REG - Restore PLC - FY Results 2021 - Exceeding expectations
16/03/2022 07:00
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RNS Number : 8936E Restore PLC 16 March 2022
16 March 2022
Restore plc
("Restore" or the "Group" or "Company")
Full Year 2021 Audited Results - Exceeding expectations
Strategic M&A and organic growth driving Restore
Restore plc (AIM: RST), the UK's leading provider of digital and information
management and secure lifecycle services, is pleased to provide its audited
results for the year ended 31 December 2021.
Restore reached a record financial performance in 2021 through the successful
delivery of its strategy centred on strong organic growth, margin expansion
and eight acquisitions across four business units.
SUMMARY OF RESULTS
Continuing operations 2021 2020 Change
Revenue £234.3m £182.7m +28%
Statutory profit before tax £23.0m £4.0m +475%
Adjusted profit before tax(1) £38.1m £23.2m +64%
EBITDA(2) £74.2m £57.4m +29%
Net debt £100.8m £66.1m (52%)
Adjusted earnings per share(3) 23.2p 15.0p +55%
Earnings per share 8.7p 0.2p +4,250%
Dividend per share 7.2p - (n/a)
BUSINESS AND STRATEGIC HIGHLIGHTS
· Good performance across all business units contributing to
growth, with strong underlying organic growth and eight successful
acquisitions driving increased scale and capability across the Group
· Exit run rate revenue of £260 million based on Q4, 21% higher
than pre pandemic levels
· Restore Digital's transformative acquisition of EDM in April 2021
doubles exit run rate revenue to £46 million, enhances capability (Cloud,
BPO, Software) and delivers scale margin benefit
· Restore Technology completed three strategic acquisitions
doubling exit run rate revenue to £34 million with strong demand and margin
momentum building through the year
· Restore Records Management gained further market share with
strong organic revenue growth of 5.6%, alongside acquisition revenue growth of
5.9% and COVID-19 repair of 4.2%
o Positive net box growth momentum in line with expectations at 1.3% (2020:
0.9%)
o Property consolidation strategy progressed with new high density storage
facilities in Heywood and Sittingbourne
· Restore Datashred continued steady recovery to 84% of
pre-pandemic activity levels by Q4, with significant progress in underlying
productivity although profit behind 2019 levels
· Restore Harrow Green activity levels strong throughout the UK
with a new site in Cambridge addressing the life sciences sector and
delivering record profitability
· Development of significant pipeline of further acquisition
opportunities across the Group to support the ambitious growth plans
· The Group announced its new ESG strategy, 'Restoring our World'
with ambitious targets including our Net Zero commitment by 2035
FINANCIAL HIGHLIGHTS
· Revenue up +28% to £234.3 million (2020: £182.7 million) driven
by:
o Organic growth +5.0%
o COVID19 repair +5.6%
o In year acquisitions +16.4% plus full year effect of prior year
acquisitions +1.2%
· Adjusted profit before taxation up +64% to £38.1 million (2020:
£23.2 million) and operating margin increasing from 18.5% in H1 to 20.7% in
H2
· Statutory profit before tax up 475% to £23.0 million
· Strategic acquisitions successfully completed totalling £86.3
million during 2021, delivering a post synergy ROIC(4) of 13.0%
· Strong Cash conversion(5) at 85% with closing net debt at £100.8
million and leverage(6) of 1.8x
· New increased debt facility agreed post year end at enhanced
terms, providing further capacity for continued investment
· Proposed final dividend of 4.7 pence, taking total dividend for
2021 to 7.2 pence (2020: nil pence)
CURRENT TRADING AND OUTLOOK
2021 saw delivery of record revenues and profit demonstrating strong strategic
progress and the resilience of our revenue and markets despite a challenging
economic backdrop.
The new financial year has started well, in line with our expectations, and we
are expecting further financial and strategic progress in 2022, which will
benefit from:
· Further underlying organic growth, market share gains and new
customer wins from a significant commercial pipeline;
· Ongoing cost reduction and productivity programmes which,
together with effective pricing discussions, should help mitigate further
inflationary cost pressures;
· The contribution from accretive acquisitions completed in 2021,
with additional synergies realised during 2022; and
· A substantial and high-quality strategic acquisition pipeline
with several transactions already in exclusivity or with verbal commitments
and over 10 deals strongly progressed with more in the pipeline.
Strong activity and momentum has continued into the new financial year with
underlying demand for our mission critical services continuing to build and we
will continue to further extend our capability and offering in line with the
long term structural growth trends that underpin our markets. Against this
backdrop, we have an ambitious but achievable medium-term target to grow
annual revenue to £450-500 million and double EBITDA to more than £150
million (2021: £74.2 million).
Charles Bligh, CEO, commenting on the results and outlook, said:
"Our strong organic growth and eight successful strategic acquisitions have
delivered an outstanding performance with record results for 2021. The new
businesses we have acquired are improving margins and there is no doubt the
quality of Restore's services is reflected in our sector leading positions in
all of our markets.
With excellent sales momentum, activity levels further increasing across all
our markets and a well progressed pipeline of acquisitions, I am confident our
success will build further in 2022 and beyond."
1) Adjusted profit before tax is stated before amortisation, impairment, and
exceptional items and after the effects of IFRS 16
2) EBITDA is earnings before interest, taxation, depreciation, amortisation,
impairment, and exceptional items
3) Adjusted earnings per share is calculated using adjusted profit before tax
and a standard tax rate of 19%
4) Calculated using pre-IFRS16 EBITDA adjusted for management's expectations
of post-acquisition synergies, and consideration net of cash acquired plus
exceptional costs
5) Calculated using net cash generated from operating activities after capital
expenditure and lease payments, but before exceptional items, divided by
adjusted operating profit with a standard tax rate of 19%, with an amendment
to exclude the impact of the VAT deferral from 2020 to 2021
6) Calculated using pre-IFRS16 EBITDA adjusted for share-based payments,
including a pro-forma adjustment for acquisitions in line with financial
covenants
Restore plc
www.restoreplc.com
(http://www.restoreplc.com/)
Charles Bligh,
CEO
020 7409 2420
Neil Ritchie, CFO
Peel Hunt
LLP www.peelhunt.com
(http://www.peelhunt.com/)
Mike
Bell
020 7418 8900
Ed Allsopp
Buchanan Communications
www.buchanan.uk.com (http://www.buchanan.uk.com/)
Charles
Ryland
020 7466 5000
Stephanie Whitmore
Tilly Abraham
Chair's Introduction
I am pleased to report that Restore achieved an excellent all-round
performance for 2021 with significant financial growth, substantial strategic
progress made and further enhancement on the quality of the business overall.
The business is performing well, and I was delighted that the Board invited me
to take on the role of Chair from Martin Towers on his retirement from the
Board during October 2021. I would like to thank Martin on behalf of the
Board and shareholders for his significant contribution to the substantial
growth of the business during his tenure.
As I look ahead, I am highly confident in Restore's prospects and that our
team will continue to transform and evolve the Group and the critical services
it provides to the organisations we serve.
2021 has been an important year for the Group with strategic development and
expansion of the Technology and Digital businesses, continued growth in
Records Management, solid performance in Harrow Green and stabilisation in
Datashred as we exit the pandemic. With a clear strategy for growth, set out
at our Capital Markets Day event in November 2021, shareholders should be
assured that the Group is in good health and well positioned for future
expansion.
Over the last two years, the pandemic has required an extraordinary response
from the nation and the team at Restore. Our people have shown tremendous
resilience and relentless commitment to our customers and to one another,
maintaining full service throughout the disruption of the past two years. I
feel incredibly proud of the positive response from our front-line teams, the
supporting functions, and our leadership group as they navigated the uncertain
events of the past two years. I would like to thank them for their outstanding
contribution on behalf of the Board, shareholders, and our customers.
2021 Performance
Restore has delivered strong revenue and profit growth in 2021 with a 28%
increase in revenues to £234.3 million and a 64% increase in adjusted profit
before tax to £38.1 million compared with 2020. This growth is from the
restoration of revenues impacted in 2020 by extensive disruption, through
acquisition and from underlying organic revenue growth. With a strong exit
rate from 2021 and an annualised £260 million exit run rate revenue, the
business is 21% larger when compared to the pre-pandemic revenue of £215.6
million in 2019.
Whilst 2021 was subject to further restrictions, particularly in the first
quarter and at the end of the year with the emergence of the Omicron variant,
the underlying business environment for Restore has been more predictable with
the embedding of adapted working patterns across the organisations we serve.
As a result of this high confidence in the performance of the business, the
Board approved investment in eight acquisitions during the course of the year.
These acquisitions continued to build the Records Management business and have
transformed the Digital and Technology businesses, more than doubling their
scale and significantly enhancing our product capability.
To support this investment, the Group raised £40 million through an equity
raise in May and the Board thanks shareholders for their support in this
over-subscribed offer.
