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Document management business remains confident in full year forecasts

Restore (RST) 510p

Gain to date: 0.6%

Original entry price: Buy at 507p, 29 Mar 2018

The gains from our ‘buy’ stance on document management group Restore (RST:AIM) have been more or less erased after a mixed update on 21 May.

The company noted that trading had started ‘satisfactorily’ in 2018 and that its expectations for the full year remained unchanged, despite pressure on its shredding unit. However, the market clearly felt there was a risk the problems in this part of the business could see it miss estimates.

Restore Datashred, the shredding business, delivered lower operating margins than budgeted in the first quarter and steps have been taken to improve margins in the second quarter.

More positively, and ahead of this announcement, Liberum initiated on the stock with a 600p price target.

Analysts Rahim Karim and Joe Brent reckon there is still scope for significant upside at the firm. They argue: ‘A combination of organic growth and acquisitions has built the leading provider of outsourced office services in the UK.

‘However, with a market share of just 11.5%, we believe the existing strategy still has the potential to drive significant growth.

‘This top-line dynamic, combined with significant margin upside, means the potential to once again transform the scale of the business remains.’


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