REG - Restore PLC - Half Year Results 2022
28/07/2022 07:00
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RNS Number : 9619T Restore PLC 28 July 2022
28 July 2022
Restore plc
("Restore" or the "Group" or "Company")
Half Year Results 2022
Strategy delivering organic momentum and acquisition expansion
Restore plc (AIM: RST), the UK's leading provider of digital and information
management and secure lifecycle services, is pleased to announce its unaudited
results for the six months ended 30 June 2022 ("H1" or "the period").
OVERVIEW
Restore continued to deliver strategic progress with substantial revenue
growth of 32% in the first half, driven by strong organic momentum (+19%) and
the successful integration of acquisitions made in 2021 and H1 2022 (+13%).
Digital and Information Management achieved revenue growth of 41% as a result
of strategic contract wins in the last 18 months and excellent operational
delivery in H1. Secure Lifecycle Services grew revenue by 20% with Technology
growing strongly (+40%) and Datashred also performing well (+33%). The Group
also successfully managed inflationary cost pressures during the period
through proportionate price rises, whilst driving cost reductions across the
Group.
With strong organic momentum, three further acquisitions completed in H1 and
substantial financial capacity to make further acquisitions, the Group
continues to grow capability and scale and management remain confident of
delivering its stated objective to reach annual revenues of £450 million and
double EBITDA to £150m in the medium term.
FINANCIAL SUMMARY H1 2022 H1 2021 Change
Revenue £140.3m £106.1m +32%
Adjusted Profit Before Tax* £21.2m £15.6m +36%
Statutory Profit Before Tax £14.1m £8.9m +58%
Adjusted EBITDA* £40.3m £33.2m +21%
Net Debt £103.5m £91.6m +13%
Adjusted* Earnings Per Share** 12.6p 9.8p +29%
Statutory Earnings Per Share 7.5p 1.5p +400%
Dividend per share 2.6p 2.5p +4%
*stated before exceptional items and amortisation
**calculated using a standard tax charge
HIGHLIGHTS
Strong business momentum and organic expansion resulting from high customer
satisfaction and innovation
· Increasing demand and activity continuing from 2021
· Major contract wins in Digital and Information Management
· Substantial evolution of the Group's product range in Digital and
Technology businesses
· 'Restoring our World', ESG strategy on track
Excellent progress in acquisition strategy
· Successful integration of prior year acquisitions, all on track
or ahead of plan
· Two bolt-on investments in Records Management for £0.7m during
H1
· Strategic acquisition of Ultratec for an enterprise value of
£9.3m in May
· Well developed pipeline of acquisition opportunities
Substantial financial growth
· Revenue of £140.3m (+32%) from organic growth (+19%) and
acquisitions (+13%)
· Strong profit delivery of £21.2m (+36%) with price and
productivity mitigation of cost pressures
· Adjusted EPS of 12.6p (+29%)
· Annualised run rate revenue increased to c.£280m per annum
Strong cash management with leverage reduced to 1.7x as at 30 June 2022, with
substantial headroom for further investment.
Interim dividend declared of 2.6p per share (2021:2.5p).
Management remain confident the Group will deliver strong growth for FY22.
Growth strategy on track to double EBITDA to £150m.
OUTLOOK
The Board is pleased with the Group's strategic progress during H1 and the
delivery of sustained organic momentum and successful integration of
acquisitions made during the last 18 months.
Management remain confident that the Group will deliver strong growth for
FY22, with activity levels increasing and pricing adjustments offsetting cost
increases. However, rising interest rates are leading to higher finance
charges and it is anticipated that interest costs will be £1.0 million to
£2.0 million greater than planned for the year.
Looking further ahead, the critical services that the Group provides in
digital transformation, information management and secure lifecycle services
are in high demand and Restore is in a strong position to capitalise on its
market leading positions. The Group's strategy to grow through organic
expansion, strategic acquisition and margin improvement remains on track to
deliver a larger, responsible and highly profitable business in the medium
term.
CHARLES BLIGH, CEO, commented:
"I am delighted with the growth achieved in the first half which demonstrates
that our strategy and execution is on track. Across the Group we are seeing
increasing sales activity and significant customer contract wins. Our staffing
levels have grown substantially in the last 6 months in order to support
delivery and I want to thank the whole team for doing such a great job and
ensuring customer experience continues to be at the heart of what we do.
In addition to our confidence in future organic growth, we have a well
developed pipeline of acquisition opportunities and, with our strong balance
sheet, we are looking forward to completing further investments in H2 and
continuing to deliver great results for our shareholders and customers."
For further information please contact:
Restore plc www.restoreplc.com (http://www.restoreplc.com)
Charles Bligh, CEO +44 (0) 207 409 2420
Neil Ritchie, CFO
Investec (Nominated Adviser and Joint Broker) www.investec.com
(file:///C%3A/Users/M_Hartley/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/CPRLD4QW/www.investec.com)
Carlton Nelson +44 (0) 207 597 5970
James Rudd
Canaccord Genuity (Joint Broker, Corporate Advisor) www.canaccordgenuity.com
(file:///C%3A/Users/M_Hartley/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/CPRLD4QW/www.canaccordgenuity.com)
Max Hartley +44 (0) 207 523 8000
Chris Robinson
Citi (Joint Broker) www.citigroup.com
(file:///C%3A/Users/M_Hartley/AppData/Local/Microsoft/Windows/INetCache/Content.Outlook/CPRLD4QW/www.citigroup.com)
Stuart Field +44 (0) 207 986 4074
Laura White
Buchanan Communications (PR enquiries) www.buchanan.uk.com (http://www.buchanan.uk.com)
Charles Ryland +44 (0) 207 466 5000
Stephanie Whitmore
BUSINESS PERFORMANCE
The Group achieved a strong performance in H1, with revenue up 32% vs the same
period in 2021 and importantly showing sequential improvement with an increase
of 13% in Q2 over Q1.