As a result of the improved profits of the Group and reflecting the increase
in shares issued, adjusted earnings per share increased to 23.2 pence for the
year, an increase of 55% compared to 15.0 pence achieved for 2020.
The Group continues to demonstrate its strong cash generative nature and
despite the substantial level of investments during 2021, the closing leverage
of 1.8x EBITDA provides plenty of capacity to continue to invest in 2022.
Strategic progress
In addition to the strong financial performance for the year, Restore has made
strategic progress across a number of commercial and operational areas adding
further depth and capability to the Group.
Records Management continues to grow in scale and is providing an excellent
platform for extension of the Group's digital and information management
services. Over the course of the last year the business has won, and is
executing, a number of substantial client service contracts supporting the
increasing requirement to extract value from existing and newly created data
in both hard copy and digital formats.
The investment in Restore Digital, and its subsequent expansion of scale and
product lines, is a significant step in the development of the business. It
is well on its evolutionary journey from high volume processor of scanning and
digitisation to become a value-add digital services partner, focussed on
business process outsourcing, digital storage, digital data management and
enhanced software capabilities.
The Board and I are also pleased to report on the successful steps in
executing on the substantial opportunity Charles and the team have previously
presented in relation to the IT and Technology asset lifecycle support sector.
Restore Technology reached number 1 status in this sector during the year with
6% market share and the team are successfully driving a fast growth
acquisition and organic growth strategy.
Management have also been very active in deepening the quality of the
business. In addition to the continued digitisation of the business and
internal operational enhancements, the Board was pleased to formally launch
the Group's Environmental, Social and Governance ('ESG') strategy in November
2021.
The 'Restoring Our World' strategy can be found on the Group's recently
updated website at www.restoreplc.com. Our management team and the Board is
fully committed to the balanced objectives set out in the strategy and in
achieving the headline target to become a Net Zero organisation by 2035.
The Board received an unsolicited, non-binding and equity-based offer from
Marlowe plc during the year. Whilst the Board took time to seek external
guidance and invested significant resources to properly assess the offer, the
bid was unanimously rejected by the Board. We considered that it
fundamentally undervalued the Group, lacked strategic rationale or logic and
the financial consideration proposed, in the form of Marlowe shares, would
have been a very poor outcome for shareholders. The Board would like to thank
our shareholders for their overwhelming support of the Board in their
rejection of this offer.
Health and Safety
During the last quarter of the year, the Board engaged a third party to
perform an independent audit of the Group's health and safety environment and
to assess progress since the last external audit performed in 2019.
The audit highlighted significant progress in Restore's Health and Safety
operating framework and recognised the high priority given to Health and
Safety matters across the Group's management. The report also highlighted
additional areas to focus on, in particular more advanced skills training and
reporting, and these will be taken forward and actioned.
In addition to the development of the Health and Safety structure I would
extend my gratitude to the health and safety and management team for their
excellent navigation of the COVID-19 period and for guiding us in the constant
evolution of our safe working practices through the whole period.
Finally, I would like to mention the investment we have made in our
deep-storage mine facilities which I visited with the Board in October. Over
the course of the last two years the Group has made significant investment
into enhancing the environmental quality of our deep-storage facilities and in
2021 successfully installed extensive networking within the mines, creating a
safer and more productive work environment.
Dividends
Your Board is recommending a final dividend of 4.7 pence, payable on 8 July
2022. This brings the total dividend for the year to 7.2 pence (2020: nil
pence due to pandemic risk mitigation).
The restoration of the dividend during 2021 is consistent with the Board's
high degree of confidence in the business and a return to its previous
progressive dividend policy.
CEO's Statement
I am delighted to report that 2021 was a transformational year for the company
with record adjusted profit before tax of £38.1 million (+64% vs 2020 and +7%
vs 2019) and a significant expansion of the services we provide to customers
which will continue in 2022 as we make progress on our ambitious growth
strategy. We completed eight acquisitions in the year across Records
Management, Digital, Datashred and Technology which has increased both the
scale and the capability of these business units in what continue to be high
growth, mission critical services.
I reported last year that the business showed great resilience in the face of
the pandemic and that during the second half of 2020 the business rebounded,
quickly regaining momentum after the initial impact of the pandemic in Q2.
This recovery continued to build through 2021, with both underlying growth and
bounce back effects, despite the significant lockdowns that were imposed in Q1
of 2021. The strong bounce back beyond pre-pandemic levels demonstrates the
resilience of the business and the critical nature of the services we provide
to our customers despite any social or business restrictions posed by
COVID-19.
Health and Safety (H&S) is the number one priority in the Group for our
employees, suppliers and customers. I am delighted to report improving results
in all business units throughout the year. With the increasing activity in the
business a key focus was around new employees and their correct H&S
induction. We increased the number of surveillance audits with encouraging
results because our focus is to continue to improve our operations and to
invest strongly in H&S, training, education and drive a culture of H&S
first in all that we do.
During the year all business units started to deliver on investments in
technology and organisational changes which will yield benefits in 2022 and
beyond. These changes and further investments in 2022 will transform the
digital experience for customers and also create significant productivity
benefits. In most of the business units our portals and customer digital
experience are very good, but our goal is to have an industry leading
experience from initial engagement, through the sales process to the
day-to-day operational management.
With the increasing activity across the Group, we end the year with record
number of employees in the business to further expand in 2022. The end of year
employee numbers are 2,760 permanent employees with a further 300-400 agency
workers which is overall an increase of over 25% on pre-pandemic levels. I
have been particularly delighted with the improvement in the leadership talent
across the group as we invest in leadership cognisant of delivering improving
profit in the year but also investing heavily in talent for the next stage in
the scaling of the business. In the top 62 leaders over 75% are new in role or
new to the company through hiring or acquisition of businesses and in the
Executive Committee there have been two new appointments in the year.
We made good progress on our high growth strategy and we have further
announced ambitious but achievable medium-term goals to increase our exit run
rate revenues from c.£260 million towards £450- 500 million with EBITDA
doubling to over £150 million. This will deliver significant shareholder
value creation.
Results
I am delighted to report record revenues of £234.3 million which is 28% up on
2020 and 9% above pre-pandemic levels. Our profit performance is strong with a
record adjusted profit before tax of £38.1 million, strong operating margin
performance across the businesses and EBITDA of £74.2 million for the year
(+29%). We continue to show a disciplined approach to cash management with
debtor days and aged debt in line with our expectation, net debt finishing the
year at £100.8 million and a leverage ratio of 1.8x. From the Group's
continued high cash generation and with increased capacity from our newly
expanded bank facility, the Restore Group has substantial capacity for further
investment growth.
As well as driving earnings accretive acquisitions our disciplined approach
demands a strong Return On Invested Capital (ROIC) from our investments. With
£86.3 million invested in 2021, delivering a post-synergy ROIC of 13.0%, the
returns from our investments are proving to be very strong and well above our
cost of finance. As the business expands and matures, the scale benefit of the
investments we are making will substantially enhance the ROIC from the
business.
Organic revenue growth continues to compound and was 5.0% for 2021, which is a
very good result considering 3-4 months of the year were significantly
disrupted with lockdowns delaying sales decisions. We can see momentum in each
of our sectors and strengthening levels of cross selling and up-selling
opportunity across the Group with over 1,200 referrals from one business unit
to another.
We continue our focus on cost management and productivity across the teams. I
am delighted the business units have continued to improve operational
performance metrics while delivering productivity and cost management
initiatives.
The strong financial performance for 2021, and our confidence to invest £86.3
million in acquisitions during the year, demonstrates the team's successful
progress in delivering our strategy and confirms our strong conviction in our
potential for substantial growth in the future.
Customers and our Markets
The business has transformed over the last 3 years and this change is
reflected in the divisional structure and our evolution from Document
Management and Relocation to Digital and Information Management and Secure
Lifecycle Services.
We currently participate in markets with total size of at least £1.9 billion
with an overall market share of c.13%. We have either a number one or number
two position in each market and even with these leading positions we have
ample room to grow to a 25%+ share and towards our initial goal of £450-500
million in revenues. The market forces which dominate the rate of change and
growth are 1) Digitisation, 2) Security of Data, 3) Flexible working, and 4)
Sustainable working. The pandemic is likely to further accelerate momentum to
these changes which as we have said over the last three years (even before the
pandemic) are very good trends for the growth of Restore. We have embraced and
are driving these trends and actively evolving our offerings and creating new
ones with large public and private sector organisations to provide commercial
benefit, manage risk, address their ESG obligation and expand their
productivity.
One other key change in the markets we could see in the medium term as a
result of COVID-19 is customer evaluation of the providers with whom they
deal.
We prioritised customer responsiveness and experience during the last 18
months and in a number of cases invested significant extra effort to service
those customers. We have also worked hard to moderate price rises with cost
management; the end result being extremely favourable customer feedback and
low customer churn levels. The same cannot be said for our competitors in
various business units who either closed offices/service provision or
responded with, in our view aggressive pricing tactics.
