TIDMRCN
RNS Number : 2324T
Redcentric PLC
21 July 2022
Redcentric plc
Preliminary results announcement for the year ended 31 March
2022
Redcentric plc (AIM: RCN) ("Redcentric" or the "Company"), a
leading UK IT managed services provider, today announces its full
year results for the year ended 31 March 2022 ("FY22").
Financial performance measures
Year ended
Year ended 31 March 2021
31 March 2022 (restated(1)
("FY22") ) ("FY21") Change
--------------------------------- --------------- --------------- ---------
Total revenue GBP93.3m GBP91.4m 2.1 %
Recurring revenue (2) GBP83.0m GBP81.9m 1.3 %
Recurring revenue percentage(2) 88.9% 89.6% (0.7%)
Adjusted EBITDA(2) GBP23.7m GBP24.6m (3.5%)
Adjusted operating profit(2) GBP15.9m GBP15.6m 2.2%
Reported operating profit GBP6.6m GBP12.8m (48.3%)
Adjusted cash generated from
operations(2) GBP19.3m GBP26.5m (27.2%)
Reported cash generated from
operations GBP17.2m GBP16.9m 1.3%
Net debt(2) (GBP16.6m) (GBP15.6m) (6.9%)
Adjusted net (debt)/cash (2) (GBP1.5m) GBP1.0m (257.7%)
Adjusted basic earnings per
share(2) 7.68p 7.45p 3.1%
Reported basic earnings per
share 4.43p 5.87p (24.5%)
Percentage change calculated on absolute values
(1) For an explanation and reconciliation in relation to the
prior year restatement following the adoption by the Redcentric
group of companies (the "Group") of the IFRS Interpretations
Committee ("IFRIC") agenda decision on cloud computing
implementation, configuration and customisation costs, please refer
to note 8.
(2) This announcement contains certain financial measures that
are not defined or recognised under IFRS but are presented to
provide readers with additional financial information that is
evaluated by management and investors in assessing the performance
of the Group.
This additional information presented is not uniformly defined
by all companies and may not be comparable with similarly titled
measures and disclosures from other companies. These measures are
unaudited and should not be viewed in isolation or as an
alternative to those measures that are derived in accordance with
IFRS.
For an explanation of the alternative performance measures used
in this announcement and reconciliations to their most directly
related GAAP please see Appendix 1.
(3) Excluding EDF contribution following the sale of business
and assets associated with the Company's contract with EDF, which
completed on 31 March 2021.
Key financial highlights:
-- Total revenue growth of 3.2% to GBP93.3m (FY21: GBP90.4m excluding EDF contribution (3) );
-- Recurring revenue(2) grew by 2.6% to GBP83.0m, with recurring
revenue representing 88.9% of the total revenue (FY21: GBP80.9m /
89.5% excluding EDF contribution (3) );
-- Adjusted EBITDA(2) of GBP23.7m is marginally behind (0.6%)
FY21 (excluding EDF contribution (3) ), reflecting the challenges
caused by increased electricity prices;
-- Adjusted operating profit(2) increased by GBP0.3m to GBP15.9m (2.2%);
-- Net debt at 31 March 2022 was GBP16.6m, including GBP14.1m of
IFRS16 lease liabilities that were previously classified as
operating leases under IAS17, and GBP1.0m of supplier loans;
-- Reported operating profit reduced by GBP6.2m to GBP6.6m,
which includes (i) the sale of assets relating to the Company's
contract with EDF in FY21, which resulted in a profit on disposal
of GBP4.5m; and (ii) the release of the provision in relation to
the Company's restitution scheme agreed with the Financial Conduct
Authority ("FCA") in FY21 for GBP2.2m ("Restitution Scheme").
Operational highlights
-- During FY22, Redcentric completed two capability
acquisitions, both of which are trading well and have been quickly
integrated into the business with higher than anticipated synergy
savings already delivered.
-- A new divisional operating structure has been introduced
subsequent to the balance sheet date, to drive focus and growth
across all divisions.
-- New sales orders during the second half of the year improved
significantly on the first half and the Group is now nearing the
levels seen prior to the outbreak of the COVID-19 pandemic,
including the resumption of large-scale projects.
-- Retention rates have been broadly consistent with prior years.
-- Electricity price increases have added GBP0.5m to costs and
equipment supply chain issues have resulted in delays to both
recurring and non-recurring revenues.
-- The board of directors of the Company (the "Board") is
cognisant of the continued volatility in electricity prices and of
the sector-wide employment, retention and salary inflation
challenges.
Post period end
-- Successful completion of Sungard data centre ("Sungard DC")
assets and 4D Data Centres Limited ("4D") acquisitions, enhancing
scale and capability of the Group.
-- The acquisitions provide the Group with an excellent blue
chip customer base and significant cross-sell opportunities.
Integration of FY22 acquisitions
Piksel Industry Solutions Limited ("Piksel") is now fully
integrated into the Redcentric business. Excellent progress has
been made in realising synergies from this acquisition, with
c.GBP1.5m of annualised costs already eliminated, surpassing the
GBP1.1m of synergies identified at the time of the acquisition. A
further GBP0.5m of synergies are anticipated to be realised in
FY23.
Good progress has also been made with the acquisition of 7
Elements Limited ("7 Elements"). For operational independence
reasons, 7 Elements will be maintained as a standalone business,
but most of the back-office functions (e.g. finance and human
resources) have already been integrated.
Divisional focus
As highlighted in previous announcements, the preceding three
years have been spent focussing primarily on delivering
integration, optimisation and efficiency programmes to ensure that
there is a solid and scalable foundation for future growth. As the
business now switches focus to growth, the organisational structure
also needs to adapt to deliver sustainable and profitable growth.
To that end, the last six months have been spent designing and,
post year end, implementing an organisational structure that can
deliver the Company's ambitious growth strategy, by providing the
level of focus required across the key revenue streams of Cloud,
Networks and Collaboration products.
In addition to the appointments directly relating to the
divisions, some central support functions have been augmented to
provide support for the increased divisional demand.
This investment is one which sets the Company up for the future.
It recognises the need for dedicated product expertise and
addresses the broadening of our customer base. With the delivery of
this structure, the Company can not only exploit the significant
cross-sell opportunities that the new enlarged customer base
brings, but also confidently compete and succeed across all areas
of the market.
Peter Brotherton CEO commented:
"In the last twelve months we have delivered on the acquisition
strategy as outlined in last year's annual report and accounts.
During this period, five acquisitions were completed which have
transformed the Company. The Piksel, 7 Elements and Sungard
consultancy business acquisitions have all added significant
capability in the high market growth areas of hyper-cloud and cyber
security. The Sungard DC and 4D acquisitions bring considerable
additional scale with a clear path to significantly increased scale
over the next two years.
Our focus will now switch to fully integrating the recently
acquired businesses and exploiting the meaningful cross-sell
opportunities and synergies that these acquisitions bring to
Redcentric. At the same time, we will continue to monitor potential
targets and should a suitable opportunity arise, our solid balance
sheet, strong cash generation and access to GBP66m of undrawn bank
facilities will enable us to react swiftly.
We look forward to capitalising on the very significant
opportunities that come with the recent acquisitions and to an
exciting future"
Enquiries:
Redcentric plc
Peter Brotherton, Chief Executive Officer
David Senior, Chief Financial Officer +44 (0)800 983 2522
finnCap Ltd - Nominated Advisor and Broker
Marc Milmo / Simon Hicks / Charlie Beeson
(Corporate Finance) +44 (0)20 7220 0500
Andrew Burdis / Sunila de Silva (ECM)
Oakley Advisory Limited - Financial Advisor
Chris Godsmark / Marc Jones / James Whyms +44 (0)20 7766 6900
Chairman's Statement
Overview and Financial Results
These results demonstrate the robust nature of the business.
Despite considerable headwinds associated with the COVID-19
pandemic, materially higher electricity prices, and substantially
increased lead times on equipment orders, trading for the year was
broadly equivalent with the prior year and remained ahead of the
pre COVID-19 period (the financial year ended 31 March 2020
("FY20")).
With the conclusion of the investigation by the FCA ("FCA
Investigation"), historical acquisitions fully integrated and
efficiency programmes delivered, the focus of the management team
during the year has been on the long-term growth of the business.
During FY22, two capability acquisitions were completed and
following the year end a further capability acquisition was
completed along with two scale acquisitions. The Piksel, 7 Elements
and Sungard consultancy business ("Sungard Consulting") capability
acquisitions have significantly enhanced our hyper-cloud, security,
and consultancy product offerings. The capability acquisitions all
operate within the highest growth areas of the market and will be a
significant driver of future growth for the Group. The Sungard DCs
and 4D scale acquisitions are highly accretive to the Group,
reflecting the operational leverage of the business whilst also
adding c.520 customers into which we can cross-sell our broad range
of products and solutions.
At the start of FY23, a new divisional structure was
implemented, significantly strengthening the management team,
positioning the Company for growth, and recognising the very
significant increase in both scale and capability as a result of
the acquisitions undertaken.
Having completed five acquisitions in the last nine months, the
near focus of the board is to ensure that the most recent
acquisitions are fully integrated, and synergies maximised. At the
date of approval, the Company had drawn GBP35.5m of its GBP80m
committed bank facility, and this, along with the significant cash
generation of the business, means the Group has significant
firepower for future acquisitions.
Dividend and share buyback
A final dividend of 2.4p per share is recommended by the Board
and will result in a total dividend for FY22 of 3.6p per share
(financial year ended 31 March 2021 "FY21": 3.6p per share).
Subject to approval by shareholders at the Company's annual general
meeting ("AGM"), this will be paid on 16 September 2022 to
shareholders on the register at the close of business on 29 July
2022 with shares going ex-dividend on 28 July 2022. The last day
for Dividend Reinvestment Plan elections is 19 August 2022.
During the year, the FY21 final dividend payment of GBP3.7m was
paid along with the FY22 interim dividend payment of GBP1.9m. In
addition, a further GBP3.0m was returned to shareholders through
share and warrant buybacks. Returns to shareholders during the year
therefore totalled GBP8.6m reflecting continued strong cash
generation from the Group.
The Board intends to continue with the same level of dividends
and selective share buybacks but will review these policies in
light of any large-scale acquisitions.
Board changes and people
On 17 November 2021, I joined the business, replacing Ian
Johnson as Independent Non-Executive Chair of the Board, Chair of
the Nomination Committee and member of the Remuneration Committee.
I am a chartered management accountant and have been both chair and
non-executive director for a portfolio of companies across the
data, communications, software and financial services sectors and,
between 2014 and 2020, sat on the board of directors for Nasstar
plc.
On the 7 July 2021, Helena Feltham was appointed as an
Independent Non-Executive Director, taking the responsibilities of
Chair of the Remuneration Committee and becoming a member of the
Audit and Nomination Committees, roles previously held by Stephen
Vaughan. With the publication of this Report, Jon Kempster steps
down from the Board as Chair of the Audit Committee and
Non-Executive Director and the Board is delighted to welcome Alan
Aubrey as a new Non-Executive Director and Chair of the Audit
Committee. Alan brings with him considerable market knowledge and
breadth and depth of skills and experience. Our thanks and best
wishes go to Jon for his service to the Company.
I would also like to thank the Board for their support in my
first seven months, and special thanks to our management and
employees for their hard work and dedication to progress the
Company's performance. I would like to welcome all our new
employees that have joined our Redcentric family through our recent
acquisitions.
Outlook
The five acquisitions undertaken in the last nine months add
increased capability and an enlarged customer base into the Group.
As we fully integrate our acquired operations, I look forward to
building strong relationships with all our customers, new and old,
and I am confident that we can surpass their expectations through
the delivery of our enhanced range of services.
With the considerable progress made in the year the board is
optimistic for the future of the business.
Nick Bate
Chairman
21 July 2022
Chief Executive's Review
Overview
PROVIDING FOCUS AND STRUCTURE FOR GROWTH
FY22 has been a very significant and productive year for
Redcentric. After many years of positioning the business for
growth, we completed two capability acquisitions within FY22, both
of which are trading well and have been quickly integrated into the
business, delivering higher than anticipated synergy savings.
Following the year end, we have completed a further capability
acquisition and two scale acquisitions. As a result, we have
completed five acquisitions in the last nine months and totally
transformed the Company, adding over six hundred customers to our
existing base and increasing run rate revenues by approximately
60%.
The acquisitions of Piksel, 7 Elements and Sungard Consulting
have significantly increased our capabilities and revenues in
hyper-cloud, security and consultancy services, complementing our
already significant network revenues, whilst the scale acquisitions
of 4D and Sungard DCs provide operational leverage and an enlarged
customer base for us to cross-sell our products and services
into.
With these acquisitions we believe that we now have the most
comprehensive IT and telecommunications product and solutions
offering in the market.
