REG - Restore PLC - Half year results 2024
31/07/2024 07:00
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RNS Number : 4695Y Restore PLC 31 July 2024
31 July 2024
Restore plc
("Restore" or the "Group" or the "Company")
Half year results 2024
Restore plc (AIM: RST), the UK's leading provider of digital and information
management and secure lifecycle services, today announces its results for the
half year ended 30 June 2024.
SUMMARY OF RESULTS
H1 2024 H1 2023 Change
Revenue (£m) 139.4 139.6 -
Adjusted operating profit(1) (£m) 23.6 21.7 9%
Adjusted operating margin(2) (%) 16.9% 15.5% 140bps
Adjusted profit before tax(3) (£m) 16.3 15.1 8%
Statutory profit/(loss) before tax (£m) 8.6 (25.9) n/a
Net debt(4) (£m) 93.5 97.9 4%
Leverage(5) 1.7x 1.8x 6%
Adjusted basic earnings per share(6) (pence) 9.0p 8.4p 7%
Statutory basic earnings/(loss) per share (pence) 4.7p (20.5p) n/a
Dividend per share (pence) 2.00p 1.85p 8%
STRATEGY
· Continued focus on improving operational and financial
performance and maintaining good cash generation.
· Records Management property consolidation strategy progressing
well:
o First boxes moved into Markham Vale, our new 100,000 square foot facility,
in Q2; on track to remove majority of boxes from our Redhill and Paddock Wood
sites by year-end.
o Planning for our next site consolidation now underway.
· New contract awarded with Department for Work and Pensions
("DWP") for inbound mail and document management services with a total minimum
contract value of over £70m spanning six years, to start in FY25.
· Further actions undertaken to improve the operational efficiency
and profitability of the Digital business:
o Integration of the Digital business into Records Management; improve
approach to market and reduce overheads.
o Closure of Stockport site and significant reduction in scale of Manchester
operation, and consolidation of activity into Wolverhampton sites; reduction
in capacity to benefit utilisation without constraining growth.
o Estimated integration costs of c£3m, primarily in 2024, and annualised
cost savings of c£3m.
TRADING PERFORMANCE
· Group revenue broadly flat at £139.4m (H1 2023: £139.6m):
o Digital and Information Management revenue of £87.5m (H1 2023: £85.1m);
continued strong growth in Records Management storage revenues driven by
RPI/CPI linked price rises. Box numbers were broadly flat at 22.5m. Digital is
trading in line with expectations.
o Secure Lifecycle Services revenue of £51.9m (H1 2023: £54.5m); Harrow
Green impacted by slower commercial moves market and construction delays on
projects, as previously anticipated. Datashred and Technology trading in
line with expectations, recycled paper pricing continuing to improve.
· Adjusted operating profit of £23.6m (H1 2023: £21.7m),
reflecting increased operating margins in Records Management and lower Group
overheads.
· Continued strong cash conversion(7) of 84% with net debt of
£93.5m; leverage decreased to 1.7x, well within the Groups target range.
· Interim dividend of 2.00 pence (H1 2023: 1.85 pence).
CHARLES SKINNER, CEO, commented:
"We are executing well against our plans, including the changes in operating
style. The changes have been significant and will therefore take time before
they fully bear fruit. That said, the management team are revitalised and we
are starting to see signs of improved performance. We continue to believe
Restore should be targeting an adjusted operating margin of no less than 20%
in the medium term.
Our expectations for the Group's full year performance remain unchanged and we
continue to anticipate that all of our businesses, with the exception of
Harrow Green, will deliver an improvement in adjusted operating margins in the
current year as we work towards the Group's medium term goal."
1) Calculated as statutory operating profit before adjusting items
(reconciled below the condensed consolidated statement of comprehensive
income).
2) Calculated as adjusted operating profit divided by revenue.
3) Calculated as statutory profit before tax and adjusting items
(reconciled below the condensed consolidated statement of comprehensive
income).
4) Calculated as external borrowings less cash, excluding the effects
of lease obligations under IFRS16 (reconciled in note 9).
5) Calculated as Net debt relative to adjusted EBITDA (defined in note
3)
6) Calculated as adjusted profit before tax with a standard tax charge
applied, divided by the weighted average number of shares in issue (reconciled
in note 5).
7) Calculated as free cashflow divided by net operating profit after
tax (reconciled below the condensed consolidated statement of cash flows)
Cautionary Statement: This announcement contains certain statements,
statistics and projections that are or may be forward-looking. The accuracy
and completeness of all such statements, including, without limitation,
statements regarding the future financial position, strategy, projected costs,
plans and objectives for the management of future operations of Restore and
its subsidiaries is not warranted or guaranteed. These statements typically
contain words such as 'intends', 'expects', 'anticipated', 'estimates' and
words of similar import. By their nature, forward-looking statements involve
risk and uncertainty because they relate to events and depend on circumstances
that will occur in the future. Although Restore believes that the
expectations will prove to be correct. There are a number of factors, many of
which are beyond the control of Restore, which could cause actual results and
developments to differ materially from those expressed or implied by such
forward-looking statements.
ENDS
Half year results presentations
Restore will host a presentation for analysts and investors at 8.30am today
which can be accessed via the details below:
https://www.investis-live.com/restoreplc/66447eca7e7bb30d006d42ef/tqwer
(https://www.investis-live.com/restoreplc/66447eca7e7bb30d006d42ef/tqwer)
Conference call:
United Kingdom (Local): +44 20 3936 2999 (tel:+442039362999)
United Kingdom (Toll-Free): +44 800 358 1035 (tel:+448003581035)
Global Dial-In Numbers
(https://www.netroadshow.com/conferencing/global-numbers?confId=67005)
Access Code: 269109
The presentation will be webcast live and a recording will be available after
the event.
There will also be a presentation for private investors at 9.00am on Friday 2
August.
To register for the event, please follow this link
(https://www.equitydevelopment.co.uk/news-and-events/restore-investor-presentation-2august2024)
.
A recording will be available shortly after the event here
(https://www.equitydevelopment.co.uk/research) .
For further information please contact:
Restore plc www.restoreplc.com (http://www.restoreplc.com)
Charles Skinner, CEO 44 (0) 207 409 2420
Dan Baker, CFO
Chris Fussell, Company Secretary
Investec (Nominated Adviser and Joint Broker) www.investec.com (http://www.investec.com)
Carlton Nelson +44 (0) 207 597 5970
James Rudd
Canaccord Genuity (Joint Broker) www.canaccordgenuity.com (http://www.canaccordgenuity.com)
Max Hartley +44 (0) 207 523 8000
Alex Aylen
FTI Consulting (PR Enquiries) www.fticonsulting.com/uk (http://www.fticonsulting.com/uk)
Nick Hasell +44 (0) 203 727 1340
Alex Le May
BUSINESS PERFORMANCE
Overview
Revenue for H1 2024 was broadly flat at £139.4m (H1 2023: £139.6m).
