Document storage company Restore tumbles to a loss

Document storage company Restore (RST) has fallen to a statutory loss before tax of £29mn and has cut its dividend by 30 per cent to 5.2p. This is not due to a shortage of paper-filled boxes – despite the rise of cloud computing, this side of the business is still growing. Instead, it is more modern ventures that are causing the problems. 

The digital division, which scans paper records and converts them into a computerised format, saw revenue drop by 16 per cent to £46mn. This reflected a spike in 2022 revenues on the back of a one-off government contract, but also an “absence of major digitisation projects” in 2023. 

Shredding sales fell by 4 per cent as a result of lower recycled paper prices, which immediately hit Restore’s bottom line. The Datashred business also suffered a £32.5mn non-cash impairment of goodwill, following a “reassessment of future growth expectations”.

The technology division – which recycles and decommissions IT assets, and was expanded at the height of the pandemic – is also suffering due to a “significant decline in recycled IT equipment”. The group admitted it had misapprehended the commercial opportunities in this field. 

A potential turnaround is now under way, however. Charles Skinner, who led Restore between 2009 and 2019, has returned as chief executive. He has reduced the staff base by 7 per cent, scaled back head office functions and is hunting for cheaper storage facilities. 

Skinner stressed the cash-generative nature of Restore, and its dominant market position, adding that it was “already showing strong signs of improved financial performance”. He is targeting an adjusted operating margin of 20 per cent in the medium term. 

For now, however, evidence of a genuine turnaround is limited. Hold. 

Last IC View: Hold, 127, 16 Aug 2023