In the first month of the pandemic, we said very clearly we would prioritise
1) Health & Safety, 2) customer experience, and 3) the bounce back of the
business. Those decisions taken early in 2020 are very evident in the
performance of the business in 2021. I firmly believe that with our very
strong customer experience, value of our services, investment in continual
transformation and investment in new services we will be the net beneficiary
of customers looking to establish new long-term relationships with our
business.
ESG
We announced our new ESG Strategy in Q4 2021 called 'Restoring our World'. We
have taken the time to understand what matters to all stakeholders in the
business when developing this strategy from shareholders, employees,
customers, suppliers, and the wider community. We have also worked hard to
ensure we have specific targets, actions, and timing for this first strategic
plan with the aim of delivering on these and also looking to improve the
timing and impact. At Restore we pride ourselves on being extremely customer
centric and pragmatic with the way we run our business for the long term but
also brave in transforming the business and using the strong financial
position of the company to deliver against the plans.
We have set out a bold target to become a Net Zero organisation by 2035 which
requires real and sustained focus along with technology based investments and
we are endeavouring to work towards even more ambitious achievements. We are
also working on the next version of the strategy to include more specific
plans on Waste, Scope 3 emissions and other areas that matter to our
stakeholders based on feedback from the inaugural strategy and plans we have
announced.
I can say with absolute certainty that the whole team at Restore is motivated
and energised by our commitment to do the best for our environment and the
communities we live in. We are committed to deliver with the highest levels of
integrity and governance you would expect from a company entrusted with such
critical services to customers and the broader society in the UK.
Digital and Information Management
Our Digital and Information Management division comprises Restore Records
Management and Restore Digital. For 2021 revenue was £138.3 million, up
£32.2 million on 2020 with operating profit of £42.5 million, an increase of
£8.5 million on 2020.
Restore Records Management
Restore Records Management growth was substantial during 2021 with organic
revenue growth of 5.6% and total revenue growth up 16%. Pricing was increased
at ordinary inflation rates with total box storage volumes up 11.6%, including
organic growth at an impressive 1.3% (vs 0.9% in 2020 and 1.9% in 2019). This
demonstrates that even with various lockdowns and interrupted business
activity in the wider economy we can grow strongly. Three acquisitions in the
year of 1BDM, EDM and The Document Warehouse ('TDW') contributed to this
overall excellent result. Our total box storage volume at the end of 2021 is
now 22 million boxes which means over the last three years we have increased
our storage by 2.6 million boxes or 13.3%.
Storage revenue grew by 5.4% during the year and including activity-based
revenues the total revenue for the year was £101.4 million and we end the
year with exit run rate revenue of £110 million. Although we experienced a
strong recovery in activity levels, we still have a number of customers in the
private and public sector that are yet to fully recover their delivery and
retrievals which will provide a positive further tailwind for the business in
2022.
Occupancy rates closed the year at 89% (2020: 94%) with the addition of
capacity at our new Heywood site of c.1 million boxes and capacity in the
recently acquired TDW business in Sittingbourne. We exited one large site at
Transfessa, Paddock Wood with a further 4-5 sites planned for consolidation in
2022. Over the next 8 years we have a clear plan to reduce the number of
buildings in the estate by 50% while at the same time ensuring increased
capacity for the organic and acquisitive growth of the business. We will
invest in larger and higher density sites as we have done in 2021 to drive
down our property cost in the region of c.25%. We will do this while staying
close to our customers to ensure excellent service levels with deliveries of
records.
New customer wins included Department for Work & Pensions ('DWP'), a
document services project of approximately £10 million over 20 months which
commenced in June 2021.
As part of the service, 95 employees transferred across to us from the
previous provider. We had several other significant wins across the public
sector, including NHS Hospitals, local councils, and Clinical Commissioning
Groups (CCG's). These entities are a new opportunity for us, driven by funding
by NHS commissioners to move patient notes off site.
Across the private sector we had a 27% increase in new customer wins compared
to 2020 and our pipeline at the end of 2021 is 7% bigger compared to the
previous year. We have almost half of our 2022 new box target already
confirmed.
The market trends are very positive for our Records Management business.
Organisations have been slow to adopt digital workflows in the last 20 years
and although some companies have rushed to implement new digital experiences
for customers in the last 12 months, we are still seeing significant growth in
physical documents for storage. If customers decide to invest in further
digitisation of their business (which we encourage) then we are well placed to
win this business because we can deliver both the physical and digital service
for customers. Flexible working also drives more demand for those 'unvended
boxes' held in customers' premises. When customers move, whether it be
downsizing, rightsizing or upsizing their business it makes no sense to move
boxes to expensive new office facilities when we can offer a fast turn around
and cheaper service compared to inhouse provision with additional benefits of
inventory and asset tracking to provide peace of mind. We estimate this
un-vended market to be c. £50-100 million of revenues per year and we
experienced 185 new customers in 2021 with unvended boxes demonstrating this
growth opportunity. A significant customer trend is towards sustainability in
the Records Management market, this means a focus on energy costs associated
with storage of boxes. We provide the lowest carbon offering to customers to
reduce their Scope 3 emissions. It is these trends coupled with our excellent
customer experience as shown by over 140 Trustpilot reviews (4.7 out of 5)
that means we win against competition to drive an increase in organic market
share.
As demonstrated over the last few years (including during the COVID-19
pandemic) our overall strategy in Records Management is to drive capacity
growth which will deliver significant revenue and profit growth. We are
delivering consistent organic growth with the market drivers described while
also focusing on the customer experience and reduction in costs. There are
substantial acquisition opportunities in the market, supported by active
discussions with over 20 companies of a total number of 110 with whom we have
continual dialogue.
Restore Digital
Restore Digital helps customers in their digital journey with services from
Digitisation, Cloud, Consulting, Digital Mailroom and Business Process
Outsourcing ('BPO'). Restore Digital revenues increased substantially from
£18.5 million in 2021 to £36.9 million for 2021 with an exit run rate of
£46 million. It was a transformational year for the business with strong
organic growth coupled with two acquisitions, the largest being EDM which was
completed in April 2021 for £62.4 million (24% of the revenues fall in the
Restore Records Management business with 76% of the revenues in Restore
Digital). Importantly the capabilities of the business have been transformed
with the addition of EDM which enhanced our position in the all-important
Digital Mailroom space to be the market leader, and enhanced our Cloud, BPO
and software assets and capabilities which have been outlined as strategic
areas of growth over the last 2 years. We operate nationally from 11 sites
with over 800 employees and provide cloud hosting services of c.£6 million in
revenues and growing with c. 500 million cloud hosted images.
With this increase in higher margin services and additional scale driving
efficiencies alongside operational improvement the net margin of Restore
Digital has improved materially in line with our expectations and the strategy
that we have outlined over the last 2 years.
We are winning in the market with long term contracts demonstrating the
critical nature of the services we provide. In addition, the sales pipeline at
the end of 2021 was significantly higher than 2020 (increase of 28%).
We have a 10 year contract in partnership with Canon; an awarded tender
through TCS (Tata Consultancy Services) in the DigiGOV Framework where we will
provide Digital Mailroom and Payment Processing services commencing in
September 2022. These services are vital to support the delivery of a new
smart mobility system that will reimagine the administration of taxi and
private hire vehicles in London.
We were awarded a 3 year contract directly with Monzo bank, one of the first
online-only challenger banks in the UK. We have successfully rolled out a
digital inbound and outbound omnichannel mailroom, and together we are looking
to develop this further, including cheque processing and wider electronic
banking services.
We signed a contract for 3 years with Dashly, the only 24/7 Mortgage
Evaluation Platform. Restore Digital delivers intelligent Capture and Data
Perfection services that enable Dashly's own revolutionary technology to
evaluate individuals' mortgages against the entire market 24/7 to find the
right deal for every customer. These services enable mortgage advisers to
effortlessly onboard their clients and are then alerted whenever Dashly
identifies an opportunity for them to save money, taking into account all fees
and early repayment charges.
Over the last 12 months we have made extensive preparations for the upcoming
delivery of critical elements of the Scottish Census on behalf of National
Records Scotland and in partnership with APS Group we look forward to the
start of service delivery at the end of February 2022. The services provided
illustrate the breadth of Restore Digital's capability, from document
digitisation, through complex data capture and interpretation and including
provision of supporting systems.
The long term trends for Restore Digital are very positive with customers
looking to unlock the information in physical records to support a digital
transformation. We can help customers with both of these challenges and so
provide a one stop shop for customers who want to simplify what are difficult
changes for them. Changes in the workplace are favourable with services like
Digital Mailroom which remove the need for customers to have onsite mailroom
employees and this also enhances their ability to change their property
portfolios. Hybrid working increases the need to be more digital and we offer
a complete physical to digital service and with our consulting, cloud and
software assets we help customers in this journey. The services we provide
come with attractive financial profiles for Restore comprising a mixture of
project and multi-year subscriptions revenues.
