Photo-Me International (LON:PHTM)


Share price: 166p (+7.7%)
No. shares: 375.5m
Market cap: £623m

Interim Results (for the six-month period ended 31 October 2016)

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A bullish report this morning from this vending machine operator (photobooths, printing kiosks, laundromats, and more).


Note the huge tailwind from currency movements. UK/ROI revenues are only about one quarter of total revenues (the rest primarily coming from Continental Europe and Japan), so the move in Sterling produced a windfall of additional profits. 

Outlook: It is no surprise that the shares are bouncing, given the following outlook statement.

The Group's performance for the first half was ahead of the Board expectations and the Board therefore now expects the Group's profits will significantly exceed current market expectations for the financial period ending 30 April 2017. The Board continues to be optimistic about the Group's future prospects.

Revenue analysis: The number of vending units increased by 3.4% to nearly 47,000. Photobooths are 60% of the entire estate, and are growing at a slower rate. Instead, the primary growth driver is laundry units, whose numbers increased by 51%.

Profit (at constant currency) is  growing at a slightly faster rate than revenue, which is growing at a slightly faster rate than the total number of machines - these are all positive signs to me.

Dividend: Interim dividend is increased by 20% to 3.09p. This suggests a possible yield of 4.2% on the current share price (depending on the movement of the final dividend).

Net cash: £68 million, after making adjustments and deductions from £77 million of gross cash, with a very healthy balance sheet. Indeed, I would have argued that this was probably too much cash for the business to hold, but I note that it has already made three special dividends since 2012. So I can't blame management for not trying to keep the cash balance under control!

My opinion: I have been watching the Finance Director's presentation to Mello earlier this year, and have a very positive overall impression of the business. ROCE has been estimated according to my sources at an average of c. 29% over the past three years, which for me puts it in the category of a super-high-quality business (although it's true that these were all-time high performance levels for the…

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