Shares in support services company Restore (RST:AIM), were trading lower this morning despite the company issuing a positive trading update for the eight months to 31st August.
This is particularly surprising given that the group’s strong performance may reignite bid interest in the group.
Today’s trading update has highlighted that trading in July and August has continued the positive momentum achieved throughout the year.
This has provided management with confidence that the group will have a strong second half. The current run rates for revenue and EBITDA (earnings before tax depreciation and amortization), stand at £254 million and £74 million respectively. This equates to an 18% growth above pre-COVID 19 revenue levels.
KEY GROWTH DRIVER
Acquisitions continue to be a key growth driver for the growth. During the first half Restore completed acquisitions with a value of £80.9 million. For the second half this figure is anticipated to be in the range of £20 million-to-£30 million. The group has indicated that its pipeline for next year is building strongly.
In July business services company Marlowe Plc (MRL:AIM) made an unsolicited £743 million bid for Restore. The cash component of the offer was only 71 pence per share with the remainder of the 530p offer in Marlowe shares.
At the time, the offer equated to a 26 per cent premium. Under the terms of the deal Restore would have owned 49% of the combined entity. Restore rejected the takeover approach, and in August Marlowe withdrew its bid for Restore.
RIPE BID TARGET
There have been a veritable plethora of bids for UK companies, albeit predominantly within the FTSE 250 segment as opposed to AIM. Nonetheless today’s positive trading update may prompt either another industry player or a private equity company to run the slide rule over Restore.
Low interest rates and a surfeit of private equity funds searching for a home are creating a febrile M&A environment within the UK equity market.
