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Interims detail performance in the Managed Service Provider (MSP) business, with the datacentre (DC) business designated as discontinued operations. (As a reminder, the disposal of the DC business targeted on or around 31st March 2026, deadline of 31st May; an EV of £115m to £127m; and excess cash post disposal to be used to pay down debt and returned to shareholders as a tender offer, as yet unquantified.) The MSP business delivered adjusted EBIT/ adjusted EBITDA of £5.6m / £9.1m respectively, from revenue of £66.8m. 1H26 group FCF (DC & MSP) was £1.1m, after £4.2m capex, £1.6m interest, and £1.9m lease liabilities (rent), all of which will fall considerably post disposal: the disposal converts RCN from a leveraged infrastructure group to a capital-light tech services company. With new management (CEO May 2025; CFO August 2025) giving sharper focus on the MSP after the recent rewarding concentration of efforts on the disposal, we reinstate forecasts, extending to FY28, with strong visibility supported by the 90%+ recurring revenue. This focus is expected to deliver cost savings as well as a platform for growth: forecasts describe modest investment in 2H26E, before revenue growth of +3.9% and 4.6% in FY27E and FY28E are amplified by margin expansion to 10% adj EBIT in FY28E. Target price 155p.
Redcentric Plc
After the October announcement of the sale of the Redcentric datacentre (DC) business to Stellanor for up to £127m (c80p per share), Redcentric has released a trading update for the interim period to 30th September for the continuing Managed Services Provider (MSP) business. Revenues of £67m (1H25: £69m) reflect a slight decline resulting from a management focus on higher-margin revenue streams: accordingly, adj EBITDA has improved from £8.9m at 1H25 to £9.1m, reflecting margin improvement from 12.9% to 13.6%. The completion of the DC disposal is expected to complete in 1Q26 and will be followed by a tender offer, as yet unquantified, subject to deleveraging the balance sheet, at least in part. CEO Michelle de Fonseca will be providing an update on MSP strategy at interims, expected 10th December.
Redcentric has announced the agreement for sale of the datacentre business to Stellanor Datacentres, in an all-cash deal, with consideration based on an enterprise value of a maximum of £127m, equivalent to 15.1x EV/adj EBITDA (IAS 15 adj EBITDA ie adding in lease obligations), subject to potential adjustments. The likely maximum consideration payable is estimated in the range of £115m to £127m, after accounting for adjustments relating to commercial and property matters, then subject to working capital, cash and debt adjustments. Total consideration is likely to be settled in three tranches: 1) most materially on completion, anticipated by the end of May 2026; 2) on completion of accounts true up; and 3) on completion of a final true up anticipated by end of June 2026. Following a Board allocation review, cash proceeds are expected to de-lever the balance sheet, return capital to shareholders via a tender offer process and provide a balance sheet boost support the ongoing MSP business. A significant milestone for Redcentric, crystallisation of the DC carve out will enable both management to focus on its attractive MSP offering, and the market to more accurately value the sum of the parts. As new senior management (CEO since May 2025 and CFO since August 2025) take stock of the continuing MSP business and manage the disposal of the DC business, forecasts remain suspended pending their conclusions, and we look forward to their updated strategy for the MSP business at interims, expected in December.
With the potential datacentre (DC) business disposal in the public domain, and moved into ‘discontinued operations’, Redcentric results to the FY March 2025 disclose the constituent group businesses. The continuing Managed Services Provider (MSP) business is shown to be the lower margin but lower capex, profitable, cash-generative business generating £18.8m adj EBITDA (FY25), with 88% recurring revenue. The ‘discontinued’ DC business represents the result of the successful restructuring of assets acquired in 2021 and 2022, resulting in an enterprise which advanced from breakeven to £16.3m adj EBITDA in FY25, £4.7m adj EBIT, and a net book value of £42m. With attractive (including reserved unused) power capacity and Redcentric having undertaken the hard yards of efficiency improvement and reorganisation, we believe the market continues to overlook the value that is to be revealed through exposing the sum of the parts. With new senior management (CEO since May 2025 and CFO since August 2025) taking stock of the continuing MSP business at the same time as managing the disposal of the DC business, we suspend forecasts pending their conclusions, and look forward to their strategy for the MSP business at interims, expected in November. While we have withdrawn our target price, we present potential outcomes indicating positive upside, within a range of target prices between 144p and 192p, which assumes disposal proceeds between £116m and £144m, and may still underappreciate the heat in the DC market.
