TIDMRCN
RNS Number : 2050U
Redcentric PLC
22 November 2023
Redcentric plc
("Redcentric" or the "Company")
Half year results for the six months ended 30 September 2023
(unaudited)
Redcentric plc (AIM: RCN), a leading UK IT managed services
provider, is pleased to announce its unaudited results for the six
months to 30 September 2023.
Six months Six months Change
to 30 Sept to 30 Sept
2023 (H 2022 (H
1-24) 1-23)
Unaudited Unaudited
(Restated(2)
)
-------------------------------------------- ------------ -------------- --------
Total revenue GBP82.0m GBP61.5m 33.3%
Recurring revenue (1) GBP74.8m GBP56.4m 32.6%
Recurring revenue percentage 91.2% 91.7% (0.5%)
Adjusted EBITDA(1) GBP14.5m GBP11.7m 24.3%
Adjusted operating profit(1) GBP5.6m GBP3.9m 43.4%
Reported operating profit/(loss) GBP2.0m (GBP5.5m) 135.9%
Adjusted cash generated from operations(1) GBP10.4m GBP2.2m 379.9%
Reported cash generated from operations GBP8.4m (GBP2.6m) 421.4%
Adjusted net debt(1) (GBP41.6m) (GBP39.3m) (5.8%)
Reported net debt (GBP74.7m) (GBP63.2m) (18.3%)
Adjusted basic earnings per share(1) 1.51p 1.44p 27.2%
Reported basic earnings per share (0.14p) (3.86p) 158.8%
-------------------------------------------- ------------ -------------- --------
(1) This report contains certain financial alternative
performance measures ("APMs") that are not defined or recognised
under International Financial Reporting Standards ("IFRS") but are
presented to provide readers with additional financial information
that is evaluated by management and investors in assessing the
performance of the Group.
This additional information presented is not uniformly defined
by all companies and may not be comparable with similarly titled
measures and disclosures from other companies. These measures are
unaudited and should not be viewed in isolation or as an
alternative to those measures that are derived in accordance with
IFRS.
For an explanation of the APMs used in this announcement and
reconciliations to their most directly related Generally Accepted
Accounting Principles ("GAAP") measure, please refer to the Chief
Financial Officer's Review.
(2) See note 16 for an explanation and reconciliation in
relation to the prior year restatement to present the impact of the
revised Purchase Price Allocation of the Sungard and 4D
acquisitions.
Financial highlights
-- Total revenue grew by 33.3% to GBP82.0m (H1-23: GBP61.5m)
with recurring revenue of GBP74.8m (H1-23: GBP56.4m), reflecting
the full period impact of the three acquisitions made during
H1-23.
-- The proportion of recurring revenue decreased by 0.5% to
91.2% (H1-23: 91.7%) reflecting good growth in one-off sales in
H1-24.
-- Adjusted operating expenditure increased by GBP13.0m (40.9%)
to GBP44.7m (H1-23: GBP31.8m) reflecting the full period impact of
the three acquisitions made in H1-23.
-- Adjusted EBITDA was GBP14.5m (H1-23: GBP11.7m) and adjusted
EBITDA margins decreased by 1.3% to 17.7% (H1-23: 19.0%) which
reflects the full period impact of acquisitions prior to the full
efficiency programmes and synergies following significant
integration activity in the past 12 months.
-- Reported operating profit increased to GBP2.0m (H1-23: loss
of GBP5.5m) as a result of the above impacts couple with
significant exceptional costs in H1-23 from the acquisitions.
-- Net debt has increased by GBP1.7m since 31 March 2023 to
GBP74.7m (31 March 2023: GBP73.0m), reflecting:
o The payments of the final consideration for the Sungard and 7
Elements acquisitions (GBP0.9m).
o New sale and leaseback arrangements of GBP2.4m for new
equipment used in the data centres acquired in 4D and Sungard.
o The cash cost of exceptional items of GBP2.0m, relating to
integration and restructuring costs on the 4D and Sungard
acquisitions.
-- Excluding leases previously classified as operating leases
under IAS17, net debt was GBP41.6m (31 March 2023: GBP35.6m).
-- The interim dividend will be maintained at 1.2p per share.
Operational highlights
-- The enlarged customer base and broader product portfolio
resulting from the acquisitions, along with an increased investment
in sales resource has resulted in a very strong underlying organic
growth rate of 8.3%.
-- Electricity conservation programmes completed post the period
end with annualised savings of GBP2.8m realised, GBP0.8m ahead of
expectations.
-- Further own-use electricity commodity contracts taken out
with 100% of FY24 and 70% of FY25 anticipated volumes secured at
fixed prices.
-- Closure of Harrogate data centre progressing well with
annualised cash savings of GBP1.4m offset by gross profit impact of
customer losses of c.GBP0.7m.
-- Insourcing of several managed services contracts completed
with net annualised savings of GBP0.8m, in line with
expectations.
-- Further annualised operational savings of, at least, GBP0.5m
to come as a result of the consolidation of cloud and data back-up
platforms.
-- The Group expects to see the full benefits of reduced electricity commodity prices and the implementation of the energy conservation programmes being realised from 1 April 2024.
Peter Brotherton, Chief Executive Officer commented:
"The integration of the businesses acquired over the course of
the last two financial years is on track to be fully completed by
the end of this financial year. The acquisitions have added
considerable scale and broadened our product and solutions
offerings, both of which have driven underlying recurring revenue
growth of 8.3%.
Since acquiring Sungard DCs, we have put considerable effort and
resource into reducing electricity volumes. All major energy
efficiency initiatives have now been completed and we are yielding
very significant gains as a result. The reduction in electricity
volumes, alongside the forward purchasing of electricity, brings
certainty to our forecasts and will result in an expected reduction
in electricity costs of GBP8.4m next financial year.
We look forward to the next financial year and beyond with
confidence that we can continue to build on the impressive platform
we have built. With the integration work complete, exceptional
items will cease and capital expenditure will return to more
normalised levels both of which, alongside a significant reduction
in operating costs, is expected to drive strong cash flow
generation in FY25 and beyond."
Enquiries:
Redcentric plc +44 (0)800 983 2522
Peter Brotherton, Chief Executive Officer
David Senior, Chief Financial Officer
Cavendish Capital Markets Limited - Nomad and Broker +44 (0)20 7220 0500
Marc Milmo / Simon Hicks / Charlie Beeson (Corporate
Finance)
Andrew Burdis / Sunila de Silva (ECM)
Chief Executive Officer's review
Overview of the six months ended 30 September 2023
Chief Executive Officer's review
OPERATIONAL REVIEW
Since the last update given in August 2023 when the annual
results were released, we have continued to focus on three
operational themes: organic revenue growth, integration of the
acquired businesses and electricity conservation measures.
Organic growth
The sales team continues to perform well and is successfully
exploiting the opportunities resulting from the acquisitions made
over the previous two financial years. The enlarged customer base
brings with it enhanced cross sell opportunities and the wider
product offerings present further opportunities to grow the revenue
base.
In fifteen of the seventeen months to 31 October 2023, we have
achieved positive net new business (defined as new order intake
less cancellations received less renewal churn). For the purposes
of this analysis, we exclude the losses from Sungard short term
contracts and the losses from the closure of the Harrogate data
centre, both of which are discussed later in this update.
Recurring revenues, excluding revenue from Sungard short term
contract cancellations, grew by 8.3% over the prior six month
period with net new business gains seen across all service towers.
It is also pleasing to note that we are now attracting new logos on
a monthly basis.
Revenues from cancelled Sungard short term contracts amounted to
GBP1.0m in the 6 months ended 30 September 2023 (6 months to 31
March 2023: GBP3.9m). Whilst it is disappointing that we did not
retain these customers following our acquisition, cancelled short
term customer contracts were excluded from the calculation of the
final consideration payable, and any remaining Sungard short term
contracts have now been converted into longer term contracts.
