TIDMRCN
RNS Number : 2877X
Redcentric PLC
25 April 2023
Redcentric plc
("Redcentric" or the "Company")
Trading Update
Redcentric plc (AIM: RCN), a leading UK IT managed services
provider offering cloud, cyber security, connectivity and
communication solutions to mid-market and enterprise customers, is
pleased to announce the following update for the financial year
ended 31 March 2023 ("FY23").
PROVISIONAL RESULTS FOR THE YEARED 31 MARCH 2023
We are pleased to announce following provisional results for
FY23:
-- Revenues of GBP141.8m (FY22: GBP93.3m);
-- Adjusted EBITDA* of GBP24.8m (FY22: GBP23.7m); and
-- Adjusted net debt as at 31 March 2023 of GBP35.5m (31 March 2022: net debt of GBP1.5m).
These results reflect the contribution from the five
acquisitions completed over the last two financial years including
a full year of trading from Piksel and 7 Elements, and a partial
year's contribution from 4D Data Centres and the two Sungard asset
acquisitions. The results further reflect the following:
-- Higher than anticipated electricity costs of c.GBP1.7m,
reflecting the impact of the Government Energy Bill Relief Scheme
not being applied to overall consumption, the significant increase
in non-commodity charges and rephasing of energy efficiency savings
as a result of supplier equipment delays.
-- Higher than expected software license costs of GBP0.7m
(annualised effect of GBP1.5m) as a result of the acquired Sungard
business not recording platform usage accurately and under
reporting license consumption prior to the acquisition.
*Adjusted EBITDA is EBITDA excluding exceptional items,
share-based payments and associated National Insurance.
OPERATIONAL AND OTHER UPDATES
Organic growth update
We continue to see strong organic growth, with an increase in
net new business (new business plus or minus renewal churn less
cancellations and excluding inflationary price increases) in each
of the last ten months to the end of March 2023. Net new business
when converted into revenue equates to an organic growth rate of
approximately 6%, a level that has not been experienced for a
number of years and we expect this level of organic growth to
continue into FY24.
The improvement in organic growth reflects the increase in new
logos and delivering against the cross-selling opportunities to
existing customers as a result of Redcentric's broader product
offering and enlarged customer base.
Electricity sourcing
Redcentric operates out of eight of its own data centres and has
a large (including management) presence in a third-party data
centre. In seven out of nine of these data centres, Redcentric is
responsible for the sourcing of electricity. The electricity
purchasing cost differences between the data centres are detailed
below:
-- In the seven data centres where procurement is managed by
Redcentric, electricity has been forward bought for the whole of
FY24. The commodity rates achieved are consistent with the Board's
expectations and removes the commodity price risk in these data
centres until 1 April 2024.
-- The two data centres where Redcentric has no control on the
procurement of electricity have also locked in forward prices but
at rates much higher (c.80%) than those achieved by Redcentric.
Whilst we have the ability to pass on price increases to the former
Redcentric, Piksel and 4D customer bases, the fixed priced Sungard
customer contracts mean that for FY24 there will be GBP0.9m of
increased costs which cannot be passed on to customers. One of the
two data centres where Redcentric has no control on electricity
purchasing decisions will be closed by the end of FY24.
Redcentric continues to monitor the forward rates for FY25 and
beyond and will forward buy electricity as and when it considers
beneficial to do so in line with our historical hedging policy.
Integration update
The integration programme is progressing well with total
synergies of GBP22.0m now forecast, GBP5m ahead of the expectations
at the time of the H1 FY23 results. GBP16.2m of the total synergies
have already been actioned and reflected in the run rate, with the
balance of GBP5.8m to be actioned throughout the course of FY24 and
effective throughout both FY24 and FY25.
The anticipated total cost synergies, progress to date and
phasing of synergies is shown below:
Annual savings - GBPm Outstanding synergies
timing - GBPm
Complete In progress Total FY24 FY25 Total
Data centre and
property rationalisation 5.0 1.9 6.9 0.4 1.5 1.9
Staff efficiencies 4.7 0.2 4.9 - 0.2 0.2
Energy efficiencies 3.0 3.0 6.0 2.0 1.0 3.0
Supplier efficiencies 3.5 0.7 4.2 0.4 0.3 0.7
Total synergies 16.2 5.8 22.0 2.8 3.0 5.8
Total P&L classification
- GBPm
FY24 FY25 Total
Operating costs 16.6 2.8 2.0 4.8
IFRS16 lease costs 5.4 0 1.0 1.0
22.0 2.8 3.0 5.8
The sale of the Elland data centre anticipated for December 2022
did not complete due to funding issues on the buyer's part and as a
result this facility will now be retained and developed as a
long-term strategic asset. The Harrogate data centre will now be
closed instead with customer and core equipment transferred to
Elland by the end of FY24. Annualised savings of circa GBP1.4m are
anticipated versus the GBP0.6m expected for Elland, but these
savings will materialise in FY25 rather than FY24. In addition, one
of the two sites where Redcentric does not have control over
electricity purchasing decisions will have been closed (see
Electricity sourcing above).
