Proactive Investors - Run By Investors For Investors

Restore shares drop as worries over lower shredding volumes takes shine off upbeat trading statement

The office services provider said full-year trading was broadly in line with expectations and it expects to deliver its ninth successive year of double-digit earnings growth
Shredding
The company said its shredding business Restore Datashred experienced lower volumes than budgeted over the course of the year

Restore PLC (LON:RST) saw its shares drop on Monday as worries over lower volumes at its shredding business took the shine off an otherwise upbeat year-end trading statement, and led Liberum Capital to reduce its estimates and target price.

In its update for the year ended 31 December 2018, the office services provider said full-year trading was broadly in line with expectations and it expects to deliver its ninth successive year of double-digit earnings growth.

READ: Restore takes steps to address margin erosion in its shredding business

The AIM-listed group said its earnings growth continued to be driven primarily by its Restore Records Management division, which comprises the majority of the group's profit.

The firm added that TNT Business Solutions, acquired in May 2018, performed in line with expectations and is providing Restore Records Management and other parts of the group with many additional growth opportunities, particularly in the public sector.

However, the company said its shredding business Restore Datashred - one of the two main operators in the UK market - experienced lower volumes than budgeted over the course of the year.

In late morning trading, Restore shares were 11.4% lower at 343p.

Liberum cuts target, keeps ‘buy’

In reaction to the update, Liberum Capital reduced its target price for Restore to 635p from 660p, while maintaining a ‘buy’ rating on the stock.

Liberum’s analysts commented: “A lower than expected volume performance in Shredding combined with the first bad debts since 2013 results in us reducing our FY18 PBT estimates by 5%. Despite this, the group is still expected to deliver 13% EPS growth – reflecting the strength of its model.

“As a result we remain confident that the group’s existing strategy has the potential to drive significant top-line growth alongside greater operational efficiency in the coming years.”

They added: “Whilst we acknowledge the recent announcement of the retirement of the long term CEO Charles Skinner creates some uncertainty, we believe that this is more than discounted in the current rating.”

View full RST profile View Profile

Restore Plc Timeline

Related Articles

Investment papers and laptop
May 07 2019
The investment firm focuses on providing consultancy services to universities and other research organisations to help them commercialise any intellectual property arising from their research
Stobart
May 31 2019
"Stobart Group has a clear focus on developing infrastructure assets in the aviation and energy sectors," chief executive Warwick Brady said.
Online payment
Wed
The company's payment services specialise in card-not-present transactions, payments made without face-to-face contact or verification, usually online or via mobile

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use