Redcentric Share Discussion Threads

[masurenguy] 15/7/2021 07:24

Final Results for YE March 2021

Highly resilient results which are in line with the market expectations in place pre the outbreak of the COVID-19 pandemic and with no benefit from any government support packages including no staff furloughed and no cash flow reliefs taken as at the year end.

-- Headline revenue growth of 4.5% to £91.4m.

-- Organic recurring revenue grew to 5.5% to £81.9m, with recurring revenue representing 90% of total revenue (FY20: £77.6m / 89%).

-- Adjusted EBITDA of £24.6m which is £4.0m (19%) ahead of FY20 reflecting the increased revenue and substantial direct and operating cost savings primarily derived from the network and data centre rationalisation programme.

-- During the financial year, the Company repaid in full its revolving credit facility. Net debt reduced by £19.0m to £15.6m as at 31 March 2021 (FY20: £34.5m), primarily reflecting adjusted cash flow from operations of £26.5m, net capex of £4.1m, interest and tax of £1.6m, dividend payments of £1.9m and net restitution payments and fees of £1.6m.

-- As at 31 March 2021 the Company had a year-end cash balance of £5.3m.

-- Adjusted basic EPS of 7.23p (FY20: 4.76p) and statutory basic EPS of 6.01p (FY20: -7.14p).

-- During the year, an interim dividend of 1.2p (£1.9m) was paid and a final dividend of 2.4p (£3.7m) is being recommended to shareholders. It is the intention of the board of directors of the Company to continue with a progressive dividend policy (50% of adjusted earnings) in FY22 and beyond.

Peter Brotherton CEO commented:"We have had an extremely productive year with many historical issues addressed and with a very robust financial performance in line with expectations set before the pandemic. We are now an efficient and fully integrated business delivering sector leading financial metrics including high recurring revenue, strong EBITDA margins and excellent cash generation. Notwithstanding such a resilient set of results, it is impossible to avoid the impact of the ongoing Covid uncertainty. Throughout the Covid-19 pandemic we have experienced customer delays regarding decisions on large-scale IT projects. These delays have persisted into FY22 and consequently we expect revenues and EBITDA in H1 FY22 to be broadly flat with modest growth returning in the second half of FY22 once the country returns to a more normalised position. We remain confident about our medium-term outlook, with an encouraging pipeline of potential new business which continues to gather momentum. With such a strong balance sheet we are ideally placed to supplement our organic growth strategy with targeted acquisitions for both scale and capability. The next phase of our journey is to capitalise on our scale, financial strength and customer proposition to enable us to take part in the inevitable industry consolidation."

[masurenguy] 14/7/2021 00:51

Results due on Thursday.

[masurenguy] 16/6/2021 01:13

Looks like KPMG are just being prudently extra careful in view of the PwC history.

Auditor takes extra time at Redcentric

An IT services provider that was censured last year for overstating its profits in 2016 has delayed the publication of its latest results after its auditor said that it needed more time to complete the process because of the pandemic. Redcentric said that KPMG had “requested additional time to complete its procedures because of the practical challenges caused by the Covid-19 pandemic”. The Aim-listed company said that results for the year to the end of March would be released on July 15 in “a short delay” to the previously announced publication date of June 24. In late 2016, Redcentric admitted that it had overstated its assets by £13m and its profits by £9.5m, sending its shares crashing and resulting in PwC, its auditor at the time, receiving a £4.5m fine from the Financial Reporting Council.

Peter Brotherton, 53, Redcentric’s chief executive, said that there was nothing untoward and that auditors were simply taking a little longer to complete audits through having to work remotely. He told The Times: “I’m conscious of the fact that with our colourful history you could be thinking, ‘Crikey, what’s happened now?’ But there’s nothing wrong at all, the business is in great shape and the results will be very good.” Despite the delay to results, the company said that they were expected to be “in line with the trading update provided on April 6”. That said Redcentric’s performance throughout the year had been “excellent”.

[simon gordon] 15/6/2021 15:37

Looking on the bright side, we'll get a full Q1 trading update with the Prelims.

[masurenguy] 15/6/2021 07:49

Unexpected delay resulting from KPMG's request for extra time to complete its audit procedures. The company expects results to be in line with the April year end trading update, which is referenced below.

