Redcentric’s (RCN) revenues for the year to March 2019 came in slightly below analysts’ forecasts, reflecting a dip in recurring sales from £87.1m to £81m.
The IT managed services group has continued to lose public-sector hosting work to Crown Hosting – the joint venture between the UK’s Cabinet Office and Ark Data Centres. Although public-sector hosting revenues sat at £8.2m in FY2017, they fell to £4.4m last year and are expected to reduce the top line by £2.6m in FY2020.
Competitive pricing pressure also took its toll as contracts came up for renewal – although broker Numis reckons larger price cuts are in the past. And there’s still the issue of the Financial Conduct Authority's (FCA) investigation into the historic overstatement of Redcentric’s net assets and profits – announced in March 2017. This investigation is ongoing, and management can’t yet gauge whether a fine will ensue. The Financial Reporting Council recently announced sanctions against Redcentric’s old auditor PwC.
More positively, the group achieved £5m in annualised cost savings in the second half, and won multiple Health and Social Care Network tenders along with contracts for the Yorkshire and Humber Public Sector Network Framework. Numis expects adjusted EPS of 4.8p for the March 2020 year-end, against 3.8p in FY2019.
| REDCENTRIC (RCN) | ||||
| ORD PRICE: | 80p | MARKET VALUE: | £119m | |
| TOUCH: | 79-80p | 12-MONTH HIGH: | 92p | LOW: 52p |
| DIVIDEND YIELD: | 1.8% | PE RATIO: | na | |
| NET ASSET VALUE: | 51p* | NET DEBT: | 23% | |
| Year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 94.0 | 7.8 | 5.5 | 3.5 |
| 2016 | 102 | -6.1 | -2.9 | 4.5 |
| 2017 | 105 | -4.2 | -1.6 | nil |
| 2018 | 100 | -0.5 | 0.3 | nil |
| 2019 | 93.3 | -1.4 | -1.3 | 1.4 |
| % change | -7 | - | - | - |
| Ex-div: | 4 Jul | |||
| Payment: | 26 Jul | |||
| *Includes intangible assets of £75.8m, or 51p a share | ||||
