our next-generation photobooths, currently being deployed, offers this functionality as part of the multi-service offering.

 

Feed.ME - Vending equipment for the food service market

 

Feed.ME activities are focused on two areas, self-service fresh fruit juice equipment market and  pizza vending machines aimed at the B2B retail and hospitality markets. The Group currently has operations in Belgium, France, Japan and Switzerland.

 

The Feed.ME business model is primarily based on the sale of vending equipment. Customers frequently, but under no obligation, sell the vending equipment back to the Group at a later date. The equipment is then refurbished and re-sold, generating repeat revenue for the Group.

 

The Group also sells maintenance agreements, under which it services vending equipment for an agreed period of time.

 

Technical adjustments to our pizza vending machine led the Group to move manufacture of this machine in-house during the commercialisation phase. This enabled us to increase production to 30 machines per month and ensures that our R&D team are on hand to support and have oversight of quality control and cost efficiencies. 

 

On a smaller scale, the Group operates fruit juice machines in Japan. During the year we reinstated our B2B vending operations aimed at end markets such as the hospitality sector. At 31 October 2023, the Group had 441 freshly squeezed-orange-juice vending machines in operation, which includes fulfilment of the oranges for the machines.

 

Revenue from the sale of equipment, consumables and services was £8.9 million. Combined with other revenue (£4.6 million), the total revenue of Feed.ME was £13.5 million (2022: £12.5 million). This business area contributed 4.5% of total Group revenue.

 

A review following the technical issues experienced with the pizza machines, which have slowed progress in this business area, has resulted in an impairment of goodwill and intangibles of £2.6 million related to the acquisition of the pizza vending machine manufacturer (Resto'Clock) in 2021. The group will continue to sell pizza vending equipment, with the target of relaunching this division and improving profitability.

 

EBITDA was £3.8 million and contributed 3.6 % of Group EBITDA.

 

Growth strategy and progress

 

The food service sector remains an attractive proposition for the Group. We remain focused on growing our fruit juice vending machine operations in Japan and we plan to increase the production of our pizza vending machines, with the aim of selling more than 15 per month.

 

The Group's aim is to become the food vending equipment market leader in Europe.

 

Other vending equipment

 

At 31 October 2023, the Group operated 6,055 (2022: 6,483) other vending units in addition to its four principal business areas. These included 2,356 children's rides (Amuse.ME), 3,374 photocopiers (Copy.ME) and 325 other miscellaneous machines.

 

These machines are typically located in high-footfall locations alongside the Group's principal activities, thereby benefiting from existing site owner relationships and operating synergies. Amuse.ME units are mostly situated in the United Kingdom and the Netherlands. Copy.ME units are mostly situated in France. The Group will continue to operate other vending units where profitable.

 

Other vending equipment accounted for 13.6% of the Group's total vending estate by number of units, down 1.7% compared with the previous year and represented 4.0% of the total Group revenue.

  

Growth Strategy In Action

 

Our growth strategy is centred on five key pillars to support the development of the Group's principal business areas: photobooths, laundry services, digital printing and food vending equipment.

 

We are pleased to have made solid progress against our five-year plan to 2027, driving forward a number of initiatives as part of this mid-term roadmap.

 

Below we are pleased to outline progress in FY 2023 on delivery of our growth strategy against each of the five key pillars aimed at supporting the development of the Group's principal business areas.

 

1.  Expansion into new geographic territories

Continue to build the Group's international presence in recently entered markets of Italy, Finland and Australia.

 

Progress in FY 2023

 

The Group has continued to drive expansion of operations in new geographic territories. In Australia, we have around 11 photobooths installed across Sydney and Melbourne, our pilot cities. Whilst expansion in Australia remains at an early test phase, we continue to look at how we can best grow our operations and believe there is a significant opportunity in the region.

 

 

2.   Entering new market segments

 

Through securing new partnerships with businesses such as supermarkets and smaller retailers.

 

Progress in FY 2023

 

Our partners and site owners remain a valuable route for us to grow our business by entering new market segments. We launched new partnerships with Co-op and Morrisons, two major supermarket chains in the UK, enabling us to offer conveniently accessible laundry services to consumers at those sites.

 

 

3.   Ongoing new product and technology innovation

 

To meet the vending needs of consumers through state-of-the-art user experience, backed by the best technology, and an omnichannel approach.

Progress in FY 2023

 

The Group is well underway with the deployment of modernisation software across its photobooth estate. This new proprietary software provides us with the ability to deploy new functionality and services, as well as update interfaces, remotely. Further details are disclosed further down in this report.

 

 

4.   Continued expansion and diversification of services

 

Revenue growth through a multi-service instant-service offering and integration of centralised operating systems.

 

Progress in FY 2023

 

The Group has rolled out a number of next generation photobooths, predominantly across France, as part of our strategy to introduce a multi-service offering across its operations. Machines are being installed at a rate of around 180 per month with ambitions to increase to 250 new installations per month during 2024.

 

 

5.   Merger and acquisition strategy

 

Focused on enabling our growth strategy through bolt-on acquisitions, which meet the Group's return-on-investment criteria, to extend our geographic footprint, consolidate our market position and increase the breadth of our services available through our machine network.

 

Progress in FY 2023

 

In October our Japanese subsidiary, ME Group Japan K.K., completed the acquisition of the automated-photobooth business from FUJIFILM Corporation. The acquired photobooths have been fully integrated into the Group's operations, benefitting from wider operational synergies, and consequently the Group is positioned as a market leader for photobooths across Japan.