Redcentric PLC – Half Year Results

Redcentric plc (“Redcentric”, “the Company”, or “the Group”) (AIM: RCN), a leading UK IT managed services provider, today announces its unaudited results for the six months to 30 September 2019.

 

Financial measures	Six months to 30 Sept 2019 (H1-20)1	Six months to 30 Sept 2019 (H1-20) pre-IFRS 161	Six months to 30 Sept 2018 (H1-19)	Change1
Total revenue	£43.2m	£43.2m	£47.5m	-9%
Recurring monthly revenue (RMR) 2	£38.8m	£38.8m	£41.3m	-6%
Adjusted EBITDA2	£10.3m	£8.8m	£8.1m	+8%
Adjusted operating profit2	£5.5m	£5.0m	£4.1m	+23%
Reported operating profit	£1.9m	£1.4m	£0.5m	+219%
Adjusted cash generated from operations2	£10.2m	£8.7m	£9.2m	-6%
Reported cash generated from operations	£9.8m	£8.2m	£8.8m	-6%
Net debt	£(40.0)m	£(16.5)m	£(22.6)m	-27%
Adjusted basic earnings per share2	2.41p	2.48p	1.89p	+31%
Reported basic earnings per share	0.34p	0.41p	(0.38)p	+208%
Interim dividend per share	0.83p	0.83p	0.4p	+108%

 

¹ The results for H1-20 are not directly comparable with the prior year due to the adoption of IFRS 16 Leases. Further details are provided in note 3 to the financial statements, and Appendix 1, which sets out the impact of IFRS 16 Leases on the primary statements. The % change figures reported above relate to H1-20 vs. H1-19 pre any IFRS 16 Leases impact.

 

² For an explanation of the alternative performance measures used in this report, please refer to Appendix 2.

Financial Highlights

·      Total revenue down by 9% to £43.2m, but good future visibility with £38.8m recurring revenue representing 90% of total revenue (H1-19: 87%).

·      Gross margins improved to 64.5% from 59.8%.

·      Adjusted (pre-IFRS 16) EBITDA up 8% to £8.8m (H1-19 £8.1m), with margin improving to 20.3% (H1-19 17.1%).

·      Adjusted (pre-IFRS 16) operating profit up 23% to £5.0m (H1-19 £4.1m), with margin improving to 11.6% (H1-19 8.6%).

·      Continued strong cash flows with £8.7m of adjusted pre-IFRS 16 operating cash flow in the period (99% cash conversion).

·      Net debt, excluding the impact of IFRS 16, reduced by £1.1m in the period to £16.5m, with £4.8m capital expenditure and £1.5m of dividends paid in the period.

·      Interim dividend increased to 0.83p per share (H1-19 0.4p) , to be paid in January.

Operational Highlights

·      Q1-20 recurring revenues were flat on Q4-19 and Q2-20 recurring revenues were up on Q1-20, driven by both new logo wins and effective cross-selling.

·      Operating margins continued to improve due the cost measures undertaken in the second half of the last financial year.

·      £1.1m invested in our national network and a further £1.5m invested in our infrastructure as a service (IaaS) platform. We now have modern, resilient and scalable platforms and networks from which we can service our current and future customer base.

·      Product management and Development teams reorganised, with managed firewall and SD WAN launched in Q3-20 and further enhancement to our Collaboration and Security portfolios to be launched in Q4-20.

·      Strategic review of our data centre and network portfolios underway, with the expectation that this will result in annual savings of at least £2.8m in FY21 onwards.

 

Ian Johnson, Non-Executive Chairman, commented:

“Visibility of future revenues remains strong with recurring revenues reaching 90%. New customers were added in the period which, together with effective cross selling, led to quarter on quarter revenue growth.  This revenue growth has been achieved despite the ongoing FCA investigation, which continues to impact the pace at which we win new business.

Management continues to improve the operational efficiency of the business. The strategic data centre and network portfolios review now underway is expected to lead to the realisation of annual savings of at least £2.8m and further improvements in operating margins. 

Cash flow remains strong allowing significant investment into our network and a further reduction to net debt in the period.  The Board is confident that the business will continue to generate strong cash flows enabling it to return cash to shareholders by way of dividend and further share purchases via the share buy-back programme.”