Integration of the acquired businesses
The integration work undertaken in FY24 has concentrated on
three main areas: closure of the Harrogate data centre, supplier
rationalisation and consolidation of cloud platforms.
Closure of the Harrogate data centre
The closure of the Harrogate data centre is on course to be
completed by the end of January 2024, with the fully decommissioned
building on target to be handed back to the landlord on the lease
end date of 24 March 2024.
At the time of this report, we are approximately halfway through
the migration of customer and internal systems from the Harrogate
data centre into our Elland data centre. All migrations to date
have proceeded well and without any major customer incidents. The
move, however, has resulted in some customers cancelling their
contracts. These contracts have combined annual revenues of
c.GBP1.4m, and we expect to see revenues from these contracts
dropping off during the second half of this financial year.
Final savings from the closure of Harrogate of GBP1.4m are
anticipated, in line with previous expectations and comprise lease
cost savings of GBP1.0m and operating costs savings of GBP0.4m,
with these savings effective from the next financial year. These
savings will be offset by a reduction in gross profit of circa
GBP0.7m from the customer cancellations referred to above.
Supplier rationalisation
During the first six months of the financial year, we have
continued to rationalise the supplier base and have insourced two
large managed services contracts. This will result in net combined
annual savings of GBP0.8m, being supplier savings of GBP1.4m offset
by additional staff costs of GBP0.6m. These savings and their
timing are in line with previous updates.
Consolidation of cloud platforms
As a result of the acquisitions, we have acquired numerous cloud
and backup platforms which replicate existing Redcentric platforms.
We currently have plans to merge two of these platforms by the end
of this financial year and anticipate associated annualised savings
of GBP0.5m in FY25. Once resource is freed up from the Harrogate
relocation project, we expect to launch further and more extensive
consolidation programmes which will result in further but as yet
unquantified savings.
Electricity conservation measures
Having largely completed the basic and short-term electricity
conservation measures, our recent attention has focused on
delivering the more complex and longer-term measures.
London Technology Centre ("LTC") (previously referred to as the
Heathrow data centre)
An investment of GBP2.2m has been made for new cooling
infrastructure, significantly upgrading the plant at the recently
acquired LTC. Commissioning of the new system commenced on 10
November 2023 and is expected to be fully operational by the end of
November. We are currently achieving volume savings on
non-productive power of approximately 30%, which is ahead of our
expectations. Based on the current volume savings and the forward
electricity prices secured, we expect to achieve annualised savings
of c.GBP1.4m, resulting in an impressive payback of nineteen months
and very significant savings over the course of its expected
fifteen-year life.
The installation was not without complications, however, as we
encountered significant issues with highly contaminated water in
the existing cooling systems. As a result of this, we had to deploy
new filtration plant which will remain in place to ensure that the
issue does not recur. The cleansing of the water caused a
four-and-a-half-month delay to the installation.
The combined net effect of the installation delay and the impact
of the higher volume savings will be to increase electricity costs
by GBP0.4m in this financial year. The higher than anticipated
volume savings will reduce electricity costs by approximately
GBP0.6m in FY25.
Woking data centre
This is a third-party data centre where we rent a large hall
rather than actively managing the site ourselves. Our partners at
this site have also recently completed a major chiller replacement
programme with their new plant being live from 1 September 2023.
This is currently yielding non-productive power savings of 22.5%,
in line with our expectations.
Based on the current savings being realised and the anticipated
electricity prices, we expect to achieve annualised savings of
c.GBP0.7m from this site. As with LTC, this installation was
completed later than anticipated and will result in higher than
anticipated energy costs of circa GBP0.3m in the current financial
year. In addition, electricity costs are expected to be GBP0.7m
higher in FY24 and GBP0.5m higher in FY25 due to worse than
anticipated procurement by the third-party.
With the new cooling infrastructure now in place, a major amount
of uncertainty has been removed from the financial forecasts.
Whilst the implementation delays were disappointing, this is purely
a timing difference, and the long-term profitability has been
improved with an anticipated realisation of savings of an
impressive circa GBP2.1m per annum.
FINANCIAL REVIEW
Six months Six months Change
to 30 Sept to 31 March
2023 (H1-24) 2023 (H2-23)
Unaudited Unaudited
---------------------------------- -------------- -------------- ---------
Total revenue GBP82.0m GBP80.2m 2.2%
Recurring revenue(1) GBP74.8m GBP72.0m 3.9%
Recurring revenue percentage 91.2% 89.8% 1.4%
Gross profit GBP59.3m GBP57.5m 3.3%
* Staff costs GBP19.6m GBP18.6m 5.3%
GBP13.3m GBP14.8m (10.6%)
* Electricity costs GBP11.9m GBP11.3m 5.3%
GBP44.8m GBP44.7m 0.2%
* Other costs
Operating costs
Adjusted EBITDA(1) GBP14.5m GBP12.8m 13.3%
Reported operating profit/(loss) GBP2.0m (GBP3.4m) 164.7%
Adjusted cash generated from
operations(1) GBP10.4m GBP20.9m (50.2%)
Reported cash generated from
operations GBP8.4m GBP17.5m (52.0%)
Adjusted net debt(1) (GBP41.6m) (GBP35.6m) (16.9%)
Reported net debt (GBP74.7m) (GBP73.0m) (2.3%)
(1) For an explanation of the APMs used in this report, please
refer to page 5.
On a statutory reporting basis (H1 FY24 versus H1 FY23),
revenues grew from GBP61.5m to GBP82.0m and adjusted EBITDA grew
from GBP11.7m to GBP14.5m. Reported operating profit increased from
a loss in H1 FY23 of GBP5.5m to a profit in H1-24 of GBP2.0m.
Comparison of the numbers is very difficult given that the H1
FY23 numbers only include part period contributions from the
Sungard and 4D Data Centre acquisitions. Therefore, for the purpose
of this review we have compared H1 FY24 against H2 FY23 as we feel
this is a more meaningful comparison.
Revenue
Overall, recurring revenue increased by 3.9% from GBP72.0m for
the six months ended 31 March 2023 to GBP74.8m. Excluding the
revenue from cancelled Sungard short term contracts, recurring
revenue growth was an impressive 8.3%.
Non-recurring revenues are seasonal in nature due to higher
public sector spending in the second half of the financial year.
Non-recurring revenues of GBP7.2m compare favourably to the H1 FY23
revenues of GBP5.1m, with the six months ended 31 March 2023 being
GBP8.2m.
Gross profit
Gross profit increased by GBP1.8m from GBP57.5m for the six
months ended 31 March 2023 to GBP59.3m reflecting the net impact of
consumer price inflation-related price increases and savings
resulting from the Group's integration initiatives.
Operating costs
Electricity costs
Electricity costs have reduced by GBP1.5m from H2 FY23 to H1
FY24 reflecting the seasonally lower electricity prices, volume
reductions in relation to energy efficiency measures and short term
Sungard customer exits.
Staff costs
Staff costs from H2 FY23 to H1 FY24 increased by GBP1.0m
reflecting the annual pay award, costs of restructuring the sales
team and an increase in the UK employee headcount from 540 to 561.
The increase in headcount reflects a strengthening of the sales (7
additional heads) and delivery (7 additional heads) teams as well
as an additional headcount of 7 in respect of third-party managed
service contracts insourced.
Other costs
Other costs have increased by GBP0.6m, primarily as a result of
significantly increased business rates (GBP0.4m) and ERP
development costs of GBP0.2m (ERP development costs were previously
either capitalised or treated as exceptional items).
Capital expenditure
Gross capital expenditure in the six months to 30 September 2023
was GBP6.6m, comprising:
-- Customer capex of GBP2.1m
-- Maintenance capex of GBP1.2m
-- Acquisition-related capex
o LTC cooling infrastructure of GBP2.2m
o Elland data centre of GBP1.1m
With the integration work nearing completion, we expect capital
expenditure to return to more normalised levels of circa GBP6.5m
per annum with effect from 1 April 2024.
