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Restore PLC strengthens records management business with acquisition

Published: 07:38 06 Oct 2014 BST

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Restore (LON:RST), the UK office services provider, is to acquire Cintas Document Management (UK) Limited (CDMUK), for £23.5mln.

CDMUK is the UK records management and scanning division of Cintas Corporation of the US and is one of the UK's 10 largest providers of records management services.

In the year to the end of May 2014, CDMUK recorded underlying earnings (EBITA) of £0.2mln and made an operating loss of £0.4mln after amortisation of goodwill of £0.6mln.

Total revenues were £19.7mln, with £12.9mln of that coming from records management, £6.4mln from scanning services with the remainder accounted for by non-transferring revenues.

The acquisition is expected to be earnings enhancing in the first full year of ownership.

The acquisition will be financed through funds raised from a placing of shares at 210p to raise £14.9mln, plus a new debt facility of £15mln.

Restore’s shares closed at 228p on Friday.

"This acquisition is a major milestone in Restore's development and represents the most significant consolidation within the UK records management sector since we embarked on our strategy of acquisitive growth four years ago,” said Charles Skinner, Restore’s chief executive.

“It provides an excellent opportunity for Restore to deploy its operational expertise and expand its presence in records management and scanning, and we are confident that the significant synergies between Restore and CDMUK will ensure an attractive return on invested capital for our shareholders," he added.

Broker Cenkos said the acquisition will cement Restore’s position as the number two in the records management sector in the UK, and will bring scale and capacity to Restore’s Scan division.

“Whilst the Cintas UK business made adjusted EBIT of just £0.2mln last year, there is a clear path for Restore to increase profitability to c£4mln,” the house broker believes, adding that the £4mln target may well prove conservative, given the track record of Restore’s management.

“The existing properties currently operate at only 68% capacity (Restore target 95%) with the exit of one loss-making site expected to save over £1mln p.a., whilst head office and operating cost savings are estimated at c£3mln.

“We believe that further opportunities may open up as Restore continues to lead the consolidation of records management,” the broker added.

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