TIDMRST
RNS Number : 8682A
Restore PLC
17 September 2018
17 September 2018
RESTORE PLC
Half Year Results 2018
Restore plc ("Restore" or "the Group"), the UK office services
provider, announces its unaudited half year results for the six
month period ended 30 June 2018.
Financial Highlights:
ADJUSTED RESULTS - Continuing
operations HY 2018 HY 2017 % Change
------------------------------- -------- -------- ---------
Revenue (GBPm) 95.1 86.9 9%
EBITDA (GBPm)* 22.1 19.5 13%
Operating profit (GBPm)* 18.9 16.5 15%
Profit before tax (GBPm) * 17.3 15.3 13%
Earnings per share** 12.0 10.9 10%
Dividend per share (p) 2.0 1.67 20%
Net debt (GBPm) 115.4 76.9
* Before amortisation of intangible assets, exceptional items
and share-based payments charge
** Calculated based on the weighted average shares in issue and
a standard tax charge
STATUTORY RESULTS - Continuing
operations HY 2018 HY 2017
-------------------------------- -------- --------
Operating profit (GBPm) 10.9 1.3
Profit before tax (GBPm) 9.3 0.1
Basic earnings per share (p) 6.2 0.0
Summary:
-- Group revenue up 9% to GBP95.1m
-- Group adjusted profit before tax up 13% to GBP17.3m
-- Adjusted basic earnings per share up 10% to 12.0p
-- Document Management revenue up 8% to GBP69.9m; operating profit up 11% to GBP17.6m
o Restore Datashred benefit from increased GDPR-related activity
in second quarter
-- Relocations revenue up 14% to GBP25.2m; operating profit up 35% to GBP2.7m
o Improvement in operating margin from increased operational
efficiency
-- Good initial contribution from TNT Business Solutions; integration programme now underway
-- Interim dividend per share up 20% to 2.0p
Commenting on the results Charles Skinner, Chief Executive,
said:
"We are pleased to report another strong first-half performance,
particularly in light of the demanding comparator set by our growth
in the prior year period.
TNT Business Solutions, whose acquisition we completed in May,
has performed in line with expectations and its full integration
into the Group is now underway. We remain focused on realising our
targeted operational synergies and the longer-term opportunities
that the business provides to expand our presence in the UK public
sector, where many entities still undertake records management
in-house.
We will continue to pursue our strategy of organic and
acquisitive growth and we are well positioned to gain further
market share across all of our businesses.
The Board's expectations for the full year remain
unchanged."
Contact:
Restore plc
Charles Skinner, Chief Executive 07966 234 075
Adam Councell, Group Finance
Director 07860 402 434
Cenkos
Nick Wells 020 7397 8900
Harry Hargreaves
FTI Consulting
Nick Hasell 020 3727 1234
Alex Le May
CHIEF EXECUTIVE'S REVIEW
SUMMARY
I'm pleased to report a strong performance in the first half of
2018. Adjusted earnings per share growth of 10% was highly
satisfactory given the strength of the comparative period in 2017,
when year-on-year growth was 38%. Revenues were GBP95.1m (2017:
GBP86.9m) with adjusted profit before tax increasing to GBP17.3m
(2017: GBP15.3m). Statutory profit before tax was GBP9.3m (2017:
GBP0.1m).
During the period, our Document Management division delivered
adjusted operating profit of GBP17.6m (2017: GBP15.8m) on turnover
of GBP69.9m (2017: GBP64.8m). The core records management business
continued to account for the majority of this, with secure revenues
and good margins, including a healthy contribution for two months
from the records management activities of TNT Business Solutions
("TNT BS"). Restore Datashred, our shredding business, faced a very
strong comparator period and underperformed against budget for the
early months of the year, but finished the period well, partly due
to increased GDPR-related activity, with operating margins moving
up closer to our medium-term aspirations. Restore Digital, whose
primary activity is document scanning, performed well in the period
and successfully executed its major seasonal contract scanning exam
papers.
Our Relocations division delivered adjusted operating profit of
GBP2.7m (2017: GBP2.0m) on turnover of GBP25.2m (2017: GBP22.1m) in
what is its seasonally weaker half. Restore Harrow Green, our
office relocation business which accounts for the majority of the
division's activities, traded comfortably ahead of the previous
year. Restore Technology, which comprises our IT Lifecycle
Services, IT Relocation and Printer Cartridge Recycling businesses,
continued to perform well overall.
In May we acquired the business and assets of TNT BS for
GBP88.0m, funded through a GBP51.5m equity issue and new debt
facilities. The business has a particularly strong public sector
base, which is expected to enhance our position within the public
sector in both records management and our other activities, and two
significant freehold sites. Immediately following the acquisition,
the Competition and Markets Authority served an Initial Enforcement
Order on us which meant that we weren't able to integrate the
business into our existing operations, thereby delaying the
realisation of some of the operational synergies we expect to
generate. The enforcement order was removed in July and the
investigation was closed in August. Accordingly, we have now
embarked upon our integration programme. The business has performed
well since acquisition and in line with management
expectations.
We made three small scanning acquisitions during the period, the
largest of which was ORS, a scanning bureau in Hampshire acquired
in June.
Whilst our Group is structured so that the individual businesses
have the power and responsibility to operate autonomously, a key
strength of the Group is that all of our businesses share a similar
customer base. A key factor in the development of the Group has
been maintaining the same customer relationship management system
for all of our businesses to ensure that our full range of services
are offered to all existing and potential customers. This means we
can generate significantly more sales opportunities and build
closer relationships with our customers. As part of this we
undertook a major rebranding exercise during the period whereby all
of our operations are now immediately recognisable as being part of
the Restore group. This further consolidates our position as a
coherent business and an increasing force in UK office
services.