Of the GBP6.6m gross capex, GBP4.2m was paid in cash and GBP2.4m
was covered by lease arrangements.
Adjusted net debt
Adjusted net debt has increased by GBP6.0m primarily
reflecting:
-- Adjusted EBITDA of GBP14.5m, less
-- Lease repayments of GBP5.3m (including a one off payment of GBP0.2m)
-- Negative working capital movements of GBP4.2m
-- Exceptional costs of GBP2.0m
-- Capital expenditure of GBP6.6m
-- Bank interest costs of GBP1.7m
-- Contingent consideration of GBP0.9m
DIVID
The Board has reviewed the financial performance of the business
and has decided to maintain an interim dividend payment of 1.2p per
share, which will be paid on 18 April 2024 to shareholders on the
register at the close of business on 8 March 2024, with the shares
going ex-dividend on 7 March 2024. The last date for dividend
reinvestment plan (DRIP) elections is 25 March 2024.
BOARD CHANGES
On 24 July 2023, Helena Feltham stood down from the Board as
Chair of the Remuneration Committee and Non-Executive Director. A
search for Helena's replacement is currently underway.
With these results we are announcing the appointment of Oliver
Scott as a non-executive director, with effect from 1 December
2023. Oliver joins the Board as a shareholder representative with
full details given in a separate RNS also issued today.
SUMMARY AND OUTLOOK
We are very close to completing the acquisition phase of our
strategy and returning the business to a more normalised footing.
By the end of this financial year, we will have completed all of
the major integration work streams, exceptional costs will cease,
and capital expenditure will return to more normalised levels.
Electricity has moved from being a relatively insignificant cost
in the business to being one of the biggest cost items. We have
expended significant effort and cost on successfully reducing
electricity volumes and we have secured future electricity
commodity prices at competitive rates for FY24 and FY25. Given the
existing fixed price customer contracts, current electricity
volumes and the forward pricing contracts in place, we expect
electricity costs to reduce by circa GBP8.4m in the next financial
year, with further significant savings anticipated for future
financial years if prices return to historical levels.
We look forward to the next financial year and beyond with
confidence that we can continue to build on the impressive platform
we have built. This confidence is well placed given the impressive
customer base we now have and our broadened product and solutions
offerings.
The Board expects to commence FY25 at least in line with its
prior expectations. With the integration of the recent acquisitions
complete, FY25 will see the return of healthy EBITDA margins
approaching 25% and excellent cash generation, both of which are
driven by high levels of recurring revenues underpinned by long
term customer contracts.
Chief Financial Officer's Review
Alternative performance measures
This interim report contains certain alternative performance
measures that are not defined or recognised under IFRS but are
presented to provide readers with additional financial information
that is evaluated by management and investors in assessing the
performance of the Group.
This additional information presented is not uniformly defined
by all companies and may not be comparable with similarly titled
measures and disclosures by other companies. These measures are
unaudited and should not be viewed in isolation or as an
alternative to those measures that are derived in accordance with
IFRS.
As outlined in note 16, the six month period to 30 September
2022 has been restated from the previously published interim
results to present the impact of the final Purchase Price
Allocations ("PPAs") of the Sungard and 4D acquisitions. Where
applicable, the restated numbers have been highlighted.
Recurring revenue
Recurring revenue is the revenue that annually repeats either
under contractual arrangement or by predictable customer habit. It
highlights how much of the Group's total revenue is secured and
anticipated to repeat in future periods, providing a measure of the
financial strength of the business. It is a measure that is well
understood by the Group's investor and analyst community and is
used for internal performance reporting.
Six months Six months Year ended
to 30 to 30 31 March
Sept 2023 Sept 2022 2023
GBP'000 GBP'000 GBP'000
----------------------- ----------- ----------- -----------
Reported revenue 81,998 61,531 141,674
Non-recurring revenue (7,188) (5,095) (13,213)
----------------------- ----------- ----------- -----------
Recurring revenue 74,810 56,436 128,461
----------------------- ----------- ----------- -----------
Adjusted EBITDA
Adjusted EBITDA is earnings before interest, tax, depreciation
and amortisation and excluding exceptional items (as set out in
note 5), share-based payments and associated national insurance.
Items are only classified as exceptional due to their nature or
size, and the Board considers that this metric provides the best
measure of assessing trading performance as it excludes items that
impact financial performance such as amortisation of acquired
intangibles arising from business combinations which vary year on
year depending on the timing and size of any acquisitions.
Year ended
Six months
to 30
Sept 2022 31 March
Six months
to 30 Sept
2023 (Restated) 2023
GBP'000 GBP'000 GBP'000
------------------------------------------- ------------ ------------- -----------
Reported operating profit/(loss) 1,966 (5,470) (8,939)
Amortisation of intangible assets arising
on business combinations 3,225 4,178 8,183
Amortisation of other intangible assets 317 262 590
Depreciation of tangible assets 2,776 2,194 4,636
Depreciation of ROU assets 5,854 5,346 10,617
EBITDA 14,138 6,510 15,087
Exceptional items (100) 4,655 8,149
Share-based payments 503 536 1,256
------------------------------------------- ------------ ------------- -----------
Adjusted EBITDA 14,541 11,701 24,492
------------------------------------------- ------------ ------------- -----------
Adjusted cash from operations
Adjusted cash from operations is cash from operations excluding
the cash cost of exceptional items
Six months Six months Year ended
to 30 Sept to 30 Sept 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ------------ -----------
Reported cash from operations 8,357 (2,632) 14,824
Cash costs of exceptional items 2,000 4,790 8,258
--------------------------------- ------------ ------------ -----------
Adjusted cash from operations 10,357 2,158 23,082
--------------------------------- ------------ ------------ -----------
Cash from operations has increased by GBP8.2m, with the 6 months
to 30 September 2022 including the acquisition of working capital
balances.
Maintenance capital expenditure
Maintenance capital expenditure is the capital expenditure that
is incurred in support of the Group's underlying infrastructure
rather than in support of specific customer contracts.
Six months Six months Year ended
to 30 to 30 31 March
Sept 2023 Sept 2022 2023
GBP'000 GBP'000 GBP'000
--------------------------------- ----------- ----------- -----------
Reported capital expenditure 6,565 1,542 6,765
Customer capital expenditure (2,105) (595) (3,234)
--------------------------------- ----------- ----------- -----------
Maintenance capital expenditure 4,460 947 3,531
--------------------------------- ----------- ----------- -----------
The increase in customer capex reflects the broader customer
base following the acquisitions in FY23.
Adjusted operating profit and adjusted earnings per share
Adjusted operating profit is operating profit excluding
amortisation on acquired intangibles, exceptional items, and
share-based payment charges. The same adjustments are also made in
determining the adjusted operating profit margin and in determining
adjusted earnings per share ("EPS"). The Board considers this
adjusted measure of operating profit to provide the best metric of
assessing underlying performance as it excludes exceptional items
and the amortisation of acquired intangibles arising from business
combinations which varies year on year dependent on the timing and
size of any acquisitions.
Year ended
Six months
to 30
Sept 2022 31 March
Six months
to 30 Sept
2023 (Restated) 2023
GBP'000 GBP'000 GBP'000
------------------------------------------- ------------ ------------- -----------
Reported operating profit/(loss) 1,966 (5,470) (8,939)
Amortisation of intangible assets arising
on business combinations 3,225 4,178 8,183
Exceptional items (100) 4,655 8,149
Share-based payments 503 536 1,256
------------------------------------------- ------------ ------------- -----------
Adjusted operating profit 5,594 3,899 8,649
------------------------------------------- ------------ ------------- -----------
The EPS calculation further adjusts for the tax impact of the
operating profit adjustments, as presented in note 8.
Adjusted operating costs
Adjusted operating costs are operating costs less depreciation,
amortisation, exceptional items, and share-based payments. This
metric shows the trading operating expenditure of the Group,
excluding any non-trading and non-recurring items which impact
financial performance. These are controllable operating costs which
provide investors with useful information about how the Group is
managing its expenditure.
