TIDMRST
RNS Number : 8879E
Restore PLC
04 July 2023
4 July 2023
Restore plc
("Restore" or the "Group" or "Company")
Trading Update
Restore (AIM: RST), the UK's leading provider of digital and
information management and secure lifecycle services, provides the
following trading and business update.
The Group continues to deliver revenue growth in its core
Records Management business but notes the continued weakness in its
Technology business, a reduction in demand for certain service
lines since the last update, particularly in bulk digital scanning,
and that the price of recycled shredded paper has significantly
fallen in the past month with this trend anticipated to continue
into H2.
As a result of these factors, whilst the Group continues to
demonstrate its cash generative characteristics, the Board
anticipates that the adjusted profit before tax will be lower than
previously expected and will be GBP31 million for the full
year.
Digital and Information Management Division
Records Management, which represents 70% of Group profits, is
seeing expansion in storage revenues and good cost control with the
new contract wins for the Department for Work and Pensions and BBC
commencing successfully.
These positive effects are offsetting the anticipated year to
year fall in revenues in the Digital business due to the
non-repeating large public sector contract delivered in H1 2022 of
GBP5.2 million. However, the Digital business has additionally
experienced a slow down in order conversion and demand for bulk
scanning services, reducing profit expectation from this business
for the year.
The other services (Cloud, Digital Mailrooms, BPO, Records
Preservation) in Digital, which represent over 40% of the business
unit revenues and contain a large proportion of longer term
contracts, are trading in line with management expectations.
Despite these headwinds, Records Management continues to make
progress and in Digital, win rates are consistent YoY and the
overall size of the opportunity pipeline is slightly larger versus
the start of the year.
As a result, the division continues to take significant actions
to reduce costs whilst preserving the operational capabilities of
the business to respond when demand improves.
Secure Lifecycle Services Division
As previously reported, Restore Technology IT Recycling (ITAD)
revenues are declining year to year due to the contraction of IT
hardware investment by customers following their unique and
significant increase in procurement in 2021 driven by the pandemic.
Demand remains weak despite quoting activity improving in June and
we are now assuming volumes and resale values remain consistent H2
vs H1 and therefore are lowering expectations from this business
for the year.
A number of strategic and tactical actions are in hand including
the closure of one processing site with a number of further actions
planned to reduce costs across the business, whilst ensuring
capacity and skills are maintained for future recovery in
demand.
IT Relocation and Mid Life services growth continues and is in
line with our expectations for FY23 driven by data centre
relocations and office moves.
Restore Datashred is delivering consistent volume of service
visits YoY and we expect this to continue into H2. Service visits
contribute c.70% of the revenues with the remaining c.30% from the
sale of shredded/recycled paper.
Paper pricing has shown a sharp decline in recent weeks due to
an over-supply of paper (particularly from Europe) and weaker
overall activity in the UK/EU economies. Whilst profit is likely to
be in line with expectation for H1, the lower recycled paper
pricing will impact H2 profitability significantly. The overall
impact is partly mitigated by continued strong cost control.
Restore Harrow Green is performing well and is expected to grow
in FY23 with committed larger projects already started and the
overall activity driven by significant customer organisational
restructuring and office moves across the UK. In addition, storage
revenues are also expected to grow in FY23.
Financial
With the recent changes in the UK base rate and in anticipation
of further increases in Q3 and Q4, we have assumed higher interest
cost for the year notwithstanding lower net debt. Total interest
cost, excluding the impact of IFRS16, is now assumed to be
cGBP9.6million for 2023 (2022: GBP5.9m, 2021: GBP2.9m).
As a result of the weaker outlook for the business, an
assessment of potential non-cash impairment on intangible assets
will be performed as part of the H1 close.
Cost Reductions
We continue to focus on structural cost savings in staff and
supplier input costs, and these programmes are delivering the
targeted results.
With actions already taken and further planned steps in early Q3
we expect to reduce permanent staff by 230. These roles are across
senior managers, sales, support functions and operations. The total
savings in FY23 are GBP4.5m with H1 savings of GBP1.1m and H2
savings of GBP3.4m.
Outlook
The Board anticipates that the Group will deliver revenue growth
for the year underpinned by the core storage and long term contract
income that are a central feature of the Group's strength.
Cash generation remains good and net debt for H1 is in line with
management expectations.
Whilst the near-term economic outlook remains uncertain, the
fundamentals of the business remain strong, with the core long term
contracted and storage revenues underpinning the profitability of
the business, strong cash generation and the ability to implement
inflation indexed price increases and structural cost savings.
The Group's half year results will be announced on August 16(th)
2023.
For further information:
Restore plc www.restoreplc.com
Jamie Hopkins, Interim CEO
Sharon Baylay-Bell, Executive Chair
Neil Ritchie, CFO
Chris Fussell, Company Secretary +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
Luke Spells +44 (0) 207 986 4074
Buchanan Communications (PR enquiries) www.buchanan.uk.com
Charles Ryland
Simon Compton
Note: +44 (0) 207 466 5000
This announcement includes inside information as defined in
Article 7 of the Market Abuse Regulation No. 596/2014 (which forms
part of domestic UK law pursuant to the European Union (Withdrawal)
Act 2018) and is disclosed in accordance with the Company's
obligations under Article 17 of those Regulations.
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END
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