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Redcentric saw surge in sales opportunities in March

The share repurchase programme has been suspended and the board said it is highly unlikely it will recommend the payment of a final dividend in respect of the fiscal year just ended

Redcentric PLC -
More than half of Redcentric's non-recurring revenue has historically been derived from the Health sector

Redcentric PLC (LON:RCN), the managed information technology services provider, saw a material increase in sales opportunities in March as a result of the COVID-19 pandemic.

The surge happened in the second half of the month and meant that the volume of new recurring revenue contracts signed in March was materially above that seen in previous years.

The group expects new sales volumes in April will be in line with those normally seen at this time of the year.

Looking further forward, Redcentric anticipates a reduction in sales to new customers and a slowdown in major change projects from existing customers until such time as the COVID-19 crisis is averted. It also anticipates that some of its customers will come under pressure as a result of the COVID-19 pandemic and this may lead to delayed customer receipts and increased business failures.

Offsetting this, it expects a lower level of normalised cancellations and renewal churn in the same period.

As for the fiscal year just ended, trading was in line with expectations.

Net debt at 31 March was £13.5mln after £400,000 or so of share buybacks executed in the second half of the financial year. In view of current economic uncertainty, the board has suspended the share repurchase programme.

Aside from the welcome uplift in sales opportunities, the current coronavirus (COVID-19) crisis naturally presents certain challenges to the company but the board believes the company is well-placed to survive.

90% of the group’s revenues are recurring in nature and more than half of its non-recurring revenue has historically been derived from the Health sector, Redcentric noted.

The business is operating profitably and is generating cash. The group has low levels of borrowing, currently running at less than one year’s underlying earnings (EBITDA as calculated on a pre-IDRS16 accounting standards basis).

At the end of March, gross cash was £3.7mln with a further £8.0mln available from undrawn bank credit facilities.

In a separate announcement, Redcentric revealed it has parted ways with its chief financial officer, Dean Barber.

He has been replaced by David Senior, who has been the finance director since 2017. Senior will join the board following his promotion.

In a separate announcement, the company said trading in the year just ended

Shares in Redcentric were up 5.9% at 104.3p.

Quick facts: Redcentric PLC

Price: 116 GBX

AIM:RCN
Market: AIM
Market Cap: £172.25 m
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