To ensure that each product category receives dedicated focus on
growth, efficiency, and innovation, we have created a structure
that enables us to deploy and manage the tailored technical skills
and expertise required to innovate across different technologies. A
new divisional structure implemented after the year end has
resulted in several new senior appointments within the organisation
representing a significant step change in the way the business
operates. The dedicated focus that each division receives enables
colleagues to gain improved knowledge of the products and services
within their area, resulting in better quality customer
conversations and improved bid quality.
A new banking facility was agreed on 26 April 2022 which
provides us with significant additional firepower at very
competitive rates of interest to support and accelerate our
acquisition strategy. Under this new four bank syndicate facility,
we have GBP80m of committed funds available, with a further GBP20m
accordion facility accessible if required. This has been well
utilised and at 30 June 2022, GBP34m of the facility has been drawn
to fund acquisitions, leaving sufficient capacity for further scale
and capability opportunities.
As we move into a phase of delivering growth through M&A,
the Board has changed to reflect this, and I am pleased to welcome
Nick Bate and Helena Feltham to the Board, both of whom bring a
wealth of experience relevant to the Company's growth strategy,
including corporate M&A transactions.
BUSINESS PERFORMANCE
Revenues for the year increased by 2.1% on last year with
recurring revenues accounting for 88.9% of total revenues
marginally down by (0.7) ppts on FY21.
The sale of business and assets relating to the EDF Contract,
which was not core to the Redcentric business, on 31 March 2021,
for a consideration of GBP5.75m, had the impact of reducing
revenues for FY22 by GBP1.0m, whereas the acquisition of Piksel on
30 September 2021 and the acquisition of 7 Elements on 14 March
2022 contributed GBP6.0m to Group revenues.
Underlying organic revenues contracted slightly in FY22
reflecting a market that was still recovering from the COVID-19
pandemic but follows a year of solid growth in FY21. Over the
two-year period of the COVID-19 pandemic, the business has grown
underlying revenues by 1%, a strong performance given the
significant market and economic headwinds, with the additional 5.7%
of revenue growth generated by the acquisitions of Piksel and 7
Elements.
As the country started to emerge from the COVID-19 pandemic and
the various lockdowns and measures eased, the business experienced
a number of market trends and evolving customer behaviours:
-- Reengagement on previously deferred large-scale IT projects;
-- Digital transformation continuing to be a key focus for
customers as they plan for life after COVID-19;
-- Cost bases being closely scrutinised resulting in additional
cancellations of non-critical services;
-- Customers adapting to changes in workforce by appraising office space utilisation; and
-- A shortage of electrical components affecting both recurring and non-recurring revenues.
The behaviours described above have led to a subdued market for
most of FY22, with new order intake being approximately half the
pre-COVID-19 levels for the first three quarters of FY22, and
cancellations remaining at pre-COVID-19 levels. The final quarter
of FY22 was more positive, with several larger scale projects being
signed, resulting in the order intake levels increasing to
approximately 80% of pre-COVID-19 volumes.
The well documented shortage of hardware technology has not only
meant that we have been unable to satisfy and, in some cases,
accept product orders, but it has also delayed larger project
rollouts that require end user hardware. Whilst this continues to
be a challenge, we are managing this by working closely with our
suppliers to avoid delays to customer projects.
The outlook following the COVID-19 pandemic continues to be
positive, with an encouraging pipeline including several
discussions at an advanced stage. The additional capabilities from
Piksel, 7 Elements, Sungard Consulting and Sungard DCs have opened
new markets and the recent acquisitions have brought with them
skills that improve the way we are able to identify customers'
needs and articulate appropriate solutions.
We are pleased to announce that trading for FY22 was in line
with the expectations of the Board:
-- Revenues of GBP93.3m (FY21: GBP91.4m);
-- Adjusted EBITDA(2) of GBP23.7m (FY21 restated(1) : GBP24.6m);
-- Adjusted operating profit(2) of GBP15.9m (FY21 restated(1) : GBP15.6m);
-- Adjusted net debt of GBP1.5m (31 March 2021: net cash of GBP1.0m); and
-- Reported operating profit of GBP6.6m (FY21 restated(1) : GBP12.8m).
(1) For an explanation and reconciliation in relation to the
prior year restatement following the Group's adoption of the IFRIC
agenda decision on cloud implementation, configuration and
customisation costs please see note 8.
(2) For an explanation of the alternative performance measures
used in this announcement please refer to appendix 1.
The net debt position is after dividend payments of GBP5.6m; the
disposal of assets relating to the EDF Contract for GBP5.8m; share
and warrant buybacks of GBP3.0m; the acquisitions of Piksel and 7
Elements for a combined cash cost of GBP10.4m (net of cash
acquired); and a c. GBP2m working capital catch up in respect of
Piksel to align supplier payment practices.
OPERATIONAL HIGHLIGHTS
-- During FY22, Redcentric completed two capability
acquisitions, both of which are trading well and have been quickly
integrated into the business with higher than anticipated synergy
savings already delivered.
-- A new divisional operating structure has been introduced
subsequent to the balance sheet date, to drive focus and growth
across all divisions.
-- New sales orders during the second half of the year improved
significantly on the first half and we are now nearing the levels
seen prior to the outbreak of the COVID-19 pandemic, including the
resumption of large-scale projects.
-- Retention rates have been broadly consistent with prior years.
-- Electricity price increases have added GBP0.5m to costs and
equipment supply chain issues have resulted in delays to both
recurring and non-recurring revenues.
-- The Board is cognisant of the continued volatility in
electricity prices and of the sector-wide employment, retention and
salary inflation challenges.
INTEGRATION OF FY22 ACQUISITIONS
Piksel is now fully integrated into the Redcentric business.
Excellent progress has been made in realising synergies from this
acquisition, with c.GBP1.5m of annualised costs already eliminated
surpassing the GBP1.1m of synergies identified at the time of the
acquisition. A further GBP0.5m of synergies are anticipated to be
realised in FY23.
Good progress has also been made with the 7 Elements
acquisition. For operational independence reasons, 7 Elements will
be maintained as a standalone business but most of the back-office
functions (e.g. finance and human resources) have already been
integrated.
DIVSIONAL FOCUS
As highlighted in previous announcements, the preceding three
years have been spent focussing primarily on delivering
integration, optimisation, and efficiency programmes to ensure that
there is a solid and scalable foundation for future growth. As the
business now switches focus to growth, the organisational structure
also needs to adapt to one that can deliver sustainable and
profitable growth. To that end, the last six months have been spent
designing and, post year end, implementing an organisational
structure that can deliver the Company's ambitious growth strategy,
by providing the level of focus required across the key revenue
streams of Cloud, Networks and Collaboration products.
In addition to the appointments directly relating to the
divisions, some central support functions have been augmented to
provide support for the increased divisional demand.
This investment is one which sets the Company up for the future.
It recognises the need for dedicated product expertise and
addresses the broadening of our customer base. With the delivery of
this structure, the Company can not only exploit the significant
cross-sell opportunities that the enlarged customer base brings,
but it can also confidently compete and succeed across all areas of
the market.
Cloud Services
Following the acquisitions of Piksel, Sungard Consulting and 4D,
the Company's cloud services offering has further expanded its
range of cloud hosting solutions, ranging from colocation through
to hybrid and public cloud services. IT modernisation, digital
transformation and dev-ops skills have also been added, which
complete the business' portfolio of cloud offerings.
The acquisition of Piksel also gave us increased security
capability and this was further strengthened by the acquisition of
7 Elements, which adds security and penetration testing to our
portfolio of security services.
Network Services
Network integration and data connectivity solutions are another
of Redcentric's core strengths, accounting for one-third of our
recurring revenues. Most of the Company's customers take some sort
of connectivity service, increasing their stickiness and reducing
potential churn.
After the pause of several large potential network projects in
the pipeline during the COVID-19 pandemic period, the Company is
now starting to see a return of such opportunities. In the second
half of the year, notable successes were a large network cross-sell
into the Piksel customer base and two large public sector network
wins.
Collaboration Services
Despite a strong range of collaboration product offerings and
the high number of customers already taking connectivity from the
Company, collaboration services remain a relatively small
proportion of the Group's recurring revenue (c. 8%). Over the last
12 months Redcentric has actively looked to strengthen both the
product offering and scale of this area of the business but, to
date, no suitable acquisitions have been found. Whilst the search
for such acquisitions will continue, we have formed a new
Collaboration Services Division to better exploit the opportunities
in this area. A new and experienced management team is in the
process of being set up with a new managing director and sales
director due to join the business at the end of July 2022.
Support Services
New positions of Chief Technical Officer ("CTO") and Customer
Services Director have been created to support the Company's growth
plans.
The CTO's role will be to drive product innovation and increase
the automation and efficiency of operational systems and
processes.
The Customer Service Division has been created to bring
customers to the forefront of everything Redcentric does. By
combining the Service Operations, Service Delivery and Assurance
teams from across Redcentric and Piksel into one division that
supports the newly formed business units, we are able to ensure our
customers remain our focus and that they receive a consistently
high level of service across all group services.
OUTLOOK
The five acquisitions that have been completed within the last
nine months have totally transformed the business. We have
significantly increased our capabilities in the highest growing
areas of the market by acquiring Piksel, 7 Elements and Sungard
Consulting, whilst increasing our customer base by over six
hundred, including through the addition of Sungard DCs and 4D. The
additional customer base brings with it a wealth of cross-sell
opportunities as the Redcentric product offering is much wider than
both Sungard and 4D.
During the next six to nine months our focus will be on fully
integrating the acquired businesses and exploiting the meaningful
cross-sell opportunities and synergies that these acquisitions
bring to Redcentric. The new divisional structure will bring a
renewed focus to the organisation and will ensure that each of the
service offerings are fully aligned and can capitalise on the
undoubted market opportunity.
Whilst our focus will be on the successful integration of the
recent acquisitions, we will continue to monitor potential targets
and should a suitable opportunity arise, our strong balance sheet
and access to GBP66m of undrawn bank facilities will enable us to
react swiftly.
We look forward to capitalising on the very significant
opportunities that come with the recent acquisitions and to an
exciting future.
Peter Brotherton
Chief Executive Officer
21 July 2022
Financial Review
Financial performance measures
Year
ended
31 March Year ended
Year ended 2021 31 March
31 March (FY21) 2021 (FY21)
2022 (FY22) Restated(1) Change (3) Change(3)
--------------------------------- ------------- ------------- --------- ------------- ----------
Total revenue GBP93.3m GBP91.4m 2.1% GBP90.4m 3.2%
Recurring revenue (RMR)(2) GBP83.0m GBP81.9m 1.3% GBP80.9m 2.6%
Recurring revenue percentage(2) 88.9% 89.6% (0.7%) 89.5% (0.7%)
Adjusted EBITDA(2) GBP23.7m GBP24.6m (3.5%) GBP23.9m (0.6%)
Adjusted operating profit(2) GBP15.9m GBP15.6m 2.2% n/a n/a
Reported operating profit GBP6.6m GBP12.8m (48.3%) n/a n/a
Adjusted cash generated GBP19.3m GBP26.5m (27.2%) n/a n/a
from operations(2)
Reported cash generated GBP17.2m GBP16.9m 1.3% n/a n/a
from operations
Net debt(2) (GBP16.6m) (GBP15.6m) (6.9%) n/a n/a
Adjusted net cash/(debt) (GBP1.5m) GBP1.0m (257.7%) n/a n/a
(2)
Adjusted basic earnings
per share(2) 7.68p 7.45p 3.1% n/a n/a
Reported basic earnings
per share 4.43p 5.87p (24.5%) n/a n/a
(1) For an explanation and reconciliation in relation to the
prior year restatement following the Group's adoption of the IFRIC
agenda decision on cloud implementation, configuration and
customisation costs, please refer to note 8.
(2) For an explanation of the alternative performance measures
used in this report, please refer to Appendix 1
(3) Excluding EDF Contribution following the sale of business
and assets associated with the EDF contract completed on 31 March
2021.
Overview
The business has delivered another set of strong results,
showing resilience against challenging market conditions, with the
Group continuing to perform ahead of pre-COVID levels of FY20. The
stability in the underlying business has positioned the Group to
begin to implement its acquisition strategy as the Company seeks to
capitalise on the market consolidation opportunity. This year's
accounts include the impact and contributions made by the Piksel
and 7 Elements acquisitions completed in the financial year as well
as the disposal of the EDF contract completed at the end of the
last financial year. Key considerations include:
1. The acquisition of the entire issued share capital of Piksel
by the Company's trading subsidiary, Redcentric Solutions Limited
("RSL"), completed on 30 September 2021 for initial cash
consideration of US$13.0m (c.GBP9.5m) of which US$12.0m (cGBP8.8m)
was payable immediately with US$0.75m (c.GBP0.55m) being held in
escrow for a period of 12 months and $0.25m (GBP0.18m) being
deferred to offset future costs as part of a transitional services
agreement. This acquisition significantly enhances the Group's
cloud services proposition. The business and assets of Piksel were
hived up into Redcentric Solutions Limited on 28 February 2022 and
the statutory entity itself now ceases to trade.
