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.
