Photo-me Share Discussion Threads

[ny boy] 01/6/2018 11:30

Solid Company, plenty of cash, Japan business is around 20%, so this has been over sold imho and will reverse north again, too many investors about looking for value. GL

[master rsi] 01/6/2018 10:32

PHTM - Progressive Equity Research -Analyst Denese Newton 01/06/2018
Trading Update

Photo-Me has issued a trading update ahead of the publication of full year results in July. The Group expectations for turnover and PBT for FY2018E are in-line with our forecast. The statement does, however, highlight difficulties in trading in Photo ID in Japan which will result in a lowering of our PBT forecast for FY2019E to £44m from £53m. The board has taken steps to resolve the issues and expects the Japanese Photo ID business to return to profitability following the restructuring in FY2019E.

Revenues for FY2018E are expected to grow at approximately 6% on a constant currency basis, which is in-line with our expectations. PBT is also expected to be in-line with our forecast of £50.2m for FY2018E.
This includes restructuring cost associated with the UK Retail business of £2.6m, a gain on disposal of the head office of £2.4m and a gain on investments of £3.7m.

The Photo ID business, except for Japan, continues to perform in line with previous expectations. In Japan there have been difficulties due to oversupply in the market, meaning declining market share and a
resultant reduction in average revenue per machine as well as upward pressure on commissions payable. The Board intends to re-structure the Japanese business to facilitate a return to profitability. For FY2019E
we are lowering our forecast trading PBT for Japan by £5m and anticipate a restructuring cost of £4m.

The Laundry business continues its expansion and remains a key growth driver. Revenue from Laundry operations in FY2018E grew 49% to £32.3m. Following relocation to Poland, an increase in manufacturing capacity will fuel an acceleration in the deployment of machines.

Post year-end the Group acquired La Wash Group, a leading Spanish laundry provider, for €4.75m. La Wash Group had turnover of €3.7m for the year ended 31 December 2017 and corresponding PBT of €0.8m. This acquisition highlights the Group’s commitment to making complimentary bolt-on Laundry acquisitions.

Photo-Me Retail in the UK has been successfully restructured to provide unattended digital printing kiosk services. This will boost the profitability of the UK digital printing business with an associated re-structuring cost of £2.6m in FY2018E.

Although the Board has made no final decision, it expects to maintain the Group’s current dividend policy

Trading Update
Except for the Japanese Photo ID business (see below), all areas performed in line with our expectations. Turnover for FY2018E is expected to grow by 6% on a constant currency basis or 7% on an absolute basis. PBT for FY2018E is expected to be broadly in line with market expectations. We forecast PBT for FY2018E of £50.2m.

Photo Identification Excluding Japan, the photo identification business continued to perform well. The UK roll-out of encrypted passport photo ID upload began in December 2017. By the year end, 2200 photobooths had been converted to provide direct and secure transmission if ID photos and data to HMPO. The Group is therefore well positioned to take advantage of the introduction of new UK passports.
This technology continues to be deployed in France and Ireland and the Group is also
in discussions with the Dutch government about its introduction in the Netherlands.

Laundry
Laundry continues to be a key growth driver with revenue for FY2018E expected to increase by 49% to £32.3m. Manufacturing capacity of the Revolution laundry machines increased following the relocation of production facilities to a new factory in Poland. This capacity increase will enable an acceleration of the roll-out programme in the longer term.

In May 2018, the Group acquired La Wash Group, a laundry services group. The acquisition cost was €4.75m, 1.3x FY2017 revenue. During that year the business had PBT of €0.8m. This acquisition shows Photo-Me’s commitment to identifying valuable strategic bolt-on laundry acquisitions to facilitate further growth.

Kiosks
Photo-Me Retail in the UK was re-organised to boost the profitability of the UK digital printing business. This resulted in a one-off re-structuring cost of £2.6m which is included in PBT.

Japanese Photo ID
Following the introduction of the My Number ID card programme in Japan the market in Photo ID has become increasingly competitive. However, this programme has not become compulsory and the market has not grown as much as had been anticipated. Existing operators and new entrants have deployed more machines hoping to take advantage of the programme. Total photo booths in Japan, across all operators, has increased from 16,000 to 27,000. Photo-Me does not have a monopoly in this market
and its market share has fallen from 33% to 30%.

This reduction in market share has decreased revenue per machine by 12%. In addition,there has been upward pressure on commissions payable which have risen between 2.5% and 3%. The resultant reduction in trading profits compared to our previous forecast will have a negative impact on PBT of £5m for FY2019E.

To address these pressures, the Group intends to restructure the Japanese business, primarily the head office. The savings made will be in the region of £2m-£2.5m per annum. The total cost of restructuring in FY2019 will amount to c.£4m. Negotiations with unions are ongoing but the Group is confident that progress will be made and that following this restructuring the Japanese Photo ID business will return to profitability.

The Japanese photo ID business accounts for all of our downgrade to FY2019E forecasts.