RESULTS
Adjusted operating profit for the six months to 30 June 2018 was
GBP18.9m (2017: GBP16.5m). Adjusted profit before tax was GBP17.3m
(2017: GBP15.3m) on sales of GBP95.1m (2017: GBP86.9m). Adjusted
earnings per share for the period were 12.0p (2017: 10.9p).
On an unadjusted basis, operating profit was GBP10.9m (2017:
GBP1.3m) and profit before tax was GBP9.3m (2017: GBP0.1m).
Unadjusted earnings per share were 6.2p (2017: 0.0p). Exceptional
items in the period were GBP4.3m, of which GBP2.0m related to costs
on the TNT BS acquisition, including GBP1.0m of Stamp Duty. There
were GBP1.7m of restructuring costs primarily related to
acquisitions made in 2017 and 2018, but also including costs
related to the vacant former PHS DS site in Leyton which has now
been re-let. The other element of exceptional costs was National
Insurance on share option exercises totalling GBP0.6m.
DOCUMENT MANAGEMENT
Our Document Management division comprises Restore Records
Management, Restore Datashred and Restore Digital.
For the period the division achieved an operating profit of
GBP17.6m (2017: GBP15.8m) on turnover of GBP69.9m (2017:
GBP64.8m).
Restore Records Management - Revenue GBP38.8m (2017:
GBP34.3m)
Restore Records Management, our core records management
business, continued to trade well. With the recently acquired TNT
BS assets, the number of boxes stored by the Group is now
approaching 20 million. Records management continues to be the
bedrock of the Group with very solid earnings visibility and
continuing organic growth in revenues and profit. In the period,
there was an increase in destruction activity related to the
introduction of GDPR legislation, combined with a delay in the
intake of some major new contracts, such that overall net box
growth was flat. Looking ahead, we continue to expect net box
growth from our existing customer base, with storage rates
increasing. We also expect to generate growth from new business
wins, particularly in the public sector where many entities still
undertake records management in-house.
We continue to develop our estate to maximise storage cost
efficiency. We have developed additional space in our freehold site
outside Bath. We have also taken long leases on more hardened
aircraft shelters at our site in Oxfordshire. We will shortly start
work on a major building project at our site at Rainham where we
will increase capacity significantly; this will accommodate future
growth as well as providing lower cost space to replace more
expensive sites as their leases expire. With the acquisition of two
major freehold sites as part of the TNT BS transaction, our scope
to create more space at existing facilities is further enhanced. An
example of current property rationalisation is our surrender this
month of our lease on a large site in Motherwell: all of its
contents have been transferred to our other sites in Scotland so
that occupancy rates are now optimal and operating margins have
sharply improved.
Much of our operational focus is now on the integration of the
TNT BS acquisition. Two of the three main sites, both in the
Midlands, are predominantly focused on public sector work,
including a major contract with the Ministry of Defence. These
sites are specifically configured for the specialist work they
undertake and there is limited need for integration; we intend to
focus this part of the business on growing our public sector
activities where we see significant long-term opportunities. The
other main site is on the same estate in Essex as another of our
large facilities and is currently being integrated into our South
East operations, thereby generating operational synergies. The
leases on the two other smaller sites which formed part of the
acquisition expire over the next two years and will not be renewed,
leading to further efficiencies. We believe that the TNT BS
acquisition is an excellent strategic fit with our business and can
also be expected to generate a strong return on invested capital.
It traded in line with expectations in the two months in the period
under our ownership.
Our records management business combines steady revenue growth
with opportunities to increase margins through increased
efficiencies. This produces a highly visible, steadily growing
earnings stream. We are continually looking for ways to grow this
business further and remain focused on demonstrating to potential
clients in the public sector the merits of outsourcing their
requirements. As the largest of our businesses, our records
management division also plays an important role in working closely
with our other businesses to generate sales opportunities from our
Group-wide customer base.
Restore Datashred - Revenue GBP20.8m (2017: GBP19.6m)
Restore Datashred, our secure shredding and recycling business,
started the period weakly but showed significant improvement in the
later months of the period. Most of the business comprises the
shredding business acquired as part of the acquisition of PHS DS
two years ago. In 2017 we embarked on the major project of moving
the IT systems away from its previous owner. This involved
introducing a new operating system and creating a new back office.
Such an operation is never without risk and it undoubtedly impacted
the business's performance in the second half of 2017 and the
opening months of 2018. The period under review was also impacted
by the heavy snow at the end of the winter; this is an
operationally geared business and the lost revenue from the
snow-affected days dropped through to the bottom line. But the
performance towards the end of the period was encouraging, with
revenues showing solid organic growth, partly due to increased
GDPR-related activity, and a reduction in costs.
We have recently commissioned our new site at Crayford, South
East London, replacing an aged and ill-configured facility that had
become unsuited to the high volumes it was servicing. The new
facility is the largest dedicated confidential shredding centre in
Europe with a dual-line design capable of shredding 30 tonnes per
hour. While this expansion has increased Restore Datashred's
operating costs, we expect its increased operational efficiencies
to benefit operating margins in the longer term. We have also
relocated our site in Livingston, Scotland, to a more modern
facility and are in the process of closing our site in Telford and
moving its operations to our sites in Manchester and Rugby.
