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Restore's growth story continues

Document manager Restore is making impressive gains by consolidating a profitable niche industry
September 11, 2014

The near doubling of pre-tax profit in Restore's (RST) reported half-year numbers is somewhat misleading: strip out one-off costs, which were much higher last year, and earnings were up by a more modest fifth. But the office services provider is still growing fast, thanks largely to its core records management operation.

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Chief executive Charles Skinner told us this business was benefitting from acquiring and integrating smaller rivals as part of the group’s long-term strategy to consolidate the UK records management sector. The document management division, which contains the core records business, is remarkably profitable, posting adjusted operating profit of £5.3m on sales of £16m for the half.

These figures were also boosted by the group’s shredding company, Restore Shred, and its game-changing acquisition of Cannon Confidential in May. Mr Skinner said the deal had expanded Restore's customer base, operating capacity and geographic coverage in what has developed into a massive growth sector.

Acquisitions remain central to Restore's business model, accounting for half its top-line growth during the first half. To fund them, the group signed a new finance arrangement in March with Barclays, involving a single £30m revolving credit facility with the potential for a further £7.5m.

Broker N+1 Singer expects adjusted pre-tax profits of £11.5m for the full year, giving EPS of 11.9p – up from £9.5m and 9.5p last year.

RESTORE (RST)
ORD PRICE:228pMARKET VALUE:£171m
TOUCH:227-229p12-MONTH HIGH:229pLOW: 128p
DIVIDEND YIELD:0.9%PE RATIO:31
NET ASSET VALUE:66p*NET DEBT:45%

Half-year to 30 June 2014Turnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201324.61.82.00.6
201430.63.33.50.8
% change+24+83+75+33

Ex-div: 16 Oct

Payment: 14 Nov

*Includes intangibles of £47.8m or 64p per share