Redcentric plc Annual Report 2019

FY2019 Annual Report · Redcentric plc
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R E P O R T   &   A C C O U N T S 
R E P O R T   &   A C C O U N T S 

2019
2019

Year ended 31 March 2019
Redcentric plc

Redcentric Report & Accounts 2019

O U R   VA L U E
P R O P O S I T I ON

ORGANISATIONAL AGILITY

ASSURED AVAILABILITY

SMARTER WORKING

Helping organisations 
respond to operational, 
ﬁ nancial and regulatory 
pressures

Delivering the robust 
infrastructure and resilient 
environments that 
organisations can rely
on for productivity, 
performance and proﬁ t 
regulatory pressures

Enabling and empowering 
organisations to connect, 
communicate, collaborate, 
change and compete 
through the intelligent 
leveraging of technology

2

Contents

Strategic report

Chairman’s statement

Chief Executive’s review

Financial review

Risk management

Corporate responsibility

Governance

Directors’ proﬁ les

Corporate governance report

Directors’ report

Statement of directors’ responsibilities

Directors’ remuneration report

Auditors’ report to the members of Redcentric plc

Financial Statements

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Statement of Financial Position

Consolidated Cash Flow Statement

Notes to the Consolidated Financial Statements

Company Balance Sheet

Company Statement of Changes in Equity

Notes to the Company Financial Statements

Redcentric Report & Accounts 2019

4

5-7

8-15

16-17

18

19

20-23

24-26

27

28-33

34-40

41

42

42

43

44

45-73

74

75

76-78

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Strategic Report

Redcentric Report & Accounts 2019

Chairman’s statement

I am pleased to present Redcentric’s results for the year ended 31 March 2019.

The Chief Executive’s review highlights the progress made in addressing the signiﬁ cant challenges that 
the business has faced over the last three ﬁ nancial years and the positive steps taken this year to position 
the company for the future. The cost base has received considerable attention, ensuring that we have 
mitigated some customer losses. In the second half of the year, the business had particular success in the 
public sector by winning a number of the Health and Social Care Network (HSCN) tenders. The balance 
sheet is strong with exemplary cash ﬂ ows for the year resulting in a net debt reduction of £10.1m.
Our restructuring and attention to sales growth is our business imperative.

Financial results

Revenue declined by 6.7% to £93.3m, and adjusted EBITDA 
decreased from £18.1m to £16.7m. Statutory operating proﬁ t 
decreased from £0.9m to an operating loss of £0.3m.

Net debt fell from £27.7m to £17.6m, a decrease of £10.1m 
in the year. 

Finally, we are also pleased to announce that Dean Barber 
will be joining the Board as Chief Financial Ofﬁ cer and 
Executive Director on 1 September 2019. 

My thanks to the Board for their support, and special thanks 
to our management and employees for their hard work and 
dedication to progress the Company’s performance.

Outlook

The recent Board and management changes, operational 
improvements and ﬁ nancial stability of the Company, all 
demonstrate that we are well positioned for the future
and a return to organic revenue growth.

Chris Cole

Non-Executive Chairman

Operating cash ﬂ ows were particularly strong with an 
operating cash conversion of 127% reﬂ ecting a signiﬁ cant 
reduction in debtor days to 38.8 days at 31 March 2019
(48.6 days: 31 March 2018).

Dividend

At the half year we announced the reinstatement of a 
progressive dividend policy. An interim dividend of 0.4p
was paid in December 2018, reﬂ ecting a dividend cover of
4 times adjusted earnings. In light of the continued excellent 
cash performance, the Board has re-evaluated this policy 
in the second half of the year and decided to increase the 
dividend to reﬂ ect a cover of 2 times adjusted earnings.
This will result in a ﬁ nal dividend of 1.0p per share.

In addition to this ﬁ nal dividend, the Board will also be 
seeking approval at the upcoming AGM to buy back up to 
5% of the issued share capital of the Company. 

Board changes and people

In November 2018, Redcentric announced the resignation 
of Chris Jagusz from his directorship and position as Chief 
Executive Ofﬁ cer. Peter Brotherton, Chief Financial Ofﬁ cer, 
assumed an interim position as Chief Executive and we are 
pleased to report that he has now accepted the Board’s 
invitation to become the permanent Chief Executive. 

In February 2019, Stephen Puckett resigned from the 
Board as a Non-Executive Director and Chair of the Audit 
Committee, and Chris Rigg joined the Board as a
Non-Executive Director. Jon Kempster has taken over 
Stephen’s responsibility as Chair of the Audit Committee.

4

Strategic Report

Redcentric Report & Accounts 2019

Chief Executive’s review

Overview

Delivery function

Over the last 12 months we have made signiﬁ cant progress 
in addressing historical issues and focussing on creating a 
platform for sustainable growth. 

During the last three ﬁ nancial years the business has 
operated in a very competitive market, we have been 
materially affected by Crown Hosting and the FCA 
investigation has been ongoing. 

During the second half of the year we made a signiﬁ cant 
investment in our delivery function with dedicated project 
management and engineering teams created to support both 
the public and private sectors. This investment has increased 
the headcount in our delivery team by 20% and will initially 
focus on facilitating and expediting the delivery of the orders 
secured against the HSCN procurement waves and YHPSN 
framework in the last six months. 

Cost efﬁ ciencies

In the second half of the year annualised savings of £5m
were realised. 

We have rationalised and re-engineered our core network 
which has yielded annualised savings of £1.4m. A further 
£2m of annualised savings have been realised through 
renegotiation of supplier contracts in relation to direct costs.

Additionally, we reorganised and streamlined several 
business functions resulting in a headcount reduction of
20 and annualised savings of £1.5m. We also closed our 
Theale ofﬁ ce and transferred the staff to our Reading data 
centre and ofﬁ ce. This has yielded annualised savings of 
£130k and as there are 3 years remaining on the lease, an 
onerous lease exceptional charge of £553k has been made
in the FY19 accounts. 

Public sector

Health and Social Care Network (HSCN)
During the year, much focus was devoted to the conversion 
of opportunities in the public sector and in particular those 
associated with HSCN. HSCN is replacing the legacy N3 
network and provides the underlying network arrangements 
to help integrate and transform health and social care. Over 
the course of this year, suppliers tendered for, and were 
appointed to, frameworks across the country and this one-off 
process is now largely concluded.