Restore Datashred can be expected to continue to benefit from
greater awareness generated by GDPR of the need to securely destroy
paper records. It is increasingly well placed to take advantage of
its strong market position as one of the main operators in an
attractive market where scale brings significant benefits. We have
recently slowed our acquisition activities in shredding as we
address some of the operational issues relating to the change in IT
systems, but we expect to take advantage of opportunities to
consolidate what remains a fragmented market. We believe the
business is well-positioned for a period of strong growth and
improving margins.
Restore Digital - Revenue GBP10.3m (2017: GBP10.9m)
Restore Digital, our digitisation business whose primary
activity is scanning, produced an increase in year-on-year profit
despite lower revenues. Over the last two years we have focused
strongly on the operational performance of the business, including
the development of our flagship branch at Manchester. Our operating
margins at our main scanning bureaus have increased and we are now
focusing on generating increased revenues to channel through these
facilities.
Restore Digital has several business streams in addition to
conventional scanning bureau activity. These include our major exam
scanning contract where we are in the first year of the renewed
5-year contract. The major seasonal activity under this contract,
scanning GCSE and A level exams, was successfully and profitably
executed in May and June. Other major contracts include our work
for the Nuclear Decommissioning Authority and several major
projects with NHS Trusts where we are typically digitising patients
records over a number of years. Our management consultancy
activities traded strongly in the period and our hosting and
support activities continue to generate very stable revenue
streams.
During the period we made two small acquisitions of scanning
businesses, both of whose activities were immediately integrated
into our existing operations. We also acquired ORS, a
Southampton-based scanning bureau, which provides us with an
additional scanning facility.
RELOCATIONS
Our Relocations division comprises Restore Harrow Green, the UK
market leader in office relocation, and three businesses trading
under the Restore Technology banner. IT Lifecycle Services recycles
IT equipment safely and securely and is increasingly involved in
the full lifecycle of IT hardware. IT Relocation specialises in
server and data centre relocation, as well as IT moves, equipment
installation and deployment. Printer Cartridge Recycling is the
UK's leading collector of empty toner cartridges which are
subsequently sold on in bulk to refillers and original equipment
manufacturers worldwide.
During the period, which is the seasonally weaker half of the
year for Restore Harrow Green, the division recorded an operating
profit of GBP2.7m (2017: GBP2.0m) on turnover of GBP25.2m (2017:
GBP22.1m). Organic growth across the division was strong.
Restore Harrow Green - Revenue GBP17.6m (2017: GBP15.8m)
Restore Harrow Green traded well with steady growth in both
London and in the regional branches. There were no particularly
significant one-off moves during the period but demand from our
regular large customers remained strong. Our new facility in East
London has significantly helped our operational efficiency and
contributed to our improvement in operating margins.
Restore Technology - Revenue GBP7.6m (2017: GBP6.3m)
IT Lifecycle Services continued to perform well. We are
increasingly involved in the entire lifecycle of IT assets,
including configuration and deployment, as well as moving and
support, through to final disposal. This is a fast-growing niche
and we have recently moved into a new facility in Bedford which
significantly enhances our capacity and operational efficiency. Our
IT Relocation business continued to perform steadily. It is working
more closely with IT Lifecycle Services. Our Printer Cartridge
Recycling business continues to struggle and is focused on
leveraging the Restore group customer base, the majority of whom
produce empty toner cartridges.
GROUP
Central costs for the period were GBP1.4m (2017: GBP1.3m),
representing 1.5% (2017: 1.5%) of Group revenues.
STATEMENT OF FINANCIAL POSITION
Net bank debt on 30 June 2018 was GBP115.4m (30 June 2017:
GBP76.9m). The year on year increase is a result of M&A
activity with the largest being TNT BS which completed on 1 May
2018 and was funded by a combination of debt and a GBP51.5m equity
placing before expenses. Smaller acquisitions have been funded by
the Group's debt facilities. Property, plant and equipment has
increased largely due to the addition of the two freehold
properties acquired with TNT BS. Current assets and current
liabilities, excluding cash, financial liabilities and tax, have
both increased year on year due to the increased scale of the
business as a result of acquisitions, most notably TNT BS. The
financial position of the Group remains robust. The Group remains
comfortable in its ability to service its financial obligations and
leverage at 30 June 2018 was 2.3x pro forma adjusted EBITDA.
CASH FLOW
Net cash generated from operations was GBP10.6m (2017: GBP3.1m).
The year on year increase was largely driven by the increase in
profitability helped by the significant reduction in exceptional
costs. The working capital outflow of GBP7.2m has primarily been
driven by two factors. Firstly, funding the working capital
requirement for TNT BS as the working capital did not transfer as
part of the transaction. The working capital required was higher
than expected due to the delayed integration as a result of the
Initial Enforcement Order issued by the Competition and Markets
Authority which had a knock-on effect on customer billing
timetables. Secondly, the seasonal impact of increased trading days
in June 2018 versus December 2017 and the large exam scanning
contract mean that additional working capital levels are required
in the first six months of the year. Capital expenditure totalled
GBP5.2m (2017: GBP2.3m) compared to depreciation of GBP3.2m (2017:
GBP3.0m). The first six months of 2018 has seen investment in our
Datashred and IT Lifecycle Services facilities. Net bank interest
paid amounted to GBP0.9m (2017: GBP1.1m) and tax paid totalled
GBP2.0m (2017: GBP1.4m).
BANK FACILITIES
As part of the acquisition of TNT BS the Group extended its bank
facilities. This included the extension of the banking syndicate
from two to four banks. The enlarged facilities continue to
November 2022 and consist of a single GBP160m RCF facility. In
addition there is a GBP30m uncommitted accordion facility. These
facilities provide the Group with adequate capital to continue to
support its growth strategy.