Restore has a clear, high growth strategy, with ambitious but achievable
strategic growth objectives. The financial performance of the business is
clearly showing delivery against the stated growth pillars of organic
expansion, strategic acquisitions and margin enhancement through scale and
productivity, despite the headwinds resulting from the global pandemic and
macro-economic uncertainty.
Digital and Information Management
Our Digital and Information Management division comprises Restore Records
Management and Restore Digital.
For the period, the division achieved an adjusted operating profit of £24.6m
(H1 2021: £18.8m) on turnover of £87.1m (H1 2021: £61.9m).
Restore Records Management - Revenue £55.9m up 17% YoY (H1 2021: £47.7m)
Revenue increased strongly at +17% YoY driven by organic growth of 11% and
acquisition related growth of 6%.
Activity levels increased YoY and are now above pre-covid levels. Within this
activity, BAU service levels (normal pickups and file deliveries) are down on
pre-covid levels which was expected given part of the period was impacted by
covid ways of working but this was more than offset by the increase in
projects with customers. The contract with DWP (Department for Work and
Pensions) to audit and consolidate c.27million files started on the 1 April
2022 and is on track to be completed at the end of this year.
Our insight from customers in the last six months is consistent with pre-covid
research that customers are still looking for long term storage while they
look to transform their businesses. They find it difficult to know where to
start in the digital transformation and are looking to Restore to help them to
effectively use their highly valuable and long-term data held in a physical
form with new data held in a digital form.
Positive organic net box growth was achieved plus additional box growth of 78k
boxes through two 'pick and lift' storage acquisitions. Restore is winning new
business in the market with c.140 new customers in H1 2022, which is three
times the pre-covid levels seen in 2019, clearly showing successful and strong
sales execution from the team. Of these new c.140 accounts, 70% are customers
with un-vended boxes. New Box intake and Organic growth were up substantially
from H1 2021 and destructions are back to pre-covid levels while perm-out
(where a customer permanently checks out a box) have decreased vs pre-covid
levels. Restore started the year with 22m boxes in storage and we are
expecting the full year organic box growth to be between 1-2% plus acquisition
related increases in box storage driving strong revenue growth.
The storage utilisation rate of 91% reflects the addition of new capacity (in
H2 2021) which will cater for our organic growth over the next 18 months plus
ongoing consolidation of the property estate. The Group emptied three sites
with over 320k boxes moved in H1 and is progressing the exit from a further
three sites with over 500k boxes into existing, larger facilities. We are
currently working through further additional lease and warehouse expansion
opportunities to underpin the growth and consolidation strategy including a
planning application to significantly extend our freehold site in
Sittingbourne.
The pipeline of acquisitions continues to develop and we have started H2 2022
strongly with a number of customer awards for large projects.
Restore Digital - Revenue £31.2m up 120% YoY (H1 2021: £14.2m)
As a result of the transformation of Restore Digital (scale and scope of
services) over the last two years, the business showed exceptional revenue
growth of 120%, and delivered turnover of £31.2m for the period. This
increase comprised of organic growth of 65% from strong project revenues and
underlying sales growth, and acquisition related growth of 55% as a result of
the EDM acquisition in April 2021.
Strong growth in H1 2022 was underpinned by a substantial contract award from
HMRC, a successful Public Sector Government contract delivered in partnership
with APS Group, and the return of the examination scanning activities for RM
Education. To deliver these contracts, over 500 staff were successfully
onboarded during H1. As Restore Digital exits the period, staffing levels are
26% higher than H1 2021.
Last year's acquisition of EDM Group has extended the breadth of services and
the newly combined business has achieved three significant pipeline additions
to digital mailroom services during the period. Integration of these
businesses has progressed according to plan and is delivering substantial
synergies in line with expectations. To support further growth plans, the
Leadership Team has recently been strengthened by the addition of senior
Finance and Service Delivery Directors.
Restore Digital won 226 deals in the period and total contract value increased
by 11% compared with H1 2021. This included two significant public sector
digitisation contracts. Our organic growth strategy is underpinned by a
significant pipeline (600 deals) of business, with over 17% of the pipeline
consisting of strategically important complex digital transformation projects.
Our sales focus continues to be on high volume complex contracts in regulated
sectors where customers value the high quality and security of Restore's
services. Customer retention levels are excellent and three of our top ten
customers signed contract extensions in the period.
Further opportunity for growth is available through acquisitions with a number
of opportunities under consideration.
Secure Lifecycle Services
Our Secure Lifecycle Services division comprises Restore Technology, which is
now the market leader in IT Lifecycle Services, Restore Datashred, a leading
National shredding business, and Restore Harrow Green, the UK's market leader
in office and commercial relocations.
For the period the division achieved an operating profit of £5.6m up 19% (H1
2021: £4.7m) on turnover of £53.2m up 20% (H1 2021: £44.2m).
Restore Technology - Revenue £17.2m up 40% YoY (H1 2021: £12.3m)
Revenue significantly increased by 40% supported by strong organic growth of
14% and acquisition related growth of 26%. Restore Technology saw continued
strong demand for IT investment which requires customers to decommission older
equipment in both the office environment but also from the upgrade of data
centres and data networks. Although a significant proportion of our services
involve end of life activity, we are building out our capability selectively
in the pre and mid-life services area and in H1 2022 pre & mid-life
revenue was up 50% with a strong pipeline of deals for the next 12 months.
