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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Restore Plc | LSE:RST | London | Ordinary Share | GB00B5NR1S72 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2.50 | 1.12% | 225.00 | 220.00 | 225.00 | 222.50 | 222.50 | 222.50 | 166,297 | 16:35:17 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Business Services, Nec | 279M | 16.8M | 0.1227 | 18.13 | 304.66M |
From Apr 2019 to Apr 2024
TIDMRST
RNS Number : 8682A
Restore PLC
17 September 2018
17 September 2018
RESTORE PLC
Half Year Results 2018
Restore plc ("Restore" or "the Group"), the UK office services provider, announces its unaudited half year results for the six month period ended 30 June 2018.
Financial Highlights:
ADJUSTED RESULTS - Continuing operations HY 2018 HY 2017 % Change ------------------------------- -------- -------- --------- Revenue (GBPm) 95.1 86.9 9% EBITDA (GBPm)* 22.1 19.5 13% Operating profit (GBPm)* 18.9 16.5 15% Profit before tax (GBPm) * 17.3 15.3 13% Earnings per share** 12.0 10.9 10% Dividend per share (p) 2.0 1.67 20% Net debt (GBPm) 115.4 76.9
* Before amortisation of intangible assets, exceptional items and share-based payments charge
** Calculated based on the weighted average shares in issue and a standard tax charge
STATUTORY RESULTS - Continuing operations HY 2018 HY 2017 -------------------------------- -------- -------- Operating profit (GBPm) 10.9 1.3 Profit before tax (GBPm) 9.3 0.1 Basic earnings per share (p) 6.2 0.0
Summary:
-- Group revenue up 9% to GBP95.1m -- Group adjusted profit before tax up 13% to GBP17.3m -- Adjusted basic earnings per share up 10% to 12.0p -- Document Management revenue up 8% to GBP69.9m; operating profit up 11% to GBP17.6m
o Restore Datashred benefit from increased GDPR-related activity in second quarter
-- Relocations revenue up 14% to GBP25.2m; operating profit up 35% to GBP2.7m
o Improvement in operating margin from increased operational efficiency
-- Good initial contribution from TNT Business Solutions; integration programme now underway -- Interim dividend per share up 20% to 2.0p
Commenting on the results Charles Skinner, Chief Executive, said:
"We are pleased to report another strong first-half performance, particularly in light of the demanding comparator set by our growth in the prior year period.
TNT Business Solutions, whose acquisition we completed in May, has performed in line with expectations and its full integration into the Group is now underway. We remain focused on realising our targeted operational synergies and the longer-term opportunities that the business provides to expand our presence in the UK public sector, where many entities still undertake records management in-house.
We will continue to pursue our strategy of organic and acquisitive growth and we are well positioned to gain further market share across all of our businesses.
The Board's expectations for the full year remain unchanged."
Contact:
Restore plc Charles Skinner, Chief Executive 07966 234 075 Adam Councell, Group Finance Director 07860 402 434 Cenkos Nick Wells 020 7397 8900 Harry Hargreaves FTI Consulting Nick Hasell 020 3727 1234 Alex Le May
CHIEF EXECUTIVE'S REVIEW
SUMMARY
I'm pleased to report a strong performance in the first half of 2018. Adjusted earnings per share growth of 10% was highly satisfactory given the strength of the comparative period in 2017, when year-on-year growth was 38%. Revenues were GBP95.1m (2017: GBP86.9m) with adjusted profit before tax increasing to GBP17.3m (2017: GBP15.3m). Statutory profit before tax was GBP9.3m (2017: GBP0.1m).
During the period, our Document Management division delivered adjusted operating profit of GBP17.6m (2017: GBP15.8m) on turnover of GBP69.9m (2017: GBP64.8m). The core records management business continued to account for the majority of this, with secure revenues and good margins, including a healthy contribution for two months from the records management activities of TNT Business Solutions ("TNT BS"). Restore Datashred, our shredding business, faced a very strong comparator period and underperformed against budget for the early months of the year, but finished the period well, partly due to increased GDPR-related activity, with operating margins moving up closer to our medium-term aspirations. Restore Digital, whose primary activity is document scanning, performed well in the period and successfully executed its major seasonal contract scanning exam papers.
Our Relocations division delivered adjusted operating profit of GBP2.7m (2017: GBP2.0m) on turnover of GBP25.2m (2017: GBP22.1m) in what is its seasonally weaker half. Restore Harrow Green, our office relocation business which accounts for the majority of the division's activities, traded comfortably ahead of the previous year. Restore Technology, which comprises our IT Lifecycle Services, IT Relocation and Printer Cartridge Recycling businesses, continued to perform well overall.
In May we acquired the business and assets of TNT BS for GBP88.0m, funded through a GBP51.5m equity issue and new debt facilities. The business has a particularly strong public sector base, which is expected to enhance our position within the public sector in both records management and our other activities, and two significant freehold sites. Immediately following the acquisition, the Competition and Markets Authority served an Initial Enforcement Order on us which meant that we weren't able to integrate the business into our existing operations, thereby delaying the realisation of some of the operational synergies we expect to generate. The enforcement order was removed in July and the investigation was closed in August. Accordingly, we have now embarked upon our integration programme. The business has performed well since acquisition and in line with management expectations.
We made three small scanning acquisitions during the period, the largest of which was ORS, a scanning bureau in Hampshire acquired in June.