Delay of Full Year Results

Redcentric plc (AIM: RCN), a leading UK IT managed services provider, today announces a revised date for the publication of its final results. The Company's auditor, KPMG LLP, has requested additional time to complete its procedures because of the practical challenges caused by the Covid-19 pandemic. The Company's preliminary results for the twelve months to 31 March 2021 will now be released on Thursday 15 July 2021, a short delay to the previously announced date of Thursday 24 June 2021. The Board expects to report full year results in line with the trading update provided on 6 April 2021.

Trading update: 6 April 2021

The Company's performance throughout the year ended 31 March 2021 has been excellent with revenues growing, healthy profitability and exceptional cash flows. Our strong recurring revenues, resilient business model and diverse customer base have enabled us to not only weather the Covid-19 storm but also flourish in these difficult times. Revenue and adjusted EBITDA for the financial year ended 31 March 2021 are expected to be in line with the board's expectations, with net debt of approximately £15.6m (including £16.5m of IFRS-16 liabilities & supplier loans) being better than the board's expectations. Good cash flow and strong working capital performance continues to be a feature of the business. During the year ended 31 March 2021, net debt reduced by approximately £19.0m after dividend payments of £1.9m and exceptional items of £2.9m (net of £5.8m restitution fund raise). On 1 March 2021 the Company repaid its revolving credit facility in full.

"We have had a very busy and successful year with all strategic objectives being achieved. The business has reacted well to the many challenges presented by the Covid-19 pandemic and has proven to be resilient. We have returned to growth, operational efficiency programmes have been delivered, the ERP system has been successfully implemented and profits are healthy." Peter Brotherton

[simon gordon] 19/5/2021 18:43

Undercover Fund Manager - 17/5/21:

10 benefits of owning good companies

You can make money in bad businesses, if you buy them cheap enough or ride a wave of momentum.

However, I much prefer owning good companies that are competitively advantaged, cash-generative & growing.

Here's why...

1) Time is my friend

Good businesses compound in value over time; bad ones typically become less valuable over time.

Warren Buffett famously said:

"Time is the friend of the wonderful company, the enemy of the mediocre"

I want time on my side.

2) Market timing matters less

Trading shares and timing markets is notoriously difficult.

Yet, if I own a bad business, trading in and out at the right time is critical.

If I get my timing slightly wrong with good businesses I'll still probably do well, if I'm patient.

3) It's easier to buy more

Owning good businesses gives me confidence to add when the share price falls, since it's unlikely the long-term cash flows are significantly impaired.

Bad businesses may not even survive a downturn, making topping-up risky/psychologically difficult.

4) The economy matters less

Good businesses tend to perform far better than bad ones in weak economic conditions; and are generally less susceptible to external shocks.

I've no idea what the economy will do so I want to own resilient companies that can grow in most conditions.

5) The strong get stronger

Good businesses tend to emerge stronger from downturns.

Although the shares will probably fall in a crisis, the intrinsic value of good businesses usually increases once the crisis passes.

Bad businesses are often permanently weakened by crises.

6) I like positive surprises

Good businesses tend to deliver more positive surprises than bad ones.

There's more hidden value and positive optionality that probably isn't captured in the price.

This is why great businesses often look expensive, but are cheap in retrospect.

7) Good businesses are easier to value

Their cash flows are more predictable and resilient.

Compare this to a speculative enterprise, valued based on cash flows that may or may not turn up in the distant future. That's very hard to value and I'll probably get it wrong.

8) It's more enjoyable

I'm more inclined to monitor and research a company I enjoy owning, than one that leaves me grimacing every time it reports results.

Investing for me isn't just about making money, I have to enjoy the process. I want to study companies I admire.

9) I'm more likely to stick with them

The first rule of compounding is to never interrupt it unnecessarily. That's according to Charlie Munger.

I'm much less likely to do that with good businesses, leaving more time for compounding to work its magic.

10) I sleep better at night

A calm, relaxed mind is vital when investing. I feel much calmer knowing my wealth is aligned with good businesses that are stewarded by people I respect.

This allows me to make more rational decisions and ride out the market's ups an downs.

[mrbbd] 18/5/2021 11:53

Masurenguy - my mistake, it wasnt from an RNS as sharw mentioned. Whats the importance; for me IMHO; attention to detail from the board. SportsDirect will have massive IT infrastructure, so will they need to deal with RCN in the future? This is one example of there 600 clients, there are others. DYOR. Its widley publically pubslished; DWP, NHSD are leaving/left that already.

RCN for a while used to publish lots about Pizza Express as big customer; that chain has significant challenges due to COVID19, so as an investor, ideally we would all like to know more about the challenges, regarding these revenues & values. Its not deramping, its pragmatic. Nothing we say on here will have any material effect on an share price

The org is run by accountants now; CEO is ex CFO and current CFO is the ex Finance Director. Where is the boards strategy for the technical vision for the next 3-5 years. Standby my post, its for sale and GL to anyone who buys in at these current prices.