With the transformed scale (we are four times larger compared with three years
ago) and increased breadth of capability, Restore Technology is now competing
for and winning much larger and longer projects and also strengthening
strategic partnerships. In H1 2022 a selection of the wins include a large IT
infrastructure contractor (£1.0m), an IT support and solutions consultancy
(£0.6m), a large investment bank for destruction work (£0.5m) and a large
telco contract renewal (£1.0m).
A strategic focus is building a strong channel (indirect business) with IT
Vendors and Resellers and Network vendors and resellers and we are delighted
with the growing pipeline of business from this investment in people,
capability and focus.
Feedback from customers shows a growing emphasis from direct clients on
assurance and governance as clients seek more transparency around ESG
(specifically supply chain risk, secure erasure of data and disposal of
assets). Many large clients require completion of complex and detailed
submissions with greater assurance in bids and tenders which is a favourable
trend for the Group given our leading market position and credentials.
Restore Technology is also seeing significant interest to offer its lifecycle
services to partners to extend their services propositions and it was pleasing
to see large public sector clients won recently in partnership with our
channel as a result.
We continue to invest and transform the business as we grow. A new Operations
Director and Marketing Director are due to join in early Q3 2022 to further
strengthen the team. With a fleet of over 90 ICE vehicles (and growing),
Restore Technology is working hard to drive adoption of new EV vehicles as we
optimise the routing of the business. The Group is investing in a major
upgrade of the IT platform to be completed in H1 2023 to support the expected
significant growth in the business over the next few years.
Ultratec Ltd was acquired in May 2022 for an enterprise value of £9.3m.
Ultratec is the pre-eminent Hard Disk lifecycle business in the UK with a
unique capability from a product called Genesis which is a software and
appliance for the erasure and importantly restoration of failed hard drives
and also Nemesis, which has the same capability for network devices (switches
and routers) which is a growing security concern for many organisations. We
have a number of acquisitions in the pipeline to continue to build our scale
and scope of services as the Group looks to double the size of Restore
Technology over the medium term.
Restore Datashred - Revenue £18.3m up 33% YoY (H1 2021: £13.8m)
Revenue increased 33% YoY and vs H2 2021 revenue increased sequentially by 12%
which shows the continual increase in activity levels and also stronger paper
prices for recycled paper delivered to the paper mills.
Activity levels increased c.30% YoY which is very encouraging, although remain
slightly lower (9%) than pre-covid levels. We expect continued growth as more
people return to work and even with more work from home activity going
forward, we believe the business will continue to grow as a result of growing
data management requirements and that we are winning in the market.
The tonnage of paper collected is lower than pre-covid levels but paper
pricing remains high with the average price per tonne at c.£230. It is
extremely difficult to forecast paper pricing but in the short term we expect
to sustain these pricing levels given the substitute of paper from virgin
forests is less sustainable and less competitive as shipping prices around the
world remaining high.
We continue to focus relentlessly on operational efficiency with route density
(number of visits per vehicle per day) improved 19% YoY with mileage per visit
down 21% which drove down fuel and maintenance costs of the fleet. Restore
Datashred also introduced new online capability for new sales from existing
customers which enables them to increase self service, improving customer
experience and reducing costs. This additional functionality is part of a
wider IT platform upgrade which will enable Restore Datashred to drive even
greater optimisation of operations and deliver further customer experience
benefits.
The NPS customer experience continued to improve from 71 to 74 over the last
12 months, and we are seeing excellent Trustpilot reviews from customers which
is very encouraging given the significant improvements that have been made.
With the future plans laid out and additional changes management have
identified, we know there is further potential to improve.
Restore Harrow Green - Revenue £17.7m down 2% YoY (H1 2021: £18.1m)
Revenue was slightly lower at 2% YoY reflecting the loss of one contract with
Defence DAS (MoD staff relocations) but activity levels overall remained
stable. Restore Harrow Green saw good performances in its regional locations
but the London relocation market remained soft with few large projects. This
was mainly offset by many small/medium projects. We have a number of large
relocations that have been delayed due to slower building works in the last
two years but indications from customers are they will resume these
relocations over the next 12 months.
Pricing in the market is competitive and Restore Harrow Green has seen a
number of large customers engage after having experienced poor delivery with
competitors who had offered lower pricing during the pandemic. This
recognition that certainty of delivery is the key priority, positions Restore
Harrow Green strongly as the class leader in execution. With the labour market
remaining tight we are seeing increased costs but with price increases and
with a dedicated and well-established team, we are confident that as the
larger project activity returns, we will be able to deliver for customers.
Proposal activity remains strong with companies looking at their real estate
footprint/usage and starting to make decisions about what they change over the
next several years. With a national presence and pre-eminence in the market
for large and complex moves Restore Harrow Green is ideally placed over the
next few years for the significant changes in real estate locations and mix of
use for organisations.
Storage of items (largely large crate and pallet storage) has increased with
revenues up 12% to £2.2m. We store items in nine locations across the UK with
c.95% utilisation. This market will increase in size and we are investing
strongly to increase our storage facilities.
We have invested heavily in specific high growth segments such as the R&D
and Pharmaceuticals industry and as a result we are building key relationships
and winning new types of contracts in the sector. We are expanding our
facility in Cambridge and looking at further investments to meet the growth we
are experiencing.
STRATEGIC UPDATE
To deliver the high growth strategy the Group is organised across two
divisions.