Our strategy is to continue to grow aggressively with a mix of organic growth
and acquisitions for additional capability and scale. The market size is at
least £320 million and growing at a minimum of 4% and with 15% market share
we have significant room to grow. After integrating EDM in 2021 and delivering
strong organic growth the business is ready for an even bigger year in 2022.
Secure Lifecycle Services
Our Secure Lifecycle Services Division comprises Restore Technology, Restore
Datashred and Restore Harrow Green. For 2021 revenue was £96.0 million, up
£19.4 million on 2020 with operating profit of £11.7 million, an increase of
£8.5 million on 2020.
Restore Technology
Restore Technology had a transformational year and exits 2021 with exit run
rate revenues of £34 million. This means the revenue from this business unit
has trebled in size over the last three years. Size and scale expansion has
also resulted in significantly improved margins, with further opportunities
still to pursue through operational efficiency. Scaling from £15.3 million to
£28.1 million, this business unit now operates across seven sites, provides
truly national coverage, employs almost 400 people, serves 18,000 clients,
handles over 1.4 million assets, and enjoys the market leading position and is
the largest UK owned IT Lifecycle Services business.
Three new businesses were acquired in the year. Starting in January 2021 we
purchased Computer Disposals Limited, a scale IT Asset Disposals ('ITAD')
company with national coverage and operational strength. We acquired a small
business, The Bookyard which increased our capability with Apple technologies,
and in August we acquired PRM Green Technology, another ITAD company with
operational strength, with significant penetration in the education sector. I
am delighted with the acquisitions in Restore Technology this year. The
inorganic growth from these businesses, combined with the sales growth
delivered by the team has contributed to both a strengthening of performance
and capability. Our pipeline of future acquisitions is exciting and promises
continued success in this vein, particularly as we consider how expanding
capability throughout the technology lifecycle will offer yet more value to
our clients and differentiation of our portfolio.
In line with our overall growth, 2021 has been a year of success with our
clients. Organic and inorganic growth combined saw this business welcome £9
million of new client opportunities, which is a several fold increase YoY,
incorporating many prestigious logos. Our increasing scale and client base
presented an opportunity to evolve our sales strategy and coverage model. We
increased our focus on clients, new and existing, enterprise and SME, direct
and in partnership with our channel. We intensified our efforts around client
experience, eCommerce and digital transformation. Our resilience and agility
enabled our clients to rely on us as their businesses evolved through 2021,
despite the changing landscape of COVID-19 restrictions.
Our brand's association with trust further strengthened throughout 2021. Our
clients already associate us with the highest levels of accreditation and
certification, giving them confidence to trust us with the responsibility of
handling their data ethically and securely. Our PlanetMark certification
achieved in 2021 underscores our commitment to environmental sustainability, a
core value of our technology business. Trusting Restore Technology with the
processing of technology ensures assets are always handled securely, ethically
and sustainably, whether that be for services early in the lifecycle such as
asset and imaging, services through the lifecycle such as upgrading or moving,
and services at the end of the lifecycle such as reuse, remarketing, or
destruction. The Restore Technology business is now 'the' secure and
sustainable choice for technology lifecycle services.
As market dynamics continue to elevate the importance of these values, the
technology lifecycle market will only continue to grow and our opportunity
likewise. Technology spend is growing at least 6% pa. which in turn drives
demand for the need to recycle technology assets in a secure and sustainable
way. Our ambition for growth in this area reflects this growing demand and
will see us outpace the market. Our exciting medium-term goals are to build a
business with £80-100 million annual revenues with a services portfolio
designed to serve both our clients and our channel alike, across all phases of
the technology lifecycle. 2022 promises to be another exciting year for this
part of our business.
Restore Datashred
Restore Datashred our secure shredding and paper recycling business was
impacted in the H1 2021 with the UK wide lockdowns and in H2 showed
significant improvement in activity levels with customers. Revenue increased
to £30.2 million (2020: £28.0 million) with a 9% increase in service visits
for the year. Recycled paper prices increased during the year. Entering the
year, the average price per tonne was c £158 and the average for the whole
year was c.£185, with overall paper volumes on par with 2020 levels; we
expect this volume to materially increase in 2022.
We carefully maintained our position as one of the top online search choices
for shredding services in the UK. This maximised the inbound opportunity and
delivered a consistent level of ad-hoc destruction requirements across the UK.
There were a number of key wins across the year with a sizeable new national
pharmacy customer, operating over 1,400 sites across the UK. This opportunity
was successfully transitioned, on-boarded and operations began servicing at
the end of 2021. In addition, the sales team on-boarded over 2,200 new
customers into the Group. As a result of cross selling the team supported some
major new contracts in Records Management and Digital, where having the
capability to destroy documents inhouse, formed a major part of the decision
criteria.
We have a clear plan to improve operational efficiency whilst also improving
our customer experience. Our 5-year operational strategy is focused on
delivering transformation aligned to the Group ESG targets: optimising the
number of customers we service per route per vehicle, ensuring we utilise the
right vehicles so we match capacity with customers, reviewing our depot
footprint to make sure we are aligned to our customer density and have the
optimum destruction capability to service our customer needs. In addition,
over the last 2 years the team has focused on optimising our fleet with a mix
of different vehicles from vans to small and large trucks to fit the profile
of the work we do (onsite shredding vs offsite) to drive more visits per day
and overall utilisation. We have also improved the routing of vehicles and the
operations of our 9 destruction sites and 3 collection sites across the UK.
With a focus on transformation whilst managing the complexities of the
pandemic, the team have improved the overall structural productivity of the
business. With the expected increase in volumes across this year, this will
generate improved returns from this business.
Customer satisfaction was excellent throughout the year with positive feedback
and a continued strong Trustpilot score of 4.6/5. We improved our market
leading NPS score from an average across FY20 of 70 to 72.5. Service levels
into our customer base were also maintained above 95%, which in a COVID
impacted environment is testament to our robust processes and professionalism
across our operations teams.
Our digital transformation drive continues, with a focus on automation to
streamline our processes, enhancing our customer experience. We launched a new
online service, Homeshred for consumer home collections during the pandemic
and expanded the service to now the most comprehensive range in the market. We
also launched a pilot demonstrating our new automated customer reports, to
which feedback has been excellent, and it is now part of our mainstream
business.
We completed one small acquisition in Q4 2021 which is now fully integrated,
and we are in early stage discussions with a number of companies. We expect
over the next 12 months to see increasing activity which will help us scale up
the business on the stronger foundations we have created over the last 18
months.
The paramount concern of our customers is the security of data with their
shredding service but increasingly the environmental impact of the service
including carbon emission, waste management and the recycling of material is
becoming a key buying criterium, which is a positive trend for our business.
Our strategy is to grow the business substantially both organically and
through acquisitions which increases our scale and investment in new
technologies to deliver a Net Zero service. I am delighted with the progress
of the team in the last 2 years. They have weathered the uncertainties
presented by COVID-19 and continued to transform the business such that we are
ready for the bounce back with significantly improved sales and operational
performance and a lower cost base to generate good returns for the business as
activity and scale returns.
Restore Harrow Green
Restore Harrow Green delivered a very strong year despite the volatility posed
by COVID-19 with customer decision cycles changing more than normal. Harrow
Green achieved an increase in revenues to £37.7 million (2020: £33.3
million) and also delivered record profits with very strong cost control
across the business.
In 2021 we saw a sharp increase in activity levels for quoting of work which
was up 24% vs 2020 but still lower than 2019 volumes as we expected. The
increase in opportunities did bring some very significant wins throughout the
year, with the following projects secured: University of Exeter >£800k,
University of Glasgow >£190k, City of London Police >£350k and
Victoria & Albert Museum >£200k. Overall the larger scale corporate
projects have significantly reduced in terms of volume and size however we
expect this to come back in 2022 and beyond with pent up demand.
We made significant progress in 2021 around our strategic goal in increasing
our presence in the Life Science market. We opened our Cambridge site in Q1 of
2021 with its increased capability supporting the pharmaceutical market. We
have significant capability already and on the back of this investment we have
seen very encouraging new wins for major office and laboratory moves along
with storage, delivery and installations of equipment for OEMs supplying these
customers. The additional storage capability with this new site has meant we
have achieved storage revenues of £4.1 million across our 9 facilities which
is 26.5% ahead of 2020 and 36% on 2019. We have seen strong long-term demand
for this value added service which also drives improvement in the margin. We
intend to invest further in new facilities in 2022 to increase our storage
capacity. In 2021 we were unsuccessful in renewing the DAS contract (Defence
Accommodation Service) of which we are a sub-contractor (our portion is
<15% of the overall contract) through Amey. We will have at least 3 months
of the contract in 2022 and will TUPE the affected employees at the end of the
contract.
