Photo-Me International: Laundry Opportunities And Japanese Restructuring
Edison | Jul 19, 2018 06:14AM ET
Photo-Me International's (LON:PHTM) FY18 results confirmed a successful business model divided by mutually exclusive sectors. A choppy market in Asia squeezed segment revenues but restructuring plans potentially improve profitability beyond FY19. FX headwinds and reduced tax benefited margins, although politically driven tax breaks can’t be assumed to be permanent. The aggressive laundry unit roll-out helped to drive the top line with segment revenue mix shifting in Portugal and Ireland. We expect consensus to be downgraded temporarily but expansion in underpenetrated markets supports low single-digit growth over coming years.
FY18 results: Earnings per share overshoot
Results surprised the market with PBT (underlying) growth of 4.4% but EPS growth of 14.2% on lower tax. Group revenue was up 7.1% to £229.8m, driven primarily by the rapid expansion of Laundry. The Japanese market proved challenging with the ID card programme failing to gain the anticipated momentum, which led to a decline of 35.7% in Asia segment operating profit (c 22.0% share of group vending units). Strategic acquisitions, organic growth and favourable exchange rates resulted in EBITDA growth of 2.8%; however, EBITDA margin decreased 130bp to 30.9%
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