In a year where we are primarily looking for demonstration of (post FY22 & FY23 acquisitions) steady progress in improving margins, revenue growth of 6% included 5% recurring revenue growth (still at 90% of sales), even as adj EBITDA margin expanded from 17.4% in 1H24 to 21.0% in 1H25 – and adj EBIT grew 58%. We nudge up forecast revenue +2% in all years due to lower-margin VMware growth, even though passing election-driven demand softness will mildly suppress 2H25 in other revenue – restored momentum in orders is now supporting FY26. A combination of cost savings of £1.5m taking effect slightly later than expected, inflation pressures, and some shared platform costs trim adj EBITDA -4% in FY25E, including amounts for NIC and minimum wage considerations in FY26 and FY27. The investment case is unchanged: EBITDA margins remain over 20% and adj EBIT margin >11%, alongside accelerating free cash flow as capex and interest ease after FY25. (During FY25, elements of the datacentre portfolio are receiving upgrades to accommodate high density halls, better cost (electricity) consumption attribution per rack and by customer, and capacity to meet the needs of AI customers, as opportunities arise). Free cash generation of £3.7m improved from £-5.4m in 1H24, and net debt dropped to £39.9m, en route to <1x EBITDA during 1H26E, and 0.3x by FY27E. Given the market appraisal of Redcentric, it remains overlooked that the RCN negative free cash flow 4% adj PBT margin ugly duckling (during integration) is growing to become a 13% margin swan with >£20mE FCF in FY27. The separation of the businesses by reporting lines will reveal further valuation support on a sum-of-the-parts basis, and quite clearly make the elements separately disposable. Our target price remains 190p, equivalent to 14.8x March FY26E EV/Adj EBIT, in line with the Cav Tech 40 index at 14.6x.
FY24 provided the material completion of the integration process of the 5 businesses acquired up to June 2022, lifting the revenue run rate from £90m to £150m. FY25 will see the re-establishment of adj EBIT margins at 12%+, with our forecasts’ horizon credibly indicating that adj EBIT of £9.7m in FY24 (to March) will increase to £21.2mE in FY25, and onward to £27.2mE in FY27. As net debt reduces from £42m at FY24 to £5.7mE at FY27, M&A and improved dividends are possible. We expect that FY24 to be seen as the year the final integration creases were ironed out; and FY25 the base line for post-acquisition performance at normalised growth and margins. The retirement of CEO Peter Brotherton suggests he feels the integration is done, leaving a company at least twice the size of the challenging opportunity he took hold of (moving from CFO to CEO) in FY19. While industry peers continue to value in EV/EBITDA, EV/Adj EBIT represents reality when significant capex obligations are involved: our 190p target price equates to 13.5x FY26E EV/Adj EBIT, vs the Cavendish Tech 40 Index EV/Adj EBIT of 14.85x and RCN at 10.9x currently.
Redcentric continues to iron out the final wrinkles in the integration process in anticipation of the unchanged expectation of a clean FY25, while still achieving revenue growth. Management focus has remained on organic growth, integration of the acquired businesses, and energy cost minimisation. Organic growth in recurring revenue (excl Sungard short-term contracts) exceeded 8%, including a very healthy level of new logos; and non-recurring revenue grew 38%, with no detriment to gross margin. Multiple small changes have popped up in 1H24 such as: investing for an improved return on energy savings at the London Technology Centre (Heathrow datacentre), but a delay in the completion of the implementation; some increased energy costs by third-party DC procurement; in-sourcing of formerly outsourced managed services contracts, creating net savings; and consolidation of acquired cloud platforms for future savings, as a further consolidation phase. On a net basis, we reduce FY24E (March y/e) EBITDA by £1.5m, with no net change to FY25E revenue or profitability, which continues to represent the clean year following an integration process that was never going to be straightforward given the state of the acquisition (and explaining the extraordinary total operational savings generated of >£20m). The board has reiterated its commitment to a dividend of at least 3.6p, with dividend cash outflow managed to continue to focus on debt reduction. With the second half delivering completion of the original synergy initiatives, FY25 looks very attractive, with current 10.7% free cash flow yield, which still remains high (5.9%) even at our 190p target price. The ‘wait-and-see’ approach of potential investors will be running out of time as we approach March 2024, and we look forward to share price appreciation over the next four or five months en route to the April trading update.
Prelims to March 2023 reiterate the significant revenue benefit of the acquisitions in the year. FY23 EBITDA growth of 3% to £24.5m was generated from revenue growth of 52% to £141.7m, highlighting the FY24-25 opportunity for material EBITDA growth once post-acquisition cost management completes. While the FY23 revenue expansion is set off by some cost increases (principally, but not solely, energy), £16.2m cost savings have been delivered with a further £5.8m in process during FY24. This will more than double the adj EBIT margin from 6.1% to 13.5% by FY25. Forecasts show the path to scale benefits and synergies: 600 customers were added, and run rate revenue has expanded 75% to £160m since acquisitions began in FY21, with 91% recurring revenue (up from 89%), supporting credibility in revenue expectations; while FY24 will demonstrate ongoing delivery of the reduced cost base. Expected energy consumption, in particular, is hedged throughout FY24 and a significant proportion of FY25, removing forecasts’ risk. The investment case remains unchanged: acquisition of revenue in FY23 enables cost savings in FY24 and beyond, in anticipation of margin expansion into the “clean” year of FY25. We reiterate our 190p target price, equivalent to 20x FY25 P/E and still generating a 6.8% free cash flow yield to deliver debt reduction, dividend support, and potential for M&A.