Records Management achieved record revenues of £64.0m (H1 2023: £59.3m)
driving an increase in the Digital and Information Management division's total
revenues to £87.5m (H1 2023: £85.1m) despite Digital's revenues decreasing
from £25.8m to £23.4m. The Secure Lifecycle Services division's revenues
fell to £51.9m (H1 2023: £54.5m). Revenues in Technology were higher at
£17.0m (H1 2023: £16.3m) while Datashred saw revenues fall to £17.5m (H1
2023: £18.6m), wholly attributable to the market decline in recycled paper
prices. Revenues in the division were also impacted by reduced activity levels
in Harrow Green, as anticipated, with revenues reducing to £17.4m (H1 2023:
£19.6m).
Adjusted profit before tax increased to £16.3m from £15.1m in H1 2023,
reflecting increased operating margins in Records Management and lower Group
overheads. Apart from Records Management, our other operating businesses saw a
decline in operating profit.
The strengths of Records Management are reflected in these results. We are
confident that the changes undertaken over the last nine months and currently
underway will improve operating profit performance across the other
businesses. It is our firm view that the strength of the Records Management
business should not subsidise underperformance elsewhere.
Digital and Information Management
Our Digital and Information Management division comprises Records Management
and Digital. 2024 revenue was £87.5m (H1 2023: £85.1m), with adjusted
operating profit of £24.6m (H1 2023: £20.9m), reflecting increased operating
margins in Records Management.
Records Management
Records Management increased revenues by 8% to £64.0m in H1 2024. The number
of boxes stored was broadly flat, with contractual price changes accounting
for the revenue increase. Adjusted operating margins increased appreciably as
a result of increased prices and strong cost control.
We are currently operating at 95% of box storage capacity (utilisation of the
available capacity). Whilst we are seeing a higher level of destructions than
in previous years, particularly from private sector clients, new box intake is
offsetting this, leading to broadly stable box numbers. The rate of perm-outs
(boxes transferred to competitors) is notably low. A stable number of boxes
allows us to secure efficiencies from estate management and our property
consolidation strategy.
During the period, we signed a long-term lease on a 100,000 square foot
facility in Markham Vale, East Midlands, which has a capacity of 1.4m boxes.
We have started decanting boxes from two of our most expensive legacy sites,
Redhill and Paddock Wood, into this facility, where storage costs per box are
far cheaper, resulting in an improvement in margins. This decanting operation
is expected to be completed by the end of this year. After this exercise,
there will still be surplus space, enabling us to decant boxes from other more
expensive sites. We intend to continue this steady transfer of boxes from
smaller, more expensive sites into larger, cheaper sites over the coming
years; and we have started the search for a new large site for the next
consolidation.
We have also started building work to expand our freehold site in
Sittingbourne, Kent. We expect this to be completed within the next twelve
months. This will give us more space at a comparatively low cost of capital in
South-East England, where property values for our type of facility have
accelerated sharply over the last decade.
Digital
Digital revenue in H1 2024 experienced a fall from £25.8m to £23.5m, despite
large contracts being won with HMRC and the Land Registry. The overall
reduction in major one-off contracts during the period accounts for the fall
between the 2023 and 2024 revenues; this was particularly noticeable in the
volume of work undertaken for the NHS. The impact of lower revenues was felt
in operating margins, which also declined.
Accordingly, we have taken further action to improve Digital's profitability,
in addition to the site closures undertaken in 2023. We are in the process of
closing our Stockport facility and have recently announced the reduction in
scale of our Manchester facility. These actions will simplify our operations
to two primary facilities, both in Wolverhampton. By reducing our capacity, we
are confident that utilisation rates will increase, driving up gross margins
through improved efficiency.
We are pleased to announce a significant Digital contract win with the
Department for Work and Pensions for the provision of inbound mail and
document management services. The contract, valued at over £70 million
(dependent on transactional volumes), spans six years and is expected to
commence in H1 2025.
During the period, we were informed that we were unsuccessful in our bid to
renew our contract with a government agency where we currently provide lower
margin bulk scanning activities onsite at their two UK facilities. As a
result, this contract will terminate at the end of 2024.
Integration of Digital into Records Management
It has become clear that the activities of our Records Management and Digital
businesses, which comprise our Digital & Information Management division,
increasingly overlap. We continue to see considerable demand from our
customers to supply their physical records back to them in digital form, and
our existing and potential customers also look to us to help them with
choosing when and what digitisation to undertake. It is logical to combine
these two businesses to facilitate the selling of both services as alternative
rather than competing programmes and we have therefore recently announced to
our people and customers that we will integrate them.
Overall, combining these two businesses will reduce overheads within the
division, enabling a significant increase in the operating margin. Whilst
detailed plans are being finalised, the integration process has started and is
expected to be substantially complete within the next twelve months.
We estimate that the closure of the Stockport site and the scaling back of the
Manchester site, together with the integration of the Digital business into
Records Management, will incur one-off integration costs of c£3m, principally
relating to redundancies and primarily incurred in 2024, and give rise to
annualised cost savings in the order of £3m.
Secure Lifecycle Services
Our Secure Lifecycle Services division comprises Technology, Datashred and
Harrow Green. Our H1 2024 revenue was £51.9m (H1 2023: £54.5m), with
adjusted operating profit of £2.4m (H1 2023: £3.7m). All three businesses
experienced specific headwinds and we are confident that the division's
financial performance can be improved in the short term.
Technology
Technology increased revenues to £17.0m (H1 2023: £16.3m). We are beginning
to see an increase in recycled IT equipment in line with an uptick in global
IT sales. Profitability was marginally better than the prior period.
Technology is undergoing considerable operational change at present as we
refocus its core activities on two main business streams: the recycling of
end-of-life equipment for blue-chip customers, and providing lT lifecycle
services to the end-customers of the large value-added IT resellers. To this
end, we have repurposed our Bedford site to work exclusively on lifecycle
customers, while Runcorn, Birmingham and Cannock focus on more traditional IT
asset disposal activities. This is complemented by our destruction services in
Bristol. As part of this process, we have ceased low-end recycling at Cannock.
The switch in activity at Cannock meant that the facility continued to lose
money during the changeover period, but it is now set up to operate
profitably.
We have significantly improved the business information in Technology,
enabling us to understand the profitability of individual activities. This
exercise has also drawn attention to areas of inefficiency such as in
transport, re-selling activities and specialist activities. We are in the
process of introducing a new IT system such that all sites will be operating
on the same system and stock can be monitored across the business.