2. On 15 March 2022, the acquisition of 7 Elements was completed
for GBP2.4m initial consideration, and contingent consideration
dependent on business performance over the next 12 months with a
maximum value of GBP0.45m. 7 Elements provides security services
across a range of industries and sectors and brings additional
capability to the Group. 7 Elements will continue to operate as a
standalone business.
3. Subsequent to the year-end, on 26 April 2022, the Group
completed a refinance of its debt facilities that were due to
mature on 30 June 2022. The new debt facilities consist of an
GBP80m revolving credit facility ("RCF") and a GBP20m accordion
facility and are provided by a new four bank group consisting of
NatWest, Barclays, Bank of Ireland, and Silicon Valley Bank (the
"New Facility"). The New Facility has an initial maturity date of
26 April 2025 with options to extend by a further one or two years.
The borrowing cost of the RCF is determined by the level of the
Company leverage and has a borrowing cost of 175 basis points over
SONIA at the Company's current leverage levels. An arrangement fee
of 75 basis points will be payable upfront, in addition to a
commitment fee on the undrawn portion of the new RCF, on equivalent
terms to the previous facility. The New Facility provides the Group
with additional liquidity to be used for working capital purposes
and to fund acquisitions, in accordance with the Group's stated
strategy.
4. The sale of business and assets relating to the EDF Contract
was completed on 31 March 2021 for a fixed consideration of
GBP5.75m, payable in two instalments: GBP3.5m on 30 April 2021 and
GBP2.25m on 30 September 2021. Under the terms of the EDF Contract,
the Company provided maintenance services to four EDF nuclear power
stations and in FY21, the EDF Contract contributed GBP1m to revenue
and GBP0.72m to EBITDA and generated GBP0.68m of operating cash
flow ("EDF Contribution"). FY21 comparatives3 exclude the EDF
Contribution to allow for more meaningful comparatives.
5. In April 2021, IFRIC published an agenda decision to clarify
the accounting treatment in relation to the implementation,
configuration and customisation costs incurred in implementing
software-as-a-service ("SaaS") cloud computing arrangements. Due to
the nature of the decision and the level of investment made by the
Group on its enterprise resource planning system ("Dynamics 365"),
the Group's accounting policy in relation to such implementation,
customisation and configuration costs has been reviewed and changed
to align to the IFRIC guidance issued. The restatement represents a
non-cash adjustment. The revision to the accounting policy has been
accounted for retrospectively resulting in a prior year restatement
and prior-year comparatives have been restated where necessary. See
note 8 for further details.
The key financial highlights are as follows:
-- Total revenue growth of 3.2% to GBP93.3m (FY21: GBP90.4m excluding EDF Contribution(3) );
-- Recurring revenue(2) grew by 2.6% to GBP83.0m, with recurring
revenue representing 88.9% of the total revenue (FY21: GBP80.9m /
89.5% excluding EDF Contribution(3) );
-- Adjusted EBITDA(2) of GBP23.7m is marginally behind (0.6%)
FY21 (excluding EDF Contribution(3) ) reflecting the challenges
caused by increased electricity prices;
-- Adjusted operating profit(2) increased by GBP0.3m to GBP15.9m (2.2%);
-- Net debt at 31 March 2022 was GBP16.6m, including GBP14.1m of
IFRS16 lease liabilities that were previously classified as
operating leases under IAS17 and GBP1.0m of supplier loans;
-- Reported operating profit reduced by GBP6.2m to GBP6.6m as a
result of the sale of EDF in FY21 which resulted in a profit of
GBP4.5m and the release of the Restitution Scheme provision in FY21
for GBP2.2m.
Revenue
Revenue for FY22 was generated wholly from the UK and is
analysed as follows:
Year Year
Year ended ended ended
31 March 31 March 31 March
2022 2021 2021(3) Change(3) Change(3)
GBP'000 GBP'000 GBP'000 GBP'000 %
---------------------- ----------- ---------- ---------- ---------- ----------
Recurring revenue(2) 82,965 81,897 80,897 2,068 2.6%
Product sales 6,187 5,072 5,072 1,115 22.0%
Services revenue 4,176 4,430 4,430 (254) (5.7%)
---------------------- ----------- ---------- ---------- ---------- ----------
Total revenue 93,328 91,399 90,399 2,929 3.2%
---------------------- ----------- ---------- ---------- ---------- ----------
(2) For an explanation of the alternative performance measures
used in this report, please refer to Appendix 1
(3) Excluding EDF Contribution, as defined above.
Total revenue increased by GBP1.9m compared to FY21, impacted
by: the loss of cGBP1.0m contribution from EDF (3) following the
disposal of assets relating to the EDF Contract, and incremental
revenue in FY22 generated by the acquisitions of Piksel and 7
Elements which added GBP6.0m to Group revenues. As outlined above,
underlying organic revenues contracted slightly in FY22 reflecting
a market that was still recovering from the COVID-19 pandemic.
However, we are seeing signs of a return to a more normalised
environment.
Revenue is analysed into the following categories:
-- Recurring revenue has increased 2.6% to GBP83.0m (FY21:
GBP80.9m excluding EDF contribution(3) ).
-- Non-recurring product revenue has increased GBP1.1m to
GBP6.2m (FY21: GBP5.1m) following a strong FY22 second half ("H2")
performance as hardware orders signed up during FY21 and first half
("H1") FY22 which were previously delayed due to the worldwide
shortage in microchips have now been delivered. We still have a
high level of product revenue in work in progress ("WIP") as we
continue to see impacts of the microchip shortage.
-- Non-recurring services revenue was lower at GBP4.2m (FY21:
GBP4.4m), reflecting the continuing lower level of activity on new
projects.
Gross profit
Year Year ended Year ended
ended
31 March 31 March 31 March
2022 2021 2021(3) Change(3) Change(3)
GBP'000 GBP'000 GBP'000 GBP'000 %
-------------- ----------- ------------ ------------ ---------- ----------
Gross Profit 59,550 57,939 56,939 2,611 4.6%
-------------- ----------- ------------ ------------ ---------- ----------
Gross Margin 63.8% 63.4% 63.0% n/a 0.8%
(3) Excluding EDF Contribution, as defined above.
Gross profit increased by 4.6% (GBP2.6m) (excluding EDF
contribution(3) ) reflecting the Group's increased revenue and an
improvement in gross margin to 63.8% (FY21: 63.0% excluding EDF
contribution(3) ) due to contribution from higher margin Piksel
& 7 Elements acquisitions.
Adjusted operating costs(2)
The Group's adjusted operating costs (operating expenditure
excluding depreciation, amortisation, exceptional items and
share-based payments) are set out in the table below:
Year Year Year
ended ended ended
31 March 31 March 31 March Change
2022 2021 2021(3) (3)
GBP'000 GBP'000 GBP'000 GBP'000 Change
(3)
%
----------------------------------------- ---------- ---------- ---------- -------- --------
UK employee costs 21,369 19,700 19,468 1,901 9.8%
Office and data centre costs 4,411 3,789 3,752 659 17.6%
Network and equipment costs 7,299 6,941 6,933 366 5.3%
Other sales, general and administration
costs 1,553 1,428 1,428 125 8.8%
Offshore costs 1,205 1,502 1,502 (297) (19.8%)
----------------------------------------- ---------- ---------- ---------- -------- --------
Total adjusted operating
costs 35,837 33,360 33,083 2,754 8.3%
----------------------------------------- ---------- ---------- ---------- -------- --------
(3) Excluding EDF Contribution, as defined above.
(2) For an explanation of the alternative performance measures
used in this report, please refer to Appendix 1
Total adjusted operating costs for FY22 were 8.3% (GBP2.8m)
higher than prior year (excluding EDF contribution (3) ),
reflecting:
-- employee costs increased GBP1.9m (9.8%) due to additional
employees following the Piksel and 7 Elements acquisitions;
-- office and data centre costs increased by GBP0.7m, primarily
due to the impact of increased electricity costs as several
electricity supply contracts fell due during the UK energy
crisis;
-- network and equipment costs increased by GBP0.4m, of which
GBP0.5m is attributable to Piksel;
-- other sales, general and administration costs are up GBP0.1m,
with GBP0.2m relating to Piksel, offset by reduced legal costs; and
offshore costs reduced by GBP0.3m due to reduction in employee
costs with the average number of employees reducing from 126 to 100
following more roles being moved onshore.
Employees
Year
ended
31 March Year ended
2022 31 March
Variance
(Number) 2021 (Number) (Number)
-------------------- ----------- --------------- ----------
Year-end headcount
UK 376 295 81
India 91 100 (9)
Total employees 467 395 72
-------------------- ----------- --------------- ----------
Year
ended
31 March Year ended
2022 31 March Variance
(Number) 2021 (Number) (Number)
------------------- ---------- --------------- ----------
Average headcount
UK 386 294 92
India 100 126 (26)
Total employees 486 420 66
------------------- ---------- --------------- ----------
Adjusted EBITDA(2)
Adjusted EBITDA is EBITDA excluding exceptional items (as set
out in note 2), share-based payments and associated National
Insurance. The same adjustments are also made in determining the
adjusted EBITDA margin.
Year ended
31 March
2021
Year
ended
31 March
2022 (restated)(1)
GBP'000 GBP'000
------------------------------------------------- ---------- ---------------
Reported operating profit 6,607 12,782
Amortisation of intangible assets arising on
business combinations 6,498 6,252
Amortisation of other intangible assets 475 670
Depreciation on tangible assets 2,745 3,408
Depreciation on ROU assets 4,578 4,932
EBITDA 20,903 28,044
Exceptional items 1,629 (4,152)
Share-based payments and associated National
Insurance 1,181 687
------------------------------------------------- ---------- ---------------
Adjusted EBITDA(2) 23,713 24,579
------------------------------------------------- ---------- ---------------
EDF Contribution (3) - (725)
------------------------------------------------- ---------- ---------------
Adjusted EBITDA (excluding EDF contribution)(3) 23,713 23,854
------------------------------------------------- ---------- ---------------
(1) For an explanation and reconciliation in relation to the
prior year restatement following the Group's adoption of the IFRIC
agenda decision on cloud implementation, configuration and
customisation costs, please refer to note 8.
(2) For an explanation of the alternative performance measures
used in this report, please refer to Appendix 1
(3) Excluding EDF Contribution, as defined above
Adjusted EBITDA decreased by 3.5% to GBP23.7m, GBP0.9m lower
than prior year. Excluding the EDF Contribution (3) , adjusted
EBITDA for FY22 was marginally lower than the prior year (0.6%).
FY22 EBITDA includes six months of contribution from the
acquisition of Piksel and one month of contribution from the
acquisition of 7 Elements worth GBP0.8m in total, which has been
offset by increased electricity costs.
Taxation, interest and dividend
The tax charge for the year was a credit of GBP1.4m (FY21: a
charge of GBP2.3m), comprising an income tax charge of GBP0.4m
(FY21: GBP1.2m) and a deferred tax credit of GBP1.8m (FY21: a
charge of GBP1.1m).
Net finance costs for the year were GBP1.1m (FY21: GBP1.5m),
including GBP1.0 (FY21: GBP1.2m) of interest payable on leases of
which GBP0.8m (FY21: GBP1.0m) related to leases previously
recognised as operating leases under IAS17.
During the year, the Group paid an interim dividend for FY22 of
1.2p per share, totalling GBP1.9m.
A final dividend payment of 2.4p per share will be paid on 16
September 2022, subject to approval at the Company's AGM, to
shareholders on the register at the close of business on 29 July
2022 with shares going ex-dividend on 28 July 2022. The last day
for Dividend Reinvestment Plan elections is 19 August 2022.
Net debt
During the year, net debt increased by GBP1.1m to GBP16.6m as at
31 March 2022, with the movements shown in the tables below:
Year ended Year ended
31 March 31 March
2022 2021 (restated)(1)
GBP'000 GBP'000
---------------------------------------------------- ----------- --------------------
Operating profit 6,607 12,782
Depreciation and amortisation 14,296 15,262
Exceptional items 1,629 (4,152)
Share based payments 1,181 687
---------------------------------------------------- ----------- --------------------
Adjusted EBITDA(2) 23,713 24,579
Working capital movements (4,017) 1,881
Transfer from intangible assets to cost of 140 -
sales
Non-cash provision movements (577) -
---------------------------------------------------- ----------- --------------------
Adjusted cash generated from operations 19,259 26,460
Cash conversion 81.2% 107.7%
Capital expenditure - cash purchases (2,765) (2,307)
Capital expenditure - finance lease purchases (438) (2,235)
Proceeds from sale and lease back of assets - 1,036
Net capital expenditure (3,203) (3,506)
Corporation tax receipt / (paid) 246 (149)
Interest paid (51) (398)
Loan arrangement fees/fee amortisation - (17)
Finance lease/term loan interest (885) (1,017)
Effect of exchange rates 27 (26)
---------------------------------------------------- ----------- --------------------
Other movements in net debt (663) (1,607)
Normalised net debt movement(2) 15,393 21,347
---------------------------------------------------- ----------- --------------------
Cash cost of exceptional items (2,091) (9,514)
Share buyback (2,666) -
Non-capitalised finance leases purchases (145) -
Acquisition of subsidiaries (net of cash acquired) (10,422) -
Cash received on disposal of non-core business 5,750 -
unit
IFRS 16 lease additions (2,094) -
IFRS 16 lease disposals 813 -
Remeasurement relating to lease modification - 3,917
Supplier loans - (1,207)
Dividends (5,627) (1,868)
Disposal of treasury shares on exercise of
share options - 494
Cash received on exercise of share options 12 36
Share issues 1 5,775
---------------------------------------------------- ----------- --------------------
(16,469) (2,367)
(Increase)/Decrease in net debt (1,076) 18,980
---------------------------------------------------- ----------- --------------------
Net debt at the beginning of the period (15,569) (34,549)
---------------------------------------------------- ----------- --------------------
Net debt at the end of the period (16,645) (15,569)
---------------------------------------------------- ----------- --------------------
(1) For an explanation and reconciliation in relation to the
prior year restatement following the Group's adoption of the IFRIC
agenda decision on cloud implementation, configuration and
customisation costs, please refer to note 8.
