REG - Redcentric PLC - Final Results
24/09/2025 07:00
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RNS Number : 6003A Redcentric PLC 24 September 2025
The information contained within this announcement is deemed to constitute
inside information as stipulated under the retained EU law version of the
Market Abuse Regulation (EU) No. 596/2014 (the 'UK MAR') which is part of UK
law by virtue of the European Union (Withdrawal) Act 2018. The information is
disclosed in accordance with the Company's obligations under Article 17 of the
UK MAR. Upon the publication of this announcement, this inside information is
now considered to be in the public domain.
24 September 2025
Redcentric plc
('Redcentric', the 'Company' or the 'Group')
Final Results
Redcentric plc (AIM: RCN), a leading UK IT Managed Services provider, is
pleased to announce its final audited results for the year ended 31 March 2025
('FY25' or the 'year'). The 2025 Annual Report and Accounts containing full
details of the results will be made available on the Company's website shortly
and posted to shareholders in the coming days.
Corporate Highlights
During FY25
· As previously announced, during the period the Group undertook an
exercise to create two autonomous business units by separating out the Data
Centre ('DC') business unit and the Managed Service Provider ('MSP') business
unit. The rationale for this was the belief that the two business units target
different markets with business market dynamics, so therefore needs to be
addressed by different business models and have separate management teams.
This separation successfully completed on 1 February 2025;
· The Group has appointed advisors with regards to the possible sale of
the DC business unit and, as announced on 22 August 2025 in response to press
speculation, the Group is currently in advanced negotiations with a preferred
third party. Given the potential sale of the DC business, the assessment under
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations is that
the DC business unit should be recognised as a discontinued operation.
Shareholders will be kept informed of developments and there can be no
certainty that a transaction will be concluded;
· Developing and growing the MSP business unit is the ongoing focus of
the Group where the Board sees an opportunity to build additional shareholder
value. The financial statements have been prepared on a continuing basis for
this business unit, with appropriate disclosures made under IFRS 5; and
· The Board welcomed Richard McGuire as Non-Executive Chairman and John
Radziwill as a Non-Independent Non-Executive Director.
Post year-end
· The Board welcomed new senior management, with Michelle Senecal de
Fonseca, formerly a Non-Executive Director, becoming CEO in May 2025, and Tony
Ratcliffe joining as CFO in August 2025. Both individuals have substantial
experience building technology businesses, leading change and generating
shareholder value.
Financial Highlights
Unless otherwise indicated, the following results are based on the continuing
operations of the Group. Percentage changes are calculated on absolute values:
Year ended Year ended Change
31 March 2025 31 March 2024
('FY25') ('FY24')
£135.1m £124.8m +8.3%
Total revenue
Recurring revenue(1) £120.7m £110.7m +9.0%
Recurring revenue percentage(1) 89.3% 88.7% +0.6%
Gross profit £83.3m £78.2m +6.5%
Gross margin 61.6% 62.7% -1.1ppts
Adjusted EBITDA(2) £18.8m £17.4m +8.1%
Adjusted EBITDA(2) margin 13.9% 13.9% -
Reported operating profit £8.4m £5.7m +47.5%
Reported profit before tax £4.4m £1.8m +139.3%
Group Net debt (£65.5m) (£72.4m) -9.5%
Group Adjusted net debt(3) (£41.9m) (£42.0m) +0.3%
Adjusted basic earnings per share(4) 3.82p 3.74p +2.3%
Reported basic earnings per share 1.70 1.10p +54.5%
These results contain certain financial 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 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.
A full explanation of the alternative performance measures used is available
in the Appendix and more fully in the Annual Report. In summary:
(1) Recurring revenue comprises the revenue that repeats either under
contractual arrangement or by predictable customer habit;
(2) Adjusted EBITDA comprises earnings before interest, tax, depreciation and
amortisation ('EBITDA') further adjusted for exceptional items and share-based
payments, including National Insurance;
(3) Adjusted net debt comprises reported net debt (borrowings net of cash) but
excluding any supplier loans or lease liabilities that would have been
classified as operating leases under IAS17 and is a measure reviewed by the
Group's banking syndicate as part of covenant compliance; and
(4) Adjusted basic earnings per share comprises earnings before interest, tax,
depreciation and amortisation, exceptional items and share-based payments to
which a notional tax charge of 25% is applied.
Financial Highlights - Total Operations
(Combined MSP business unit and the DC business unit that is recognised as
discontinued under IFRS 5)
· Total revenue for the Group was £169.9m (FY24: £163.2m)
· Recurring revenue for FY25 was £155.0m (FY24: £149.1m)
· Recurring revenue percentage of 91.2% (FY24: 91.4%)
· Adjusted EBITDA was £35.4m (FY24: £28.3m)
Continuing Group Operational Highlights
· Integration of Group acquisitions undertaken in FY22 and FY23 are
progressing well, delivering additional operational capabilities within the
MSP business; and
· The large number of cloud platforms previously acquired have been
consolidated and optimised. This rationalisation project provided increased
scale for multi-tenant platforms and annualised cost savings from sunsetting
sub-optimal dedicated customer platforms.
Outlook
· FY26 focus on recurring revenue whilst actively managing the cost
base to deliver the strongest possible margin and cash flow;
· Stable revenue expectations for FY26;
· Confident in medium to long-term outlook with a strong business model
and renewed strategy to be outlined at the interim results; and
· Anticipated sale of the DC business expects to generate a significant
return of capital to shareholders as well as retaining sufficient capital
required to expand the MSP business and reduce debt.
Commenting on the results, Michelle Senecal de Fonseca, CEO of Redcentric,
said: "These are positive results in what has been a busy and transformational
year for the Group. Significant groundwork has been completed, paving the way
for the possible disposal of the DC business, which I look forward to updating
shareholders on in due course. Our ongoing focus is on MSP, which has a strong
business model, brand and market position in both public and private markets.
I look forward to driving the MSP business ahead in the coming years and am
presently refining the go-forward strategy. I also look forward to providing a
more detailed update on this strategy at the interim results."
For further information:
Redcentric plc via Burson Buchanan
Michelle Senecal de Fonseca, CEO www.redcentricplc.com (http://www.redcentricplc.com/)
Tony Ratcliffe, CFO
Tel: +44 (0) 20 7220 0500
Cavendish Capital Markets Limited - Nomad and Broker
Marc Milmo / Callum Davidson (Corporate Finance)
Andrew Burdis / Sunila de Silva (ECM)
For media enquiries:
Burson Buchanan - Financial Communications Tel: +44 (0) 20 7466 5000
Henry Harrison-Topham / Jamie Hooper / Toto Berger redcentric@buchanancomms.co.uk (mailto:redcentric@buchanancomms.co.uk)
Notes to Editors:
Redcentric has a strong track record in delivering IT Managed Services
provision that empowers businesses to scale, innovate and grow in a rapidly
evolving digital landscape. As technology continues to advance the Company's
goal is to be the go-to-all-in-one infrastructure and managed IT service
provider for customers of all sizes offering an unmatched range of products
and solutions. From infrastructure management and cloud services to
cybersecurity and data analytics, Redcentric has a comprehensive suite of
solutions designed to meet the diverse needs of modern businesses.
The Company operates through two distinct divisions:
Managed Services Provider ('MSP'): Servicing the private and public sectors
with all their IT requirements. The MSP division acts as an outsourced IT
department, handling day to day maintenance and security of customers' IT
infrastructures. This allows customers to improve security and efficiency and
focus on growing their core businesses.
Data Centres ('DC') Portfolio of eight well invested data centres with 41MW
of available capacity strategically located across the UK from London to West
Yorkshire. DC serves a diverse blue chip customer base, providing critical
services to Enterprise-grade clients and Government entities reliant on secure
data centres and uninterrupted connectivity.
For additional information please visit www.redcentricplc.com
(http://www.redcentricplc.com)
Chairman's Statement
I am pleased to introduce the final results of the Redcentric Group for the
financial year ended 31 March 2025, the first in my tenure as Chairman.
Overview
This year has been a transformative and dynamic one for the Group, marked by
significant achievements and strategic advancements. The integration of
acquisitions made in FY22 and FY23 are now well progressed, delivering the
anticipated benefits, including enhanced scale in the DC business unit and
streamlined operations in the MSP business unit. By consolidating cloud
platforms and optimising site operations, the MSP business has strengthened
its operational efficiency. These efforts have established robust foundations,
positioning the Group for sustained growth and success.
A key milestone during the year was the successful separation of the Group's
operations into distinct DC and MSP business units. The DC business unit now
operates autonomously, led by a dedicated management team, with financial
results reported separately. This restructuring has highlighted the unique
value and potential of both businesses, while also underscoring the challenges
of managing two distinct operations. After careful consideration, the Board
elected to respond to interest and appoint advisors to actively market the DC
business. Having seen strong interest from a number of third parties, the
Company is currently in exclusivity and in advanced negotiations regarding a
possible sale of the DC business. Shareholders will be kept updated on
developments.
Given the possible sale of the business, the DC business unit's results are
presented, in accordance with IFRS 5, as a discontinued operation in the
Consolidated Statement of Comprehensive Income, with its assets and
liabilities classified as held for sale in the Consolidated Statement of
Financial Position.
Focus on the MSP business
The Board believes that the MSP market provides an attractive opportunity for
growth and scale, which can be capitalised on by leveraging the Group's
existing operational infrastructure and cost base, thus creating the potential
to deliver attractive returns to shareholders while continuing to deliver
market leading service to the Group's valued client base.
Solid progress and momentum were achieved in the year, with the MSP business
delivering revenue growth of 8.3% driven by strong performance across its
three core service towers: Cloud, Connectivity and Communication. The
recurring revenue model, a key strength of the MSP business, accounted for
89.3% of total MSP revenues (FY24: 88.7%). Adjusted EBITDA of £18.8m reflects
an increase of 8.1% (FY24: £17.4m). This performance is particularly notable
given the challenging market environment, characterised by cost-conscious
clients, pressure on public sector spend, tough renewal negotiations and
broader macro uncertainties.
The Group has capitalised on opportunities arising from Broadcom's acquisition
of VMware, which has reduced the pool of VMware vendors. As one of the
selected Pinnacle Partners, the Group identified and secured increased revenue
opportunities, accounting for a significant element of the revenue growth,
albeit at a lower margin.
The work involved in the separation of the two business units, plus the time
focused on the potential DC business disposal has presented some inevitable
distractions going into the new financial year (FY26). However, management is
dedicated to its commitment to drive MSP's revenue whilst prudently managing
the cost base to maximise stakeholder value. The Board continues to believe
that the MSP business provides attractive growth opportunities for the Group.
Final dividend
During the year, the Board declared an interim dividend of 1.2 pence per share
(FY24: 1.2 pence per share), with £1.9m paid to shareholders on 22 April 2025
(FY24: £1.9m).
Historically, the Group has declared total annual dividends amounting to 3.6
pence per share resulting in annual dividend distribution of approximately
£5.7m.
Should the Group successfully conclude a sale of the DC business, this will be
followed by a material return of capital to shareholders. In anticipation of
this, the Board has elected to suspend the declaration of a final dividend
this year. This prudent step will be kept under review pending the outcome of
the DC business sale discussions. Shareholders will be kept informed of
progress and any material updates in due course.
Board changes and people
The year has seen more Board changes than typically anticipated, but I am
pleased to report that the current Board composition is well-suited to meet
the Group's present and future needs, bringing a strong blend of expertise and
strategic vision.
In August 2024, Peter Brotherton, our former CEO, announced his intention to
retire and step down from the Board. To ensure a seamless transition, Peter
remained an Executive Director with the Group until May 2025, formally
stepping down after supporting the onboarding of the new CEO and he remains in
a strategic advisory capacity to the DC business and its possible sale.
The Board appointed Michelle Senecal de Fonseca as CEO in May 2025, following
her tenure as a Non-Executive Director since February 2024. Michelle has
already made a significant positive impact, driving strategic initiatives and
reinforcing the Group's forward momentum. Her leadership positions the Group
well for continued growth and success.
Following the announcement in January 2025 regarding David Senior's decision
to step down from the Board as CFO, the Board welcomed Tony Ratcliffe as CFO
in August 2025.
Redcentric also welcomed John Radziwill to the Board on 31 October 2024. John
represents ND Capital, one of the Company's largest shareholders. He brings a
wealth of expertise, is an accomplished entrepreneur and an experienced
Non-Executive Director.
Finally, I am personally delighted to have joined the Board as Non-Executive
Chairman on 27 September 2024, replacing Nick Bate, who retired having served
the Company for many years.
On behalf of the Board and everyone at Redcentric, I extend our gratitude to
Peter Brotherton, David Senior, and Nick Bate for their substantial
contributions to the Group's growth and success.
The Board remains steadfast in its commitment to upholding high standards of
corporate governance, guided by the Quoted Companies Alliance ("QCA") Code. We
are confident that the current Board composition is well-aligned with the
Group's present and anticipated future needs, providing robust oversight and
strategic direction. However, we acknowledge a shortfall in the number of
independent Non-Executive Directors as outlined in Principle 6 of the QCA Code
and a gap post the year-end date when the Group was without a CFO as outlined
in Principle 7 of the QCA Code. The Board is committed to periodic reviews to
further strengthen governance.
I also wish to express my appreciation to all our colleagues for their
tireless efforts in driving the Group's growth and development over the past
year, and for their ongoing commitment in the current year. We are equally
grateful to our valued clients for their trust and partnership, which are
fundamental to our success. Additionally, I extend my thanks to our investors
for their unwavering support. Together, we look forward to a dynamic and
successful year ahead, building on our strong foundations to deliver
sustainable value.
Richard McGuire
Non-Executive Chairman
Chief Executive Officer's Review
Introduction
These are my maiden results since being appointed as CEO in May 2025, although
I got to know the business well during my time as a Non-Executive Director.
This both excited me, given the opportunity and prepared me to make an early
impact in the role.
A key Board decision over the last 12 months was to separate the two business
units, MSP and DC, from what had historically been a single combined business.
It has become increasingly clear that these two business units work in quite
different markets, with different offerings, business models and different
capital and resource requirements. This separation was a complex and
time-consuming exercise but very worthwhile to increase visibility of
performance.