Six months Year ended
to 30 Sept
2022 31 March
Six months
to 30
Sept 2023 (Restated) 2023
GBP'000 GBP'000 GBP'000
----------------------------------------- ------------ ------------- -----------
Reported operating expenditure 57,324 49,010 109,938
Depreciation of ROU assets (5,854) (5,346) (10,617)
Depreciation of tangible assets (2,776) (2,194) (4,636)
Amortisation of intangibles arising on
business combinations (3,225) (4,178) (8,183)
Amortisation of other intangible assets (317) (262) (590)
Exceptional items 100 (4,655) (8,149)
Other operating income - (70) (88)
Share-based payments (503) (536) (1,256)
----------------------------------------- ------------ ------------- -----------
Adjusted operating expenditure 44,749 31,769 76,419
----------------------------------------- ------------ ------------- -----------
Adjusted operating expenditure has increased by 40.9% (H1-23:
GBP31.8m) reflecting the full period impact of the three
acquisitions made during H1-23.
Adjusted net debt
Adjusted net debt is net debt excluding leases that would have
been classified as operating leases under IAS 17 and supplier
loans.
Year ended
Six months
to 30 Sept
2022 31 March
Six months
to 30 Sept
2023 (Restated) 2023
GBP'000 GBP'000 GBP'000
------------------------------------------- ------------ ------------- -----------
Reported net debt (74,679) (63,151) (72,965)
Term loans 34 540 495
Lease liabilities that would have been
classified as operating leases under IAS
17 33,056 23,285 36,891
------------------------------------------- ------------ ------------- -----------
Adjusted net debt (41,589) (39,326) (35,579)
------------------------------------------- ------------ ------------- -----------
The GBP2.3m increase in adjusted net debt reflects the increased
asset financing required to deliver the data centre efficiency and
consolidation, driving future profitability.
Profitability and dividend policy
Adjusted EBITDA (GBP14.5m) and adjusted operating profit
(GBP5.6m) were up 24.3% and 43.4% respectively, with an adjusted
EBITDA margin of 17.7% (H1-23: 19.0%) and adjusted operating margin
of 6.8% (H1-23: 6.3%).
After accounting for exceptional items of GBP0.1m (gain) (H1-23:
GBP4.7m expense) and share-based payment costs of GBP0.5m (H1-23:
GBP0.5m), the reported operating profit was GBP2.0m (H1-23: loss of
GBP5.5m).
Net finance costs for the period were GBP2.7m (H1-23: GBP1.1m)
including GBP0.9m (H1-23: GBP0.4m) of IFRS 16 finance charges.
The reported basic and diluted EPS both increased to (0.14)p and
(0.14)p respectively (H1-23: (3.86)p and (3.86)p respectively).
Adjusted basic and diluted EPS both increased to 1.51p and 1.47p
respectively (H1-23: 1.44p and 1.42p respectively).
The Board has reviewed the financial performance of the business
and has decided to maintain an interim dividend payment of 1.2p per
share.
Cash flow and net debt
The principal movements in net debt are set out in the table
below.
Six months Six months Year ended
to 30 Sept to 30 Sept 31 March
2023 2022
(Restated) 2023
GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------- ------------- -----------
Operating profit/(loss) 1,966 (5,470) (8,939)
Depreciation and amortisation 12,172 11,980 24,026
Exceptional items (100) 4,655 8,149
Share based payments 503 536 1,256
---------------------------------------------- ------------- ------------- -----------
Adjusted EBITDA 14,541 11,701 24,492
Working capital movements (4,184) (9,543) (1,410)
Adjusted cash generated from operations 10,357 2,158 23,082
Cash conversion 71% 18% 94%
Capital expenditure - cash purchases (6,565) (1,542) (6,374)
Proceeds from sale of fixed asset -
sale and leaseback 2,419 - 966
Net capital expenditure (4,146) (1,542) (5,408)
Corporation tax paid (142) (176) (670)
Interest paid (1,613) (513) (1,795)
Loan arrangement fee amortisation (109) (133) (291)
Finance lease / term loan interest (789) (424) (1,248)
Effect of exchange rates (35) 38 (101)
---------------------------------------------- ------------- ------------- -----------
Other movements in net debt (2,688) (1,208) (4,105)
Normalised net debt movement 3,523 (592) 13,569
---------------------------------------------- ------------- ------------- -----------
Acquisition of subsidiaries (net of
cash acquired) - (23,229) (26,606)
Cash costs of exceptional items (2,000) (4,790) (8,258)
Contingent consideration paid (890) - -
IFRS16 lease additions (2,419) (14,188) (28,314)
IFRS16 lease additions on acquisitions - - (1,976)
Remeasurement relating to lease modification - - 629
Disposal of treasury shares on exercise
of share options - - 229
Cash received on exercise of share
options 72 12 -
Dividends - (3,719) (5,593)
---------------------------------------------- ------------- ------------- -----------
(5,237) (45,914) (69,889)
Increase in net debt (1,714) (46,506) (56,320)
Net debt at the beginning of the period (72,965) (16,645) (16,645)
---------------------------------------------- ------------- ------------- -----------
Net debt at the end of the period ( 74,679) (63,151) (72,965)
---------------------------------------------- ------------- ------------- -----------
Net debt increased by GBP1.7m from 31 March 2023 (2.3%) to
GBP74.7m and consists of total borrowings of GBP38.7m (FY23:
GBP34.1m) and leases previously classified as operating leases
under IAS17 of GBP38.1m (FY23: GBP40.2m), less cash balances of
GBP2.1m (FY23: GBP1.4m).
At 30 September 2023, the Group had a committed revolving credit
facility ("RCF") of GBP80.0m (GBP39.0m utilised at 30 September
2023) and a GBP7.0m asset financing facility (GBP4.2m utilised at
30 September 2023). In addition, the Group has access to an
uncommitted GBP20.0m accordion facility which remains undrawn.
These facilities are due to expire on 25 April 2025 with options to
extend by a further one or two years .
Related party transactions
There have been no material changes in the related party
transactions described in the last annual report and accounts of
the Group.
Principal risks and uncertainties
The principal risks and uncertainties, which could have a
material impact upon the Group's performance over the remaining six
months of the financial year ending 31 March 2024, have not changed
from those set out on pages 30 and 31 of the Group's 2023 annual
report and accounts, which are available at www.redcentricplc.com .
These risks and uncertainties include, but are not limited to, the
following:
Environmental impact
Technology and cyber-security
Business continuity
Business growth
Workforce
Market and economic conditions
Loss of major contract
Competition and market pressures
Following the completion of our recent acquisitions and the
increased scale of the business, the Group has increased its
exposure to any increase in price and volatility of electricity. As
noted in the statements above, to mitigate this, we are
implementing a series of energy conservation measures which will
help to reduce consumption across the Group's data centre estate.
In addition to this the Group intends to replicate its policy of
agreeing own-use forward commodity prices across the recently
acquired businesses once electricity prices have stabilised.
Going concern
As stated in note 2 to the financial statements, the Board is
satisfied that the Group has sufficient resources to continue in
operation for the foreseeable future, a period of not less than 12
months from the date of this report. Accordingly, they continue to
adopt the going concern basis in preparing the condensed financial
statements.
