Insider: bosses back up targets with own purchases

A member of the “revitalised” leadership team at documents manager Restore (LSE:RST) has spent £68,000 backing the AIM-listed company to continue its upturn in fortunes.

The purchase by finance boss Dan Baker took place at an average price of 271p, which compares with 172.5p last September. Broker Panmure Liberum has a target of 300p, believing an expected recovery in earnings after a tough 2023 is yet to be factored in.

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Baker joined Restore in November as part of a shake-up that saw Charles Skinner return as chief executive and former Workspace boss Jamie Hopkins move from non-executive director to chair.

Skinner told investors in July’s half-year results that changes, including in operating style, have been significant and will take time before they fully bear fruit: “That said, the management team is revitalised and we are starting to see signs of improved performance.”

The former CEO of Brandon Hire and Johnson Service Group believes Restore should be targeting an operating margin of no less than 20% in the medium term, which compares with 16.9% after a 140 basis point improvement in the first half of 2024.

The group, whose operations include records management, cloud and data storage and secure document shredding, reported an 8% rise in adjusted profits to £16.3 million. A dividend of 2p a share worth £2.8 million is due on 23 October, an 8% rise on the year before.

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Landmarks included a new contract with the Department for Work and Pensions (DWP) for inbound mail and document management services worth over £70 million across six years.

Records Management is the largest part of the group, accounting for 45% of revenues as one of the two dominant operators in the UK. In conjunction with Restore’s Harrow Green division, it last year completed the move of the BBC archives from Perivale to a site in South-East England.

The records division boasts strong revenues and earnings visibility, as well as attractive margins and high barriers to market entry.

It posted a record sales figure of £124.1 million last year but three other businesses in the group faced industry-specific headwinds, including a dearth of major bulk scanning contracts that impacted on Digital’s revenues.

Weak global IT sales also meant low levels of IT recycling for Technology, while a steep decline in recycled paper prices during the year translated into reduced profitability at Datashred.

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Adjusted profit before tax reversed from £41 million to £30.3 million. Skinner, who ran Restore between 2009 and 2019, called the result disappointing given the company’s strong positions in all its markets and the recurring nature of most of its revenues. 

He has overhauled head office functions, improved operational efficiency and brought in Baker, whose experience includes as a senior divisional financial director at two blue-chip companies.

Presenting half-year results, Skinner said he expected all but one of the group’s divisions to improve their operating margin performance across the full year.

Should the margin reach 20% as Skinner hopes, Panmure Liberum said this would imply adjusted profit growth of 43% and a price/earnings rating of 9.7 times.

CEO and chair demonstrate confidence

The chair and chief executive of Secure Trust Bank (LSE:STB) have shown their confidence in the company’s £4 billion net lending target by spending a combined £350,000 on shares.

Their purchases were made after this month’s interim results revealed strong top-line growth and a 12% rise in pre-provision profit to £45.2 million, offset by a higher impairment charge due to a temporary hiatus in collections activity in the vehicle finance division.

Secure Trust continues to expect significant growth in year-on-year profits, boosted by further improvement in its cost income ratio and favourable conditions created by the Bank of England interest rate cut and benign inflation outlook.

The Solihull-based business, which was founded in 1952 and was part of the Arbuthnot Banking Group from the early 1980s until 2016, provides point-of-purchase options in the retail sector and vehicle financing at car dealerships.

It also offers asset-based lending to businesses, alongside finance for professional landlords and property developers. The bank’s savings division has £3 billion of customer deposits.

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Chief executive David McCreadie said the company continued to make progress towards its medium-term ambitions, which include net lending of £4 billion and a margin above 5.5%. The equivalent figures in half-year results were £3.4 billion and 5.3% respectively.

He disclosed share purchases worth £100,000 after the results, followed by new chair Jim Brown who spent £250,000 in two separate investments. The most recent deals took place last week at 860p, which compares with a price of 1,295p two years ago and 634p in March.

The shares have recovered on the back of the improving economic outlook and resumption of vehicle finance collections activities. They were paused during the second half of 2023 amid the FCA’s industry-wide review of borrowers in financial difficulty.

House broker Shore Capital lifted its fair value estimate of the shares from 1,500p to 1,725p following the results, boosted by the company’s disclosure that it had increased its cost savings target by £3 million to £8 million.