Redcentric is a mid-market managed services provider, gaining near-term scale through acquisitions. With >90% recurring revenue, the group has very strong visibility, delivering services across the spectrum of complexity. A return to a strategy of targeted acquisitions, funded by the group’s strong cash generation profile, has delivered momentum and scale to the top line. This will be complemented by the savings opportunity in the Sungard datacentres acquisition, which drives the bulk of the 48% top-line growth in FY23, and 16% EBITDA growth – followed by 35% EBITDA growth in FY24 as the full-year benefit of synergies come through. CEO Peter Brotherton has the reputation for finding yet more savings each time the company reports. With the market as yet unmoved by the transformational effect of the last four acquisitions (in June and July), the second half of the year to March 2023 will deliver proof of execution which should light a fire underneath the share price. If it doesn’t, then Redcentric the consolidator will become Redcentric the consolidated, for PE to deliver an acquisition hub in a fragmented sector where scale matters.
Interims to September are in line with the November trading update and expectations are unchanged. £11.7m EBITDA was delivered from £61.5m revenue, generating £-11.1m of free cash flow after a well flagged and discretionary inventory build-up, as well as the one-off effects of Sungard onboarding (which will unwind by March year-end). The July completion of the final elements of the acquisition (4D, Sungard Consulting and Sungard data centre) has contributed momentum to the top line which will be fully felt in 2H23 (with a current annualised revenue run rate of £150m), leading to expected sales growth for the full year of 48%, and EBITDA growth of 16% – and a robust balance sheet with a refreshed £100m debt facility to April 2025, and current net debt of £39.3m. The transaction has not yet caught the eye of the market – if it is proof of execution that is awaited, then this is the time to sit up and take notice. At 5.1x FY24 EV/EBITDA, and 9.5x EV/Adj EBIT, with a >11% FCF yield, the stock is a bargain. Target 190p reiterated.
In a busy period that included the July acquisitions of Sungard and 4D, RCN reports revenue & EBITDA in line with expectations, and a positive outlook with a significant increase in sales orders in 2Q23. The Sungard integration is complete, with duplicated costs and transitional arrangements ceased, and phase one of staff restructuring complete (saving £3.2m salaries). Some temporary costs, formerly adjudged exceptionals and opex, are redefined as IFRS16 charges, leaving FY23 EBITDA expectations unchanged but reducing EBIT/PBT/EPS with nil cash effect, before disappearing in FY24. Separately, we upgrade FY24 EBITDA as a consequence of additional FY23 capex-funded energy-saving measures, with a one-year payback. Working capital at 1H23 experienced a deliberate inventory build up to provide a shield to rising prices; and some strategic stock build up to ensure delivery of larger contracts on time, where shortages are a risk. With reduced free cash flow, FY23 net debt expectations are revised to £29.3m (formerly £23m) for FY23 and £15.4m (£13.2m) in FY24, very comfortable within the 2025 £100m facility. 190p target, equal to 8.6x FY24 EV/EBITDA & 6.8% FCF yield (currently 11% @116p) in the first FY post acquisitions.
Redcentric has delivered FY22 results in line with expectations and has executed on its stated scale and capability acquisitions and integration delivery plans, setting itself up to reach £150m revenue at 25% EBITDA in FY24, alongside characteristically strong cash generation. It delivered £23.7m EBITDA (+8.3% underlying growth) from £93.3m revenue (+3.2% underlying growth), leading to FCF of £10m. Since March, management has confirmed trading in line with expectations, with the benefit of acquisitions coming through against the global backdrop of component shortages. Forecasts are mildly and positively amended, raising adj EBIT and adj PBT FY23 by £1m to £15.5m and £12.9m respectively as a result of clearer advice on value of acquired fixed assets acquired shifting depreciation positively. Net debt expectations move from £1.8m net cash (ahead of £1.5mE net debt forecasts) in FY22 to £19.2m in FY23 and £9.4m in FY24. We reiterate our target price of 190p, equivalent to 9.2x FY24 EBITDA, and 5.4% FY24 FCF yield.
Redcentric has announced the exchange of conditional contracts for the acquisition of the business & assets relating to three datacentres (DCs) and relating to colocation, cloud and network services. The vendor – Sungard Datacentre/ Sungard Availability Services – entered administration, blaming energy inflation and challenging rental costs, and the completion and final consideration payable are conditional upon Sungard customers agreeing new terms with Redcentric. If all three DCs individually achieve a required threshold, consideration will vary within an initial consideration range from £11m to £22m, with a further £7.625m subject to certain other undisclosed financial criteria being met, after 12 months. In addition, Redcentric has announced the £4.2m acquisition of a Sungard UK consulting & AWS cloud-related services business. The acquisitions will be settled from existing cash & debt resources (£100m debt facility), and forecasts adjusted with completion of the transaction. The market has been waiting for Redcentric to deploy its efficient integration machine in favour of a compelling opportunity, one that we suspect is too daunting (and therefore at a good price) for a typical managed services provider with multiple operating platforms to contend with – but business as usual for the Redcentric modus operandi of getting under the surface and exposing synergies. With a blue chip customer base which was doubtless terrified of its datacentre provider being in administration, we look forward to 23 days’ time for the result of the novation process. Target 190p reiterated based on currently unchanged forecasts – it’s this type of transaction we’ve all been waiting for.
