Redcentric (RCN) investors who kept their faith in the company after its accounting blunder can have some grounds to believe the worst is over. The group has reported results in line with revised expectations, with revenue up slightly at £105m, and adjusted cash profit up from £14.4m to £17.3m.
The income statement made for worse reading lower down. A forensic review conducted by three external auditors - which cost £1.3m - ultimately concluded that at 31 March 2016 net assets had been overstated by £15.8m and net debt understated by £12.5m. Related charges meant non-recurring costs only fell slightly from £6.7m to £5.5m despite a big fall in restructuring costs and vacant property provisions.
Ignore these difficulties and trading has been okay. Redcentric signed three major public sector contracts worth £9.6m in total, and a £2.9m five-year contract to deliver its cloud services in private sector healthcare. Recurring revenue is impressive at 86 per cent of total revenue and the group remains cash generative.
Numis still expects revenue and cash profits to rise in the year to March 2018, but higher capital expenditure and finance charges - a side effect of the recovery - means the broker has cut EPS forecasts to 4.6p (FY2017: 4.7p), from cash profit of £18m.
REDCENTIRC (RCN) | ||||
|---|---|---|---|---|
| ORD PRICE: | 84p | MARKET VALUE: | £125m | |
| TOUCH: | 83.5-84p | 12-MONTH HIGH: | 190p | LOW: 40p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 51.5p* | NET DEBT | 51% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | na | na | na | na |
| 2014 | 58.3 | -2.6 | 2.0 | 1.0 |
| 2015 | 94.3 | 7.8 | 5.5 | 3.5 |
| 2016 (restated) | 102 | -6.1 | -2.9 | 4.5 |
| 2017 | 105 | -4.2 | -1.6 | nil |
| % change | +2 | - | - | - |
Ex-div:na Payment:na *Includes intangible assets of £88.7m, or 60p a share | ||||
