Canaccord Genuity hits Photo-Me with 'buy' rating

Canaccord said the interim results from Photo-Me were "better than expected", driven by continued double-digit revenue growth in laundry and "an encouraging performance" from its identification unit that led to photo booth revenue seeing "a fast-paced" second-quarter recovery.

The Canadian bank said strong demand in Japan from higher than normal applications for the firm's My Number ID cards had also provided a one-off boost.

"As a result, in H1'FY21E Photo-Me delivered 76% of the revenue and 62% of the adj. EBITDA that it reported in the pre-pandemic six month period to 31 October 2019," said the analysts.

Canaccord also pointed out that Photo-me has now completed a restructuring programme initiated at the start of the Covid-19 pandemic and was seeing "improving levels of cash generation" that reflected some recovery in consumer activity across key geographies.

On the back of this, Photo-Me increased guidance set in April, with revenues now seen at the top-end of its £190.0-200.0m range and adjusted pre-tax profits now projected to be roughly £21.0-24.0m.

"With Photo-Me continuing to invest in its Laundry and Food verticals, alongside a wider market recovery, it has reintroduced FY22E guidance, anticipating that adj. PBT will be broadly similar to that achieved in FY19," concluded the analysts, which also gave the firm a target price of 105.0p, down from 150.0p before placing the stock under review in June 2020).