The Board also made a strategic decision to actively market the DC business
and to focus the Group's efforts on building MSP. As demonstrated by the
interest shown, the Board believes that the DC business has been built, both
organically and through more recent acquisitions, into a highly valuable and
attractive asset. There are a number of significantly larger players in the DC
space, all seeking to consolidate their market positions through acquisition.
Following a potential disposal, the DC business unit's customers, colleagues
and other stakeholders should expect to benefit from the additional
opportunities available to it.
The focus and attention of the Board and management going forward is directed
to addressing what it sees as an attractive MSP market opportunity, where the
Group has strong foundations built on recurring revenues which it is expected
can be further increased to create shareholder value. The focus of my review
below is devoted to the MSP business.
The IT Managed Services market
UK customer demand for managing IT infrastructure, cybersecurity and end-user
systems is well established.
The IT Managed Services market is highly fragmented, with a small number of
very large providers, a significant number of quite small providers and a
modest number of mid-tier providers, including Redcentric. These providers are
a broad spectrum of businesses from global telecommunication companies through
hardware and software providers, system integrators and a range of independent
providers, and include companies providing individual elements of the overall
IT Managed Services spectrum.
Redcentric has built a particularly strong position in the public sector,
including NHS trusts, as well as commercial markets, and enjoys an enviable
portfolio of customers.
The Board believes that the Group's market position - sitting between the
small number of large system operators and the larger universe of small
operators - is compelling. Management believes the Group has the requisite
scale to provide a diverse and attractive product and service offering but is
nimble enough to offer the high levels of service and engagement that the
largest players struggle with. The Group does not suffer from many of the
challenges that its smaller competitors face, such as the lack of a delivery
structure, reputation, reliability and financial strength. The Board views its
AIM listing as a strong and visible demonstration of the Group's solid balance
sheet, making the Group a particularly strong counterparty for its customers
to contract with.
Strategy and business model
The Group provides a broad range of IT Managed Services across its three core
specialist areas of Cloud, Connectivity and Communication. Each of these areas
has a dedicated focus with technologically advanced infrastructure and
appropriately skilled resource. Historically, the Group has built its offering
both organically and through M&A.
The Group has positioned itself in the market as being able to combine the
benefits of proprietary networks with a flexible and technically skilled
workforce able to deliver and support critical services and solutions in an
exceptionally secure environment.
The Group seeks to differentiate itself in three distinct ways:
· Innovation - in the design and delivery of services;
· Reliability - the right technical skills, organised in the right way,
to give predictable high-quality results; and
· Value - service offerings designed to offer value for money to
mid-market customers.
The Group has a well-established and capable direct sales and account
management team, which in some circumstances is complemented by strategic
partners, who work to continue to attract new customers and to deepen and
broaden its relationships with existing customers. The Group's very high
proportion of recurring revenue is a highly attractive facet of its business
model. Focus continues on increasing the level of recurring revenues, as this
provides a solid and highly visible picture of future revenues and earnings,
but also to complement these revenues with non-recurring revenues, for example
professional services around new client installations, which can provide
useful uplifts in revenue.
MSP's focus is towards the public sector and commercial and large enterprise
customers, with a significant amount of business secured through bid or tender
processes. Customer contracts vary but are typically multi-year contracts.
There is of course a natural cycle when customer contracts approach renewal
and the Group generally seeks to renew on broadly similar terms. Despite
customer loyalty, the Group typically faces pressure to reduce costs at
renewal or to consider newer or cheaper offerings. Therefore, focus on
securing renewals is a key internal KPI.
Whilst the Group has a complete and attractive portfolio of offerings, it is
committed to remaining at the technological forefront of the market and
therefore seeks to broaden its offering to provide customers with solutions
that best meet their needs. The Group has a strong and reliable infrastructure
and has developed a delivery model that provides assurance and certainty for
customers.
Given the complexities of splitting the MSP and DC business units, the
associated internal reorganisations, and being new to the CEO role, the
current focus is on an organic growth strategy. That being said, the Board
retains its opportunistic approach to M&A should it fulfil various
criteria including being strategically relevant, financially accretive,
contribute to Group scale, expand or enhance infrastructure to deliver greater
levels of security and service, bring new technologies to benefit from
innovation, or offer cross-selling opportunities.
Operations
As already noted, there has been significant change and progress in the year.
Summarised below are some operational highlights in relation to the three
areas of focus within the MSP business:
Cloud
As a result of historic acquisitions, the Group ended up with numerous cloud
platforms and services, with an element of duplication. During the year, the
rationalisation exercise which started in FY24 was completed. Eight individual
platforms were removed through consolidation or decommissioning, while
additional optimisation activities focused on platform relocations and cost
efficiencies. The programme reduced total platform count from 56 to 21, which
are subject to normalised platform life cycle management and capability
development as well as dedicated customer requirements.
Strong progress was made in the year to consolidate the Group's capability
offerings, specifically within the area of data storage/backup and recovery
services. This greatly simplifies the go-to-market propositions while reducing
operational complexity. The Group's capabilities are now strongly suited to
current and growing market demands in these areas.
Investment in the year was focused on the Group's market leading Sovereign
Private Cloud platform, providing highly secure and compliant private cloud
for government, public sector and wider regulated organisations. Projects
delivered in the year included platform enhancements, service improvements and
operational oversight to provide a strong basis for continuing growth in
platform usage, particularly at a time of growing sovereign platform
dependency.
VMware
The acquisition of VMware by Broadcom, which completed in November 2023, was a
significant driver of the increased revenue delivered in the year. Broadcom
reduced its number of UK partners to service VMware's route to market.
Redcentric was one of the go-forward partners, selected as a Pinnacle Partner
and thus benefitted from the opportunity to sell VMware licences to an
increased customer base. This accounted for approximately £7.2m of the
increased revenue in the year. An increased focus towards supporting VMware
customers and identifying attractive cross-selling opportunities is continuing
in FY26 and Broadcom has announced an intention to further reduce its number
of UK partners, with Redcentric again being retained as a key Cloud Solution
Partner for Broadcom.
Connectivity
Following a successful new product launch, Redcentric was awarded two
contracts for Cisco's Data Centre architecture solution that introduces AI
capabilities into its customers' network infrastructure, enabling them to gain
efficiencies on the management of their networks.
Work continued in the year on the digital transformation of the circuit
ordering process and, in the second half, the Group went live with an ordering
API with BT Wholesale, reducing the time to place a single circuit order from
two hours down to mere seconds. The Group successfully removed a significant
amount of legacy network configuration from historic acquisitions. Development
work is underway to onboard the remainder of the Group's key circuit supply
chain.
Communication
The Group was first to market with real-time calling analytics for MS Teams,
giving customers instant visibility of their call traffic within MS Teams. New
product 'PTT headsets' were launched and successfully installed in two major
customers with national reach and the removal of the Group's legacy voice
platform was completed.
Organic growth
The sales team continued to exploit the opportunities arising from prior
acquisitions, with the enlarged customer base presenting new cross-selling
opportunities and the new product offerings providing a wider range of
services to the existing customer base. The organic growth strategy can be
summarised into three key focus areas:
1. Cross-sell multiple products and services to existing customers, where
they only have one or a few products or services;
2. Cross-sell other Group products and services to VMware customer wins;
and
3. Attracting new customers.
The Group appointed Aleksandra Lubavs as Chief Revenue Officer in June 2025
and under her leadership the sales team is newly invigorated and driven to
meet ambitious targets for both recurring and non-recurring revenue.
Summary financial results
More detailed financial data is summarised in the Chief Financial Officer's
report with fuller detail in the Financial Statements. At the headline level,
the Group delivered 8.3% growth in revenue for the year, all of this being
organic. Total revenues from continuing operations were £135.1m, an increase
of £10.3m (FY24: £124.8m). Recurring revenue increased as a proposition to
89.3% (FY24: 88.7%). These are commendable results in what remains a
challenging market.
Gross profit increased to £83.3m (representing a 61.6% gross margin) from
£78.2m (representing a 62.7% gross margin) in FY24. The modest reduction in
gross margin was due to revenue mix (including an increased proportion of
lower margin VMware sales) and cost inflation.
Adjusted EBITDA increased to £18.8m (at a 13.9% margin) from £17.4m (at a
13.9% margin). Whilst it is positive to see the increase in adjusted EBITDA,
the static adjusted EBITDA percentage is due partly to the lower gross profit
percentage as noted above and partly by increased operating costs, which
continue to remain under pressure.
Outlook
Being just over seven months post the split of the Group into two business
units and also a few months into my tenure as CEO, the focus for FY26 is to
drive recurring revenue within our MSP business, whilst actively managing the
cost base to deliver the strongest possible margin and cashflow performance
over the medium to long-term.
A market review exercise is underway to provide the Board with the granular
and detailed evaluation of market trends and opportunities as it refines the
strategy for the MSP business to ensure its efforts are targeted to deliver
attractive growth. I expect to update shareholders on the Group's more
detailed go-to-market plan and future prospects at the time of the interim
results, expected to be in November 2025. The Board and senior management
believe that there is fundamentally an attractive MSP opportunity to build
scale and deliver shareholder value.
In the current market environment, the Board currently expects that FY26 MSP
revenues will be broadly flat versus FY25 MSP revenues and management is
focused on managing general cost pressures. The first few months of the year
have delivered solid top-line and bottom-line earnings performance. I remain
confident of the Group's medium to long-term MSP prospects and anticipate that
the Group will be in a position to return to delivering revenue and earnings
growth from FY27 onwards.
The Board looks forward to completing the anticipated disposal of DC and, upon
successful conclusion, expects to announce a material return of capital to
shareholders after retaining sufficient capital required to execute MSP's
growth plan and reducing debt.
I look forward to providing a fuller update on the strategy for the MSP
business at the Group's interim results.
Michelle Senecal de Fonseca
Chief Executive Officer
Chief Financial Officer's Review
Overview
The results for the year highlight a change in presentation to last year. As
previously discussed, during the year, the decision was made to separate the
DC and MSP business units (which had been aggregated in all previous financial
reporting), as they now represent two quite distinct business units, operating
in different market segments with different business models and having
different resource requirements. In addition, again as previously discussed
above, the Board has appointed advisors to actively market the DC business
unit. Whilst no sale has completed as yet, the Company is in advanced
negotiations with a third party. The consequence of this decision to sell the
DC business is that under IFRS 5, the financial reporting for this year
primarily highlights the continuing operations, i.e. MSP. The detail in the
Statement of Comprehensive Income therefore shows the line-by-line results of
MSP, together with appropriate comparative data for the prior year to allow a
meaningful comparison.
The financial results of the DC business unit have been summarised and
included as a single line item in the Consolidated Statement of Comprehensive
Income - "profit/loss after tax for the period from discontinued operations".
The DC business unit continues to trade successfully. At the balance sheet
date only, the assets and liabilities of the DC business unit have been shown
as two-line items on the Consolidated Statement of Financial Position -
"assets held for sale", shown within current assets, and "liabilities directly
associated with the assets for sale", shown within current liabilities. Under
IFRS 5, the comparative balance sheet has not been restated to reflect this
change in presentation and therefore, by definition, the balance sheet items
show more marked variances compared to prior year.
The financial review below covers the primary Financial Statements as
presented and, unless otherwise stated, focuses on the continuing MSP
business. Where significant differences have arisen because of the change in
presentation as noted above, these are highlighted.
Revenue
Revenue for continuing operations, the MSP business unit, for the year was
generated wholly from the UK and was £135.1m, an increase of 8.3% on £124.8m
generated in FY24. Total revenue can be analysed below:
Year ended Year ended Change Change
31 March 31 March
2025 2024
£'000 £'000 £'000 %
Continuing operations - MSP business unit 135,138 124,774 10,364 +8.3%
Discontinued operations - DC business unit 44,571 47,393 (2,822) -6.0%
Inter-segment revenue (9,818) (9,017) (801) +8.9%
Total revenue 169,891 163,150 6,741 +4.1%
The Group has a large portfolio of service and product offerings. The largest
component of the increase in revenue was driven by increased VMware licence
sales, made possible as the Group became one of a smaller pool of VMware
selected partners after its acquisition by Broadcom. The increase in VMware
sales amounted to £7.2m of the increase in revenue.
The Group's continued focus remains to maximise recurring revenues which
provide strong visibility and security of future revenues. The mix of revenues
for the MSP business unit, is summarised below:
Year ended Year ended Change Change
31 March 31 March
2025 2024
Continuing operations £'000 £'000 £'000 %
Recurring revenue 120,657 110,715 9,942 +9.0%
Product sales 4,888 5,507 (619) -11.2%
Services revenue 9,593 8,552 1,041 +12.2%
Total revenue 135,138 124,774 10,364 +8.3%
Recurring revenue amounted to £120.7m (89.3% of total revenue), an increase
of 9.0% on £110.7m (88.7% of total revenue) generated in FY24. Non-recurring
revenue amounted to £14.5m, an increase of 0.9% on £14.1m generated in FY24,
being essentially flat in aggregate.
Gross profit
Year ended Change
31 March Year ended £'000 Change
2025 31 March
£'000 2024
*restated
Continuing operations £'000
Gross profit 83,281 78,226 5,055 +6.5%
Gross margin 61.6% 62.7% n/a -1.1ppts
*restated to reflect continuing operations.
The gross profit for the year from continuing operations was £83.3m, an
increase of 6.5% on £78.2m generated in FY24. This represented a gross margin
of 61.6%, which compared to 62.7% in FY24. In common with competitors in the
sector, whilst the Group has the benefit of index linked annual price
increases in a number of customer contracts, it also typically encounters
price pressure as customers may renew contracts at lower prices for newer
offerings. It has also experienced general cost pressures which will remain a
high priority activity to manage as far as possible.