In the initial stages, our approach to HSCN tendering was 
poor and this resulted in a very low conversion rate. We 
learned important lessons from this, and the Company took 
decisive steps to ensure that the pricing was appropriate to 
the project, the product list was aligned to customer demand 
and the overall sales process was substantially improved. 

Whilst the impact this year of these historical issues has
 been signiﬁ cant, both in terms of management attention and 
ﬁ nancial consequence, it is pleasing to report that they have 
largely worked their way through the business. In parallel,
the positive steps that have been taken to address the 
structure and capability of the sales and delivery functions, 
coupled with signiﬁ cant cost efﬁ ciencies and improvements 
to our network and platforms, gives us conﬁ dence for FY20 
and beyond.

FY19 focus and achievements 

Sales function

Signiﬁ cant progress has been made in the restructuring 
of the Sales function, with the objective of improving our 
capabilities and enabling our teams to adopt a consultative 
sales methodology. 

We have created dedicated ﬁ eld and desk-based sales 
teams across both the public and private sectors, focusing 
on continuing to develop our relationships with our existing 
customers and new customer acquisition. These teams are 
supported by our Marketing, Service Delivery, Pre-sales 
technical and Product Management teams that are part of 
our revised Sales function.

We have made progress in the year to clearly identify our 
target markets and create propositions that deliver the 
requisite business outcomes for our customers. Our key 
growth priorities, established in the second half of the year, 
will continue into FY20 as we focus on: further developing 
our relationships with our customers in the public and private 
sector, maximising the potential of our public sector wins and 
acquiring new name business in the private sector.

To deliver against these priorities we have developed, over 
the course of the second half of the year, a marketing plan 
and go to market proposition underpinned by strategic 
vendors that leverages our provenance in both the public 
and private sector.

These changes have resulted in an enabled, proactive, 
motivated and capable team that has a clear set of
strategic priorities and engagement across the public
and private sectors.

5

Strategic Report

Redcentric Report & Accounts 2019

Chief Executive’s review continued

This action led to a strong performance in the public sector in the second half of the year with high levels of conversion and a 
more successful end to the tender process. As at the end of June 2019, we have secured contracts with seven HSCN partners 
totalling £13m as follows:

Customer

Worcester Health

Midlands & Lancashire

Bedford, Luton & Milton Keynes

East Aggregate Procurement

Birmingham & Solihull

Sandwell & West

Telford & Wrekin

Total

Average
Contract Length

Total
Contract Value

Total
Annualised Revenue

5 years

3 years

5 years

3 years

3 years

3 years

3 years

£000

1,600

800

5,300

980

2,200

1,300

570

12,750

£000

300

270

1,000

260

680

375

190

3,075

In addition to revenues derived from connectivity services, there exists signiﬁ cant opportunity for cross-selling additional 
products. We have already been awarded a £1.7m contract for supplying IP telephony services to more than 6,000 users by 
Worcester Health. When fully rolled out this will equate to £300k additional annualised sales. (N.B. these additional ﬁ gures are 
not included in the table above.)

Yorkshire and Humber Public Sector Network (YHPSN) Framework
During the second half of the year we put a number of actions in place to enable us to maximise the opportunity afforded by 
the YHPSN framework. We have made good progress across the framework and after our initial focus on health partners, we 
have now broadened our approach to include education and local government. This positive momentum has delivered a total 
contract value of £4.1m across more than 30 partners in the ﬁ rst quarter.

The Public Sector sales team will continue to focus on successful account management and sales and cross-selling 
opportunities. Their progress this year, in the second half particularly, demonstrates the momentum in this side of our business 
and we expect to see further progress in FY20. Looking forward, we now have the processes and structures in place to tender 
for contracts with conﬁ dence.

Crown Hosting
Due to our past success in public sector hosting we have been more exposed to the ﬁ nancial impact of the establishment of 
Crown Hosting than most of our competitors. In FY17 public sector hosting revenue amounted to £8.2m. This year’s results 
reﬂ ect like for like revenue of £4.4m and we anticipate that by the end of FY21 all such business will have been migrated away 
from Redcentric.

Products, Networks and Platforms

The Company has continued to invest in its core network and operational platforms, which will underpin some key 
developments in FY20. These investments reinforce our view that it is our network infrastructure and capabilities that form our 
most important competitive advantage. 

The connectivity portfolio is being upgraded to allow 10gb connections to terminate into the network, and we are also working 
on the overall expansion of the network to give a 100gb core. The need for this is driven by increased usage and demand 
from customers who require 10gb circuits from day one. Additionally, this will help future-proof the network as customer 
requirements change.

In parallel we are developing a robust software-deﬁ ned wide area network offering for launch in FY20 which is intended to 
complement our core network technologies. This will afford our customers more ﬂ exibility and control whilst maintaining the 
high level of service that they have come to expect.

Whilst the trend towards the hyper-cloud continues, there is still customer demand for private shared cloud. To support 
this and to ensure the Company can offer the best service to its customers, we are upgrading its internal Infrastructure as a 
Service platform. This will increase the efﬁ ciency and stability of the service offered to customers and will also modernise the 
user experience. We have also developed and launched a range of transition and management services which will help our 
customers migrate their workloads to both Microsoft Azure and our own platforms.

6

Strategic Report

Redcentric Report & Accounts 2019

Strong cash ﬂ ows have been a consistent feature of the 
business and this, taken with the positive steps achieved 
throughout the year and the low levels of net debt, gives 
the Board conﬁ dence in the outlook for Redcentric. It also 
enables us to announce a revised and more substantial 
dividend policy with future dividends based on a pay-out 
of 50% of adjusted earnings. In addition, we will seek 
shareholder approval at the upcoming AGM for the
authority to buy back up to 5% of the issued share capital
of the Company.

Peter Brotherton

Chief Executive Ofﬁ cer

25 June 2019

Chief Executive’s review continued

External Updates 

Brexit

Whilst there is ongoing political and economic uncertainty 
as to the outcome of Brexit, we do not foresee any material 
impact on the Company as a result. The vast majority of our 
revenue is generated in the UK from UK based customers 
and all of our suppliers are UK based also. Any revenue from 
outside of the UK is immaterial. 