(2) For an explanation of the alternative performance measures
used in this report, please refer to Appendix 1
As
As at Net Net at
31 March cash non-cash 31 As at
2020 flow flow March Net cash Net non-cash 31 March
2021 flow flow 2022
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ----------- -------- -------------- --------- --------- ------------- ----------
Cash 3,710 1,567 (27) 5,250 (3,473) 27 1,804
RCF (12,483) 12,500 (17) - - - -
Term Loan (151) 212 (1,552) (1,491) 532 (45) (1,004)
Lease Liabilities (25,625) 4,527 1,770 (19,328) 3,701 (1,818) (17,445)
------------------- ----------- -------- -------------- --------- --------- ------------- ----------
(34,549) 18,806 174 (15,569) 760 (1,836) (16,645)
------------------- ----------- -------- -------------- --------- --------- ------------- ----------
Included in lease liabilities at 31 March 2022 are GBP14.1m
(FY21: GBP15.1m) of IFRS 16 lease liabilities that were previously
classified as operating leases under IAS17 and GBP1.0m (FY21:
GBP1.5m) of term loans. Other movements reflect acquisition of
subsidiaries of GBP10.4m, capital expenditure of GBP3.2m, GBP5.6m
on dividends, and GBP2.7m on share buybacks. GBP2.1m outflow from
exceptional items includes GBP0.8m acquisition and integration
costs.
Following completion of the Sungard DCs and 4D acquisitions, as
at 7 July 2022 net debt was GBP33.1m excluding IFRS16 lease
liabilities and GBP0.6m of supplier loans.
Trade Debtors
In the year, focus remained on maintaining a strong ageing
profile with a low level of aged debt. At the year-end, 97% of debt
was current or less than 30 days overdue (FY21: 97%).
Year
ended Year ended
31 March 31 March
2022 2021
GBP'000 GBP'000
------------------------ ---------- -----------
Current 8,736 9,343
1 to 30 days overdue 1,997 600
31 to 60 days overdue 452 282
61 to 90 days overdue 80 21
91 to 180 days overdue 19 21
> 180 days overdue (172) 1
------------------------- ---------- -----------
Gross trade debtors 11,112 10,268
Provisions (884) (1,104)
Net trade debtors 10,228 9,164
------------------------- ---------- -----------
Trade debtor days were 36 at 31 March 2022 compared to 34 at 31
March 2021. Trade debtor days are calculated as trade debtors
divided by revenue (incl. VAT) multiplied by 365.
Trade creditor days were 37 at 31 March 2022 compared to 37 as
at 31 March 2021. Trade creditor days are calculated as trade
creditors divided by total purchases (cost of sales and operating
expenditure) multiplied by 365.
Financing
31 March 2022 31 March 2021
Available Drawn Undrawn Available Drawn Undrawn
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------------- ---------- --------- --------- ---------- --------- ---------
Committed
* Revolving credit facility 5,000 - 5,000 5,000 - 5,000
* Term Loans 1,004 1,004 - 1,491 1,491 -
* Leases 17,445 17,445 - 19,328 19,328 -
--------------------------------------- ---------- --------- --------- ---------- --------- ---------
23,449 18,449 5,000 25,819 20,819 5,000
--------------------------------------- ---------- --------- --------- ---------- --------- ---------
Uncommitted
- - - - - -
* Bank overdraft
* Accordion facility 20,000 - 20,000 20,000 - 20,000
* Asset financing facility 7,000 1,100 5,900 5,190 - 5,190
27,000 1,100 25,900 25,190 - 25,190
--------------------------------------- ---------- --------- --------- ---------- --------- ---------
Total borrowing facilities 50,449 19,549 30,900 51,009 20,819 30,190
======================================= ========== ========= ========= ========== ========= =========
Uncommitted facilities represent facilities available to the
Group, but which can be withdrawn by the lender and hence are not
within the Group's control. When the asset financing facility is
utilised, a lease is created and hence there is no committed asset
financing facility.
As at 31 March 2022, the Group was party to GBP32m of banking
facilities , comprising an RCF of GBP5m (GBPnil utilised at 31
March 2022) with a GBP20.0m accordion (GBPnil utilised at 31 March
2022) and a GBP7.0m Asset Financing Facility (GBP1.1m utilised at
31 March 2022). As at 31 March 2022, these facilities were due to
expire on 30 June 2022.
Subsequent to the year-end, on 26 April 2022, the Group
completed a refinance of its debt facilities that were due to
mature on 30 June 2022. The New Facilities consist of an GBP80m RCF
and an uncommitted GBP20m accordion facility and are provided by a
new four bank group consisting of NatWest, Barclays, Bank of
Ireland and Silicon Valley Bank. The New Facility has an initial
maturity date of 26 April 2025 with options to extend by a further
one or two years.
The borrowing cost of the RCF is determined by the Group's
leverage and has a borrowing cost of 175 basis points over SONIA at
the Group's current leverage levels, which is a significant
improvement to the previous facility. An arrangement fee of 75
basis points will be payable upfront, in addition to a commitment
fee on the undrawn portion of the new RCF, on equivalent terms to
the previous facility. The New Facility provides the Group with
additional liquidity to be used for working capital purposes and to
fund acquisitions, in accordance with the Group's stated
strategy.
At the date of approval, the Group had drawn GBP35.5m of the RCF
to fund acquisitions after the balance sheet date as detailed in
the business overview of this review.
David Senior
Chief Financial Officer
21 July 2022
Consolidated statement of comprehensive income for the year
ended 31 March 2022
Year Year ended
ended 31 March
31 March 2021 (restated(1)
2022 )
Note GBP'000 GBP'000
---------------------------------------- ----- ---------- -------------------
Revenue 93,328 91,399
Cost of sales (33,778) (33,460)
---------------------------------------- ----- ---------- -------------------
Gross Profit 59,550 57,939
Operating expenditure (53,046) (49,664)
Other operating income 103 4,507
Adjusted EBITDA(2) 23,713 24,579
Depreciation of property, plant
and equipment 5 (2,745) (3,408)
Amortisation of intangibles 4 (6,973) (6,922)
Depreciation of right of use assets 6 (4,578) (4,932)
Exceptional items 2 (1,629) 4,152
Share-based payments (1,181) (687)
Operating profit 6,607 12,782
Finance income - -
Finance costs (1,071) (1,460)
---------------------------------------- ----- ---------- -------------------
Profit before taxation 5,536 11,322
Income tax credit/(expense) 1,404 (2,311)
---------------------------------------- ----- ---------- -------------------
Profit for the period attributable
to owners of the parent 6,940 9,011
---------------------------------------- ----- ---------- -------------------
Other comprehensive income
Items that may be reclassified
subsequently to profit or loss:
Currency translation differences (26) 103
Deferred tax movement on share options 58 (224)
---------------------------------------- ----- ---------- -------------------
Total comprehensive profit for
the period 6,972 8,890
---------------------------------------- ----- ---------- -------------------
Earnings per share
Basic earnings per share 4.43p 5.87p
Diluted earnings per share 4.36p 5.79p
---------------------------------------- ----- ---------- -------------------
(1) See note 8 for an explanation and reconciliation in relation
to the prior year restatement arising from a change in accounting
policy following the Group's adoption of the IFRIC agenda decision
on cloud implementation, configuration and customisation costs.
(2) For an explanation and reconciliation of the alternative
performance measures used in this report, please refer to Appendix
1
Consolidated statement of financial position as at 31 March
2022
31 31 March 31 March
March 2021 2020
2022 (restated(1) (restated(1)
) )
Note GBP'000 GBP'000 GBP'000
------------------------------- ----- --------- -------------- --------------
Non-Current Assets
Intangible assets 4 67,726 61,280 68,415
Property, plant and equipment 5 5,372 5,834 8,475
Right-of-use assets 6 17,038 18,787 26,010
Deferred tax asset 3,999 1,403 2,324
94,135 87,304 105,224
------------------------------- ----- --------- -------------- --------------
Current Assets
Inventories 1,393 1,061 891
Trade and other receivables 22,123 25,663 23,261
Corporation tax receivable - - 346
Cash and cash equivalents 1,804 5,250 3,710
------------------------------- ----- --------- -------------- --------------
25,320 31,974 28,208
------------------------------- ----- --------- -------------- --------------
Total assets 119,455 119,278 133,432
------------------------------- ----- --------- -------------- --------------
Current Liabilities
Trade and other payables (24,053) (22,459) (24,311)
Corporation tax payable (800) (641) -
Bank and term loans (508) (487) (12,598)
Lease liabilities (4,086) (3,735) (3,528)
Provisions 3 - (574) (12,122)
Contingent consideration 7 (422) - -
------------------------------- ----- --------- -------------- --------------
(29,869) (27,896) (52,559)
------------------------------- ----- --------- -------------- --------------
Non-current liabilities
Deferred tax liability - - -
Bank and term loans (496) (1,004) (36)
Lease liabilities (13,359) (15,593) (22,097)
Provisions 3 (3,883) (2,695) (2,531)
------------------------------- ----- --------- -------------- --------------
(17,738) (19,292) (24,664)
------------------------------- ----- --------- -------------- --------------
Total liabilities (47,607) (47,188) (77,223)
------------------------------- ----- --------- -------------- --------------
Net assets 71,848 72,090 56,209
------------------------------- ----- --------- -------------- --------------
Equity
Called up share capital 157 156 149
Share premium account 73,267 73,267 65,734
Common control reserve (9,454) (9,454) (9,454)
0wn shares held in treasury (2,673) (32) (724)
Retained earnings 10,551 8,153 504
------------------------------- ----- --------- -------------- --------------
Total Equity 71,848 72,090 56,209
------------------------------- ----- --------- -------------- --------------
(1) See note 8 for an explanation and reconciliation in relation
to the prior year restatement arising from a change in accounting
policy following the Group's adoption of the IFRIC agenda decision
on cloud implementation, configuration and customisation costs.
The financial statements of Redcentric Plc (Registration Number
08397584) were approved by the Board on 21 July 2022 and are signed
on its behalf by:
David Senior
Chief Financial Officer
Consolidated cash flow statement for the year ended 31 March
2022
Year Year ended
ended 31 March
31 March 2021 (restated(1)
2022 )
Note GBP'000 GBP'000
---------------------------------------------- ------ ---------- -------------------
Profit before taxation 5,536 11,322
Finance costs 1,071 1,460
Operating profit 6,607 12,782
Adjustment for non-cash items
Depreciation and amortisation 4,5,6 14,296 15,262
Exceptional items 2 1,629 (4,152)
Share-based payments 1,181 687
---------------------------------------------- ------ ---------- -------------------
Operating cash flow before exceptional
items and movements in working capital 23,713 24,579
Transfer from intangible assets to cost 140 -
of sales
Non-cash provision movements (577) -
Cash costs of exceptional items (2,091) (9,514)
---------------------------------------------- ------ ---------- -------------------
Operating cash flow before changes in
working capital 21,185 15,065
Changes in working capital
Increase in inventories (185) (15)
Decrease in trade and other receivables 559 4,433
Decrease in trade and other payables (4,391) (2,537)
---------------------------------------------- ------ ---------- -------------------
Cash generated from operations 17,168 16,946
---------------------------------------------- ------ ---------- -------------------
Tax received/(paid) 246 (149)
---------------------------------------------- ------ ---------- -------------------
Net cash generated from operating activities 17,414 16,797
---------------------------------------------- ------ ---------- -------------------
Cash flows from investing activities
Purchase of property, plant and equipment (2,264) (1,541)
Disposal of non-core contracts 5,750 -
Acquisition of subsidiaries (net of cash (10,422) -
acquired)
Purchase of intangible fixed assets (501) (767)
---------------------------------------------- ------ ---------- -------------------
Net cash used in investing activities (7,437) (2,308)
---------------------------------------------- ------ ---------- -------------------
Cash flows from financing activities
Dividends paid (5,627) (1,868)
Share buyback (2,666) -
Disposal of treasury shares on exercise
of share options - 494
Cash received on exercise of share options 12 36
Sale and leaseback - 1,036
Interest paid (936) (1,415)
Repayment of leases (3,745) (4,325)
Repayment of term loans (487) (156)
Drawdown of borrowings 4,500 7,000
Repayment of borrowings (4,500) (19,500)
Issue of shares 1 5,775
Net cash used in financing activities (13,448) (12,923)
---------------------------------------------- ------ ---------- -------------------
Net (decrease)/increase in cash and
cash equivalents (3,471) 1,566
Cash and cash equivalents at beginning
of period 5,250 3,710
Effect of exchange rates 25 (26)
Cash and cash equivalents at end of
the period 1,804 5,250
---------------------------------------------- ------ ---------- -------------------
The accompanying notes form an integral part of the consolidated
financial information.