DIVIDS
The Board has declared an interim dividend of 2.0p per share
(2017: 1.67p), a 20% year-on-year increase. The interim dividend
will be paid on 9 November 2018 to shareholders on the register on
5 October 2018. The Company paid its first interim dividend in 2012
of 0.4p and the increased interim dividend is in line with the
Board's intention to follow a progressive dividend policy.
PEOPLE
We firmly believe that power and responsibility should be locked
together and driven as far down the business as possible. We remain
committed to this principle and it is unaffected by now having over
two thousand people working in the Group. This relies on our people
being prepared to take on responsibility; it is their dynamism and
commitment which will drive the business forward. I thank them for
their energy, professionalism and effectiveness which has achieved
so much for Restore and its shareholders. I look forward to them
continuing to benefit from the Group's success.
OUTLOOK
We will continue to pursue our strategy of organic and
acquisitive growth and we are well positioned to gain further
market share across all of our businesses.
The Board's expectations for the full year remain unchanged.
Charles Skinner
Chief Executive 17 September 2018
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2018
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Note GBP'm GBP'm GBP'm
---------------------------------------- ----- ------------ ------------ -------------
Revenue 2 95.1 86.9 176.2
Cost of sales (55.5) (50.8) (108.9)
Gross profit 39.6 36.1 67.3
Administrative expenses (21.2) (19.9) (34.2)
Amortisation of intangible assets 7 (3.2) (3.0) (5.4)
Exceptional items 2 (4.3) (11.9) (15.5)
Operating profit 2 10.9 1.3 12.2
Finance costs (1.6) (1.2) (2.5)
Profit before tax 9.3 0.1 9.7
Income tax charge 3 (2.1) (0.1) (1.9)
Profit and total comprehensive
income for the period from continuing
operations 7.2 - 7.8
Profit attributable to owners
of the parent 7.2 - 7.8
---------------------------------------- ----- ------------ ------------ -------------
Earnings per share attributable to owners of the parent (pence)
Total and continuing operations
- Basic 4 6.2p 0.0p 6.9p
- Diluted 4 6.0p 0.0p 6.7p
======================================== ===== ============ ============ =============
The reconciliation between the statutory results shown above and
the non-GAAP adjusted measures are shown below:
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Note GBP'm GBP'm GBP'm
------------------------------------ ------ ----------- ----------- ------------
Operating profit 10.9 1.3 12.2
Adjustments for:
Amortisation of intangible assets 4 3.2 3.0 5.4
Exceptional items 4 4.3 11.9 15.5
Share-based payments charge 4 0.5 0.3 0.6
------------------------------------ ------ ----------- ----------- ------------
Adjustments 8.0 15.2 21.5
------------------------------------ ------ ----------- ----------- ------------
Adjusted operating profit 18.9 16.5 33.7
------------------------------------ ------ ----------- ----------- ------------
Depreciation of property, plant
and equipment 7 3.2 3.0 6.0
------------------------------------ ------ ----------- ----------- ------------
Earnings before interest, taxation,
depreciation, amortisation and
exceptional items (EBITDA) 22.1 19.5 39.7
------------------------------------ ------ ----------- ----------- ------------
Profit before tax 9.3 0.1 9.7
------------------------------------ ------ ----------- ----------- ------------
Adjustments 8.0 15.2 21.5
------------------------------------ ------ ----------- ----------- ------------
Adjusted profit before tax 17.3 15.3 31.2
==================================== ====== =========== =========== ============
Condensed Consolidated Statement of Financial Position
At 30 June 2018
Unaudited Unaudited Audited
30 June 30 June 31 December
Note 2018 2017 2017
GBP'm GBP'm GBP'm
------------------------------------- ---- --------- --------- ------------
Assets
Non-current assets
Intangible assets 8 258.2 191.0 193.9
Property, plant and equipment 70.2 46.8 46.1
Deferred tax asset 3.5 3.0 3.9
------------------------------------- ---- --------- --------- ------------
331.9 240.8 243.9
------------------------------------- ---- --------- --------- ------------
Current assets
Inventories 1.8 1.7 2.0
Trade and other receivables 53.5 43.9 43.4
Cash and cash equivalents 9 15.7 15.4 10.7
71.0 61.0 56.1
Total assets 402.9 301.8 300.0
------------------------------------- ---- --------- --------- ------------
Liabilities
Current liabilities
Trade and other payables (41.5) (39.6) (33.5)
Financial liabilities - borrowings 9 - (6.9) (9.4)
Other financial liabilities (0.1) (0.2) (0.1)
Current tax liabilities (1.0) (0.2) (0.9)
Provisions (1.2) (0.9) (1.5)
------------------------------------- ---- --------- --------- ------------
(43.8) (47.8) (45.4)
------------------------------------- ---- --------- --------- ------------
Non-current liabilities
Financial liabilities - borrowings 9 (131.1) (85.4) (79.5)
Other long term liabilities (0.1) (0.1) (0.1)
Other financial liabilities (0.2) (0.2) (0.2)
Deferred tax liabilities (13.4) (13.3) (13.3)
Provisions (5.4) (6.5) (5.6)
------------------------------------- ---- --------- --------- ------------
(150.2) (105.5) (98.7)
------------------------------------- ---- --------- --------- ------------
Total liabilities (194.0) (153.3) (144.1)
------------------------------------- ---- --------- --------- ------------
Net assets 208.9 148.5 155.9
===================================== ==== ========= ========= ============