Our lifecycle activities are growing fast. Our contract with CDW to provide
lifecycle services to DWP has grown rapidly and we are starting to attract a
broader base of value-added resellers to our capabilities. We believe there is
significant opportunity in this business stream.
Our hard disk services at Ultratech and Ultratest continue to trade
satisfactorily. Our engineering activities, primarily undertaking IT moves for
our customers, have been slow but there is increasing crossover between their
customer base and the wider business's customers, particularly in lifecycle
activities which can be expected to drive activity.
Datashred
Datashred's revenues declined to £17.5m (H1 2023: £18.6m), wholly due to the
average recycled paper price being £155/tonne compared to £220/tonne in the
first half of 2023. The impact of this is a reduction in revenue and profit in
excess of £1m. The paper price has recently improved and is now trading
within longer term averages of £160-190/tonne; we expect this to now
stabilise, providing a tailwind rather than a headwind over the next twelve
months.
There have been several initiatives in Datashred which have started to yield
benefits. Our site visits per vehicle are at record levels, reducing our
transport costs and improving gross margins. Our closer relationships with the
UK paper mills are helping us manage our paper-selling prices better. New
business lines, including textile and other material shredding and disposal,
is ramping up. Our new business sales, helped by more dynamic pricing, are
strong, such that the number of visits we will undertake in 2024 will be ahead
of 2023.
Datashred continues to have unique advantages in its market: a captive client
in Records Management which typically supplies c10,000 tonnes of paper per
annum to Datashred; the attractions of "chain of custody" to Group customers,
knowing that documents can be stored, scanned and shredded by one trusted
supplier; the opportunity to reduce rent costs by sharing paper collection
sites with other Group businesses, typically Records Management sites; and the
benefits of scale, which are so important to route-based businesses.
We remain confident that these structural advantages under the energetic
management we have in place will strengthen our market position and lead to
higher operating margins. The UK shredding industry remains comparatively
unconsolidated and we intend to be the key player in this sector.
Harrow Green
Harrow Green's revenues fell to £17.4m (H1 2023: £19.6m) and this resulted
in appreciably lower profitability, despite the successful completion of the
laboratory move for a major pharmaceutical company.
Several major projects scheduled in 2024 have been postponed, not helped by
the reluctance of customers to make major commitments in a General Election
year. We also believe that the structural shift in working patterns will have
a longer-term impact on Harrow Green's business, with a reduction in large
one-off office moves in London for our large private sector customers.
We have addressed this by reducing headcount amongst our operatives, sales and
support teams at our flagship London facility at Silvertown. We also continue
to address key attractive markets, notably life sciences, where we are
building a significant market position. As part of this, we have built a
biobank to store customer's materials in our Cambridge branch; much of this
specialist storage space has been pre-sold. We have also opened a new branch
in Oxford which should reach profitability in its first year of operation. We
also continue to develop our heritage capability where the predominantly
public sector customer base is ill-equipped to cope with the volume of storage
their assets require.
Harrow Green remains comfortably the preeminent operator in its industry and
we expect that it will return to double-digit operating margins when activity
levels pick up towards more normal levels.
Outlook
"We are executing well against our plans, including the changes in operating
style. The changes have been significant and will therefore take time before
they fully bear fruit. That said, the management team are revitalised and we
are starting to see signs of improved performance. We continue to believe
Restore should be targeting an adjusted operating margin of no less than 20%
in the medium term.
Our expectations for the Group's full year performance remain unchanged and we
continue to anticipate that all of our businesses, with the exception of
Harrow Green, will deliver an improvement in adjusted operating margins in the
current year as we work towards the Group's medium-term goal."
FINANCIAL PERFORMANCE
Overview
Revenue for the period ended 30 June 2024 was broadly flat at £139.4m (H1
2023: £139.6m). Adjusted profit before tax was £16.3m (H1 2023: £15.1m). On
a statutory basis, the Group made a profit of £8.6m (H1 2023: loss of
£25.9m). Good cash generation endures as a key strength of the Group with
cash conversion of 84%.
Revenue
£m H1 2024 H1 2023 Variance
Records Management 64.0 59.3 4.7
Digital 23.5 25.8 (2.3)
Digital and Information Management 87.5 85.1 2.4
Technology 17.0 16.3 0.7
Datashred 17.5 18.6 (1.1)
Harrow Green 17.4 19.6 (2.2)
Secure Lifecycle Services 51.9 54.5 (2.6)
Total 139.4 139.6 (0.2)
Adjusted profit
Despite revenue in the Group being broadly flat, adjusted operating profit was
up 9% at £23.6m (H1 2023: £21.7m) driven by pricing, particularly within
Records Management, combined with cost control actions across all businesses
and head office that were implemented towards the end of 2023. This was
partially offset by the lower average recycled paper price of £155/tonne in
Datashred (H1 2023: £220/tonne).
Bank interest costs were slightly higher than last year at £4.6m (H1 2023:
£4.4m). Despite the headwind of 1% higher average base rate, tighter cash
management and actions taken to pay down the RCF facility (£80m drawn down as
at 30 June 2024, compared to £97m as at 31 December 2023) and trim excess
capacity to save facility fees (RCF facility of £125m as at 30 June 2024,
compared to £200m as at 31 December 2023) mitigated some of the rate impact.
Consequently, the Group's adjusted profit before tax was £16.3m (H1 2023:
£15.1m).
Adjusting items
Due to the nature of certain income or costs, the Directors believe that an
alternative measure of profit before tax and earnings per share provides
readers of these results with a useful representation of the Group's
performance that should be considered together with statutory profit and
earnings per share.
The adjusting items in arriving at adjusted profit before tax are as follows:
£m H1 2024 H1 2023
Impairment of non-current assets - 32.5
Amortisation of intangible assets 6.0 6.3
Acquisition related transaction/advisory costs - 0.2
Restructuring and redundancy costs 0.7 1.0
Property related costs 0.4 -
Strategic IT organisation costs 0.6 1.0
Total 7.7 41.0
The largest component of adjusting items in H1 2023 related to an asset
impairment of £32.5m, being a non-cash impairment of the goodwill in
Datashred following a reassessment of its future growth expectations. There
have not been any impairments in H1 2024.
There were no material acquisitions over the past 12 months and therefore the
amortisation charge is broadly consistent. The lack of M&A activity has
also driven a reduction in the acquisition transaction costs incurred during
the period.
The restructuring started towards the end of 2023 to right size the Group
completed in H1, resulting in restructuring and redundancy charges of
£0.7m. Actions to improve the profitability of the Digital business,
including the closure of two additional sites and integration of the business
within Records Management, have now commenced and we estimate will cost around
£3m, primarily incurred in 2024.