Financial Conduct Authority (FCA)

Unfortunately, the business continues to experience the
effect of the FCA investigation. As well as diverting 
management time, signiﬁ cant costs are still being incurred 
(£0.6m in FY19 and £2.5m since November 2016), we are 
constrained in the markets into which we can sell, and 
strategic options are limited. 

The FCA investigation is still ongoing and has not yet 
reached its conclusion. At this time, the FCA has not 
communicated how it intends to proceed and what, if any, 
action it might bring against the Company. Until such stage 
as the FCA’s intention becomes clear, the Directors are not 
able to judge whether a ﬁ ne will be likely and therefore 
whether we would need to make a relevant provision in the 
accounts. We continue to cooperate as fully as we can with 
the investigation and whilst the overall timing is out of our 
control, we are seeking to expedite it as soon as
practicably possible.

Summary and outlook

We have had a productive year. The resolution of some of 
the historical issues has allowed us to increasingly focus our 
attention on the future. The ongoing investigation by the 
FCA and the effect of Crown Hosting will remain a challenge 
into FY20 with an anticipated further reduction in revenue of 
£2.6m from the latter.

We have taken positive steps to address the structure and 
capability of the sales and delivery functions, coupled 
with signiﬁ cant cost efﬁ ciencies and improvements to our 
network and platforms. Our key strategic growth priorities, 
established in the second half of the year, will continue into 
FY20 as we focus on: further developing the relationships 
with our customers in the public and private sector, 
maximising the potential of the YHPSN and other public 
sector frameworks and acquiring new business in the
private sector.

7

Strategic Report

Redcentric Report & Accounts 2019

Financial review

Financial highlights and overview 

Statutory ﬁ nancial reporting measures

Revenue

Operating proﬁ t / (loss)

Basic earnings per share

Net debt

Adjusted performance measures (APMs)

Adjusted EBITDA

Adjusted EBITDA margin

Adjusted cash generated from operations

Adjusted operating cash conversion

Adjusted operating proﬁ t

Adjusted basic earnings per share

Year ended 
31 March
2019

Year ended
31 March
2018 

       Variance

£93.3m

£(0.3)m

(1.32)p

£17.6m

£100.0m

£0.9m

0.34p

£(6.7)m

£(1.2)m

(6.7)%

(133.3)%

(1.66)p

(484.5)%

£27.7m

£10.1m

(36.5)%

£16.7m

17.9%

£21.3m

127.3%

£8.2m

3.89p

£18.1m

18.1%

£22.6m

125.2%

£9.4m

4.35p

£(1.4)m

(20)bps

£(1.3)m

201bps

£(1.2)m

(0.46)p

(7.6)%

(5.7)%

(12.6)%

(10.6)%

The Directors use the APMs listed above as they are critical to understanding the ﬁ nancial performance of the Group. Most of 
the Adjusted measures remove the impact of depreciation, amortisation, share based payments and exceptional costs as these 
are deemed to not be indicative of the underlying operational performance of the business. 

As the APMs are not deﬁ ned by IFRS, they may not be directly comparable with other companies who use similar measures.

APM

Deﬁ nition

Reconciliation to equivalent
IFRS measure of performance

Adjusted EBITDA

Earnings before interest, tax, depreciation, 
amortisation, exceptional costs and
share-based payments

A reconciliation of this measure is provided
in the consolidated income statement

Adjusted EBITDA margin

Adjusted EBITDA to revenue

Adjusted EBITDA less exceptional costs less 
share-based payments, all as a percentage
of revenue

Adjusted cash generated 
from operations

Adjusted operating cash 
conversion

Adjusted operating proﬁ t

Adjusted basic earnings
per share

Adjusted operating costs

Cash generated from operations add 
exceptional costs

Cash generated from operations less 
exceptional costs

Adjusted cash generated from operations
to adjusted EBITDA

Cash generated from operations less 
exceptional costs, divided by EBITDA

Operating proﬁ t add amortisation on 
acquired intangibles, exceptional costs
and share based payments

Adjusted earnings – proﬁ t /loss add 
amortisation (acquired intangibles), share 
based payments, exceptional costs, tax 
charge/credit

Operating costs less depreciation,
amortisation and share based payments
and exceptional costs

Operating proﬁ t as disclosed on the 
consolidated income statement

A reconciliation of this measure is provided
in Note 9

Operating expenditure as outlined in the 
consolidated income statement

8

Strategic Report

Redcentric Report & Accounts 2019

Financial review continued

Revenue

Revenue for the year ended 31 March 2019 was £93.4m, a decrease of £6.7m on the previous ﬁ nancial year.

Recurring revenue

Product revenue

Services revenue

Total revenue

Year ended 
31 March 
2019

Year ended 
31 March 
2018 

       Variance

£000

£000

£000

%

80,544

5,810

6,906

87,065

7,180

5,745

(6,521)

(1,369)

1,161

(7.5)%

(19.1)%

20.2%

93,260

99,990

(6,730)

(6.7)%

The key revenue metric of RMR (recurring monthly revenue) was down 7.5% compared to last year and accounted for 86%
of total revenue in-line with 2018 at 87%.

Gross proﬁ t

Gross proﬁ t

Gross margin

Year ended 
31 March 
2019

Year ended 
31 March 
2018 

       Variance

£000

£000

£000

%

56,365

59,994

(3,629)

(6.0)%

60.4%

60.0%

Gross proﬁ t has decreased year on year due to a reduction in revenue. The overall gross margin has increased slightly due to
a signiﬁ cant reduction in direct costs through supplier renegotiations and better management of all third-party costs. 

Adjusted operating costs

Year ended 
31 March 
2019

Year ended 
31 March 
2018

       Variance

£000

£000

£000

%

Staff costs (excluding share-based compensation)

20,507

23,292

(2,785)

(12.0)%

Ofﬁ ce and data centre costs

Network and equipment costs

Other sales, general and administration costs

Offshore costs

Total adjusted operating costs

7,049

7,311

2,693

2,091

6,942

6,805

3,010

1,860

107

506

(317)

231

39,651

41,909

(2,258)

1.5%

7.4%

(10.5)%

12.4%

(5.4)%

Adjusted operating costs excludes depreciation, amortisation, and share based payments.

