Photo-Me International (PHTM) is guiding towards impressive 20% growth in profit before tax (PBT) for the year ended 30 April. This is largely down to a strong second half of continued double-digit growth enhanced by currency tailwinds for the photobooths, printing kiosks and laundry machines operator.

The roll-out of laundry units across Europe and beyond represents an exciting growth opportunity for cash-generative Photo-Me, a progressive dividend payer with pedigree in terms of special payouts too.

However, the rather muted share price reaction, up 3p to 169.6p today, reflects the absence of further earnings upgrades. There remain lingering concerns over the possible introduction of selfie mobile phone photos for UK passports, a potential threat factor for investors to weigh.

Click here to read to today’s pre-close trading update from the instant-service equipment supplier, which has had a full listing on the London Stock Exchange since 1962.

Ahead of full year results later this month (27 June), Photo-Me reports ‘excellent progress in the financial year’ recently ended, driven by investment in new products, growth in its laundry business and with a boost from sterling’s weakness versus the euro and yen.

LAUNDRY ROLL-OUT EXCITES

Photo-Me benefited from upgrading photo-booths across France to enable secure transmission of ID photos/data for driving licences, but has seen particularly strong growth from the roll-out of laundry units and launderettes across the channel.

Besides France, Photo-Me is also expanding its laundry business in Ireland, Belgium and Portugal.

During the second half, Photo-Me started deploying its ‘Revolution’ laundry units here in the UK, with some 100 machines up and running at the end of the year.

Revolution, the 24/7 outdoor self-service machine range, has also been extended to include two smaller models, ‘Compact’ and ‘Mini’, targeted at the Far East market. A first Launderette shop opened in Japan in the final quarter and is ‘proving to be very successful’.THE ANALYSTS’ VIEW

Over at finnCap, analyst Roger Tejwani sticks with his 215p price target for Photo-Me, one implying 27% potential upside.

Canaccord Genuity’s Simon Davies remains a buyer and has upgraded his price target from 185p to 202p. The analyst says 20% PBT growth would be bang in line with his £48.3m forecast, so no additional upgrades today unfortunately.

Davies also nudges down his year-end net cash estimate from £49.7m to £40.1m to reflect higher spending on the company’s photobooths roll-out and investment to improve the profit performance of Asda’s photo division, which Photo-Me acquired last year.

‘The roll-out of digitally enhanced photo-booths across Europe is encouraging, as is momentum for its laundry units and laundrettes,’ writes Davies. ‘Full year 2018 will be a transitional year for the Asda contract. But momentum looks strong across the group and supports our full year 2018 forecasts, which are unchanged with projected PBT (normalised) of £52.4m and earnings per share of 10p.’

Addressing the possible introduction of selfie mobile phone photos for UK passports, Davies continues to believe that ‘increased political focus on immigration/terrorism is likely to result in a shift in the UK towards higher specification passports/drivers licences, which could provide a material growth driver.'

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