Interims to September 2021 are in line with the trading update and unchanged P&L forecasts on an underlying basis. The Piksel acquisition locked-box mechanism, which appeased the uncertainty of prolonged negotiations by fixing a certain acquisition date, led to trading update confirmation of revenue of £46m and EBITDA of £12m; however, a review in accounting treatment has led to recognition of the benefit of those months (1st August to 30th September) as a reduction to the purchase price instead of participating as combined group performance. Reported revenue and EBITDA are revised to £44.3m (-£2.1m, of which £1.5m recurring) and £11.9m (-£0.1m), and cash performance is unchanged, leading to £0.4m net debt at 30th September. The presentational accounting pedantry only affects 1H22: 2H22 & FY23 are unaffected, and are now supported even more by revenue performance at Piksel. Pre Piksel, the peer-group wide absence of large project work, noted in the trading update, led to 3% revenue decline including 2% contraction in recurring monthly revenue, on a like-for-like basis (excl. the sold EDF business). The 1H20 COVID boost to revenue has eased back and business is now normalised. Post Piksel, the acceleration in cloud service capabilities and the associated growth opportunities provide real excitement in an otherwise slow managed services market, and shows the benefit of M&A and efficient integration that Redcentric has already displayed in a single transaction. The change in Chairman in favour of Nick Bate, formerly Chairman at Nasstar, also adds important sector experience to Redcentric as both predator and prey, as Nasstar was before it. Target 190p reiterated, equivalent 11x FY23 EBITDA, and still delivering 5% free cash flow yield even at that level (7.4% at the current 129p).
Having weathered the COVID storm with flying colours, Redcentric has delivered results in line as per the April trading update. Pre COVID, we looked to £24.1m EBITDA for the year, adjusting down to £23.6m in April 2020; and yet the group delivered EBITDA of £24.6m (+19% vs FY20), challenges and opportunities having been accommodated by an efficient platform and nimble response. The group furloughed no staff, proving the margins are sustainable, and rapidly developed & delivered solutions to suit urgent client demands. Free cash flow was £2.4m (+15%) ahead of expectations, and has not only enabled an unexpectedly early delivery of a year-end net cash position (£1.0m) but also a dividend 20% ahead of both our pre- and post-COVID expectations at 3.6p for the year. With longer COVID effects still affecting the sales cycle for non COVID-related larger project work, growth expectations in FY22 are trimmed to be more cautious but maiden FY23 forecasts demonstrate a return to growth, which we believe will be superseded by at least one earnings-enhancing acquisition from existing facilities. We lift our target price to 190p (170p) equivalent to a 10.8x FY23 EBITDA multiple and 5.1% FCF yield for the flagship of the sector peer group.
NFT Investments plc is an investment company that specialises in non-fungible tokens (NFT). Has applied for admission to the Access segment of the AQSE Growth Market. No funds being raised. Due 16 April. Thor Explorations (TSXV:THX) seeking a secondary listing on AIM. The Company is targeting Admission during Q2 2021. Segun Lawson, President & CEO, stated: “Thor Explorations has advanced significantly, in both project development and capitalisation since the acquisition of Segilola in 2016. This year, the Company is well positioned to achieve two major milestones with the commencement of gold production at Segilola in Nigeria and a maiden resource at Douta in Senegal, as well as continuing to progress our highly prospective Nigerian exploration portfolio on the Ilesha Schist belt.” MAST Energy Developments (MED) is to IPO on the Standard List on 14th April 2021 under the ticker MAST. The company has raised £5m giving a market capitalisation on listing of c. £23m. MED is currently a 100% subsidiary company of AIM quoted, Kibo Energy*. MED was established to acquire and develop a portfolio of flexible power plants in the UK and become a multi-asset operator in the rapidly growing Reserve Power market. PensionBee has confirmed its intention to float on the High Growth Segment of the Main Market of LSE. The online pension provider had approximately 130,000 Active Customers and £1.5bn of assets under administration, in each case as at 28 February 2021. The Offer will comprise new Shares raising gross proceeds of approximately £55m and existing Shares to be sold by certain existing small minority shareholders of up to £5m. None of the founders, directors or members of senior management of PensionBee are selling any existing Shares. Expected in April. Imperial X (AQSE:IMPP) to join the Main Market (standard). It is also proposed that on Admission to the Official List, the Company will change its name to Cloudbreak Discovery Plc. With effect from Admission, Imperial X will hold equity positions and royalties in a variety of projects in the natural resources sector across multiple jurisdictions, primarily in the Americas and Africa. The Company is proposing to raise up to £1.5m by way of placing of new Ordinary Shares to support further prospect acquisitions. Current Mkt cap £4.7m Expected April 2021. Proposed move to AIM from the main market (standard) by Emmerson (EML.L) to provide Emmerson with access to a market and environment which is more suited, in the Board's view, to the Company's current size and strategy ahead of pivotal period for the Company with the commencement of mine construction at the Khemisset Potash Project expected by end of 2021. Follows recent award of Mining Licence granting Emmerson exclusive right to develop and mine the potash deposit and £5.5m raise to fund ongoing project development work. NextEnergy Renewables to launch an IPO on the Main Market. NREN is a differentiated renewables investment Company that aims to capture the most attractive private renewables and energy transition infrastructure investment opportunities globally. Targeting a £300m raise. NREN is targeting total returns of 9-11 per cent. per annum (net of all fees and