A growing desire among organisations to outsource IT management and infrastructure is playing into the hands of managed IT services company Redcentric (RCN), allowing it to move away from lower-margin hardware sales into more profitable and predictable service business. Redentric is supporting growth by snapping up rivals and looks well set to continue on the acquisition trail following the agreement of a new debt facility.
- Strong sales and profit growth
- High recurring revenue
- Shares are attractively rated
- Small but growing yield
- Rising debt
- Calyx first-half loss
Redcentric, which was spun off from IT infrastructure group Redstone in early 2013, is cashing in on growing demand from medium-sized organisations keen to avoid the costs, complexities and security risks of managing their computer servers and networks. The company focuses on winning multiyear contracts for higher-margin services - such as remote data storage, cloud applications and video conferencing - which it provides through its four UK data centres. The upshot has been strong sales and profit growth, rising profitability and an increase in the proportion of its revenues that are recurring in nature, which accounted for more than four-fifths of the total in the six months to 30 September.