USContract Win/Trading Update

Photo-Me International PLC
15 November 2006


Wednesday 15 November 2006


                           PHOTO-ME INTERNATIONAL PLC                           
                                                                               
Important US Contract Win, Trading Update and Outcome of Strategic Review

The Board of PMI (PHTM.L), the digital imaging company, provides shareholders
with an update on the US contract win, current trading and its strategic review.

US CONTRACT WIN

PMI and CVS Pharmacy have now signed a contract to extend the exclusive sale of
minilabs into 2007. PMI will supply CVS with the third generation DKS 3 model.
Production has commenced, for delivery starting in January 2007.
 
CVS is the largest retail pharmacy in the USA, operating about 6,200 retail and
speciality pharmacy stores in 43 states. In the period December 2005 to
September 2006, PMI supplied to CVS 700 second generation DKS 15xx series
minilabs, the bulk of these in the period to 30 April 2006.
 
Serge Crasnianski, PMI's Chief Executive, stated 'This repeat business with CVS
represents a further measure of success for PMI's minilabs, which
unprecedentedly have won DIMA (Digital Imaging Marketing Association) awards for
the quality of its minilabs - the world's most prestigious - in each of the past
four years.'

PMI continues to be in discussion with other large US chains.
 
TRADING UPDATE

Trading in the second quarter, to 31 October 2006, continues to be broadly
consistent with the Chairman's AGM statement of 20 September 2006. In the
Vending Division, trading has been similar to last year. In the Manufacturing
Division, as expected, trading has remained subdued, mainly because of initial
delays in delivery of the new DKS 3 minilabs. As a result and although the
second quarter was much stronger than the first quarter, PMI expects its result
for the half year to 31 October 2006 to be below the adjusted profit before tax
(before the £5.4m non-operating exceptional credit) of £15.9m reported for the
half year to 31 October 2005.
 
In the second half, as indicated in the AGM Statement, the Manufacturing
Division will benefit substantially from growing unit sales as a result of the
transition to the new DKS 3 series and the new contract with CVS. A
well-received new product, the Photobook Pro (a machine producing photo albums),
is also expected to start contributing to the result. The Imaging Solutions
wholesale labs business continues to trade successfully.
 
While the Board believes that a pre-tax profit for the year to 30 April 2007
broadly in line with market expectations remains achievable, this outcome is
conditional on the attainment of demanding minilab production schedules by one
of the Group's subcontractors, following the initial delays referred to above.

STRATEGIC REVIEW
 
In response to press speculation, PMI announced on 5 June 2006 that it was
conducting a strategic review which may or may not lead to an offer being made
for the whole of the Company.
 
Whilst the Board received several indications of interest for the Company as a
whole and engaged in detailed discussions, it has concluded that an outright
sale of the Company as a single entity would not maximise value for
shareholders. The Board has therefore terminated these discussions.
 
This strategic review process has highlighted the different nature of the
individual businesses within PMI. As a consequence, the Board believes that
pursuing strategic options for the individual businesses will maximise
shareholder value.
 
In addition, the Board has assessed PMI's existing capital structure, future
capital requirements and anticipated cash flows and has decided to effect a
significant return of surplus capital to shareholders. The various options for
returning capital to shareholders are being reviewed with PMI's advisors and
bankers. The Company will circulate proposals to shareholders as soon as
practicable.
 
The Board believes this two-pronged strategy is likely to realise the full value
of the Company in the medium-term whilst optimising its capital structure in the
short term.
 
Major shareholders have indicated their support for this action plan.
 
Notes for Editors:
 
In the year to 30 April 2006, PMI reported revenue of £230.0m and a pre-tax
profit of £28.5m. If the £2.3m net exceptional credit is excluded, EBITDA was
£53.3m and pre-tax profit amounted to £26.2m.

Enquiries:
 
Photo-Me International                                   01372-453 399
Vernon Sankey (Chairman)                                              
                                                                      
JPMorgan Cazenove                                        020-7588 2828
Malcolm Moir                                                          
                                                                      
Bankside Consultants                                                  
Charles Ponsonby                          020-7367 8851/07789-202 312       
                                                                      

 



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