expenses but including the Target Dividend and capital appreciation) . The Company's target dividend yield for the first full financial year to 31 December 2022 is 5.5 pence. Due Early March 2021. Digital 9 Infrastructure launch an initial public offering on the Specialist Fund Segment of the Main Market of the London Stock Exchange, by way of an initial placing and offer for subscription for a target issue £400m. Digital 9 Infrastructure plc is a newly established, externally managed investment trust. The Company will invest in a range of digital infrastructure assets which deliver a reliable, functioning internet. The IPO Prospectus is expected to be published in March 2021. Fix Price announces its intention to float on the Main Market of the London Stock Exchange. Fix Price is one of the leading variety value retailers globally and the largest in Russia, with more than 4,200 stores. Fix Price has revenues of RUB 190.1bn, RUB 142.9bn and RUB 108.7bn for 2020, 2019 and 2018, respectively. Adjusted EBITDA for the same years was RUB 36.8bn, RUB 27.2bn and RUB 14.2bn, respectively. The Offer would consist of an offering of GDRs by certain existing shareholders of the Company. Great Point Entertainment Income Trust PLC announced its prospectus has been approved by the FCA. Great Point Entertainment Income Trust PLC is a newly established, externally managed closed-ended investment company. The Company will provide project finance to content makers and commissioners in the global television and film production industry via senior loans secured against pre-sold intellectual property (IP) rights. GPEIT's investment objective is to provide Shareholders with dividend income and modest capital growth through exposure to media content finance.
RCN SGN PRIM ORR AVCT RENX CMCL ARO UKXA
Interims accompany the sale process termination, while providing a return to growth alongside shareholder returns through a reinstated dividend and restoration of the buyback programme. The typically reliable delivery, increasing efficiency (15% adj PBT margin vs 10% 1H21) and enhanced cash generation (£6m 1H21 FCF from £6.8m adj PBT), is complemented by return to not just underlying but also headline growth – representing a strong investment case and an acquisition hub for a fragmented sector where scale and a single core platform is vital to successful integration. With 7% revenue growth including 18% growth in public sector revenue, reinvigoration of private sector new business after the innovative FCA settlement offers routes to further organic growth. A clean balance sheet, single ERP, simplified network, and rationalised datacentre estate, leave Redcentric the perfect predator. Management having worked so hard to successfully solve historic issues, that same energy can now be applied to growth and expansion. We look forward to the journey. Target 170p reiterated.
Finals for the year to March demonstrate rude health and opportunities despite lockdown – and after nearly four years, the absence of the spectre of the FCA investigation has been dealt with. The organisational efficiency which CEO (and former CFO) Peter Brotherton has delivered over those four years has not just allowed included cost savings, but also an upgraded and rationalised network and infrastructure, a single ERP (from October), and opportunities for private and public sector revenue growth. The group is now primed to play an active part in the consolidation of the mid-market managed services sector, as predator or prey, with a healthy balance sheet (net debt/EBITDA 0.1x at FY21) and an FY22 debt facility. Results are as expected: FY21 EBITDA is tweaked up 2%, and FY22 is introduced with upgrade potential. We lift our target price once again, to 170p (160p), 10x March FY22 EBITDA and still delivering a 6.0% FCF yield.
Redcentric has agreed a settlement with the FCA whereby net purchasers of stock between November 2015 and November 2016 will be compensated at the equivalent of approximately 17p per share, payable as preferred as part shares/part cash, all shares, or all cash. To assist in funding the compensation in the event of an all cash settlement, the group has agreed a provisional placing for £5.8m at 110p, in addition to use of treasury shares and existing cash resources. The relief from the shadow of the FCA investigation will be a welcome fillip to business prospects, re-opening opportunities with the private sector and confirming no further action, which would have adversely affected public sector bid prospects, and M&A. With the accompanying trading update, 1Q21 performance in recurring revenue sales orders is mildly ahead of 1Q20, and further cost savings lead us to nudge March FY21 EBITDA expectations from £23.6m to £24.0m (+1%) despite trimming revenue 3% due to a COVID-based slowdown in lower-margin non-recurring revenue. With relief from the uncertainty of the FCA investigation, we lift our target price to 160p, as the group can finally return to business as usual.
Typically for Redcentric, strict cost control has delivered like-for-like pre IFRS16 EBITDA ahead of prior year, from revenue behind the prior year. Quarterly revenue performance suggests revenue decline has been stemmed, with new logo wins and strong, if protracted, opportunities for growth in existing public sector framework agreements. While also focusing on the challenge restoring top-line growth, the deeper management team (new CFO since 2 September) has now had capacity to quietly tidy up further elements of the business and drive further efficiencies, today highlighting third-party datacentres and surplus legacy network infrastructure, which represent costs savings of £2.8m in FY21. The resulting leaner and single platform machine finds itself perhaps one of the cleanest vehicles for consolidation of its scale, as a listed principal or as agent of a private equity roll up. Once the overhanging FCA investigation has finally been closed we look forward to RCN, with a strong balance sheet (0.1x net debt/EBITDA by March FY21), a single efficient platform from network to billing, and management well versed in cleansing inefficient processes and infrastructure, being a key driver in necessary industry consolidation. Target 120p.