Operating expenses
For continuing operations, the Group's total operating costs were £74.9m, an
increase of 1.8% on the £73.5m in FY24. An analysis of the major components
of the cost base is shown below:
Year ended Year ended Change Change
31 March 31 March
2025 2024
*restated
Continuing operations £'000 £'000 £'000 %
UK-based employee costs 36,006 34,379 1,627 +4.7%
Office costs 742 955 (213) -22.3%
Network and equipment costs 22,472 20,799 1,673 +8.0%
Other sales, general and administration costs 3,960 3,510 449 +12.8%
Offshore based employee and office costs 1,344 1,223 121 +9.9%
Underlying operating costs 64,523 60,866 3,657 +6.0%
Depreciation of property, plant and equipment 4,001 2,649 1,352 +51.0%
Amortisation of intangibles 2,593 5,178 (2,585) -49.9%
Depreciation of right-of-use assets 1,610 2,265 (655) -28.9%
Exceptional costs 924 1,466 (542) -37.0%
Share-based payments and associated National Insurance 1,235 1,118 117
+10.5%
Total operating costs 74,886 73,542 1,344 +1.8%
*restated to reflect continuing operations.
It should be highlighted that network and equipment costs represent technical
infrastructure costs that cannot individually be linked to customer contracts.
The Group's underlying cash-based operating costs in the year, as shown above,
total £64.5m, an increase of 6.0% on the £60.9m in FY24, reflecting
generally increased costs incurred in the year.
There remains significant pressure on all costs, and this will continue in the
new financial year.
Adjusted EBITDA
The Board's key measure of underlying business profitability and assessing
trends across periods is adjusted earnings before interest, tax, depreciation
and amortisation ('EBITDA') further adjusted for exceptional items,
share-based payments and associated National Insurance costs ("adjusted
EBITDA"). Adjusted EBITDA for continuing operations for the year was £18.8m,
an increase of 8.1% on the £17.4m generated in FY24, essentially driven by
the operating leverage of increased business volume achieved in the year.
Finance costs
For continuing operations, net finance costs for the Group year were broadly
in line at £4.0m (FY24: £3.9m).
Tax
For continuing operations, the tax charge for the year was £1.7m (FY24:
£0.1m).
The total tax charge for the year was £2.5m (FY24: a credit of £1.2m)
comprising an income tax charge of £0.4m (FY24: £0.2m), and a deferred tax
charge of £2.1m (FY24: a credit of £1.4m).
Discontinued operations
The net profit after tax for the discontinued operations, being the DC
business unit was, £0.8m (FY24: loss of £5.2m), shown as a single line item
in the Consolidated Statement of Comprehensive Income. A fuller analysis of
the components of this amount is shown below.
( ) Year ended Year ended
31 March 31 March
2025 2024
( ) £'000 £'000
Revenue 44,571 47,393
Cost of sales (18,415) (27,787)
Gross profit 26,156 19,606
Operating expenditure (23,091) (25,538)
Gain on contingent consideration - 1,092
Adjusted EBITDA from discontinued operations 16,633 10,956
Depreciation of property, plant and equipment (3,617) (3,440)
Amortisation of intangibles (832) (832)
Depreciation of right-of-use assets (8,308) (9,512)
Exceptional costs (779) (3,084)
Exceptional income - 1,092
Share-based payments (32) (20)
Operating profit/(loss) from discontinued operations 3,065 (4,840)
Finance costs (1,461) (1,642)
Profit/(loss) before tax from discontinued operations 1,604 (6,482)
Income tax (expense)/credit (809) 1,318
Profit/(loss) for the period from discontinued operations 795 (5,164)
Revenue for the discontinued operations for the year was generated entirely in
the UK and was £44.6m, a decrease of 6.0% on the £47.4m generated in FY24.
Gross profit for the discontinued operations for the year was £26.2m, an
increase of 33.4% on £19.6m generated in FY24, largely due to reduced power
costs negotiated and other expense savings, as previously highlighted in the
Group's Interim Financial Statements. This represented a gross margin of
58.7%, which compared to a 41.4% gross margin in FY24.
Operating costs for the discontinued operations were £23.1m, a decrease of
9.6% on £25.5m in FY24 as a consequence of data centre consolidation activity
in FY24.
Adjusted EBITDA for the discontinued operations for the year was £16.6m, an
increase of 51.8% on the £11.0m generated in FY24, fuelled largely by power
savings and data centre consolidation activity.
Earnings per share
As detailed further in note 10, the basic and diluted earnings per share for
continuing operations amounted to 1.70 pence per share and 1.64 pence per
share in the year, compared to 1.10 pence per share and 1.06 pence per share
in FY24.
Adjusted basic and diluted earnings per share on continuing operations, which
is an Alternative Performance Measure and excludes tax, amortisation of
acquired intangibles, share-based payments plus associated National Insurance
and exceptional items, to which a notional tax charge of 25% is applied
amounted to 3.82 pence per share and 3.70 pence per share in the year,
compared to 3.74 pence per share and 3.62 pence per share in FY24.
Intangible assets
As detailed further in note 6, total intangible assets amounted to £36.4m at
the year-end date, compared to £78.9m at the year-end date FY24. The most
significant reason for the change in the year was the reclassification of
£40.7m to assets held for sale, in relation to goodwill and customer
contracts allocated to the DC business unit.
Property, plant and equipment
As detailed further in note 7, total property, plant and equipment amounted to
£10.2m at the year-end date, compared to £21.4m at the year-end date FY24.
Total additions in the year amounted to £9.7m whilst total depreciation in
the year amounted to £7.6m. The most significant reason for the change in the
year was the reclassification of £13.2m to assets held for sale, in relation
to leasehold improvements and fixtures and fittings in relation to the DC
business unit's facilities.
Right-of-use assets
As detailed further in note 8, total right-of-use assets amounted to £4.7m at
the year-end date, compared to £37.5m at the year-end date FY24. Total
additions in the year amounted to £0.8m whilst total amortisation in the year
amounted to £9.9m. The most significant reason for the change in the year was
the reclassification of £23.1m to assets held for sale, in relation to
leasehold premises of the DC business unit.
Trade and other receivables
Total trade and other receivables (both current and non-current) amounted to
£32.3m at the year-end date, compared to £36.9m at the year-end date FY24.
The expected credit loss provision amounted to £0.1m at the year-end date,
compared to £0.3m at year-end FY24. Trade debtor days were 30 at 31 March
2025 compared to 36 at 31 March 2024. Trade debtor days are calculated as
gross trade debtors divided by revenue (incl. VAT) multiplied by 365.
Trade and other payables
Total trade and other payables amounted to £32.9m at the year-end date,
compared to £42.1m at the year-end date FY24. Trade payable days were 28 at
31 March 2025 compared to 36 at 31 March 2024. Trade payable days are
calculated as trade payables divided by total purchases (cost of sales and
operating expenditure) multiplied by 365.
Net debt
As detailed further in the Appendix, net debt for the Group amounted to
£65.5m at 31 March 2025, compared to £72.4m at 31 March 2024, a reduction of
£6.9m.
The table below summarises the Group's total movements (continuing and
discontinued operations) in the components of net debt, with the cash flow and
non-cash flow elements separated out:
( ) As at 31 Net cash Net non- As at 31
( ) As at 31 Net cash Net non- March flow cash March 2025
March 2023 flow cash flow 2024 flow
( ) £'000 £'000 £'000 £'000 £'000 £'000 £'000
Cash 1,366 1,873 (109) 3,130 (93) (19) 3,018
Revolving Credit Facility (33,631) (2,712) (3,542) (39,885) 4,515 (3,577) (38,947)
Term Loan (495) 474 - (21) 18 - (3)
Asset Financing Facility - (1,517) (2,092) (3,609) (1,367) 52 (4,924)
Lease Liabilities (40,205) 11,966 (3,741) (31,980) 10,013 (2,632) (24,599)
(72,965) 10,084 (9,484) (72,365) 13,086 (6,176) (65,455)
Included in lease liabilities at 31 March 2025 are £23.6m (FY24: £30.3m) of
IFRS 16 lease liabilities that were previously classified as operating leases
under IAS 17 Leases.
The split of net debt at 31 March 2025 between continuing operations and
discontinued operations is shown below:
( ) Continuing Total Group Year ended
operations Discontinued 31 March 2025
operations
( ) £'000 £'000 £'000
Cash 3,018 - 3,018
Revolving Credit Facility (38,947) - (38,947)
Term Loan (3) - (3)
Asset Financing Facility (1,805) (3,119) (4,924)
Lease Liabilities (4,707) (19,892) (24,599)
Net Debt (42,444) (23,011) (65,455)
Financing
Total facilities and amounts drawn at 31 March 2025, compared to the year-end
date FY24 are summarised below.
31 March 2025 31 March 2024
Available Drawn Undrawn Available Drawn Undrawn
£'000s £'000s £'000s £'000s £'000s £'000s
Committed
Revolving Credit Facility 80,000 39,000 41,000 80,000 40,000 40,000
Term Loan 3 3 - 21 21 -
Asset Financing Facility 10,000 4,924 5,076 7,000 3,609 3,391
Lease Liabilities 24,600 24,600 - 31,980 31,980 -
114,603 68,527 46,076 119,001 75,610 43,391
Uncommitted
- Accordion Facility 20,000 - 20,000 20,000 - 20,000
20,000 - 20,000 20,000 - 20,000
Total borrowing facilities 134,603 68,527 66,076 142,609 79,234 63,391
Uncommitted facilities represent facilities available to the Group, but which
may be withdrawn by the lender subject to agreement by the lenders and hence
are not within the Group's control.
As at 31 March 2025, the Group was party to £90.0m of committed banking
facilities, comprising a Revolving Credit Facility ("RCF") of £80.0m (net
£39.0m utilised at 31 March 2025) and a £10.0m Asset Financing Facility
("AFF") (£4.9m utilised at 31 March 2025).
In August 2024, the AFF was extended from £7.0m to £10.0m.
In July 2025, the RCF was renewed, with expiry moving from 25 April 2026 to 25
April 2027. The RCF was renewed at a lower level of £60.0m compared to the
£80.0m at the balance sheet date and Bank of Ireland withdrew from the
syndicate. The Group was satisfied with a lower overall facility.
The borrowing cost of the RCF is determined by the Group's leverage and has a
borrowing cost of 205 basis points over SONIA at the Group's current leverage
levels. A commitment fee is payable on the undrawn portion of the RCF at 82
basis points, being 40% of the borrowing cost.
In due course and following the anticipated sale of the DC business unit, the
Group expects to re-negotiate its banking facilities and to materially reduce
its borrowing.
Lease liabilities
Total current and non-current lease liabilities amounted to £4.7m at the
year-end date, compared to £35.6m at year-end date FY24. The most significant
reason for the change in the year was the reclassification of £19.9m for
lease liabilities attached to assets held for sale, in relation to leasehold
premises of the DC business unit.
Provisions
Provisions amounted to £0.7m at the year-end date, compared to £12.4m at
year-end date FY24. The reduction related to dilapidations provisions
associated to certain leased properties, which were reclassified in relation
to leasehold premises of the DC business unit.
Tony Ratcliffe
Chief Financial Officer
Consolidated Statement of Comprehensive Income for the year ended 31 March
2025
Year ended Year ended
31 March 31 March
2025 2024
*Restated
Note £'000 £'000
Continuing operations
Revenue 135,138 124,774
Cost of sales (51,857) (46,548)
Gross profit 83,281 78,226
Operating costs (74,886) (73,542)
Gain on settlement of contingent consideration 5 - 1,008
Adjusted EBITDA(1) 18,758 17,360
Depreciation of property, plant and equipment 7 (4,001) (2,649)
Amortisation of intangibles 6 (2,593) (5,178)
Depreciation of right-of-use assets 8 (1,610) (2,265)
Exceptional costs 5 (924) (1,466)
Exceptional income 5 - 1,008
Share-based payments and associated National Insurance (1,235) (1,118)
Operating profit 8,395 5,692
Finance costs (4,011) (3,860)
Profit before taxation on continuing operations 4,384 1,832
Income tax expense (1,691) (109)
Profit for the period from continuing operations 2,693 1,723
Discontinued operations
Profit/(loss) after tax for the period from discontinued operations 795 (5,164)
Profit/(loss) for the period attributable to owners of the parent 3,488 (3,441)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Currency translation differences (105) (117)
Net loss on cash flow hedges (245) -
Deferred tax in relation to prior years 14 -
Total comprehensive profit/(loss) for the period 3,152 (3,558)
Earnings per share
Basic earnings/(loss) per share 10 2.20p (2.20p)
Diluted earnings/(loss) per share 10 2.13p (2.20p)
Earnings per share from continuing operations
Basic earnings per share 10 1.70p 1.10p
Diluted earnings per share 10 1.64p 1.06p
( )
* For detail on the prior year restatements, please see note 2.
