CTGP Cartucho

RNS Number:4684G
Cartucho Group Ltd
20 July 2006



Press Release                                                       20 July 2006
                             Cartucho Group Limited

                         ("Cartucho" or "the Company")

                                 Trading Update


On 11 May 2006, the Company announced that it had installed 116 kiosks under its
contract with its major customer in the US. As at 16th July 2006, the number of
kiosks installed and generating revenues stood at 284 kiosks, with the Company's
manufacturing facility capable of producing up to 50 kiosks per week.

The announcement on 11 May 2006 referred to the Company's major customer
experiencing differing refill rates across its stores. Since that time, kiosks
in some 25 stores have produced average refill rates of 12 cartridges a day for
prolonged periods, and four have achieved average refill rates of 15 cartridges
a day for prolonged periods, meeting or exceeding Director's expectations. In
particular, the Directors are encouraged by the fact that kiosks in stores that
have been the focus of marketing initiatives have performed better. It has
become apparent, however, that advertising campaigns and marketing initiatives
undertaken by the Company's major customer have not kept pace with the speed of
the roll-out programme, with overall average refill rates remaining below
expectations. In recognition of this, the Company and its major customer have
agreed to install 540 kiosks by mid-September 2006 and then reduce significantly
the speed of the remainder of the roll-out in order to enable the marketing
effort and sales initiatives of the Company and its major customer to catch up.

The ink refill kiosk remains a key component of the Company's major customer's
strategy and the Company has been provided with details of initiatives that have
been and are being put in place, including more aggressive and dynamic pricing
and in-store marketing. All parties remain committed to completion of the full
roll-out of the balance of the kiosks and the Company is looking forward to
recommencing higher levels of kiosk deployment and installation once the average
refill rates of the installed kiosks reach an acceptable level over a reasonable
period.

The Directors believe that a clear focus on achieving strong performance from
the 540 machines will provide long term benefits for the Company. In addition,
this approach will avoid any working capital issues for the Company. As at 30
June 2006, the Company's cash balances stood at over #2,000,000 and the measures
put in place, together with the Company's #500,000 overdraft facility with Bank
of Scotland mean that the Directors believe the Company to have sufficient
working capital to achieve its current objectives. The precise timing of
completion of the balance of the roll-out cannot be predicted, however, and the
Directors expect the slow down in the roll-out to result in the Company's
profits for this year and next year to be adversely affected. Following the
change to the refill pricing policy adopted by the Company's major customer, the
Company has renegotiated the revenue share model with the Company's major
customer.  The Company will receive a percentage of the refill price, rather
than the previous arrangement of a fixed fee regardless of the price of the
refill.  Given the forecast refill rates discussed with the Company's major
customer, the Directors expect this to have a beneficial effect on the Company.

The Company's ink refill kiosk continues to attract significant interest from US
retailers and the Company has completed initial deployments of 10 kiosks each in
two major US chains in the drug store and mass grocery sectors on a revenue
share basis. The Company has also sold a further four kiosks making a total of
five deployed in a major U.K. supermarket chain, and two kiosks in a major
French retailer.  The Company is also addressing potential opportunities with
resellers and distributors in the U.S. and other territories.

Whilst the Directors have been disappointed that average refill rates have been
below expectations, the manufacturing and support infrastructure of the Company
are well established, with the Company having proper structures in place and
adequate cash resources. The Directors are delighted with the effort and
commitment being shown by the Company's major customer and believe that the
proposed focus on 540 machines will produce positive results and endorse the
Company's business model. The expected increase in refill rates and
opportunities that exist for the Company, mean that the Directors view the
future with confidence.


                                    - Ends -

For further information:
Cartucho Group Limited
Mike Willcocks, Chief Executive                      mikewillcocks@cartucho.com

Media enquiries:
Abchurch
Heather Salmond / Franziska Bohnke                  Tel: +44 (0) 207398 7700
heather.salmond@abchurch-group.com                  www.abchurch-group.com



                      This information is provided by RNS
            The company news service from the London Stock Exchange

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