Storing boxes of documents may not sound glamorous, but Restore (RST) makes enviable margins doing just that. The company’s document-management business reported an impressive 37 per cent operating margin on adjusted operating profit of £10.3m last year - up from 36 per cent a year earlier. “[The margin] is where we would like it to be,” comments chief executive Charles Skinner, who says it reflects the long-term commitment required to look after a company’s paperwork and the high initial costs of filling up an empty warehouse.
Another characteristic of the business is that once Restore has got a customer’s documents in one of its warehouses, that customer very rarely goes through the upheaval of switching document-management supplier, making the revenues fairly predictable.
Margins in Restore’s office-relocation business are much lower, but still showed good progress, moving up to 8.5 per cent from 5.4 per cent in 2012 as cost-cutting paid off. The improved profitability, combined with revenue growth driven by recent acquisitions, nearly doubled operating profit to £2.2m last year. Mr Skinner says the outlook is brightening after a few tough years as the revival of the London office market feeds through the business ecosystem.
Broker Cenkos expects 2014 adjusted earnings per share of 12.3p (2013: 10.5p) rising to 13.8p in 2015.
| RESTORE (RST) | ||||
|---|---|---|---|---|
| ORD PRICE: | 186p | MARKET VALUE: | £ 139m | |
| TOUCH: | 185-187p | 12-MONTH HIGH: | 189p | LOW: 111p |
| DIVIDEND YIELD: | 1% | PE RATIO: | 32 | |
| NET ASSET VALUE: | 63p* | NET DEBT: | 34% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 27.0 | -7.8 | -1.6 | nil |
| 2010 | 27.7 | 0.6 | 3.5 | nil |
| 2011 | 18.8 | 1.2 | 2.6 | 1.0 |
| 2012 | 43.3 | 1.5 | 2.5 | 1.5 |
| 2013 | 53.6 | 5.0 | 5.9 | 1.9 |
| % change | +24 | +233 | +136 | +27 |
Ex-div:11 Jun Payment:09 Jul * Includes intangible assets of £41.9m or 56p a share | ||||
