"Restores interims confirm a period of strong growth and operational delivery. Importantly, the integration of December 2015 acquisition Wincanton Records Management is going smoothly and there has been no repeat of last years summer scanning issues. Growth metrics are impressive in all areas, assisted by the pick up in acquisitive activity over recent periods. Full year guidance is reiterated and we adjust our numbers for the recent PHS Data acquisition this morning, bringing us in line with consensus. Overall a very solid set of results."
Office support services company Restore (RSTP) is delivering notable revenue growth while working as an industry consolidator.
Peel Hunt analyst Christopher Bamberry reiterated his buy recommendation and target price of 359p on the stock following the companys annual general meeting. The shares rose 1% to 333.2p yesterday.
2016 has started satisfactorily across the group and as a consequence, trading is in line with expectations, he said.
Restore is delivering notable organic revenue growth, while at the same time successfully consolidating the UK records management industry. The disposal of the Irish Document Management business in March increases the capacity for future acquisitions in Restores core UK market.
He added that the current share price is underpinned by our base-case discounted cashflow valuation of 309p but that we believe that looking at a standalone valuation undervalues the business, as it ignores the acquisition investment potential
I do like it when companies put a simple first paragraph giving the key conclusion - performance against market expectations, which is what Restore has done today, so thank you for that - to the company and its advisers. All companies should follow this approach please.
Restore plc, the UK office services provider ("Restore" or "the Group"), confirms that trading for the year ended 31 December 2015 was in line with expectations.
This approach is very considerate, and shows understanding that investors have a one hour window between 7-8am, when we're still cranking our brains into action after usually not enough sleep, to absorb maybe 10-20 different company announcements, and form a view on which (if any) we need to take buy or sell action on.
Therefore a key conclusion at the start, allows us to check it, then move on, and revisit the detail below at our leisure.
There should of course also be outlook comments either at the start, or the end of the announcement (not buried in the detail, in the middle).
Outlook - a fairly generic positive-sounding comment, but reminding us that visibility of earnings is good, because a lot of business they do is on recurring revenue contracts;
"We are pleased by another year of good performance by the Group, with significant increases in revenue, profits and earnings per share. As expected at the time of acquisition, several acquired businesses have required substantial restructuring and these are now showing a marked improvement in profitability under our ownership. We continue to strengthen our position as a key supplier of services to UK offices and we have an excellent platform for further profitable growth with strong visibility of earnings."
My opinion - this company looks quite good, but I'm not keen on groups which grow by acquisition, hence creating an appearance of growth, but all too often funded by increasing debt.
It's on 19.3 times forecast 2015 earnings, which considering it has some (but not excessive, last time I checked) debt, looks on the pricey side.
It's not for me - the price looks too high in my view, although that's probably because the market is factoring in improved profitability at acquired companies (as noted above), and rewarding a company that appears to be well managed, and making sensible acquisitions.
Restore reported a sharp jump in profits in the first half of the year, and the shares are an interesting option for long-term investors. The company stores documents, which may sound boring but is highly cash generative and is an extremely stable market. The problem for every professional service firm, from lawyers and accountants to banks, is that everything still relies upon a signed document. Restore owns and operates a 70-acre disused mine in Wiltshire into which all the documents go. Restore charges customers to take the documents away as well as an annual fee to keep them safe. This provides excellent visibility on revenues; and because the cost of storage is low, the cash flow is equally predictable and strong. Restores shares have gained almost 90% during the past two years and market consensus is for full-year adjusted pre-tax profits of £16.4 million, from revenues of £91 million. This gives 15.4p in earnings per share. The stock is trading on 17 times forecast earnings. Management underlined their confidence with a 25% increase in the interim dividend to 1p, going ex-dividend on October 14 and payable November 13.
Can't understand there are so many pessimists commenting on this stock, which has risen immensely since last year, but is 'just resting'. With its strong /experienced management leading the company, the long-term prospects for Restore appear to be all positive.
Reduced some from 1.80 purchase banking 50% gain since August.
Gets a mention in this weeks Money Week from Shares Mag:-
Despite a reassuring trading update from the document storage firm, it could still struggle to hit forecasts for
2015. To do so, Restore will have to improve margins at Cintas. The valuation is challenging. Shares
Hi Zulu. Have you changed your UKGrowth slot, or gone off air? I think you have my e-mail address. If not, I think I can find yours if you have gone private. Always happy to share information and ideas in other ways, away form some of these chattery bbs. Kind regards
I wouldn't doubt Charles Skinner knows what he is doing but based on the numbers alone this acquisition looks like a bit of a stretch to me. £23.5m for a loss-making business, which I'm sure they will turn around in time as they consolidate it into their existing business, but with an immediate 10% dilution for shareholders. Skinner must really believe in what he is buying here.
I sold my entire holding today at 228 for a 50% profit. They feel fairly valued to me at best after their strong recent run with a 2014 PEG above 1 and 2015 PEG a little below. I dont expect them to fall much but if they do I will come back in. Good luck everyone.
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