GLA

[masurenguy] 17/5/2021 20:34

Thanks sharw - my post 1000 just quoted Master Investor and their inclusion of Evans Cycles could presumably relate to them as a current functioning client under Sports Direct ownership rather than ECI Partners their previous private equity owners. In either case it really is totally insignificant issue. Thanks for highlighting mrbbd as a deramper here - his future posts will consequently be disregarded.

[sharw] 17/5/2021 18:20

Masurenguy - the reference comes from your post 1000 of 26/4 stating Evans Cycles is one of 600 clients. This comes originally from RCN's website, not an RNS, so why it needs to be singled out from the other 599 clients is beyond me.



finnCap often gives reasons for its target price, in this case because at that price it would still trade below 10x EV/EBITDA

mrbbd only posts on this board. Ex employee with chip on shoulder???

[masurenguy] 17/5/2021 17:25

"Love the way the updated RNS mentioned Evans Cycles, which went into administration on 2018"

What updated RNS are you referring to and what relevance does Evans Cycles have to RCN in 2021?

[mrbbd] 17/5/2021 16:29

Love the way the updated RNS mentioned Evans Cycles, which went into administration on 2018 and was bought by SportsDirect for £8m in a pre-pack. Wonder what impact that had on the numbers RCN?

Think the tight spread is the MM's forcing the price up... looking at the numbers, I certainly dont believe the business as it stands is worth its MCap of circa £200m at current prices and FinnCap is possibly tipping 170p.. how? Thats the highest it will have been since Fraser Fisher swindled the books.

The MM's know something and expecting a big ForSale sign soon.

[masurenguy] 17/5/2021 16:13

A strange Sell of 21,783 shares at 121p - some 14% below the bid - reported on the LSE. Meanwhile, there is a quite a tight spread of 142.0 - 142.75 this afternoon.

[masurenguy] 26/4/2021 15:56

Main points from the above MV link as a quick reference for new prospective investors.

Listed on AIM in 2013, RCN is an IT managed service provider, delivering highly available network, cloud and collaboration solutions that help public and private sector organisations to succeed. With over 450 employees, it operates through six different locations and has multiple data centres in the UK, providing a 24-hours a day, seven days a week maintenance and support network.

The group has over 800 customers using its various services. Clients include Hays, Howdens, the NHS, the CBI, Virgin Care, Yo sushi, Devon Doctors, Black Pear Software, Teletext holidays, Thomas Pink, the Royal Air Force Benevolent Fund, The Salvation Army, VP, RIBA Architecture, West Berkshire Council, Best Food Logistics, University of Lincoln, University of Westminster, Evans Cycles, Coastal Housing Group, Bevan Brittan, West Berkshire Council, Proactis, Ascot, and the Cumberland Building Society.

There are 156m shares in issue. Larger holders include Kestrel Investment Partners (18.09%), ND Capital Investments (15.91%), Lombard Odier Asset Management (12.55%), Slater Investments (11.91%), Harwood Capital (11.65%), Chelverton Asset Management (5.20%), Artemis Investment Management (3.10%), Stephens Group (2.05%) & Granite Associates (1.31%). There is one private holder Richard Griffiths (5.50%) worth noting.

In the last year the group has undergone a process of cost-cutting measures aimed at reducing such outflow by £2.8m. The update informs us has actually been bettered to £4m of annualised savings.

The house broker, finnCap, currently have earmarked the group’s shares for a rise to 170p. They are estimating that revenues for the year to end-March were around £92m (£87.5m), with adjusted pre-tax profits coming in at £13.3m (£8.7m), generating 6.9p of earnings (4.7p), covering a 3p (0.8p) dividend. However, I think that perhaps they are being too cautious in going for just £94m of sales this current year, profits of £14.8m, earnings of 7.6p and a 3.3p dividend per share.

Redcentric annual recurring revenue rates (ARR) were showing a very healthy 87%. Couple that rate with ongoing operational economies and exponential gains can be created.

The finals will be released on 24 June, at which time I would hope that we will get even more positive news from the group regarding current year prospects and its objectives going forward.

[tole] 23/4/2021 13:06

https://masterinvestor.co.uk/equities/redcentrics-turnaround-is-bearing-fruit/

[bamboo2] 22/4/2021 16:33

Added a few more at 137.8 on a possible turn.