9

Strategic Report

Redcentric Report & Accounts 2019

Financial review continued

Employees

Year-end headcount

UK

India

Total

Average headcount

UK

India

Total

31 March 
2019

31 March 
2018 

Variance

310

156

466

347

141

488

(37)

15

(22)

31 March 
2019

31 March 
2018 

Variance

329

150

479

362

139

501

(33)

11

(22)

Overall, adjusted operating costs for FY19 were £2.3m (5.4%) lower than FY18 as a result of the following:

•   Headcount has reduced by 37 heads in the UK driving a favourable variance year on year of £2.8m. These reductions have not 

had an impact on the operational running of the business. One-off exceptional costs of these reductions totalled £0.8m.

•   Ofﬁ ce and data centre costs have increased slightly by 1.5% in the year. Large electricity increases in FY19 have been offset 
by the annualised impact of the closures made in FY18. Additionally, the Company has combined its ofﬁ ce in Theale with 
the data centre in Reading and has therefore allocated the costs of the Theale ofﬁ ce to a vacant property provision (January 
2019 onwards).

•   Network and equipment costs have increased due to reclassiﬁ cation of items from cost of sales to operating costs as well 

as additional licensing costs for internal platforms. 

•   Savings have also been made in other sales, general and administration costs, achieved by reducing the number of

third-party consultants in the business and a tighter control of marketing and corporate costs. 

•   Offshore costs have increased due to movement of roles from the UK to India. This is reﬂ ected in the headcount

numbers above.

Adjusted EBITDA (and adjusted operating proﬁ t)

Adjusted EBITDA

Adjusted EBITDA margin

Adjusted operating proﬁ t

Adjusted operating proﬁ t margin

Year ended 
31 March 
2019

Year ended 
31 March 
2018 

       Variance

£000

£000

£000

%

16,714

17.9%

8,243

8.8%

18,085

18.1%

9,432

9.4%

(1,371)

(7.6)%

(1,189)

(12.6)%

Adjusted EBITDA is the key measure that the Group uses to assess the underlying proﬁ tability of the business. Adjusted EBITDA 
excludes exceptional costs and share based payments.

Adjusted EBITDA decreased by £1.4m or 7.6% to £16.7m reﬂ ecting the decrease in gross proﬁ t of £3.6m offset by the 
decrease in operating costs of £2.3m. Adjusted EBITDA margin decreased slightly from 18.1% to 17.9%.

10

Strategic Report

Redcentric Report & Accounts 2019

Financial review continued

With the implementation of IFRS 16 for FY20, adjusted operating proﬁ t has been included here as a point of reference.
The impact of this standard is expected to make a material impact to EBITDA so the Company is considering moving to 
operating proﬁ t to assess the underlying performance of the business.

Exceptional costs

Professional fees associated with the forensic review
and Financial Conduct Authority (FCA) investigation

Staff restructuring

Integration costs

Vacant property provisions

Year ended 
31 March 
2019

Year ended 
31 March 
2018 

       Variance

£000

£000

£000

%

554

804

-

553

1,911

672

868

132

-

1,672

(118)

(64)

(132)

553

239

(17.6)%

(7.4)%

(100.0)%

100.0%

14.3%

Overall, the level of exceptional items has increased from £1.7m to £1.9m. The key movements are as follows:

•   Professional fees associated with the forensic review and FCA investigation − these costs relate to legal advice received
in respect of the ongoing FCA investigation. Whilst the Company is still incurring these costs, they are steadily reducing.

•   Staff restructuring costs – as part of the overall cost base review and movement of UK roles to India. This restructuring 

resulted in 20 redundancies.

•   Post the integration of City Lifeline, there have been no further costs of this nature. All the group companies are now

fully integrated.

•   Vacant property provision relates to closure of the Theale ofﬁ ce. All staff have been transferred to the data centre

in Reading.

Net ﬁ nancing costs

Interest receivable

Other interest receivable

Interest payable

Interest payable on bank loans and overdrafts

Interest payable on ﬁ nance leases

Amortisation of loan arrangement fees

Year ended 
31 March 
2019

Year ended 
31 March 
2018 

       Variance

£000

£000

£000

%

(13)

(19)

6

(31.6)%

947

93

51

1,091

1,241

143

68

1,452

(294)

(50)

(17)

(361)

(23.7)%

(35.0)%

(25.0)%

(24.9)%

Net ﬁ nancing costs

1,078

1,433

(355)

(24.8)%

The reduction in net ﬁ nancing costs in FY19 is primarily due to the reduced balance on the revolving credit facility.

11

Strategic Report

Redcentric Report & Accounts 2019

Financial review continued

Share-based payments

SAYE schemes

Director and senior manager schemes

MXC options

Employers NI

Year ended 
31 March 
2019

Year ended 
31 March 
2018 

       Variance

£000

£000

£000

%

134

220

-

12

366

224

162

148

34

568

(90)

58

(148)

(22)

(202)

(40.2)%

35.8%

(100.0)%

(64.7)%

(35.6)%

NI is being accrued, where applicable, at a rate of 13.8% on the potential employee gain on share-based incentives granted. 

Taxation

The tax charge for the year was £0.6m (FY18: credit of £1.0m) which was made up of a corporation tax charge of £0.8m
(FY18: charge of £1.1m) and a deferred tax credit of £0.2m (FY18: credit of £2.1m).

The corporation tax charge comprises a current year corporation tax charge of £0.6m, a prior year corporation tax charge
of £0.1m and an overseas tax charge of £0.1m.

As at 31 March 2019, the Group had £16.4m of tax losses carried forward comprising:

No tax losses carried forward

Losses carried forward:

- Stream 1

- Stream 2

% of proﬁ ts

Losses
available

70.66%

-

19.64%

8,813,109

9.70%

7,535,445

100.00% 16,348,554

The Group is made up several historic acquisitions, some of which had tax losses brought forward. The Group’s taxable proﬁ ts 
are streamed in proportion to the relative size of the original acquired company as a percentage of Redcentric as a whole.
At 31 March 2019 £16m of tax losses were still available to be utilised against 29.34% of future proﬁ ts.

Earnings per share and dividends

Basic loss per share for FY19 was (1.32)p (FY18: basic earnings per share of 0.34p).

