10th Jun 2024 11:45
(Alliance News) - Analysts at Berenberg think Monday's trading statement from ME Group International PLC implies it is tracking ahead of full-year pretax profit expectations.
The Epsom, England-based vending machine operator, formerly known as Photo-Me International, said positive trading momentum has continued throughout the first half of financial 2024 compared with a year prior.
"The board is confident in delivering record profitability for the year, in line with market expectations," ME Group said in a statement.
Revenue rose 4.6% in the six months to April 30, or 8.6% at constant currency rates, and pretax profit rose 10%, or 14% at constant currency.
ME Group said it remained focused on the continued growth of its core photobooth and laundry operations.
Photobooth activity across all territories performed as expected with Photo.Me revenue up 2.3%, or 7.4% excluding foreign exchange movements, from a year prior. This was driven by global demand for official photo ID.
Wash.ME Revolution laundry operations saw revenue grow 17%, or 20% at constant currency, from a year prior, as the rollout of Revolution laundry machines continued and built on its record performance.
ME Group said the number of Revolution laundry machines in operation grew by 18% compared to a year ago, with a record 420 Revolution machines installed in the financial first half.
Berenberg said the trading statement demonstrates two "important things."
First, that the company delivered double-digit pretax profit growth, which implies that it is tracking ahead of full-year pretax profit expectations.
Second, that roll-out rates of its Revolution machines are accelerating.
"We think that this should be the focal point of investor attention following the update as the company continues to deliver robust operating performance," the broker remarked.
Berenberg thinks that its roll-out rate will accelerate in the second half. The broker estimates that the company will roll out around 941 machines in the full-year and and that Wash.ME will reach around GBP99 million in sales, up 21% from a year prior.
Berenberg notes management expects that both a seasonally-stronger second-half for sales and profitability, driven by continued growth in Wash.ME and accelerating installation rates, will help the group to deliver profitability in line with market expectations.
The broker put pretax profit consensus at GBP73.6 million.
"While movements in FX may pose a further risk to headline sales growth, we think that ME Group’s improving business mix – driven by Wash.ME – and the strong underlying growth rates across both divisions offers confidence that it will hit its [pretax profit] expectations."
Berenberg reiterated a 'buy' rating on ME Group.
Shares in ME Group fell 4.6% to 162.55 pence in London on late Monday morning.
By Jeremy Cutler, Alliance News reporter
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