Equity
Share capital 6.1 5.6 5.6
Share premium account 150.4 100.9 100.9
Other reserves 2.8 1.8 3.2
Retained earnings 49.6 40.2 46.2
------------------------------------- ---- --------- --------- ------------
Equity attributable to owners
of parent 208.9 148.5 155.9
===================================== ==== ========= ========= ============
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2018
Attributable to owners of the parent
Share Share Other Retained Total
capital premium reserves earnings equity
GBP'm GBP'm GBP'm GBP'm GBP'm
-------------------------------- --------- --------- ---------- ---------- --------
Balance at 1 January 2017 5.6 100.9 2.4 43.2 152.1
Profit for the period - - - - -
-------------------------------- --------- --------- ---------- ---------- --------
Total comprehensive income
for the period - - - - -
-------------------------------- --------- --------- ---------- ---------- --------
Transactions with owners
Dividends - - - (3.0) (3.0)
Transfers - - (0.3) 0.3 -
Share-based payments charge - - 0.3 - 0.3
Cash settlement of EIP options - - (0.8) - (0.8)
Deferred tax on share-based
payments - - 0.2 - 0.2
Negative equity in minority
interest - - - (0.3) (0.3)
-------------------------------- --------- --------- ---------- ---------- --------
Balance at 30 June 2017
(unaudited) 5.6 100.9 1.8 40.2 148.5
================================ ========= ========= ========== ========== ========
Balance at 1 July 2017 5.6 100.9 1.8 40.2 148.5
Profit for the period - - - 7.8 7.8
-------------------------------- --------- --------- ---------- ---------- --------
Total comprehensive income
for the period - - - 7.8 7.8
-------------------------------- --------- --------- ---------- ---------- --------
Transactions with owners
Dividends - - - (1.9) (1.9)
Transfers - - (0.1) 0.1 -
Share-based payments charge - - 0.3 - 0.3
Deferred tax on share-based
payments - - 1.2 - 1.2
--------------------------------
Balance at 31 December 2017
(audited) 5.6 100.9 3.2 46.2 155.9
================================ ========= ========= ========== ========== ========
Balance at 1 January 2018 5.6 100.9 3.2 46.2 155.9
Profit for the period - - - 7.2 7.2
-------------------------------- --------- --------- ---------- ---------- --------
Total comprehensive income
for the period - - - 7.2 7.2
-------------------------------- --------- --------- ---------- ---------- --------
Transactions with owners
Issue of shares during the
year 0.5 51.0 - - 51.5
Issue costs - (1.5) - - (1.5)
Dividends - - - (4.1) (4.1)
Transfers - - (0.3) 0.3 -
Share-based payments charge - - 0.5 - 0.5
Deferred tax on share-based
payments - - (0.6) - (0.6)
Balance at 30 June 2018
(unaudited) 6.1 150.4 2.8 49.6 208.9
================================ ========= ========= ========== ========== ========
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2018
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Note GBP'm GBP'm GBP'm
-------------------------------------- ----- ------------ ------------ -------------
Net cash generated from operations 7 10.6 3.1 15.7
Net finance costs (0.9) (1.1) (2.2)
Income taxes paid (2.0) (1.4) (2.5)
-------------------------------------- ----- ------------ ------------ -------------
Net cash generated from operating
activities 7.7 0.6 11.0
Cash flows from investing activities
Purchases of property, plant
and equipment and applications
software 2 (5.2) (2.3) (5.3)
Purchase of subsidiary, net
of cash acquired 6 (1.4) (2.0) (5.6)
Purchase of trade and assets (88.3) (0.8) (1.5)
Proceeds from sale of available
for sale assets - - 0.1
-------------------------------------- ----- ------------ ------------ -------------
Cash flows used in investing
activities (94.9) (5.1) (12.3)
Cash flows from financing activities
Proceeds from share issues 50.0 - -
Dividends paid - - (4.9)
Repayment of bank borrowings (2.3) (3.0) (7.3)
Drawdown/(repayment) of revolving
credit facility 1.0 - (9.0)
New bank loans raised 44.0 10.0 20.0
Finance lease repayments (0.1) - (0.1)
-------------------------------------- ----- ------------ ------------ -------------
Net cash generated/(used) in
financing activities 92.6 7.0 (1.3)
-------------------------------------- ----- ------------ ------------ -------------
Net increase in cash and cash
equivalents 5.4 2.5 (2.6)
Cash and cash equivalents at
start of period 10.3 12.9 12.9
-------------------------------------- ----- ------------ ------------ -------------
Cash and cash equivalents at
the end of period 9 15.7 15.4 10.3
====================================== ===== ============ ============ =============
Cash and cash equivalents shown
above comprise:
Cash at bank 15.7 15.4 10.7
Bank overdraft - - (0.4)
-------------------------------------- ----- ------------ ------------ -------------
15.7 15.4 10.3
====================================== ===== ============ ============ =============
Notes to the Consolidated Interim report
For the six months ended 30 June 2018
1 Basis of preparation
The condensed consolidated interim financial information for the
six month period ended 30 June 2018 was approved by the Board of
Directors and authorised for issue on 17 September 2018. The
disclosed figures are not statutory accounts in terms of Section
435 of the Companies Act 2006. Statutory accounts for the year
ended 31 December 2017, on which the auditors gave an audit report
which was unqualified and did not contain a statement under section
498(2) or (3) of the Companies Act 2006, have been filed with the
Registrar of Companies. The annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union.