Basic adjusted earnings per share for FY19 was 3.9p, compared to 4.3p in FY18. Diluted adjusted earnings per share for FY19 
was 3.8p compared to 4.3p in FY18.

Dividends

A progressive dividend policy was announced at the interim accounts with a 0.4p per share dividend paid out in December 
2019. This equated to a total payment of £597k. A ﬁ nal dividend payment of 1.0p per share will be paid on 6 September 2019, 
subject to approval at the Company's Annual General Meeting. The shares will have an ex-dividend date of 4 July 2019 and a 
record date of 5 July 2019. No dividends were paid during FY18. 

12

Strategic Report

Redcentric Report & Accounts 2019

Financial review continued

Financial position

The summary ﬁ nancial position of the Group is set out below:

Non-current assets

Net current assets (excl. net debt)

Non-current liabilities (excl. net debt)

Net debt

Net assets

Year ended
31 March
2019

Year ended
31 March
2018 

£000

£000

94,077

102,724

14

(881)

(17,565)

75,645

3,326

(421)

(27,707)

77,922

Net current assets have declined by £3.3m as a result of better working capital management and better conversion of debtors 
into cash. This, along with normalised funds generated from operations, accounts for the material decrease in net debt.

Net debt and cash ﬂ ows

Revolving credit facility

Term loans

Cash

Finance leases

Unamortised loan arrangement fees

Net debt

Year ended 
31 March 
2019

Year ended 
31 March 
2018 

£000

£000

19,500

363

(7,206)

4,976

(68)

17,565

28,000

-

(6,089)

5,932

(136)

27,707

During FY19, net debt fell from £27.7m at 31 March 2018 to £17.6m as at 31 March 2019. The movements in net debt are analysed 
on page 14. For the second consecutive year the company has achieved an operating cash conversion greater than 100%. 

13

Strategic Report

Redcentric Report & Accounts 2019

Year ended 
31 March 
2019

£000

16,714

4,575

21,289

127%

(5,229)

(2,506)

1,181

665

(5,889)

(1,873)

(1,044)

(68)

(8)

(76)

12,407

(1,668)

(597)

(2,265)

10,142

(27,707)

(17,565)

Financial review continued

Net debt and cash ﬂ ows (continued)

Adjusted EBITDA

Working capital movements

Adjusted cash generated from operations

Cash conversion

Capital expenditure

- Cash purchases

- Finance lease purchases

- Proceeds from sale and lease back of assets

- Proceeds from sale of ﬁ xed asset

Corporation tax

Interest paid

Other movements in adjusted net debt

Amortisation of loan arrangement fees

Effect of exchange rates

Decrease in adjusted net debt pre-exceptional costs

Exceptional costs

- Exceptional costs

- Dividend paid to shareholders

Net decrease in adjusted net debt

Net debt at the beginning of the period

Adjusted net debt at the end of the period

14

Strategic Report

Redcentric Report & Accounts 2019

Financial review continued

Working capital movements

There has been a large focus in FY19 on, not only clearing down legacy debt, but improving processes to ensure a consistently 
low level of debt over 90 days old. Debt greater than 90 days has reduced by 48% year on year, whilst debt greater than 180 days 
has reduced by 30%. Trade debtor days have also reduced to 38.8 days (2018: 48.6 days).

Current

1 to 30 days overdue

31 to 60 days overdue

61 to 90 days overdue

91 to 180 days overdue

> 180 days overdue

Gross trade debtors

Credit note provision

Net trade debtors

Year ended 
31 March 
2019

Year ended 
31 March 
2018 

£000

£000

9,074

2,628

505

99

390

416

13,112

(1,521)

11,591

11,323

1,951

1,417

550

945

593

16,779

(981)

15,798

Trade creditor days were 28 at 31 March 2019 compared to 28 as at 31 March 2018.

Financing

Committed

31 March 2019

31 March 2018

Available

Drawn

Undrawn

Available

Drawn

Undrawn

£000

£000

£000

£000

£000

£000

- Revolving credit facility

25,000

19,500

5,500

40,000

28,000

12,000

- Term loans

- Finance leases

Uncommitted

- Bank overdraft

- Finance leases

363

4,976

363

4,976

-

-

30,339

24,839

5,500

-

5,932

45,932

-

5,932

33,932

-

-

12,000

2,000

4,724

6,724

-

-

-

2,000

4,724

6,724

2,000

4,603

6,603

-

-

-

2,000

4,603

6,603

Total borrowing facilities

37,063

24,839

12,224

52,535

33,932

18,063

In addition to the above facilities, the Company has access to a non-committed £20m accordion facility.

During the year the company cancelled £15m of unutilised facility, reducing the committed level down from £40m to £25m
and thereby saving £186k in annualised commitment fees. 

Post the year end a further £2.5m was cancelled from the facility leaving a committed revolving credit facility of £22.5m.

Peter Brotherton

Chief Executive Ofﬁ cer

25 June 2019

15

Strategic Report

Redcentric Report & Accounts 2019

Infrastructure failure

The Directors believe that one of the key differentiators that 
Redcentric offers is that its services are provided over its 
own controlled and managed infrastructure, such as its own 
networks and data centres. Whilst this provides customers 
with comfort around resilience and reliability, the Group is also 
exposed to risks of infrastructure failure. A critical element 
of Redcentric’s operating methodologies and procedures 
is to mitigate such risks through the careful construction, 
maintenance and management of its own infrastructure. 
All networks and data centres have fully resilient fail-over 
procedures with regular testing of back-up and recovery plans.

FCA Investigation

The FCA investigation is ongoing and has yet to reach its 
conclusion. The Company continues to cooperate fully with 
the FCA with a view to bringing the matter to a conclusion 
as soon as possible. The Company has taken specialist legal 
advice in respect of the investigation, given its signiﬁ cance 
and to ensure that it manages the associated risks as 
effectively as possible.

Strategy

The market for IT managed services in the UK is highly 
fragmented and is served by a broad spectrum of businesses 
from global telecommunication companies through hardware 
and software providers, system integrators and a range of 
independent managed service providers of varying sizes, 
through to companies providing individual elements of the
IT managed services spectrum. The market is growing, driven 
by the continued move towards off-premise solutions and 
mobile access to secure services.