Whilst our Group is structured so that the individual businesses have the power and responsibility to operate autonomously, a key strength of the Group is that all of our businesses share a similar customer base. A key factor in the development of the Group has been maintaining the same customer relationship management system for all of our businesses to ensure that our full range of services are offered to all existing and potential customers. This means we can generate significantly more sales opportunities and build closer relationships with our customers. As part of this we undertook a major rebranding exercise during the period whereby all of our operations are now immediately recognisable as being part of the Restore group. This further consolidates our position as a coherent business and an increasing force in UK office services.
RESULTS
Adjusted operating profit for the six months to 30 June 2018 was GBP18.9m (2017: GBP16.5m). Adjusted profit before tax was GBP17.3m (2017: GBP15.3m) on sales of GBP95.1m (2017: GBP86.9m). Adjusted earnings per share for the period were 12.0p (2017: 10.9p).
On an unadjusted basis, operating profit was GBP10.9m (2017: GBP1.3m) and profit before tax was GBP9.3m (2017: GBP0.1m). Unadjusted earnings per share were 6.2p (2017: 0.0p). Exceptional items in the period were GBP4.3m, of which GBP2.0m related to costs on the TNT BS acquisition, including GBP1.0m of Stamp Duty. There were GBP1.7m of restructuring costs primarily related to acquisitions made in 2017 and 2018, but also including costs related to the vacant former PHS DS site in Leyton which has now been re-let. The other element of exceptional costs was National Insurance on share option exercises totalling GBP0.6m.
DOCUMENT MANAGEMENT
Our Document Management division comprises Restore Records Management, Restore Datashred and Restore Digital.
For the period the division achieved an operating profit of GBP17.6m (2017: GBP15.8m) on turnover of GBP69.9m (2017: GBP64.8m).
Restore Records Management - Revenue GBP38.8m (2017: GBP34.3m)
Restore Records Management, our core records management business, continued to trade well. With the recently acquired TNT BS assets, the number of boxes stored by the Group is now approaching 20 million. Records management continues to be the bedrock of the Group with very solid earnings visibility and continuing organic growth in revenues and profit. In the period, there was an increase in destruction activity related to the introduction of GDPR legislation, combined with a delay in the intake of some major new contracts, such that overall net box growth was flat. Looking ahead, we continue to expect net box growth from our existing customer base, with storage rates increasing. We also expect to generate growth from new business wins, particularly in the public sector where many entities still undertake records management in-house.
We continue to develop our estate to maximise storage cost efficiency. We have developed additional space in our freehold site outside Bath. We have also taken long leases on more hardened aircraft shelters at our site in Oxfordshire. We will shortly start work on a major building project at our site at Rainham where we will increase capacity significantly; this will accommodate future growth as well as providing lower cost space to replace more expensive sites as their leases expire. With the acquisition of two major freehold sites as part of the TNT BS transaction, our scope to create more space at existing facilities is further enhanced. An example of current property rationalisation is our surrender this month of our lease on a large site in Motherwell: all of its contents have been transferred to our other sites in Scotland so that occupancy rates are now optimal and operating margins have sharply improved.
Much of our operational focus is now on the integration of the TNT BS acquisition. Two of the three main sites, both in the Midlands, are predominantly focused on public sector work, including a major contract with the Ministry of Defence. These sites are specifically configured for the specialist work they undertake and there is limited need for integration; we intend to focus this part of the business on growing our public sector activities where we see significant long-term opportunities. The other main site is on the same estate in Essex as another of our large facilities and is currently being integrated into our South East operations, thereby generating operational synergies. The leases on the two other smaller sites which formed part of the acquisition expire over the next two years and will not be renewed, leading to further efficiencies. We believe that the TNT BS acquisition is an excellent strategic fit with our business and can also be expected to generate a strong return on invested capital. It traded in line with expectations in the two months in the period under our ownership.
Our records management business combines steady revenue growth with opportunities to increase margins through increased efficiencies. This produces a highly visible, steadily growing earnings stream. We are continually looking for ways to grow this business further and remain focused on demonstrating to potential clients in the public sector the merits of outsourcing their requirements. As the largest of our businesses, our records management division also plays an important role in working closely with our other businesses to generate sales opportunities from our Group-wide customer base.
Restore Datashred - Revenue GBP20.8m (2017: GBP19.6m)
Restore Datashred, our secure shredding and recycling business, started the period weakly but showed significant improvement in the later months of the period. Most of the business comprises the shredding business acquired as part of the acquisition of PHS DS two years ago. In 2017 we embarked on the major project of moving the IT systems away from its previous owner. This involved introducing a new operating system and creating a new back office. Such an operation is never without risk and it undoubtedly impacted the business's performance in the second half of 2017 and the opening months of 2018. The period under review was also impacted by the heavy snow at the end of the winter; this is an operationally geared business and the lost revenue from the snow-affected days dropped through to the bottom line. But the performance towards the end of the period was encouraging, with revenues showing solid organic growth, partly due to increased GDPR-related activity, and a reduction in costs.
We have recently commissioned our new site at Crayford, South East London, replacing an aged and ill-configured facility that had become unsuited to the high volumes it was servicing. The new facility is the largest dedicated confidential shredding centre in Europe with a dual-line design capable of shredding 30 tonnes per hour. While this expansion has increased Restore Datashred's operating costs, we expect its increased operational efficiencies to benefit operating margins in the longer term. We have also relocated our site in Livingston, Scotland, to a more modern facility and are in the process of closing our site in Telford and moving its operations to our sites in Manchester and Rugby.