(1) For an explanation and reconciliation in relation to the
prior year restatement following the Group's adoption of the IFRIC
agenda decision on cloud implementation, configuration and
customisation costs, please refer to note 8.
Consolidated statement of changes in equity for the year ended
31 March 2022
Share Share Common Own shares Retained Total
capital premium control held earnings equity
reserve in treasury
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- --------- --------- ------------- ---------- --------
At 31 March 2020 - as
previously reported 149 65,734 (9,454) (724) 4,096 59,801
Prior year restatement(1) - - - - (3,592) (3,592)
1 April 2020 - (restated(1)
) 149 65,734 (9,454) (724) 504 56,209
Profit for the period
(restated(1) ) - - - - 9,011 9,011
Transactions with owners
Share-based payments - - - - 582 582
Issue of new shares 7 7,533 - - - 7,540
Dividends paid - - - - (1,868) (1,868)
Share option exercises - - - 692 (198) 494
Other comprehensive
income
Deferred tax movement
on share options - - - - 224 224
Currency translation
differences - - - - (103) (103)
At 31 March 2021 (restated(1)
) 156 73,267 (9,454) (32) 8,153 72,090
At 31 March 2021 - as
previously reported 156 73,267 (9,454) (32) 11,960 75,897
Prior year restatement - - - - (3,807) (3,807)
------------------------------- --------- --------- --------- ------------- ---------- --------
At 1 April 2021 (restated(1)
) 156 73,267 (9,454) (32) 8,153 72,090
Profit for the period - - - - 6,940 6,940
Transactions with owners
Share-based payments - - - - 1,067 1,067
Share buyback - - - (2,666) - (2,666)
Issue of new shares 1 - - - - 1
Dividends paid - - - - (5,627) (5,627)
Share option exercises - - - 25 (14) 11
Other comprehensive
income
Deferred tax movement
on share options - - - - 58 58
Currency translation
differences - - - - (26) (26)
------------------------------- --------- --------- --------- ------------- ---------- --------
At 31 March 2022 157 73,267 (9,454) (2,673) 10,551 71,848
------------------------------- --------- --------- --------- ------------- ---------- --------
The accompanying notes form an integral part of the consolidated
financial information.
(1) See note 8 for an explanation and reconciliation in relation
to the prior year restatement arising from a change in accounting
policy following the Group's adoption of the IFRIC agenda decision
on cloud implementation, configuration and customisation costs.
1) Summary of significant accounting policies
Redcentric plc is a public limited company incorporated and
domiciled in England and Wales, whose shares are publicly traded on
the Alternative Investment Market ("AIM") division of the London
Stock Exchange. Redcentric plc was incorporated on 11 February 2013
and admitted to AIM on 24 April 2013.
The principal accounting policies applied in the preparation of
the financial information contained in this document are set out
below. These policies have been applied consistently in the current
and prior period, within the exception of the changes in accounting
policy following the IFRIC agenda decision of April 2021 in
relation to costs incurred on cloud computing configuration and
implementation costs (see note 8).
The financial information is presented in pounds sterling, being
the currency of the primary economic environment in which the Group
operates.
The financial information is prepared on the historical cost
basis except that contingent consideration is measured at fair
value.
Basis of preparation
The financial information set out in this document does not
constitute the Group's statutory Financial Statements for the
reporting years ended 31 March 2022 or 31 March 2021 but is derived
from those Financial Statements. Statutory Financial Statements for
the reporting year ended 31 March 2021 have been delivered to the
Registrar of Companies. The statutory Financial Statements for the
reporting year ended 31 March 2022 were approved by the Board of
Directors on 21 July 2022 along with this Financial Report but will
be delivered to the Registrar of Companies in due course. The
auditor has reported on those statutory Financial Statements; their
reports were (i) unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
The Group's consolidated financial statements have been prepared
and approved by the directors in accordance with applicable law and
UK-adopted international accounting standards.
The financial statements are prepared on a going concern basis
which the directors believe to be appropriate for the following
reasons.
The Directors have prepared cash flow forecasts for a period of
12 months from the date of approval of these financial statements
which indicate that, taking account of reasonably possible
downsides on the operations and its financial resources, the Group
and the Company will have sufficient funds to meet its liabilities
as they fall due for that period, and will comply with its debt
covenants over that period.
The Directors' forecasts have been built from the detailed Board
approved budget for the year ending 31 March 2023, and draft budget
for 31 March 2024. The forecasts include a number of assumptions in
relation to order intake, renewal and churn rates, EBITDA margin
improvements and the impact of post year end acquisitions.
Whilst the Group's trading and cash flow forecasts have been
prepared using current trading assumptions, the operating
environment presents a number of challenges which could negatively
impact the actual performance achieved. These risks include, but
are not limited to, achieving forecast levels of order intake, the
impact on customer confidence as a result of general economic
conditions, inflationary pressures and the achievability of actions
the directors consider they would take should further risks
materialise. In making their going concern assessment in light of
these risks, the Directors have also modelled a severe but
plausible downside scenario when preparing the forecasts.
The downside scenario assumes significant economic downturn over
FY23, impacting new order intake alongside cost inflation, supply
chain delays and loss of a key customer. In this scenario,
recurring monthly order intake is forecast to reduce by 25%
compared to base case budget and product and services revenues
reduce by 19% compared to base case budget incorporating both
potential supply chain issues and reduced investment from our
customer base. Under the downside scenario modelled, the forecasts
demonstrate that the Group is expected to maintain sufficient
liquidity and will continue to comply with the relevant debt
covenants after management have taken the mitigating actions which
are within the Group's control including delaying any potential
FY23 interim dividend and the rephasing of discretionary capital
expenditure. The Directors therefore remain confident that the
Group has adequate resources to continue to meet its liabilities as
and when they fall due within the period of at least 12 months from
the date this report.
Changes in accounting policy and disclosure
Adopted IFRS not yet applied
There are no new standards, amendments to existing standards or
interpretations that are not yet effective that are expected to
have a material impact on the Group. Such developments are
routinely reviewed by the Group and its financial reporting systems
are adapted as appropriate.
Application of IFRIC agenda decision
In April 2021, the IFRIC published an agenda decision clarifying
the accounting treatment of costs incurred in relation to the
customisation and configuration of implementing
Software-as-a-Service (SaaS) cloud computing arrangements:
- Amounts paid to the cloud vendor for configuration and
customisation costs incurred that are not distinct from access to
the cloud software are expensed over the SaaS contract term;
- In limited circumstances, some configuration and customisation
costs incurred in relation to SaaS arrangements may give rise to an
identifiable intangible asset, for example where code is created
and controlled by the entity;
- In all other instances, customisation and configuration costs
will be expensed as the related services are received.
Following this publication, the Group reviewed the accounting
treatment applied to applicable arrangements taking into account
factors such as the nature and terms of the relevant arrangements,
ownership of intellectual property rights, the ability to restrict
access of others, the ability to remove software applications from
the cloud and run them independently, and the ability to determine
when and how frequently updates are applied.
See note 8 for further details.
Basis of consolidation
The Group financial statements consolidate those of the Company
and of its subsidiary undertakings drawn up to 31 March 2022.
Subsidiaries are all entities over which the Group has control.
The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over
the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to the Group. They are deconsolidated
from the date that control ceases.
The Group applies the acquisition method of accounting to
account for business combinations. The acquisition date is defined
as the date on which control is transferred to the Group. The
consideration transferred for the acquisition of a subsidiary is
the fair value of the assets transferred, the liabilities incurred,
and the equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement.
Acquisition-related costs are expensed as incurred. Identifiable
assets acquired and liabilities and contingent liabilities assumed
in a business combination are measured initially at their fair
value at the acquisition date. The Group recognises any
non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest's proportionate share of the acquiree's
net assets.
The excess of the consideration transferred and the amount of
any non-controlling interest in the acquiree over the fair value of
the separable identifiable net assets acquired and liabilities
incurred or assumed at the acquisition date is recorded as
purchased goodwill. Provision is made for any impairment.
Accounting policies previously applied by acquired subsidiaries are
changed as necessary to comply with accounting policies adopted by
the Group.
Intra-group transactions, balances and unrealised gains and
losses on transactions between group companies are eliminated on
consolidation.
Business combinations
Business combinations are accounted for by applying the
acquisition method at the accounting date, which is the date on
which control is transferred to the Group. The Group controls an
entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity.
Where an acquisition involves a potential payment of contingent
consideration the cost is estimated based on its acquisition date
fair value and is included as part of the consideration transferred
in a business combination. To estimate the fair value an assessment
is made as to the amount of additional consideration that is likely
to be paid with reference to the associated criteria. Where a
change is made to the fair value of contingent consideration within
the initial measurement period as a result of new or additional
information that existed at the acquisition date the change is
accounted for as a retrospective adjustment to goodwill. Any change
as a result of events that occurred after the acquisition date then
the adjustment is accounted for as a charge or credit to profit or
loss. Measurement period adjustments are adjustments that arise
from additional information obtained during the 'measurement
period' (which cannot exceed one year from the acquisition date)
about facts and circumstances that existed at the acquisition
date.
Costs related to acquisitions, other than those associated with
the issue of debt or equity securities, are expensed as
incurred.
Critical accounting judgements and key sources of estimation
uncertainty
Judgements
Information regarding critical accounting judgements made in
applying the accounting policies that have the most significant
effects on the values recognised in the Group Financial Statements
are as follows:
Intangible assets relating to cloud customisation and
configuration costs
Judgement is required in assessing whether the Group has control
over the resources defined in the arrangement when costs are
incurred in relation to implementation, customisation and
configuration costs as part of a cloud based service agreement.
Management has considered the IFRIC agenda decision of April
2021 which clarified the accounting treatment in relation to these
costs. As a result of the adoption of this guidance a prior year
restatement has been made as detailed in note 8.
Estimates
Information about estimation uncertainties that have the
greatest risk of resulting in a material adjustment to the carrying
value of assets and liabilities within the next financial year are
addressed below:
Valuation of intangible assets and fair value adjustments on
acquisition
As the Group continues with its acquisition strategy there is a
requirement to fair value the assets and liabilities of any
business acquired during the financial year. The measurement period
will end when the Group receives the information it was seeking
about the facts and circumstances that existed at the date of
acquisition or learns that this information is not available. The
measurement period cannot be longer than 12 months from the date of
acquisition. The Group is required to identify, assess and value
the intangible assets within the acquired business at the time of
acquisition. When reviewing the existence of intangible assets
consideration is required as to the potential intangible assets
arising such as customer relationships.
The estimation of the value of any potential identified
intangible assets, such as customer relationships requires
estimates of the expected future cashflows that will be derived
from the existing relationships, and the associated useful life,
with a suitable discount rate required to calculate the present
value. The methods and assumptions included in determining the fair
values of acquired intangibles are therefore complex and subject to
estimation uncertainty. Details regarding the process applied in
establishing the value of intangible assets and fair value
adjustments on acquisitions completed in the year are detailed in
note 7.
2) Exceptional items
Year
ended Year ended
31 March
(restated(1)
31 March )
2022 2021
GBP'000 GBP'000
---------------------------------------- ---- --------- ----------- -----------------
Included within administrative expenses:
Employee restructuring 159 393
Insurance adviser provision including
professional fees (483) 610
Onerous service contracts - 148
Circuit termination charges - 4
Restitution Scheme provision - (2,172)
Lease modification (119) 649
Business sale process 70 93
Profit upon sale of non-core business
unit - (4,507)
Acquisition fees and integration costs 971 -
Historic Share warrant exercise 310 -
Legal fees related to the defence 119 -
of an ongoing supplier dispute
Impairment of intangible assets 205 -
Cloud configuration and customisation
costs 397 630
1,629 (4,152)
--------- ----------- -----------------
(1) See note 8 for an explanation and reconciliation in relation
to the prior year restatement following the Groups adoption of the
IFRIC agenda decision on cloud computing implementation,
configuration and customisation costs.
