In June 2009, Photo-Me International provisionally announced the sale of its perennially loss-making business Imaging Solutions for a modest sum. Then, earlier this month, it reported a much reduced deficit for 2008-09 after deducting a £14.17m loss (£1.42m) from Imaging. There's no doubt that this subsidiary had to go, but how sturdy is the new look Photo-Me?
"Reasonably" is probably the right answer. The impressive new number is a dramatic drop in year-end net debt (including money in Imaging) from £45.6m to £23.5m, helped by reduced capital spending and improved working capital balances. Photo-Me expects this trend to continue and end-April 2010 net debt could be as little as £10m. On the other hand, favourable currency movements (notably the yen) accounted for all and more of the rise in 2008-09 turnover - and may not happen again in 2009-10.
In the short term, Photo-Me's biggest challenge is the introduction of new EU passports containing biometric data - and how this will be achieved. In France, an important market, the company is fighting proposals that local (and powerful) mayors will provide local on-site photography facilities. It believes it can fend off village snappers but has also cut costs there. Then there's a need to diversify. To date such measures have produced an eclectic range of amusement products including supermarket kiddy rides made by a subsidiary in Skegness. On the other hand, rapid debt reduction gives the company scope to acquire. In 2005, photo booths accounted for 100 per cent of the business, now it's less than half and the two-year target is just a third.
PHOTO-ME INTERNATIONAL (PHTM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 20.25p | MARKET VALUE: | £72.8m | |
| TOUCH: | 20-20.25p | 12-MONTH HIGH: | 23.05p | LOW: 7.5p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 20p | NET DEBT: | 35% | |
| Year to 30 Apr | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2005 | 237 | 33.9 | 6.18 | 2.0 |
| 2006 | 225 | 28.0 | 5.53 | 2.4 |
| 2007 | 213 | 15.7 | 2.78 | 2.4 |
| 2008 | 194 | -14.6 | -5.52 | 2.4 |
| 2009 | 211 | -5.1 | -4.34 | nil |
| % change | +9 | – | – | –100 |
| Recreational products | ||||
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