Restore Datashred can be expected to continue to benefit from greater awareness generated by GDPR of the need to securely destroy paper records. It is increasingly well placed to take advantage of its strong market position as one of the main operators in an attractive market where scale brings significant benefits. We have recently slowed our acquisition activities in shredding as we address some of the operational issues relating to the change in IT systems, but we expect to take advantage of opportunities to consolidate what remains a fragmented market. We believe the business is well-positioned for a period of strong growth and improving margins.
Restore Digital - Revenue GBP10.3m (2017: GBP10.9m)
Restore Digital, our digitisation business whose primary activity is scanning, produced an increase in year-on-year profit despite lower revenues. Over the last two years we have focused strongly on the operational performance of the business, including the development of our flagship branch at Manchester. Our operating margins at our main scanning bureaus have increased and we are now focusing on generating increased revenues to channel through these facilities.
Restore Digital has several business streams in addition to conventional scanning bureau activity. These include our major exam scanning contract where we are in the first year of the renewed 5-year contract. The major seasonal activity under this contract, scanning GCSE and A level exams, was successfully and profitably executed in May and June. Other major contracts include our work for the Nuclear Decommissioning Authority and several major projects with NHS Trusts where we are typically digitising patients records over a number of years. Our management consultancy activities traded strongly in the period and our hosting and support activities continue to generate very stable revenue streams.
During the period we made two small acquisitions of scanning businesses, both of whose activities were immediately integrated into our existing operations. We also acquired ORS, a Southampton-based scanning bureau, which provides us with an additional scanning facility.
RELOCATIONS
Our Relocations division comprises Restore Harrow Green, the UK market leader in office relocation, and three businesses trading under the Restore Technology banner. IT Lifecycle Services recycles IT equipment safely and securely and is increasingly involved in the full lifecycle of IT hardware. IT Relocation specialises in server and data centre relocation, as well as IT moves, equipment installation and deployment. Printer Cartridge Recycling is the UK's leading collector of empty toner cartridges which are subsequently sold on in bulk to refillers and original equipment manufacturers worldwide.
During the period, which is the seasonally weaker half of the year for Restore Harrow Green, the division recorded an operating profit of GBP2.7m (2017: GBP2.0m) on turnover of GBP25.2m (2017: GBP22.1m). Organic growth across the division was strong.
Restore Harrow Green - Revenue GBP17.6m (2017: GBP15.8m)
Restore Harrow Green traded well with steady growth in both London and in the regional branches. There were no particularly significant one-off moves during the period but demand from our regular large customers remained strong. Our new facility in East London has significantly helped our operational efficiency and contributed to our improvement in operating margins.
Restore Technology - Revenue GBP7.6m (2017: GBP6.3m)
IT Lifecycle Services continued to perform well. We are increasingly involved in the entire lifecycle of IT assets, including configuration and deployment, as well as moving and support, through to final disposal. This is a fast-growing niche and we have recently moved into a new facility in Bedford which significantly enhances our capacity and operational efficiency. Our IT Relocation business continued to perform steadily. It is working more closely with IT Lifecycle Services. Our Printer Cartridge Recycling business continues to struggle and is focused on leveraging the Restore group customer base, the majority of whom produce empty toner cartridges.
GROUP
Central costs for the period were GBP1.4m (2017: GBP1.3m), representing 1.5% (2017: 1.5%) of Group revenues.
STATEMENT OF FINANCIAL POSITION
Net bank debt on 30 June 2018 was GBP115.4m (30 June 2017: GBP76.9m). The year on year increase is a result of M&A activity with the largest being TNT BS which completed on 1 May 2018 and was funded by a combination of debt and a GBP51.5m equity placing before expenses. Smaller acquisitions have been funded by the Group's debt facilities. Property, plant and equipment has increased largely due to the addition of the two freehold properties acquired with TNT BS. Current assets and current liabilities, excluding cash, financial liabilities and tax, have both increased year on year due to the increased scale of the business as a result of acquisitions, most notably TNT BS. The financial position of the Group remains robust. The Group remains comfortable in its ability to service its financial obligations and leverage at 30 June 2018 was 2.3x pro forma adjusted EBITDA.
CASH FLOW
Net cash generated from operations was GBP10.6m (2017: GBP3.1m). The year on year increase was largely driven by the increase in profitability helped by the significant reduction in exceptional costs. The working capital outflow of GBP7.2m has primarily been driven by two factors. Firstly, funding the working capital requirement for TNT BS as the working capital did not transfer as part of the transaction. The working capital required was higher than expected due to the delayed integration as a result of the Initial Enforcement Order issued by the Competition and Markets Authority which had a knock-on effect on customer billing timetables. Secondly, the seasonal impact of increased trading days in June 2018 versus December 2017 and the large exam scanning contract mean that additional working capital levels are required in the first six months of the year. Capital expenditure totalled GBP5.2m (2017: GBP2.3m) compared to depreciation of GBP3.2m (2017: GBP3.0m). The first six months of 2018 has seen investment in our Datashred and IT Lifecycle Services facilities. Net bank interest paid amounted to GBP0.9m (2017: GBP1.1m) and tax paid totalled GBP2.0m (2017: GBP1.4m).
BANK FACILITIES
As part of the acquisition of TNT BS the Group extended its bank facilities. This included the extension of the banking syndicate from two to four banks. The enlarged facilities continue to November 2022 and consist of a single GBP160m RCF facility. In addition there is a GBP30m uncommitted accordion facility. These facilities provide the Group with adequate capital to continue to support its growth strategy.