In the Digital and Information Management Division the growth trends are
strong with increasing demand for secure storage, flexible work practices and
the ongoing digitisation by organisations to drive down costs and respond to
changing demand. As the number two in the Records Management sector and as the
number one Digital business Restore provides market leading solutions to
customers to solve their need for physical, hybrid physical/digital or a pure
digital service.
In Restore's Secure Lifecycle Services division, the market is also large and
growing with very positive underlying trends based on organisations'
requirements for assurance in securely destroying data (on paper or technology
assets), and ESG trends in recycling and reusing IT assets as well as
workplace transformation. We service these markets as the leading provider
with Restore Datashred the number two national shredding business, Restore
Technology the number one IT lifecycle/recycling business and Restore Harrow
Green the number one commercial relocation and storage business servicing
mid-market, enterprise and public sector customers.
Resilience with significant opportunity underpins our growth strategy
Restore's business model is highly resilient and this is particularly
important in uncertain economic times. The Group delivers essential services
to mid-market, FTSE100 businesses and public sector organisations, and their
demand for our services is increasing as they grow or restructure. Our
services cannot be delivered by in-house teams and we use the scale of our
operations to drive down costs and provide savings to customers which is
greatly valued in the currently uncertain economic backdrop.
Restore sees significant opportunity in all our markets to grow share
organically and acquire in highly fragmented markets. We believe that
continued organic growth is a foundation for shareholder value and this
underpins our acquisition strategy. When acquiring businesses, a fundamental
principle is to integrate the acquisitions quickly into each business unit in
order to enhance customer experience and deliver synergies. As such, our
acquisition model is generally to acquire businesses in full at the
transaction date, subject to modest retentions for completion matters, and we
avoid earn-out deals which prevent strategic integration.
Organic Growth
The foundation of the organic growth strategy is to deliver exceptional
customer service at the right price using the scale of our business to drive
down costs. By delivering for customers every day we have the opportunity to
cross sell from the wider Group services and so the virtuous circle continues
which further drives our growth. Our markets overall are growing at 3%+ and
our plan is to grow at a minimum of 4% per annum although we are investing
with a view to drive above this to 8%+ (before the effects of potentially
higher inflation). Restore has delivered consistent growth giving confidence
in the platform to reliably deliver and during the pandemic we continued to
grow and win new customers which gives the Group assurance that we can
continue this trend. We are also expanding heavily into high growth segments
such as in our Digital and Technology business units.
Acquisition growth
We have a very strong M&A platform with a highly qualified and dedicated
M&A team and the business unit management teams have the experience and
structure to integrate acquisitions quickly. Restore operates in large and
extremely fragmented markets where we look for companies that add scale to our
business (which means there are significant synergies) and/or add extra
capability to enhance our products and services and provide significant
synergy benefits. All acquisitions are earnings accretive and with multiple
opportunities in each market and, due to Restore's well-earned reputation as a
trusted buyer, we can buy good quality business at fair prices with the
sellers knowing we will complete a deal and successfully integrate the
acquired asset.
Margin Expansion
The focus as Restore grows is to improve margins and we have a detailed plan
to achieve this. With inflationary pressures costs are increasing but we have
significant ability to pass these on to customers while being customer centric
in how this is executed. At the same time we are using our scale to drive down
costs and market test what we procure continually as one company with its
total scale versus each of the five business units independently procuring
services with lower buyer leverage. A hallmark of the Company and the
leadership team's focus is very tight cost control.
A significant cost to the business is property where we operate in 95 sites.
We have a clear plan to ensure we drive significant utilisation as we grow at
the various operating sites and rationalise the number of properties over
time. This is especially true in Restore Records Management where in a select
number of cases proximity is needed to deliver service levels but increasingly
for low activity records we can store in lower cost and larger facilities. We
currently have capacity for c.24m boxes and we are planning on this being 30m+
boxes in the medium to long term to meet growth objectives. We are adding
larger capacity sites (as we consolidate from smaller sites) with higher eaves
heights which will drive greater density and lower unit costs.
A main source of productivity is in the use of better technology and the
significant information we know about customer activity and needs. This is
enabling Restore to design more efficient routes, improve SLAs and develop the
profile of services which is driving significant optimisation of the current
operations, improve productivity and enhance customer experience.
Compelling investment case delivering shareholder value
Our strategy is to drive significant increases in profitability over the
medium term and in the last three years we have demonstrated this through
especially challenging times. In addition to this underlying growth momentum,
we also have significant defensive qualities due to the critical nature of the
services we provide, and the cash generative nature of our business model.
Our business model to deliver shareholder value is based on;
· Highly recurring and long term contracted revenues with high
levels of customers satisfaction
· Delivery of essential services that are growing with outsourced
services that in house teams cannot do at scale
· Attractive and growing operating margins with strong free cash
conversion
· Competitive advantage through our scale leading to cost advantage
· Significant barriers to entry with scale and security
· Ambitious ESG Strategy 'Restoring our World'
· Leading position in growth markets
· Fragmented markets with significant acquisition opportunity
· Strong management team with demonstrated delivery of results.
FINANCIAL PERFORMANCE
Financial overview
Restore delivered a strong financial performance in the first half, with
underlying organic expansion and accretive acquisitions contributing to high
levels of revenue and profit growth.
The increasing scale and capability of the Group were strongly demonstrated in
H1 with several major contract wins and expansion of recurring business
resulting in high levels of organic momentum. Additionally, the Group
continued to make strategic investments and deployed £9.5 million (net of
cash acquired) during the period across the Records Management and Technology
businesses. These acquisitions continue to increase the scale of the Digital
and Information Management division and have added further capability to our
Secure Lifecyle Services business.