By order of the Board,
Chief Executive Officer Chief Financial Officer
Peter Brotherton David Senior
21 November 2023 21 November 2023
Redcentric plc
Condensed consolidated statement of comprehensive income for the
six months ended 30 September 2023
Six months Six months Year ended
to 30 September to 30 September 31 March
2023 Unaudited 2022 2023
Unaudited Audited
(Restated(2)
)
Note GBP'000 GBP'000 GBP'000
---------------------------------------- ----- ----------------- ----------------- -----------
Revenue 4 81,998 61,531 141,674
Cost of sales (22,708) (18,061) (40,763)
---------------------------------------- ----- ----------------- ----------------- -----------
Gross Profit 59,290 43,470 100,911
Operating expenditure (57,324) (49,010) (109,938)
Other operating income - 70 88
---------------------------------------- ----- ----------------- ----------------- -----------
Adjusted EBITDA (1) 14,541 11,701 24,492
Depreciation of property, plant,
and equipment (2,776) (2,194) (4,636)
Amortisation of intangibles (3,542) (4,440) (8,773)
Depreciation and Amortisation of
ROU assets (5,854) (5,346) (10,617)
Exceptional items 5 100 (4,655) (8,149)
Share-based payments (503) (536) (1,256)
Operating profit/(loss) 1,966 (5,470) (8,939)
Finance costs 6 (2,687) (1,129) (3,530)
---------------------------------------- ----- ----------------- ----------------- -----------
Loss before taxation (721) (6,599) (12,469)
Income tax credit 7 507 575 3,219
---------------------------------------- ----- ----------------- ----------------- -----------
Loss for the period attributable
to owners of the parent (214) (6,024) (9,250)
---------------------------------------- ----- ----------------- ----------------- -----------
Other comprehensive income
Items that may be classified to
profit or loss:
Currency translation differences (40) (64) (97)
Deferred tax movement on share options - - 47
---------------------------------------- ----- ----------------- ----------------- -----------
Total comprehensive loss for the
period (254) (6,088) (9,300)
---------------------------------------- ----- ----------------- ----------------- -----------
Loss per share
Basic loss per share 8 (0.14)p (3.86)p (5.94)p
Diluted loss per share 8 (0.14)p (3.86)p (5.94)p
---------------------------------------- ----- ----------------- ----------------- -----------
(1) For an explanation of the APMs used in this report, please
refer to page 5.
(2) For detail on the prior period restatement, please see note
16.
Redcentric plc
Condensed consolidated statement of financial position as at 30
September 2023
30 Sept 30 Sept 31 March
2023 2022 2023
Unaudited Unaudited Audited
(Restated(1)
)
Note GBP'000 GBP'000 GBP'000
-------------------------------- ----- ----------- -------------- ----------
Non-Current Assets
Intangible assets 80,621 84,521 83,217
Property, plant, and equipment 19,971 16,237 17,131
Right-of-use assets 40,428 27,982 46,282
Deferred tax asset 1,607 69 1,076
-------------------------------- ----- ----------- -------------- ----------
142,627 128,809 147,706
-------------------------------- ----- ----------- -------------- ----------
Current Assets
Inventories 9 4,173 4,634 3,716
Trade and other receivables 10 38,572 33,441 39,254
Corporation tax receivable 165 - 48
Cash and cash equivalents 2,099 2,606 1,366
-------------------------------- ----- ----------- -------------- ----------
45,009 40,681 44,384
-------------------------------- ----- ----------- -------------- ----------
Total Assets 187,636 169,490 192,090
-------------------------------- ----- ----------- -------------- ----------
Current Liabilities
Trade and other payables 11 (39,250) (30,355) (43,578)
Corporation tax payable - ( 471) -
Loans and borrowings 12 (22) (240) (475)
Leases 12 (10,887) (5,442) (10,804)
Provisions 13 (1,857) (341) (1,841)
Contingent consideration 14 - ( 5,496) (2,990)
-------------------------------- ----- ----------- -------------- ----------
(52,016) (42,345) (59,688)
-------------------------------- ----- ----------- -------------- ----------
Non-Current Liabilities
Loans and borrowings 12 (38,696) (39,720) (33,651)
Leases 12 (27,173) (20,355) (29,400)
Provisions 13 (11,322) (4,440) (11,160)
-------------------------------- ----- ----------- -------------- ----------
(77,191) (64,515) (74,211)
-------------------------------- ----- ----------- -------------- ----------
Total Liabilities (129,207) (106,860) (133,899)
-------------------------------- ----- ----------- -------------- ----------
Net Assets 58,429 62,630 58,191
-------------------------------- ----- ----------- -------------- ----------
Equity
Called up share capital 15 157 157 157
Share premium account 15 73,267 73,267 73,267
Capital redemption reserve (9,454) (9,454) (9,454)
Own shares held in treasury (898) (1,336) (898)
Retained earnings (4,643) (4) (4,881)
-------------------------------- ----- ----------- -------------- ----------
Total Equity 58,429 62,630 58,191
-------------------------------- ----- ----------- -------------- ----------
(1) For detail on the prior period restatement, please see note
16.
Redcentric plc
Co ndensed consolidated statement of changes in equity as at 30
September 2023
Share Share Capital Own Shares Retained Total
Capital Premium Redemption Held Earnings Equity
Reserve in Treasury
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- --------- ------------ ------------- ---------- --------
At 31 March 2022 157 73,267 (9,454) (2,673) 10,551 71,848
Loss for the period (Restated(1)
) - - - - (6,024) (6,024)
Transactions with owners
Share-based payments - - - - 449 449
Dividends paid - - - - (3,719) (3,719)
Share options exercised - - - 1,337 (1,325) 12
Other comprehensive income
Currency translation differences
(Restated(1) ) - - - - 64 64
---------------------------------- --------- --------- ------------ ------------- ---------- --------
At 30 September 2022 Unaudited
(Restated(1) ) 157 73,267 (9,454) (1,336) (4) 62,630
Loss for the period - - - - (3,225) (3,225)
Transactions with owners
Share-based payments - - - - 595 595
Dividends paid - - - - (1,874) (1,874)
Share options exercised - - - 438 (221) 217
Deferred tax relating
to prior periods - - - - (37) (37)
Other comprehensive income
Deferred tax movement
on share options - - - - 47 47
Currency translation differences - - - - (162) (162)
---------------------------------- --------- --------- ------------ ------------- ---------- --------
At 31 March 2023 157 73,267 (9,454) (898) (4,881) 58,191
Loss for the period - - - - (214) (214)
Transactions with owners
Share-based payments - - - - 492 492
Other comprehensive income
Currency translation differences - - - - (40) (40)
---------------------------------- --------- --------- ------------ ------------- ---------- --------
At 30 September 2023
Unaudited 157 73,267 (9,454) (898) (4,643) 58,429
---------------------------------- --------- --------- ------------ ------------- ---------- --------
(1) For detail on the prior period restatement, please see note
16.
Redcentric plc
Condensed consolidated cash flow statement for the six months
ended 30 September 2023
Six months Six months
to 30 to 30
Sept Sept 2022 Year ended
2023 Unaudited 31 March
Unaudited (Restated(1) 2023
) Audited
GBP'000 GBP'000 GBP'000
----------------------------------------------- ----------- -------------- -----------
(Loss)/profit before tax (721) (6,599) (12,469)
Finance costs 2,687 1,129 3,530
----------------------------------------------- ----------- -------------- -----------
Operating profit/(loss) 1,966 (5,470) (8,939)
----------------------------------------------- ----------- -------------- -----------
Adjustment for non-cash items
Depreciation and amortisation 12,172 11,980 24,026
Exceptional items (100) 4,655 8,149
Share-based payments 503 536 1,256
----------------------------------------------- ----------- -------------- -----------
Operating cash flow before exceptional
items and movements in working capital 14,541 11,701 24,492
Cash cost of exceptional items (2,000) (4,790) (8,258)
----------------------------------------------- ----------- -------------- -----------
Operating cash flow before changes in working
capital 12,541 6,911 16,234
Changes in working capital
Increase in inventories (456) (3,241) (2,324)
Decrease / (increase) in trade and other
receivables 596 (9,663) (15,463)
(Decrease) / increase in trade and other
payables (4,323) 3,361 16,377
----------------------------------------------- ----------- -------------- -----------
Cash generated from operations 8,358 (2,632) 14,824
----------------------------------------------- ----------- -------------- -----------
Tax paid (142) (176) (670)
----------------------------------------------- ----------- -------------- -----------
Net cash generated from operating activities 8,216 (2,808) 14,154
----------------------------------------------- ----------- -------------- -----------
Cash flows from investing activities
Acquisition of subsidiaries net of cash
acquired - (23,229) (26,606)
Purchase of property, plant, and equipment (5,619) (1,364) (5,505)
Purchase of intangible fixed assets (946) (178) (869)
Net cash used in investing activities (6,565) (24,771) (32,980)
----------------------------------------------- ----------- -------------- -----------
Six months Six months
to 30 to 30
Sept 2023 Sept 2022 Year ended
Unaudited Unaudited 31 March
(Restated(1) 2023
) Audited
GBP'000 GBP'000 GBP'000
----------------------------------------------- ----------- -------------- -----------
Cash flows from financing activities
Dividends paid - (3,719) (5,593)
Disposal of treasury shares on exercise
of options - - 229
Sale and leaseback of fixed assets 2,419 966
Cash received on exercise of share options 72 12 -
Interest paid (1,674) (937) (1,771)
Interest paid on leases (784) - (1,218)
Repayment of leases (4,555) (5,836) (6,901)
Repayment of term loans (462) (464) (508)
Drawdown of borrowings 10,500 45,500 55,500
Repayment of borrowings (5,500) (5,500) (21,500)
Repayment of loan arrangement fees - (713) (713)
Contingent consideration paid (890) - -
Net cash used in financing activities (874) 28,343 18,491
----------------------------------------------- ----------- -------------- -----------
Net increase / (decrease) in cash and
cash equivalents 777 764 (335)
Cash and cash equivalents at beginning
of period 1,366 1,804 1,804
Effect of exchange rates (44) 38 (103)
Cash and cash equivalents at end of the
period 2,099 2,606 1,366
----------------------------------------------- ----------- -------------- -----------
(1) For detail on the prior period restatement, please see note
16.