-- Employee restructuring costs relate to a rationalisation
programme across various departments during the year as a result of
efficiencies delivered through the continued integration of the
Group's ERP system launched in FY21 and were cash costs in FY22 and
FY21.
-- The insurance advisor provision costs in the prior year
represent a provision booked for costs repayable on advisor fees in
relation to the FCA Investigation which has been released in FY22
as repayment is not considered probable. Cash costs were GBP44k
(FY21 - GBP17k).
-- The onerous service contract cost in the prior year relate to
costs associated with third party service arrangements no longer
utilised (or in the process of being ceased) by the business. This
was a cash cost in FY22 of GBP47k (FY21 - GBP23k).
-- Circuit termination charges in the prior year relate to
cancellation costs incurred on unused circuits / connections
cancelled during the year, as part of the Group's network
rationalisation review. This was non-cash in FY21.
-- The Restitution Scheme provision in the prior year related to
the provision released upon closure of the scheme. The Restitution
Scheme originally related to an estimate of the costs to settle
with net purchasers of ordinary shares in the Company between 9
November 2015 and 7 November 2016 as agreed with the FCA. The cash
cost in FY21 was GBP7,730k.
-- Lease modification costs represent legal and advisor fees
incurred in relation to a new leasehold property in York prior to
the lease being signed (GBP30k), residual costs incurred after the
business terminated a lease in the prior year (GBP79k) and a credit
relating to the early termination of the office lease in Hyderabad
(GBP228k). This was a cash cost in FY22 of 109k (FY21 -
GBPnil).
-- Business sale process costs were incurred as a result of the
sales process during FY21. Cash costs were GBP70k in FY22 (FY21 -
GBP721k).
-- Profit upon sale of non-core business unit in the prior year
resulted from the sale of assets and knowhow for the provision of
maintenance services to EDF nuclear power stations under the EDF
Contract. The total consideration was GBP5,750k and was a received
in cash in FY22 (no cash impact in FY21).
-- Acquisition and integration costs were incurred in relation
to the purchase of Piksel and 7 Elements during the year (note 7)
and relate to legal and advisor fees and due diligence costs and
other direct costs incurred in integrating the two businesses into
the Group. Cash costs were GBP837k.
-- During the year options were exercised by Barclays Bank PLC
over warrants with an exercise price of 36p, settled in cash,
resulting in an expense of GBP310,000. The warrants were issued on
demerger in April 2013 for warrants previously held in Redstone
plc, and could have been converted to shares at any time before the
sale of the entire share capital of the company. Redcentric plc was
created when Redstone plc demerged its network-based management
service business. Cash costs were GBP310k.
-- Legal fees related to the defence of an ongoing supplier
dispute were charged by the Group's advisors during the year. Cash
costs were GBP119k.
-- Cloud configuration and customisation costs relate to
expenditure previously capitalised in relation to the Group's
implementation and development of Dynamics 365(1) - this was a cash
costs in both years.
3) Provisions
Onerous
Restitution Scheme Dilapidations service
Scheme fees provision contract Total provision
provision provision provision
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- -------------- ------------ ---------------- ----------- ------------------
At 1 April 2020 11,429 - 2,526 698 14,653
Additional provisions created
during the period 130 553 333 21 1,037
Released during the period (2,172) - (164) (193) (2,529)
Utilised during the period (9,387) - - (505) (9,892)
------------------------------- -------------- ------------ ---------------- ----------- ------------------
At 31 March 2021 - 553 2,695 21 3,269
Additional provisions created
during the period - - 1,189 - 1,189
Provisions acquired from
business combination - - - 577 577
Released during the period - (527) - - (527)
Utilised during the period - (26) (1) (598) (625)
------------------------------- -------------- ------------ ---------------- ----------- ------------------
At 31 March 2022 - - 3,883 - 3,883
------------------------------- -------------- ------------ ---------------- ----------- ------------------
FY22 Analysed as:
Current - - - - -
Non-current - - 3,883 - 3,883
------------------------------- -------------- ------------ ---------------- ----------- ------------------
- - 3,883 - 3,883
------------------------------- -------------- ------------ ---------------- ----------- ------------------
FY21 Analysed as:
Current - 553 - 21 574
Non-current - - 2,695 - 2,695
------------------------------- -------------- ------------ ---------------- ----------- ------------------
- 553 2,695 21 3,269
------------------------------- -------------- ------------ ---------------- ----------- ------------------
The Restitution Scheme fees provision represents costs which
were potentially repayable on adviser fees in relation to the FCA
Investigation. This provision was released in FY22 as repayment is
no longer considered probable.
The dilapidations provision represents the estimated costs
associated with returning certain leasehold properties to the
original condition upon exiting the lease. Given there is
estimation in determining the quantum of provisions to be
recognised a third-party expert was engaged to determine
appropriate estimates. After initial measurement, any subsequent
adjustments to the dilapidations provision will be recorded against
the original amount included in right of use assets with a
corresponding adjustment to future depreciation charges. The
utilisation of the dilapidations provision will be in line with the
end of the leasehold properties lease terms to which the provisions
relate.
The onerous service contract provision relates to the costs
associated with third party services arrangements no longer
utilised by the business and service contracts with customers where
the Group estimates the cost to fulfil the contract will exceed the
benefit.
4) Intangible Assets
Customer
contracts
and related Software
Goodwill relationships Trademarks and licences Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April 2020 43,269 62,284 275 5,669 111,497
Additions (restated(1)
) - - - 1,047 1,047
Disposals (1,185) - - (130) (1,315)
Exchange differences - - - (1) (1)
-------------------------------- ----------- --------------- ----------- -------------- --------
At 31 March 2021 (restated(1)
) 42,084 62,284 275 6,585 111,228
Additions - - - 502 502
Additions on acquisition
(note 7) 10,332 2,746 174 31 13,283
Disposals - - - (1,548) (1,548)
Exchange differences - - - - -
At 31 March 2022 52,416 65,030 449 5,570 123,465
-------------------------------- ----------- --------------- ----------- -------------- --------
Accumulated amortisation
and impairment
At 1 April 2020 - 38,317 275 4,490 43,082
Charged in year (restated(1)
) - 6,252 - 670 6,922
Disposals - - - (56) (56)
At 31 March 2021 (restated(1)
) - 44,569 275 5,104 49,948
Charged in year - 6,324 174 475 6,973
Disposals - - - (1,182) (1,182)
At 31 March 2022 - 50,893 449 4,397 55,739
-------------------------------- ----------- --------------- ----------- -------------- --------
At 31 March 2022 52,416 14,137 - 1,173 67,726
-------------------------------- ----------- --------------- ----------- -------------- --------
At 31 March 2021 (restated)(1) 42,084 17,715 - 1,481 61,280
-------------------------------- ----------- --------------- ----------- -------------- --------
Customer contracts have a weighted average remaining
amortisation period of 4 years and 4 months (FY21: 3 years and 11
months).
Software and licences include GBP0.1m (FY21 - GBP0.6m) of
additions in relation to customer capital expenditure.
(1) Application of IFRIC agenda decision
During the year and following the release of the IFRIC guidance
issued in April 2021 in relation to Saa) cloud computing
implementation costs, the Group has reviewed its accounting policy
in relation to the customisation and configuration costs previously
capitalised. Following this review costs capitalised in the year to
31 March 2020 of GBP4.4m have now been expensed and amortisation of
GBP0.4m previously charged on these assets in the year has been
reversed. In addition, GBP0.6m of costs previously capitalised in
the year ended 31 March 2021 have been expensed and associated
amortisation of GBP0.4m reversed. See note 8 for further details on
the prior year restatement.
Goodwill and intangible assets are allocated to cash generating
units ("CGUs") in order to be assessed for potential impairment.
CGUs are defined by accounting standards as the lowest level of
asset groupings that are capable of generating separately
identifiable cashflows independently of other CGUs. During the
year, and as a result of the acquisitions completed, the Group has
considered the following:
- Following the hive out of trade and assets from Piksel into
RSL on 28 February 2022, the acquisition does not result in a
separate CGU;
- The acquisition of 7 Elements on 14 March 2022 results in a new CGU "Security Services".
The CGUs and allocation of Goodwill to those CGUs is shown
below:
Year ended Year ended
31 March 31 March
2022 2021
GBP'000 GBP'000
-------------------- ----------- -----------
IT Managed Service 50,765 42,084
Security Services 1,651 -
52,416 42,084
-------------------- ----------- -----------
Goodwill is tested annually for impairment and, to confirm
whether an impairment of the goodwill is necessary, management
compares the carrying value to the value in use. Other intangible
assets are tested for impairment whenever events or a change in
circumstances indicate carrying values may no longer be
recoverable.
The value in use has been calculated using budgeted cash flow
projections to the period of 31 March 2024, extrapolated for a
further three years by an average annual revenue growth rate of
2.0% (FY21: 1.5%). A terminal value based on a perpetuity
calculation using a 0.0% real growth rate was then added (FY21:
0.0% growth).
In addition to revenue growth, the key assumptions used in the
impairment testing were as follows:
- Gross margin percentage reducing to 63% (FY21: 60.5%);
- Operating costs increasing by 1.5% (FY20: 1.5%);
- Pre-tax discount rate of 11.8% (FY21: 8.3%) (post tax rate of
7.2% (FY21: 7.0%) estimated using weighted average cost of capital,
adjusted to reflect current market assessments of the time value of
money and the risks specific to the Group; and
- Terminal growth rate percentage consistent with the market the entity operates in.
A reasonably possible adverse movement in any of the above key
assumptions made would not give rise to impairment.
5) Property, plant and equipment
Leasehold Vehicles
improvements Office fixtures & computer
and fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 April 2020 (restated)(1) 7,528 1,033 21,559 30,120
Additions 404 442 940 1,786
Disposals (129) (103) (816) (1,048)
Exchange differences - (9) (24) (33)
--------------------------------- -------------------------- ---------------- ------------ --------
At 31 March 2021 (restated)(1) 7,803 1,363 21,659 30,825
Additions 527 107 1,630 2,264
Additions on acquisition
(note 7) 11 27 - 38
Disposals - (331) (25) (356)
Exchange differences - 16 - 16
At 31 March 2022 8,341 1,182 23,264 32,787
--------------------------------- -------------------------- ---------------- ------------ --------
Accumulated depreciation
At 1 April 2020 (restated)(1) 4,458 653 16,534 21,645
Charged in year 458 148 2,802 3,408
On disposals - - (32) (32)
Exchange differences - (8) (22) (30)
--------------------------------- -------------------------- ---------------- ------------ --------
At 31 March 2021 4,916 793 19,282 24,991
Charged in year 533 141 2,071 2,745
On disposals - (316) (9) (325)
Exchange differences - 4 - 4
At 31 March 2022 5,449 622 21,344 27,415
--------------------------------- -------------------------- ---------------- ------------ --------
Net book value
At 31 March 2022 2,892 560 1,920 5,372
At 31 March 2021 2,887 570 2,377 5,834
--------------------------------- -------------------------- ---------------- ------------ --------
Vehicles and computer equipment includes GBP1.0m (FY21 -
GBP1.3m) relating to customer capital expenditure.
(1) The cost of property, plant and equipment (PPE) at 1 April
2020 has been restated due to a change in accounting policy
following the Group's adoption of the IFRIC agenda decision on
cloud implementation, configuration and customisation costs. In
FY21 costs were reclassified from PPE to intangible assets.
Following the change in accounting policy and subsequent
restatement, these assets have been expensed to the income
statement retrospectively resulting in a restatement of the cost
and net book value of assets in FY20. For further details please
see note 8.
6) Right of use assets
Most of the Group's right-of-use assets are associated with our
leased property portfolio.
Land and Vehicles &
buildings computer equipment Total
GBP'000 GBP'000 GBP'000
Cost
At 1 April 2020 29,889 9,615 39,504
Additions - 2,092 2,092
Remeasurement (4,383) - (4,383)
At 31 March 2021 25,506 11,707 37,213
Additions 2,947 460 3,407
Disposals (1,479) (231) (1,710)
At 31 March 2022 26,974 11,936 38,910
--------------------------- ----------- -------------------- --------
Accumulated depreciation
At 1 April 2020 9,721 3,773 13,494
Charged in year 2,540 2,392 4,932
At 31 March 2021 12,261 6,165 18,426
Charged in year 2,252 2,326 4,578
Disposals (893) (239) (1,132)
At 31 March 2022 13,620 8,252 21,872
--------------------------- ----------- -------------------- --------
Net book value
At 31 March 2022 13,354 3,684 17,038
At 31 March 2021 13,245 5,542 18,787
--------------------------- ----------- -------------------- --------
Of the GBP3,407k right of use assets acquired in the year,
GBP438k was funded using leases that would have previously been
classified as finance leases under IAS17 (FY21: GBP2,092k).
