TIDMRST
RNS Number : 6542A
Restore PLC
01 October 2020
1 October 2020
Restore plc
("Restore" or the "Group" or "Company")
Positive Trading Update
Good momentum increasing across all businesses
Restore plc (AIM: RST), the UK market leading document
management, commercial relocation and IT recycling business, is
pleased to provide the following positive trading update for the
nine months to 30 September 2020.
OVERVIEW - GOOD MOMENTUM ACROSS ALL BUSINESSES
-- Further increase in activity levels and winning new business
across all business units in Q3:
o Revenues showing sustained improvement, Q3 increased by c16%
versus Q2
o With significantly improved activity levels, furloughed staff
continue to return to work with only c21% on the Government's Job
Retention Scheme at end of September 2020 vs 47% at peak of
pandemic
o Continuing to win new customers across all business units in
Q3
o Successful new product launches focused on flexible working
trends
-- Profitability substantially improved:
o Profit increased substantially with Q3 profit c50% higher vs
Q2
o Cost actions implemented in Q2 continue to benefit financial
performance
o Long-term structural cost reduction initiatives being
implemented to drive sustainable improvements in efficiency and
flexibility
-- Cash generation strong, with continued reduction in net debt:
o Robust financial position, underpinned by core recurring
cashflows
o Provides capability to accelerate strategic progress, with a
growing pipeline of potential acquisitions
-- Property rationalisation continuing on track as planned
-- The Board remains highly confident in the Group's prospects:
o Restore on track to deliver stronger second half profit
BUSINESS UNIT TRADING REVIEW
Restore Records Management
o Continued growth in core highly predictable storage income
o Service revenue continued to rise throughout Q3 in response to
improving activity levels
o Strong net new box intake in Q3 driving an overall net box
growth for Q3, the highest for the year
o Continued market share gains in Q3 with a number of new
customer wins and a strong pipeline
o As a result, overall revenue in Q3 increased to c90% of prior
year
Restore Digital
o Strong trading and increased activity resulted in an
improvement in revenue and profit in Q3 vs Q2
o Two smaller sites closing as planned with work consolidating
into an expanded site in Redditch
o Won three further medical records scanning contracts of
GBP6-10m total over two years. Restore has also been appointed to
the NHS England DPS framework for GP records scanning which could
bring to market projects worth GBP150m-190m over the next three to
five years
o Continued to win digital mail room contracts with two larger
customers each with a value of >GBP100k pa and we continue to
build a strong pipeline
Restore Datashred
o Activity levels across the UK have increased sharply in Q3 vs
Q2
o Continuing to win and re-sign customers with a full complement
of sales staff at the end of September
o Recycled paper pricing has continued to be healthy and stable
through Q3
o North London collection site closed as planned and work
consolidated into our flagship London processing centre (Crayford),
consistent with the Group's long-term site strategy
Restore Harrow Green
o Continued high levels of activity during Q3 both in London and
the Regions
o Activity consisting of normal, scheduled relocations and
further COVID-19 office reconfigurations as well as longer term,
flexibility focused public and private sector site
reconfigurations
o Increased scheduling of work during the week has improved
workforce mix and reduced labour costs with a consequent
improvement in margins
o Healthy win rate during Q3 from existing and new customers.
Notable wins include relocation projects for four universities
across the UK worth over GBP1.3m
Restore Technology
o Customers re-using older technology to enable homeworking is
largely complete and therefore with IT refresh projects restarting
it has delivered a significant increase in activity in Q3 vs Q2
o Profit in Q3 was significantly above profit levels in Q2
o E-commerce sales continue to perform strongly with pricing at
healthy levels with increasing volume
GROWTH STRATEGY
The Group's growth strategy is unchanged despite COVID-19. Over
time, the physical to digital services we provide customers as they
transform their business models, as well as their data security we
provide through Restore Datashred and Restore Technology will be in
high demand in an increasingly flexible office environment.
As outlined at our Capital Markets Event in November 2019, our
growth strategy is based on:
1) Organic Growth
2) Acquisition Growth
3) Margin Expansion
Restore has a market position of number 1 or number 2 in the
markets we serve and overall, with only 11% market share we have
significant room to grow and drive margin expansion with further
scale.
We believe that COVID-19 will accelerate the trends we have seen
in the last 25 years of 1) Flexible working, 2) Businesses
automating with digital processes, 3) Risk of data loss increasing
and 4) Environmental awareness. All these business trends will be
positive for Restore as the Group utilises its diversified business
portfolio. Restore is exceptionally well placed with market leading
positions to support customers to address these challenges.
ACQUISITIONS
There are significant acquisition opportunities across all the
markets we serve, and the level of inbound enquiries has increased,
particularly with businesses we have known for some years. There
are many factors driving this increased activity, but one important
factor is the level of uncertainty in the market around potential
changes in capital gains tax over the medium term. Overall, we are
seeing improved realism in the market around prices for various
businesses and we remain very disciplined in choosing the right
businesses that drive the long-term strategy and strong financial
returns.
OUTLOOK
The combination of the continued recovery in activity in our
markets, together with the benefit of self-generated growth and
improved profitability, have seen Group momentum strengthen
noticeably in Q3. The Board is confident that the business is on
track to deliver a stronger profit in H2 2020 in comparison with H1
2020, in line with previous market statements.
The Group's total revenue has bounced back strongly with total
revenue now reaching 80% vs the previous year, compared with only
68% at the height of the COVID-19 impact in April 2020, and is
anticipated to continue to improve during Q4. A strength of the
Group, especially during the current uncertainty, is the regional
nature of the business. Across the Group less than 10% of the
operating profit is derived from London office 'footfall'. We
continue to monitor the latest announcements from the Government
relating to increasing social restrictions but with Harrow Green
performing well in London, due to the constant changing nature of
offices, and new products to support flexible working, we continue
to minimise this impact.
Records Management, the Group's largest business unit, is
rapidly approaching its pre-COVID levels of profitability and
expects to achieve net box growth of c.1% for FY20.
With continued cost management, the strategic rationalisation of
sites and staffing levels and with rising activity Restore expects
around 10% spare capacity in staff by November which will enable
further increases in customer activity going into December and Q1
2021. We further expect these changes to lower Group costs by
cGBP2m pa during 2021.
With continued strong cash conversion and in the absence of
acquisitions, our net debt reduction is expected to be c.GBP5-10m
in H2 to deliver c.GBP65-69m overall net debt (pre-IFRS16) by the
end of 2020, a significant reduction from GBP89m at the start of
the year and a substantial improvement in underlying debt gearing.
The RCF of GBP160m has substantial capacity to more than meet
current requirements including supporting the Group's strategic
priorities and capital allocation objectives.
Charles Bligh, CEO, commented on the good progress:
"I am delighted with the strong trading across all our markets
as we deliver critical services to our customers. We focused on
making decisions early in the pandemic that ensured we continued to
deliver for customers safely and ensured we could bounce back
strongly. These decisions are starting to deliver, and we are well
placed to deliver increased profits in the second half of the
year."
Restore plc www.restoreplc.com
Charles Bligh, CEO 020 7409 2420
Neil Ritchie, CFO
Peel Hunt LLP www.peelhunt.com
Mike Bell 020 7418 8900
Ed Allsopp
Buchanan Communications www.buchanan.uk.com
Charles Ryland 020 7466 5000
Stephanie Watson
Tilly Abraham
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END
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