PCI Pal (PCIP): Corp FY 2019 is an excellent first full year for new platform | Redcentric (RCN): Corp Interim trading update – in line
Redcentric Plc PCI-PAL PLC
Redcentric has delivered free cash flow of £12.1m (vs £8.3mE) from EBITDA of £16.7m (£17.0mE) and revenue of £93.3m (£94.2mE). The strong cash performance from the in-line EBITDA performance demonstrates a continuing determined delivery of a corrected balance sheet – maiden FY21 forecasts released today indicate net debt reduction to £1.9m, or 0.1x EBITDA. With restoration of the dividend at interims, and the payout ratio today increased to 50%, the board will request authority for a buyback programme of up to 5% at the AGM, indicating strong cash confidence. £5m cost savings (vs £3mE) and a refreshed sales team delivering on public sector network opportunities (£16.8m of new contract value in 2H19), delivers forecasts for a return to growth in FY21. Target 120p reiterated.
Kingswood Holdings (KWG): Corp A small company at present, but with big ideas | Redcentric (RCN): Corp Trading update on track – strong cash generation | Savannah Resources (SAV): Corp Acquiring remaining minority interest in Mina do Barroso
Redcentric Plc Savannah Resources Plc
A typically strong cash performance at interims demonstrates yet further exceptional cost control and cash generation. A lack of momentum in revenue is already being dealt with – CEO Chris Jagusz has stood down, and the group is refocusing on restoring revenue growth through a focus on delivery where success is already evident. The Public Sector Network and Health and Social Care Network frameworks and contracts, including new wins, are achieving measured success at a slower rate than expected, while the private sector represents an area of strength for renewed focus. Nevertheless, strong cash generation is now a standard feature of RCN performance, supported by further cost efficiencies which we expect to support margin expansion into 2H19 and FY20. We review forecasts: FY19 revenue -5%, EBITDA -2%; and FY20 revenue -13% and EBITDA -9%; however, strong free cash flow expectations lead us to improve upon former net debt forecasts, falling to £10.9m (formerly £12m) by FY20. Target price 120p (125p).
Prelims are in line with the April trading update, delivering EBITDA of £18.1m (£18.4mE) from revenue of £100.0m (£101.9mE), leading to net debt of £27.7m and implying a very strong return to positive cash flow. £11.9m of free cash generation (FY17: £-1.6m) demonstrated the construction of an effective financial function and the transformation of the financial control environment, with a normalised working capital profile and net debt expected to dip to 1.2x EBITDA by FY19. Forecasts for FY19 were amended in June and EBITDA is tweaked here -3%; FY20 shows the 21% EBITDA growth benefit of the four-year £70m combined Yorkshire Health & Social Care Network and Public Sector Network contract win, delivering an expected additional +£15m revenue to FY20 (@15% EBITDA margin). While the environment for managed services will continue to evolve, the Yorkshire contract demonstrates industry credibility in RCN’s service quality, and shows the potential for large scale contracts wins – the smaller scale lost government hosting contracts led to a revenue revision of c£-5m per annum, so it is a question of perspective – we reiterate our 125p target price.
Interims to September 2017 demonstrate that the goals needed to reassure the market have been delivered (cash flow and control of net debt from stable revenue and improving margins). The financials are now in order, with normalised and much improved working capital, and a completion of restatements delivered by a refreshed financial team. With evident control of the improved forecast net debt position demonstrating achievable net debt/EBITDA levels of below 1x by FY19E (which we believe would justify a return to the dividend list), along with a reinforced board, and a new, experienced and well regarded CEO, the group can now return to a focus on growth in its target mid market. We lift our price target to 125p (117p).
Redcentric Plc Tethys Oil AB
Prelims are in line with the trading update including net debt of £39.5m as expected, revenue of £104.6m (£106.2mE), and EBITDA £17.3m (£17.5mE). Sales targets were met: 88 new customer logos added £19.4m initial total contract value, while three public sector contract renewals illustrated the continuing quality of service delivery. A deliberate move away from product sales and a continuing caution means we adjust FY18 revenue forecasts -6% and EBITDA -5%, moving net debt expectations from £29.7m to £32.3m. While the market appears to be waiting for an approach, management is striving to rebuild margins and reiterate the strength in recurring revenue, with a third set of accountants having now reviewed numbers which we expect will mean the last of the adjustments – and most notably for net debt expectations, a return to normalised working capital movements. Prospects are looking up, although it may take a further reporting period for sufficient disclosure to illustrate positive developments.
