Recall Financial Results – Half-Year Ended 31 December 2015

Constant currency revenue growth +6.7% and PAT +7.3%

Confirming strong underlying trends

Recall Holdings Limited (ASX:REC), a global leader in document storage, digital information solutions, data protection and secure destruction services, today announces its results for the six months ended 31 December 20151.

During the period, Recall continued to execute its strategic plan and delivered constant currency revenue growth of +6.7%. Cost control initiatives maintained EBITDA margins and generated a constant currency increase of +7.3% in underlying profit after tax.

Recall also announced separately that it intends to defer the Scheme Meeting, at which Recall shareholders will vote on the proposed acquisition of Recall by Iron Mountain, from Thursday 17 March 2016 to Tuesday 19 April 2016, with implementation scheduled to occur on Monday 2 May 2016. The deferral of the Scheme Meeting is subject to Court approval, which Recall will seek as soon as practicable.

1 Financials are presented in USD and comparisons to H1 FY15 are made on a constant currency basis.

Highlights

H1 FY16

Actual FX

H1 FY16

Constant FX

H1 FY15

Actual FX

Change %

Constant FX

        
      
      
        
          Revenue
        
        
        
        
        
        
        
        
          397.6
        
        
        
        
        
        
          450.9
        
        
        
        
        
        
          422.4
        
        
        
        
        
        
          +6.7%
        
      
      
        
          Underlying EBITDA
        
        
        
        
        
        
        
        
          91.4
        
        
        
        
        
        
          107.0
        
        
        
        
        
        
          100.4
        
        
        
        
        
        
          +6.6%
        
      
      
        
          Underlying PAT
        
        
        
        
        
        
        
        
          30
        
        
        
        
        
        
          38.3
        
        
        
        
        
        
          35.7
        
        
        
        
        
        
          +7.3%
        
      
      
        
          Dividend (AUD cents per share)
        
        
        
        
        
        
        
        
          9.5
        
        
        
        
        
        
        
        
        
        
        
        
          9.0
        
        
        
        
        
        
          +5.5%
        
      
    
    

• Revenue growth in line with expectations
  • Organic growth ~2.0%, ahead of FY15
  • Acquisition growth ~5.0%, slowed to assist Iron Mountain transaction process
• 6 acquisitions YTD with annualised revenue of $28M
• Growth across all service lines and organic carton growth across all regions
• EBITDA up +6.6%; cost control maintained EBITDA margins
• Facility Optimisation Programs 1 and 2 on track and delivering benefits
• Dividend determined AUD 9.5 cents

President and CEO Doug Pertz said “We are very pleased with our results for H1 FY16 that reflect our commitment to executing Recall’s strategy and achieving revenue and earnings growth. The underlying trends are strong and we are managing the short term challenges associated with the delay to the Iron Mountain transaction which, among other things, has meant slowing down acquisition growth.

“All regions delivered revenue growth and it was particularly satisfying to see Australia/New Zealand and Europe return to positive revenue growth, underpinned by positive organic carton growth, improved customer retention and acquisitions.

“We are committed to our operational excellence program which delivered constant currency EBITDA growth of 6.6% through effective cost control and continues to lay the base for future margin improvement. The utilisation of our racking and building assets has improved over last year, excluding the transitional impact of the Facility Optimisation Program, which is progressing well and to plan.

“I would especially like to thank our employees for their dedication and commitment, and the excellent service they continue to provide to our customers during these times of transaction uncertainty.

“We also announced today the deferral of the Scheme Meeting to 19 April 2016. Iron Mountain has made substantial progress with the regulators in each of Australia, the U.S., Canada and the UK and has assured the Recall Board of Directors that it is working to close the transaction as soon as possible.

“The revised transaction timetable takes into account Iron Mountain’s commitments to complete the regulatory reviews, and to meet all other obligations under the Scheme Implementation Deed. Iron Mountain has also assured the Recall Board that it is confident that the transaction will continue to result in meaningful synergies and accretion, and that the material shareholder value the transaction should deliver remains achievable,” concluded Mr Pertz.

Exchange rate sensitivity

The strengthening U.S. dollar has negatively impacted the reported USD financials. This is likely to remain the case, although the impact will be less pronounced in H2 FY16 if FX rates remain consistent with rates as at 31 December 2015. In H1 FY16, translating non-U.S. dollar revenue into U.S. dollars for reporting purposes at FX rates applicable during H1 FY16, rather than the prior comparable period, had a negative impact of approximately $53 million on revenue, a reduction of approximately 11.8%.

Significant items

Significant items before tax were $20.4 million for the period, of which $16.2 million were costs associated with the Iron Mountain transaction.

Dividend

The Board has determined an interim dividend of AUD 9.5 cents per share, which is a pay-out ratio of approximately 70% of underlying net profit after tax. The interim dividend is expected to be paid on 20 April 2016 to shareholders on the Recall register on 1 April 2016. The dividend will be franked to 30%, with 70% qualifying as conduit foreign income.

Outlook

Recall will continue to execute its strategic plan until shareholders approve the Iron Mountain transaction, which is causing some short term revenue headwinds, principally in acquisition revenue. However, organic constant currency revenue growth for FY16 is expected to be consistent with the strategic plan, and increased over FY15, at approximately 2%.

Acquisitions already completed will add approximately 5% to constant currency revenue growth in FY16. The approach to M&A has been deliberately slowed in the short term, in order to assist with the regulatory review process and having regard to the Iron Mountain footprint.

Accordingly, in FY16 Recall1 expects to deliver, on a constant currency basis, revenue growth approaching high single digits, reflecting the short term impact of a slowed approach to M&A activity. Constant currency EBITDA growth is expected to be in line with revenue growth.

As detailed above, the appreciating U.S. dollar continues to impact statutory results, but at FX rates current at 31 December 2015, the impact will be lower in H2 FY16 than that experienced in H1 FY16.

Recall’s outlook is based on assumptions regarding present and future business strategies and the environment in which Recall will operate in the future. Recall’s future results are subject to market conditions and unforeseen circumstances and risks that may arise. This earnings release, the investor presentation, Appendix 4D and conference call / webcast details are all available on the company’s investor relations website at Recall.com.

About

Recall is a global leader in information management solutions, offering customers complete management of their physical and digital information. Recall’s innovative solutions empower organizations to make better business decisions throughout the information lifecycle, while assuring regulatory compliance and eliminating unnecessary resources, time and costs. Recall services more than 80,000 customer accounts in over 300 dedicated facilities, spanning five continents in 25 countries. For more information, please visit recall.com.

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          1 Financials are presented in USD and comparisons to H1 
          FY15 are made on a constant currency basis.
        
      
      
        
          

2 After excluding SDS Germany sold in December 2014 and adjusting for $4 million of revenue lost as a consequence of the Citistorage fire.

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