The Records Management property consolidation strategy commenced in H1 2024,
leading to a charge of £0.4m relating to dual running costs for our new
Markham Vale site and the logistics costs of moving the boxes from the sites
we are exiting in Redhill and Paddock Wood.
Investment in the Group's new finance systems has largely completed following
an early curtailment of the programme, with Harrow Green going live in June
2024. Due to the nature of cloud-based accounting, these costs are expensed
as they are incurred.
Following these adjusting items, the Group made a statutory profit before tax
of £8.6m (H1 2023: statutory loss before tax of £25.9m).
Net debt and leverage
Net debt as at 30 June 2024 was £93.5m (H1 2023: £97.9m) with leverage
decreasing from 1.8x to 1.7x.
£m H1 2024 H1 2023
Net debt (£m) 93.5 97.9
Leverage 1.7x 1.8x
Cashflow
The Group generated free cashflow before financing costs of £14.9m (H1 2023:
£14.0m). Net cash generated from operating activities was in line with H1
2023 at £31.9m.
CONDENSED INTERIM FINANCIAL STATEMENTS
Condensed consolidated statement of comprehensive income
For the half year ended 30 June 2024
Unaudited Unaudited Audited
six months ended six months ended year ended
30 June 2024 30 June 2023 31 December 2023
£'m £'m £'m
Revenue - continuing operations 139.4 139.6 277.1
Cost of sales (77.5) (80.1) (160.7)
Gross profit 61.9 59.5 116.4
Administrative expenses (45.8) (46.3) (94.4)
Movement in trade receivables loss allowance (0.1) - (0.7)
Impairment of non-current assets - (32.5) (36.3)
Operating profit/(loss) 16.0 (19.3) (15.0)
Finance costs (7.4) (6.6) (14.0)
Profit/(loss) before tax 8.6 (25.9) (29.0)
Taxation (2.2) (2.2) (1.7)
Profit/(loss) after tax 6.4 (28.1) (30.7)
Other comprehensive profit/(loss) 0.1 - (0.1)
Total comprehensive income/(loss) for the period from continuing operations 6.5 (28.1) (30.8)
and profit/(loss) attributable to owners of the parent
Earnings/(loss) per share attributable to owners of the parent (pence)
Total - basic 4.7p (20.5p) (22.5p)
Total - diluted 4.7p (20.5p) (22.5p)
The reconciliation between the statutory results shown above and the non-GAAP
adjusted measures are shown below:
Unaudited Unaudited Audited
six months ended six months ended year ended
30 June 2024 30 June 2023 31 December 2023
£'m £'m £'m
Operating profit/(loss) 16.0 (19.3) (15.0)
Adjusting items - administrative expenses 1.6 2.2 10.8
Adjusting items - amortisation of intangible assets 6.0 6.3 12.2
Adjusting items - impairment - 32.5 36.3
Total adjusting items 7.6 41.0 59.3
Adjusted operating profit 23.6 21.7 44.3
23.6 21.7 44.3
Adjusted operating profit
Tax at 25% (2023: 23.5%) (5.9) (5.1) (10.4)
NOPAT (Net operating profit after tax) 17.7 16.6 33.9
8.6 (25.9) (29.0)
Profit/(loss) before tax
Adjusting items (as stated above) 7.6 41.0 59.3
Adjusting items - finance costs 0.1 - -
Adjusted profit before tax 16.3 15.1 30.3
Condensed consolidated statement of financial position
At 30 June 2024
Company registered no. 05169780
Unaudited 30 June 2024 Unaudited 30 June 2023 Audited 31 December 2023 Audited 31 December 2022
Restated* Restated* Restated*
£'m £'m £'m £'m
ASSETS
Non-current assets
Intangible assets 279.9 293.5 284.7 331.9
Property, plant and equipment 79.6 80.5 79.4 79.7
Right of use assets 114.8 110.3 109.0 113.7
Other receivables 4.7 5.0 5.2 5.1
479.0 489.3 478.3 530.4
Current assets
Inventories 1.5 2.2 1.5 2.0
Trade and other receivables 65.4 61.8 63.1 64.9
Cash and cash equivalents 10.0 25.3 22.7 30.2
Current tax assets - 0.3 1.2 -
76.9 89.6 88.5 97.1
Total assets 555.9 578.9 566.8 627.5
LIABILITIES
Current liabilities
Trade and other payables (46.2) (49.6) (44.9) (49.1)
Financial liabilities - lease liabilities (20.2) (27.1) (24.9) (18.9)
Derivative liability - - (0.1) -
Current tax liabilities (0.1) - - (1.6)
Provisions (5.3) (1.7) (4.4) (1.7)
(71.8) (78.4) (74.3) (71.3)
Non-current liabilities
Financial liabilities - borrowings (103.5) (123.2) (120.5) (133.7)
Financial liabilities - lease liabilities (108.8) (94.9) (98.2) (105.1)
Deferred tax liability (27.4) (30.4) (29.3) (30.9)
Provisions (12.5) (15.8) (14.2) (15.4)
Other payables (0.2) (0.3) (0.4) (0.1)
(252.4) (264.6) (262.6) (285.2)
Total liabilities (324.2) (343.0) (336.9) (356.5)
Net assets 231.7 235.9 229.9 271.0
EQUITY
Share capital 6.8 6.8 6.8 6.8
Share premium 187.9 187.9 187.9 187.9
Other reserves 1.4 6.5 3.7 6.9
Retained earnings 35.6 34.7 31.5 69.4
Total equity 231.7 235.9 229.9 271.0
*Refer to Note 1 for details of the restatement
Condensed consolidated statement of changes in equity
For the half year ended 30 June 2024
Attributable to owners of the parent
Share Share Other Retained Total
capital premium reserves earnings equity
£'m £'m £'m £'m £'m
Balance at 1 January 2023 as previously stated 6.8 187.9 6.9 71.6 273.2
Restatement (refer to note 1) - - - (2.2) (2.2)
Balance at 1 January 2023 restated 6.8 187.9 6.9 69.4 271.0
Loss for the period - - - (28.1) (28.1)
Total comprehensive loss for the period - - - (28.1) (28.1)
Transactions with owners:
Dividends - - - (6.6) (6.6)
Share-based payments charge - - (0.4) - (0.4)
Balance at 30 June 2023 (unaudited) (restated) 6.8 187.9 6.5 34.7 235.9
Balance at 1 July 2023 (restated) 6.8 187.9 6.5 34.7 235.9
Loss for the period - - - (2.6) (2.6)
Other comprehensive loss - - (0.1) - (0.1)
Total comprehensive loss for the period - - (0.1) (2.6) (2.7)
Transactions with owners:
Dividends - - - (2.5) (2.5)
Share-based payments charge - - (0.1) - (0.1)
Deferred tax on share-based payments - - (0.2) - (0.2)
Transfer* - - (3.3) 3.3 -
Purchase of treasury shares - - (0.6) - (0.6)
Disposal of treasury shares - - 1.5 (1.4) 0.1
Balance at 31 December 2023 (audited) (restated) 6.8 187.9 3.7 31.5 229.9
Balance at 1 January 2024 (restated) 6.8 187.9 3.7 31.5 229.9
Profit for the period - - - 6.4 6.4
Other comprehensive income - - 0.1 - 0.1
Total comprehensive income for the period - - 0.1 6.4 6.5
Transactions with owners:
Dividends - - - (4.6) (4.6)
Share-based payments charge - - 0.7 - 0.7
Transfer* - - (2.4) 2.4 -
Purchase of treasury shares - - (0.8) - (0.8)
