Restore swings to statutory loss amid market challenges

14th Mar 2024 12:24

(Sharecast News) - Digital information and document management specialist Restore reported a 1% fall in full-year revenue on Thursday, to £277.1m, while facing a more substantial 15% drop in adjusted operating profit to £44.3m.

The AIM-traded firm said its adjusted profit before tax slid 26% to £30.3m for the 12 months ended 31 December, and on a statutory basis it recorded a loss before tax of £29m, swinging from the £23.3m profit in 2022.

In response to those challenges, Restore said it had embarked on a strategic realignment, initiated by the appointment of new executive leadership in the second half.

The strategy, unveiled in November, concentrated on enhancing operational efficiency, margin improvement, and sustaining robust cash flow.

Measures taken included the reduction of head office functions and the decentralisation of responsibilities, alongside the induction of new management teams.

Despite the overall downturn, Restore said its digital and information management sector saw revenue of £170.1m, up from £168.2m in 2022, buoyed by increased records management storage revenues.

However, that growth was offset by declines in major scanning projects.

The secure lifecycle services division faced a reduction in revenue to £107m from £110.8m, affected by a slow IT replacement market and diminishing recycled paper prices.

Nonetheless, the company highlighted notable contract wins and projects during the year, including significant engagements with HM Revenue & Customs, the BBC, and the execution of the UK's largest pharmaceutical company move.

Reflecting the challenging financial performance, Restore announced a reduced dividend per share of 5.2p, down 30% from the prior year's 7.4p.

That adjustment aligned with the company's strategic refocus towards financial stability and operational improvement in the face of adverse market conditions.

"While the 2023 results were disappointing given the calibre of Restore's market positions and recurring income streams, the core strengths of the group remain intact," said chief executive officer Charles Skinner.

"Restore has undergone considerable change over the last six months, including a change in operating style and approach to certain of our markets, a reduction in head office functions to give power and responsibility back to the businesses, and management changes which have brought new energy, enthusiasm, and entrepreneurial spirit to the group."

Skinner said the group was already showing "strong signs" of improved financial performance.

"Given the strength of our market positions in attractive sectors and our highly contracted and recurring income streams, we believe Restore should be targeting an adjusted operating margin of no less than 20% in the medium term.

"Trading since the start of the year has been in line with the board's expectations, and we anticipate all of our businesses, with the possible exception of Harrow Green, to deliver an improvement in adjusted operating margins in the current year."

At 1146 GMT, shares in Restore were down 5.58% at 220p.

Reporting by Josh White for Sharecast.com.