This half-yearly report has been prepared on a basis consistent
with the accounting policies expected to be applied for the year
ended 31 December 2018, and uses the same accounting policies and
methods of computation applied for the year ended 31 December 2017,
except in relation to the adoption of IFRS 15 'Revenue from
Customers' and IFRS 9 'Financial Instruments', effective 1 January
2018. The adoption of these standards has not lead to any changes
in the interim financial statements.
IFRS 16 'Leases' was issued in January 2016. The Group will
apply the standard from 1 January 2019 and will transition to IFRS
16 with the modified retrospective approach and prior year figures
will not be adjusted.
As shown in note 30 of the 2017 Annual Report, the Group had
GBP143.9m of non-cancellable operating lease commitments. It is
expected that the application of this standard will have a material
impact on the Group's Financial Statements to bring these
obligations and associated assets onto the Statement of Financial
Position. The Group is currently finalising its assessment of
this.
IFRS 16 requires lessees to adopt a uniform approach to the
presentation of leases, assets must be recognised for the right of
use received and liabilities must be recognised for the discounted
payment obligations entered into for all leases. The Group will
make use of the relief options provided for leases of low-value
assets and short-term leases (shorter than 12 months). For leases
that have been classified to date as operating leases in accordance
with IAS 17, the lease liability will be recognised at the present
value of the remaining lease payments, discounted using the
lessee's incremental borrowing rate. The right of use asset will
generally be measured at the amount of the lease liability plus
initial direct costs. Net debt will rise accordingly due to the
material increase in lease liabilities. Depreciation charges on
right of use assets and the interest expense from unwinding of the
discount on the lease liabilities will be recognised. The change in
presentation of operating lease expenses will result in a
corresponding improvement in cash flows from operating activities
and a decline in cash flows from financing activities.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Thus they continue to adopt the going concern
basis of accounting in preparing these half-yearly financial
statements.
2 Segmental information
The Group is organised into two main operating segments,
Document Management and Relocation, and incurs Head Office costs.
Services per segment operate as described in the Chief Executive's
review. The main segmental profit measure is adjusted operating
profit and is shown before exceptional items, share-based payments
charge and amortisation of intangible assets. The vast majority of
trading of the Group is undertaken within the United Kingdom.
Segment assets include intangibles, property, plant and equipment,
inventories, receivables and operating cash. Central assets include
deferred tax and Head Office assets. Segment liabilities comprise
operating liabilities. Central liabilities include income tax and
deferred tax, corporate borrowings and head office liabilities.
Capital expenditure comprises additions to computer software,
property, plant and equipment and includes additions resulting from
acquisitions through business combinations. Segment assets and
liabilities are allocated between segments on an actual basis.
REVENUE
The revenue from external customers was derived from the Group's
principal activities primarily in the UK (where the Company is
domiciled) as follows:
Unaudited six months ended 30 June 2018
Document
Management Relocation Head Office Total
GBP'm GBP'm GBP'm GBP'm
------------------------------ ----------- ---------- ----------- ------
Revenue 69.9 25.2 - 95.1
------------------------------ ----------- ---------- ----------- ------
Segment adjusted operating
profit/(loss) 17.6 2.7 (1.4) 18.9
------------------------------ ----------- ---------- ----------- ------
Amortisation of intangible
assets (3.2)
Exceptional items (4.3)
Share-based payments charge (0.5)
------------------------------ ----------- ---------- ----------- ------
Operating profit 10.9
Finance costs (1.6)
------------------------------ ----------- ---------- ----------- ------
Profit before tax 9.3
------------------------------ ----------- ---------- ----------- ------
Tax charge (2.1)
------------------------------ ----------- ---------- ----------- ------
Profit after tax 7.2
------------------------------ ----------- ---------- ----------- ------
Segment assets 348.6 48.5 5.8 402.9
Segment liabilities 38.6 11.6 143.8 194.0
Capital expenditure 4.7 0.5 - 5.2
Depreciation and amortisation 3.4 3.0 - 6.4
============================== =========== ========== =========== ======
Unaudited six months ended 30 June 2017
Document
Management Relocation Head Office Total
GBP'm GBP'm GBP'm GBP'm
------------------------------ ----------- ---------- ----------- ------
Revenue 64.8 22.1 - 86.9
------------------------------ ----------- ---------- ----------- ------
Segment adjusted operating
profit/(loss) 15.8 2.0 (1.3) 16.5
------------------------------ ----------- ---------- ----------- ------
Amortisation of intangible
assets (3.0)
Exceptional items (11.9)
Share-based payments charge (0.3)
------------------------------ ----------- ---------- ----------- ------
Operating profit 1.3
Finance costs (1.2)
------------------------------ ----------- ---------- ----------- ------
Profit before tax 0.1
------------------------------ ----------- ---------- ----------- ------
Tax charge (0.1)
------------------------------ ----------- ---------- ----------- ------
Profit after tax -
------------------------------ ----------- ---------- ----------- ------
Segment assets 264.0 32.0 5.8 301.8
Segment liabilities 41.8 9.1 102.4 153.3
Capital expenditure 2.2 0.1 - 2.3
Depreciation and amortisation 5.6 0.4 - 6.0
============================== =========== ========== =========== ======
Audited year ended 31 December 2017
Document
Management Relocation Head Office Total
GBP'm GBP'm GBP'm GBP'm
------------------------------ ----------- ------------ ----------- ------
Revenue 126.9 49.3 - 176.2
------------------------------ ----------- ------------ ----------- ------
Segment adjusted operating
profit/(loss) 31.0 5.2 (2.5) 33.7
------------------------------ ----------- ------------ ----------- ------
Amortisation of intangible
assets (5.4)
Exceptional items (15.5)
Share-based payments charge (0.6)
Operating profit 12.2
Finance costs (2.5)
------------------------------ ----------- ------------ ----------- ------
Profit before tax 9.7
------------------------------ ----------- ------------ ----------- ------
Tax charge (1.9)
------------------------------ ----------- ------------ ----------- ------
Profit after tax 7.8
------------------------------ ----------- ------------ ----------- ------
Segment assets 246.1 53.5 0.4 300.0
Segment liabilities 34.6 11.4 98.1 144.1
Capital expenditure 4.9 0.4 - 5.3
Depreciation and amortisation 10.6 0.8 - 11.4
============================== =========== ============ =========== ======
For the six months ended 30 June 2018, exceptional costs were
GBP4.3m (including restructuring costs of GBP2.0m, GBP1.7m of
transaction costs, GBP0.6m of National Insurance on the exercise of
share options (2017: exceptional costs were GBP11.9m including
restructuring costs of GBP3.7m, GBP0.3m in relocation and transport
costs, GBP0.1m of transaction costs, GBP7.2m in relation to the
settlement of the Executive Incentive Plan in cash and GBP0.6m of
other exceptional costs).
