REG - Restore PLC - Trading Update

RestoreAnnouncement

22/11/2022 07:00

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RNS Number : 1212H  Restore PLC  22 November 2022

22 November 2022

Restore plc

("Restore" or the "Group" or "Company")

 

Trading Update

 

Continuing strategic progress and good momentum despite macro-economic
headwinds

 

 

Restore plc (AIM: RST), the UK's leading provider of digital and information
management and secure lifecycle services, is pleased to provide a trading
update for the 10 months to 31 October 2022 (the "Period").

 

Recent trading has continued the positive momentum seen through the first half
with significant contract wins and expansion in activity levels. Revenue is
performing strongly with the second half to date tracking well ahead of the
same period in 2021. EBITDA also continues to show strong growth despite the
macroeconomic pressures of inflation and the uncertain commercial environment.
Restore Technology is also growing strongly albeit at a lower rate than
planned due to a slowing in the IT equipment market, associated with current
global supply chain issues.

 

CHARLES BLIGH, CEO, commented:

 

"Restore has achieved strong commercial momentum in 2022 and, whilst the
current economic environment creates challenges, we are winning new business
and are confident that we will continue to expand in 2023 with organic growth,
complementary acquisitions, and a continued focus on costs.

 

I am delighted with the recent landmark wins by Records Management for the BBC
and the Department for Work and Pensions, which together have a total contract
value of over £30 million and both of which were previously unvended
opportunities that demonstrate that the underlying market continues to grow.
Whilst recycled IT asset sales are growing more slowly than planned in H2,
this is a near term supply chain issue with forecasts for PC shipments to grow
in 2023 and onwards.

 

The Group is well-positioned to navigate the current macroeconomic uncertainty
and with our highly cash generative business model that delivers essential
services and saves customers money, we will emerge as an even larger and
stronger business."

 

Operating performance year to date

·      Records Management is winning substantial long-term and unvended
contracts demonstrating continued strong demand and the growing breadth and
depth of Restore's product offer:

-       Expected net box growth in Records Management reaffirmed at 1%
to 2% (FY21: 1.3%)

-       In September, Restore announced its largest ever contract win,
the BBC's heritage asset storage and service contract, which provides
long-term secure storage and management  for the nation's highly valued
national film and assets archive. The total contract value over 10 years is
c. £22 million and a new specialist environmentally controlled vault is being
constructed by Restore to meet the BBC's stringent requirements. Restore
Harrow Green will also manage the uplift of items worth c. £1 million in
project revenues

-       In November we signed a multi-year storage and service contract
with the Department for Work and Pensions to add more than 350,000 boxes to
the Group's existing portfolio of 22.3 million boxes under management. The
value of the contract is anticipated to be in excess of £1 million per year
and will be facilitated by the recent expansion of storage space in North West
England

·      Restore Digital is winning new contracts and building substantial
product capability:

-       After an outstanding performance in H1, the Digital pipeline for
FY23 is building strongly

-       Operational integration of EDM, acquired in 2021, is complete
and focus has now moved to IT upgrades to optimise performance further

-       Increased revenue visibility with c.70% of revenue derived from
recurring revenue streams, including long-term digitisation and automation
programmes, BPO and cloud storage

-       Scale benefits clearly apparent in operating margins with
further optimisation potential

·      Datashred is demonstrating its resilience and strong performance
optimisation:

-       Service visits have built steadily and the business is exiting
FY22 ahead of FY21

-       Paper volume processed increased 10% to 44k tonnes for the
period, with recycled paper bale pricing continuing to be strong

-       Strong productivity levels achieved with visits per driver per
day sustaining at 10.5 to 11 per day compared with 8 per day pre COVID19

·      Restore Technology continues to navigate the impact of post
COVID19 global supply chains:

-       Weaker than planned sales of refurbished assets due to slower IT
asset rotation upstream, resulting from supply chain issues

-       IT market projections (PC/Laptop and Server shipments) are
forecast to return to growth in FY23

-       Substantial opportunity for revenue and cost synergies from the
existing business in FY23

-       Recently appointed Operations Director driving major efficiency
enhancements and realising scale benefits following a period of significant
acquisition activity

·      Restore Harrow Green continuing to expand capability:

-       Strategic objective to increase specialist storage revenues on
track through organic growth and acquisition expansion during the Period

-       Life science category expansion is progressing well with major
contracts in the pipeline for FY23

·      Acquisition activity continued in H2 with two further
acquisitions recently completed for £2.6 million offering complimentary
additions to Restore's portfolio of businesses:

-       £0.1 million bolt-on in October 2022 with 17k boxes
consolidated into Records Management's existing facilities

-       Acquisition of specialist storage provider, CAMA Workspace Ltd,
for an enterprise value of £2.5 million in October 2022 which will be fully
integrated into Harrow Green's existing business

-       5 acquisitions successfully completed across 3 business units in
the period showing continued delivery and discipline in our acquisition
strategy

 

Outlook

·      Since the interim results announcement in July, business momentum
has continued across the Group, with significant contract wins, activity
expansion and selective acquisitions delivering increasing annualised revenue

·      For FY22 Restore continues to expect strong growth in EBITDA
despite inflationary pressures across the business and an impact of the lower
than planned expansion of refurbished asset sales in Restore Technology
resulting from IT market headwinds, which we expect to improve substantially
in FY23

·      Higher borrowing rates mean that interest expense for FY22 is now
anticipated to be £5 million (2021: £2.5 million)

·      Following acquisition and restoration of dividend, leverage
anticipated to be comfortably within target range of 1.5 to 2x proforma EBITDA
at end of FY22 (FY21: 1.8x)

·      Looking forward to FY23, the Group continues to see substantial
growth potential across its organic and acquisition strategies, with
opportunities to improve margins further through pricing and cost synergies

·      We anticipate that net boxes under management will continue to
grow strongly within the guided range of 1% to 2% (FY21: 1.3%) for FY22 and
FY23 as a result of reported new wins and organic growth from existing
customers

·      The Group anticipates that its pricing in FY23 will reflect the
cost inflation that it has seen in FY22 and anticipates for FY23 with price
negotiations fully recovering the cost increases incurred across people and
other operating expenses

·      In response to the inflationary environment the Group is
targeting further cost reductions of at least £3 million in FY23 spread
across supplier rationalisation, cost of sales and operating overheads. £1
million of these savings have already been actioned

·      Interest expense for FY23 will increase despite an expected
reduction in debt levels (before any further acquisitions)

·      The acquisition pipeline for FY23 remains strong with acquisition
price levels anticipated to reduce reflecting the macro-economic environment
and increasing cost of capital. The Group remains disciplined and focussed on
delivering strong returns

 

 

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

 Jack Devoy

 

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