TIDMRST
RNS Number : 1212H
Restore PLC
22 November 2022
22 November 2022
Restore plc
("Restore" or the "Group" or "Company")
Trading Update
Continuing strategic progress and good momentum despite
macro-economic headwinds
Restore plc (AIM: RST), the UK's leading provider of digital and
information management and secure lifecycle services, is pleased to
provide a trading update for the 10 months to 31 October 2022 (the
"Period").
Recent trading has continued the positive momentum seen through
the first half with significant contract wins and expansion in
activity levels. Revenue is performing strongly with the second
half to date tracking well ahead of the same period in 2021. EBITDA
also continues to show strong growth despite the macroeconomic
pressures of inflation and the uncertain commercial environment.
Restore Technology is also growing strongly albeit at a lower rate
than planned due to a slowing in the IT equipment market,
associated with current global supply chain issues.
CHARLES BLIGH, CEO, commented:
"Restore has achieved strong commercial momentum in 2022 and,
whilst the current economic environment creates challenges, we are
winning new business and are confident that we will continue to
expand in 2023 with organic growth, complementary acquisitions, and
a continued focus on costs.
I am delighted with the recent landmark wins by Records
Management for the BBC and the Department for Work and Pensions,
which together have a total contract value of over GBP30 million
and both of which were previously unvended opportunities that
demonstrate that the underlying market continues to grow. Whilst
recycled IT asset sales are growing more slowly than planned in H2,
this is a near term supply chain issue with forecasts for PC
shipments to grow in 2023 and onwards.
The Group is well-positioned to navigate the current
macroeconomic uncertainty and with our highly cash generative
business model that delivers essential services and saves customers
money, we will emerge as an even larger and stronger business."
Operating performance year to date
-- Records Management is winning substantial long-term and
unvended contracts demonstrating continued strong demand and the
growing breadth and depth of Restore's product offer :
- Expected net box growth in Records Management reaffirmed at 1% to 2% (FY21: 1.3%)
- In September, Restore announced its largest ever contract win,
the BBC's heritage asset storage and service contract, which
provides long-term secure storage and management for the nation's
highly valued national film and assets archive. The total contract
value over 10 years is c. GBP22 million and a new specialist
environmentally controlled vault is being constructed by Restore to
meet the BBC's stringent requirements. Restore Harrow Green will
also manage the uplift of items worth c. GBP1 million in project
revenues
- In November we signed a multi-year storage and service
contract with the Department for Work and Pensions to add more than
350,000 boxes to the Group's existing portfolio of 22.3 million
boxes under management. The value of the contract is anticipated to
be in excess of GBP1 million per year and will be facilitated by
the recent expansion of storage space in North West England
-- Restore Digital is winning new contracts and building substantial product capability:
- After an outstanding performance in H1, the Digital pipeline for FY23 is building strongly
- Operational integration of EDM, acquired in 2021, is complete
and focus has now moved to IT upgrades to optimise performance
further
- Increased revenue visibility with c.70% of revenue derived
from recurring revenue streams, including long-term digitisation
and automation programmes, BPO and cloud storage
- Scale benefits clearly apparent in operating margins with further optimisation potential
-- Datashred is demonstrating its resilience and strong performance optimisation:
- Service visits have built steadily and the business is exiting FY22 ahead of FY21
- Paper volume processed increased 10% to 44k tonnes for the
period, with recycled paper bale pricing continuing to be
strong
- Strong productivity levels achieved with visits per driver per
day sustaining at 10.5 to 11 per day compared with 8 per day pre
COVID19
-- Restore Technology continues to navigate the impact of post COVID19 global supply chains:
- Weaker than planned sales of refurbished assets due to slower
IT asset rotation upstream, resulting from supply chain issues
- IT market projections (PC/Laptop and Server shipments) are
forecast to return to growth in FY23
- Substantial opportunity for revenue and cost synergies from the existing business in FY23
- Recently appointed Operations Director driving major
efficiency enhancements and realising scale benefits following a
period of significant acquisition activity
-- Restore Harrow Green continuing to expand capability:
- Strategic objective to increase specialist storage revenues on
track through organic growth and acquisition expansion during the
Period
- Life science category expansion is progressing well with major
contracts in the pipeline for FY23
-- Acquisition activity continued in H2 with two further
acquisitions recently completed for GBP2.6 million offering
complimentary additions to Restore's portfolio of businesses:
- GBP0.1 million bolt-on in October 2022 with 17k boxes
consolidated into Records Management's existing facilities
- Acquisition of specialist storage provider, CAMA Workspace
Ltd, for an enterprise value of GBP2.5 million in October 2022
which will be fully integrated into Harrow Green's existing
business
- 5 acquisitions successfully completed across 3 business units
in the period showing continued delivery and discipline in our
acquisition strategy
Outlook
-- Since the interim results announcement in July, business
momentum has continued across the Group, with significant contract
wins, activity expansion and selective acquisitions delivering
increasing annualised revenue
-- For FY22 Restore continues to expect strong growth in EBITDA
despite inflationary pressures across the business and an impact of
the lower than planned expansion of refurbished asset sales in
Restore Technology resulting from IT market headwinds, which we
expect to improve substantially in FY23
-- Higher borrowing rates mean that interest expense for FY22 is
now anticipated to be GBP5 million (2021: GBP2.5 million)
-- Following acquisition and restoration of dividend, leverage
anticipated to be comfortably within target range of 1.5 to 2x
proforma EBITDA at end of FY22 (FY21: 1.8x)
-- Looking forward to FY23, the Group continues to see
substantial growth potential across its organic and acquisition
strategies, with opportunities to improve margins further through
pricing and cost synergies
-- We anticipate that net boxes under management will continue
to grow strongly within the guided range of 1% to 2% (FY21: 1.3%)
for FY22 and FY23 as a result of reported new wins and organic
growth from existing customers
-- The Group anticipates that its pricing in FY23 will reflect
the cost inflation that it has seen in FY22 and anticipates for
FY23 with price negotiations fully recovering the cost increases
incurred across people and other operating expenses
-- In response to the inflationary environment the Group is
targeting further cost reductions of at least GBP3 million in FY23
spread across supplier rationalisation, cost of sales and operating
overheads. GBP1 million of these savings have already been
actioned
-- Interest expense for FY23 will increase despite an expected
reduction in debt levels (before any further acquisitions)
-- The acquisition pipeline for FY23 remains strong with
acquisition price levels anticipated to reduce reflecting the
macro-economic environment and increasing cost of capital. The
Group remains disciplined and focussed on delivering strong
returns
For further information please contact:
Restore plc www.restoreplc.com
Charles Bligh, CEO
Neil Ritchie, CFO +44 (0) 207 409 2420
Investec (Nominated Adviser and Joint www.investec.com
Broker)
Carlton Nelson
James Rudd +44 (0) 207 597 5970
Canaccord Genuity (Joint Broker, Corporate www.canaccordgenuity.com
Advisor)
Max Hartley
Chris Robinson +44 (0) 207 523 8000
Citi (Joint Broker) www.citigroup.com
Stuart Field
Laura White +44 (0) 207 986 4074
Buchanan Communications (PR enquiries) www.buchanan.uk.com
Charles Ryland
Jack Devoy +44 (0) 207 466 5000
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END
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