DIVIDS
The Board has declared an interim dividend of 2.0p per share (2017: 1.67p), a 20% year-on-year increase. The interim dividend will be paid on 9 November 2018 to shareholders on the register on 5 October 2018. The Company paid its first interim dividend in 2012 of 0.4p and the increased interim dividend is in line with the Board's intention to follow a progressive dividend policy.
PEOPLE
We firmly believe that power and responsibility should be locked together and driven as far down the business as possible. We remain committed to this principle and it is unaffected by now having over two thousand people working in the Group. This relies on our people being prepared to take on responsibility; it is their dynamism and commitment which will drive the business forward. I thank them for their energy, professionalism and effectiveness which has achieved so much for Restore and its shareholders. I look forward to them continuing to benefit from the Group's success.
OUTLOOK
We will continue to pursue our strategy of organic and acquisitive growth and we are well positioned to gain further market share across all of our businesses.
The Board's expectations for the full year remain unchanged.
Charles Skinner
Chief Executive 17 September 2018
Condensed Consolidated Statement of Comprehensive Income
For the six months ended 30 June 2018
Hot Features
Premium
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Note GBP'm GBP'm GBP'm
---------------------------------------- ----- ------------ ------------ -------------
Revenue 2 95.1 86.9 176.2
Cost of sales (55.5) (50.8) (108.9)
Gross profit 39.6 36.1 67.3
Administrative expenses (21.2) (19.9) (34.2)
Amortisation of intangible assets 7 (3.2) (3.0) (5.4)
Exceptional items 2 (4.3) (11.9) (15.5)
Operating profit 2 10.9 1.3 12.2
Finance costs (1.6) (1.2) (2.5)
Profit before tax 9.3 0.1 9.7
Income tax charge 3 (2.1) (0.1) (1.9)
Profit and total comprehensive
income for the period from continuing
operations 7.2 - 7.8
Profit attributable to owners
of the parent 7.2 - 7.8
---------------------------------------- ----- ------------ ------------ -------------
Earnings per share attributable to owners of the parent (pence)
Total and continuing operations
- Basic 4 6.2p 0.0p 6.9p
- Diluted 4 6.0p 0.0p 6.7p
======================================== ===== ============ ============ =============
The reconciliation between the statutory results shown above and
the non-GAAP adjusted measures are shown below:
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Note GBP'm GBP'm GBP'm
------------------------------------ ------ ----------- ----------- ------------
Operating profit 10.9 1.3 12.2
Adjustments for:
Amortisation of intangible assets 4 3.2 3.0 5.4
Exceptional items 4 4.3 11.9 15.5
Share-based payments charge 4 0.5 0.3 0.6
------------------------------------ ------ ----------- ----------- ------------
Adjustments 8.0 15.2 21.5
------------------------------------ ------ ----------- ----------- ------------
Adjusted operating profit 18.9 16.5 33.7
------------------------------------ ------ ----------- ----------- ------------
Depreciation of property, plant
and equipment 7 3.2 3.0 6.0
------------------------------------ ------ ----------- ----------- ------------
Earnings before interest, taxation,
depreciation, amortisation and
exceptional items (EBITDA) 22.1 19.5 39.7
------------------------------------ ------ ----------- ----------- ------------
Profit before tax 9.3 0.1 9.7
------------------------------------ ------ ----------- ----------- ------------
Adjustments 8.0 15.2 21.5
------------------------------------ ------ ----------- ----------- ------------
Adjusted profit before tax 17.3 15.3 31.2
==================================== ====== =========== =========== ============
Condensed Consolidated Statement of Financial Position
At 30 June 2018
Unaudited Unaudited Audited
30 June 30 June 31 December
Note 2018 2017 2017
GBP'm GBP'm GBP'm
------------------------------------- ---- --------- --------- ------------
Assets
Non-current assets
Intangible assets 8 258.2 191.0 193.9
Property, plant and equipment 70.2 46.8 46.1
Deferred tax asset 3.5 3.0 3.9
------------------------------------- ---- --------- --------- ------------
331.9 240.8 243.9
------------------------------------- ---- --------- --------- ------------
Current assets
Inventories 1.8 1.7 2.0
Trade and other receivables 53.5 43.9 43.4
Cash and cash equivalents 9 15.7 15.4 10.7
71.0 61.0 56.1
Total assets 402.9 301.8 300.0
------------------------------------- ---- --------- --------- ------------
Liabilities
Current liabilities
Trade and other payables (41.5) (39.6) (33.5)
Financial liabilities - borrowings 9 - (6.9) (9.4)
Other financial liabilities (0.1) (0.2) (0.1)
Current tax liabilities (1.0) (0.2) (0.9)
Provisions (1.2) (0.9) (1.5)
------------------------------------- ---- --------- --------- ------------
(43.8) (47.8) (45.4)
------------------------------------- ---- --------- --------- ------------
Non-current liabilities
Financial liabilities - borrowings 9 (131.1) (85.4) (79.5)
Other long term liabilities (0.1) (0.1) (0.1)
Other financial liabilities (0.2) (0.2) (0.2)
Deferred tax liabilities (13.4) (13.3) (13.3)
Provisions (5.4) (6.5) (5.6)
------------------------------------- ---- --------- --------- ------------
(150.2) (105.5) (98.7)
------------------------------------- ---- --------- --------- ------------
Total liabilities (194.0) (153.3) (144.1)
------------------------------------- ---- --------- --------- ------------
Net assets 208.9 148.5 155.9
===================================== ==== ========= ========= ============
