Skittish investors sent shares in Redcentric (RCN) down 5 per cent after the managed IT services specialist posted sharp declines in statutory earnings for the six months to 30 September. But ignore one-off expenses - chiefly £3.6m in integration costs following the takeover of peer Calyx in April - and adjusted cash profit leapt 17 per cent to £11.8m.
Organic sales and recurring revenues rose strongly as Redcentric focused on selling lucrative services, rather than computer servers and other low-margin products. The group continued to target medium-sized UK organisations eager to farm out the management and security of their computer systems, and keen to invest in remote data storage and wide-area networks. Indeed, Redcentric inked a £4.5m central government contract to provide hosting, a network and a managed platform, as well as a five-year £1.1m deal with Medica to offer fast, secure, 24/7 access to radiology and imaging reports to NHS trusts across the country.
Funding the Calyx deal meant Redcentric's net debt more than tripled to £16.5m. But broker finnCap expects robust cash generation to slash that figure to below £10m by the end of March. It expects adjusted pre-tax profit of £19.7m in the year to March 2016, giving EPS of 10.4p (from £15.5m and 8.1p in FY2015).
| REDCENTRIC (RCN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 188p | MARKET VALUE: | £273m | |
| TOUCH: | 187-191p | 12-MONTH HIGH: | 199p | LOW: 123p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 47 | |
| NET ASSET VALUE: | 64p* | NET DEBT: | 18% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 46.8 | 3.9 | 2.3 | 1.0 |
| 2015 | 54.0 | 1.4 | 0.8 | 1.5 |
| % change | +15 | -64 | -67 | +50 |
Ex-div: 14 Jan Payment: 17 Feb *Includes intangible assets of £92.5m, or 64p a share | ||||
