Photo_Me PHTM

21st Jun '16 by HRISC

15 comments 7472 reads

Results for the FYE to 30 April 2016 announced today. Highlights:

Revenue up 3.8% to £188.4m
EBITDA up 9.5% to £58.4m
Underlying Pre-Tax Profit up 4.1%to £41.3m
Cash up 2.8% to £60.7m
Annual dividend up 20.1%

Positives all round although this comment:

"Whilst uncertainties remain, in particular in relation to currency, the Board anticipates another year of good growth."

Share price down 16%, which surprises me.

Year on year this business delivers. Highly cash generative and innovative.

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About the Author

HRISC

Premium Member

15 comments

WarrantStar

21st Jun '16

I'm a holder with no plans to sell. I think the market reaction is based on:
1) Dividend not as large as hoped for.
2) Worries about BREXIT & exchange rates

I think it's prospects look good.

HRISC

21st Jun '16

Thanks Warranstar. I agree entirely. Volumes are quite low and trades generally low value from what I can see.

Dearg Doom

21st Jun '16

Hi HRISC.

Re Photo-Me International (LON:PHTM)

Had not looked at this share in recent years Back of envelope stab at figures.

The share price is settling back into a more normal price range given earnings of 7.77p per share for the year and its outlook for growth going forward which is not as rapid as previously envisaged in Japan and the incremental effect of around 1,000 units extra per year on profitability.

Subtract 62.4 million cash from market capitalisation gives a value of circa 470 million for ongoing business. Circa 30 million of earnings multiplied by 15 times gives a valuation of 450 million which knocks another 20 million of its valuation by circa 5% bringing the valuation back to sub 130's.

I like the share and represents better value than most shares. Share price now back to levels 12 months ago. Broker updated forecasts for next year required.

Best to wait a week or so to pick up in low 1.20's if you are bullish. Bearish readers may pay 12 times earnings plus cash which is circa £1.00 as an entry point.

Regards

Dearg Doom

Rusty2

21st Jun '16

The problem is Japan, where much of the increase in profits was coming from but now there have been problems:

"'Owing to technical and administrative problems at local government level, the implementation of this plan to date has not gone as smoothly as planned, after a strong start, but the Japanese government is committed to the programme and is increasing financial resource to ensure swifter issuance.'

...'due to the uncertainty over timing, we have not included any profits related to My Number in our forecast for the current year. '

timarr

22nd Jun '16

The area I would be concerned about is the historic passport photo business which dominates revenues. As they state in the risks section:

In many European countries where the Group operates, if governments were to implement centralised image capture for biometric passport and other applications, the Group's revenues and profits could be seriously affected.

A couple of months ago I had to renew my passport. I got an email from HM Passport Office inviting me to participate in their beta passport re-issue program: I got my daughter to take a picture of me on my phone, submitted it online, sent in my old passport and got the new one back in 4 days : https://www.passport.service.gov.uk/renew/

I like the business but it's too risky for me.

timarr

shanklin100

22nd Jun '16

timarr

That's interesting given France seem to be going in completely the opposite direction and essentially forcing one to use a PHTM booth to have one's driving licence photo taken, as per.

http://www.investegate.co.uk/photo-me-intnl-/rns/t...

"Photo-Me has over 22,000 photobooths worldwide and these booths are leading-edge in terms of automation and high quality facial image capture. Governments however, face an increasing challenge to implement secure ID systems using technologies like biometrics and 3D, whilst at the same time complying with the latest standards of identity assurance and privacy protection. To meet these requirements, Photo-Me has a number of initiatives underway to introduce the next generation of secure ID technology into its booths and is pleased to announce the commencement of a major initiative in France.

In 2013, the French Government created a new format driving license incorporating holographic design and a machine readable zone (similar to passports). Photomaton, the Group's French subsidiary has now obtained the first agreement with ANTS (National Agency of Secure Documents) to allow the delivery of a digitized e-photo and signature, fully compliant with the new requirements. This document is sent from the photobooths via a secure server.

All of Photo-Me's French photobooths - totalling 7,800 -will be upgraded and capable of delivering this service and the new connected secure system is being deployed nationally beginning in Paris and the Ile-de-France. Approximately 2,000 machines should be upgraded by the end of June 2016 and the balance converted progressively in the following months, with the intention to complete the rollout by the end of 2016."

Perhaps I am mis-understanding the RNS? I cannot see too many smart phones delivering a satisfactory 3D image should that be required.

Cheers, Martin

timarr

22nd Jun '16

Hi Martin

I don't think the French driving licence actually contains a 3D image, I think that's Photo-Me International (LON:PHTM) doing a bit of not directly related futurology: http://www.imprimerienationale.fr/en/products-serv...

3D images may end up being exciting new ID card and passport technology, but they're not being generally mandated yet. And in fact the very latest smartphone technology can include 3D cameras: I just can't see how PHTM can keep ahead of the smartphone camera curve.

It's just not clear to me where PHTM's moat is here, any more. If you look at their response to the risk I mention above they state:

The Group is developing new systems that could respond to this situation, including the introduction of 3D technology in ID security standards. The Group also ensures that its ID product remains affordable and of high quality.

Note the "could" in that statement. They then go on to add:

The Group is also conducting lobbying activities.

Which suggests a rearguard action to try to persuade governments that their technology should be mandated. They may succeed, they may not, but either way that looks like a weak position.

timarr

Ramridge

22nd Jun '16

Hi timarr -
I wish I had heard about this service just a few days back. Last week, I took my renewal papers with new photos to the local post office for their check and forward service, and the photos failed because there was a tiny bit of reflection from the bottom of my spectacles. You had to look hard to notice it.

About time we start using new technology to bin old antiquated processes with higher costs, longer timeline, etc, etc.

Rusty2

22nd Jun '16

I thought you had to remove glasses for passport photos?

Ramridge

22nd Jun '16

No, it's optional as long as there is no reflection.

shanklin100

22nd Jun '16

timarr

Thank you for your comments which I found very helpful. Its all very well the photo-booths being a cash cow but it sounds like smart phone technology are a significant threat to this income.

Cheers, Martin

Rusty2

22nd Jun '16

OK I see they have changed the rules although they do recommend removing if possible.

Rusty2

21st Dec '16

I notice the CEO has bought loads of shares in the last few days over £7m, any views about this.

DVB99

21st Dec '16

CEO must be confident to invest that much

Damian Cannon

21st Dec '16

Yup Serge has spent just over £7.5m in a couple of days here and if that isn't a vote of confidence then I don't know what is. Still I can see where he's coming from as their laundry arm is going great guns, exchange rates are in their favour and they've got pots of cash in the bank. PHTM normally put out a trading update in Jan or early Feb and I get the distinct feeling that it's going to be a good one with a possible special dividend attached.

That said I'd like to know who's off-loading all of these shares but even if an institution is selling out (clearing their books for the end of year?) I'm happier backing Serge than someone further away from the coal face.

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HRISC

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