The strong financial result was underpinned with excellent 'on the day'
execution by the team and continued cost control throughout the year. Activity
levels in the regions increased strongly which offset a more subdued London
market which we expect to equalise during 2022.
Over the next 12-24 months our expectation is that there will be pent up
demand for office relocation and reconfiguration. A number of companies and
public sector organisations delayed lease breaks and office changes that had
been planned and this demand plus the new demand posed by organisations
needing to move offices with lease breaks will mean a significant wave of
activity. We have seen in the last two months of 2021 increased proposal and
quoting activity, although we have seen a slower return to activity in January
following the latest restrictions. We are being cautious with the addition of
labour to meet this demand and we can flex with our agency workforce as
required.
Restore Harrow Green's strategy is to grow organically and expand into new
customer segments that value certainty of delivery as demonstrated with our
Life Sciences investment in Cambridge. Although the strategy is focused on
organic growth, we will look at acquisition opportunities that may present
themselves as we emerge from COVID-19 to strengthen our regional footprint and
also key customer segments.
Outlook
Looking ahead we are seeing increasing demand for our mission critical
services and coupled with strong cost control and acquisitions we expect to
deliver further increases in EPS in-line with our high growth strategy.
Despite macro uncertainty, we are well positioned for further organic growth
in 2022 and have an active pipeline of strategic acquisitions to further build
scale and capability. Inflation is a headwind but with strong productivity
gains and pricing, we are confident in our ability to contain this risk.
In Records Management, we delivered 1.3% organic growth in boxes in 2021 and
we are determined to improve on this result in 2022 in line with our guidance
of between 1-2% organic volume growth, and with price increases on the storage
revenue increase in 2021.
Our margin expansion strategy over the medium term is very clear, and, in the
shorter term with continued scaling of the business, higher margin services
and tight cost control, we see a good margin expansion opportunity on a
business which is much larger.
The financial strength stemming from strong recurring revenues and long-term
contracts coupled with high customer satisfaction levels mean we can invest
heavily for long term growth while delivering in year increases in EPS. We
operate in attractive markets that are growing and also largely fragmented and
so we have significant organic and acquisition growth opportunity.
Our medium-term goal to increase run rate revenues from £260 million to
between £450-500 million and double EBITDA of £74.2 million today to over
£150 million is on track.
Trading since the start of the year has been in line with the Board's
expectations.
CFO's Statement
Restore has delivered a strong financial performance for 2021 with record
levels of revenue and profit, positive organic growth momentum and successful
execution of a number of transformative acquisitions.
The Group has delivered clear underlying business expansion and successfully
completed eight strategically aligned, high quality business acquisitions at
an investment cost of £86.3 million, net of cash acquired, during the year to
31 December 2021. With combined annualised revenues of c.£44 million and
EBITDA of c.£16 million after synergies, these investments are providing
strong returns and a post synergy ROIC of over 13.0%. These investments have
increased the number of boxes under management in Records Management from 20
to 22 million boxes, more than doubled the size of both Restore Digital and
Restore Technology and further enhanced the Group's scale, capability, and
breadth of products.
Reflecting this strong financial performance and confidence in the Group's
prospects, a final dividend of 4.7 pence per share is proposed. Together with
the interim dividend of 2.5 pence per share, previously declared and paid, the
total dividend for the year to 31 December 2021 will be 7.2 pence per share
(2020: nil pence).
With revenues of £234.3 million for 2021, and an exit run rate of £260
million, Restore has substantially increased in scale. With a track record of
strong cash generation, substantial balance sheet capacity and significant
opportunity for organic and acquisition expansion, the Group is well placed
for further growth in 2022.
H1 H2 2021
Revenue £m £m £m
2021 106.1 128.2 234.3
2020 89.5 93.2 182.7
2019 106.2 109.4 215.6
2021 v 2020 119% 138% 128%
2021 v 2019 100% 117% 109%
Income Statement and profit performance
The Group's revenue for the year ended 31 December 2021 was £234.3 million,
an increase of 28% over 2020. This strong growth reflects a return to largely
normal activity levels during 2021 following the impact of COVID-19 on 2020
performance, underlying organic expansion and the benefit of strategic
acquisitions during 2021.
Revenue bridge £m
2020 Revenue 182.7
COVID-19 repair 10.2
Organic growth 9.2
Acquisitions in year 30.0
Full year effect of prior year acquisitions 2.2
2021 Revenue 234.3
As anticipated, 2021 saw a strong recovery from the impact of COVID-19
restrictions on 2020 performance with revenues back to 95% of pre-pandemic
levels by the end of Q1 2021. The business experienced a steady return of
activity and underlying organic expansion throughout the year although Restore
Datashred was slower to recover than other businesses repairing from 62% of
pre-pandemic revenue levels in Q1 2021 to 84% by Q4 2021.
Organic growth in the year, is estimated at £9.2 million with identifiable,
organic only effects derived from net box growth, normal price increase and
net contract wins. This represents an organic growth rate of 5% and is in line
with strategic objectives as set out at the Capital Markets Day in November
2021.
Whilst COVID-19 recovery and organic expansion has been strong, a number of
headwinds remained in the year with potential to repair further in the future.
Notably, compared to the pre-pandemic period, Restore Datashred revenues were
down c.£10 million; Restore Digital once again absorbed the cancellation of
GCSE and A level digital exam scanning at a revenue impact of c.£3 million;
and certain service income activities were lower in Harrow Green (c.£4
million); and Records Management (c.£4 million).
Acquisitions in the year benefitted revenue by £30 million. This annualises
to £44 million and has driven a substantial increase in the scale of the
business from revenues of £215.6 million in 2019 to an exit run rate of £260
million by Q4 2021. The returns on these investments have been excellent,
achieving a post synergy return in capital invested of 13.0%.
The business continued to focus on cost and margin improvement during the year
with a number of strategic cost initiatives underway. Of note, the Group
completed fuel supplier consolidation in H1, entered into a strategic
long-term lease in Heywood and acquired a freehold in Sittingbourne to support
Records Management growth and reduce cost per box through increased storage
density. In Q4, the business commenced a strategic review of fleet suppliers,
in light of future ESG goals, and started to assess the potential
consolidation of security and facilities services across the Group.
Using 2019 as a clean comparative, the key cost ratios have remained flat
through to 2021 with people costs at 43% of revenue in 2021 and 2019, and with
property lease payments at 8% of revenue across the two periods.
As a result of the revenue expansion and productivity improvements, the
Group's adjusted profit before tax increased to £38.1 million for the year to
31 December 2021 from £23.2 million for 2020, an increase of 64%. The
operating margins also showed positive momentum during 2021, growing from
18.5% in H1 to 20.7% for H2 to give a full year margin of 19.7% (2020: 17.4%).
The statutory profit before tax for the year to 31 December 2021 was £23.0
million (2020: £4.0 million). This increase results from the positive trading
reasons stated previously and the impact of non-cash impairments in the prior
year totalling £8.6 million.
Adjusted profit items
Due to the one-off nature of exceptional costs and the noncash element of
certain charges, the Directors believe that the alternative performance
measure of an adjusted profit before tax and earnings per share provides
shareholders and other stakeholders with a useful representation of the
Group's underling earnings and performance. The adjusting items in arriving at
the underlying adjusted profit before tax are as follows:
2021 2020
£m £m
Statutory profit before tax 23.0 4.0
Adjustments
- Amortisation 10.7 8.3
- Impairment - 8.6
- Exceptional costs 4.4 2.3
Adjusted profit before tax 38.1 14.6
Amortisation has increased as a result of acquisition investment. Details of
exceptional cost movements are set out below.
Exceptional costs
Restore's strategy is to grow through organic expansion, strategic acquisition
and margin enhancement through efficiency and scale. To deliver these
objectives, costs of a one-off or unusual nature may occur and in order to
give a suitable representation of the underlying earnings of the Group, these
costs are shown separately.
2021 2020
£m £m
Acquisition transaction costs 1.2 0.1
Acquisition related restructuring costs 2.4 0.1
Restructuring and redundancy - 1.3
Other exceptional items 0.8 0.8
Total exceptional costs 4.4 2.3
Acquisition related transaction costs and restructuring costs have increased
from £0.2 million in 2020 to £3.6 million in 2021. This increase is as a
result of the Group's eight acquisitions during the year and represents 4% of
the acquisition investment during the year, in line with management
expectations.
Other exceptional costs in 2021 include legal and advisory costs in respect of
the unsolicited, non-binding, highly conditional approach to the Group by
Marlowe plc during the year (£0.5 million), and final adjustments to the
penalty relating to an incident at the Crayford site in 2018 (£0.3 million),
with the total fine finalised at £0.6 million.
Earnings Per Share (EPS)
Basic adjusted earnings per share are calculated by reference to the adjusted
profit for the year, less a standard tax charge, to the weighted average
number of shares in issue during the year.
The fully diluted adjusted earnings per share are calculated by reference of
the adjusted profit for the year, less a standard tax charge, to the weighted
average number of shares in issue and options granted over the shares of the
Group during the year.
