-Better than expected first-half trading
-Increased guidance for full-year revenues to grow at least 20%
-Company retains significant pricing power
Instant-service equipment group Photo-Me International (PHTM) surprised the market with the news it had performed above expectations for the first half to 30 April with revenues up 24.2% year-on-year.
Better than expected trading also had a positive impact on profitability, leaving the company company with cash of £41 million at the end of the period.
Despite a significant increase in supply chain and raw material costs, as reported by other global businesses, the company said its strong market positions gave it ‘significant’ pricing power.
Consequently, the firm now expects full-year revenues to grow by at least 20% and is forecasting adjusted pre-tax profit in a range of between £47 million and £50 million.
The anticipated revenue growth is around 7% higher than market forecasts, helping push the shares 9% higher to 77.2p.
STRONG REBOUND
The company believes the easing of Covid-19 restrictions has encouraged customers to be more confident to travel and socialize which has provided a tailwind for the business.
Consequently, demand for the group’s services has been ‘stronger than ever’ with trading returning to pre-pandemic levels across all regions apart from Asia.
The photobooth business saw a significant jump in revenues, particularly in the UK and France, driven by pent-up demand for passports and other official documentation.
Photo-Me has continued to roll-out a new corporate brand ME Group which management believe better reflects the group’s recent diversification and investment in innovation.
The laundry division continued to perform strongly after a new low-cost machine called the ‘Flex’ was recently launched, which produced ‘extremely positive’ early trading results.
The plan is to rapidly deploy this new product across Europe to exploit the ‘strong’ market opportunity. The company anticipates ‘significant international growth’ in coming months and years.
A further growth opportunity is seen in the food business including a new pizza vending offer which is said to be proving very attractive.
EXPERT VIEW
Guy Hewett, director of research at FinnCap, increased his fiscal 2022 earnings per share forecast by 15% to 9.8p and raised his price target to 123p from 105p.
Hewett commented: ‘We value the shares on a fiscal 2022 free cash flow yield of 7.1%. This represents a 50% discount to the small- and mid-cap market’s 4.7%, justified by the structural challenges seen in the UK ID market (selfies) and, to some degree, the continued risk from the pandemic.’
