For most of the past decade, Restore (RST) was a classic mid-cap consolidator. The Aim-traded business services provider was dependable, acquisitive and powered by the cash flows of its high-margin records management division.

Then came 2023, when a string of profit warnings ended in a statutory loss and made clear that the strategy had veered off course.

The company, which manages and stores physical and digital records, recycles IT equipment and handles office moves, went on a dealmaking run that left it with volatile, low-quality growth just as its core records unit slowed. What should have been a steady compounder began to look like an overstretched roll-up, and the shares sold off accordingly.

Under chief executive Charles Skinner, who two years ago returned to the business he first built, Restore is undergoing a turnaround. While revenue dipped slightly last year, reported profits moved back into the black. By the end of June, the adjusted operating margin had risen to 17.7 per cent. That was up from a nadir of 15.5 per cent in the first half of 2023, and on the way to the company’s medium-term target of 20 per cent.

Skinner’s strategy has included trimming head office costs, merging the digital and physical records units into a new division called information management, and consolidating Restore’s property footprint. But beyond the raw numbers, analysts say the foundations now look sturdier and more coherent than before.

A jewel in the crown asset

That optimism isn’t reflected in the share price. Restore has underperformed the Aim 100 index over the past year, leaving the shares trading on less than 11 times forward earnings and the enterprise value on less than five times earnings before interest, tax, depreciation and amortisation (Ebitda). That’s a sharp discount to New York-listed peer Iron Mountain (US:IRM), whose EV/Ebitda multiple sits at 18.

At the current valuation, Canaccord Genuity analyst James Wood sees 70 per cent upside to his target price, backed by the value he ascribes to the information management arm. Stripping out central costs and net debt, Wood argues that the division is worth more than the entire group, which would mean the market now ascribes a negative value to the rest of the business.

Investec’s Tom Callan agrees, pegging the division at 11 times Ebitda and therefore above the group’s current enterprise value.

Within the division is the records management arm, which stores, manages and retrieves millions of physical files for blue-chip and government clients, including the NHS, under long-term contracts.

Around 80 per cent of its revenues are recurring – as boxes of records are stored for years or decades – with inflation-linked price rises and a capital-light model that throws off sticky cash flows. The division can generate operating profit margins above 30 per cent in normal conditions, contributing to around 85 per cent of group profits.

The digital business, which focuses on bulk scanning and digitisation for large government mailrooms such as HMRC, has been weak after a major contract ended last year and scanning activity slowed. But folding digital and physical records into one unit has already helped win a major scanning contract with Oxford University Hospitals starting in 2026.

“By having physical and digital together, they can offer more of a hybrid option to customers,” explains Wood. “The NHS has to have physical records but wants to digitise, so having that dual approach and a team incentivised to sell that dual approach is making a difference.”

Back to the dealmakers’ table

After pausing M&A to stabilise the group, Restore returned to dealmaking in March, buying UK document management business Synertec for an enterprise value of £33mn. The company, which has been folded into Restore’s information management arm, serves around 75 per cent of NHS trusts, managing critical communications such as appointment notifications and test results. 

The company’s model delivers 20 per cent operating margins when excluding pass-through postage costs. Multiyear contracts also improve customer stickiness, while its competitive moat is built around its proprietary software, which converts customer data into multiple output formats, such as Braille or easy-read letters. 

Synertec’s margins are in line with Restore’s medium-term target, but analysts are most bullish about the potential to drive cross-selling opportunities with other divisions, particularly by providing access to more NHS relationships. “Charles wants to get into the public sector with the records business,” notes Callan. “There’s an obvious strategic fit there.”

The resilience of the information management division, and physical records in particular, has been doubly important amid difficult trading conditions for Restore’s other interests. The IT lifecycle management arm, which handles the deployment, refurbishment and disposal of corporate tech equipment, was a major contributor to those problems.

However, it is this business that has undergone the biggest turnaround over the past two years. In the first six months of 2025, it returned to profitability. Under a new divisional head, the focus has shifted from one-off bulk recycling jobs of old hardware to service-based contracts and partnerships with value-added resellers (VARs), which bring in more predictable volumes.