Consolidated Statement of Financial Position as at 31 March 2025
31 March 31 March
2025 2024
Note £'000 £'000
Non-Current Assets
Intangible assets 6 36,428 78,883
Property, plant and equipment 7 10,208 21,422
Right-of-use assets 8 4,689 37,478
Trade and other receivables 3,508 3,307
Deferred tax asset 2,109 2,503
56,942 143,593
Current Assets
Inventories 2,509 4,187
Trade and other receivables 28,809 33,543
Corporation tax receivable - 53
Cash and cash equivalents 3,018 3,130
Assets held for sale 9 82,169 -
116,505 40,913
Total Assets 173,447 184,506
Current Liabilities
Trade and other payables 30,436 42,154
Bank loans and asset financing 822 1,149
Lease liabilities 1,526 8,903
Financial liabilities 153 -
Provisions 507 892
Corporation tax payable 329 -
Liabilities directly associated with the assets held for sale 9 40,320 -
74,093 53,098
Non-Current Liabilities
Trade and other payables 2,461 -
Bank loans and asset financing 39,933 42,366
Lease liabilities 3,181 23,077
Financial liabilities 92 -
Provisions 233 11,482
45,900 76,925
Total Liabilities 119,993 130,023
Net Assets 53,454 54,483
Equity
Called up share capital 11 159 159
Share premium account 75,649 75,649
Common control reserve (9,454) (9,454)
Own shares held in treasury (298) (779)
Cash flow hedge reserve (245) -
Retained earnings (12,357) (11,092)
Total Equity 53,454 54,483
Consolidated Cash Flow Statement for the year ended 31 March 2025
Year Year
ended ended
31 March 31 March
2025 2024
Note £'000 £'000
Profit/(loss) before taxation 5,988 (4,650)
Finance costs 5,472 5,502
Operating profit 11,460 852
Adjustment for non-cash items
Depreciation and amortization 6,7,8 20,961 23,876
Profit on disposal of property, plant and equipment - (53)
Exceptional income 5 - (2,100)
Exceptional costs 5 1,703 4,550
Share-based payments 1,267 1,138
Operating cash flow before exceptional items and movements in working capital 35,391 28,263
Cash costs of exceptional items (1,320) (4,240)
Cash costs of provisions (33) (978)
Operating cash flow before changes in working capital 34,038 23,045
Changes in working capital
Decrease/(increase) in inventories 1,678 (471)
(Increase)/decrease in trade and other receivables (846) 2,411
Decrease in trade and other payables (4,959) (1,826)
Cash generated from operations 29,911 23,159
Tax paid (145) (174)
Net cash generated from operating activities 29,766 22,985
Cash flows from investing activities
Purchase of property, plant and equipment (9,664) (9,265)
Acquisition of subsidiaries (net of cash acquired) - (890)
Purchase of intangible assets (1,698) (1,479)
Net cash used in investing activities (11,362) (11,634)
Cash flows from financing activities
Dividends paid (5,705) (1,369)
Disposal of treasury shares on exercise of share options 387 116
Financing of property, plant and equipment 1,714 2,419
Financing of unsecured loans 966 -
Interest paid on bank loans, term loans and asset financing (3,597) (3,569)
Interest paid on leases (1,251) (1,328)
Repayment of leases (8,762) (10,638)
Repayment of asset financing liabilities (1,031) (635)
Repayment of term loans (18) (474)
Drawdown of bank loans 8,500 16,500
Repayment of bank loans (9,500) (10,500)
Payment of loan arrangement fees (200) -
Net cash used in financing activities (18,497) (9,478)
Net (decrease)/increase in cash and cash equivalents (93) 1,873
Cash and cash equivalents at beginning of period 3,130 1,366
Effect of exchange rates (19) (109)
Cash and cash equivalents at end of the period 3,018 3,130
Consolidated Statement of Changes in Equity for the year ended 31 March 2025
Share Share Common Own Retained Total
capital premium control shares Cash earnings equity
reserve held in flow
treasury hedge
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2023 157 73,267 (9,454) (898) - (4,881) 58,191
Loss for the period - - - - - (3,441) (3,441)
Transactions with owners
Share-based payments - - - - - 1,053 1,053
Issue of new shares 2 2,382 - - - - 2,384
Dividends paid - - - - - (3,752) (3,752)
Share option exercises - - - 119 - (3) 116
Deferred tax movement on share options - - - - - 78 78
Deferred tax relating to prior periods - - - - - (29) (29)
Other comprehensive income
Currency translation differences - - - - - (117) (117)
At 31 March 2024 159 75,649 (9,454) (779) - (11,092) 54,483
Profit for the period - - - - - 3,488 3,488
Transactions with owners
Share-based payments - - - - - 1,137 1,137
Dividends paid - - - - - (5,705) (5,705)
Share option exercises - - - 481 - (94) 387
Other comprehensive income
Currency forward contracts - - - - (245) - (245)
Currency translation differences - - - - - (105) (105)
Deferred tax relating to prior periods - - - - - 14 14
At 31 March 2025 159 75,649 (9,454) (298) (245) (12,357) 53,454
Notes to the Financial information for the year ended 31 March 2025
1 Corporate information
Redcentric plc is a public limited company incorporated and domiciled in
England and Wales, whose shares are publicly traded on the AIM market of the
London Stock Exchange. Redcentric plc was incorporated on 11 February 2013 and
admitted to AIM on 24 April 2013. The registered office is located at Central
House, Beckwith Knowle, Harrogate, HG3 1UG.
The Group Financial Statements have been prepared and approved by the
Directors in accordance UK-adopted international accounting standards ("UK
adopted IFRS").
The principal accounting policies applied in the preparation of these
Financial Statements are set out more fully in the Annual Report and Accounts.
These policies have been applied consistently in the current and prior period.
This Financial Information is presented in pound sterling, being the currency
of the primary economic environment in which the Group operates. All amounts
have been rounded to the nearest thousand (£'000), unless otherwise
indicated. The Financial information is prepared on the historical cost basis
except that derivative financial instruments are measured at fair value.
2 Basis of preparation
While the financial information included in this results announcement has been
prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards (IFRSs), this announcement does
not in itself contain sufficient information to comply with IFRSs.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 31 March 2025 or 2024 but is derived
from those accounts. Statutory accounts for the year ended 31 March 2024 have
been delivered to the registrar of companies, and those for 2025 will be
delivered in due course. The Auditor has reported on those accounts; their
reports were (i) unqualified, (ii) did not include a reference to any matters
to which the auditor drew attention by way of emphasis without qualifying
their report and (iii) did not contain a statement under section 498 (2) or
(3) of the Companies Act 2006.
The Financial Statements are prepared on a going concern basis which the
Directors believe to be appropriate for the following reasons:
The Group and Company meets their day-to-day working capital requirements from
the Group's operational cash flows, a Revolving Credit Facility, Asset
Financing Facility and leasing arrangements. As at the year-end date, the
Revolving Credit Facility is an £80.0m facility (net £39.0m utilised at 31
March 2025), while the Asset Financing Facility is a £10.0m facility
(increased from £7.0m in August 2024). A total of £4.9m of the Asset
Financing Facility was utilised at 31 March 2025. In March 2024 the Revolving
Credit Facility and Asset Financing Facility were extended at the Group's
request, with a new maturity date of 26 April 2026. Subsequent to the year-end
date, on 25 July 2025, the Revolving Credit Facility and Asset Financing
Facility were extended a further year to 26 April 2027. In parallel with this
extension, the Revolving Credit Facility was reduced from £80.0m to £60.0m,
with Bank of Ireland exiting the facility, all other terms remaining
unchanged.
The Directors have prepared detailed line-by-line financial forecasts,
including cash flow forecasts, on a monthly basis 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
and the Company will have sufficient funds to meet their 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, IFRS 16 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, Redcentric
Solutions Limited and Redcentric Data Centers Limited. Covenants are tested
quarterly each year. During FY24 the Group continued to invest heavily in
integration and efficiency programmes which delivered significant benefits to
the business during FY25 and beyond. In addition, a significant proportion of
the Group's focus was on the Harrogate data centre relocation in favour of
delivering other projects including the further consolidation of cloud
platforms. In anticipation of the effect of these factors on continued
covenant compliance, particularly as the covenant tests are on a rolling
12-month basis, in June 2024 the Directors reached agreement with the banking
syndicate to apply less stringent debt covenant requirements for the quarters
ended June and September 2024, despite not anticipating a breach at these
quarters. The purpose of this amendment was to provide additional headroom on
covenants in the event of a severe but plausible downside scenario, and to
provide additional flexibility around the timing and financing of capital
expenditure for new customer projects. There were no other material changes
to the terms and conditions of the borrowings because of this amendment. The
Group can confirm it has met each quarterly covenant. The covenant to provide
audited FY25 financial statements to the lenders within 120 days of the year
end date has (as in previous years) been extended to 30 September.
The Directors' forecasts in respect of the going concern assessment period
have been built from the detailed budget for the year ending 31 March 2026 as
presented to the Board in May 2025, and associated financial forecast for the
year ending 31 March 2027, and the going concern assessment takes account of
the debt covenant requirements.
The DC business unit has been presented as an asset held for sale and as such
the base and downside scenario assumes a sale takes place in the forecast
period at current expected consideration, net proceeds and an assumed
distribution to shareholders. Should the disposal complete as anticipated, it
is expected to lead to a substantial improvement in the Group's liquidity
position and the Directors would expect to renegotiate the terms of the
Group's facilities and associated covenants to ensure they are appropriate for
the size of the Group going forwards.
Whilst a sale is deemed to be highly probable, alternative scenarios have been
undertaken to assess the Group's ability to continue as a going concern should
a sale fail to take place. The following paragraphs outline the scenario
planning underpinning both a sale occurring and not occurring. In the former
instance it would govern the period up to the sale for the DC business, and
beyond a sale for the continuing business.
The forecasts include a number of assumptions in relation to order intake,
renewal and churn rates, EBITDA margin improvements, the full year impact of
energy efficiency investment and improved electricity pricing (a significant
proportion of which is locked in through FY26 at forward rates favourable to
those achieved in prior years).
The DC business unit has been presented as an asset for sale and, should such
a sale crystallise in the coming months, with consideration in cash, the Board
would anticipate a very substantial upside scenario.
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 new order intake, the impact on customer confidence as a result of
general economic conditions, inflationary cost pressures including unexpected
one-off cost impacts, and the efficacy of energy efficiency measures under a
prolonged period of hot weather. In making their going concern assessment, in
light of these risks, the Directors have also modelled a combined severe but
plausible downside scenario when preparing the forecasts.
The downside scenario assumes significant economic downturn over FY26 and into
FY27, primarily impacting recurring new order intake and non-recurring product
and services revenues as the Directors note the uncertainties surrounding the
timing and extent of non-recurring revenue from quarter to quarter. In this
scenario, recurring monthly order intake is forecast to materially reduce
compared to base case budget and product and services non-recurring revenues
are forecast to similarly materially reduce compared to base case budget
incorporating potential supply chain issues, reduced investment from the
Group's existing customer base and failure to expand market share as planned.
In addition, the downside scenario also assumes the new business obtained does
not achieve the gross margin planned, with a reduction to the planned gross
margin achievement across all new recurring revenue modelled.
An additional factor that can impact the revenue and gross margin assumptions
in the going concern assessment period is the level of customer cancellations
(of an individual service or product). Whilst known, near-term customer
cancellations have been modelled, coupled with an underlying level of customer
cancellations based on historic trends, there remains a risk that unexpected,
medium to large customer cancellations could occur in the near-term. The Group
is protected contractually to a large extent with notice periods and
cancellation clauses, however a residual risk remains. An additional level of
customer cancellations has therefore been modelled each quarter in the
downside scenario to reflect this risk.
Following the energy efficiency measures delivered in FY24, electricity
volumes are significantly more predictable than they have been historically.
In addition, power prices are primarily fixed (at current volumes) through to
September 2028. However, there remains a risk that periods of sustained higher
summer temperatures, considering the impacts of wider climate-related factors,
could increase energy usage at sites where new efficiency measures have been
introduced, but not tested, at these prolonged higher temperatures. An
increase in forecasted usage has been modelled across a period of three months
over the summer to reflect this risk. In the instance of a DC business sale,
the impact of this is minimal given electricity almost exclusively impacts the
DC business unit.
In preparing the cash flow forecasts and analysis relating to debt covenant
compliance through the going concern assessment period, the Directors have
considered the nature of exceptional items and are satisfied that such items
meet the Group's accounting policy and borrowings facility agreement
definition of exceptional items.
Given external market analysis indicates an expectation that interest rates
have stabilised, no sensitivity on interest rates has been included in the
plausible downside scenario. Both the base case and severe but plausible
downside forecast scenarios continue to model the payment of dividends,
including a potential final FY25 dividend payment in January 2026, however in
the instance of a DC business sale there is not anticipated to be a dividend
paid in the testing period, due to significant funds being return to
shareholders from the proceeds anticipated. The Directors will continue to
monitor the impact and timing of dividend payments in the normal course of
their quarterly liquidity and debt covenant compliance monitoring.
Under the downside scenario modelled, and including the new customer contract
overlay, the forecasts demonstrate that the Group is expected to maintain
sufficient liquidity and will continue to comply with the relevant debt
covenants without management taking mitigating actions. While not modelled,
mitigating actions which are within the Group's control would also be
available in the event of a severe downside. Such actions include, but are not
limited to, the rephasing of discretionary capital expenditure, and further
management of discretionary cost areas such as marketing, training and travel.
The Directors therefore remain confident that the Group and Company have
adequate resources to continue to meet their liabilities as and when they fall
due within the period of at least 12 months from today's date.
Prior year restatement
During the year management have reviewed the rationale for inclusion of data
centre related electricity costs within operating costs, as opposed to cost of
sales. Following the acquisitions of Sungard and 4D Data Centres Limited,
electricity costs now form a significant part of the Group's cost base.
Electricity volumes are in material part driven by the usage of the customer,
along with external factors such as outside temperature. Electricity prices
are market driven, and, where contractually permitted, passed on to customers.
In addition, during the period the Group has been exploring its business model
to provide further clarity to stakeholders, resulting in a proposed
operational separation of the data centre business. This separation would
further isolate electricity costs as the key variable cost to the data centre
business, and a more directly attributable customer cost.
Furthermore, following recent significant investments on power metering in the
Group's data centres, the Group can also now much more accurately track the
electricity usage by customer and manage the cost and onward charge
accordingly. As a result of these increased capabilities and the better
information which is now available, electricity costs can be more accurately
and directly allocated by customer for FY25.
Consequently, for the year ended 31 March 2025 management have decided that
cost of sales better reflects the nature of the expense, as a cost which is
directly attributable to revenue generation from customers. The prior year
comparisons have been restated accordingly, which also ensures comparability.
In addition, when assessing the nature of direct costs, management also
reviewed the rationale for the amortisation of the contract acquisition asset
being included within operating costs. The contract acquisition asset is
recognised under IFRS 15 as a cost to obtain a contract and is amortised over
the life of the customer contract. While the amortisation of the contract
acquisition asset was previously included within operating costs, as disclosed
in the relevant accounting policies previously, the Group considers the
related amortisation is better reflected as a cost of sale. The prior period
and prior year comparisons have been restated accordingly.
The prior period/year restatements are presentational within operating profit,
and have no impact on adjusted EBITDA, overall operating profit or net income,
and have no impact on the Statement of Financial Position, cashflows or
equity.
In addition, as a result of the DC business unit carve out and subsequent
recognition as a discontinued operation at 31 March 2025, the prior year
results have been restated so that both FY25 and FY24 profit and loss is
presented on a continuing basis.
