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Photo-Me shares up as profits rise in full-year but May profit warning looms

Published: 08:32 10 Jul 2018 BST

Photo booths
The firm also upped its final dividend to 4.73p from 3.49p in 2017

Photo-Me International plc (LON:PHTM) shares were up in early trading Tuesday as it upped its final dividend in full-year results and profits were lifted, however the spectre of a trading update in May continued to hang over the group.

The photo booth operator reported a pre-tax profit for the year of £50.2mln, up from £48mln the previous year, while revenues rose to £229.8mln from £214.7mln.

READ: Photo-Me sharply negative after profit warning

The firm also upped its final dividend to 4.73p compared to 3.49p in 2017.

In May, the group issued a profit warning for the 2019 financial year in which it downgraded pre-tax profit forecasts to at least £44mln, lower than consensus estimates of £54.1mln, as it warned of competitive pressures in its Japanese market and an investment to restructure its Japanese subsidiary to boost profitability.

Aside from its Japanese difficulties, the firm reported that it had seen rapid growth in its higher margin laundry business, which saw revenue growth of 69% during the year and contributed to 16% of group revenue as opposed to 10% in 2017.

In its outlook, Photo-Me non-executive chairman John Lewis said the firm would expand its laundry business into new and existing markets while also focusing on expanding government partnerships for its identification business.

He added that there was a risk that the UK’s departure from the EU could affect photo ID market growth, although the group could benefit in the short to medium term by an influx of blue passport renewals as well as a devaluation of sterling against the euro.

In a note to clients, analysts at City broker finnCap upped their target price for the group to 183 from 163p, commenting that a decrease in the group’s effective tax rate to 19.7% from 26.9% in 2017 and a slightly better than expected cash flow allowed them to estimate a 5% free cash flow yield for the 2019 financial year.

Photo-Me shares were up 4.9% at 114.8p.

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