2021 2020
Basic adjusted earnings per share from continuing operations 23.2p 15.0p
Fully diluted adjusted earnings per share from continuing operations 22.4p 14.6p
Basic earnings per share from continuing operations 8.7p 0.2p
The 55% year on year increase adjusted EPS reflects the 64% increase in the
Group's earnings in excess of the 6% increase in the weighted average number
of shares following the issue of equity in support of acquisition activity in
May 2021.
Interest cost 2021 2020
£m £m
Interest on bank loans and overdrafts 2.6 2.8
Interest on lease liabilities 5.2 5.4
Amortisation of deferred finance costs 0.3 0.3
Total 8.1 8.5
The bank interest cost for 2021 is slightly reduced compared to 2020 with the
average debt balance broadly similar, although generally increasing, through
2021.
Non-cash interest cost on the lease liability reflects the application of
IFRS16 and is slightly reduced from £5.4 million in 2020 to £5.2 million for
2021 as the liability reduced during the year from £120.7 million at 31
December 2020 to £117.0 million at 31 December 2021.
Taxation
The current tax charge for the period is £11.5 million. Following the
announcement on 3 March 2021 of a change to the UK corporate rate to 25% in
2023, which has now been substantively enacted, we have re-assessed the
deferred tax position of the Group which has resulted in an additional
non-cash tax charge of £6.2 million being recognised in the income statement.
Cash generation and financing
The Group's cashflow continues to benefit from a high quality, reliable
customer base with very low levels of bad debt or late payment. The free
cashflow generation of £24.5 million for 2021 (2020: £29.6 million),
reflects the continued high profit to cash conversion characteristic of the
Group and is after a working capital outflow of £12.1 million primarily due
to absorbing the effect of the expansion of working capital in support of the
business growth of c.£2 million, working capital requirements associated with
acquisitions and full repayment of c.£8 million of VAT deferred from 2020.
During the year, the Group substantially increased the pace of business
acquisitions and invested £86.3 million, net of cash acquired, including
deferred consideration. Whilst primarily funded from the Group's debt
facilities, the business also raised additional capital of £38.1 million, net
of issue costs, through an equity placing in May 2021.
The Group continues to have significant headroom within its borrowing
facilities with the current Revolving Credit Facility (RCF), which runs to
April 2025, providing borrowing capacity of up to £200 million plus a further
uncommitted accordion of £50 million, leaving the Group with flexibility to
invest as opportunities arise.
Statement of Financial Position
The Group's balance sheet continues to be in good health with key working
capital ratios in line with previous years and further expansion of the net
assets of the business due to the profitable nature of the Group's activities
whilst balancing with returns to shareholders.
2021 2020
£m £m
Working capital* 12.8 3.3
Total Equity/Net Assets 265.2 218.6
Net Debt (post IFRS16) 217.8 186.8
Net Debt (pre IFRS16) 100.8 66.1
*Trade and other receivables plus inventory less trade and other payables
Working capital management remains a strength of the business with debt ageing
consistent at 51 days and the current asset to current liability ratio
improving from 1.2x to 1.4x. Total equity has increased to £265.2 million
(2020: £218.6 million) as a result of the annual profit and the equity raise
in May 2021.
The strength of the Statement of Financial Position is indicative of the
overall good health of the business and provides substantial capacity to
support future growth and investment requirements.
Consolidated statement of comprehensive income
For the year ended 31 December 2021
Note Year ended Year ended
31 December
31 December
2021
2020
£'m
£'m
Revenue 2 234.3 182.7
Cost of sales (127.1) (105.9)
Gross profit 107.2 76.8
Administrative expenses (61.1) (45.2)
Amortisation of intangible assets (10.7) (8.3)
Exceptional items 3 (4.4) (2.3)
Movement in trade receivables loss allowance 0.1 0.1
Impairment of intangible assets - (7.0)
Impairment of investment - (1.6)
Operating profit 31.1 12.5
Finance costs (8.1) (8.5)
Profit before tax 23.0 4.0
Taxation 4 (11.5) (3.8)
Profit after tax 11.5 0.2
Other comprehensive income - -
Total comprehensive income for the year and 11.5 0.2
profit attributable to owners of the parent
Earnings per share attributable to owners
of the parent (pence)
Total - basic 5 8.7p 0.2p
Total - diluted 5 8.4p 0.2p
All the Group's results are from continuing operations.
The reconciliation between the statutory results shown above and the
non-GAAP adjusted measures are shown below:
Note Year ended Year ended
31 December 31 December
2021 2020
£'m £'m
Operating profit - continuing operations 31.1 12.5
Adjustments for:
Amortisation of intangible assets 8 10.7 8.3
Exceptional items 3 4.4 2.3
Impairment of intangible assets - 7.0
Impairment of investment - 1.6
Adjustments 15.1 19.2
Adjusted operating profit 46.2 31.7
Depreciation of property, plant, and equipment and right of use assets 28.0 25.7
Earnings before interest, taxation, depreciation, amortisation, impairment, 74.2 57.4
and exceptional items (EBITDA)
Profit before tax 23.0 4.0
Adjustments (as stated above) 15.1 19.2
Adjusted profit before tax 38.1 23.2
Consolidated statement of financial position
At 31 December 2021
Company registered no. 05169780
Note 31 December 31 December
2021 2020
£'m
£'m
ASSETS
Non-current assets
Intangible assets 8 327.2 247.4
Property, plant, and equipment 78.8 70.6
Right of use assets 102.5 107.1
Investments - -
Deferred tax asset 5.9 3.4
514.4 428.5
Current assets
Inventories 1.4 0.9
Trade and other receivables 56.9 41.2
Corporation tax receivable - 0.3
Cash and cash equivalents 10 32.9 26.4
91.2 68.8
Total assets 605.6 497.3
LIABILITIES
Current liabilities
Trade and other payables (45.5) (38.8)
Financial liabilities - lease liabilities (18.2) (16.7)
Current tax liabilities (1.5) -
Provisions (0.9) (0.4)
(66.1) (55.9)
Non-current liabilities
Financial liabilities - borrowings 10 (133.7) (92.5)
Financial liabilities - lease liabilities (98.8) (104.0)
Deferred tax liability (33.9) (19.8)
Provisions (7.9) (6.5)
(274.3) (222.8)
Total liabilities (340.4) (278.7)
Net assets 265.2 218.6
EQUITY
Share capital 6.8 6.3
Share premium account 187.9 150.3
Other reserves 7.0 6.0
Retained earnings 63.5 56.0
Equity attributable to the owners of the parent 265.2 218.6
Consolidated statement of changes in equity
For the year ended 31 December 2021
Attributable to owners of the parent
Share Share Other Retained Total
capital premium reserves earnings equity
£'m £'m £'m £'m £'m
Balance at 1 January 2020 6.2 150.3 6.1 55.9 218.5
Profit for the year - - - 0.2 0.2
Total comprehensive income for the year - - - 0.2 0.2
Transactions with owners
Issue of shares during the year 0.1 - - (0.1) -
Current tax on share-based payments - - 0.8 - 0.8
Deferred tax on share-based payments - - (1.3) - (1.3)
Share-based payments charge - - 1.2 - 1.2
Purchase of treasury shares - - (0.8) - (0.8)
Balance at 31 December 2020 6.3 150.3 6.0 56.0 218.6
Balance at 1 January 2020 6.3 150.3 6.0 56.0 218.6
Profit for the year - - - 11.5 11.5
Total comprehensive income for the year - - - 11.5 11.5
Transactions with owners
Issue of shares during the year 0.5 39.5 - - 40.0
Issue costs - (1.9) - - (1.9)
Dividends - - - (3.4) (3.4)
Current tax on share-based payments - - 0.2 - 0.2
Deferred tax on share-based payments - - 0.6 - 0.6
Share-based payments charge - - 2.2 - 2.2
Transfer* - - (0.2) 0.2 -
Purchase of treasury shares - - (2.6) - (2.6)
Disposal of treasury shares - - 0.8 (0.8) -
Balance at 31 December 2021 6.8 187.9 7.0 63.5 265.2
* In 2021 a net amount of £0.2m was reclassified from share-based
payments reserve to retained earnings in respect of lapsed and exercised
options.