It could even be a source of growth. Peel Hunt thinks the division is well placed to profit from a “wave of IT disposal and refresh projects” as devices bought during the pandemic approach the end of their useful lives, while Callan noted that Restore could also benefit from data centre fit-outs. As hardware refreshes return and more volume goes through its processing site, margins should snap back quickly.

The odd one out

Restore’s office relocation arm, however, remains the problem child. Harrow Green’s revenues fell by 12 per cent to £35mn last year, with adjusted operating profit slumping by nearly 60 per cent and the margin squeezed by 6 percentage points to 5.4 per cent even though the company cut staff. By the end of the first half, the margin had fallen to 2 per cent.

The division is battling a tough market, thanks to several postponed relocations and pricing pressures from companies continuing to downsize rather than expand their office footprints, especially in London. The jury is still out on whether the pain is temporary or structural.

However, the business sits awkwardly within the group and is viewed as non-core. The prolonged slowdown has fuelled speculation that the unit could be the most obvious candidate for a sale, although perhaps not yet. “[Skinner] is not going to make a decision in a hurry,” reckons Callan.

A sale would certainly be welcome for the debt pile, which has bloated significantly following the Synertec deal and smaller bolt-on acquisitions. Net debt excluding leases rose to £120mn at the half-year mark, up from £94mn a year earlier. That pushed leverage to 1.9 times Ebitda, towards the upper end of what some may consider comfortable given its business model.

With profits typically weighted to the second half, Investec’s Callan expects leverage to fall to 1.6 times by the year-end thanks to the cash Restore throws off, and to 1.2 times by the end of next year assuming no further deals. That would put Restore below its own target range of 1.5 to 2 times Ebitda and reopen the door to more M&A, buybacks or a bigger payout. 

With leverage falling, margins rebuilding, a trusted operator at the helm and a valuation still stuck at distressed levels, Restore is clearly more than just a business on the mend. Yet the market is still treating it as though nothing has changed. That stark disconnect offers a way in.

Real estate is not a fast-moving sector. Repositioning a portfolio requires timing, skill, a little luck and plenty of patience. For shareholders, the latter quality has been a prerequisite in recent years. Land Securities (LAND) – better known as Landsec – appears to seek saintlike quantities of the stuff from its investors.

The FTSE 100 landlord will spend the next half decade, and possibly longer, reorienting its £11bn office-led portfolio towards a more balanced split between offices, shopping centres and residential premises. Plentiful execution risks lie in wait along the way.

Playing the retail revival

Landsec has made its initial goal clear. “For the next 12 to 18 months, our priority is further investment into major retail destinations, given the high income returns and attractive income growth on offer,” chief executive Mark Allan told analysts last month.

This means shopping centres. The rationale appears sound, with the asset class on the comeback trail after a volatile couple of decades. “They aren’t viewed as the big problem child they once were,” says Adam Shapton, analyst at real estate research firm Green Street. Indeed, like-for-like income from Landsec’s existing £3bn retail portfolio – 75 per cent of which is shopping centres and the rest smaller retail parks – grew by 5 per cent in the six months to 30 September 2025. That helped increase valuations by 2 per cent.

A deterioration in UK consumer confidence or willingness to spend could slow this growth, however.

Allan has publicly stated the company plans to target only the top 30 shopping centre assets in the UK. As a known buyer with a finite time horizon, Landsec risks overpaying or being outbid, as other institutional interest follows.

This includes retail giant Frasers (FRAS), which has now been buying retail assets for a decade and, unlike Landsec, was recently among the names linked with the acquisition of Merry Hill, a top-tier shopping centre in the West Midlands valued at £270mn.

“Will [Landsec] be far enough through [its] capital recycling programme to take advantage of opportunities when they come up?” wonders UBS analyst Zachary Gauge.

Complicating the task, the company has little choice but to fund acquisitions through disposals. It is already amply leveraged, with a portfolio loan to value of 39 per cent and a net debt to Ebitda (earnings before interest, tax, depreciation and amortisation) ratio of 8.6, both above their target levels of 35 per cent and 7, respectively. This leaves limited room to draw down or finance further borrowing.

