Analysts at Berenberg reiterated their ‘buy’ rating on document management group Restore on Friday, stating recent defensive growth implied it would have a “better 2023”.
Berenberg said Restore’s full-year 2022 results on Thursday contained “no significant surprises” following a negative update in November and a positive one in February, with “strong revenue growth” of 19%, driven by a combination of volume growth, “impressive” new contract wins, and some price increases.
The bank acknowledged that profit growth was “slightly weaker”, with underlying earnings up 10% and pre-tax profits growing 8%, affected by inflationary pressures, largely on staff and fuel, and higher interest costs, particularly in the second half.
“While this sounds reasonable, shares have fallen by 35% since the start of 2022, due to a factor of market-wide pressures and downgrades to forecasts caused by the aforementioned inflationary pressure and higher interest rates. From this lower base, we are convinced that Restore is well placed to grow its earnings and share price over the year ahead,” said the analysts, who also stood by their 450.0p target price on the stock.
“Profit growth will come from annualising new contract wins, underlying growth in defensive markets and much stronger pricing. With, hopefully, fewer negative surprises on rates and a starting point of just 12.6x P/E and a 7.3% FCF yield, we think the shares are well positioned to perform from here.”
Reporting by Iain Gilbert at Sharecast.com