Disposal of treasury shares - - 0.1 (0.1) -
Balance at 30 June 2024 (unaudited) 6.8 187.9 1.4 35.6 231.7
*In the period ended 30 June 2024 a net amount of £2.4 million was
reclassified from share-based payment reserve to retained earnings in respect
of lapsed and exercised options (year ended 31 December 2023: £3.3m)
Condensed consolidated statement of cash flows
For the half year ended 30 June 2024
Unaudited Unaudited Audited
six months ended six months ended year ended
30 June 2024 30 June 2023 31 December 2023
£'m £'m £'m
Cash generated from operating activities 31.9 32.5 66.9
Net finance costs (7.6) (5.5) (12.8)
Income taxes paid (2.7) (4.8) (6.3)
Net cash generated from operating activities 21.6 22.2 47.8
Cash flows from investing activities
Purchase of property, plant and equipment and applications software IT (5.7) (5.6) (10.3)
Purchase of subsidiary undertakings, net of cash acquired - (1.1) (1.3)
Purchase of trade and assets (0.6) - (0.4)
Net cash used in investing activities (6.3) (6.7) (12.0)
Cash flows from financing activities
Dividends paid - - (9.1)
Purchase of treasury shares (0.8) (0.2) (0.6)
Proceeds from disposal of treasury shares - 0.1 0.1
Repayment of revolving credit facility (17.0) (35.0) (48.0)
Drawdown of revolving credit facility - - 10.0
Drawdown of US Private Placement notes facility - 25.0 25.0
Lease principal repayments (10.2) (10.3) (20.7)
Net cash used in financing activities (28.0) (20.4) (43.3)
Net decrease in cash and cash equivalents (12.7) (4.9) (7.5)
Cash and cash equivalents at start of period 22.7 30.2 30.2
Cash and cash equivalents at end of period 10.0 25.3 22.7
A reconciliation between the statutory results above and the non-GAAP cashflow
measures is shown below:
Unaudited Unaudited Audited
six months ended six months ended year ended
30 June 2024 30 June 2023 31 December 2023
£'m £'m £'m
Cash generated from operating activities 31.9 32.5 66.9
Income taxes paid (2.7) (4.8) (6.3)
Purchase of property, plant and equipment and applications software IT
(5.7) (5.6) (10.3)
Lease principal repayments (10.2) (10.3) (20.7)
Add back: Cash impact of adjusting items - administrative expenses
1.6 2.2 7.7
Free cashflow 14.9 14.0 37.3
NOPAT (Net operating profit after tax) 17.7 16.6 33.9
Cash conversion 84% 84% 110%
Notes to the condensed interim financial statements
For the half year ended 30 June 2024
1. Basis of preparation
The condensed interim financial statements have been prepared in accordance
with IAS 34, Interim Financial Reporting, adopting accounting policies that
are consistent with those of the previous financial year and corresponding
half year reporting period. The condensed interim financial statements do not
constitute statutory accounts as defined in Section 434 of the Companies Act
2006.
The information for the year ended 31 December 2023 is based on audited
statutory accounts which have been filed with the Registrar of Companies.
The Auditor's report for 2023 was (i) unqualified, (ii) included no matters to
which the auditor drew attention by way of emphasis and (iii) did not contain
statements under Sections 498 (2) or 498 (3) of the Companies Act 2006 in
relation to the financial statements. The six-month period to 30 June 2024 and
30 June 2023 was unaudited.
The condensed interim financial statements have been prepared on a historical
cost basis, except for certain financial assets and liabilities and share
options which are held at fair value. The accounting policies have been
consistently applied, other than where new policies have been adopted. The
preparation of financial statements in conformity with IFRS requires the use
of certain accounting estimates. It also requires management to exercise its
judgement in the process of applying the Group's accounting policies. The
condensed interim financial statements are presented in pounds sterling and,
unless stated otherwise, shown in pounds million to one decimal place. The
principal risks impacting the Group during the period remain unchanged from
those disclosed in the 31 December 2023 Annual Report.
The Directors are satisfied that climate change does not have a material
impact on either individual assets or cash-generating units in the condensed
interim financial statements.
The Group's operations are not normally affected by significant seasonal
variations between the first and second halves of the calendar year.
The condensed interim financial statements were approved by the Board of
Directors on 30 July 2024.
Going concern
The Group meets its day-to-day working capital requirements through its
financing facilities. Details of the Group's borrowing facilities are given in
note 9. The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for a period of at
least 12 months from the approval date of the condensed interim financial
statements. Thus, they continue to adopt the going concern basis of accounting
in preparing the condensed interim financial statements. In making this
assessment, the Directors have considered the financing arrangements available
to the Group and the Group's cashflow forecasts through to 31 December 2025,
taking into account reasonably possible downside trading scenarios involving a
reduction to non-recurring income streams. The Directors' assessment includes
reviewing the level of liquidity headroom and financial covenant compliance
headroom over the period in review, including in the downside scenarios
modelled. The Group's latest outlook for H2 2024 and forecasts for 2025 show
that the Group is expected to operate within the level of its current
facilities.
Prior period restatements
IFRS 16 lease modifications
During the first half of 2024 it was noted that a small number of lease
modifications had not been appropriately recorded in prior periods. The right
of use assets and lease liabilities have therefore been restated as at 31
December 2023, 30 June 2023 and 31 December 2022 to appropriately record these
transactions. There is no profit impact to the reported 2023 numbers as the
incorrect modifications relate to preceding periods.