As a result of these factors, the Group's annualised run rate revenues have
increased to £280 million with further progress anticipated in H2.
An interim dividend of 2.6p per share (2021: 2.5p) has been declared and will
be paid on 14 October 2022 to shareholders on the register at 16 September
2022.
Income Statement
Revenue for the first half was £140.3 million, an increase of 32% compared
with the corresponding period in the prior year. This strong year on year
growth reflects organic momentum of £20.1 million and acquisition related
growth of £14.1 million.
The Group's organic expansion is the result of sustained box growth in Restore
Records Management, together with the benefit from a number of large project
wins in Digital and Records Management, emphasising the division's increased
capability to provide complex project and business support services.
Acquisition expansion added further growth to Records Management, Digital and
Technology and reflects the successful integration of the eight businesses
acquired during 2021. The Digital and Technology businesses also saw strong
market demand and continued to expand the variety of services they provide and
their capability to meet customer requirements.
In the other businesses, Restore Datashred has seen its collection activity
largely recover to pre-covid levels and although paper volume is lower, this
was offset by higher prices for the bales of recycled paper it produces.
Finally, Restore Harrow Green transitioned out from a large Defence DAS (MoD
staff relocation) contract in H1 and largely offset lost revenue through
increased activity elsewhere particularly in Life Sciences sector work and
commercial storage income.
Revenue H1 2022 H1 Organic YoY Acquisition YoY
£m 2021 % YoY %
£m %
Restore Records Management 55.9 47.7 11% 6% +17%
Restore Digital 31.2 14.2 65% 55% +120%
Digital and Information Management 87.1 61.9 23% 18% +41%
Restore Technology 17.2 12.3 14% 26% +40%
Restore Datashred 18.3 13.8 32% 1% +33%
Restore Harrow Green 17.7 18.1 -2% - -2%
Secure Lifecycle Services 53.2 44.2 13% 7% +20%
Total 140.3 106.1 19% 13% +32%
Adjusted profit before tax for the period was £21.2 million (2021: £15.6
million), an increase of 36% year on year. The profit growth reflects the
substantial growth in activity and net effect of pricing and costs in the
period.
£m
H1 2021 Adjusted Profit Before Tax 15.6
Interest (0.6)
Cost increases (2.2)
Price increases 1.6
Non-cash accounting adjustments (0.2)
Activity growth 7.0
H1 2022 Adjusted Profit Before Tax 21.2
With significant cost pressures across the UK and the Global economy, the
Group has been active in managing pricing and costs in the first half.
Operating margin of 18.4% is consistent with H1 2021 with the Digital and
Information Management division margin down slightly from 30.4% to 28.2% as a
result of dilution from the increased digital mix whilst Secure Lifecyle
Services at 10.5% is broadly in line with H1 2021.
Prices to customers have been increased at higher than ordinary rates across
the businesses in 2022. The benefit of price increases in H1 are estimated at
+£1.6 million with cost increases estimated at £2.2 million to give a net
effect on profit for H1 of -£0.6 million. This gap reflects the time lag of
pricing increases when compared with the more immediate impact of cost
increases. Pricing remains a significant area of focus as management look
ahead.
In terms of cost exposure, the main areas of cost for the Group are people,
property and operation of the Group's fleet. As highlighted above, the
business has a number of pricing levers to mitigate cost pressure in the short
term and in the medium term the Group has a number of strategic initiatives to
improve margin through productivity, scale, consolidation of property and
transition of the fleet.
During H1, progress has continued to be made on these strategic objectives
with property consolidation opportunities in the North West and South East,
increasing yields from operating facilities in Restore Digital and Restore
Technology and further increases in network efficiency in Restore Datashred.
On a statutory basis, profit before tax was £14.1 million (2021: £8.9
million). Statutory profit before tax is stated after taking into account
charges for amortisation of £5.9 million (2021: £5.0 million) and
exceptional items of £1.2 million (2021: £1.7m).
Adjusted basic earnings per share increased by 29% to 12.6 pence (2021: 9.8
pence) with statutory basic earnings per share increased to 7.5 pence (2021:
1.5 pence).
Adjusting items
Due to the one-off nature of exceptional costs and the non-cash nature of
certain charges, the Directors believe that an adjusted measure of profit
before tax and earnings per share provides shareholders with a useful
representation of underlying earnings from the Group's business.
The adjusting items in arriving at the underlying adjusted profit before tax
are as follows:
H1 2022 H1 2021 Change
£m £m
Exceptional items 0.9 1.7 -47%
Exceptional finance costs 0.3 - -
Amortisation of intangible assets 5.9 5.0 +18%
Total adjusting items 7.1 6.7 +6%
Exceptional items incurred in H1 2022 are primarily acquisition related
restructuring costs (£0.8 million), acquisition related transaction costs
(£0.1 million) and non-cash incremental write-off of bank charges on
refinancing of the RCF (£0.3 million).
Balance Sheet and Cashflow
The Balance Sheet as at 30 June 2022 remains strong, with key ratios across
working capital and trade debt consistent with prior periods. The growth in
scale of the business is shown in the increase in net assets to £270.9
million. (2021: £259.2 million).
The Group continues to generate strong operating cashflows which increased
from £25.8 million in H1 2021 to £28.5 million for H1 2022 after increased
working capital of £12.7 million (2021: £6.6 million) to support revenue
growth.
