..as we have news of yet another round of talks scheduled in the Greek debt crisis as the latest proposals could not be signed off. I guess this one may run down to the wire again before an agreement, perhaps. However, even if they do reach an agreement more repayments and similar problems will no doubt be along again before too long unless we finally have a Grexit this time around.
Meanwhile in a busier day for announcements in the UK stock markets we have had in line final results from Photo-Me (PHTM) which I wrote up recently. They increased the dividend by 30% as promised and this was despite currency headwinds from the strength of Sterling against the Euro and the Yen. The underlying strength of the cash generation from the business helped to fund the dividend and capital expenditure together which totalled £40 million.
Despite these outflows they still ended the year with net cash only down slightly at £60.7m versus £63.1m last year. On the back of this they outlined a new dividend policy for the next three years where they say they intend to increase the dividend by 10% per annum and any net cash on the balance sheet at 30 April 2016 (and the following two years) in excess of £50m will be available to shareholders as a special dividend in line with the new policy.
This is driven by the continued investment in rolling out Photo booths in new territories and continued investment in their Revolution Laundry product. On these, in addition to their plans for having 2000 of these by the end of this year they say they hope to have 6,000 units in operation in Europe by 2020 and that they are also looking for opportunities in Asia and the USA. They also say they are still trialling a car wash concept, which would have some overlap in terms of location as the stand-alone Revolution laundry units and use the same network of engineers. Results from those first units are encouraging and they will report further on its plans for this concept in 2016, based on progressively scaled-up trials. If these are successful I assume this would impact on their cash requirements as they are higher cost than the laundry units, which would then reduce the likelihood of special dividends but could boost medium term growth.
On the outlook they say "...the Group's Treasury function keeps FX under continual review, although the continued strengthening of sterling against the euro and the yen, which may have an adverse effect in the coming year, remains a challenge. Importantly, however, the operational performance of the business remains very good. Subject to the risks and uncertainties detailed in the Strategic Report, the Board anticipates another year of strong underlying progress."
Summary & Conclusion
In line numbers and a suggested dividend increase of 10% may disappoint the market as forecasts seemed to suggest a further near 30% increase in the dividend for the coming year to 6.3p. Using the 10% forecast this would suggest around 5.4p which would put it on around a 4% yield which may though provide some support. However, of course it is possible that if the cash remains around current level and they decide not to roll out the Car washes, then there could be a circa £10m special dividend next year, which would equate to about 2.6p per share which would then exceed the current forecast. So a bit of a curates egg as you might get a lower pay out if they have found another profitable avenue for investment, or a higher pay out if they don't.
Otherwise the PE looks quite full at around 17.8x, but if you adjust for the cash then it looks fairer at around 16x. So overall another set of good numbers from this one and a further roll out of photo booths and the new laundry product and potentially car washes to drive future growth, but I'm not sure there is enough in all of this to push the shares dramatically higher in the short term, but they could be interesting in the medium term if they can deliver on their plan, so definitely one to watch given the financial metrics on this one.