7) Acquisition of subsidiary
Piksel Industry Solutions Limited ("Piksel")
On 30 September 2021, the Group acquired 100% of the issued
share capital of Piksel, obtaining control at this date. The
acquisition is in line with the Group's strategy to grow its
operations, both organically and through acquisitions. Piksel is a
provider of IT modernisation and digital transformation services
focussing primarily on the public cloud. Taking control of Piksel
significantly enhances Redcentric's service offerings in both cloud
and security and provides a complementary customer base with
excellent cross-sell opportunities. The Group also expects to
reduce costs through cost synergies as Piksel is integrated into
the Group.
The following table summarises the acquisition date fair value
of each major class of consideration transferred:
GBP000's
----------------------------------- ---------
Cash(4) 9,459
Novation of Intercompany loans(5) 3,069
Deferred consideration(6) 183
---------
12,711
---------
(4) Of the total cash consideration, $750k (GBP549k) is to be
held in escrow for a period of 12 months after which time the
balance will be released to the vendor less any claims made by the
Group to offset undisclosed liabilities.
(5) An intercompany receivable balance between Piksel and the
seller was novated to the acquiring group company, RSL, as part of
the acquisition.
(6) Deferred consideration is to offset against future costs
incurred as part of the transitional services agreement between
Piksel and the seller.
The Group incurred acquisition-related costs of GBP948,000 on
legal fees, due diligence costs and direct integration costs
relating to systems migration etc. These costs have been included
in exceptional costs (note 2).
The following table summarises the recognised amounts of assets
and liabilities assumed as the date of acquisition:
Note Book Fair Final
value value fair
GBP000's adjustments value
GBP000's GBP000's
--------------------------------------- ----- ---------- ------------- ----------
Tangible fixed assets 5 38 - 38
Customer relationships 4 - 1,868 1,868
Other intangible assets 4 28 174 202
Trade and other receivables 2,418 - 2,418
Cash and cash equivalents 965 - 965
Intercompany loans 3,069 - 3,069
Corporation tax receivable 557 - 557
Deferred tax 1,403 (467) 936
Trade and other payables (2,940) - (2,940)
Deferred income (1,817) - (1,817)
Payroll and social security creditors (345) - (345)
VAT liability (344) - (344)
Onerous contract provisions (577) - (577)
---------- ------------- ----------
Total identifiable net assets
acquired 2,455 1,575 4,030
---------- ------------- ----------
Goodwill 4 8,681
----------
Total consideration 12,711
----------
The goodwill arising on acquisition represents future income
from new customers, the potential to cross-sell existing Group
products to the established Piksel customer base as well and the
assembled workforce which increases the Group's competence in key
growth areas of the managed IT services sector allowing the Group
to provide additional services to its existing customer base,
together with the benefits to the Group in merging the business
with its existing infrastructure and the anticipated future
operating synergies from the new combination.
The fair value of the acquired customer relationships is
GBP1.9m. To estimate the fair value of the customer relationships
intangible asset, a multi-period excess earnings method "MEEM"
approach has been adopted, this approach considers the present
value of net cash flows expected to be generated by the customer
relationships, by excluding any cash flows related to contributory
assets.
The fair value of financial assets acquired includes trade
receivables with a fair value of GBP1.1m comprised of the gross
amount due under contracts, all of which is expected to be
collectable.
On 28 February 2022 the trade, assets and liabilities of Piksel
were hived out to the Group's trading subsidiary RSL. For the 5
months ended 28 February 2022, Piksel contributed revenue of
GBP4.9m and profits, before allocation of group overheads, share
based payments and tax, of GBP0.3m to the Group's results.
7 Elements Limited ("7 Elements")
On 14 March 2022 the Group acquired 100% of the issued share
capital of 7 Elements obtaining control at this date. 7 Elements is
an industry leading provider of security testing, incident response
management and bespoke security consultancy services. The
acquisition significantly enhances the Group's service portfolio
with additional capacity within the increasingly important security
market. The acquisition is in line with the Group's strategy to
grow its operations, both organically and through acquisitions. The
following table summarises the acquisition date fair value of each
major class of consideration transferred:
GBP000's
---------------------------------------------------------- ---------
Cash(7) 2,409
Contingent consideration(8) 422
2,831
---------
(7) Of the cash consideration of GBP2.4m above, GBP0.13m
was paid after the year end
(1) The contingent consideration is payable on the performance
of the business over the next thirteen months (to the financial
year ended 31 March 2023) "earn out". Payment will be due
immediately once performance criteria have been satisfied over this
period. The potential undiscounted amounts of the contingent
payment are between GBPnil and GBP450,000. In considering the fair
value, management assessed recent trading performance and expected
performance once 7 Elements has been integrated into the Group
against the criteria of the earn out.
The Group incurred acquisition-related costs of GBP23,000 on
legal fees and due diligence costs. These costs have been included
in exceptional costs (note 2).
The following table summarises the recognised amounts of assets
and liabilities assumed as the date of acquisition:
Note Book Fair
value value Final
GBP000's adjustments fair value
GBP000's GBP000's
--------------------------------------- ----- ---------- ------------- ------------
Other intangible assets 4 3 - 3
Customer relationships 4 - 878 878
Trade and other receivables 168 - 168
Cash & cash equivalents 465 - 465
Trade and other payables (11) - (11)
Payroll and social security creditors (1) - (1)
Deferred Tax - (220) (220)
VAT liability (50) - (50)
Corporation tax liability (52) - (52)
---------- ------------- ------------
Total identifiable net assets
acquired 522 658 1,180
---------- ------------- ------------
Goodwill 4 1,651
------------
Total consideration 2,831
------------
The goodwill arising on acquisition represents future income
from new customers, the potential to cross-sell existing Group
products to established 7 Elements customer base and the assembled
workforce which increases the Group's competence in key growth
areas of the managed IT services sector.
The fair value of the acquired customer relationships is
GBP878,000. To estimate the fair value of the customer
relationships intangible asset, a multi-period excess earnings
method "MEEM" approach has been adopted, this approach considers
the present value of net cash flows expected to be generated by the
customer relationships, by excluding any cash flows related to
contributory assets.
The fair value of financial assets acquired includes trade
receivables with a fair value of GBP159,000 comprised of the gross
amount due under contracts, all of which is expected to be
collectable.
7 Elements earned revenue of GBP104,000 and delivered profits,
before allocation of group overheads, share-based payments and tax
of GBP54,000 in the period since acquisition.
Unaudited pro-forma full year information
The following unaudited pro-forma summary presents the Group as
if the business acquired during FY22 had been part of the Group
since 1 April 2021. This includes the results of the acquired
business, depreciation of the acquired assets and an amount of
GBP160,000 relating to the amortisation of the acquired intangible
assets recognised on acquisition. This information is presented
purely for illustrative purposed and does not necessarily reflect
the actual underlying results that would have occurred.
Pro-forma
year ended
31 March
2022
GBP000's
--------- ------------
Revenue 100,169
Profit 6,903
--------- ------------
8) Prior year restatement
In April 2021, the IFRIC published an agenda decision to clarify
the accounting treatment in relation to the configuration and
customisation costs incurred in implementing SaaS cloud computing
arrangements, issuing the following conclusions:
- Any amounts for configuration and customisation to the cloud
vendor, that are not distinct from access to the cloud software
should be expensed over the SaaS contract term;
- Any code that is created and controlled by the entity may give
rise to an identifiable intangible asset, however this is expected
to be in very limited circumstances;
- In all other instances, cloud configuration and customisation
costs should be expensed as the configuration and customisation
services are received.
Due to the nature of this decision combined with the level of
investment made by the Group on Dynamics 365, the Group's
accounting policy in relation to cloud implementation,
customisation and configuration costs has been reviewed and amended
to align with the issued IFRIC guidance. The revision to the
accounting policy has been accounted for retrospectively resulting
in a prior year restatement and represents a non-cash
adjustment.
T he Group identified GBP4.4m of assets in FY20, GBP0.6m of
additions in FY21 and a further GBP0.4m of costs incurred in FY22
that relate to configuration and customisation costs which should
now be expensed after further consideration of the IFRIC guidance.
In FY21 in relation to these assets, GBP0.4m of amortisation was
charged, which is to be reversed.
These costs give rise to a reduction in the tax charge for the
year ended 31 March 2020 of GBP842k and corresponding increase to
the deferred tax asset.
The affected financial statement line items are as follows:
31 March 31 March
2021 (previously 2021
reported) Restatement (restated)
GBP000's GBP000's GBP000's
------------------------------------------- ------------------------------- ---------------- ------------
Income Statement Impact
Included within admin expenses:
Amortisation of intangible fixed
assets (7,337) 415 (6,922)
Exceptional items 4,782 (630) 4,152
Operating profit 12,998 (216) 12,782
Profit/(loss) on ordinary activities
before taxation 11,538 (216) 11,322
Income tax (expense)/credit (2,311) - (2,311)
Profit/(loss) for the period attributable
to owners of the parent 9,227 (216) 9,011
Total Comprehensive income/(loss)
for the period 9,106 (216) 8,890
Basic earnings/(loss) per share 6.01 (0.14) 5.87
Diluted earnings/(loss) per share 5.93 (0.14) 5.79
31 March 31 March
2021 (previously 2021
reported) Restatement (restated)
GBP000's GBP000's GBP000's
-------------------------------------------------------- ---------------------- ------------ ---------------
Statement of Financial Position
Intangible assets 65,929 (4,649) 61,280
Deferred Tax Assets 561 842 1,403
-------------------------------------------------------- ---------------------- ------------ ---------------
Total non-current assets 91,111 (3,807) 87,304
-------------------------------------------------------- ---------------------- ------------ ---------------
Net assets 75,897 (3,807) 72,090
Retained earnings 11,960 (3,807) 8,153
-------------------------------------------------------- ---------------------- ------------ ---------------
Total equity 75,897 (3,807) 72,090
31 March
2021 31 March
(previously 2021
reported) Restatement (restated)
GBP000's GBP000's GBP000's
--------------------------------------------------- ----------------------- ---------------- ------------
Statement of Cash Flows Impact
Operating profit/(loss) 12,998 (216) 12,782
Depreciation and amortisation 15,677 (415) 15,262
Exceptional items (4,782) 630 (4,152)
Exceptional items (cash) (8,884) (630) (9,514)
Operating cash flow before changes
in working capital 15,696 (630) 15,066
Net cash generated from operating activities 17,428 (630) 16,798
Purchase of intangibles (1,397) 630 (767)
Net cash used in investing activities (2,938) 630 (2,308)
In accordance with IAS 1, a third balance sheet has been
prepared to illustrate the impact to the opening Balance Sheet for
the year ended 31 March 2021. Costs that the Group identified that
were previously capitalised under cloud computing arrangements in
FY20 totalling GBP4.4m have been expensed and the associated
amortisation charge of GBP0.4m has been reversed.
The opening balance sheet of the prior year has therefore been
restated for these adjustments with the affected financial
statement line items as follows:
1 April
2020
1 April
(Previously 2020
reported) Restatement (restated)
GBP000's GBP000's GBP000's
---------------------------------------------- ----------------- ---------------- ---------------
Statement of financial position impact
Tangible assets 12,909 (4,434) 8,475
Deferred tax assets 1,482 842 2,324
Total non-current assets 108,816 (3,592) 105,224
Net assets 59,801 (3,592) 56,209
Retained Earnings 4,096 (3,592) 504
9) Earnings per share (EPS)
Year ended
Year ended 31 March
31 March 2021 (restated(1)
2022 )
Earnings GBP'000 GBP'000
--------------------------------------- ------------------- ----------------- -----------------------
Statutory earnings 6,940 9,011
Tax (credit)/charge (1,404) 2,311
Amortisation of acquired intangibles 6,498 6,252
Share-based payments 1,181 687
Exceptional items 1,629 (4,152)
Adjusted earnings before tax 14,844 14,109
Notional tax charge (2,820) (2,681)
---------------------------------------------- ------------ ----------------- -----------------------
Adjusted earnings 12,024 11,428
---------------------------------------------- ------------ ----------------- -----------------------
Weighted average number of ordinary Number Number
shares '000 '000
--------------------------------------- ------------------- ----------------- -----------------------
In issue 156,992 153,930
Held in treasury (420) (439)
---------------------------------------------- ------------ ----------------- -----------------------
For basic EPS calculations 156,572 153,491
Effect of potentially dilutive
share options 2,803 2,215
---------------------------------------------- ------------ ----------------- -----------------------
For diluted EPS calculations 159,375 155,706
---------------------------------------------- ------------ ----------------- -----------------------
EPS Pence Pence
--------------------------------------- ------------------- ----------------- -----------------------
Basic 4.43p 5.87p
Adjusted 7.68p 7.45p
Basic diluted 4.36p 5.79p
Adjusted diluted 7.54p 7.34p
---------------------------------------------- ------------ ----------------- -----------------------
The calculation of basic and diluted EPS is based on the above
earnings and number of shares. In line with the Group's policy, the
notional tax charge above is calculated at a standard rate of 19%
(2021 - 19%).