Redcentric released interims before Christmas, with an analyst meeting this morning, however no new related news is available. The extent of the accounting misstatement has already been quantified at £20.8m, of which £5.9m related to the interim period ending September 2016, relating to accounting practices, policies, and errors regarding cost accrual, cost deferral, and revenue recognition. Having withdrawn original forecasts with the initial revelations, we reintroduce amended forecasts, assuming that the forensic accounting investigation has uncovered the issues, and having been corrected that 2H17 performance (to March) continues to replicate performance in 1H17 (to September 2016), as management guidance indicates. Target 117p.
Redcentric has provided an update on the forensic review following the discovery of misstated balances in the group’s balance sheet. The cumulative overstatement of net assets and profits after tax up to 30 September 2016 is c.£20.8m. Management currently believe that c.£5.9m of this misstatement (£4.7m at the EBITDA level) arose in the six months ended 30 September 2016. The group’s previous indications had been that all issues related to prior periods. H1’16 revenue is now expected to be c.£53.0m with EBITDA of c.£9.1m. The average net debt position over the past 8 months to November 2016 was £42.0m. This is materially higher than originally reported. The group expects to report its interim results before 31st December which will provide more detail on the forensic review and remedial action plan. Our forecasts and recommendation remain Under Review until the full detail can be released.
Victoria* (VCP): Acquisition of Dunlop Flooring (CORP) | Redcentric* (RCN): Impairment update (CORP) | Idox (IDOX): Prelims on track; placing and acquisition (HOLD) | Mortgage Advice Bureau (MAB): Upside down under (BUY)
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Redcentric’s FY’16 results highlight the high quality, predicable company that the group has become. Group revenue grew 16% to £109.5m with adj. EBITDA up 21% to £25.8m, both in-line with forecasts. Recurring revenue remains the focus and showed an impressive 17% growth (11% organic) making up 82% of total revenue. Higher customer-led capex and a one-off working capital outflow resulted in net debt rising to £19.9m against our original £10.2m forecast. We believe the working capital outflow will reverse in FY’17 and are not concerned by the overall level of debt. We believe Redcentric is a core holding and deserves a premium rating. Our 215p TP (set at a 10% premium to the sector) offers 22% TSR, we retain our Buy recommendation.
Redcentric (RCN LN) Core holding which will keep on delivering | UBM (UBM LN) PRN disposal closed!
Redcentric Plc UBM Development AG
Redcentric delivered a strong set of prelims, with EBITDA (+21% vs FY15), revenue (+16%) and dividend (+29%) in line with unchanged expectations. With 8% organic group revenue growth, including 11% organic growth in recurring revenue, the importance of customer service and low churn is key, generating 60% of new sales key, with acquisitions boosting that base: Calyx is now integrated, and the integration of City Lifeline is well underway. Board confidence is expressed in ongoing dividend growth, supported by the opportunity for further organic growth and acquisitions, with comfortable £70m debt facility headroom (net debt £25.3m). Target 245p reiterated.
Redcentric has delivered another strong year with recent acquisitions augmenting a good organic performance. Total revenue grew 16% to £109.5m with recurring revenue up an impressive 17% (11% organic) and now 82% of total revenue. Adj. EBITDA grew 21% to £25.8m, in-line with our forecasts. As highlighted in March, an increase in customer driven capex combined with a larger than usual working capital outflow resulted in net debt at the year-end above our initial estimates. Net debt at March ’16 was £19.9m, in-line with our £19.3m revised estimate but higher than our original £10.2m estimate. Total net borrowings (incl. finance leases) of £25.3m is under 1x EBITDA, leaving plenty of scope for further accretive acquisitions. The outlook remains positive with a year-end sales pipeline of £95m, c.12% higher than at Sept’15. We do not expect to make any major changes to our FY’17 forecasts, leaving the group trading on c.10x March’17 EBITDA. We see Redcentric as a core holding in the sector and retain our Buy recommendation.
Redcentric*: Consistent growth in recurring revenue (CORP) | PPHE*: Refinancing supports on-going refurbishment (CORP) | Chariot Oil & Gas*: Mauritania and Morocco updates (CORP) | Seeing Machines*: Guardian distributor in SE Asia (CORP)
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Redcentric’s FY’16 pre-close trading update points to continued strong performance, in-line with expectations. Our forecasts show revenue and EBITDA growth in FY’16 of 15% and 21% respectively. Revenue has grown through a combination of new client wins and growth with existing customers. Our forecasts show a 55% H2 EBITDA weighting. This has been achieved via successful integration of the Calyx acquisition and an improved revenue mix, resulting in a stronger EBITDA margin in the second half. Increased success-based capex and an increase in year-end debtor days has resulted in net debt slightly higher than expectations. We increase our FY’16 net debt forecast to £19.3m (also incorporating the recent £4.8m City Lifeline acquisition). The group has debt facilities of up to £70m, giving plenty of scope for further acquisitions. Redcentric has consistently delivered against expectations and we expect continued strong performance. We roll forward our valuation methodology resulting in a 215p TP (11.5x FY’17 EV/EBITDA). Buy.