The restated Consolidated Statement of Comprehensive Income for the year ended
31 March 2024 is as follows:
Year ended 31 March 2024 (restated) Year
Year ended ended
31 March 31 March
2024 (previously reported) IFRS 5 presentational adjustment 2024
Cost *Restated
reclassification
£'000 £'000 £'000 £'000 £'000
Revenue 163,150 - 163,150 (38,376) 124,774
Cost of sales (45,115) (27,565) (72,680) 26,132 (46,548)
Gross profit 118,035 (27,565) 90,470 (12,244) 78,226
Operating costs (119,283) 27,565 (91,718) 18,176 (73,542)
Gain on settlement of contingent consideration 2,100 - 2,100 (1,092) 1,008
Adjusted EBITDA(1) 28,316 - 28,316 (10,956) 17,360
Depreciation of property, plant and equipment (6,089) - (6,089) 3,440 (2,649)
Amortisation of intangibles (6,010) - (6,010) 832 (5,178)
Depreciation of right-of-use assets (11,777) - (11,777) 9,512 (2,265)
Exceptional costs (4,550) - (4,550) 3,084 (1,466)
Exceptional income 2,100 - 2,100 (1,092) 1,008
Share-based payments and associated National Insurance (1,138) - (1,138) 20 (1,118)
Operating profit 852 - 852 4,840 5,692
Finance costs (5,502) - (5,502) 1,642 (3,860)
(Loss)/profit before taxation on continuing operations (4,650) - (4,650) 6,482 1,832
Income tax credit 1,209 - 1,209 (1,318) (109)
(Loss)/profit for the period from continuing operations (3,441) (3,441) 5,164 1,723
-
Discontinued operations
Loss after tax for the period from discontinued operations (5,164) (5,164)
- - -
Loss for the period attributable to owners of the parent (3,441) (3,441) - (3,441)
-
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Currency translation differences (117) - (117) - (117)
Net loss on cash flow hedges - - - - -
Total comprehensive loss for the period (3,558) - (3,558) - (3,558)
Of the £27.6m of costs reallocated to cost of sales from operating costs,
£25.7m related to electricity costs and £1.9m to contract acquisition asset
amortisation.
As a result of the changes to segmental reporting in accordance with IFRS 8,
and the classification of the DC business unit as a discontinued operation and
asset held for sale in accordance with IFRS 5, a number of APM's have been
restated for the prior year which are not reconciled in the table above due to
their nature. The following reconciliations show the movement from the final
FY24 position to the restated FY24 position shown.
Year ended 31 March 2024 (previously reported) Year ended
31 March
IFRS 5 presentational adjustment 2024
Restated
£'000 £'000 £'000
Recurring revenue 149,091 (38,376) 110,715
EBITDA 24,728 (8,944) 15,784
Adjusted operating profit 9,669 1,996 11,665
Changes in accounting policy and disclosure
The following amendments became effective as at 1 January 2024:
· Classification of liabilities as current or non-current and
non-current Liabilities with covenants (amendments to IAS 1);
· Lease liability in a sale and leaseback (amendments to IFRS 16);
and
· Disclosures: supplier finance arrangements (amendments to IAS 7
and IFRS 7).
The amendments have not had any impact on the Group for the year ended 31
March 2025 as the Group already aged its liabilities with covenants and did
not have any sale and leaseback transactions or supplier finance arrangements.
Adopted IFRS not yet applied
There are no new standards, amendments to existing standards or
interpretations that are not yet effective that are expected to have a
material impact on the Group. Such developments are routinely reviewed by the
Group and its financial reporting systems are adapted as appropriate.
Basis of consolidation
The Group Financial Statements consolidate those of the Company and of its
subsidiary undertakings drawn up to 31 March 2025.
Subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. Subsidiaries are fully
Consolidated from the date on which control is transferred to the Group. They
are deconsolidated from the date that control ceases.
Intra-group transactions, balances and unrealised gains and losses on
transactions between Group companies are eliminated on consolidation.
Critical accounting judgements, key sources of estimation uncertainty and
other areas of estimation
In the application of the Group's accounting policies, the Board is required
to make judgements, estimates and assumptions about the carrying amounts of
assets and liabilities, without clear direction from other sources. The
estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis and
are consistent with the Group's risk management and climate-related
commitments where appropriate. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision only
affects that period, or in the period of the revision and future periods if
the revision affects both current and future periods.
Judgements
The Group has identified the following items as a critical accounting
judgement which could have a significant impact on the amounts recognised in
the Financial Statements for the year ended 31 March 2025.
Identification of cash generating units ("CGUs") and subsequent split of
goodwill
In accordance with IAS 36 Impairment of assets, the Group assesses at each
reporting date whether there is an indication that its non-financial assets
may be impaired. For the purpose of this impairment testing, assets are
grouped into the smallest identifiable group of assets that generates cash
inflows largely independent of those from other assets or groups of assets -
referred to as a CGU. The identification of CGUs involves management
judgement, particularly in determining the level at which cash inflows are
independent.
During the current year, management re-evaluated the composition of its CGUs
in line with the change in segmental reporting outlined below and determined
that the Group comprises two distinct CGUs, being the MSP business unit and
the DC business unit, rather than a single integrated operation. This judgment
was based on the assessment that each business unit had independent cash
inflows, is operated and managed separately from 1 February 2025, and serves
different markets with different offerings and business models. Accordingly,
the change in CGU composition was deemed a trigger for impairment testing in
line with IAS 36. This impairment was conducted at 31 January 2025, prior to
the carve out, on the original CGU composition. Significant headroom was
identified therefore no impairment noted. In addition, reasonable
sensitivities would not result in an impairment charge.
As per IAS 36 the goodwill recognised at both subsidiary level and on
consolidation needs to be allocated to each CGU. The identification of two
CGUs on 1 February 2025 led management to split the existing goodwill, which
represented synergies of the Group, in two using a relative value method.
Management have used judgement and determined that the most reliable and
appropriate valuation method for this exercise was to prepare a value-in-use
(VIU) model for each CGU to calculate the recoverable amounts for both CGUs
before considering the portion of goodwill to allocate. The outcome of this
exercise is that on a relative value basis £27.2m of goodwill is allocated to
the MSP CGU and £33.4m to the DC CGU.
In determining the VIU for the MSP CGU, the Directors applied the following
key assumptions:
· New order intake increased steadily on prior year following sales
team stability and improved marketing conditions;
· Price increases average of 1.0% of total revenue;
· Overall gross margin percentage of c. 70% in line with historic
trends;
· Operating costs (depending on nature) to increase in line with
either revenue growth or 3%, factoring in any near-term licence inflation;
· Pre-tax discount rate of 11.89% at 31 January 2025 and 12.87% at
31 March 2025 (FY24: 10.87%); and
· Terminal growth rate percentage of 2.0% is consistent with the
market the entity operates in for real growth.
The MSP VIU is sensitive to changes in key assumptions, and the Directors have
disclosed sensitivities in relation to this in note 6.
In determining the VIU for the DC CGU, the Directors determined that since the
carve-out of the trade and assets into a separate CGU was being done for the
purpose of a potential sale of that CGU (see note 4), the VIU for the purpose
of the relative value exercise should include cashflows from the operation of
the CGU up to the expected date of disposal, plus the expected net proceeds
from a forecast sale of the CGU. The expected net proceeds is a key assumption
in this VIU model. The Directors have disclosed a sensitivity in relation to
this in note 6. Reasonably possible changes in other assumptions would not
drive a significantly different outcome.
In line with IAS 36, impairment testing was then conducted at 31 March 2025 at
the newly defined CGU level, representing a change in the lowest level at
which assets generate largely independent cash flows. Whilst headroom was
identified, a number of sensitivities have been performed. Additional
information is included in note 6.
Segmental reporting - prior period restatement
During the current year, management re-evaluated the composition of its
operating structure, which resulted in the separation of one previously
reported business into two distinct operating segments, being the MSP business
unit and the DC business unit. Work to formally carve out the DC business
began in summer 2024, with Redcentric Data Centres Limited being incorporated
on 28 August 2024 as a wholly owned subsidiary of Redcentric PLC. On 1
February 2025 the trade and assets of the DC business were transferred from
Redcentric Solutions Limited into Redcentric Data Centres Limited, such that
the trading activities of the DC business unit essentially sits within
Redcentric Data Centres Limited and the trading activities of the MSP business
unit essentially sits within Redcentric Solutions Limited. As a result of this
carve out and migration, management were able to report to the Board, (the
Chief Operating Decision Maker "CODM") from 1 February 2025, discrete
financial information for both business units.
In order to complete this business unit separation, a thorough and detailed
contract by contract analysis was undertaken for components of both revenue
and costs to determine into which business unit individual items belonged. In
preparing comparative information for the two new segments, management had to
exercise judgement in applying the basis of this separation retrospectively
but believe that the approach taken and result obtained represented a
reasonable set of comparative results.
Comparative information in respect of revenue from external customers was
derived from the underlying financial records on an aggregated basis
determined by its revenue product category, as opposed to contract detail
level obtained in respect of the current year. The level of estimation from
this approach was low due to the discrete nature of the revenue streams within
the data centre business.
Inter-segment revenues, and corresponding cost of sales and operating costs,
for both years were derived with reference to the contractual relationships
that governed the period from 1 February 2025 onwards. Management judge the
contracts to be on an arms-length basis, determined by reference to existing
third-party customer and supplier contracts and considered extensively at the
Board level before their initiation.
Cost of sales from external customers for both years was derived by reference
to underlying financial records, with limited judgement applied due to the
discrete nature of costs that are analysed in this caption.
Operating costs before adjusted EBITDA for both years were derived again by
reference to underlying financial records, principally the cost centre
originally used for existing reporting, thereby requiring little judgement.
Judgement has been applied in respect of corporate overheads, by reference to
appropriate metrics such as headcount and sales effort, though the quantum of
costs assessed under this basis is a small proportion of overall overheads.
Depreciation and amortisation for both years could again be derived by
underlying financial records by reference to asset registers and their
corresponding categorisation. Judgement was mainly applied in this area in
reference to the split of Customer relationship intangible assets. In this
example the segmentation has been performed by reference to which business
unit that customer relationship has been allocated to when separating the
business units on 1 February 2025.
Exceptional costs and exceptional income have been assessed by management on
an item-by-item basis for both years based on the business unit that drove the
exceptional activity, which in most cases was discrete.
Share-based payments for both years have been derived by reference to the
associated employees, with no judgement required.
Finance costs in respect of lease arrangements in both years have been derived
by underlying financial records, with little judgement required. Finance costs
in respect of the Group's RCF have been allocated based on an estimation of
the original drawdown requirement, adjusted for the estimated segmental cash
flows subsequent to initial drawdown. This has required a degree of judgement
in respect of the drawdown allocation and the subsequent judgements over cash
flows, however represents management's best estimation of the segments' use of
the RCF during this period. Other bases were considered including working
capital / capital employed, as well as measures such as revenue or
profitability measures, however management deemed these bases to be either
inappropriate or requiring a higher degree of estimation than the method used.
These allocations represent management's best estimate of the financial impact
of the DC business on prior periods and management considers this to provide
relevant, reliable, and understandable information to users of the Financial
Statements in accordance with the principals of IFRS 8 and IFRS 5. Additional
information is included in note 3.
Assets held for sale and discontinued operations
During the year management has exercised judgement in determining whether the
criteria for classification of an operation held for sale under IFRS 5
Non-current Assets Held for Sale and Discontinued Operations have been met for
the DC business unit at the reporting date of 31 March 2025.
Discussions with prospective buyers of the DC business unit have taken place
in the latter part of the year and the DC business was formerly separated as
of 1 February 2025.
The Board considered the DC business unit and hence Redcentric Data Centre
Limited subsidiary to meet the criteria to be classified as held for sale at
31 March 2025 for the following reasons:
· Redcentric Data Centres Limited, i.e. the DC business unit, was
available for immediate sale and could be sold to an appropriate buyer in its
current condition;
· The actions to complete any potential sale had commenced and was
expected to be completed within one year from the date of the initial
classification; and
· Whilst a number of interested parties had come forward,
negotiations were at an advanced stage with a preferred buyer with whom the
Company had agreed a non-binding offer in March 2025.
In making this assessment, the Board considered factors such as the progress
of negotiations, existence of a signed non-binding offer and external
conditions that may affect a completion timeline. Although there are always
inherent uncertainties in any such transaction, the Board believes that a sale
will occur within the coming months and therefore criteria for classification
as an asset held for sale are met.
Management also exercised judgement in determining what components of the
Group's operations met the requirements of IFRS 5 to ensure that only trade
that is ceasing was included in the discontinued operations disclosures. It
should be highlighted that in the allocation of costs to the two business
units, all central and shared costs, which would be ongoing in the event of a
disposal of the DC business unit, have been shown within the MSP business unit
with the exception of the RCF finance costs which have been split.
Accordingly, the assets and liabilities of the DC business unit have been
reclassified as single line items within the Consolidated Statement of
Financial Position. The Income Statement results of the DC business have also
been extracted from the total business results and shown separately within the
Consolidated Statement of Comprehensive Income in accordance with IFRS 5.
Exceptional items
The Group presents separately on the face of the Consolidated Statement of
Comprehensive Income, material items of income and expenses, which, because of
their nature and expected infrequency of events giving rise to them, merit
separate presentation to allow shareholders to understand better the elements
of the Company's underlying financial performance. An element of management
judgment is required in identifying these exceptional items. Additional
information and a detailed breakdown of exceptional items is included in note
5.
Estimates
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below. The Group based its assumptions
and estimates on parameters available when the consolidated financial
statements were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or circumstances
arising that are beyond the control of the Group. Such changes are reflected
in the assumptions when they occur.
Relative value method of splitting goodwill between the MPS CGU and the RDC
CGU
As part of the work in determining the net asset value of the DC business unit
to complete the carve out on 1 February 2025, the value of goodwill in
Redcentric Solutions Limited needed to be split to show what is attributable
to the DC business unit and what should remain in relation to the MSP business
unit. Whilst this carve out was a common control transaction, the method of
splitting goodwill using a relative value approach at a business unit level
(and also statutory company level in this case) is also applicable to
splitting Group goodwill for the purpose of adhering to IFRS 5 requirements
when disclosing an operation as held for sale.
The relative value approach to splitting goodwill is based on the VIU of each
CGU at the date of split. The determination of VIU of each CGU involves the
application of valuation techniques such as DCF models and market-based
methods. These techniques require management to make significant assumptions
about future events and market conditions which is also explained in the
"impairment of non-financial assets" section above. As such, the process is
subject to estimation uncertainty, particularly in the following areas:
· Future cash flow projections; and
· Discount rates.
