Photo-Me splashes out on special dividend

Pent-up demand for passports has turned Photo-Me International’s (PHTM) fortunes around. Customers were apparently undeterred by the recent one-third price hike from €6 (£5) to €8 during the period, with photobooth revenues rising by 27.4 per cent to £66.9mn in the six months to 30 April, though these will be digested in the seasonally-stronger second half. Shares in the operator of assorted laundry, printing, and pizza vending machines, rose by 16 per cent on results day.

The easing of travel restrictions has been uneven so far. While three quarters of Photo-Me’s machines are in Continental Europe, the UK, and Ireland, the remaining quarter are in Asia Pacific. Ongoing Covid-19 restrictions, especially in Japan, have hampered performance, with regional revenues sinking by 12 per cent to £19.8mn and without a full re-opening in sight.

Elsewhere, Photo-Me saw healthy growth in its unattended ‘Revolution’ laundry machines, installing an average of 50 new units per month and increasing revenues by 37.5 per cent to £25.3mn. Meanwhile, the firm’s ongoing removals of unprofitable machines is resulting in better profitability, with cash margins rising to 34.9 per cent from 30.3 per cent a year ago.

Some of this will be distributed to shareholders through a special dividend of 6.5p per share, on top of the standard interim payment. The firm’s progressive policy will see it pay out over half of its annual profits after tax in dividends. Canaccord Genuity said it anticipates a normalised dividend yield of 7.5 per cent for the full-year, excluding the special distribution, which “looks market-leading when considering the stable cash flow characteristics of the group”. We agree, but considering weakening consumer confidence, we keep a cautious outlook for now. Hold.

Last IC View: Hold at 75p, 12 July 2021.