Inflation
The business continues to experience widespread inflationary
increases across its cost base, primarily wage inflation,
electricity costs and software license costs. Furthermore, we have
been notified of significant increases in business rates (c.33%)
across our data centre portfolio which is anticipated to add
c.GBP0.8m to the FY24 cost base. Although the business can pass on
specific increases relating to electricity (with the exception of
the Sungard customer base) and license costs periodically,
increases relating to general inflation can only be passed on
annually.
Change in accounting standards
To align to the IFRS Interpretations Committee's agenda decision
in April 2021, ongoing development costs that relate to cloud
computing arrangements will be treated within operating costs from
FY24 onwards. These costs have previously been treated as
exceptional costs on the basis that they related to the
customisation and configuration of the D365 ERP solution. The
expected development costs included within operating costs for FY24
are GBP0.6m.
Contingent consideration
As part of the deal structure for the acquisition of 7 Elements
Ltd, contingent consideration of up to GBP0.45m was included based
on the performance of the business in the 13 months to 31 March 23.
As the acquisition has exceeded the targets set, the maximum amount
of GBP0.45m became payable, and was paid on 3 April 2023.
The final consideration for the Sungard DCs acquisition is based
on the conversion of short-term contracts into long-term contracts.
This position will not fully crystalise until June 2023 and based
on latest information the contingent consideration is expected to
be GBP2.75m, which will be payable in July 2023.
CURRENT TRADING AND OUTLOOK
Considering the improved electricity purchasing arrangements,
customer and supplier price increases effective from 1 April 2023
and completed cost reductions as result of the synergy programme,
we commence FY24 with annualised revenues and adjusted EBITDA of
c.GBP160.0m and c.GBP29.0m respectively.
The focus for FY24 will be to complete the integration of the
recently acquired businesses and to continue to grow the business
by capitalising on the excellent opportunities provided by the
broader product offerings and increased customer bases which have
resulted from the acquisitions undertaken in FY22 and FY23.
Electricity costs remain key to financial performance and we
will continue to make significant investments in FY24 to further
reduce electricity consumption. This will be achieved by deploying
new cooling infrastructure at the flagship data centre in Heathrow
and by installing solar panels at the Heathrow and Elland data
centres. The Company has locked in electricity prices for the whole
of FY24 and so will not be subject to commodity price volatility in
the current financial year.
With both the synergy and energy efficiency programmes
completing during the course of FY24, FY25 will be the first full
year that reflects the full benefit of the acquisitions.
NOTICE OF FINAL RESULTS
The Company intends to announce its results for the financial
year ended 31 March 2022 on Wednesday 19 July 2023.
Peter Brotherton, Chief Executive Officer, commented:
"The last two years have been transformational for the Company.
The five acquisitions, together with a return to organic growth,
has seen Redcentric's revenues grow by 75% in the last two years
from GBP91.4m in FY21 to a current annualised run rate of
c.GBP160m.
Due to the very significant and complex nature of the synergy
programmes, which were reflected in the consideration paid for the
acquisitions, the boost in profitability will not be fully realised
until FY25. However, we are confident of achieving long term EBITDA
margins close to or in line with our stated target of 25% once the
integration programmes have been completed and fully reflected in
the cost base.
Given the broader product offerings, the enlarged customer base,
and the integration programmes currently underway, I am extremely
confident in the outlook for Redcentric."
Enquiries:
Redcentric plc
Peter Brotherton, Chief Executive Officer
David Senior, Chief Financial Officer +44 (0)800 983 2522
finnCap Ltd - Nomad and Sole Broker
Marc Milmo / Simon Hicks / Charlie Beeson (Corporate
Finance)
Andrew Burdis / Sunila de Silva (ECM) +44 (0)20 7220 0500
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it
forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with
the company's obligations under Article 17 of MAR.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
TSTPPUCCCUPWGMC
(END) Dow Jones Newswires
April 25, 2023 02:00 ET (06:00 GMT)
Redcentric (AQSE:RCN.GB)
Historical Stock Chart
Von Dez 2024 bis Jan 2025
Redcentric (AQSE:RCN.GB)
Historical Stock Chart
Von Jan 2024 bis Jan 2025