Consolidated statement of cash flows
For the year ended 31 December 2021
Note Year ended Year ended
31 December 31 December
2021 2020
£'m £'m
Cash generated from operating activities 9 59.9 66.9
Net finance costs (7.0) (8.0)
Income taxes paid (5.2) (7.2)
Net cash generated from operating activities 47.7 51.7
Cash flows from investing activities
Purchase of property, plant and equipment and applications software (8.8) (7.3)
Purchase of subsidiary undertakings, net of cash acquired (85.8) (3.4)
Purchase of trade and assets (0.9) (0.3)
Cash flows used in investing activities (95.5) (11.0)
Cash flows from financing activities
Net proceeds from share issue 38.1 -
Dividends paid (3.4) -
Purchase of treasury shares (2.6) (0.8)
Repayment of revolving credit facility (65.0) (13.0)
Drawdown of revolving credit facility 106.0 -
Lease principal repayments (18.8) (17.1)
Net cash used in financing activities 54.3 (30.9)
Net increase in cash and cash equivalents 6.5 9.8
Cash and cash equivalents at start of year 26.4 16.6
Cash and cash equivalents at end of year 10 32.9 26.4
Notes to the preliminary financial information
For the year ended 31 December 2021
1. Basis of Preparation
The financial information in this preliminary announcement has been extracted
from the audited consolidated financial statements for the year ended 31
December 2021 and does not constitute the statutory accounts for the Group.
The consolidated financial statements of Restore plc have been prepared in
accordance with UK-adopted International Accounting Standards in conformity
with the requirements of the Companies Act 2006 as applicable to companies
reporting under those standards.
The consolidation financial statements have been prepared on a historical cost
basis, except for certain financial assets and liabilities which are held at
fair value. The accounting policies have been consistently applied, other than
where new accounting standards have been adopted. The preparation of financial
statements in conformity with IFRS requires the use of certain accounting
estimates. It also requires management to exercise its judgement in the
process of applying the Group's accounting policies.
The consolidated financial statements are presented in pounds sterling and,
unless stated otherwise, shown in pounds million to one decimal place.
2. Segmental Analysis
During the year, the Directors have reviewed the Group's operating segments,
which has resulted in the classification of two new operating segments:
Digital & Information Management, and Secure Lifecycle Services. The prior
year comparatives have therefore been restated in accordance with these new
segments.
The vast majority of trading of the Group is undertaken within the United
Kingdom. Segment assets include intangibles, property, plant, and equipment,
right of use assets, 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 and property, plant, and
equipment. 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:
Revenue - Continuing operations 2021 (Restated)
£'m 2020
£'m
Restore Records Management 101.4 87.6
Restore Digital 36.9 18.5
Digital & Information Management 138.3 106.1
Restore Technology 28.1 15.3
Restore Datashred 30.2 28.0
Restore Harrow Green 37.7 33.3
Secure Lifecycle Services 96.0 76.6
Total Revenue 234.3 182.7
For the year ended 31 December 2021 no customers individually accounted for
more than 3% (2020: 3%) of the Group's total revenue.
Segmental information:
Profit before tax 2021 (Restated)
£'m 2020
£'m
Digital & Information Management 42.5 34.0
Secure Lifecycle Services 11.7 3.2
Head office (5.2) (4.5)
Amortisation of intangible assets (10.7) (8.3)
Impairment of intangible assets and investment - (8.6)
Exceptional items (4.4) (2.3)
Share-based payments charge (including related NI) (2.8) (1.0)
Operating profit 31.1 12.5
Finance costs (8.1) (8.5)
Profit before tax 23.0 4.0
Digital & Information Management Secure Lifecycle Head 31 December 2021
£'m
Office
Total
Services
£'m
£'m
£'m
Segment assets 341.2 255.5 8.9 605.6
Segment liabilities 154.1 57.3 129.0 340.4
Capital expenditure 5.7 2.7 0.4 8.8
Depreciation and amortisation 26.2 12.1 0.4 38.7
(Restated) Head 31 December 2020
Office
Total
Digital & Information Management (Restated)
£'m
£'m
£'m
Secure Lifecycle
Services
£'m
Segment assets 347.4 136.3 13.6 497.3
Segment liabilities 132.2 59.4 87.1 278.7
Capital expenditure 5.8 1.3 0.2 7.3
Depreciation and amortisation 22.6 11.3 0.1 34.0
3. Exceptional Items
2021 2020
£'m
£'m
Acquisition - transaction costs 1.2 0.1
Acquisition related restructuring costs 2.4 0.1
Restructuring and redundancy - 1.3
Other exceptional 0.8 0.8
Total 4.4 2.3
Restore's strategy is to grow organically, through acquisition and from
unlocking margin expansion opportunities, particularly the development of
synergies across the Group. To deliver these goals, costs of a one-off or
unusual nature may occur and in order to give a suitable representation of the
underlying earnings of the Group, these are shown separately.
Acquisition related transaction costs and restructuring costs have increased
from £0.2 million in 2020 to £3.6 million in 2021 as a result of the Group's
eight acquisitions during the year. Acquisition related exceptional costs
represent 4% of the acquisition investment during the year, net of cash
acquired.
Other exceptional costs in 2021 include defence costs in respect of a takeover
proposal of the Group (£0.5 million), and the final adjustment to the legal
liability in 2018 (£0.3 million), for which the total fine was £0.6 million,
as disclosed in Group's interim results. Other exceptional costs in 2020
include the first part of legal liability above, employer's national insurance
on legacy share option exercises (£0.3 million) and the costs associated with
a corporate restructure (£0.2 million).
Restructuring costs in 2020 were as a result of the COVID-19 pandemic, where
the Group sought to reduce costs in the business on an ongoing basis through
redundancies and site closures but had to incur some one-off costs to
implement this (£1.3 million).
4. Taxation
2021 2020
£'m £'m
Current tax:
UK corporation tax on profit for the year 6.8 4.1
Adjustment in respect of previous periods - (0.4)
Total current tax 6.8 3.7
Deferred tax:
Current year 4.7 0.6
Adjustment in respect of previous periods - (0.5)
Total deferred tax 4.7 0.1
Total tax charge 11.5 3.8
The charge for the year can be reconciled to the profit in the Consolidated
statement of comprehensive income as follows:
2021 2020
£'m £'m
Profit before tax 23.0 4.0
Profit before tax multiplied by the rate of corporation tax of 19.0% 4.4 0.8
(2020:19.0%)
Effects of:
Expenses not deductible 0.9 2.0
Adjustment in respect of corporation tax for previous periods - (0.4)
Adjustment in respect of deferred tax for previous periods - (0.5)
Share-based payments - 0.2
Effect of change in rate used for deferred tax 6.2 1.7
Tax charge 11.5 3.8
The tax charge for the year is higher than the profit before tax multiplied by
the rate of corporation tax (2020: higher).
An increase in the UK corporation tax rate from 19% to 25%, effective 1 April
2023, was substantively enacted on 24 May 2021. This will increase the
company's future current tax charge accordingly. Deferred tax at the balance
sheet date have been measured using these enacted rated and reflected in these
financial statements.
5. Earnings Per Ordinary Share
Basic earnings per share have been calculated on the profit for the year after
taxation and the weighted average number of ordinary shares in issue during
the year.
2021 2020
Weighted average number of shares in issue 132,932,784 125,214,737
Total profit for the year £11.5m £0.2m
Total basic earnings per ordinary share 8.7p 0.2p
Weighted average number of shares in issue 132,932,784 125,214,737
Share options 4,736,714 3,543,950
Weighted average fully diluted number of shares in issue 137,669,498 128,758,687
Total fully diluted earnings per share 8.4p 0.2p
Continuing profit for the year £11.5m £0.2m
Continuing basic earnings per share 8.7p 0.2p
Continuing fully diluted earnings per share 8.4p 0.2p
Adjusted earnings per share
The Directors believe that the adjusted 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:
2021 2020
£'m £'m
Continuing profit before tax 23.0 4.0
Adjustments:
Amortisation of intangible assets 10.7 8.3
Exceptional items 4.4 2.3
Impairment of intangible assets and investment - 8.6
Adjusted continuing profit for the year 38.1 23.2
The adjusted earnings per share, based on the weighted average number of
shares in issue during the year, 132.9m (2020:125.2m) is calculated below:
2021 2020
Adjusted profit before tax (£'m) 38.1 23.2
Tax at 19.0% (£'m) (7.2) (4.4)
Adjusted profit after tax (£'m) 30.9 18.8
Adjusted basic earnings per share 23.2p 15.0p
Adjusted fully diluted earnings per share 22.4p 14.6p
6. Dividends
The Directors recommend a final dividend of 4.7p per share for the year ended
31 December 2021 (2020: nil per share). The dividend will be paid on 8 July
2022 to shareholders on the register at 6 June 2022. An interim dividend of
2.5p, amounting to £3.4 million, was paid during the year (2020: £nil).
7. Business Combinations
The Group's strategy seeks to target the substantial acquisition opportunities
that exist in all of the markets in which it operates, whilst applying strict
investment discipline. The Group has completed eight acquisitions during the
year.
On 8 January 2021, the Group acquired 100% of the share capital of Computer
Disposals Ltd ("CDL"), a Technology business, which provides leading IT
recycling and asset disposition (ITAD) services. CDL operates from a
state-of-the-art facility, which provides further capacity for Restore's
operations in the North West of England. The acquisition has enhanced Restore
Technology's market share within the highly fragmented ITAD market.