Redcentric positions itself in the market as being able to 
combine the beneﬁ ts of proprietary network and data centres 
with a ﬂ exible and technically skilled workforce able to
deliver and support critical services and solutions in a highly 
secure environment.

Redcentric seeks to differentiate itself in three distinct ways: 

•   Innovation – innovation in the design and delivery

of services; 

•   Reliability – the right technical skills, organised in the

right way, to give predictable high-quality results; and 

•   Value – service offerings that are designed to offer value 

for money to mid-market customers. 

Risk management

Identifying, evaluating and managing the principal risks
and uncertainties facing the Group is an integral part of 
the way Redcentric does business. There are policies and 
procedures in place throughout the operations, embedded 
within our management structure and as part of our normal 
operating processes.

Market and economic conditions are recognised as one of 
the principal risks in the current trading environment. This risk 
is mitigated by the monitoring of trading conditions and the 
constant search for ways to achieve new efﬁ ciencies in the 
business without impacting levels of service. 

Reliance on key personnel and management

The success of Redcentric is dependent on the services of key 
management and operating personnel. The Directors believe 
that the Group’s future success will depend largely on its ability 
to retain and attract highly skilled and qualiﬁ ed personnel, and 
to expand, train and manage its employee base. There can be 
no guarantee that suitably skilled and qualiﬁ ed individuals will 
be retained or identiﬁ ed and employed. If the Group fails to 
retain or recruit the necessary personnel, or if the Group loses 
the services of any of its key Executives, its business could be 
materially and adversely affected.

Competition

Redcentric operates in a highly competitive marketplace 
and, while the Directors believe the Group enjoys signiﬁ cant 
strengths and advantages in competing for business, some of 
the competitors are much larger with considerable scale that 
could allow them to offer similar services for lower prices than 
the Group would be prepared to match. Competitors could 
therefore materially adversely impact the scale of the Group’s 
revenues and its proﬁ tability. The Group monitors competitors’ 
activity and constantly reviews its own services and prices to 
ensure a competitive position in the market is maintained.

Technology

The market for Redcentric’s services is in a state of constant 
innovation and change. The Group actively participates in 
a number of industry-wide forums and devotes signiﬁ cant 
resource to the development of new services, ensuring new 
technologies can be incorporated and integrated with the 
Group’s core services. The nature of the Group’s services 
means that they are exposed to a range of technological 
risks, such as viruses, hacking, and an ever-changing 
spectrum of security risk. The Group maintains constant
pro-active vigilance against such risks and maintains 
membership of some of the highest levels of security 
accreditation as part of the service it offers its customers.

16

Strategic Report

Redcentric Report & Accounts 2019

Risk management continued

Through these differentiators, Redcentric aims to attract
new customers and to deepen and broaden its relationships 
with existing customers. The Board’s strategy for growth
comprises of:

•   ongoing investment in expanding and enhancing 

Redcentric’s own infrastructure so that it can provide its 
customers with the very highest levels of security and 
service; and

•   effective use of Redcentric’s scale and resources to 
explore and invest in new technologies so that its 
customers can beneﬁ t from the high levels of innovation 
across the whole industry.

The Board believes that Redcentric’s position between the 
very large system integrators and network operators and 
the smaller competitors (that may lack delivery structure, 
reputation, reliability and ﬁ nancial strength) is a very 
compelling one. Redcentric has a strong and reliable set of 
core infrastructure and has developed a delivery model that 
provides assurance and certainty for customers.

17

Strategic Report

Redcentric Report & Accounts 2019

Corporate responsibility

Employees

Charitable activity

At Redcentric we actively encourage all employees to 
raise funds for their chosen charities. All employees are 
contractually entitled to receive one day of paid leave per 
year to volunteer or support a charitable organisation.

We work with several charities on a regular basis including 
Sue Ryder, Macmillan and Sports Relief. Through a 
combination of funds raised by employees for their own 
chosen charities or charitable donations from Redcentric,
we contributed over £10,000 to various charities in 2018.

By order of the Board
Harn Jagpal

Company Secretary

25 June 2019

Our colleagues have given much to the company over 
the year. We are now a more efﬁ cient organisation and 
this improvement has not been gained at the cost of 
effectiveness. On the contrary, our customers have told us 
that they are more satisﬁ ed with us on every parameter we 
survey. I would like to offer my sincere personal thanks to 
each one of our employees in the UK and India who have 
contributed to this achievement. 

Through Redcentric’s apprenticeship programme, we have 
given two young people the opportunity to develop their 
careers with us and gain qualiﬁ cations in networks, data 
storage, computing and electro-technical systems. We have 
also launched an internal Future Leaders Programme that
will provide formal management qualiﬁ cations for a number 
of employees against an apprenticeship framework. 

Gender pay report

Our gender pay report at the snapshot date of 5th April 2018 
showed that the overall difference between men and women’s 
earnings at Redcentric was 23% (mean) or 11% (median), 
based on hourly rates of pay at the snapshot date of 5th April 
2018. Like most organisations in our industry, the primary 
reason for our gender pay gap is an imbalance of male and 
female colleagues at different levels across the organisation. 
We have fewer female colleagues in more senior positions, 
which attract higher salaries. We are conﬁ dent that as we 
make progress towards achieving greater gender balance 
across all roles within Redcentric, particularly within our 
technical, sales management and senior management roles, 
our gender pay gap will reduce.

Equality and diversity

Creating a diverse, inclusive and great place for our 
colleagues to work is top of Redcentric’s people agenda. 

Redcentric actively supports the principle of equal 
opportunities in employment and is committed to ensuring 
that individuals are treated fairly, with respect and are 
valued. Redcentric opposes all forms of unlawful or unfair 
discrimination on the grounds of colour, race, religion or 
belief, nationality, ethnic or national origin, sex, gender 
reassignment, sexual orientation, marital or civil partner 
status, age or disability (the "Protected Characteristics").

It is important to Redcentric that no one receives less 
favourable treatment or be disadvantaged on any of the 
above grounds. Every possible step will be taken to ensure 
that individuals are treated equally and fairly and that 
decisions on recruitment and selection and opportunities for 
training and promotion are based solely on objective and 
job-related criteria.

