The Investment Column: Photo-Me

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The Independent Online
INVESTORS IN Photo-Me have seen the value of their holdings double since the company unveiled a joint venture with BT in May that will see its coin operated photo booths linked to the Internet. That has left Photo-Me trading at 43 times earnings for the year to April, forecast to be pounds 30m pre-tax.

There's no doubt that Serge Crasnianski, the chief executive, has reinvigorated the company since taking the helm in October. The question is whether Photo-Me can keep on outperforming.

Full-year profits were up 32 per cent to pounds 20m before pounds 29m of charges to cover investment and redundancy costs. On the basis of profits rising to pounds 45m in 2001 and pounds 65m in 2002 - forecast by house broker Greig Middleton - the prospective p/e will fall to just below 20; a more appealing prospect, but hitting the figures depends on the plan proceeding flawlessly.

In the UK, where Photo-Me has a de facto monopoly with around 4,500 booths, converting locations from analogue to digital will allow for new services and higher sales per booth. The 20,000 other booths, mostly in Europe and Japan, are likely to face stiffer competition.

The risk is that technological innovation from an unforeseen quarter could affect development. Investors should consider this and take some profits rather than chase the shares at lofty levels. Reduce.

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