On 1 March 2021, the Group acquired 100% of the share capital of The Bookyard
Ltd ("The Bookyard"), a Technology business, which provides leading Apple
recycling and spare parts services. The Bookyard also operates two
market-leading eCommerce sites, www.mac2cash.com and www.click4mac.com which
respectively, offer trade-in and recycle options for Apple products throughout
the UK. The acquisition has further strengthened Restore Technology's
capability in the growing recycling market for Apple products.
On 15 April 2021, the Group acquired 100% of the share capital of Big Data
Management Ltd ("1BDM"), a leading high-quality Records Management business.
1BDM is recognised as a high-quality operator, and will increase Restore
Record Management's market share in the South East of England.
On 30 April 2021, the Group acquired 100% of the share capital of Rainbow
HoldCo Limited, which trades as EDM Group Limited ("EDM"). This acquisition is
additive to the Group's core Records Management business and transformational
for its growing Digital business. Digital is a core growth segment for Restore
with a sizeable UK addressable market, which is continuing to grow,
underpinning the long-term structural growth trends which have been
accelerated by COVID, with digitisation, flexible working and security of data
becoming increasingly necessary for all businesses. The acquisition doubles
Restore's existing market share and creates a stronger business which will
benefit from operating as a larger platform, with the ability to deliver both
cost synergies and cross-selling opportunities through accessing the wider
service offerings.
On 9 August 2021, the Group acquired 100% of the share capital of PRM Green
Technologies Ltd ("PRM"), a Technology business, which provides leading IT
recycling and asset disposition (ITAD) services. The business is located in
Cannock in the Midlands, where all processing is carried out. The acquisition
has enhanced Restore Technology's market share within the highly fragmented
ITAD market.
On 6 October 2021, the Group purchased the trade and assets of PS Management
Solutions Ltd ("PSMS"). The acquisition is additive to the Group's Shredding
business.
On 12 October 2021, the Group acquired 100% of the share capital of The
Document Warehouse (UK) Ltd ("TDW"), a Records Management business which
provides an additional, strategically well-located freehold site with capacity
to service the key London and the south of England markets.
On 30 November 2021, the Group acquired 100% of the share capital of Capture
All Ltd ("Capture All"), a Digital business based in Falkirk. Capture All is
one of the UK's leading providers in document scanning, storing, and
archiving. The facilities will be retained, and the business will continue to
operate from this location, providing an additional outpost for Restore
Digital.
As the Group is still in the process of establishing the fair value of the
assets and liabilities acquired, the fair values presented below are
provisional.
The Bookyard
CDL £'m Capture All
£m 1BDM EDM PRM PSMS* TDW £'m Total
£'m £'m £'m £'m £'m £'m
Intangibles - customer relationships 4.6 - 1.1 27.6 4.7 0.8 1.7 0.2 40.7
Intangibles - software - - - 1.1 - - - - 1.1
Property, plant, and equipment 1.3 - - 3.3 0.3 0.1 4.9 0.2
10.1
Right-of-use 0.4 - 5.3 - 0.2 6.3
Assets - 0.4 -
Trade and other receivables 0.5 - 0.2 6.1 0.9 - - 0.1 7.8
Inventories - 0.2 - - - - - - 0.2
Cash 4.7 0.1 0.1 4.8 0.3 - - 0.2 10.2
Trade and other payables (1.7) (0.1) (0.1) (8.0) (0.7) - (0.2) (0.1) (10.9)
Lease liabilities (0.4) - - (5.3) (0.4) - - (0.2) (6.3)
Corporation tax (0.2) - - 0.3 (0.4) - - - (0.3)
Deferred taxation (1.0) - (0.2) (4.6) (1.1) - (0.6) - (7.5)
Provisions (0.2) - - (1.3) (0.1) - - - (1.6)
Net assets acquired 8.0 0.2 1.1 29.3 3.9 0.9 5.8 0.6 49.8
Goodwill 7.8 0.6 0.9 33.1 3.3 - 0.7 0.3 46.7
Consideration 15.8 0.8 2.0 62.4 7.2 0.9 6.5 0.9 96.5
Satisfied by:
Cash to Vendors 15.3 0.8 1.9 62.4 7.2 0.9 6.2 0.9 95.6
Deferred / contingent consideration 0.5 - 0.1 - - - 0.3 - 0.9
Total consideration 15.8 0.8 2.0 62.4 7.2 0.9 6.5 0.9 96.5
*Trade and assets purchase
The fair value of acquired receivables is £7.8 million, which is equivalent
to the gross contractual amount of acquired receivables due. The loss
allowance recognised on acquisition is not considered to be material. The
Goodwill arising across the acquisitions primarily represents the potential
synergies and cross-selling to the Group's existing operations; an extension
of the Group's national coverage, increasing the Group's market share; access
to new markets; and the skilled workforce and knowledge acquired.
During the year, deferred consideration of £1.3 million was paid, in relation
to the acquisitions of Computer Disposals Ltd, Euro-Recycling Ltd and Secure
IT Disposals Ltd (2020: £0.1 million).
Post-acquisition results
The table below gives the revenue and profit for the acquisitions completed in
the year and included in the consolidated results.
2021 2020
£'m £'m
Revenue 30.0 0.5
Profit before tax since acquisition included in the Consolidated statement of 6.3 0.1
comprehensive income
If the acquisitions had been completed on the first day of the financial year,
Group revenue would have been £248.4m and Group continuing profit before tax
would have been £25.4m.
The acquisitions made during the year were to further extend national
coverage, increase customers and sites and increase the Group's market share
in its Records Management, Digital, Technology and Shredding services.
8. Intangible Assets
Goodwill Customer relationships Trade Applications software Total
£'m
£'m
names
£'m
£'m
£'m
Cost
1 January 2020 164.1 125.9 4.3 6.1 300.4
Arising on acquisition of subsidiaries 1.7 2.0 - - 3.7
Arising on acquisition of trade and assets - 0.2 - - 0.2
Additions - external - - - 1.3 1.3
Disposals - - - (0.2) (0.2)
31 December 2020 165.8 128.1 4.3 7.2 305.4
Arising on acquisition of subsidiaries 46.7 39.9 - 1.1 87.7
Arising on acquisition of trade and assets - 0.8 - - 0.8
Additions - external - - - 2.0 2.0
31 December 2021 212.5 168.8 4.3 10.3 395.9
Accumulation amortisation and impairment
1 January 2020 10.6 26.4 2.2 3.7 42.9
Charge for the year - 7.1 0.3 0.9 8.3
Impairment 7.0 - - - 7.0
Disposals - - - (0.2) (0.2)
31 December 2020 17.6 33.5 2.5 4.4 58.0
Charge for the year - 9.1 0.3 1.3 10.7
31 December 2021 17.6 42.6 2.8 5.7 68.7
Carrying amount
31 December 2021 194.9 126.2 1.5 4.6 327.2
31 December 2020 148.2 94.6 1.8 2.8 247.4
9. Cash generated from operating activities
Continuing operations 2021 2020
£'m
£'m
Profit before tax 23.0 4.0
Depreciation of property, plant and equipment and right-of-use assets 28.0 25.7
Amortisation of intangible assets 10.7 8.3
Net finance costs 8.1 8.5
Share-based payments charge 2.2 1.2
Impairment of intangible assets and investment - 8.6
Gain on disposal of property, plant and equipment and right-of-use assets - (0.1)
(Increase) / decrease in inventories (0.3) 0.5
(Increase) / decrease in trade and other receivables (7.8) 7.8
(Decrease) / increase in trade and other payables (4.0) 2.4
Net cash generated from operating activities 59.9 66.9
10. Financial Liabilities - Borrowings
2021 2020
£'m
£'m
Non-current
Bank loans - secured 134.0 93.0
Deferred financing costs (0.3) (0.5)
133.7 92.5
At 31 December 2021, the bank debt was due to The Royal Bank of Scotland plc,
Barclays Bank plc, Bank of Ireland, Clydesdale Bank plc and Allied Irish Bank
and was secured by a fixed and floating charge over the assets of the Group.
Under the bank facility the Group was required to meet quarterly covenant
tests in respect of interest cover and leverage.
On 18 January 2022, the Group extinguished its financing arrangement in place
at 31 December 2021, and replaced it with a new £200 million revolving credit
facility
All covenant tests were met during the year and the Directors expect to
continue to meet the covenant tests under the new facility.
Analysis of net debt 2021 2020
£'m
£'m
Cash at bank and in hand 32.9 26.4
Bank loans due within one year - -
Bank loans due after one year (133.7) (92.5)
(100.8) (66.1)
11. Post Balance Sheet Events
On 18 January 2022, the Group extinguished its £160 million financing
arrangement in place at 31 December 2021, and replaced it with a new RCF which
runs to 30 April 2025, providing borrowing facilities of up to £200 million
plus a further uncommitted accordion of £50 million. The Group has
significant headroom within its borrowing facilities which provides
flexibility to invest as opportunities arise.
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