Equity
Share capital 6.1 5.6 5.6
Share premium account 150.4 100.9 100.9
Other reserves 2.8 1.8 3.2
Retained earnings 49.6 40.2 46.2 ------------------------------------- ---- --------- --------- ------------ Equity attributable to owners of parent 208.9 148.5 155.9 ===================================== ==== ========= ========= ============
Condensed Consolidated Statement of Changes in Equity
For the six months ended 30 June 2018
Attributable to owners of the parent
Share Share Other Retained Total
capital premium reserves earnings equity
GBP'm GBP'm GBP'm GBP'm GBP'm
-------------------------------- --------- --------- ---------- ---------- --------
Balance at 1 January 2017 5.6 100.9 2.4 43.2 152.1
Profit for the period - - - - -
-------------------------------- --------- --------- ---------- ---------- --------
Total comprehensive income
for the period - - - - -
-------------------------------- --------- --------- ---------- ---------- --------
Transactions with owners
Dividends - - - (3.0) (3.0)
Transfers - - (0.3) 0.3 -
Share-based payments charge - - 0.3 - 0.3
Cash settlement of EIP options - - (0.8) - (0.8)
Deferred tax on share-based
payments - - 0.2 - 0.2
Negative equity in minority
interest - - - (0.3) (0.3)
-------------------------------- --------- --------- ---------- ---------- --------
Balance at 30 June 2017
(unaudited) 5.6 100.9 1.8 40.2 148.5
================================ ========= ========= ========== ========== ========
Balance at 1 July 2017 5.6 100.9 1.8 40.2 148.5
Profit for the period - - - 7.8 7.8
-------------------------------- --------- --------- ---------- ---------- --------
Total comprehensive income
for the period - - - 7.8 7.8
-------------------------------- --------- --------- ---------- ---------- --------
Transactions with owners
Dividends - - - (1.9) (1.9)
Transfers - - (0.1) 0.1 -
Share-based payments charge - - 0.3 - 0.3
Deferred tax on share-based
payments - - 1.2 - 1.2
--------------------------------
Balance at 31 December 2017
(audited) 5.6 100.9 3.2 46.2 155.9
================================ ========= ========= ========== ========== ========
Balance at 1 January 2018 5.6 100.9 3.2 46.2 155.9
Profit for the period - - - 7.2 7.2
-------------------------------- --------- --------- ---------- ---------- --------
Total comprehensive income
for the period - - - 7.2 7.2
-------------------------------- --------- --------- ---------- ---------- --------
Transactions with owners
Issue of shares during the
year 0.5 51.0 - - 51.5
Issue costs - (1.5) - - (1.5)
Dividends - - - (4.1) (4.1)
Transfers - - (0.3) 0.3 -
Share-based payments charge - - 0.5 - 0.5
Deferred tax on share-based
payments - - (0.6) - (0.6)
Balance at 30 June 2018
(unaudited) 6.1 150.4 2.8 49.6 208.9
================================ ========= ========= ========== ========== ========
Condensed Consolidated Statement of Cash Flows
For the six months ended 30 June 2018
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Note GBP'm GBP'm GBP'm
-------------------------------------- ----- ------------ ------------ -------------
Net cash generated from operations 7 10.6 3.1 15.7
Net finance costs (0.9) (1.1) (2.2)
Income taxes paid (2.0) (1.4) (2.5)
-------------------------------------- ----- ------------ ------------ -------------
Net cash generated from operating
activities 7.7 0.6 11.0
Cash flows from investing activities
Purchases of property, plant
and equipment and applications
software 2 (5.2) (2.3) (5.3)
Purchase of subsidiary, net
of cash acquired 6 (1.4) (2.0) (5.6)
Purchase of trade and assets (88.3) (0.8) (1.5)
Proceeds from sale of available
for sale assets - - 0.1
-------------------------------------- ----- ------------ ------------ -------------
Cash flows used in investing
activities (94.9) (5.1) (12.3)
Cash flows from financing activities
Proceeds from share issues 50.0 - -
Dividends paid - - (4.9)
Repayment of bank borrowings (2.3) (3.0) (7.3)
Drawdown/(repayment) of revolving
credit facility 1.0 - (9.0)
New bank loans raised 44.0 10.0 20.0
Finance lease repayments (0.1) - (0.1)
-------------------------------------- ----- ------------ ------------ -------------
Net cash generated/(used) in
financing activities 92.6 7.0 (1.3)
-------------------------------------- ----- ------------ ------------ -------------
Net increase in cash and cash
equivalents 5.4 2.5 (2.6)
Cash and cash equivalents at
start of period 10.3 12.9 12.9
-------------------------------------- ----- ------------ ------------ -------------
Cash and cash equivalents at
the end of period 9 15.7 15.4 10.3
====================================== ===== ============ ============ =============
Cash and cash equivalents shown
above comprise:
Cash at bank 15.7 15.4 10.7
Bank overdraft - - (0.4)
-------------------------------------- ----- ------------ ------------ -------------
15.7 15.4 10.3
====================================== ===== ============ ============ =============
Notes to the Consolidated Interim report
For the six months ended 30 June 2018
1 Basis of preparation
The condensed consolidated interim financial information for the six month period ended 30 June 2018 was approved by the Board of Directors and authorised for issue on 17 September 2018. The disclosed figures are not statutory accounts in terms of Section 435 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2017, on which the auditors gave an audit report which was unqualified and did not contain a statement under section 498(2) or (3) of the Companies Act 2006, have been filed with the Registrar of Companies. The annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union.