In the year ended 31 December 2017, GBP15.5m of exceptional
costs were incurred (acquisition transaction costs, GBP0.5m, box
relocation and associated costs, GBP0.5m, restructuring and
redundancy costs, GBP6.7m, GBP7.2m in relation to settlement of the
Executive Incentive Plan in cash and GBP0.6m of other exceptional
costs).
3 Tax
The underlying tax charge is based on the expected effective tax
rate for the full year to 31 December 2018. It is anticipated that
the tax charge in the period will be GBP2.1m.
4 Earnings per ordinary share
Basic earnings per share have been calculated on the profit
after tax for the period and the weighted average number of
ordinary shares in issue during the period.
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
---------------------------------- ----------- ----------- ------------
Weighted average number of shares
in issue 116,692,682 112,362,360 112,607,015
---------------------------------- ----------- ----------- ------------
Total profit after tax for the
period GBP7.2m GBP0.0m GBP7.8m
---------------------------------- ----------- ----------- ------------
Total basic earnings per ordinary
share (pence) 6.2p 0.0p 6.9p
---------------------------------- ----------- ----------- ------------
Weighted average number of shares
in issue 116,692,682 112,362,360 112,607,015
Share options 2,467,253 3,201,345 3,448,077
Weighted average fully diluted
number of shares in issue 119,159,253 115,563,705 116,055,092
---------------------------------- ----------- ----------- ------------
Total fully diluted earnings per
share (pence) 6.0p 0.0p 6.7p
---------------------------------- ----------- ----------- ------------
Continuing profit for the period GBP7.2m GBP0.0m GBP7.8m
---------------------------------- ----------- ----------- ------------
Continuing basic earnings per
share (pence) 6.2p 0.0p 6.9p
---------------------------------- ----------- ----------- ------------
Continuing fully diluted earnings
per share (pence) 6.0p 0.0p 6.7p
================================== =========== =========== ============
The Directors believe that adjusted basic earnings per share
provide a more appropriate representation of the underlying
earnings derived from the Group's business. The adjusting items are
shown in the table below:
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP'm GBP'm GBP'm
---------------------------------- ----------- ----------- ------------
Profit before tax for the period 9.3 0.1 9.7
Adjustments:
Amortisation of intangible assets 3.2 3.0 5.4
Exceptional items 4.3 11.9 15.5
Share-based payments charge 0.5 0.3 0.6
Adjusted profit for the period 17.3 15.3 31.2
================================== =========== =========== ============
The additional adjusted earnings per share, based on weighted
average number of shares in issue during the period, 116.7m (2017:
112.4m, 112.6m) is calculated below:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Adjusted profit before tax (GBP'm) 17.3 15.3 31.2
Tax at 19.0% / 19.5% / 19.25%
(GBP'm) (3.3) (3.0) (6.0)
----------------------------------- ----------- ----------- ------------
Adjusted profit after taxation
(GBP'm) 14.0 12.3 25.2
----------------------------------- ----------- ----------- ------------
Adjusted basic earnings per share
(pence) 12.0p 10.9p 22.4p
----------------------------------- ----------- ----------- ------------
Adjusted fully diluted earnings
per share (pence) 11.7p 10.6p 21.7p
=================================== =========== =========== ============
5 Dividends
In respect of the current period, the Directors propose an
interim dividend of 2.0p per share (2017: 1.67p) to be paid to
shareholders on 9 November 2018. The proposed interim dividend is
payable to all shareholders on the Register of Members on 5 October
2018. The estimated dividend to be paid is GBP2.6m (2017:
GBP1.9m).
6 Business Combinations
On 2 January 2018, the Group completed the acquisition of the
trade and assets of Scanning Direct, a scanning business for cash
consideration of GBP50,000. The customer relationships acquired
were GBP35,000.
On 9 January 2018, the Group completed the acquisition of the
trade and assets of Papershrink, a scanning business for cash
consideration of GBP0.2m. The customer relationships acquired were
GBP0.2m.
On 1 May 2018, the Company completed the acquisition of the
records management business of TNT UK Limited, for a total
consideration of GBP88.0m. As part of the acquisition, the Company
placed 10,100,000 ordinary shares of 5 pence each, with
institutional investors raising GBP51.5m before expenses. The
balance of the consideration was settled in cash. Fixed assets of
GBP22.7m were acquired and the provisional customer relationships
acquired were GBP43.7m and goodwill GBP21.6m.
