Two acquisitions contributed to a 16 per cent rise in turnover at IT-managed services provider Redcentric (RCN), but a robust performance from the existing business meant organic sales represented half of this. The majority of recurring revenue came from the original business, something chief executive Fraser Fisher says can become more difficult as the business grows. But he maintains that his company was not like others, which "grow through acquisition because they have legacy products which are declining". The fact 60 per cent of the company's organic sales came from selling extra products and services to existing clients, such as its growing cloud storage service, provides ballast to this view.
The purchase of Calyx, now fully integrated, and City Lifeline, pushed pre-tax profits in the wrong direction given the £4.6m one-off associated costs but, adjusted for this, cash profits were up a fifth to £25.8m. Management's confidence in the business, which only floated in 2013, was also reflected in a near 30 per cent hike in the dividend. Capital expenditure may have spiked to £9m (2015: £6.1m) but management said this was largely due to the types of contract won.
Analysts at Numis expect adjusted cash profits of £28.8m and EPS of 11.2p for the year to March 2017, compared with £25.8m and 9.9p in FY2016.
| REDCENTRIC (RCN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 187p | MARKET VALUE: | £273m | |
| TOUCH: | 187-188p | 12-MONTH HIGH: | 203p | LOW: 158p |
| DIVIDEND YIELD: | 2.4% | PE RATIO: | 52 | |
| NET ASSET VALUE: | 67p* | NET DEBT: | 26% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 23.7 | -0.7 | na | na |
| 2013 | na | na | na | na |
| 2014 | 58.3 | -2.6 | 2.0 | 1.0 |
| 2015 | 94.3 | 7.8 | 5.5 | 3.5 |
| 2016 | 110 | 7.4 | 3.6 | 4.5 |
| % change | +16 | -5 | -35 | +29 |
Ex-div:25 Aug Payment:21 Sep *Includes intangible assets of £92.2m or 63p a share | ||||