This half-yearly report has been prepared on a basis consistent with the accounting policies expected to be applied for the year ended 31 December 2018, and uses the same accounting policies and methods of computation applied for the year ended 31 December 2017, except in relation to the adoption of IFRS 15 'Revenue from Customers' and IFRS 9 'Financial Instruments', effective 1 January 2018. The adoption of these standards has not lead to any changes in the interim financial statements.
IFRS 16 'Leases' was issued in January 2016. The Group will apply the standard from 1 January 2019 and will transition to IFRS 16 with the modified retrospective approach and prior year figures will not be adjusted.
As shown in note 30 of the 2017 Annual Report, the Group had GBP143.9m of non-cancellable operating lease commitments. It is expected that the application of this standard will have a material impact on the Group's Financial Statements to bring these obligations and associated assets onto the Statement of Financial Position. The Group is currently finalising its assessment of this.
IFRS 16 requires lessees to adopt a uniform approach to the presentation of leases, assets must be recognised for the right of use received and liabilities must be recognised for the discounted payment obligations entered into for all leases. The Group will make use of the relief options provided for leases of low-value assets and short-term leases (shorter than 12 months). For leases that have been classified to date as operating leases in accordance with IAS 17, the lease liability will be recognised at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate. The right of use asset will generally be measured at the amount of the lease liability plus initial direct costs. Net debt will rise accordingly due to the material increase in lease liabilities. Depreciation charges on right of use assets and the interest expense from unwinding of the discount on the lease liabilities will be recognised. The change in presentation of operating lease expenses will result in a corresponding improvement in cash flows from operating activities and a decline in cash flows from financing activities.
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing these half-yearly financial statements.
2 Segmental information
The Group is organised into two main operating segments, Document Management and Relocation, and incurs Head Office costs. Services per segment operate as described in the Chief Executive's review. The main segmental profit measure is adjusted operating profit and is shown before exceptional items, share-based payments charge and amortisation of intangible assets. The vast majority of trading of the Group is undertaken within the United Kingdom. Segment assets include intangibles, property, plant and equipment, inventories, receivables and operating cash. Central assets include deferred tax and Head Office assets. Segment liabilities comprise operating liabilities. Central liabilities include income tax and deferred tax, corporate borrowings and head office liabilities. Capital expenditure comprises additions to computer software, property, plant and equipment and includes additions resulting from acquisitions through business combinations. Segment assets and liabilities are allocated between segments on an actual basis.
REVENUE
The revenue from external customers was derived from the Group's principal activities primarily in the UK (where the Company is domiciled) as follows:
Unaudited six months ended 30 June 2018
Document
Management Relocation Head Office Total
GBP'm GBP'm GBP'm GBP'm
------------------------------ ----------- ---------- ----------- ------
Revenue 69.9 25.2 - 95.1
------------------------------ ----------- ---------- ----------- ------
Segment adjusted operating
profit/(loss) 17.6 2.7 (1.4) 18.9
------------------------------ ----------- ---------- ----------- ------
Amortisation of intangible
assets (3.2)
Exceptional items (4.3)
Share-based payments charge (0.5)
------------------------------ ----------- ---------- ----------- ------
Operating profit 10.9
Finance costs (1.6)
------------------------------ ----------- ---------- ----------- ------
Profit before tax 9.3
------------------------------ ----------- ---------- ----------- ------
Tax charge (2.1)
------------------------------ ----------- ---------- ----------- ------
Profit after tax 7.2
------------------------------ ----------- ---------- ----------- ------
Segment assets 348.6 48.5 5.8 402.9
Segment liabilities 38.6 11.6 143.8 194.0
Capital expenditure 4.7 0.5 - 5.2
Depreciation and amortisation 3.4 3.0 - 6.4
============================== =========== ========== =========== ======
Unaudited six months ended 30 June 2017
Document
Management Relocation Head Office Total
GBP'm GBP'm GBP'm GBP'm
------------------------------ ----------- ---------- ----------- ------
Revenue 64.8 22.1 - 86.9
------------------------------ ----------- ---------- ----------- ------
Segment adjusted operating
profit/(loss) 15.8 2.0 (1.3) 16.5
------------------------------ ----------- ---------- ----------- ------
Amortisation of intangible
assets (3.0)
Exceptional items (11.9)
Share-based payments charge (0.3)
------------------------------ ----------- ---------- ----------- ------
Operating profit 1.3
Finance costs (1.2)
------------------------------ ----------- ---------- ----------- ------
Profit before tax 0.1
------------------------------ ----------- ---------- ----------- ------
Tax charge (0.1)
------------------------------ ----------- ---------- ----------- ------
Profit after tax -
------------------------------ ----------- ---------- ----------- ------
Segment assets 264.0 32.0 5.8 301.8
Segment liabilities 41.8 9.1 102.4 153.3
Capital expenditure 2.2 0.1 - 2.3
Depreciation and amortisation 5.6 0.4 - 6.0
============================== =========== ========== =========== ======
Audited year ended 31 December 2017
Document
Management Relocation Head Office Total
GBP'm GBP'm GBP'm GBP'm
------------------------------ ----------- ------------ ----------- ------
Revenue 126.9 49.3 - 176.2
------------------------------ ----------- ------------ ----------- ------
Segment adjusted operating
profit/(loss) 31.0 5.2 (2.5) 33.7
------------------------------ ----------- ------------ ----------- ------
Amortisation of intangible
assets (5.4)
Exceptional items (15.5)
Share-based payments charge (0.6)
Operating profit 12.2
Finance costs (2.5)
------------------------------ ----------- ------------ ----------- ------
Profit before tax 9.7
------------------------------ ----------- ------------ ----------- ------
Tax charge (1.9)
------------------------------ ----------- ------------ ----------- ------
Profit after tax 7.8
------------------------------ ----------- ------------ ----------- ------
Segment assets 246.1 53.5 0.4 300.0
Segment liabilities 34.6 11.4 98.1 144.1
Capital expenditure 4.9 0.4 - 5.3
Depreciation and amortisation 10.6 0.8 - 11.4
============================== =========== ============ =========== ======
For the six months ended 30 June 2018, exceptional costs were GBP4.3m (including restructuring costs of GBP2.0m, GBP1.7m of transaction costs, GBP0.6m of National Insurance on the exercise of share options (2017: exceptional costs were GBP11.9m including restructuring costs of GBP3.7m, GBP0.3m in relocation and transport costs, GBP0.1m of transaction costs, GBP7.2m in relation to the settlement of the Executive Incentive Plan in cash and GBP0.6m of other exceptional costs).
