Restore reports steady first-half performance

The AIM-traded company recorded strong growth in its digital and information management segment, with revenue increasing to £87.5m for the six months ended 30 June, from £85.1m a year earlier.

That growth was primarily driven by price increases linked to RPI and CPI in its records management division, although the number of storage boxes remained stable at 22.5 million.

Digital services traded in line with expectations.

However, revenue from secure lifecycle services decreased to £51.9m from £54.5m year-on-year.

The board put the decline down to a slowdown in the commercial moves market and construction delays affecting Harrow Green.

Despite the challenges, the Datashred and technology divisions performed as expected, with improving recycled paper prices supporting the business.

Restore said its adjusted operating profit rose to £23.6m from £21.7m on the year, reflecting improved operating margins in records management and reduced group overheads.

The company also maintained strong cash conversion at 84%, reducing its net debt to £93.5m, with leverage decreasing to 1.7x, comfortably within its target range.

Its interim dividend was increased to 2p per share, compared to 1.85p in the first half of 2023.

Strategically, Restore said it was continuing to focus on enhancing operational efficiency and financial performance.

Its records management property consolidation strategy was progressing well, with the first boxes moved to its new 100,000 square foot facility at Markham Vale in the second quarter.

The majority of boxes from the Redhill and Paddock Wood sites were expected to be relocated by the end of the year, with plans for the next site consolidation already underway.

Restore also secured a significant new contract with the Department for Work and Pensions (DWP) for inbound mail and document management services, valued at over £70m over six years, set to start in the 2025 financial year.

Further actions were taken to improve the operational efficiency of the digital business, including its integration into records management, the closure of the Stockport site, and a significant downsizing of the Manchester operation.

The board said the changes, aimed at reducing overheads and increasing utilisation, were expected to yield annualised cost savings of around £3m, with integration costs also estimated at £3m, primarily in 2024.

“We are executing well against our plans, including the changes in operating style,” said chief executive officer Charles Skinner.

“The changes have been significant and will therefore take time before they fully bear fruit.

“That said, the management team is revitalised and we are starting to see signs of improved performance.”

Skinner said the board believed Restore should be targeting an adjusted operating margin of no less than 20% in the medium term.

“Our expectations for the group's full year performance remain unchanged and we continue to anticipate that all of our businesses, with the exception of Harrow Green, will deliver an improvement in adjusted operating margins in the current year as we work towards the group's medium term goal.”

At 1143 BST, shares in Restore were down 1.36% at 253p.

Reporting by Josh White for Sharecast.com.