Photo-Me International (LON:PHTM) provided investors with a boost as it delivered a dividend pledge alongside prelims that revealed it was in rude financial health.
Announcing a 30% increase in the annual cash distribution to 4.88p a share, the photo booth operator said it would increase the divi by at least 10% a year for the next three years.
Not just that, it revealed it would return any cash on the balance sheet over £50mln in the form of a special pay-out.
It currently has £60mln in the bank. Broker finnCap said its cash flow analysis indicated the figure could be £72mln by the end of the current year.
This would allow it to hand back 11.4p a share in dividends, which equates to bumper yield of 8.5%.
Adverse currency movements masked the true rate of expansion at Photo-Me.
For example, revenues rose for the first time in five years at constant exchange rates, but fell on a ‘reported’ basis by 5% to £177.2mln in the 12 months ended April. Pre-tax profits of £35mln were up almost a quarter if currency factors were excluded.
"The operational performance of the business remains very good,” said chairman John Lewis.
“Subject to the risks and uncertainties detailed in the strategic report, the board anticipates another year of strong underlying progress."
The company owns 44,600 vending units – mainly photo booths, but also printing kiosks and kiddies' rides.
The launch of the new identity card in Japan will be a growth driver, while the Revolution laundry units, currently numbering around 600, are being rolled out and the plan is to have 6,000 by 2020.
The Revolution laundry system, now manufactured in Hungary, is the same dimensions as a container that fits on the back of most articulated lorries. It consists of three drums, a standard 8kg washer, a larger 18kg cylinder and a drier.
The units sit predominantly outside supermarkets, which maximises footfall and also means the users are able to dump their load before going off on the weekly shop. A text from the machine provides a five minute warning before the cycle ends.
As well as being more convenient than traipsing all the way to the local laundrette, it is also around 30% cheaper.
Photo-Me is also trialling new products as part of its expansion, including a car wash.
The acid test of a new product for the company, be these outdoor laundrettes or the new line of car-washes being trialled, is it must have a one-year payback on the initial investment.
Most of Photo-Me’s equipment is depreciated over five years but usually has an active shelf-life of 10 to 15 years.
Photo-Me also plans to take its product portfolio to new territories as part of its plans to expand the business.
The shares marked time at 136.5p in afternoon trade. finnCap reckons they are worth 170p each.