Restore (RST) H1 2024 earnings summary

Executive summary

• Full year performance expectations remain unchanged despite challenging markets, with strong recurring revenues and a major £70m six-year Digital contract win with DWP offsetting the loss of a long-term government contract.

• Operational model streamlined through decentralization, reduced head office costs, and improved divisional autonomy, supporting group profitability.

• Revenue for H1 2024 was £139.4m, broadly flat year-on-year; adjusted operating profit rose 9% to £23.6m, with improved margins and cost control.

• Cash conversion remained strong at 84%, net debt reduced to £93.5m, and leverage improved to 1.7x.

• Interim dividend increased to 2.00p per share, with cover at 3.3x.

Financial highlights

• Adjusted operating margin improved to 16.9% (up 140bps year-on-year).

• Adjusted PBT increased 8% to £16.3m; adjusted basic EPS rose 7% to 9.0p.

• Free cash flow before financing costs was £14.9m, up from £14.0m.

• Adjusting items for H1 2024 totaled £7.7m, mainly non-cash amortization; prior year included a £32.5m Datashred impairment.

• Net debt: £93.5m, leverage: 1.7x (down from 1.9x at year-end).

Outlook and guidance

• Full year guidance unchanged; recurring revenues and leading market position underpin predictability and cash generation.

• Paper price expected to be a tailwind in H2, adding £1m profit to Datashred.

• Integration of Digital and Records Management to drive further margin improvement and £3m annual cost savings, with a one-off £3m restructuring cost in 2024.

• Medium-term goal of at least 20% adjusted operating margin remains in place.

• All businesses except Harrow Green expected to improve adjusted operating margins in the current year.