Redcentric plc
Notes to the unaudited condensed set of financial statements for
the six months ended 30 September 2023
1. General information
The unaudited financial statements for the six months ended 30
September 2023 and the six months ended 30 September 2022 do not
constitute statutory accounts within the meaning of Section 434 of
the Companies Act 2006. Statutory accounts for the year ended 31
March 2023 were approved by the Board on 24 August 2023. The
auditor's report on those accounts was unqualified, did not contain
an emphasis of matter paragraph and did not contain any statement
under Section 498 (2) or (3) of the Companies Act 2006.
These condensed half year financial statements were approved for
issue by the Board on 21 November 2023 and were not independently
reviewed by the Group's auditor
Redcentric plc is a company domiciled in England and Wales.
These unaudited condensed half year financial statements comprise
the Company and its subsidiaries (together referred to as the
"Company" or the "Group"). The principal activity of the Group is
the supply of IT managed services .
2. Accounting policies
Basis of preparation
These condensed half year financial statements for the half year
ended 30 September 2023 have been prepared in accordance with the
AIM Rules for Companies, comply with IAS 34 Interim Financial
Reporting as adopted by the UK and should be read in conjunction
with the annual financial statements for the year ended 31 March
2023, which have been prepared in accordance with UK-adopted
international accounting standards.
The financial information is presented in sterling, which is the
functional currency of the Group. All financial information
presented has been rounded to the nearest thousand.
Going concern
The financial statements are prepared on a going concern basis
which the Directors believe to be appropriate for the following
reasons.
The Group meets its day to day working capital requirements from
operational cash flows, a revolving credit facility, an asset
financing facility and leasing arrangements. The Directors have
prepared cash flow forecasts for a period of at least 12 months
from the date of approval of these financial statements (the "going
concern assessment period") which indicate that, taking account of
reasonably possible downsides on the operations and its financial
resources, the Group will have sufficient funds to meet its
liabilities as they fall due for that period, and will comply with
debt covenants over that period.
The Group is required to comply with financial debt covenants
for adjusted leverage (net debt to adjusted EBITDA), cashflow cover
(adjusted cashflow to debt service, where adjusted cashflow is
defined as adjusted EBITDA less tax paid, dividend payments, IFRS16
lease repayments and cash capital expenditure) and provisions
relating to guarantor coverage such that guarantors must exceed a
prescribed threshold of the Group's gross assets, revenue and
adjusted EBITDA. The guarantors are Redcentric plc and Redcentric
Solutions Limited. Covenants are tested quarterly each year.
Following the acquisitions made in the previous year, the Group has
invested heavily in integration and efficiency programmes which are
expected to deliver significant benefits to the business from FY25
onward. In anticipation of the effect of those investments on
continued covenant compliance, in March 2023 the Directors agreed
an amendment to the borrowings facility agreement with the banking
syndicate to apply less stringent debt covenant requirements for
the quarters ended March and June 2023 and quarters ending
September and December 2023. There were no other material changes
to the terms and conditions of the borrowings because of this
amendment.
The Directors' forecasts in respect of the going concern
assessment period have been built from the detailed Board approved
forecast for the year ending 31 March 2024 and forecasts for the
year ending 31 March 2025, and the going concern assessment takes
account of the updated debt covenant requirements agreed in the
amended agreement. The forecasts include a number of assumptions in
relation to order intake, renewal and churn rates, EBITDA margin
improvements, capital expenditure requirements to service our
customers and the full year impact of the further acquisitions made
in FY23 and associated synergies and efficiencies. Revenue
assumptions reflect pre-covid levels achieved, which have been
adjusted for the enlarged customer base and additional products
following the acquisitions made in FY23. Further exceptional spend
of cGBP2.0m to complete the integration activity has been assumed
for the remainder of FY24. Both the base case and sensitised
forecasts (detailed below) include significant utilisation of the
Group's asset financing facility.
Whilst the Group's trading and cash flow forecasts have been
prepared using current trading assumptions, the operating
environment continues to present several challenges which could
negatively impact the actual performance achieved. These risks
include, but are not limited to, achieving forecast levels of order
intake, the impact on customer confidence as a result of general
economic conditions, inflationary pressures driving continued
interest rate increases and the achievability of actions the
Directors consider they would take, and which are entirely within
their control, should further risks materialise. Whilst cost
inflation is an important consideration for the Group, the
Directors have already taken positive action to mitigate this issue
in respect of the Group's single largest external cost item,
electricity. The Group has entered into contracts with energy
brokers and has agreed own-use commodity prices for a significant
proportion of its expected FY24 and FY25 electricity volumes, which
significantly reduces its exposure to price volatility. The Group
can flex contracted volumes to match expected usage volumes giving
30 days' notice.
In making their going concern assessment considering these
risks, the Directors have also modelled a severe but plausible
downside scenario when preparing the forecasts. The severe but
plausible downside scenario assumes significant economic downturn
over the remainder of FY24 and into FY25, impacting forecast new
order intake for recurring revenue and reduced non-recurring
revenue levels. All of these downside scenarios have been combined
into the Board's severe but plausible assessment. Under this severe
but plausible downside scenario, recurring monthly new order intake
is forecast to reduce by 30% and non-recurring product and services
revenues to reduce by 20%. These reductions have been modelled
against the base case budget and incorporate both potential supply
chain issues and customer timing preferences which could impact the
phasing of non-recurring revenues, and reduced investment from our
customer base more generally. No sensitivity has been applied to
interest rates on the basis that recent market analysis suggests
rates have stabilised. In isolation, each individual downside
factor is plausible, however in order to demonstrate the severity
of circumstances that would result in the Group coming close to
being unable to comply with debt covenants, the above scenarios
have been modelled simultaneously in the severe but plausible
downside scenario.
The Directors note the uncertainties surrounding the timing and
extent of non-recurring revenues from quarter to quarter, and the
timing and extent of capital expenditure, with increased
utilisation of the Group's asset financing facility modelled under
both the base case budget and the severe but plausible downside
scenario. As a result, the Directors continue to closely monitor
quarterly liquidity together with debt covenant compliance
forecasts. Under the severe but plausible downside scenario
outlined above, there is limited covenant headroom available
throughout the going concern assessment period. The cashflow
forecasts prepared and as described above, include a final FY23
dividend payment made in January 2024 assumed to be 25% cash 75%
DRIP (dividend reinvestment plan) elections in the base case (but
100% cash in the downside scenario as elections are considered
outside of the Group's control) and the Directors will continue to
monitor quarterly liquidity and debt covenant compliance and the
timing of subsequent dividend payments.
