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Preliminary results-presentation-fy20
- Revenue for the year ended 31 March 2020 was £87.5 million, down 6% from the previous year. Adjusted EBITDA was £17.6 million, up 5% from the previous year. - Operational efficiencies and network upgrades were completed during the year to improve margins. Recurring revenues returned to growth in the second half after declines in previous years. - A settlement was reached with the FCA regarding past conduct, to be funded with £11.4 million to compensate shareholders. Minimal financial impact was seen from the COVID-19 pandemic.
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Preliminary results-presentation-fy20
- 1. Full Year Results Yearended 31 March 2020
- 2. 2 Disclaimer IMPORTANT NOTICE This documentcontains statements that are, or may be deemed to be, “forward-looking statements” which are prospective in nature. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Forward-looking statements are not based on historical facts, but rather on current predictions, expectations, beliefs, opinions, plans, objectives, goals, intentions and projections about future events, results of operations, prospects, financial condition and discussions of strategy. By their nature, forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the control of Redcentric plc. Neither Redcentric plc nor any of its subsidiaries or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this document will actually occur. You are cautioned not to place undue reliance on these forward-looking statements which only speak as of the date of this document. Other than in accordance with its legal or regulatory obligations (including under the Market Abuse Regulation, the Listing Rules and the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority), Redcentric plc is not under any obligation and Redcentric plc and its subsidiaries expressly disclaim any intention, obligation or undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This document shall not, under any circumstances, create any implication that there has been no change in the business or affairs of Redcentric plc since the date of this document or that the information contained herein is correct as at any time subsequent to its date. No statement in this document is intended as a profit forecast or a profit estimate and no statement in this document should be interpreted to mean that earnings per Redcentric plc share for the current or future financial years would necessarily match or exceed the historical published earnings per Redcentric plc share. This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities. This presentation and a press release will be posted on the investor section of the Redcentric website.
- 3. 3 Contents Headlines Financials Operational Review &COVID-19 update Summary and Outlook Appendices Impact of IFRS 16 on financial statements Redcentric at a glance
- 4. 4 Headlines Financial Review ofFY20 Outlook • Revenue of £87.5m (FY19: £93.3m). • Adjusted EBITDA of £17.6m (FY19: £16.7m). • Operating cash flow of £16.7m (FY19: 21.3m). • Net debt reduced by £4.1m to £13.5m, post dividend and share buybacks of £3.5m. • Maintenance and growth capex of £4.4m. • Return to recurring revenue growth. • Significant progress in public sector. • Networks and data centres rationalised and upgraded. • Settlement reached with the FCA. • Minimal impact from COVID-19 pandemic. • The full effect of the integration and efficiency initiatives along with revenue growth will lead to higher profits in FY21. • Strong start to the year with all key business metrics showing positive trends. • Recurring revenues in Q1 FY21 up 5% on Q4 FY20, with post IFRS16 EBITDA margins in excess of 25%. • FCA settlement enables management to focus solely on the business and tap into previously inaccessible markets.
- 5. Financials Year Ended 31March 2020 (FY20) David Senior – Chief Financial Officer Note: • IFRS16 has been adopted in the FY20 statutory accounts, with the prior year comparative numbers remaining on a pre IFRS16 basis. • To enable direct comparison, the numbers in this presentation are all on a like for like pre IFRS16 basis. • A full reconciliation of the numbers in this presentation to the reported FY20 statutory accounts is provided in the appendix. • This presentation should be read in conjunction with the preliminary results announcement released on 21 July 2020.
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- 9. 9 Dividend policy &share buyback Dividends paid During the year, the Company paid the following dividends: • a final dividend for the year ended 31 March 2019 of 1p per share, totalling £1.5m; and • an interim dividend for FY20 of 0.83p per share, totalling £1.2m. Future dividends • In light of the restitution scheme and the ongoing COVID-19 pandemic, the Board has decided not to recommend a final dividend payment for FY20 to shareholders. • The Board remains committed to a progressive dividend policy and will review the possibility of reinstating the dividend when it releases the Company’s half year results. Share buyback • As part of the buyback programme, 822,427 shares were purchased at a weighted average price of 88p per share. • In light of the restitution scheme and the ongoing COVID-19 pandemic, the Board has temporarily halted the buyback programme. • The Board remains supportive of reinstating the buyback programme and is keeping it under review. Dividend Share buyback
- 10. Operational Review Peter Brotherton– Chief Executive Officer
- 11. 11 Revenue growth Return torecurring revenue growth Increase public sector presence • Excluding contracts lost to Crown Hosting, the business has seen four consecutive quarters of recurring revenue growth, with total recurring revenues growing for the last two consecutive quarters. • Growth seen in the last two quarters has been driven by increases in public sector revenues and improvements to the delivery function. • Product portfolio aligned to the current environment, where networks and remote working capabilities are now essential to most UK organisations. • Success in the Health and Social Care Network (HSCN) procurement process and good performance in rolling out HSCN networks has given a much higher profile within both the public and private health sectors. • New sales orders will result in £4.8m of annualised revenues, in addition to the £3.5m of HSCN contracts won in FY19. • Approximately 25% of FY21 revenue will be derived from the combined public and private health sectors.