As reported Impact of restatement Restated
31 December 2023 31 December 2023 31 December 2023
£m £m £m
Non-current assets
Right of use assets 91.6 17.4 109.0
Current liabilities
Lease liabilities (18.6) (6.3) (24.9)
Non-current liabilities
Lease liabilities (84.9) (13.3) (98.2)
Equity
Retained earnings 33.7 (2.2) 31.5
As reported Impact of restatement Restated
30 June 2023 30 June 2023 30 June 2023
£m £m £m
Non-current assets
Right of use assets 95.6 14.7 110.3
Current liabilities
Lease liabilities (21.6) (5.5) (27.1)
Non-current liabilities
Lease liabilities (83.5) (11.4) (94.9)
Equity
Retained earnings 36.9 (2.2) 34.7
As reported Impact of restatement Restated
31 December 2022 31 December 2022 31 December 2022
£m £m £m
Non-current assets
Right of use assets 106.8 6.9 113.7
Current liabilities
Lease liabilities (19.2) 0.3 (18.9)
Non-current liabilities
Lease liabilities (95.7) (9.4) (105.1)
Equity
Retained earnings 71.6 (2.2) 69.4
The above restatements did not result in changes to the cash flows reported in
any of the periods. There was also no impact noted to the reported profit or
earnings per share in 2023.
Classification of contract assets and liabilities
In the second half of 2023, the Group reviewed the classification and
presentation of contract assets within trade and other receivables and
contract liabilities within trade and other payables. It was determined,
following this review, that these balances should be re-presented based on the
expected timing of the realisations of these assets and liabilities. As a
result, the 30 June 2023 half year comparative information has also been
restated to be consistent with the presentation reported as at 31 December
2023.
As reported Impact of restatement Restated
30 June 2023 30 June 2023 30 June 2023
£m £m £m
Non-current assets
Other receivables - 5.0 5.0
Current assets
Trade and other receivables 66.8 (5.0) 61.8
Current liabilities
Trade and other payables (49.9) 0.3 (49.6)
Non-current liabilities
Other payables - (0.3) (0.3)
The restatement did not result in any change to reported profit, earnings per
share, net assets or cash flows reported in the period to June 2023.
New standards, interpretations and amendments adopted by the Group
The following new amendments to standards were effective for the first time
from 1 January 2024:
· Classification of Liabilities as Current or Non-current and
Non-current liabilities with covenants to IAS 1;
· Supplier Finance arrangement - Amendments to IAS 7 and IFRS 7;
and
· Lease liability in sale and leaseback - Amendments to IFRS 16.
These amendments are not considered to have a material impact on the condensed
interim financial statements.
2. Segmental analysis
The vast majority of the trading of the Group is undertaken within the United
Kingdom. Segment assets include intangible assets, property, plant and
equipment, right of use assets, 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:
Revenue - continuing operations Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£'m £'m £'m
Records Management 64.0 59.3 124.1
Digital 23.5 25.8 46.0
Digital & Information Management 87.5 85.1 170.1
Technology 17.0 16.3 31.1
Datashred 17.5 18.6 35.9
Harrow Green 17.4 19.6 40.0
Secure Lifecycle Services 51.9 54.5 107.0
Total revenue 139.4 139.6 277.1
For the period ended 30 June 2024 no customers individually accounted for more
than 3% of the Group's total revenue (H1 2023: 3%; year to 31 December 2023:
3%).
The Group had sales of goods of £14.0m relating to the sale of recycled paper
and recycled IT assets (H1 2023: £14.2m; year to 31 December 2023: £27.4m).
The remainder of revenue relates to the sales of services
Segmental information
Profit/(loss) before tax Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
Restated*
£'m £'m £'m
Digital & Information Management 23.9 20.9 36.1
Secure Lifecycle Services 2.2 3.2 5.4
Central (4.1) (4.6) (8.0)
Adjusting items - amortisation and impairment of non-current assets (48.5)
(6.0) (38.8)
Operating profit/(loss) 16.0 (19.3) (15.0)
Finance costs (7.4) (6.6) (14.0)
Profit/(loss) before tax 8.6 (25.9) (29.0)
The amortisation of acquired intangible assets and the prior year impairment
of goodwill and customer relationship have been recorded centrally.
Digital & Information Management Six months ended Six months ended 30 June 2023 Year ended
30 June 2024 Restated* 31 December 2023
£'m
£'m £'m
Operating profit 23.4 20.3 35.2
Adjusting items 1.2 0.6 5.7
Adjusted operating profit 24.6 20.9 40.9
Revenue 87.5 85.1 170.1
Adjusted operating margin 28% 25% 24%
Secure Lifecycle Services Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
Restated*
£'m £'m £'m
Operating profit 2.0 3.0 5.0
Adjusting items 0.4 0.7 1.2
Adjusted operating profit 2.4 3.7 6.2
Revenue 51.9 54.5 107.0
Adjusted operating margin 5% 7% 6%
*The 30 June 2023 balances in the segmental information tables above have been
restated to ensure consistent presentation with the disclosures in the year
ended 31 December 2023.
30 June 2024 Digital & Information Management Secure Lifecycle Central Total
£'m
£'m
£'m
Services
£'m
Segment assets 432.2 126.2 (2.5) 555.9
Segment liabilities 131.4 50.6 142.2 324.2
Capital expenditure 4.6 1.0 0.1 5.7
Depreciation and amortisation 15.8 5.2 0.3 21.3
Impairment - - - -
30 June 2023 (restated)** Secure Lifecycle Central Total
£'m
£'m
Services
£'m
Digital & Information Management
£'m
Segment assets 446.2 120.8 11.9 578.9
Segment liabilities 125.7 53.9 163.4 343.0
Capital expenditure 4.4 1.1 0.1 5.6
Depreciation and amortisation 16.3 6.4 0.2 22.9
Impairment - - 32.5 32.5
31 December 2023 (restated)** Digital & Information Management Secure Lifecycle Central Total
£'m
£'m
£'m
Services
£'m
Segment assets 442.6 119.6 4.6 566.8
Segment liabilities 132.9 48.0 156.0 336.9
Capital expenditure 8.4 1.8 0.1 10.3
Depreciation and amortisation 32.2 12.3 0.5 45.0
Impairment 0.1 0.1 36.1 36.3
** The 2023 information in the segmental balance sheet information tables
above has been restated to reflect the restatements reported in note 1.
3. Adjusting items
Management believe it is useful to provide readers of the financial statements
with alternative performance measures ("APMs") that describe the performance
of the Group before the effects of significant costs or income that are
considered to be distorting due to their nature, and non-cash amortisation
primarily arising from acquired intangible assets.