10) Contingent liability
During the FCA investigation, the Group made a claim under its
insurance policy in relation to defence costs for which a provision
was recognised in the prior year of GBP0.5m for costs potentially
repayable (the "scheme fees provision"). Following professional
advice and further developments in the year, the Group no longer
consider repayment of these fees to be probable. As a result, the
related provision has been released and a contingent liability is
disclosed for the GBP0.5m.
11) Subsequent events
Subsequent to the year-end, on 26 April 2022, the Group
completed a refinance of its debt facilities that were due to
mature on 30 June 2022. The new debt facilities consist of an
GBP80m Revolving Credit Facility and a GBP20m accordion facility
and are provided by a new four bank group consisting of NatWest,
Barclays, Bank of Ireland and Silicon Valley Bank. The New Facility
has an initial maturity date of 26 April 2025 with options to
extend by a further one or two years. The borrowing cost of the RCF
is determined by the level of the Group's leverage and has a
borrowing cost of 175 basis points over SONIA at the Group's
current leverage levels. An arrangement fee of 75 basis points will
be payable upfront, in addition to a commitment fee on the undrawn
portion of the new RCF, on equivalent terms to the previous
facility. The Group is required to comply with financial covenants
for adjusted leverage (net debt(2) to adjusted EBITDA(2) ),
cashflow cover (adjusted cashflow to debt service, where adjusted
cashflow is defined as adjusted EBITDA(2) less tax paid, dividend
payments, IFRS16 lease repayments and cash capital expenditure) and
provisions relating to guarantor coverage such that guarantors must
exceed a prescribed threshold of the Group's gross assets, revenue
and Adjusted EBITDA(2) . Covenants are tested quarterly each year.
The New Facility provides the Group with additional liquidity to be
used for working capital purposes and to fund acquisitions, in
accordance with the Group's stated strategy. No security has been
provided with regards to the RCF.
On 7 June 2022, RSL acquired the consulting business of Sungard
Availability Services (UK) Limited (in administration) for GBP4.2m
consideration in cash. The business provides services in respect of
business continuity, cloud and infrastructure, cyber resilience,
disaster recovery and hybrid cloud transformation services
alongside the provision and operation of cloud related services.
Management consider the signing of the agreement for the sale of
assets as the change of control and therefore acquisition date for
the transaction. No costs in relation to this acquisition have been
incurred in the year.
On 27 June 2022, RSL acquired 100% of the issued share capital
of 4D for GBP10.5m consideration paid in cash. The business
provides colocation, cloud and connectivity services to mid-market
customers. The primary purpose of the business combination is to
scale the Group's existing revenues in this area with significant
synergies expected as the acquisition is integrated into the Group.
Management consider signing of the share purchase agreement on 27
June 2022 as the change of control and therefore acquisition date
for the transaction. No costs in relation to this acquisition have
been incurred in the year.
On 6 July 2022, RSL acquired certain business and assets
relating to three data centres from Sungard Availability Services
(UK) Limited (in administration) for initial consideration of
GBP10.1m with contingent consideration with a maximum potential
value of GBP19m depending on customer retention and certain
performance criteria.
The Group is undertaking an exercise to establish the fair value
of the net assets acquired in each of these post year end
acquisitions. However, due to the timing of the acquisitions this
exercise is ongoing and it is not possible to provide further
detail at this stage.
On 8 July 2022 the Group settled a supplier dispute resulting in
the payment of contract termination fees (GBP0.4m) and legal fees
(GBP0.1m) which will be accounted for as exceptional items in
FY23.
(2) For an explanation of the alternative performance measures
used in this report, please refer Appendix 1.
Appendix 1 - Alternative Performance Measures
Alternative Performance Measures
This announcement contains certain financial measures that are
not defined or recognised under IFRS but are presented to provide
readers with additional financial information that is evaluated by
management and investors in assessing the performance of the
Group.
This additional information presented is not uniformly defined
by all companies and may not be comparable with similarly titled
measures and disclosures by other companies. These measures are
unaudited and should not be viewed in isolation or as an
alternative to those measures that are derived in accordance with
IFRS.
Recurring revenue
Recurring revenue is the revenue that annually repeats either
under contractual arrangement or by predictable customer habit. It
highlights how much of the Group's total revenue is secured and
anticipated to repeat in future periods, providing a measure of the
financial strength of the business. It is a measure that is well
understood by the Group's investor and analyst community and is
used for internal performance reporting.
Year Year ended
ended 31 March
31 March 2021
2022
GBP'000 GBP'000
----------------------- ---------- -----------
Reported revenue 93,328 91,399
Non-recurring revenue (10,363) (9,502)
----------------------- ---------- -----------
Recurring revenue 82,965 81,897
----------------------- ---------- -----------
Recurring revenue percentage is the percentage of recurring
revenue as a proportion of total revenue.
Recurring revenue makes up 88.9% of total revenue in FY22, a
decrease of 1% from prior year (89%).
Maintenance capital expenditure
Maintenance capital expenditure is the capital expenditure that
is incurred in support of the Group's underlying infrastructure
rather than in support of specific customer contracts. This metric
shows the level of internal investment the Group is making through
capital expenditure. As the measure explains and analyses routine
capital expenditure, land and buildings (including any associated
assets relating to dilapidation provisions) and sale and lease back
additions are excluded due to the infrequency that this expenditure
occurs. Customer capital expenditure relates to assets utilised by
the Group in delivering managed services to our customers.
Year ended
31 March
2021
Year
ended
31 March
2022 (restated)(1)
GBP'000 GBP'000
------------------------------------------------------ ---------- ---------------
- Property plant and equipment additions - excluding
additions on acquisition (note 5) 2,264 1,786
- Intangible additions - excluding additions
on acquisition (note 4) 502 1,047
- Right of use asset additions - excluding land
and buildings and sale and leaseback transaction
(note 6 460 1,056
------------------------------------------------------ ---------- ---------------
Reported capital expenditure incurred 3,226 3,889
Customer capital expenditure incurred (1,076) (1,927)
------------------------------------------------------ ---------- ---------------
Maintenance capital expenditure incurred 2,150 1,962
------------------------------------------------------ ---------- ---------------
(1) For an explanation and reconciliation in relation to the
prior year restatement following the Group's adoption of the IFRIC
agenda decision on cloud implementation, configuration and
customisation costs, please refer to note 8.
Capital expenditure of GBP3.2m has reduced by GBP0.7m (FY21:
GBP3.9m) driven by a decrease in customer capital expenditure (down
GBP0.9m to GBP1.1m) reflecting the delay in large scale IT
projects. Maintenance capital expenditure has increased by GBP0.2m
to GBP2.2m up from GBP2.0m. We will continue to monitor the Group's
capital requirements and invest in the business when appropriate.
Of the GBP3.2m capital expenditure incurred, GBP2.8m was paid in
cash during the year .
EBITDA and Adjusted EBITDA
Adjusted EBITDA is EBITDA excluding exceptional items (as set
out in note 2), share-based payments and associated National
Insurance. The same adjustments are also made in determining the
adjusted EBITDA margin. Items are only classified as exceptional
due to their nature or size.
The Board considers that this metric provides a useful measure
of assessing trading performance of the Group as it excludes items
which impact financial performance such as exceptional costs and
the amortisation of acquired intangibles arising from business
combinations which varies year on year dependent on the timing and
size of any acquisitions.
Year
ended Year ended
31 March 31 March
2022 2021 (restated)(1)
GBP'000 GBP'000
------------------------------------------------- ---------- --------------------
Reported operating profit 6,607 12,782
Amortisation of intangible assets arising on
business combinations 6,498 6,252
Amortisation of other intangible assets 475 670
Depreciation on tangible assets 2,745 3,408
Depreciation on ROU assets 4,578 4,932
EBITDA 20,903 28,044
Exceptional items 1,629 (4,152)
Share-based payments and associated National
Insurance 1,181 687
------------------------------------------------- ---------- --------------------
Adjusted EBITDA 23,713 24,579
------------------------------------------------- ---------- --------------------
EDF Contribution (3) - (725)
------------------------------------------------- ---------- --------------------
Adjusted EBITDA (excluding EDF contribution)(3) 23,713 23,854
------------------------------------------------- ---------- --------------------
(1) For an explanation and reconciliation in relation to the
prior year restatement following the Group's adoption of the IFRIC
agenda decision on cloud implementation, configuration and
customisation costs, please refer to note 8.
(3) Excluding EDF Contribution, as above.
Adjusted EBITDA decreased to GBP23.7m, GBP0.9m lower than prior
year, with adjusted EBITDA margin of 25% (down from 27%). Excluding
the EDF Contribution (3) , adjusted EBITDA for FY22 was marginally
down (0.6%) compared to prior year adjusted EBITDA of GBP23.9m.
EBITDA includes GBP0.6m delivered from the Piksel acquisition,
offset by increased electricity costs in H2.
Adjusted operating profit
Adjusted operating profit is operating profit excluding
amortisation on acquired intangibles, exceptional items and
share-based payments. The same adjustments are also made in
determining the adjusted operating profit margin and in determining
adjusted earnings profit per share ("EPS").
Year
ended Year ended
31 March 31 March
2022 2021 (restated)(1)
GBP'000 GBP'000
---------------------------------------------- ---------- --------------------
Reported operating profit 6,607 12,782
Amortisation of intangible assets arising on
business combinations 6,498 6,252
Exceptional items 1,629 (4,152)
Share-based payments 1,181 687
Adjusted operating profit 15,915 15,569
---------------------------------------------- ---------- --------------------
(1) For an explanation and reconciliation in relation to the
prior year restatement following the Group's adoption of the IFRIC
agenda decision on cloud implementation, configuration and
customisation costs, please refer to note 8.
The EPS calculation further adjusts for the tax impact of the
operating profit adjustments. This metric is used within the
Group's dividend policy and is therefore relevant for our
shareholders.
Adjusted operating costs
Adjusted operating costs are operating costs less depreciation,
amortisation, exceptional items, share-based payments and foreign
exchange. This metric shows the trading operating expenditure of
the Group, excluding non-trading and non-recurring items which
impact financial performance. These are controllable operating
costs which provide investors with useful information about how the
Group is managing its expenditure.
Year ended
31 March
2021
Year
ended
31 March
2022 (restated)(1)
GBP'000 GBP'000
------------------------------------------------- ---------- ---------------
Reported operating expenditure 53,046 49,664
Depreciation ROU assets (4,578) (4,932)
Depreciation of tangible assets (2,745) (3,408)
Amortisation of intangibles arising on business
combinations (6,498) (6,252)
Amortisation of other intangible assets (475) (670)
Exceptional items (1,629) 4,152
Other operating income (103) (4,507)
Share-based payments (1,181) (687)
Adjusted operating expenditure 35,837 33,360
------------------------------------------------- ---------- ---------------
(1) For an explanation and reconciliation in relation to the
prior year restatement following the Group's adoption of the IFRIC
agenda decision on cloud implementation, configuration and
customisation costs, please refer to note 8.
Adjusted cash generated from operations
Adjusted cash generated from operations is reported cash
generated from operations plus the cash cost of exceptional items.
As the Group has been involved in acquisitions and has had other
significant, non-repeatable cash impacting items, this measure
allows investors to see the cash generated from operations
excluding these items which are one-off by nature and therefore
will not repeat in future years.
Year
ended Year ended
31 March 31 March
2022 2021 (restated)(1)
GBP'000 GBP'000
----------------------------------------- ---------- --------------------
Reported cash generated from operations 17,168 16,946
Cash costs of exceptional items 2,091 9,514
----------------------------------------- ---------- --------------------
Adjusted cash generated from operations 19,259 26,460
----------------------------------------- ---------- --------------------
(1) For an explanation and reconciliation in relation to the
prior year restatement following the Group's adoption of the IFRIC
agenda decision on cloud implementation, configuration and
customisation costs, please refer to note 8.
Adjusted net (debt)/cash
Adjusted net cash/debt is reported net debt (borrowings net of
cash) less supplier loans and less lease liabilities that would
have been classified as operating leases under IAS17 and is a
measure reviewed by the Group's banking syndicate as part of
covenant compliance.
Year
ended Year ended
31 March 31 March
2022 2021
GBP'000 GBP'000
--------------------------------------------------- ---------- -----------
Reported net debt (16,645) (15,569)
Supplier loans 1,004 1,491
Lease liabilities that would have been classified
as operating leases under IAS 17 14,096 15,058
--------------------------------------------------- ---------- -----------
Adjusted net (debt)/cash (1,545) 980
--------------------------------------------------- ---------- -----------
Normalised net debt movement
The normalised net debt movement, as summarised in the net debt
table details the movement in net debt before one-off (exceptional)
amounts and is therefore a useful indicator to the potential
movement in net debt in FY23.
David Senior
Chief Financial Officer
21 July 2022
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END
FR UAVRRUWUBURR
(END) Dow Jones Newswires
July 21, 2022 02:00 ET (06:00 GMT)
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