- 12. 12 Operational efficiencies &upgrades Operational efficiencies Upgrade our network and platforms • Rationalisation and integration of historical physical networks. • Rationalisation of third-party data centres. • Consolidation of three historical network platforms into a single network platform. • Restructure of development and delivery teams. • Replacement of five legacy systems with a single ERP solution and introducing workflow software. • Standardisation of employment contracts and employee benefits. • Core network upgraded from a 10Gb to 100Gb capacity at a cost of £1.5m. • IaaS platform upgrade completed for £1.2m taking the total upgrade cost to £2.5m. • £1.5m spent on continuing development of the ERP system, taking the total investment to £4.5m. Sales module launched in FY20, with finance & operations modules to launch in Q3 FY21. • London data centre upgrade under way, to bring in line with Harrogate and Reading as a tier 3 data centre.
- 13. 13 FCA settlement &restitution scheme • As part of the settlement reached with the FCA, a restitution scheme has been implemented in order to compensate net purchasers of ordinary shares in the Company between 9 November 2015 and 6 November 2016. • Total cost of the scheme is anticipated to be £11.4m, with claimants having the option to receive compensation in the form of all cash, all shares or a combination of both. • The scheme has been funded as follows: • cash of £2.2m from the Company; • cash of £5.8m from a share placing at 110p per share; and • the remaining £3.4m to be settled in either shares or cash, with £1.1m of share compensation already confirmed. • No financial penalty imposed by the FCA and all restitution scheme claimants will be required to sign full and final settlements. Bringing the FCA investigation to a conclusion
- 14. 14 Covid 19 • Weresponded quickly to the pandemic with the majority of staff working from home from 17 March 2020. • No incidents so far, with all staff and IT systems working well and excellent customer service maintained. • All key busines metrics (order intake, deliveries and cash collection) have remained strong throughout the pandemic and we have not experienced any adverse affect on trading to date. • Activity levels in the business are unchanged and no employees have been furloughed. • Following the outbreak of the pandemic we have seen increased demand for additional bandwidth, communication packages and secure remote access. • Future demand is hard to predict but we anticipate a drop off in new business as customers delay implementing new IT projects. • The wider economic impact on our customer base remains unknown bur clearly represents a risk to customers. • With a customer base secured on long term contracts, high recurring revenues, strong cash flows, low levels of debt and a product set relevant to the current environment, we feel well placed to react to the challenges that COVID-19 brings. Covid-19 pandemic
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- 16. 16 • Return torecurring revenue growth, following three years of decline. • Profit margins are increasing and we are currently achieving EBITDA margins in excess of 25%. • Continued excellent cash conversion. • Investment in network and platform upgrades largely complete . • Settlement reached with the FCA, reopening markets and removing uncertainty for all stakeholders. • Strong start to the year, with both sales orders and deliveries ahead of budget and prior year. • Integration and efficiency programmes undertaken in FY20 have significantly reduced our cost base, with the full effect to be seen in FY21. • Integrated, scalable and efficient platforms provide a solid foundation for growth. • A fully integrated business with low levels of debt and the removal of the FCA barrier enables the Company to explore all strategic opportunities. Outlook and Summary Summary Outlook
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- 18. Impact of IFRS16on financial statements
- 19. 19 IFRS 16 impacton financial statements Group income statement Adjusted net debt
- 20. 20 IFRS 16 impacton financial statements Consolidated statement of financial position
- 21. Redcentric at aglance
- 22. 22 Our solutions • Connectivity •SD-WAN • Managed WAN • Secure Remote Access • LAN • Managed Wi-Fi • Network Security Network Networks that connect and secure customers’ sites to Redcentric and others’ data centres, hyper cloud providers and the internet • Infrastructure as a service • Platform as a service • Hybrid Cloud • Data Backup • Colocation • Disaster Recovery • Hosted Desktop • Cloud Migration Cloud Computer processing and storage capacity rented to customers and managed on Redcentric or others’ facilities • IP Telephony • Unified Communications • Collaboration • SIP Trunks • Call Recording Communications Person-to-person communication, telephone systems in a Redcentric data centre and customer premises, collaboration tools and fixed and mobile calls and lines. • IT Consultancy • Implementation Services • Maintenance & Support • Supply Chain ManagementICT Professional services around provision, installation and supporting of hardware on a customers’ premise
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