Adjustments made from statutory measures to adjusted measures are referred to
as adjusting items within the financial statements and include impairments,
amortisation, expenses associated with acquisitions and subsequent integration
costs, costs associated with major restructuring programmes, and other
significant costs and credits that are considered to be distorting due to
their nature when assessing the performance of the business. The Group's
adjusting items are set out below:
Six months ended Six months ended 30 June 2023 Year ended
30 June 2024 £'m 31 December 2023
£'m £'m
Impairment of non-current assets - 32.5 36.3
Amortisation of intangible assets 6.0 6.3 12.2
Acquisition related transaction/advisory costs - 0.2 0.2
Restructuring and redundancy costs 0.7 1.0 5.9
Property related costs 0.4 - 3.1
Strategic IT reorganisation costs 0.6 1.0 1.6
Total 7.7 41.0 59.3
Impairment of non-current assets
In the prior period there was a non-cash impairment of goodwill in the
Datashred CGU (£32.5m) resulting from reduced expectations on service
activity, paper volumes and recycled paper pricing. Given the overall quantum
of the impairment charge and its non-cash nature, this cost was adjusted for
in deriving the Group's alternative performance measures. No impairments have
been noted in the current period.
Amortisation of intangible assets
The amortisation charge primarily relates to acquired intangible assets
arising from business combinations in prior periods. Given the overall quantum
of the amortisation charge and its non-cash nature, this cost is adjusted for
in deriving the Group's alternative performance measures. For transparency, we
note that the Group does not similarly adjust for the related revenue and
profits generated from its business combinations in its alternative profit
measures.
Acquisition transaction/advisory costs
Acquisition related transaction and advisory costs primarily relate to legal,
due diligence, financing and other advisory costs incurred in association with
business acquisition activity. For transparency, we note that the Group does
not similarly adjust for the related revenue and profits generated from its
acquisitions in its alternative profit measures.
Restructuring and redundancy costs
Restructuring and redundancy adjustments relate primarily to the Group-wide
organisational restructuring and "right-sizing" programme which has been
ongoing across the Group since 2023 and has continued into 2024. Future cost
savings are expected from some of the restructuring activity during the year,
however, for transparency we note that these cost savings will not be adjusted
for in deriving the Group's alternative performance measures.
Property related costs
A strategic consolidation of the Group's property estate is ongoing. During
2024, the costs from this exercise and in particular the costs from the move
into the Markham Vale site are £0.6m. Future cost savings are expected from
the site consolidation activity during the year, however, for transparency we
note that these cost savings will not be adjusted for in deriving the Group's
alternative performance measures.
Strategic IT reorganisation costs
In 2024 the Group is completing its multi-year programme to deliver
cloud-based strategic IT programmes, particularly in relation to its financial
systems. The implementation costs associated with these systems
transformations are to be expensed to the income statement as incurred, with
the in-year cost being £0.6m for H1 2024 (H1 2023: £1.0m). Future cost
savings are expected from these systems implementations, however, for
transparency we note that these cost savings will not be adjusted for in
deriving the Group's alternative performance measures.
The Group's APMs are summarised below:
APMs Description
Adjusted operating profit Calculated as statutory operating profit before adjusting items.
Net operating profit after tax ("NOPAT") Calculated as adjusted operating profit with a standard tax charge applied.
APM used for calculation of cash conversion.
Adjusted EBITDA Calculated as EBITDA before IFRS16 and share-based payments. APM used for
calculation of leverage, in line with the calculation of financial debt
covenants.
Adjusted profit before tax Calculated as statutory profit before tax and before adjusting items.
Adjusted basic earnings per share Calculated as adjusted profit before tax with a standard tax charge applied,
divided by the weighted average number of shares in issue.
Adjusted fully diluted earnings per share Calculated as adjusted profit before tax with a standard tax charge applied,
divided by the weighted average fully diluted number of shares in issue.
Net debt Calculated as external borrowings less cash, excluding the effects of lease
obligations under IFRS16.
Leverage Calculated as adjusted EBITDA divided by net debt, including a pro-forma
adjustment to EBITDA for acquisitions in line with financial debt covenants.
Free cashflow Calculated as cash generated from operations less income taxes paid, capital
expenditure and lease payments, but before the cash impact of adjusting items
Cash conversion Calculated as free cashflow divided by NOPAT.
The Group's APMs should be considered as supplementary to statutory measures
and readers of the accounts should note the limitations of the measures and
that they are not comparable across companies.
4. Taxation
The income tax expense comprises:
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£'m £'m £'m
Current tax expense 4.1 2.2 3.5
Deferred tax credit (1.9) - (1.8)
Total tax expense 2.2 2.2 1.7
Tax for the six months ended 30 June 2024 is determined based on applying full
year estimates of the annual effective tax rate expected for the full
financial year. The estimated average annual tax rate used for the year to 30
June 2024 is 25%, (30 June 2023: 23.5%; 31 December 2023 23.5%).
5. Earnings/(loss) per share attributable to owners of the parent
Basic earnings/(loss) per share have been calculated on the profit/(loss) for
the period after taxation and the weighted average number of ordinary shares
in issue during the period.
Six months ended Year ended
Six months ended 30 June 2023 31 December 2023
30 June 2024 £'m £'m
£'m
Total profit/(loss) for the period (£'m) 6.4 (28.1) (30.7)
Total basic earnings/(loss) per share (pence) 4.7 (20.5) (22.5)
Weighted average number of shares in issue 136,312,349 136,924,067 136,580,425
Dilutive options (number) 1,446,316 663,859 722,328
Weighted average fully diluted number of shares in issue 137,758,665 137,587,926 137,302,753
Total fully diluted earnings/(loss) per share (pence) 4.7 (20.5) (22.5)
Adjusted earnings per share
The Directors believe that adjusted earnings per share provides a more
appropriate representation of the underlying earnings derived from the Group's
business. The adjusting items are shown in the table below:
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£'m £'m £'m
Profit/(loss) before tax 8.6 (25.9) (29.0)
Adjusting items - administrative expenses 1.6 2.2 10.8
Adjusting items - amortisation of intangible assets 6.0 6.3 12.2
Adjusting items - impairment - 32.5 36.3
Adjusting items - finance costs 0.1 - -
Adjusted profit before tax 16.3 15.1 30.3
The adjusted earnings per share and adjusted fully diluted earnings per share
is based on the weighted average number of shares in issue during the year of
136.3m (June 2023: 136.9m; December 2023: 136.6m) and weighted average fully
diluted number of shares in issue during the year of 137.8m (June 2023:
137.6m; December 2023 137.3m) respectively, are calculated below using a
standard tax charge:
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£'m £'m £'m
Adjusted profit before tax (£'m) 16.3 15.1 30.3
Tax at 25.0% (2023: 23.5%) (£'m) (4.1) (3.6) (7.1)
Adjusted profit after tax (£'m) 12.2 11.5 23.2
Adjusted basic earnings per share (pence) 9.0 8.4 17.0
Adjusted fully diluted earnings per share (pence) 8.9 8.4 16.9
6. Dividends
In respect of the current period, the Directors declare an interim dividend of
2.00p per share (H1 2023: 1.85p). The estimated dividend to be paid is £2.8m
(H1 2023: £2.5m) and will be paid on 23 October 2024 to shareholders on the
register on 20 September 2024.