After investment in acquisitions of £9.5 million (net of cash acquired) and
increased finance charges, the Group net debt increased from £100.8 million
at 31 December 2021 to £103.5 million. As a result of the business expansion,
the resulting net debt to pro-forma EBITDA leverage has reduced from 1.8x at
31 December 2021 to 1.7x at 30 June 2022.
The Group refinanced in January 2022 and agreed a new credit facility,
increasing its credit line to £200 million with improved terms and the
potential to increase this by a further £50 million through the activation of
an accordion agreement.
FINANCIAL STATEMENTS
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2022
Unaudited Unaudited
six months ended six months ended Audited
30 June 2022 30 June 2021 year ended
£'m £'m 31 December 2021
Note £'m
Revenue - continuing operations 2 140.3 106.1 234.3
Cost of sales (78.7) (58.3) (127.1)
Gross profit 61.6 47.8 107.2
Administrative expenses (35.8) (28.2) (61.0)
Amortisation of intangible assets (5.9) (5.0) (10.7)
Exceptional items 3 (0.9) (1.7) (4.4)
Operating profit 19.0 12.9 31.1
Finance costs (4.6) (4.0) (8.1)
Exceptional finance costs 3 (0.3) - -
Profit before tax 14.1 8.9 23.0
Taxation 4 (3.8) (6.9) (11.5)
Profit after tax 10.3 2.0 11.5
Other comprehensive income - - -
Profit and total comprehensive income for the period attributable to owners of 10.3 2.0 11.5
the parent
Earnings per share attributable to owner of the parent (pence)
Total
- Basic 5 7.5p 1.5p 8.7p
- Diluted 5 7.3p 1.5p 8.4p
The reconciliation between the statutory results shown above and the non-GAAP
adjusted measures are shown below:
Operating profit - continuing operations 19.0 12.9 31.1
Adjustments for:
Amortisation of intangible assets 5.9 5.0 10.7
Exceptional items 3 0.9 1.7 4.4
Adjustments 6.8 6.7 15.1
Adjusted operating profit 25.8 19.6 46.2
Depreciation of property, plant and equipment and right-of-use assets 14.5 13.6 28.0
Earnings before interest, taxation, depreciation, amortisation, impairment and 40.3 33.2 74.2
exceptional items (EBITDA)
Profit before tax 14.1 8.9 23.0
Adjustments (as stated above) 6.8 6.7 15.1
Exceptional finance costs 3 0.3 - -
Adjusted profit before tax 21.2 15.6 38.1
Condensed Consolidated Statement of Financial Position
As at 30 June
2022
Unaudited Unaudited Audited
30 June 2022 30 June 2021 31 December 2021
£'m £'m £'m
Note
ASSETS
Non-current assets
Intangible assets 330.7 320.6 327.2
Property, plant and equipment 78.6 74.0 78.8
Right-of-use assets 93.3 105.1 102.5
Deferred tax asset 5.3 4.5 5.9
507.9 504.2 514.4
Current assets
Inventories 2.3 1.2 1.4
Trade and other receivables 72.6 55.0 56.9
Corporation tax receivable - 0.1 -
Cash and cash equivalents 29.9 22.0 32.9
104.8 78.3 91.2
Total assets 2 612.7 582.5 605.6
LIABILITIES
Current liabilities
Trade and other payables (55.7) (48.8) (45.5)
Financial liabilities - lease liabilities (20.2) (17.7) (18.2)
Other financial liabilities - - -
Current tax liabilities (2.6) - (1.5)
Provisions (1.4) (1.1) (0.9)
(79.9) (67.6) (66.1)
Non-current liabilities
Financial liabilities - borrowings 9 (133.4) (113.6) (133.7)
Financial liabilities - lease liabilities (87.4) (100.6) (98.8)
Deferred tax liabilities (33.2) (34.4) (33.9)
Provisions (7.9) (7.1) (7.9)
(261.9) (255.7) (274.3)
Total liabilities 2 (341.8) (323.3) (340.4)
Net assets 270.9 259.2 265.2
EQUITY
Share capital 6.8 6.8 6.8
Share premium account 187.9 187.9 187.9
Other reserves 8.8 7.3 7.0
Retained earnings 67.4 57.2 63.5
Equity attributable to owners of parent 270.9 259.2 265.2
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2022
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 2021 (audited) 6.3 150.3 6.0 56.0 218.6
Loss for the period - - - 2.0 2.0
Total comprehensive loss for the period - - - 2.0 2.0
Transactions with owners
Issue of shares during the year 0.5 39.5 - - 40.0
Issue costs - (1.9) - - (1.9)
Share-based payments charge - - 0.9 - 0.9
Deferred tax on share-based payments - - (0.3) - (0.3)
Purchase of treasury shares - - (0.1) - (0.1)
Disposal of treasury shares - - 0.8 (0.8) -
Balance at 30 June 2021 (unaudited) 6.8 187.9 7.3 57.2 259.2
Balance at 1 July 2021 6.8 187.9 7.3 57.2 259.2
Profit for the period - - - 9.5 9.5
Total comprehensive income for the period - - - 9.5 9.5
Transactions with owners
Dividends - - - (3.4) (3.4)
Share-based payments charge - - 1.3 - 1.3
Deferred tax on share-based payments - - 0.9 - 0.9
Current tax on share-based payments - - 0.2 - 0.2
Transfer* - - (0.2) 0.2 -
Purchase of treasury shares - - (2.5) - (2.5)
Balance at 31 December 2021 (audited) 6.8 187.9 7.0 63.5 265.2
Balance at 1 January 2022 6.8 187.9 7.0 63.5 265.2
Profit for the period - - - 10.3 10.3
Total comprehensive income for the period - - - 10.3 10.3
Transactions with owners
Dividends - - - (6.4) (6.4)
Share-based payments charge - - 1.8 - 1.8
Balance at 30 June 2022 (unaudited) 6.8 187.9 8.8 67.4 270.9
*In 2021 a net amount of £0.2m was reclassified from share-based payment
reserve to retained earnings in respect of lapsed and exercised options.