In the year ended 31 December 2017, GBP15.5m of exceptional costs were incurred (acquisition transaction costs, GBP0.5m, box relocation and associated costs, GBP0.5m, restructuring and redundancy costs, GBP6.7m, GBP7.2m in relation to settlement of the Executive Incentive Plan in cash and GBP0.6m of other exceptional costs).
3 Tax
The underlying tax charge is based on the expected effective tax rate for the full year to 31 December 2018. It is anticipated that the tax charge in the period will be GBP2.1m.
4 Earnings per ordinary share
Basic earnings per share have been calculated on the profit after tax for the period and the weighted average number of ordinary shares in issue during the period.
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
---------------------------------- ----------- ----------- ------------
Weighted average number of shares
in issue 116,692,682 112,362,360 112,607,015
---------------------------------- ----------- ----------- ------------
Total profit after tax for the
period GBP7.2m GBP0.0m GBP7.8m
---------------------------------- ----------- ----------- ------------
Total basic earnings per ordinary
share (pence) 6.2p 0.0p 6.9p
---------------------------------- ----------- ----------- ------------
Weighted average number of shares
in issue 116,692,682 112,362,360 112,607,015
Share options 2,467,253 3,201,345 3,448,077
Weighted average fully diluted
number of shares in issue 119,159,253 115,563,705 116,055,092
---------------------------------- ----------- ----------- ------------
Total fully diluted earnings per
share (pence) 6.0p 0.0p 6.7p
---------------------------------- ----------- ----------- ------------
Continuing profit for the period GBP7.2m GBP0.0m GBP7.8m
---------------------------------- ----------- ----------- ------------
Continuing basic earnings per
share (pence) 6.2p 0.0p 6.9p
---------------------------------- ----------- ----------- ------------
Continuing fully diluted earnings
per share (pence) 6.0p 0.0p 6.7p
================================== =========== =========== ============
The Directors believe that adjusted basic earnings per share provide a more appropriate representation of the underlying earnings derived from the Group's business. The adjusting items are shown in the table below:
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP'm GBP'm GBP'm
---------------------------------- ----------- ----------- ------------
Profit before tax for the period 9.3 0.1 9.7
Adjustments:
Amortisation of intangible assets 3.2 3.0 5.4
Exceptional items 4.3 11.9 15.5
Share-based payments charge 0.5 0.3 0.6
Adjusted profit for the period 17.3 15.3 31.2
================================== =========== =========== ============
The additional adjusted earnings per share, based on weighted average number of shares in issue during the period, 116.7m (2017: 112.4m, 112.6m) is calculated below:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
Adjusted profit before tax (GBP'm) 17.3 15.3 31.2
Tax at 19.0% / 19.5% / 19.25%
(GBP'm) (3.3) (3.0) (6.0)
----------------------------------- ----------- ----------- ------------
Adjusted profit after taxation
(GBP'm) 14.0 12.3 25.2
----------------------------------- ----------- ----------- ------------
Adjusted basic earnings per share
(pence) 12.0p 10.9p 22.4p
----------------------------------- ----------- ----------- ------------
Adjusted fully diluted earnings
per share (pence) 11.7p 10.6p 21.7p
=================================== =========== =========== ============
5 Dividends
In respect of the current period, the Directors propose an interim dividend of 2.0p per share (2017: 1.67p) to be paid to shareholders on 9 November 2018. The proposed interim dividend is payable to all shareholders on the Register of Members on 5 October 2018. The estimated dividend to be paid is GBP2.6m (2017: GBP1.9m).
6 Business Combinations
On 2 January 2018, the Group completed the acquisition of the trade and assets of Scanning Direct, a scanning business for cash consideration of GBP50,000. The customer relationships acquired were GBP35,000.
On 9 January 2018, the Group completed the acquisition of the trade and assets of Papershrink, a scanning business for cash consideration of GBP0.2m. The customer relationships acquired were GBP0.2m.
On 1 May 2018, the Company completed the acquisition of the records management business of TNT UK Limited, for a total consideration of GBP88.0m. As part of the acquisition, the Company placed 10,100,000 ordinary shares of 5 pence each, with institutional investors raising GBP51.5m before expenses. The balance of the consideration was settled in cash. Fixed assets of GBP22.7m were acquired and the provisional customer relationships acquired were GBP43.7m and goodwill GBP21.6m.