While the Directors consider that the downside scenario modelled
represents a severe stress, mitigating actions remain available
that have not been modelled including the rephasing of
non-essential capital expenditure, and the rephasing or reduction
of certain non-essential costs. Under the severe but plausible
downside scenario modelled, the forecasts demonstrate that the
Group is expected to maintain sufficient liquidity and will
continue to comply with its debt covenants throughout the going
concern assessment period, though covenant headroom is limited
throughout and the increased utilisation level of the Group's asset
financing facility is required to ensure continued compliance with
debt covenants.
The Directors therefore remain confident that the Group have
adequate resources to continue to meet its liabilities as and when
they fall due within a period of at least 12 months from the date
of approval of these financial statements, and have therefore
prepared the financial statements on a going concern basis.
2. Critical accounting judgements and key sources of estimation uncertainty
There are no critical accounting judgements or estimation
uncertainty.
3. Segmental reporting
IFRS 8 requires operating segments to be identified based on
internal financial information reported to the chief operating
decision-maker for decision-making purposes. The Group considers
that this role is performed by the Board. Whilst the Board reviews
the Group's three revenue streams separately (recurring, product
and services), the operating costs and operating asset base used to
derive these revenue streams are the same for all three categories
and are presented as such in the Group's internal reporting
process.
4. Revenue analysis
Revenue for the six months ended 30 September 2023 was generated
wholly from the UK and is analysed as follows:
Six months Year ended
to 30 Six months 31 March
Sept 2023 to 30 Sept 2023
Unaudited 2022 Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------- ----------- ---------------- -----------
Recurring revenue 74,810 56,436 128,461
Product revenue 2,770 2,460 7,144
Services revenue 4,418 2,635 6,069
81,998 61,531 141,674
------------------- ----------- ---------------- -----------
5. Exceptional items
Six months Six months
to 30 to 30 Sept
Sept 2022 Year ended
2023 Unaudited 31 March
Unaudited (Restated(1) 2023
) Audited
GBP'000 GBP'000 GBP'000
------------------------------------------- ----------- -------------- -----------
Acquisition and integration costs 2,000 3,539 6,660
Fair value movement on Sungard contingent (2,100) - -
consideration
Costs relating to the settlement of
an historical customer dispute - 812 809
Cloud configuration and customisation
costs - 304 680
(100) 4,655 8,149
------------------------------------------- ----------- -------------- -----------
(1) For detail on the prior period restatement, please see note
16.
6. Finance costs
Six months Year ended
to 30 Sept Six months 31 March
2023 to 30 Sept 2023
Unaudited 2022 Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------------- ------------ ---------------- -----------
Interest payable on bank loans and overdrafts (1,609) (511) (1,827)
Interest payable on leases (969) (483) (1,218)
Other interest payable - - (194)
Amortisation of loan arrangement fees (109) (135) (291)
----------------------------------------------- ------------ ---------------- -----------
(2,687) (1,129) (3,530)
----------------------------------------------- ------------ ---------------- -----------
7. Income tax credit
The tax credit recognised reflects management estimates of the
tax credit for the period and has been calculated using the
estimated average tax rate of UK corporation tax for the financial
year of 19.0% (H1-23: 19.0%).
8. Earnings per share (EPS)
The calculation of basic and diluted EPS is based on the
following earnings and number of shares.
Six months
to 30 Sept
2022 Year ended
Six months Unaudited 31 March
to 30 Sept (Restated(1) 2023
2023 Unaudited ) Audited
Earnings GBP'000 GBP'000 GBP'000
--------------------------------------- ---------------- -------------- -----------
Statutory loss (214) (6,024) (9,250)
Tax credit (507) (575) (3,219)
Amortisation of acquired intangibles 3,224 4,178 8,183
Share-based payments 503 536 1,256
Exceptional items (100) 4,655 8,149
Adjusted earnings before tax 2,906 2,770 5,119
Notional tax charge at standard
rate (552) (526) (973)
--------------------------------------- ---------------- -------------- -----------
Adjusted earnings 2,354 2,244 4,146
--------------------------------------- ---------------- -------------- -----------
Weighted average number of ordinary Number Number Number
shares '000 '000 '000
--------------------------------------- ---------------- -------------- -----------
Total shares in issue 156,992 156,992 156,992
Shares held in treasury (729) (1,000) (1,391)
--------------------------------------- ---------------- -------------- -----------
For basic EPS calculations 156,263 155,992 155,601
Effect of potentially dilutive
share options 4,387 2,138 3,678
--------------------------------------- ---------------- -------------- -----------
For diluted EPS calculations 160,650 158,130 159,279
--------------------------------------- ---------------- -------------- -----------
EPS Pence Pence Pence
--------------------------------------- ---------------- -------------- -----------
Basic (0.14p) (3.86)p (5.94p)
Adjusted 1.51p 1.44p 2.66p
Basic diluted (0.14p) (3.86)p (5.94p)
Adjusted diluted 1.47p 1.42p 2.60p
--------------------------------------- ---------------- -------------- -----------
(1) For detail on the prior period restatement, please see note
16.
9. Inventories
Six months Six months Year ended
to 30 to 30 Sept 31 March
Sept 2023 2022 2023
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------ ----------- ------------ -----------
Goods for resale 4,173 4,634 3,716
------------------ ----------- ------------ -----------
Goods for resale includes components required to deliver managed
services to customers.
10. Trade and other receivables
Six months
to 30 Sept
Six months 2022 Year ended
to 30 Sept Unaudited 31 March
2023 (Restated(1) 2023
Unaudited ) Audited
GBP'000 GBP'000 GBP'000
----------------------------- ------------ -------------- -----------
Trade receivables 17,981 17,269 21,456
Less: credit note provision (993) (669) (1,251)
----------------------------- ------------ -------------- -----------
Trade receivables - net 16,988 16,600 20,205
Other receivables 1,408 221 2,363
Prepayments 9,706 6,939 9,180
Commission contract asset 3,364 2,183 2,938
Accrued income 7,106 7,498 4,568
Total 38,572 33,441 39,254
----------------------------- ------------ -------------- -----------
(1) For detail on the prior period restatement, please see note
16.
Trade receivable days were 33 at 30 September 2023 (30 September
2022: 43). The ageing of trade receivables is shown below:
Six months Six months Year ended
to 30 Sept to 30 Sept 31 March
2023 2022 2023
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------- ------------ ------------ -----------
Current 13,596 12,303 18,450
1 to 30 days overdue 2,711 3,525 2,212
31 to 60 days overdue 1,005 1,352 557
61 to 90 days overdue 354 42 283
91 to 180 days overdue 315 8 194
> 180 days overdue - 39 (240)
------------------------- ------------ ------------ -----------
Gross trade receivables 17,981 17,269 21,456
Credit note provision (993) (669) (1,251)
Net trade receivables 16,988 16,600 20,205
------------------------- ------------ ------------ -----------
11. Trade and other payables
Six months Six months Year ended
to 30 Sept to 30 Sept 31 March
2023 2022 2023
Unaudited Unaudited Audited
(Restated(1)
)
GBP'000 GBP'000 GBP'000
------------------------------ ------------ -------------- -----------
Trade Payables 12,455 10,330 16,250
Other Payables 988 1,209 1,892
Taxation and Social Security 2,642 2,819 5,076
Accruals 14,101 8,015 11,759
Deferred Income 9,064 7,982 8,331
Total 39,250 30,355 43,578
------------------------------ ------------ -------------- -----------
Trade creditor days were 28 at 30 September 2023 (30 September
2022: 33).
(1) For detail on the prior period restatement, please see note
16.