Summary and conclusion
Clearly the group has been battling the challenges in Japan for some time but had hoped for other positives to offset these problems - presumably a strong performance or material win elsewhere in the group. From Wednesday’s announcement, clearly management felt that it was no longer likely that such positives could realistically offset the Japanese difficulties, which is why the update was timed as it was.

Although it if frustrating to see the difficulties in this one market, we would highlight that the rest of the business is performing relatively well, and the group is benefiting to a degree from the diverse natures of its markets, geographies and consumer segments.

The Japanese situation (a major planned compulsory scheme, followed by its curtailment and abandonment, yet still leaving new aggressive competitors) is unlikely to be replicated in other markets or segments.
We would hope that the group can return to profit growth through a combination of simply delivering on the cost reductions already in train, and working to ensure the attractiveness and cost efficiencies of new products in a steadily-expanding range of markets.

[ny boy] 01/6/2018 10:19

Yes a back test of 105p this morning was successful and heavy volume, suggests a break higher to test 128p or as you said above 133p over the short term

[brucie5] 01/6/2018 09:51

Thanks. Sounds reasonable.

[master rsi] 01/6/2018 09:49

Brucie5

I don't have a target but 133p should be achievable in a short term basis

[brucie5] 01/6/2018 09:41

M-RSI,

Do you have a target on that chart?

[master rsi] 01/6/2018 09:38

Selected on the "UPS" this morning....

Looks ready to bounce after the sharp fall a couple days ago, there is volume today and rising the right conditions for the bounce.

Less than 2 hours trading an almost the same VOLUME as yesterday

[brucie5] 01/6/2018 09:35

Trading buy. Just picked some up as this looks heavily oversold.

[ny boy] 01/6/2018 09:22

If the share price can get through 114.4p, it could open up a go at 128p this month, the high from the dead cat bounce on recent rns.

[ny boy] 01/6/2018 09:14

Jimmy, best dyor

But the laundry side is expanding rapidly

Encouragingly, Photo-Me continues to deploy the stable cash flow from its photobooth operations to develop complementary products to power growth. Its higher margin laundry business, a key growth driver, continues to perform well, revenues shooting 50% higher to £32.3m last year.

Earlier this month, Photo-Me acquired La Wash, a Barcelona-based leader in Spain’s business-to-business laundry services market for €4.75m, a deal that fits with its strategy of identifying complementary bolt-on laundry acquisitions.

[ny boy] 01/6/2018 09:02

Breakout from 110p, volumes increasing

[bigwig] 01/6/2018 08:43

crazy mark down on the Japanese problem. Have been in and out of these for years and done very well. Am buying at this price mainly because of the laundry business growth which is taking off.

[jimmywilson612] 31/5/2018 18:09

Can anyone see what the profit is from the laundry side of the business?

I can't imagine the profit margins from these can be massive?

[ny boy] 31/5/2018 13:06

Some big trades going through today, looking forward to further rns’s GL

A break through 110p, should open up 115p+ in the short term.

[ny boy] 31/5/2018 12:07

Shareholder Name (Director*) % Voting Rights Amount
Serge Crasnianski* 22.41 84,610,701
Schroders PLC 12.51 47,238,747
Dan David Foundation 12.00 45,293,404
FIL Ltd 9.91 37,427,986

Sure he can fit in a few more 😀


Unattended laundry business is cranking up, a division to watch for further progress, reasons to be cheerful buying down at these ludicrous levels imho

Encouragingly, Photo-Me continues to deploy the stable cash flow from its photobooth operations to develop complementary products to power growth. Its higher margin laundry business, a key growth driver, continues to perform well, revenues shooting 50% higher to £32.3m last year.

[john09] 31/5/2018 11:15

I’m not sure Serge will be adding have u seen his holding already

[ny boy] 31/5/2018 11:14

Smart money s buying here, let’s see if Serge has added, sitting duck for takeover interest.

[aishah] 31/5/2018 10:13

SCVR report concludes with:

"My opinion - I'm sure some readers know the company better than I do, so are better placed to judge it. My main concern with this company is how much longer photo booths are likely to survive? It seems to me virtually inevitable that selfies on smart phones, with a direct download to the relevant authority, would sooner or later make photo booths redundant.

PHTM is trying to expand into other areas (e.g. laundry machines). For me though, if the core photo booth business is probably in structural decline, then I wouldn't want to invest unless the share price was crazily cheap - so a PER of 5 or less.

It's not for me. This could be a value trap in the long term, I suspect."

[ny boy] 31/5/2018 09:54

Far too tempting imho at these levels, will be interesting to see the large trades at the end of the day.😉

[ny boy] 31/5/2018 09:43

Buying zone for me,

Downside risk another 5/10%

110p low 10.10.2014
105.5 low. 04.10.2013
100p. Low. 17.09.2013

Strong support 95-98p Aug 2013

Takeover a strong possibility imho

Dyor as usual

[essentialinvestor] 31/5/2018 09:26

Large net net cash reduction over the last 2 years.

The dividend comment looks vague imv.

[keyno] 31/5/2018 08:53

That'll do for starters.

[stopstopgo] 31/5/2018 08:51

Kepler have restarted coverage this morning with a buy recommendation and a target of 153p.