On 21 June 2018, the Group acquired Optical Record Systems Limited (ORS), a Southampton-based scanning bureau, for an initial cash consideration of GBP1.6m. Cash of GBP0.2m was acquired as part of the net assets and the provisional customer relationships acquired were GBP0.7m and goodwill GBP0.6m.
7 Cash inflow from operations
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 June 30 June 31 December
2018 2017 2017
GBP'm GBP'm GBP'm
---------------------------------------- ----------- ----------- ------------
Continuing operations
Profit before tax 9.3 0.1 9.7
Depreciation of property, plant
and equipment 3.2 3.0 6.0
Amortisation of intangible assets 3.2 3.0 5.4
Net finance costs 1.6 1.2 2.5
Share-based payments charge for
the period 0.5 0.3 0.6
Share-based payments charge on
cash settlement of EIP options - 7.1 7.2
Cash settlement of EIP options - (7.9) (7.9)
Decrease in inventories 0.2 0.3 0.3
Increase in trade and other receivables (9.2) (4.7) (4.0)
Increase/(decrease) in trade and
other payables 1.8 0.7 (4.1)
---------------------------------------- ----------- ----------- ------------
Net cash generated from operations 10.6 3.1 15.7
---------------------------------------- ----------- ----------- ------------
8 Intangible assets
Applications
Customer Trade software
Goodwill relationships names & IT Total
GBP'm GBP'm GBP'm GBP'm GBP'm
Cost
1 January 2017 131.5 74.5 4.3 3.1 213.4
Arising on acquisition
of subsidiaries 2.0 0.5 - - 2.5
Arising on acquisition
of trade - 0.8 - - 0.8
Additions - external - - - 0.4 0.4
--------------------------- -------- -------------- ------ ------------ ------
30 June 2017 133.5 75.8 4.3 3.5 217.1
--------------------------- -------- -------------- ------ ------------ ------
1 July 2017 133.5 75.8 4.3 3.5 217.1
Arising on acquisition
of subsidiaries 2.3 2.4 - - 4.7
Disposals - - - (0.3) (0.3)
Additions - external - - - 0.6 0.6
--------------------------- -------- -------------- ------ ------------ ------
31 December 2017 135.8 78.2 4.3 3.8 222.1
--------------------------- -------- -------------- ------ ------------ ------
1 January 2018 135.8 78.2 4.3 3.8 222.1
Arising on acquisition
of subsidiaries 0.6 0.7 - - 1.3
Arising on acquisition
of trade 21.7 43.9 - - 65.6
Additions - external - - - 0.6 0.6
--------------------------- -------- -------------- ------ ------------ ------
30 June 2018 158.1 122.8 4.3 4.4 289.6
=========================== ======== ============== ====== ============ ======
Accumulated amortisation
and impairment
1 January 2017 10.6 9.3 1.3 1.9 23.1
Charge for the period - 2.5 0.2 0.3 3.0
30 June 2017 10.6 11.8 1.5 2.2 26.1
--------------------------- -------- -------------- ------ ------------ ------
1 July 2017 10.6 11.8 1.5 2.2 26.1
Charge for the period - 2.0 0.1 0.3 2.4
Disposals - - - (0.3) (0.3)
31 December 2017 10.6 13.8 1.6 2.2 28.2
--------------------------- -------- -------------- ------ ------------ ------
1 January 2018 10.6 13.8 1.6 2.2 28.2
Charge for the period - 2.7 0.1 0.4 3.2
--------------------------- -------- -------------- ------ ------------ ------
30 June 2018 10.6 16.5 1.7 2.6 31.4
=========================== ======== ============== ====== ============ ======
Carrying amount
30 June 2018 - Unaudited 147.5 106.3 2.6 1.8 258.2
--------------------------- -------- -------------- ------ ------------ ------
31 December 2017 - Audited 125.2 64.4 2.7 1.6 193.9
--------------------------- -------- -------------- ------ ------------ ------
30 June 2017 - Unaudited 122.9 64.0 2.8 1.3 191.0
=========================== ======== ============== ====== ============ ======
9 Financial liabilities
Unaudited Unaudited Audited
30 June 30 June 31 December
2018 2017 2017
GBP'm GBP'm GBP'm
Bank loans due within one year
Bank loans and overdrafts - - 0.4
Bank Loans - secured - 7.1 9.3
Deferred financing costs - (0.2) (0.3)
------------------------------- --------- --------- ------------
- 6.9 9.4
------------------------------- --------- --------- ------------
Non-current
Bank loans - secured 132.3 85.9 80.4
Deferred financing costs (1.2) (0.5) (0.9)
------------------------------- --------- --------- ------------
131.1 85.4 79.5
=============================== ========= ========= ============
On 30 April 2018, the Company put in place new debt facilities with Barclays, Royal Bank of Scotland, Lloyds and Bank of Ireland, comprising a GBP160.0m revolving credit facility and an additional GBP30.0m uncommitted accordion facility.
Analysis of net debt
Unaudited Unaudited Audited
30 June 30 June 31 December
2018 2017 2017
GBP'm GBP'm GBP'm
Cash at bank and in hand 15.7 15.4 10.7
Bank loans and overdrafts due
within one year - (6.9) (9.4)
Bank loans due after one year (131.1) (85.4) (79.5)
------------------------------ --------- --------- ------------
(115.4) (76.9) (78.2)
============================== ========= ========= ============
10 Post balance sheet events
On 31 August 2018, the Group acquired Spinnaker Waste Management Limited, a Portsmouth based Waste Electrical and Electronic Equipment (WEEE) and electronic waste recycling for GBP0.5m.
ENDS
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