[bamboo2] 19/4/2021 16:38

For info, the gap up that appears today on the daily mid price based chart is a phantom gap.
ie, it doesn't appear on the last market price based chart.

Onwards and upwards with a selection of confirmed bullish chart patterns.

I particularly like the flag which has a confirmed tp of min 153

gla

[bamboo2] 17/4/2021 10:15

A true 50/200 Golden Cross imminent at the end of April.

Breakaway gap on 31/3/2121 125-126 a good support zone if needed.

Historical resistance 151.5 and 158

Eod close above 142 earlier in week has confirmed an active target at recent high of 158

Med term target 182

[masurenguy] 17/4/2021 09:59

Ridiculous 6p/4% spread for a company with circa 156m shares in issue and a market cap of £220m !

[snoopmony] 16/4/2021 16:31

Got a good feeling about RCN

[simon gordon] 14/4/2021 07:23

Listed peer Adept Technology (Ticker: ADT - Market Cap of £63m) announced on the 7th of April a new banking facility:

New banking arrangement

AdEPT's strategy remains to grow both organically and by acquisition, to consolidate a fragmented market and bring enhanced capability to customers, leveraging the Group's banking facilities which are supported by a strong balance sheet and high cash generation.

The Board is, therefore, pleased to report that the Company has signed a new enlarged banking facility agreement with NatWest and Bank of Ireland, to support its growth ambitions with a declared intention to acquire one or two complementary, earnings enhancing, companies each year.

This agreement is for a three-year term, extendable by one year, and provides the Company with up to GBP70m senior debt, comprising a GBP35m revolving credit facility, a GBP15m term loan, and a GBP20m accordion facility. This new facility replaces the GBP40m revolving credit facility, which was due to expire in February 2022.



-

Today they've splashed some of that cash:

AdEPT, one of the UK's leading independent providers of managed services for IT, connectivity, unified communications solutions, and cloud services, is pleased to announce that yesterday it completed the acquisition of the entire issued share capital of Datrix Limited ("Datrix") for an initial cash consideration of GBP9.0m (the "Acquisition"), which has been funded through the Group's new bank facility.

Datrix is a well-established, award-winning supplier of advanced cloud-based networking, communications, and cyber security solutions, headquartered in London, with expertise in the growing Software Defined Wide Area Networking ("SD-WAN") market.

This substantial, strategically important acquisition is wholly in line with the Board's stated strategy to; a) grow both organically and by acquisition, leveraging the Group's banking facilities which are supported by a strong balance sheet and high cash generation, b) to consolidate a fragmented market, through complementary acquisitions with strong levels of recurring revenue and margin, and c) continually bring enhanced capability to customers.

[masurenguy] 12/4/2021 13:57

A reminder that at 31 March 2021 circa 87% of the shares were held by the 10 largest shareholders.

Kestrel Investment Partners: 18.09%
ND Capital Investments Ltd: 15.91%
Lombard Odier Asset Mgt: 12.44%
Slater Investments: 11.91%
Harwood Capital: 11.65%
Mr Richard Griffiths: 5.5%
Chelverton Asset Mgt: 5.2%
Artemis Investment Mgt: 3.1%
Stephens Group Inc: 2.05%
Granite Associates: 1.31%

The total no of Ordinary Shares in issue at 31 March 2021 was 156,130,141

[masurenguy] 12/4/2021 11:29

Added a few more this morning - this is looking ready to break to the upside. Someone just paid an over-the-offer premium @140.1p for circa 28,500 shares.

[simon gordon] 07/4/2021 22:20

"Good acquirers with the opportunity to deploy the majority of their free cash flow into acquisitions have enormous future optionality that isn't captured in the numbers you see today. In my experience, investors often under-estimate this source of future value creation."

The Undercover Fund Manager

[sphere25] 06/4/2021 12:01

All as expected then with the cash generation erm..."mocking" forecasts? Not heard that one before.

Hey you people at RCN, please desist with your mocking of forecasts ok? We will have no more of that mocking ok? You mocking people you.

FinnCap snippets:

"Our forecasts for net debt of £4.1m have been mocked by outstanding delivery of net cash of £0.9m."

"At 170p the stock trades would still trade below 10x EV/EBITDA, leaving plenty of upside and the opportunity for review with more details at finals"

All imo
DYOR

[alun rm] 06/4/2021 10:38

Very pleased with the update and the clear focus. I will continue to build my position with the warm comfort blanket of recurring revenues helping me sleep at night.