Restore confident in earnings forecast amid market challenges
By Josh White
Date: Thursday 21 Nov 2024
(Sharecast News) - Information management and lifecycle specialist Restore reported steady progress for the 10 months ended 31 October on Thursday, despite market challenges linked to public sector uncertainty and the Autumn Budget.
The AIM-traded company said it expected full-year revenue to remain broadly flat compared to the prior year, but remained confident in delivering adjusted profit before tax and earnings per share in line with market expectations.
In the information management division, box storage revenue benefitted from index-linked pricing, although scanning revenue was lower due to reduced public sector activity following the change in government.
Restore said its property consolidation program continued to advance, with the new 100,000 square foot Markham Vale warehouse now half full, and plans in place for an additional 85,000 square foot facility in North East England.
Cost-saving measures, including integration of the scanning business, were expected to deliver £3m in annualised savings, exceeding initial cost reduction forecasts.
The technology business meanwhile reported good revenue growth as companies resumed hardware refresh cycles and outsourced IT services to value-added resellers.
While profitability remained below the medium-term target of a 15% adjusted operating margin, improvements in the operating model and a focus on a blue-chip customer base had positioned the division for continued momentum.
Datashred achieved revenue growth driven by an increase in service visits and stabilised paper prices.
Tight cost control was expected to support profitability improvements in the second half.
Conversely, Harrow Green's performance was weaker, with trading impacted by uncertainty ahead of the Autumn Budget, and full-year revenue set to fall below 2023 levels.
Restore emphasised its strong cash generation, with a conversion rate exceeding 80% during the period.
Year-end net debt was expected to align with expectations.
The company also acknowledged the upcoming headwinds from increased employer National Insurance Contributions and National Minimum Wage rates, expected to cost the group about £3m annually from April.
However, the firm said it planned to mitigate the impacts through margin improvements and price increases where feasible, maintaining its 2025 expectations unchanged.
At 0846 GMT, shares in Restore were down 4.2% at 260.11p.
Reporting by Josh White for Sharecast.com.
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