12. Borrowings
Six months Six months Year ended
to 30 Sept to 30 Sept 31 March
2023 2022 2023
Unaudited Unaudited Audited
(Restated(1)
)
GBP'000 GBP'000 GBP'000
------------------------------ ------------ -------------- -----------
Current
Lease liabilities 10,887 5,422 10,804
Term loans 22 506 475
Unamortised loan arrangement - (266) -
fees
------------------------------ ------------ -------------- -----------
Total 10,909 5,682 11,279
------------------------------ ------------ -------------- -----------
Non-current
Lease liabilities 27,173 20,355 29,400
Term Loans 11 35 20
Bank Loans 39,000 40,000 34,000
Unamortised loan arrangement
fees (315) (315) (369)
------------------------------ ------------ -------------- -----------
Total 65,869 60,075 63,051
------------------------------ ------------ -------------- -----------
(1) For detail on the prior period restatement, please see note
16.
13. Provisions
Dilapidation provision
GBP'000
--------------------------------------- -------------------------
At 1 April 2022 3,883
Additional provisions in the period 284
Acquired through business combination 614
Released during the period -
Utilised during the period -
--------------------------------------- -------------------------
At 30 September 2022 unaudited 4,781
Additional provisions in the period 8,142
Acquired through business combination 78
Released during the period -
Utilised during the period -
--------------------------------------- -------------------------
At 31 March 2023 Audited 13,001
Additional provisions in the period 178
Acquired through business combination -
Released during the period -
Utilised during the period -
--------------------------------------- -------------------------
At 30 September 2023 unaudited 13,179
---------------------------------------- -------------------------
Analysed as:
Current 1,857
Non-current 11,322
---------------------------------------- -------------------------
At 30 September 2023 unaudited 13,179
---------------------------------------- -------------------------
14. Contingent consideration
Six months Year ended
to 30 Six months 31 March
Sept 2023 to 30 Sept 2023
Unaudited 2022 Unaudited Audited
GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------ ---------------- -----------
Contingent consideration due on acquisitions
within one year:
7 Elements Limited
Sungard - 436 450
Sungard DCs - 5,060 2,540
Total - 5,496 2,990
---------------------------------------------- ------------ ---------------- -----------
15. Share capital and share premium
Ordinary shares
of 0.1p each Share premium
---------------------- --------------
Number GBP'000 GBP'000
-------------------------------- ------------ -------- --------------
At 1 April 2022 156,991,982 157 73,267
New shares issued - - -
-------------------------------- ------------ -------- --------------
At 31 March 2023 156,991,982 157 73,267
-------------------------------- ------------ -------- --------------
New shares issued - - -
-------------------------------- ------------ -------- --------------
At 30 September 2023 unaudited 156,991,982 157 73,267
-------------------------------- ------------ -------- --------------
At both 31 March 2023 and 30 September 2023, the Company's
issued share capital consisted of 156,991,982 ordinary shares of
which 728,722 remain in treasury.
16. Prior period restatement
The financials for the six month period ending 30 September 2022
("H1-23") have been restated to reflect the final Purchase Price
Allocations ("PPAs") of the Sungard and 4D acquisitions. Due to the
close proximity of the acquisitions to the publishing of the
interim results, the PPAs weren't finalised at this time, but were
instead reflected in the Group's results for the year ended 31
March 2023. As such, the comparatives have been updated to reflect
these acquisitions accordingly.
There were a number of critical accounting judgements and areas
of estimation uncertainty in reaching the final PPAs. Details of
these can be found in the Annual Report and Accounts for Redcentric
Plc's year ended 31 March 2023 on page 96.
The table below highlights the impact of the restatement.
30 September Movement 30 September
2022 GBP'000 2022
Unaudited Unaudited
(Original) (Restated)
GBP'000 GBP'000
---------------------------------------- ----------------- --------- -----------------
Condensed consolidated statement of
financial position
Non-Current Assets
Intangible assets 102,344 (17,823) 84,521
Property, plant, and equipment 15,219 (1,018) 16,237
Right-of-use assets 27,982 - 27,982
Deferred tax asset - 69 69
---------------------------------------- ----------------- --------- -----------------
145,545 (16,735) 128,810
---------------------------------------- ----------------- --------- -----------------
Current Assets
Inventories 4,634 - 4,634
Trade and other receivables 32,696 745 33,441
Cash and cash equivalents 2,606 2,606
---------------------------------------- ----------------- --------- -----------------
39,936 745 40,681
---------------------------------------- ----------------- --------- -----------------
Total Assets 185,481 (15,991) 169,490
---------------------------------------- ----------------- --------- -----------------
Current Liabilities
Trade and other payables (30,062) (293) (30,355)
Corporation tax payable (1,571) 1,100 (471)
Loans and borrowings (40,240) 40,000 (240)
Leases (8,066) 2,624 (5,442)
Provisions (341) - (341)
Contingent consideration (5,496) - (5,496)
---------------------------------------- ----------------- --------- -----------------
(85,776) 43,431 (42,345)
---------------------------------------- ----------------- --------- -----------------
Non-Current Liabilities
Loans and borrowings 280 (40,000) (39,720)
Leases (20,355) - (20,355)
Deferred tax liability (2,998) 2,998 -
Provisions (4,440) - (4,440)
---------------------------------------- ----------------- --------- -----------------
(27,513) (37,002) (64,515)
Total Liabilities (113,289) 6,429 (106,860)
---------------------------------------- ----------------- --------- -----------------
Net Assets 72,192 (9,562) 62,630
---------------------------------------- ----------------- --------- -----------------
Total Equity 72,192 (9,562) 62,630
---------------------------------------- ----------------- --------- -----------------
Six months Movement Six months
to 30 September GBP'000 to 30 September
2022 2022
Unaudited Unaudited
(Original) (Restated)
GBP'000 GBP'000
---------------------------------------- ----------------- --------- -----------------
Condensed consolidated statement of
comprehensive income
Revenue 61,531 - 61,531
Cost of Sales (18,061) - (18,061)
---------------------------------------- ----------------- --------- -----------------
Gross Profit 43,470 - 43,470
Operating expenditure (38,307) (10,703) (49,010)
Operating income 70 - 70
Adjusted EBITDA 11,701 - 11,701
Depreciation of property, plant, and
equipment (1,441) (753) (2,194)
Amortisation of intangibles (4,175) (265) (4,440)
Depreciation and amortisation of ROU
assets (5,346) - (5,346)
Gain on bargain purchase 9,685 (9,685) -
Exceptional items (4,655) - (4,655)
Share based payments (536) - (536)
---------------------------------------- ----------------- --------- -----------------
Operating profit/(loss) 5,233 (10,703) (5,470)
Finance income - - -
Finance costs (1,129) - (1,129)
---------------------------------------- ----------------- --------- -----------------
Profit/(loss) before tax 4,104 (10,703) (6,599)
Tax (expense)/credit (567) 1,142 575
---------------------------------------- ----------------- --------- -----------------
Profit/(loss) 3,537 (9,561) (6,024)
---------------------------------------- ----------------- --------- -----------------
Other comprehensive income
Items that may be classified to profit
or loss:
Currency translation differences (65) 1 (64)
Deferred tax movement on share options - - -
---------------------------------------- ----------------- --------- -----------------
Total comprehensive income/(loss)
for the period 3,472 (9,560) (6,088)
---------------------------------------- ----------------- --------- -----------------
With regard to additional disclosures being restated, for note
12, the RCF is drawn in short to medium-term tranches of debt that
are repayable within 12 months of draw-down. These tranches of debt
can be rolled over provided certain conditions are met, including
compliance with all loan terms. The Group considers that it is
unlikely it would not be in compliance and therefore, be unable to
exercise its right to roll over the debt. The Board therefore,
believe the Group has the ability and the intent to roll over the
drawn RCF amounts when due and consequently has presented the RCF
as a non-current liability, having previously been presented as a
current liability.
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END
IR UAORRONUAUUA
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November 22, 2023 02:00 ET (07:00 GMT)
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