These assumptions are inherently uncertain. Small variations in key inputs
could have had a material impact on the relative values of CGUs and
consequently, on allocation of goodwill. Whilst this exercise represented a
key estimate during the year, it only occurred due to the change in the
composition of the Group's CGUs and is not expected to reoccur in the future.
If more/less goodwill had been allocated to the MSP CGU it would have
reduced/increased the headroom for impairment of this CGU in the future and
increased/decreased any potential future profit on disposal of the DC
business. Further details on the key assumptions used in the allocation and
subsequent testing of goodwill are provided in note 15 of this Report.
Dilapidation provision
The Group has recognised a dilapidations provision for the cost of returning
the leasehold properties to their agreed condition at the end of the lease
term, in accordance with the terms of the lease agreements. In determining the
fair value of the provision, assumptions and estimates have been made in
relation to the expected cost for anticipated condition of the properties at
the end of the lease term and reinstatement works plus inflation and discount
rates. In order to reduce the estimation uncertainty regarding expected costs
Management engaged a third part expert to prepare detailed valuations. These
were then discounted back to present value by management.
3 Segmental reporting
IFRS 8 requires operating segments to be identified based on internal
financial information reported to the chief operating decision-maker (CODM)
for decision-making purposes. The Group considers the role of the chief
operating decision-maker (CODM) for decision-making purposes as being
performed by the main Board. The Board believes that the Group continued to
comprise a single reporting segment, being the provision of IT Managed
Services to customers until the Data Centre business was transferred from
Redcentric Solutions Limited to Redcentric Data Centres Limited on 1 February
2025. After this point the Board reviewed financial information for the
P&L on a two divisional basis being the provision of IT Managed Services
("MSP") and the provision of Data Centre Services ("DC"). Balance Sheet and
Cash Flow information however continued to be reviewed on a Group basis.
In restating comparative information, management exercised judgement in
applying the basis of segmentation retrospectively based on available and
reliable information, rather than conducting standalone segment determination
on the prior period contract structure. Management deemed that reconstructing
a full standalone segmental view based on the prior period structure would
have been unduly complex and impractical as it would have required
reconstructing historic allocations at a level of detail not used by
management in prior decision making. In restating comparative information,
management exercised judgement in applying the basis of segmentation
retrospectively based on available and reliable information which it believes
presents a fair comparison. This judgement is considered in more detail below.
Comparative information in respect of revenue from external customers was
derived from the underlying financial records on an aggregated basis
determined by its revenue product category, as opposed to contract detail
level obtained in respect of the current year. The level of estimation from
this approach was low due to the discrete nature of the revenue streams within
the data centre business.
Inter-segment revenues, and corresponding cost of sales and operating costs,
for both years were derived with reference to the contractual relationships
that governed the period from 1 February 2025 onwards. The contracts
management judge to be on an arms-length basis, determined by reference to
existing 3rd party customer and supplier contracts and considered extensively
at the Board level before their initiation.
Cost of sales from external customers for both years was derived by reference
to underlying financial records, with limited judgement applied due to the
discrete nature of costs that are analysed in this caption.
Operating costs before adjusted EBITDA for both years were derived again by
reference to underlying financial records, principally the cost centre
originally used for existing reporting, thereby requiring little judgement.
Judgement has been applied in respect of corporate overheads, by reference to
appropriate metrics such as headcount and sales effort, though the quantum of
costs assessed under this basis is a small proportion of overall overheads.
Depreciation and Amortisation for both years could again be derived by
underlying financial records by reference to asset registers and their
corresponding categorisation. Judgement was mainly applied in this area in
reference to the split of Customer relationship intangible assets. In this
example the segmentation has been performed by reference to which business
unit that customer relationship has been allocated to when separating the
business units on 1 February 2025.
Exceptional costs and exceptional income have been assessed by management on
an item-by-item basis for both years based on the business unit that drove the
exceptional activity, which is most cases was discrete.
Share-based payments for both years have been derived by reference to the
associated employees, with no judgement required.
Finance costs in respect of lease arrangements in both years have been derived
by underlying financial records, with little judgement required. Finance costs
in respect of the Group's RCF have been allocated based on an estimation of
the original drawdown requirement, adjusted for the estimated segmental cash
flows subsequent to initial drawdown. This has required a degree of judgement
in respect of the drawdown allocation and the subsequent judgements over cash
flows, however represents managements best estimation of the segments use of
the RCF during this period. Other bases were considered including working
capital / capital employed, as well as measures such as revenue or
profitability measures, however management deemed these bases to be either
inappropriate or requiring a higher degree of estimation than the method used.
These allocations represent managements best estimate of the financial impact
of the DC business on prior periods and management considers this to provide
relevant, reliable, and understandable information to users of the Financial
Statements in accordance with the principals of IFRS 8 and IFRS 5.
These allocations represent management's best estimate of the financial impact
of the DC business on prior periods and management considers this to provide
relevant, reliable, and understandable information to users of the financial
statements in accordance with the principals of IFRS 8 and IFRS 5.
The CODM assesses profit performance principally through an adjusted EBITDA
measure.
Whilst the Board reviews the Group's three revenue streams separately
(recurring, product and service), 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 to the CODM. In
addition, the Statement of Financial Position is still presented on a Group
basis hence it is not disclosed in the following information on a line-by-line
basis.
The Group has presented the DC segment as a discontinued operation and
restated the comparatives for FY24 for consistency.
Segmental results
The segment results for the year ended 31 March 2025 are as follows:
( ) MSP - continuing operations DC - discontinued operations Total segments Adjustments and eliminations Consolidated
( ) £'000 £'000 £'000 £'000 £'000
Revenue
Recurring revenue 119,070 35,928 154,998 - 154,998
Product revenue 4,888 - 4,888 - 4,888
Services revenue 9,593 412 10,005 - 10,005
External customers 133,551 36,340 169,891 - 169,891
Inter-segment 1,587 8,231 9,818 (9,818) -
Total revenue 135,138 44,571 179,709 (9,818) 169,891
Cost of sales
External customers (51,681) (16,828) (68,509) - (68,509)
Inter-segment (176) (1,587) (1,763) 1,763 -
Total cost of sales (51,857) (18,415) (70,272) 1,763 (68,509)
Gross profit 83,281 26,156 109,437 (8,055)* 101,382
Adjusted EBITDA 18,758 16,633 35,391 - 35,391
Depreication of property,
Depreciation of property, plant and equipment (4,001) (3,617) (7,618) - (7,618)
Amortisation of intangibles (2,593) (832) (3,425) - (3,425)
Depreciation of right-of-use assets (1,610) (8,308) (9,918) - (9,918)
Exceptional costs (924) (779) (1,703) - (1,703)
Share-based payments and associated National (1,235) (32) (1,267) - (1,267)
Insurance
Operating profit 8,395 3,065 11,460 - 11,460
Finance costs (2,352) (3,120) (5,472) - (5,472)
Profit before tax 6,043 (55) 5,988 - 5,988
*This is eliminated out in operating costs therefore the effect is £nil at
adjusted EBITDA.
The segment results for the year ended 31 March 2024 are as follows:
( ) MSP - continuing operations DC - discontinued operations Total segments Adjustments and eliminations Consolidated
( ) £'000 £'000 £'000 £'000 £'000
Revenue
Recurring revenue 109,236 39,855 149,091 - 149,091
Product revenue 5,507 - 5,507 - 5,507
Services revenue 8,552 - 8,552 - 8,552
External customers 123,295 39,855 163,150 - 163,150
Inter-segment 1,479 7,538 9,017 (9,017) -
Total revenue 124,774 47,393 172,167 (9,017) 163,150
Cost of sales
External customers (46,372) (26,308) (72,680) - (72,680)
Inter-segment (176) (1,479) (1,655) 1,655 -
Total cost of sales (46,548) (27,787) (74,335) 1,655 (72,680)
Gross profit 78,226 19,606 97,832 (7,362)* 90,470
Adjusted EBITDA 17,360 10,956 28,316 - 28,316
Depreication of property,
Depreciation of property, plant and equipment (2,649) (3,440) (6,089) - (6,089)
Amortisation of intangibles (5,178) (832) (6,010) - (6,010)
Depreciation of right-of-use assets (2,265) (9,512) (11,777) - (11,777)
Exceptional costs (1,466) (3,084) (4,550) - (4,550)
Exceptional income 1,008 1,092 2,100 - 2,100
Share-based payments and associated National (1,118) (20) (1,138) - (1,138)
Insurance
Operating profit/(loss) 5,692 (4,840) 852 - 852
Finance costs (2,322) (3,180) (5,502) - (5,502)
Profit/(loss) before tax 3,370 (8,020) (4,650) - (4,650)
*This is eliminated out in operating costs therefore the effect is £nil at
adjusted EBITDA.
4 Discontinued Operations
As previously announced and noted, the Board took the decision to create two
autonomous business units, DC and MSP. At the balance sheet date, the Board
had made the decision to sell the DC business unit (Redcentric Data Centres
Limited), allowing the Group to concentrate on its core MSP business. The DC
business unit has therefore been treated as a discontinued operation at the
year-end reporting date.
The profit/(loss) of the discontinued operation is as follows:
( ) Year ended Year ended
31 March 31 March
2025 2024
( ) £'000 £'000
Revenue 44,571 47,393
Cost of sales (18,415) (27,787)
Gross profit 26,156 19,606
Operating expenditure (23,091) (25,538)
Gain on settlement of contingent consideration - 1,092
Adjusted EBITDA 16,633 10,956
Depreciation of property, plant and equipment (3,617) (3,440)
Amortisation of intangibles (832) (832)
Depreciation of right-of-use assets (8,308) (9,512)
Exceptional costs (779) (3,084)
Exceptional income - 1,092
Share-based payments and associated National Insurance (32) (20)
Operating profit/(loss) from discontinued operations 3,065 (4,840)
Finance costs (1,461) (1,642)
Profit/(loss) before tax from discontinued operations 1,604 (6,482)
Income tax credit/(expense) (809) 1,318
Profit/(loss) for the period from discontinued operations 795 (5,164)
Earnings per share from discontinuing operations
Basic loss per share 0.50p (3.30p)
Diluted loss per share 0.49p (3.19p)
Finance costs for the discontinued operation do not include finance costs
which relate to the DC business unit but will remain within the continuing
business. These finance costs will however be shown in the DC segment
finance costs in note 3.
Cash flows for the DC business unit have been derived on a direct basis using
the available information for the current and comparative reporting periods.
In most cases this has been derived directly from, and as a subset of,
financial records that have supported the preparation of the Group Financial
Statements. In deriving cash flows from operating activities adjusted EBITDA
less exceptional costs has been used as managements best estimate. No
adjustment has been made for working capital as there is no available
comparative financial information to derive this information, given treasury
management was managed as a Group during this time.
Cash flows from Investing and Financing activities represent those directly
attributable to the business unit, with no significant allocation activity due
to the discrete nature of these cash flows. In deriving cash flows from
financial activities no apportionment has been made for the Group's equity or
bank debt financing arrangements.
Year ended Year ended
31 March 31 March
2025 2024
£'000 £'000
Net cash flow from operating activities 16,029 7,872
Net cash flow from investing activities (3,887) (4,952)
Net cash flow from financing activities (6,295) (7,530)
5 Exceptional items
( ) Year ended Year ended
( ) 31 March 31 March
( ) 2025 2024
*restated
( ) £'000 £'000
Included within operating costs:
Acquisition related professional and legal fees 484 350
Integration costs - 383
Restructuring costs 440 733
Total exceptional costs from continuing operations 924 1,466
Total exceptional costs from discontinued operations 779 3,084
Total exceptional costs 1,703 4,550
Gain on settlement of contingent consideration - (1,008)
Total exceptional income` - (1,008)
*restated to reflect continuing operations
Current year
Exceptional costs
From time to time the Group explores potential M&A activity to further
enhance shareholder value. During the year acquisition related professional
and legal fees of £0.5m were incurred on acquisition related projects that
did not come to fruition. Cash costs of acquisition related professional and
legal fees were £0.5m.
Integration costs of £0.2m (discontinued operations) relate to residual costs
from the prior year projects to exit the Harrogate data centre and the
decommissioning of two third-party data centres inherited from historic
acquisitions (see prior year narrative for further details). Cash costs were
£0.1m.
Restructuring costs of £0.4m were incurred as a result of a one-off
restructuring activity instigated by the Board to streamline operations and
enhancing long-term profitability of the Group. This project was undertaken as
a direct consequence of the integration of prior year acquisitions and due to
the nature and size of the initiative was deemed exceptional by management.
Annualised savings from this restructure are estimated at approximately £1.0m
per annum. Cash costs were £0.4m.
On 1 February 2025 the DC business was transferred from Redcentric Solutions
Limited to Redcentric Data Centres Limited, a newly incorporated subsidiary to
better reflect the segmental reporting of the DC business unit, and the
contemplation of a potential disposal of the DC business unit. Both legal and
professional fees of £0.4m and consultancy fees and staff costs of £0.2m
have been incurred during the year (discontinued operations). Cash costs were
£0.3m.
Prior year
Exceptional costs
Acquisition related professional and legal fees of £0.4m were for
professional services linked to the significant acquisitions of certain
business and assets relating to three data centres from Sungard Availability
Services (UK) Limited ('Sungard'), the consulting business from Sungard and
100% of the issued share capital of 4D Data Centres Limited during the
previous year. These costs, though incurred in FY24, relate to the acquisition
projects and include valuation services in respect of establishing the fair
value of acquired assets and other associated professional fees. Cash costs
were £0.4m.
Integration costs of £3.5m (£3.1m relating to discontinued operations)
principally related to the exit of the Harrogate data centre and relocation of
both customer and internal platforms to our West Yorkshire data centre in
Elland. This activity was intrinsically linked to the integration of the
Sungard and 4D Data Centre acquisitions, which left the Group with significant
data centre capacity that required consolidation.
The relocation of the Harrogate data centre was a significant undertaking for
the Group, involving dedicated resource for up to 12 months, including staff
that were seconded to the project, and diverted away from other value-adding
activities, for most or all of their time before returning to their existing
roles following the project's completion. £0.7m of cost allocated to
integration costs in FY24 in respect of this move related to staff costs which
would have been included within adjusted operating profit in the prior year.