18

Governance

Redcentric Report & Accounts 2019

Directors’ proﬁ les

NON-EXECUTIVE DIRECTORS

Chris Cole 

Independent Non-Executive Chairman

Chris Cole was appointed as a Non-Executive Director and 
Chairman of Redcentric with effect from 1 September 2014. 
Chris has a strong track record and experience with quoted 
companies, having successfully led WSP Group plc as CEO 
and subsequently Non-Executive Chairman and a former 
Non-Executive Chairman at Ashtead Group plc. Chris, as 
a Chartered Engineer, founded and led the development 
of WSP both organically and acquisitively into a global 
consultancy with 10,000 people operating in 40 countries. 
Following WSP’s merger with Genivar, Inc. in August 2012, 
Chris is the Non-Executive Chairman of the new engaged 
company, WSP Global Inc. listed on the Toronto Stock 
Exchange.

In addition to the above Chris is the Non-Executive Chairman 
of Applus Services SA and Tracsis plc.

Chris is Chairman of the Nomination Committee.

Jon Kempster 

Independent Non-Executive Director

Jon Kempster was appointed as a Non-Executive Director 
on 10 January 2017. Jon is the Chief Financial Ofﬁ cer and 
member of the Board at Sports Direct International plc. 
Jon was previously the Chief Financial Ofﬁ cer at Utilitywise, 
Wincanton plc, Low and Bonar plc, Linden Group plc and
Fii Group plc.

Jon is an ACA qualiﬁ ed chartered accountant, Chairman of 
the Audit Committee (from 1 February 2019 onwards), and a 
member of the Remuneration and Nominations Committees.

Stephen Vaughan

Independent Non-Executive Director

Stephen Vaughan was appointed as a Non-Executive Director 
on 13 June 2017. Through his career, Stephen has held a 
number of Executive and Non-Executive roles focused on 
the technology sector. Stephen is also currently the Non-
Executive Chairman of Progressive Equity Research, the paid-
for equity research house and a Non-Executive Director of 
Amino Technologies plc, the AIM listed technology provider 
of media and entertainment solutions. 

Until 2015, Stephen was Chief Executive of Phoenix IT plc, 
the main-market listed IT infrastructure services business, 
and since then has been Non-Executive director of 

Mobica, a software development company, and Chairman 
of NetNames, the internet services and online brand 
management company. He has previously been Chief 
Executive at Communisis plc and Synstar plc.

Stephen is Chairman of the Remuneration Committee, a 
member of the Audit and Nomination Committees and is
the Senior Independent Non-Executive Director as of
24 July 2017.

Chris Rigg (appointed 1 February 2019)

Independent Non-Executive Director

Chris Rigg was appointed as a Non-Executive Director on 
1 February 2019. Chris currently holds Non-Executive roles 
with Sportech plc and Ridge Pharma Limited. He was also 
previously Chief Executive Ofﬁ cer and Chief Financial Ofﬁ cer 
at Quantum Pharma plc and Chief Executive Ofﬁ cer at 
Northern Recruitment Group Limited. 

Chris is a qualiﬁ ed chartered accountant and is a member of 
the Audit, Remuneration and Nomination Committees.

EXECUTIVE DIRECTORS

Peter Brotherton

Chief Executive Ofﬁ cer (from 22 November 2018),

formally Chief Financial Ofﬁ cer

Peter Brotherton was appointed as Chief Financial Ofﬁ cer 
on 28 November 2016 and as Interim Chief Executive 
Ofﬁ cer on 21 November 2018. Peter is a senior and 
experienced Chief Financial Ofﬁ cer with over 25 years' 
experience across a number of senior ﬁ nance roles. 
Peter's two previous roles were as Chief Financial Ofﬁ cer 
of Gametech and Chief Financial Ofﬁ cer at PKR Group.

Prior to those two roles, from 2011 to 2014, Peter was 
Chief Financial Ofﬁ cer and then Chief Executive of Meucci 
Solutions NV. Meucci Solutions was an international 
telecommunications and managed services business. 
During his time at Meucci Solutions, the business saw 
strong sales and EBITDA growth whilst also extensively 
reviewing its central ﬁ nancial control function.

Peter also had senior ﬁ nance roles at Varla (UK) Limited, 
Cell Structures Group plc and spent ﬁ ve years at Kingston 
Communications plc, becoming Director of Finance.
Peter qualiﬁ ed as an ACA chartered accountant at KPMG.

19

Governance

Redcentric Report & Accounts 2019

Formal agendas and reports are provided to the Board on a 
timely basis in advance of Board and Committee meetings 
and the Chairman ensures that all Directors are properly 
briefed on issues to be discussed at Board meetings. 
Directors are able to obtain further advice or seek clarity on 
issues raised at the meetings from within the Company or 
from external sources. The Company has taken external legal 
advice in respect of the ongoing FCA investigation, being a 
signiﬁ cant matter. Further details are included in note 5 to 
the Consolidated Financial Statements.

The Executive Directors of the Company are employed on 
a full-time basis. The Non-Executive Directors are required 
to devote such time to Company matters as is necessary 
for the proper performance of their duties and this changes 
from time to time. In addition to monthly Board meetings, 
members of the Board are required to attend committee 
meetings as detailed below, other ad hoc Board meetings, 
the annual general meeting of the Company, site visits, 
Board dinners and any other business or general meetings 
as required. Board members are also required to consider 
all relevant papers before each meeting and to devote 
additional time in respect of preparation and ad hoc matters 
which may arise. The Non-Executive Directors are required 
to obtain the agreement of the Chairman before accepting 
additional commitments that might affect the time that they 
are able to devote to their role as a non-executive director. 

The Board recognises the importance of evaluating its 
performance and therefore plans to undertake a board 
performance review towards the end of 2019. As part of the 
review, the time required and spent on Company matters by 
the Board will be assessed.

The Company’s Articles of Association require that a minimum 
of one third of the Directors must seek re-appointment at the 
next Annual General Meeting.

