- Second profit warning in two months sends shares down 30%
- Shares hit eight year low
- CEO stands down with immediate effect
A second profit warning in two months and the exit of the CEO is not a good luck and for records management and life-cycle services company Restore (RST) it has sent the shares to an eight-month low after falling 30% to 161.5p.
The shares have lost 61% of their value over the last two years and are 69% below the peaks reached in 2018.
WHAT WENT WRONG?
Management blamed continued weakness in the technology business, a reduction in demand for digital scanning and lower recycled shredded paper prices for the profit warning.
The board now expects full year adjusted pre-tax profit will be £31 million which is materially lower than the £41 million to £43 million expected previously.
The company also flagged higher interest costs resulting from increases in UK interest rates. Total interest cost is now assumed to be around £9.6 million compared with £5.9 million in 2022. The firm also anticipates a potential non-cash impairment on intangible assets.
COST REDUCTIONS
Actions to focus on structural cost savings by reducing staff across the group are expected to see full year savings of £4.5 million with £1.1 million in the first half.
The board said despite an uncertain near-term economic backdrop the fundamentals of the business remain ‘strong’ with the ability to implement inflation indexed price increases and structural cost savings.
In a separate announcement the company said CEO Charles Bligh is standing down with immediate effect by mutual consent to be replaced by senior independent director Jamie Hopkins on an interim basis.
An executive search process is being initiated to find a permanent replacement.
EXPERT VIEW
Analyst James Wood at Canaccord Genuity said he expects consensus earnings expectations to fall in line with the new guidance.
Wood’s adjusted pre-tax profit estimate is currently at the lower end of previous guidance.
‘We believe Records Management continues to provide a resilient backbone for the group and our sum of the parts analysis of 368p for RM (with central costs and net debt rolled in) provides a rough marker on valuation’ added Woods.
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