That said, the debt pile does have a lengthy average maturity of nine years and a low average coupon of 3.6 per cent. Barring a dramatic rise in government bond yields, this does not appear to be a significant concern. On the flip side, management has offered no indication that it plans to raise equity capital from shareholders – although with the company’s shares trading almost a third below book value, this is unsurprising.

Disposals, but at what cost?

The path ahead is therefore clear: disposals will fund acquisitions. This means selling £1.1bn-worth of retail parks and office developments in the next 12-18 months, and £2bn of lower-quality office assets over the next five years (Landsec plans to retain its prime office assets).

This strategy is sensitive to the evolution of the London office market. The difficulty here is that, for all chief executives’ talk of limited new supply, growing tenant demand and promising rental growth, the London office market remains subdued. There were only £4.5bn-worth of transactions in the first nine months of 2025, a rise on 2024 but still well below the long-run average. There have been few large deals, and valuations have flatlined.

This lack of activity doesn’t augur well for demand. The market knows Landsec will sell, and, to quote Allan, “be reasonably pragmatic about value” when it does. It may have to dispose of assets at a loss to book value, which could increase gearing and send a negative signal about the valuations of its neighbouring properties.

The company has already sold £644mn-worth of offices and retail parks at a discount since March, booking a £67mn loss in the process. UBS’s Gauge expects a further £167mn of losses on disposal through to March 2027, equal to 1.5 per cent of Landsec’s current portfolio value.

This may not matter, of course, if Landsec can redeploy the proceeds into assets with the potential for income and capital growth. But the execution risk is undoubtedly there.

Dither and delay

In the latter stages of its transformation, Landsec intends to establish a £3bn residential platform through three large developments, two in London and one in Manchester. Both the inflation-linked income and supply-and-demand fundamentals of build-to-rent platforms are attractive at face value, but the numbers still need to add up. 

So far, investors are doubtful. Landsec’s initial guidance was for these developments to yield an annual operating profit equivalent to just 5 per cent of their total cost, and then only from 2030. Investors were underwhelmed. “The yield felt low at the time, and that has been reinforced with market feedback,” argues Gauge.

The company appears to have taken the response on board and used its half-year report to reassure investors that future spending on pre-development assets will be “minimal pending visibility on the potential for public sector support to improve the return prospects for our residential schemes”. In other words, it is pausing development.

“It was a bit perplexing that in February they said a 5 per cent yield on cost was adequate but by November it wasn’t,” says Shapton. Shareholders are unlikely to welcome the incremental uncertainty.

Some might argue at this point that Landsec should just buy Grainger (GRI), a build-to-rent landlord with both a quality operating platform and sufficient scale (11,000 properties and counting), and a market cap of just £1.4bn. Alas, the price of Grainger’s shares – a third richer than Landsec’s on 16 times analysts’ 2027 estimates, all before a take-out premium – would be likely to complicate the larger group’s ability to find an earnings-accretive deal structure.

Nor does it help that Landsec has already changed strategy since Allan took the chief executive post in March 2020. Not only has its desired portfolio mix shifted from offices towards apartments, but its focus has moved to prioritising income over capital appreciation.

“We are a total return business . . . income is a very important part of total return, but should not be the key driver,” Allan proclaimed at the company’s October 2020 capital markets day, when interest rates were on the floor. By February 2025, the line was “that over longer periods, it is income growth which drives value growth”.

While shareholders should welcome the recent prioritisation of earnings growth – given how net asset values no longer provide much of an anchor to real estate investment trust share prices – such mixed messaging risks undermining the credibility of the company’s strategy. 

Landsec’s valuation, at 12 times analysts’ earnings estimates, is not too meaty. The shares’ 7 per cent dividend yield is enticing. And if borrowing costs fall faster than expected, the shares may rise along with the rest of the sector.

But the company’s guided earnings per share trajectory, which implies 4.5 per cent annual growth over the next five years, with limited near-term growth, does not adequately compensate investors for the strategic risks and uncertainties. For real estate investors seeking a similar income profile but with lower risks and clearer business plans, Sirius Real Estate (SRE) and LondonMetric (LMP) look like better options.