7. Intangible assets
Goodwill Customer relationships Trade Applications software IT Total
£'m £'m names £'m £'m
£'m
Cost
1 January 2023 219.1 177.9 4.3 10.7 412.0
Additions - - - 0.4 0.4
Disposals - - - - -
30 June 2023 219.1 177.9 4.3 11.1 412.4
Additions - 0.4 - 0.2 0.6
Disposals - - - (0.2) (0.2)
31 December 2023 219.1 178.3 4.3 11.1 412.8
Additions - 0.6 - 0.6 1.2
Disposals - - - - -
30 June 2024 219.1 178.9 4.3 11.7 414.0
Accumulation amortisation and impairment
1 January 2023 17.6 53.0 3.0 6.5 80.1
Charge for the year - 5.4 0.1 0.8 6.3
Disposals - - - - -
Impairment 32.5 - - - 32.5
30 June 2023 50.1 58.4 3.1 7.3 118.9
Charge for the year - 5.4 0.1 0.4 5.9
Disposals - - - (0.2) (0.2)
Impairment - 3.5 - - 3.5
31 December 2023 50.1 67.3 3.2 7.5 128.1
Charge for the year - 5.0 - 1.0 6.0
Disposals - - - - -
Impairment - - - - -
30 June 2024 50.1 72.3 3.2 8.5 134.1
Carrying amount
30 June 2024 169.0 106.6 1.1 3.2 279.9
31 December 2023 169.0 111.0 1.1 3.6 284.7
30 June 2023 169.0 119.5 1.2 3.8 293.5
For the purpose of impairment testing, goodwill, other intangible assets and
property, plant and equipment are allocated to cash-generating units ("CGU's")
which represent the smallest identifiable group of assets that generate cash
inflows from continuing use, in the case of Restore this is considered to be
the Business Unit level. The recoverable amount of each CGU is determined from
value-in-use calculations. The calculations use pre-tax cash flow projections
based on financial budgets and forecasts approved by the Directors.
Goodwill is tested annually for impairment, or more frequently if there are
indicators that an impairment may be required; the Group conduct the annual
assessment in line with our full year reporting at 31 December. At June
2024, we have therefore reviewed whether there are any indicators of
impairment present at the CGU level. Our conclusion is that there are only
indicators present in the Harrow Green CGU, where trading headwinds have led
to a challenging first six months. The other CGU's have performed broadly in
line with expectations and there are no other external or market factors that
would indicate an impairment.
An impairment review was therefore conducted over the carrying values of the
Harrow Green CGU including downside scenario modelling, which indicated that
no impairment was required at 30 June 2024. We have not identified any
reasonably possible changes that would result in an impairment for the Harrow
Green CGU.
The Group monitors climate-related risks and opportunities and has considered
the potential impact of climate change on the impairment review conducted.
Based on our assessment of climate-related risks likely to emerge, we do not
expect these risks to drive a significant downturn in cashflows. Therefore,
there are no overriding changes to key assumptions built into the forecasts
and no specific sensitivities relating to climate change are considered
necessary.
At December 2023, the following impairments were recorded:
· an impairment to goodwill of £32.5m was recognised in Datashred.
This impairment resulted principally from reduced expectations on service
activity, paper volumes and recycled paper pricing, as well as an increase in
the discount rate partly driven by the change in the interest rate.
· an impairment of customer relationship related intangible assets
and right-of-use assets amounting to £3.6m was recognised in the Technology
CGU in relation to a business exit.
8. Cash generated from operating activities
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£'m £'m £'m
Profit/(loss) before tax 8.6 (25.9) (29.0)
Depreciation of property, plant and equipment and right-of-use assets 15.3 16.6 32.8
Amortisation of intangible assets 6.0 6.3 12.2
Impairment charge - 32.5 36.3
Net finance costs 7.4 6.6 14.0
Share-based payment charge/(credit) (including related NI) 0.9 (0.7) -
Share-based payment settlement (0.1) (0.4) (0.7)
Profit on sale of fixed assets - - 0.2
(Increase)/decrease in inventories - (0.3) 0.5
(Increase)/decrease in trade and other receivables (1.7) 3.2 1.8
Decrease in trade and other payables (4.5) (5.4) (1.2)
Cash generated from operating activities 31.9 32.5 66.9
9. Financial liabilities - borrowings
Borrowings Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£'m £'m £'m
Non-current:
Bank loans 80.0 100.0 97.0
Other loans (US private placement) 25.0 25.0 25.0
Deferred financing costs (1.5) (1.8) (1.5)
103.5 123.2 120.5
Analysis of net debt Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£'m £'m £'m
Cash at bank and in hand 10.0 25.3 22.7
Borrowings due after one year (103.5) (123.2) (120.5)
Net debt (93.5) (97.9) (97.8)
During the half year to June 2024, the Group made the following changes to its
financing arrangements. There was no material financial cost involved in
executing these transactions:
· voluntarily cancelled £75m of the Revolving Credit Facility
("RCF"), decreasing the RCF from £200m to £125m;
· extended the RCF to 30 April 2027; and
· entered into a £10m overdraft facility with Barclays Bank plc to
accommodate short-term cash requirements and free-up excess cash at bank and
in-hand.
After these changes, the Group has £150m of available facilities, which the
Group believes is ample given its strategy. Should it be needed, the RCF
includes an accordion which the Group can exercise to increase the facility by
up to a further £25m.
10. Provisions
Six months ended Six months ended Year ended
30 June 2024 30 June 2023 31 December 2023
£'m £'m £'m
Opening 18.6 17.1 17.1
Created - 0.4 6.2
Utilised (0.6) - -
Released (0.2) - (4.7)
Closing 17.8 17.5 18.6
The balance above represents dilapidation provisions which relate to the
future anticipated costs to restore leased properties into their original
state at the end of the lease term. Estimates are stated at nominal value and
therefore the impact of discounting is not material. An increase in costs of
5% per square foot across the portfolio would result in an increase in the
provision of £0.7m.
11. Events occurring after the reporting period
Subsequent to reporting period end, the Group's Employee Benefit Trust ("EBT")
purchased 680,000 shares in the Company for future satisfaction of options to
employees granted under the Group's Share Option Plans. These shares will be
accounted for as treasury shares. The number of shares held in the EBT as at
30 June 2024 was 611,718.
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