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2022
Note Unaudited Unaudited Audited
six months ended six months ended year ended
30 June 2022 30 June 2021 31 December 2021
£'m £'m £'m
Cash generated from operations 7 28.5 25.8 59.9
Net finance costs* (5.9) (3.8) (7.0)
Income taxes paid (2.8) (2.4) (5.2)
Net cash generated from operating activities 19.8 19.6 47.7
Cash flows from investing activities
Purchase of property, plant and equipment and applications software 2 (5.1) (2.8) (8.8)
Purchase of subsidiary, net of cash acquired 8 (8.8) (71.1) (85.8)
Purchase of trade and assets 8 (0.7) - (0.9)
Cash flows used in investing activities (14.6) (73.9) (95.5)
Cash flows from financing activities
Dividends paid - - (3.4)
Net proceeds from share issue - 38.1 38.1
Purchase of treasury shares - (0.1) (2.6)
Repayment of revolving credit facility - (45.0) (65.0)
Drawdown of revolving credit facility 1.0 66.0 106.0
Principal element of lease repayments (9.2) (9.1) (18.8)
Net cash (used) / generated in financing activities (8.2) 49.9 54.3
Net (decrease) / increase in cash and cash equivalents (3.0) (4.4) 6.5
Cash and cash equivalents at start of period 32.9 26.4 26.4
Cash and cash equivalents at the end of period 9 29.9 22.0 32.9
A reconciliation between the statutory results shown above and the non-GAAP
free cashflow measure is shown below:
Net cash generated from operations
19.8 19.6 47.7
Less: Purchase of property, plant and equipment and application software (5.1) (2.8) (8.8)
Less: Principal element of lease repayments (9.2) (9.1) (18.8)
Add: Exceptional costs 3 0.9 1.7 4.4
Add: One-off refinancing cash outflow* 3 1.7 - -
Free cashflow 8.1 9.4 24.5
*Net finance costs include a one-off cash outflow of £1.7m in relation to
fees for the Group's refinancing in January 2022.
Notes to the Consolidated Interim report
For the six months ended 30 June 2022
1 Basis of Preparation
The half year report has been prepared in accordance with IAS 34, Interim
Financial Reporting, adopting accounting policies that are consistent with
those of the previous financial year and corresponding half year reporting
period,
2 Segmental Analysis
The Group is organised into two main operating segments, Digital and
Information Management and Secure Lifecycle Services and incurs central costs.
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, property, plant and
equipment. Segment assets and liabilities are allocated between segments on an
actual basis.
Revenue - Continuing operations
Unaudited Unaudited Audited
30 June 2022 30 June 2021 31 December 2021
£'m £'m £'m
Restore Records Management 55.9 47.7 101.4
Restore Digital 31.2 14.2 36.9
Digital and Information Management 87.1 61.9 138.3
Restore Technology 17.2 12.3 28.1
Restore Datashred 18.3 13.8 30.2
Restore Harrow Green 17.7 18.1 37.7
Secure Lifecycle Services 53.2 44.2 96.0
Total revenue 140.3 106.1 234.3
The revenue from external customers was derived from the Group's principal
activities primarily in the UK (where the Company is domiciled).
Profit before tax
Unaudited Unaudited Audited
30 June 2022 30 June 2021 31 December 2021
£'m £'m £'m
Digital and Information Management 24.6 18.8 42.5
Secure Lifecycle Services 5.6 4.7 11.7
Head office (2.6) (2.7) (5.2)
Amortisation of intangible assets (5.9) (5.0) (10.7)
Share-based payment charge (including related NI) (1.8) (1.2) (2.8)
Exceptional items (0.9) (1.7) (4.4)
Operating profit 19.0 12.9 31.1
Finance costs (4.6) (4.0) (8.1)
Exceptional finance costs (0.3) - -
Profit before tax 14.1 8.9 23.0
Segmental information
Digital and Information Management Secure Lifecycle Services Head Office Unaudited
£'m
£'m
£'m
30 June 2022
Total
£'m
Segment assets 441.3 152.3 19.1 612.7
Segment liabilities 117.2 52.6 172.0 341.8
Capital expenditure 3.9 1.2 - 5.1
Depreciation and amortisation 14.2 6.1 0.1 20.4
Unaudited
30 June 2021
Segment assets 444.9 125.0 12.6 582.5
Segment liabilities 76.8 37.8 208.7 323.3
Capital expenditure 2.0 0.6 0.2 2.8
Depreciation and amortisation 13.1 5.5 - 18.6
Audited
31 December 2021
Segment assets 447.5 146.3 11.8 605.6
Segment liabilities 121.0 51.8 167.6 340.4
Capital expenditure 5.7 2.7 0.4 8.8
Depreciation and amortisation 26.2 12.1 0.4 38.7
3 Exceptional items
For the six months ended 30 June 2022, exceptional costs were £1.2m,
including £0.8m acquisition related restructuring costs and £0.1m
acquisition related transaction costs. Exceptional finance costs of £0.3m
relate to the incremental deferred finance write-off costs recognised in the
income statement from the Group extinguishing its £160m facility and
replacing it with a new £200m revolving credit facility in January 2022.
