Redcentric (RCN) H2 23/24 earnings summary

Executive summary

• Revenue grew 15% year-over-year to £163.2m, with recurring revenue up 16% to £149.1m, representing 91% of total revenue.

• Adjusted EBITDA increased 16% to £28.3m, maintaining a 17% margin post-acquisitions.

• Integration of acquired businesses is largely complete, with over £22m of costs removed and significant synergy realization.

• Strong organic growth driven by an enlarged customer base, new products, and successful cross-selling.

Financial highlights

• Gross profit margin improved to 72.3% from 71.2% year-over-year, aided by higher-margin cloud business.

• Adjusted operating costs rose 17% to £89.7m, reflecting full-year impact of acquisitions and higher electricity costs.

• Net bank debt increased 18% to £42.0m, mainly due to capex and exceptional items from data centre rationalisation.

• Adjusted earnings per share fell 25% to 1.99p, reflecting lower operating profit and reduced exceptional items.

• Maintenance capex rose to £4.1m, supporting network and data centre improvements.

Outlook and guidance

• FY25 will benefit from a predicted £8.1m reduction in electricity costs due to efficiency measures and lower commodity prices.

• Organic revenue growth target set at 5% per annum, with annualised EBITDA growth of 7.5% and a continued 25% adjusted EBITDA margin target.

• Maintenance capex expected at £4m per year; customer capex to normalise at £6m, with a temporary increase to £8m in FY25.

• Dividend policy maintained at 3.6p per share, with selective share buybacks planned.

• Segmental reporting for Data Centre and MSP businesses to be introduced in March 2025 accounts.