Redcentric performs 'well' in first half

The AIM-traded firm said it was anticipating an improvement in revenues to £61.5m, from £44.3m a year earlier, and adjusted EBITDA of £11.7m, broadly in line with the £11.9m it recorded a year earlier.

Adjusted net debt was set to have expanded to £39.3m, from £1.5m at the end of March, while its capital expenditure totalled £1.5m from a restated £1.9m in the first half of the 2022 financial year.

The board said the adjusted net debt reflected the initial cash consideration, net of cash acquired, of £23.2m paid following the acquisitions of 4D Data Centres and certain business and assets of the collapsed Sungard Availability Services UK.

It also reflected an investment of £3.2m in stock forward bought to avoid “significant” price increases, in a bid to protect profitability and ensure that supply chain issues did not delay network rollout projects.

Redventric said it expected about half of that working capital investment would reverse by the end of the financial year.

An additional working capital requirement of £6.3m was also included, as the company worked to onboard the customers acquired as part of the Sungard acquisition.

The invoicing relating to that onboarding had now been brought up-to-date, and thus the adverse impact would reverse in the second half.

Exceptional costs of £4.8m were also incurred in the period - £2.5m higher than anticipated, due to additional integration and restructuring costs in relation to the 4D and Sungard acquisitions.

About half of those additional costs would result in like-for-like additional annual savings in the 2024 financial year.

Looking ahead, the board said it was “pleased” by the firm’s continued progress in the first six months of the 2023 financial year, and remains “confident” in delivering revenue and adjusted EBITDA in line with its expectations.

“Of particular note, the board is pleased to see a substantial uplift in sales activity and order intake as a result of the additional scale, breadth of product and enhanced sales team.

“The board is cognisant of the continuing volatility of electricity prices and that this could significantly increase or decrease profitability of the acquired businesses.

“Unlike the acquired businesses, Redcentric has historically hedged electricity prices and this will be replicated across the recently acquired businesses once prices have stabilised.”

The company’s directors said work was continuing to seek further synergies from recent acquisitions.

“Despite some of the current economic headwinds, the board is very confident that the Redcentric group will build on the progress shown over the last 18 months, delivering enhanced revenue growth and EBITDA ahead of the board's expectations in the 2024 financial year, as the benefits of the acquisitions are realised.”

At 1159 GMT, shares in Redcentric were down 4.2% at 114p.

Reporting by Josh White for Sharecast.com.