For the six months ended 30 June 2021, exceptional costs were £1.7m,
including £0.9m of acquisition related transaction costs, £0.5m of
acquisition related restructuring costs and £0.3m in respect of a legacy
legal liability.
For the year ended 31 December 2021, £4.4m of exceptional costs were
incurred, comprising of £1.2m acquisition related costs, £2.4m acquisition
related restructuring costs, and £0.8m other exceptional items.
4 Taxation
The current tax charge for the period to 30 June 2022 is anticipated to be
£3.8m, based on the estimated effective tax rate for the Group.
5 Earnings per ordinary share
Basic earnings per share have been calculated on the profit for the period
after taxation and the weighted average number of ordinary shares in issue
during the period.
Unaudited Unaudited Audited
six months ended six months ended year ended
30 June 2022 30 June 2021 31 December 2021
£'m £'m £'m
Weighted average number of shares in issue 136,674,067 129,129,492 132,932,784
Total profit for the period £10.3m £2.0m £11.5m
Total basic earnings per ordinary share 7.5p 1.5p 8.7p
Weighted average number of shares in issue 136,674,067 129,129,492 132,932,784
Share options 4,777,957 4,725,584 4,736,714
Weighted average fully diluted number of shares in issue 141,452,024 133,855,076 137,669,498
Total fully diluted earnings per share 7.3p 1.5p 8.4p
Adjusted earnings per share
The Directors believe that 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:
Unaudited Unaudited Audited
six months ended six months ended year ended
30 June 2022 30 June 2021 31 December 2021
£'m £'m £'m
Continuing profit before tax 14.1 8.9 23.0
Adjustments:
Amortisation of intangible assets 5.9 5.0 10.7
Exceptional items 0.9 1.7 4.4
Exceptional finance costs 0.3 - -
Adjusted continuing profit for the period 21.2 15.6 38.1
The adjusted earnings per share, based on weighted average number of shares in
issue during the period, 136.7m (2021: 129.1m) is calculated below:
Unaudited Unaudited Audited
six months ended six months ended year ended
30 June 2022 30 June 2021 31 December 2021
Adjusted profit before tax (£'m) 21.2 15.6 38.1
Tax at 19.0% (£'m) (4.0) (3.0) (7.2)
Adjusted profit after tax (£'m) 17.2 12.6 30.9
Adjusted basic earnings per share 12.6p 9.8p 23.2p
Adjusted fully diluted earnings per share 12.2p 9.4p 22.4p
6 Dividends
In respect of the current period, the Directors declare an interim dividend of
2.6p per share (2021: £2.5p). The estimated dividend to be paid is £3.6m
(2021: £3.4m) and will be paid to shareholder on 14 October 2022 to
shareholders on the register on 16 September 2022.
7 Cash generated from operating activities
Unaudited Unaudited Audited year
six months ended six months ended ended
30 June 2022 30 June 2021 31 December 2021
£'m £'m £'m
Continuing operations
Profit before tax 14.1 8.9 23.0
Depreciation of property, plant and equipment and right-of-use assets 14.5 13.6 28.0
Amortisation of intangible assets 5.9 5.0 10.7
Net finance costs (including exceptional finance costs) 4.9 4.0 8.1
Share-based payments charge 1.8 0.9 2.2
Increase in inventories (0.1) (0.1) (0.3)
Increase in trade and other receivables (14.8) (5.9) (7.8)
Increase / (decrease) in trade and other payables 2.2 (0.6) (4.0)
Cash generated from operating activities 28.5 25.8 59.9
8 Business combinations
On 3 May 2022, the Group acquired 100% of the share capital of Ultratec
(Holdings) Limited, together with its subsidiaries ("Ultratec"). Ultratec is a
Technology business that provides secure data erasure and physical data
destruction services, bespoke technology recycling solutions, hard drive parts
supply and Data Centre focussed hardware maintenance services. As the Group
is still in the process of establishing the fair value of the assets and
liabilities acquired in respect of these acquisitions, the fair values
presented in the interim results are provisional. These provisional fair
values are set out below:
Ultratec
£'m
Intangibles - goodwill, customer relationships and other 10.2
Property, plant and equipment 0.5
Right of use assets 0.9
Inventories 0.8
Trade and other receivables 0.7
Cash and cash equivalents 2.3
Trade and other payables (1.1)
Lease liabilities (0.9)
Deferred tax liabilities (1.7)
Provisions (0.2)
Net assets acquired 11.5
Consideration
Satisfied by:
Cash to vendors 10.8
Deferred consideration 0.7
Total consideration 11.5
On 4 May 2022 and 20 May 2022, the Group acquired the trade and assets of
Secure Records & Data Management Limited and UK Archive Limited
respectively, which are both Records Management businesses. Total
consideration of £0.7m was paid across both of these trade and asset
purchases. Customer relationships of £0.7m were recognised on acquisition.
During the year, deferred consideration of £0.3m was paid in relation to the
2021 acquisition of The Document Warehouse (UK) Limited.
9 Financial liabilities - borrowings
Unaudited Unaudited Audited
30 June 2022 30 June 2021 31 December 2021
£'m £'m £'m
Non-current
Bank loans - secured 135.0 114.0 134.0
Deferred financing costs (1.6) (0.4) (0.3)
133.4 113.6 133.7
Analysis of net debt
Cash at bank and in hand 29.9 22.0 32.9
Bank loans due within one year - - -
Bank loans due after one year (133.4) (113.6) (133.7)
(103.5) (91.6) (100.8)
ENDS
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