In total, £1.4m of third-party expenditure across contract resource and other
directly associated spend and £1.2m of staff salaries, bonuses and associated
taxes were spent on the move to migrate activities to the West Yorkshire data
centre. In addition, £1.0m of cost was incurred to restore the Harrogate site
to its original condition following the customer migration. These costs, where
they related to restoration and dilapidations activity, are shown as a
utilisation of the existing dilapidations provision for this site.
The remaining £0.9m of integration costs presented within exceptional costs
included £0.7m incurred to decommission presences in two third-party data
centres inherited from acquisitions as part of the ongoing strategy to
consolidate the estate and £0.2m related to staff costs performing other
integration work to migrate legacy platforms.
Cash costs relating to exceptional integration costs in the year were £3.1m.
Restructuring costs included £0.5m of staff costs associated with a
management restructure for colleagues who have subsequently left the business,
and £0.2m of related legal fees. Cash costs were also £0.7m.
Exceptional income
During FY24, the consideration for the Sungard acquisition was
finalised. £2.5m of contingent consideration was recognised as a liability
in the prior year based on the expectations at prior year balance sheet date.
The final position crystallised on the anniversary date of the acquisition, in
line with the purchase agreement. During FY24, the final settlement totalled
£0.4m, and therefore an exceptional £2.1m credit (£1.1m relating to
discontinued operations) was recognised as a gain on settlement of contingent
consideration in line with the prior year subsequent events disclosure. This
is presented separately on the face of the Consolidated Statement of
Comprehensive Income.
6 Intangible assets
Customer Trademarks Software Total
Goodwill contracts and brands and licences
and related
relationships
£'000 £'000 £'000 £'000 £'000
Cost
At 1 April 2023 60,640 80,130 649 6,303 147,722
Additions - - - 1,479 1,479
Disposals - - - (393) (393)
Transfers from property, plant and equipment - - - 261 261
At 31 March 2024 60,640 80,130 649 7,650 149,069
Additions - - - 1,698 1,698
Transfers from right-of-use assets - - - 123 -
Reclassification to assets held for sale (33,399) (9,604) - - (43,003)
At 31 March 2025 27,241 70,526 649 9,471 107,887
Accumulated amortisation and impairment
At 1 April 2023 - 58,876 649 4,980 64,505
Charged in year - 5,229 - 781 6,010
Disposals - - - (393) (393)
Transfers from property, plant and equipment - - - 64 64
At 31 March 2024 - 64,105 649 5,432 70,186
Charged in year - 2,367 - 1,058 3,425
Transfers from right-of-use assets - - - 105 -
Reclassification to assets held for sale - (2,257) - - (2,257)
At 31 March 2025 - 64,215 649 6,595 71,459
At 31 March 2025 27,241 6,311 - 2,876 36,428
At 31 March 2024 60,640 16,025 - 2,218 78,883
As part of the trade and asset transfer of the DC business from Redcentric
Solutions Limited to Redcentric Data Centres Limited on 1 February 2025 a
review was undertaken to ensure that the asset registers for intangible
assets, property, plant and equipment and right-of-use assets correctly
recorded the relevant assets. As a consequence of the decision to account for
the DC business unit as a discontinued operation, transfers have been made in
relation to the relevant DC business unit assets. In addition, intangible
assets with a NBV of £40.7m have been transferred to assets held for sale.
Amortisation of customer contracts has decreased by £2.9m to £2.4m in FY25.
This is because one large customer contract was fully amortised towards the
end of FY24.
Customer contracts have a weighted average remaining amortisation period of 8
years and 3 months (FY24: 8 years and 9 months). There are no indicators of
impairment at 31 March 2025.
Software and licences include £1.2m (FY24: £1.3m) of additions in relation
to customer capital expenditure.
Included within software and licences are £nil (FY24: £0.5) of assets
financed under the Group's Asset Financing Facility. The Directors have
exercised judgement in determining that there has been no sale of these assets
under IFRS 15 and therefore the assets are financed rather than representing a
sale and leaseback arrangement.
Goodwill impairment testing
Under IAS 36, goodwill is tested annually for impairment, or more often when
indicators of impairment exist. To confirm whether an impairment of the
goodwill is necessary, management compares the carrying value to the
recoverable amount. Other intangible assets are tested for impairment whenever
events or a change in circumstances indicate carrying values may no longer be
recoverable. Consideration for any impacts of climate-related risks to
impairment is not deemed to affect the overall conclusions in the medium to
long-term.
DC business transfer and subsequent impairment review
On 1 February the trade and assets of the DC business were transferred from
Redcentric Solutions Limited to Redcentric Data Centres Limited on a book
value basis. Following this transfer, management, including the Chief
Operating Decision Maker, viewed the financial information of the Group on a
two divisional basis being the MSP business unit and the DC business unit.
The identification of a second CGU on 1 February 2025 was a trigger for
impairment at 31 January 2025 on the original one CGU structure. This was
performed by calculating the VIU of the MSP business unit (i.e. Group) using a
Board approved five-year forecast cash flow projection to the period of 31
March 2030. This comprised the detailed Group budget for FY26 and the latest
detailed forecast for FY27, with higher level assumptions applied for the
outer years. A terminal value based on a perpetuity calculation using a 2.0%
real growth rate was then added (FY24: 2.0% growth).
The key assumptions used in the impairment testing of the Group were as
follows:
· New order intake increased steadily on prior year following sales
team stability and improved marketing conditions;
· Price increases average of 1.0% of total revenue;
· Overall gross margin percentage of c. 70% in line with historic
trends for MSP;
· Electricity costs driven by near-term contracted prices and
medium-term third-party price forecasts for energy;
· Operating costs (depending on nature) to increase in line with
either revenue growth or 3%, factoring in any near-term licence inflation;
· Pre-tax discount rate of 11.89% at 31 January 2025 and 12.87% at
31 March 2025 (FY24: 10.87%); and
· Terminal growth rate percentage of 2.0% is consistent with the
market the entity operates in for real growth.
The Group has also considered that any cost implications of achieving net zero
would not have a material impact on the assessment period.
Significant headroom was noted at 31 January 2025 therefore no impairment
noted such that reasonable sensitivities would not result in an impairment
charge and have hence not been disclosed.
Relative value allocation of goodwill
As per IAS 36 the goodwill recognised at both subsidiary level and on
consolidation needs to be allocated to each CGU. The identification of two
CGUs on 1 February 2025 led management to split the existing goodwill, which
represented synergies of the Group, in two using a relative value method. The
relative value method splits goodwill based on the relative values of the
assets, liabilities or business units to which the goodwill relates.
Management have used judgement and interpreted that the valuation method to be
used to do this must be consistent between the two CGUs i.e. a combination of
fair value and VIU cannot be used. As a result, management decided to use a
VIU method to calculate the recoverable amounts for both CGUs before
considering the portion of goodwill to allocate. In determining the VIU for
the DC CGU, the Directors determined that since the carve out of the trade and
assets into a separate CGU was being done for the purpose of a potential sale
of that CGU (see note 4), the VIU for the purpose of the relative value
exercise should include cashflows from the operation of the CGU up to the
expected date of disposal, plus the expected net proceeds from a forecast sale
of the CGU. Consequently, the key assumptions for the DC CGU differ to those
in the MSP CGU model. The key assumptions for the MSP CGU were consistent
with the Group impairment testing at 31 January 2025. The key assumptions
for the DC CGU are as follows:
· Sales proceeds less costs to sell;
· Timing of disposal; and
· Pre-tax discount rate of 11.89% at 31 January 2025 and 12.87% at
31 March 2025 (FY24: 10.87%).
The carrying amount of goodwill allocated to the two CGUs following this split
on 1 February 2025 was as follows:
1 February 2025
£'000
MSP 27,241
DC 33,399
60,640
The amount of £33.4m recognised against the DC business unit has been
included within assets held for sale. An increase in the MSP allocation would
reduce the headroom on the impairment of the MSP CGU assessment but would
increase the profit on disposal of the DC CGU.
Sensitivity analysis - MSP
For VIU calculations for the MSP CGU management consider the key assumptions
to which the recoverable amounts are most sensitive are discount rates and
EBITDA growth. Changes in key assumptions within the MSP CGU would cause a
materially different split of goodwill between the two CGUs. In each
sensitivity assessment, all other item assumptions, other than the assumption
being sensitised, remained equal:
· EBITDA growth - In the VIU calculations EBITDA growth is
primarily a result of the assumptions over revenue and gross margin growth,
as it assumed that operating costs and capital expenditure are largely fixed
or have linear relationships to gross margin growth. Therefore, a reduction in
the growth assumptions in revenue and gross margin would derive a
corresponding reduction in EBITDA growth. A reduction in the EBITDA growth
rate from a compound annual growth rate (CAGR) of 5.1% to 0% over the forecast
period would have a £5.4m increase to the goodwill allocated to the DC
business unit.
· WACC - A movement in the WACC by + or - 1% has a £1.7m impact on
the goodwill allocated to either business unit.
Sensitivity analysis - DC
For VIU calculations for the DC CGU management consider the key assumptions to
which the recoverable amounts are most sensitive are net sales proceeds and
disposal timing. A 5% change in the net proceeds would not result in a
material change to the GW allocation, nor would a reasonable scenario in the
forecast period.
The relative value split of goodwill was the result of the change in
composition of CGUs and is not expected to occur again in the next 12 months
hence this disclosure is considered a non-recurring disclosure for FY25.
Year-end impairment testing
In line with IAS 36, impairment testing was then conducted at 31 March 2025 at
the newly defined CGU level, representing a change in the lowest level at
which assets generate largely independent cash flows. This was performed by
calculating the VIU of the MSP business unit using a Board approved five-year
forecast cash flow projection to the period of 31 March 2030. This comprised
the detailed Group budget, split between the MSP and DC business units for
FY26 and the latest detailed forecast for FY27, with higher level assumptions
applied for the outer years. A terminal value based on a perpetuity
calculation using a 2.0% real growth rate was then added (FY24: 2.0%
growth). The key assumptions for the MSP CGU were consistent with the
Group impairment testing at 31 January 2025.
In determining the VIU for the DC CGU, the Directors determined that the most
appropriate cashflows include those from the operation of the CGU up to the
expected date of disposal, plus the expected net proceeds from a forecast sale
of the CGU. The key assumptions used for the DC CGU were consistent with
the relative value split on 1 February 2025.
Whilst sufficient headroom was identified at 31 March 2025 for both CGUs, a
number of sensitivities have been performed which are disclosed below.
Sensitivity analysis - MSP
There are no reasonably possible changes in key assumptions within the MSP CGU
which would erode the headroom. Management have run a combined scenario of
an EBITDA growth rate of 0% and an increase to the WACC of +1%. This scenario
erodes the headroom; however, the Directors believe this to be an unlikely
scenario to the extent that this is not a reasonably possible scenario.
Sensitivity analysis - DC
Reasonable possible movements in the assumptions regarding net proceeds and
forecast period for the purpose of the sensitivity assessment would not result
in an impairment charge.
Overall, no goodwill impairment was recognised at 31 March 2025 in either
CGUs.
Customer relationship asset impairment testing
As with goodwill the trade and asset transfer of the DC business was
identified as a trigger for impairment on 1 February 2025 for two customer
relationship assets that would need to be split between the MSP and DC
business units. The two customer relationship assets relating to the DC
business unit were tested for impairment using a discounted cash flow model at
31 January 2025 prior to the carve out and subsequent transfer. The
discounted cashflow model used the original customer revenue data from the
PPAs and compared this to the expected FY26 revenue as the base and then
applied growth and attrition thereafter. Sufficient headroom existed on both
the base and sensitised valuation models and a reasonably possible adverse
movement to any of the above key assumptions made would not give rise to
impairment at 31 January 2025.
The book value of the customer relationship assets was then split on 1
February 2025 based on which statutory entity the customer contracts were
legally assigned to. In line with IAS 36, impairment testing was then
conducted at 31 March 2025 using the same discounted cashflow method as
outlined above but updated for actual cancellations post 31 January 2025.
Sufficient headroom existed on both the customer relationship assets for both
the base and sensitised valuation models and a reasonably possible adverse
movement to any of the above key assumptions would not give rise to impairment
at 31 March 2025.
7 Property, plant and equipment
Leasehold Office fixtures Vehicles and Assets under Total
improvements and fittings computer construction
equipment
£'000 £'000 £'000 £'000 £'000
Cost
At 1 April 2023 12,371 9,698 26,862 180 49,111
Additions 4,952 95 4,271 - 9,318
Disposals (1,201) (447) (8,367) - (10,015)
Transfer to intangible assets - (261) - - (261)
Transfer from right-of-use assets - - 1,618 - 1,618
Reclassification 180 - - (180) -
Exchange differences (8) - - - (8)
At 31 March 2024 16,294 9,085 24,384 - 49,763
Additions 3,893 453 5,124 194 9,664
Disposals (300) (65) (108) - (473)
Transfer from right-of-use assets 156 - 650 - 806
Reclassification to assets held for sale (17,877) (7,558) (96) (194) (25,725)
Exchange differences - (4) - - (4)
At 31 March 2025 2,166 1,911 29,954 - 34,031
Accumulated depreciation
At 1 April 2023 6,556 2,072 23,352 - 31,980
Charged in year 1,260 2,412 2,417 - 6,089
On disposals (1,201) - (8,812) - (10,013)
Transfer to intangible assets - (64) - - (64)
Transfer from right-of-use assets - - 351 - 351
Exchange differences - (2) - - (2)
At 31 March 2024 6,615 4,418 17,308 - 28,341
Charged in year 2,352 1,694 3,572 - 7,618
On disposals (155) (50) 4 - (201)
Reclassification - - (57) - (57)
Transfer from right-of-use assets 485 - 125 - 610
Reclassification to assets held for sale (7,976) (4,442) (65) - (12,483)
Exchange differences - (5) - - (5)
At 31 March 2025 1,321 1,615 20,887 - 23,823
Net book value
At 31 March 2025 845 293 9,067 - 10,208
At 31 March 2024 9,679 4,667 7,076 - 21,422
As part of the trade and asset transfer of the DC business from Redcentric
Solutions Limited to Redcentric Data Centres Limited on 1 February 2025 a
review was undertaken to ensure that the asset registers for intangible
assets, property, plant and equipment and right-of-use assets correctly
recorded the relevant assets. As a consequence of the decision to account for
the DC business unit as a discontinued operation, transfers have been made in
relation to the relevant DC business unit assets. In addition, property, plant
and equipment with a NBV of £13.2m have been transferred to assets held for
sale.