On 21 June 2018, the Group acquired Optical Record Systems
Limited (ORS), a Southampton-based scanning bureau, for an initial
cash consideration of GBP1.6m. Cash of GBP0.2m was acquired as part
of the net assets and the provisional customer relationships
acquired were GBP0.7m and goodwill GBP0.6m.
7 Cash inflow from operations
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP'm GBP'm GBP'm
---------------------------------------- ----------- ----------- ------------
Continuing operations
Profit before tax 9.3 0.1 9.7
Depreciation of property, plant
and equipment 3.2 3.0 6.0
Amortisation of intangible assets 3.2 3.0 5.4
Net finance costs 1.6 1.2 2.5
Share-based payments charge for
the period 0.5 0.3 0.6
Share-based payments charge on
cash settlement of EIP options - 7.1 7.2
Cash settlement of EIP options - (7.9) (7.9)
Decrease in inventories 0.2 0.3 0.3
Increase in trade and other receivables (9.2) (4.7) (4.0)
Increase/(decrease) in trade and
other payables 1.8 0.7 (4.1)
---------------------------------------- ----------- ----------- ------------
Net cash generated from operations 10.6 3.1 15.7
---------------------------------------- ----------- ----------- ------------
8 Intangible assets
Applications
Customer Trade software
Goodwill relationships names & IT Total
GBP'm GBP'm GBP'm GBP'm GBP'm
Cost
1 January 2017 131.5 74.5 4.3 3.1 213.4
Arising on acquisition
of subsidiaries 2.0 0.5 - - 2.5
Arising on acquisition
of trade - 0.8 - - 0.8
Additions - external - - - 0.4 0.4
--------------------------- -------- -------------- ------ ------------ ------
30 June 2017 133.5 75.8 4.3 3.5 217.1
--------------------------- -------- -------------- ------ ------------ ------
1 July 2017 133.5 75.8 4.3 3.5 217.1
Arising on acquisition
of subsidiaries 2.3 2.4 - - 4.7
Disposals - - - (0.3) (0.3)
Additions - external - - - 0.6 0.6
--------------------------- -------- -------------- ------ ------------ ------
31 December 2017 135.8 78.2 4.3 3.8 222.1
--------------------------- -------- -------------- ------ ------------ ------
1 January 2018 135.8 78.2 4.3 3.8 222.1
Arising on acquisition
of subsidiaries 0.6 0.7 - - 1.3
Arising on acquisition
of trade 21.7 43.9 - - 65.6
Additions - external - - - 0.6 0.6
--------------------------- -------- -------------- ------ ------------ ------
30 June 2018 158.1 122.8 4.3 4.4 289.6
=========================== ======== ============== ====== ============ ======
Accumulated amortisation
and impairment
1 January 2017 10.6 9.3 1.3 1.9 23.1
Charge for the period - 2.5 0.2 0.3 3.0
30 June 2017 10.6 11.8 1.5 2.2 26.1
--------------------------- -------- -------------- ------ ------------ ------
1 July 2017 10.6 11.8 1.5 2.2 26.1
Charge for the period - 2.0 0.1 0.3 2.4
Disposals - - - (0.3) (0.3)
31 December 2017 10.6 13.8 1.6 2.2 28.2
--------------------------- -------- -------------- ------ ------------ ------
1 January 2018 10.6 13.8 1.6 2.2 28.2
Charge for the period - 2.7 0.1 0.4 3.2
--------------------------- -------- -------------- ------ ------------ ------
30 June 2018 10.6 16.5 1.7 2.6 31.4
=========================== ======== ============== ====== ============ ======
Carrying amount
30 June 2018 - Unaudited 147.5 106.3 2.6 1.8 258.2
--------------------------- -------- -------------- ------ ------------ ------
31 December 2017 - Audited 125.2 64.4 2.7 1.6 193.9
--------------------------- -------- -------------- ------ ------------ ------
30 June 2017 - Unaudited 122.9 64.0 2.8 1.3 191.0
=========================== ======== ============== ====== ============ ======
9 Financial liabilities
Unaudited Unaudited Audited
30 June 30 June 31 December
2018 2017 2017
GBP'm GBP'm GBP'm
Bank loans due within one year
Bank loans and overdrafts - - 0.4
Bank Loans - secured - 7.1 9.3
Deferred financing costs - (0.2) (0.3)
------------------------------- --------- --------- ------------
- 6.9 9.4
------------------------------- --------- --------- ------------
Non-current
Bank loans - secured 132.3 85.9 80.4
Deferred financing costs (1.2) (0.5) (0.9)
------------------------------- --------- --------- ------------
131.1 85.4 79.5
=============================== ========= ========= ============
On 30 April 2018, the Company put in place new debt facilities
with Barclays, Royal Bank of Scotland, Lloyds and Bank of Ireland,
comprising a GBP160.0m revolving credit facility and an additional
GBP30.0m uncommitted accordion facility.
Analysis of net debt
Unaudited Unaudited Audited
30 June 30 June 31 December
2018 2017 2017
GBP'm GBP'm GBP'm
Cash at bank and in hand 15.7 15.4 10.7
Bank loans and overdrafts due
within one year - (6.9) (9.4)
Bank loans due after one year (131.1) (85.4) (79.5)
------------------------------ --------- --------- ------------
(115.4) (76.9) (78.2)
============================== ========= ========= ============
10 Post balance sheet events
On 31 August 2018, the Group acquired Spinnaker Waste Management
Limited, a Portsmouth based Waste Electrical and Electronic
Equipment (WEEE) and electronic waste recycling for GBP0.5m.
ENDS
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END
IR SFWFLLFASESU
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