Redcentric disappoints

Sales were tempered by multiple factors, including the ongoing effects of previously cited “headwinds”. We already knew that some public sector hosting contracts had been cancelled, and that a new contract with the Yorkshire and Humber Public Sector Network necessitated upfront investment before revenues could multiply.

But now, the group says revenues from this agreement “will fall short both in terms of overall value and the pace at which revenue growth will be delivered”. Moreover, Redcentric’s contract win rates were lower than expected in the first half, and the quality of its new business pipeline has reduced. In turn, adjusted cash profits fell 11 per cent to £8.1m, engendering a considerable expansion in pre-tax losses.

There were some positive glimmers: adjusted operating cash conversion came in at 114 per cent, and net debt fell from £27.7m to £22.6m. And bosses expect the rate of revenue decline to slow in the second half, before returning to growth in FY2020.

Even so, house broker Numis has lowered its adjusted pre-tax profit estimate for FY2020 from £11.2m to £8.6m. It expects pre-tax profit of £7.4m and EPS of 4p for FY2019 (from £8m and 4.3p in FY2018).