The trade and asset transfer of the DC business was identified as a trigger
for impairment. Management determined that the book value of property, plant
and equipment equated broadly to their fair value, so no impairment was
identified.
Vehicles and computer equipment include additions of £4.0m (FY24: £2.8m)
relating to customer capital expenditure.
Included within property, plant and equipment additions is £2.1m (FY24:
£3.1) of assets financed under the Group's Asset Financing Facility. The
Directors have exercised judgement in determining that there has been no sale
of these assets under IFRS 15 and therefore the assets are financed rather
than representing a sale and leaseback arrangement.
8 Right-of-use assets
Land and Vehicles & computer Total
buildings equipment
£'000 £'000 £'000
Cost
At 1 April 2023 66,444 12,327 78,771
Additions 699 3,541 4,240
Transfer to property, plant and equipment - (1,618) (1,618)
At 31 March 2024 67,143 14,250 81,393
Additions 505 288 793
Reassessments (335) - (335)
Transfer to property, plant and equipment (156) (650) (806)
Transfer to intangible assets - (123) (123)
Disposals (14,359) (1,232) (15,591)
Reclassification to assets held for sale (50,058) - (50,058)
At 31 March 2025 2,740 12,533 15,273
Accumulated depreciation
At 1 April 2023 22,296 10,193 32,489
Charged in year 10,231 1,546 11,777
Transfer to property, plant and equipment - (351) (351)
At 31 March 2024 32,527 11,388 43,915
Charged in year 8,966 952 9,918
Transfer to property, plant and equipment (485) (125) (610)
Transfer to intangible assets - (105) (105)
Disposals (12,411) (3,146) (15,557)
Reclassification to assets held for sale (26,977) - (26,977)
At 31 March 2025 1,620 8,964 10,584
Net book value
At 31 March 2025 1,120 3,569 4,689
At 31 March 2024 34,616 2,862 37,478
Most of the Group's right-of-use assets are associated with the leased
property portfolio.
As part of the trade and asset transfer of the DC business from Redcentric
Solutions Limited to Redcentric Data Centres Limited on 1 February 2025 a
review was undertaken to ensure that the asset registers for intangible
assets, property, plant and equipment and right-of-use assets correctly
recorded the relevant assets. As a consequence of the decision to account for
the DC business unit as a discontinued operation, transfers have been made in
relation to the relevant DC business unit assets. In addition, right-of-use
assets with a NBV of £23.1m has been transferred to assets held for sale.
As a consequence of the above review, it was also noted that a number of
assets had been fully written down and the related lease contracts terminated
in prior years. A disposal was therefore processed (£nil NBV) to remove these
assets from the asset register as they no longer exist.
Of the £0.8m right-of-use assets acquired in the year, £0.1m was funded
using leases that would have previously been classified as finance leases
under IAS 17 (FY24: £nil).
Included in the net book value of land and buildings at 31 March 2025 is
£0.2m right-of-use assets for dilapidations (FY24: £8.2m). The significant
reduction year-on-year relates to the transfer of right-of-use assets to
assets held for sale.
9 Assets held for sale
The major classes of assets and liabilities of the DC business unit, which met
the criteria for being held for sale as at 31 March 2025 are as follows:
Year ended
31 March
2025
£'000
Intangible assets 40,746
Property, plant and equipment 13,242
Right-of-use assets 23,081
Trade and other receivables 3,227
Prepayments 754
Contract acquisition asset 425
Accrued income 694
Assets held for sale 82,169
Year ended
31 March
2025
£'000
Trade and other payables 1,005
Accruals 3,017
Deferred income 733
Asset financing liabilities 3,119
Leases 19,892
Deferred tax liability 1,650
Provisions 10,904
Liabilities held for sale 40,320
The above assets and liabilities are held at their carrying value which is
lower than their fair value. No impairment was identified on classification as
held for sale.
Included within liabilities held for sale is £3.1m of asset financing
liabilities. At the balance sheet date, these liabilities are legally held by
Redcentric Solutions Limited, and the liabilities are required to be settled
upon a sale of the relevant assets to which they relate. As such, the
Directors are satisfied that these amounts have been appropriately presented
as held for sale. Similarly, lease liabilities of £19.9m, which at the
balance sheet date are legally held by Redcentric Solutions Limited, have been
presented as held for sale as they correspond to the ROU assets that are
planned for disposal with the DC business. Post year end, a process of legally
assigning these leases and novating the asset financial liabilities to
Redcentric Data Centres Limited has commenced and is ongoing. The asset
financing liabilities will be settled as part of the consideration for the
sale.
10 Earnings per share
The calculation of basic and diluted EPS for continuing operations is based on
the following earnings and number of shares.
Year ended Year ended
31 March 31 March
2025 2024
*restated
Earnings £'000 £'000
Statutory profit/(loss) 2,693 1,723
Tax credit 1,691 109
Amortisation of acquired intangibles 1,535 4,397
Share-based payments and associated National Insurance 1,235 1,118
Exceptional costs 924 1,466
Exceptional income - (1,008)
Adjusted earnings before tax 8,078 7,805
Notional tax charge (2,020) (1,951)
Adjusted earnings 6,059 5,854
*restated to reflect continuing operations
Number Number
Weighted average number of ordinary shares '000 '000
In issue 159,021 157,371
Held in treasury (540) (693)
For basic EPS calculations 158,481 156,678
Effect of potentially dilutive share options 5,351 5,129
For diluted EPS calculations 163,832 161,807
EPS for continuing operations Pence Pence
Basic 1.70 1.10
Adjusted 3.82 3.74
Diluted 1.64 1.06
Adjusted diluted 3.70 3.62
The calculation of basic and diluted EPS for the Group (combined continuing
and discontinued operations) is based on the following earnings (number of
shares noted above).
Year ended Year ended
31 March 31 March
2025 2024
Earnings £'000 £'000
Statutory profit/(loss) 3,488 (3,441)
Tax charge 2,500 (1,209)
Amortisation of acquired intangibles 2,367 5,229
Share-based payments and associated National Insurance 1,267 1,138
Exceptional costs 1,703 4,550
Exceptional income - (2,100)
Adjusted earnings before tax 11,325 4,167
Notional tax charge (2,831) (1,042)
Adjusted earnings 8,494 3,125
EPS for combined continuing and discontinued operations Pence Pence
Basic 2.20 (2.20)
Adjusted 5.36 1.99
Diluted 2.13 (2.20)
Adjusted diluted 5.18 1.93
In line with the Group's policy, the notional tax charge above is calculated
at a standard rate of 25% (FY24: 25%).
11 Share capital
Ordinary shares of 0.1p each Share premium
Number £'000 £'000
At 1 April 2024 156,991,982 157 73,267
New shares issued 1,892,937 2 2,382
At 31 March 2024 158,884,919 159 75,649
New shares issued 260,994 - -
At 31 March 2025 159,145,913 159 75,649
The total shares held in treasury at 31 March 2025 was 242,175 at an average
cost of £1.23 per share therefore, with a total value of £298,258 (FY24:
632,703 shares at an average cost of £1.23, with a total value of £779,224).
The number of shares authorised is the same as the number of shares issued.
Ordinary shareholders have the right to attend, vote and speak at meetings,
receive dividends, and receive a return on assets in the case of a winding up.
12 Subsequent events
Subsequent to the reporting date of 31 March 2025, the Group has continued
negotiations regarding the sale of the DC business unit (Redcentric Data
Centres Limited). As at the date of approval of these Financial Statements,
no transaction had been completed.
The potential transaction is part of the Group's strategic initiative to focus
on its core business operations of the MSP business unit, which the Board
believes offers attractive growth opportunities. The assets and liabilities
related to the Data Centre business unit were classified as held for sale as
at 31 March 2025 in accordance with IFRS 5.
The Group will assess and recognise any financial impacts arising from the
transaction, including any gain on the disposal, in the period in which the
sale completes.
On 14 April 2025 the Group signed a reversionary lease for its London West
site. The reversionary lease will take effect upon expiry of the current lease
being 24 June 2030 and will extend the term for 10 years, ending on 23 June
2040. The reversionary lease includes terms that are substantially similar to
the current lease. Management have assessed that the signing of the
reversionary lease is a non-adjusting subsequent event, as the agreement was
executed after the reporting period and does not provide evidence of
conditions that existed at the balance sheet date.
On 25 July 2025, the Revolving Credit Facility and Asset Financing Facility
were extended a further year to 26 April 2027. In parallel with this
extension, the Revolving Credit Facility was reduced from £80.0m to £60.0m,
with Bank of Ireland exiting the facility, all other terms remaining
unchanged.
Appendix - Alternative Performance Measures
This report contains certain financial measures and analyses that are not
defined or recognised under IFRS but are presented to provide readers with
additional financial information that management believes will be helpful to
investors and other readers in assessing the underlying performance of the
Group.
This additional information 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.
This information is again presented on a continuing basis unless otherwise
indicated.
Recurring revenue
Recurring revenue is the revenue that repeats annually, either under
contractual arrangement or by predictable customer habit. It is a helpful
measure as 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 and stability of the business. It is a measure that is very well
understood by the investor and analyst community. It is also a key measure
used internally for tracking revenue mix and performance reporting.
Continuing operations: Year ended Year ended
31 March 31 March
2025 2024
*restated
( ) £'000 £'000
Recurring revenue 120,657 110,715
Non-recurring revenue 14,481 14,059
Total revenue 135,138 124,774
*restated to reflect continuing operations
The recurring revenue percentage is the percentage of recurring revenue as a
proportion of total revenue and was 89.3% in the year, an increase of 0.5ppts
from the prior year (FY24: 88.7%), remaining a favourable performance measure.
Capital expenditure - maintenance and customer
Maintenance capital expenditure is the element the capital expenditure that is
incurred in support of the Group's underlying infrastructure rather than in
support of specific customer contracts. This metric shows the level of
internal investment the Group is making through capital expenditure. As the
measure explains and analyses routine capital expenditure, land and buildings
(including any associated assets relating to dilapidation provisions) and
asset financing additions are excluded due to the infrequency of this
expenditure occurring.
Customer capital expenditure relates to expenditure on assets utilised by the
Group in delivering IT Managed Services to its customers.
The tables below are reported on a Group (combined continuing and discontinued
operations) basis.
Capital expenditure is analysed as:
( ) Year ended 31 March 2025 Year ended
31 March
2024
( ) £'000 £'000
Property plant and equipment additions 9,664 9,318
Intangible additions 1,698 1,479
Right-of-use asset additions 288 1,033
Total capital expenditure 11,650 11,830
*These are right-of-use assets defined by the banking covenants.
Capital expenditure is split as:
( ) Year ended Year ended
31 March 31 March
2025 2024
( ) £'000 £'000
Maintenance capital expenditure 6,519 7,731
Customer capital expenditure 5,131 4,099
Total capital expenditure 11,650 11,830
EBITDA and Adjusted EBITDA
Adjusted EBITDA is earnings before interest, taxation, depreciation and
amortisation ("EBITDA") excluding exceptional items and share-based payments
plus any associated National Insurance. The same adjustments to earnings are
also made in determining the adjusted EBITDA margin.
The Board considers that this metric provides a useful measure of assessing
the underlying trading performance of the Group as it excludes items which can
dramatically impact financial performance, for example one-off exceptional
costs, or amortisation of acquired intangibles arising from business
combinations, which varies year on year dependent on the timing and size of
any acquisitions, and obscure the visibility of the underlying trading
performance of the business. Adjusted EBITDA also helps to more easily assess
the business' ability to generate cashflow and is a widely adopted metric.
( ) Year ended Year ended
31 March 31 March
2025 2024
*restated
( ) £'000 £'000
Reported operating profit 8,395 5,692
Amortisation of intangible assets arising on business combinations 1,535 4,397
Amortisation of other intangible assets 1,058 781
Depreciation of property, plant and equipment 4,001 2,649
Depreciation of right-of-use assets 1,610 2,265
EBITDA 16,599 15,784
Exceptional income (see note 5) - (1,008)
Exceptional costs (see note 5) 924 1,466
Share-based payments and associated National Insurance 1,235 1,118
Adjusted EBITDA 18,758 17,360
*Restated to reflect continuing operations
Adjusted EBITDA increased to £18.8m, £1.4m higher than prior year, with an
adjusted EBITDA margin of 13.9% (FY24: 13.9%).
Adjusted operating profit
Adjusted operating profit is operating profit excluding amortisation on
acquired intangibles, exceptional items and share-based payments and any
associated National Insurance.
Reconciliation of operating profit to adjusted operating profit for continuing
operations is as follows:
( ) Year ended Year ended
31 March 31 March
2025 2024
*restated
( ) £'000 £'000
Reported operating profit 8,395 5,692
Amortisation of intangible assets arising on business combinations 1,535 4,397
Exceptional costs 924 1,466
Exceptional income - (1,008)
Share-based payments and associated National Insurance 1,235 1,118
Adjusted operating profit 12,089 11,665
*Restated to reflect continuing operations
Adjusted net debt
Adjusted net debt is reported net debt (i.e. total borrowings net of cash)
less supplier term loans and less lease liabilities that would have been
classified as operating leases under IAS 17 and is a measure reviewed by the
Group's banking syndicate as part of covenant compliance. The table below is
based on the full Group numbers combining both continuing and discontinued
operations.
( ) Year Year
Ended ended
31 March 31 March
2025 2024
( ) £'000 £'000
Borrowings - Revolving Credit Facility (38,947) (39,885)
Borrowings - Lease liabilities (24,599) (31,980)
Borrowings - Term loan (3) (21)
Borrowings - Asset Financing Facility (4,924) (3,609)
Total borrowings (68,473) (75,495)
Cash 3,018 3,130
Reported net debt (65,455) (72,365)
Term loans 3 21
Lease liabilities defined by the banking covenants 23,562 30,346
Adjusted net debt (41,890) (41,998)
Shown as:
Continuing operations (38,771)
Discontinued operations (3,119)
Adjusted net debt (41,890)
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