Redcentric released its H1’16 results yesterday showing continued strong execution of its growth strategy. Group revenue and adj. EBITDA grew 15% and 17% respectively, representing a solid mix of organic and acquisitive growth. Recurring revenue showed 18% growth (12% organic) and continues to be the backbone of the group (81% of total revenue). Net debt of £16.5m was marginally higher than our £14.1m forecast but still well within the group’s debt facilities of up to £70m, leaving plenty of scope for further accretive acquisitions. We make no changes to our full year forecasts and roll forward our valuation methodology resulting in a 204p target price (11.5x Dec’16 EV/EBITDA). The shares have performed well and we stay at Buy.
Redcentric has released interims showing continuation of the high-quality performance trends which have described the company’s track record: 8% organic revenue growth; 81% recurring revenue which is growing at 12%; gross margin expansion (+7%) and EBITDA margin expansion (+0.3%); and strong cash generation. Results are in line with expectations. With the demonstration of continuing high-quality performance and growth, we lift our 12-month target price to 245p, equivalent to 10x EV/Trading EBITDA FY17, 17x FY17 P/E.
Redcentric has released its interim results for the six months to 30th September 2015. 15% revenue growth to £54.0m (8% organic) and 17% EBITDA growth to £18.8m are in-line with expectations and leave the group well placed to meet our forecasts for the full year. Net debt post the Calyx acquisition is slightly higher than forecast at £16.5m (N+1Se: £14.1m) but remains well within existing facilities. Integration of Calyx was completed in September and we expect the benefits to flow through in the second half. The group continues to show good growth in recurring revenues with the potential to augment organic growth with accretive acquisitions as opportunities arise.
Redcentric*: Consistently strong (CORP) | red24*: Interim results (CORP)
Redcentric Plc Red24
Redcentric has released an in-line trading update for the six months to 30th September. Organic growth has continued, with five £1m+ contracts with Government and commercial clients adding to the high levels of recurring revenue. Cash generation is said to be strong and the integration of Calyx is on track. Alongside the trading update the group has announced that Fraser Fisher will be stepping up to CEO, with Tony Weaver remaining on the board as an NED. Fraser is already well known to investors and we believe this change will be well received. The shares have been strong recently but we believe that 80%+ recurring revenue, a 2.5% dividend yield and the potential to augment organic growth with further acquisitions remains attractive. We increase our target price to 197p and remain at Buy.
Redcentric*: Interim trading update – on track (CORP) | iomart*: Interim trading update (CORP) | Corero Network Security*: Interims show progress (CORP) | Volex: Board changes and trading update (BUY) | Avingtrans^: Full-year results (BUY) | ZincOx Resources*: Interims show improved operational performance (CORP) | Proteome Sciences*: Interims in line (CORP) |Sphere Medical*: Model update (CORP) |ServicePower Technologies*: Interim results (CORP) |Litebulb*: Interim results (CORP) |Camco Clean Energy*: Roll-in of REDT minorities (CORP) |Zambeef*: Trading good but local FX collapse (CORP) |San Leon Energy*: Interim results and Moroccan well update (CORP) |Independent Oil & Gas*: Interim results (CORP)
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Recentric’s full year results to March ’15 showed the progress made since the InTechnology (IMS) acquisition in November ’13. A clean year allowed the organic growth to be seen clearly with revenue and adjusted EBITDA both coming in slightly ahead of expectations. With strong momentum in the existing business and significant balance sheet strength to explore further earnings enhancing acquisitions, we believe the shares deserve a premium rating. We increase our TP from 165p to 179p, a blend of 17.8x FY’16 PER and 10.3x FY’16 EBITDA, our recommendation stays at Buy.
Redcentric prelims indicate evidence of strong continuing performance, in line with both their mid March trading update and our forecasts. 81% of revenue is recurring (FY14: 71%) with group EBITDA margin expansion to 22.7% (FY14: 18%) including 23.9% 2H15 margin performance. Having proved the potential of the business in a clean 12-month period, ie integrating IMS without further acquisitions, we expect operating fundamentals to benefit from continuing organic growth (FY15: 8%) in addition to a return to the acquisition trail, as has already begun with Calyx in April. This type of activity will in turn give continuing momentum to the valuation potential in the share price as multiples respond. Target lifted to 205p (180p).
Redcentric has announced a strong set of results for the year to March ’15, delivering organic revenue growth of 8% to £94.3m and 32% pro-forma growth in adj EBITDA to £21.4m. This period is the first full year with no acquisitions or disposals and, as flagged in March, the results are slightly ahead of our expectations at the revenue and adjusted EBITDA level. Operating cash conversion was strong at 89% although higher capex in the year led to net debt being slightly higher than our forecasts at £4.8m (N+1Se £4.0m). Strong growth in recurring revenue (+13%) and a £71m pipeline of qualified opportunities gives us confidence that the group will continue to deliver predictable, cash generative growth in FY’16 and beyond. We remain at Buy.
Redcentric*: Recurring execution (CORP) | Byotrol*: Prelims – on track for breakeven (CORP)
Redcentric Plc Byotrol plc
Redcentric*: Acquisition (CORP)|21st Century* (CORP)
Redcentric Plc 21St Century Technology