Corporate governance report

The Board is responsible for the Group’s corporate 
governance policies and recognises the important of high 
standards of corporate governance and integrity. The Board 
has chosen to adopt the Quoted Companies Alliance (QCA) 
Code for Small and Mid-sized Quoted Companies 2018. A 
copy of the Group’s full Corporate Governance Statement is 
available on the Group’s website at www.redcentricplc.com

The Board of Directors

At the ﬁ nancial year end the Board comprised the
Non-Executive Chairman, Chris Cole; the Chief Executive, 
Peter Brotherton; and Non-Executive Directors Jon Kempster, 
Stephen Vaughan, and Chris Rigg. The experience and skills 
of each of the members of the Board are set out on page 
19. The Board has signiﬁ cant and appropriate levels of 
experience given the nature and size of the Company and 
each member is responsible for ensuring their continuing 
professional development to maintain their effective skills 
and knowledge.

The business and management of the Company and its 
subsidiaries are the collective responsibility of the Board. 
The Board meets on a monthly basis and at each meeting, 
considers and reviews the trading performance of the 
business. The Board has a formal written schedule of matters 
reserved for its review and approval. These include the 
approval of the annual budget, major capital expenditure, 
investment proposals, the interim and annual results, and 
a review of the overall system of internal control and risk 
management.

There are three standing Board Committees: Audit, 
Nomination and Remuneration. Each of these Committees acts 
within deﬁ ned terms of reference. Additional information is set 
out later in this report and also in the Directors’ Remuneration 
Report in respect of the Remuneration Committee. 

Authority for the execution of the approved policies, business 
plan and daily running of the business is delegated to the 
Executive Directors. 

Stephen Vaughan is the Senior Independent Non-Executive 
Director and served from 24 July 2017 in this position.

All Directors have access to the advice and services of the 
Company Secretary who is responsible for ensuring that 
Board procedures and applicable rules and regulations are 
observed. The Board has a procedure whereby any Director 
may seek, through the Company Secretary, independent 
professional advice, at the Company’s expense, in furtherance 
of his duties.

20

Governance

Redcentric Report & Accounts 2019

Corporate governance report continued

The following table details the attendance of the Board members at Board and Committee meetings in FY19:

Name

Position
at 31/3/19

     Main
     Board

     Audit
     Committee

     Remuneration  
    Committee

     Nomination
     Committee

Total Attended

Total Attended

Total Attended

Total Attended

Chris
Cole

Stephen 
Vaughan

Jon
Kempster

Chris
Rigg 1

Peter 
Brotherton

Stephen 
Puckett 2

Chris 
Jagusz 3

Chairman

NED

NED

NED

CEO

NED

NED

16

16

16

2

16

14

9

16

15

16

2

16

11

9

-

2

2

0

-

1

-

-

1

2

0

-

1

-

-

2

2

0

-

2

-

-

2

2

0

-

1

-

2

2

2

0

-

2

-

2

2

2

0

-

0

-

1 Appointed with effect from 1 February 2019

2 Resigned with effect from 1 February 2019

3 Resigned with effect from 21 November 2018

Nomination Committee

The Nomination Committee consists of Chris Cole (Chairman), Stephen Vaughan, Jon Kempster and Chris Rigg.

The Committee meets at least once a year and at other times during the year as agreed between the members of the Committee 
or as otherwise requested. For nominations, the Committee meets as and when necessary to consider the appointment of new 
Executive and Non-Executive Directors.

A process is in place for the appointment of new Directors involving, if felt appropriate, the use of external consultants followed 
by meetings with both the Committee and subsequently with the Board as a whole. This ensures that the selection process is both 
formal and objective. The Committee has formal terms of reference (available on request from the Company Secretary) and once 
a year reviews the structure, size and composition of the Board (including gender balance), considers succession planning for the 
Board and other senior Executives and review the Executive and Non-Executive leadership needs of the organisation.

Remuneration Committee

The Remuneration Committee consists of Stephen Vaughan (Chairman), Jon Kempster and Chris Rigg.

Details of the Committee and its policies are set out in the Directors’ Remuneration Report on pages 28-33. The Committee
has formal terms of reference (available on request from the Company Secretary).

Audit Committee

The Audit Committee consists of Jon Kempster (Chairman), Stephen Vaughan and Chris Rigg.

During the year, Jon Kempster was appointed as Chairman of the Committee and the Committee adopted new terms of 
reference. In accordance with these, the Committee will meet at least three times a year at appropriate intervals in the
ﬁ nancial reporting and audit cycle, and at other times during the year as agreed between the members of the Committee or
as required.

21

Governance

Redcentric Report & Accounts 2018
Redcentric Report & Accounts 2019

Corporate governance report continued

Audit Committee (continued)

The Committee’s terms of reference are available on 
request from the Company Secretary. They include the 
recommendation of, appointment, re-appointment and 
removal of the external auditors, the review of the scope and 
results of the external annual audit by the auditors, their cost 
effectiveness, independence and objectivity. The Committee 
also reviews the nature and extent of any non-audit services 
provided by the external auditors. In addition, the Committee 
reviews the effectiveness of internal controls, considers the 
need for an internal audit function and considers any major 
accounting issues and reports on such matters to the Board. 
The Committee reviews formal announcements and the 
integrity of the ﬁ nancial statements, including signiﬁ cant 
estimates and judgements made in connection with the 
preparation of the statements (further details of which are
in note 1.25 to the Consolidated Financial Statements).
A whistleblowing arrangement exists whereby matters can 
be conﬁ dentially reported to the Committee. The Executive 
Directors are not members of the Committee but attend the 
meetings by invitation, as necessary, to facilitate its business.

The Director of Financial Control (covering part of the 
Chief Financial Ofﬁ cer role pending the start of a new Chief 
Financial Ofﬁ cer) monitors the level and nature of non-audit 
services and speciﬁ c assignments are ﬂ agged for approval by 
the Audit Committee as appropriate. The Audit Committee 
reviews non-audit fees and considers implications for the 
objectivity and independence of the relationship with the 
external auditors.

Internal control

The Board has overall responsibility for the Group’s system 
of internal control and for reviewing its effectiveness. The 
implementation and maintenance of the risk management 
and internal control systems are the responsibility of the 
Executive Directors and senior management. The internal 
control system is designed to manage risk rather than 
eliminate it and can therefore only provide reasonable and 
not absolute assurance against material misstatement or loss. 
In accordance with the guidance set out in the FRC Guidance 
on risk management and internal control, related ﬁ nancial 
and business reporting, the Group has an on-going process 
for identifying, evaluating and managing the signiﬁ cant risks 
faced by it. 

The Group is committed to maintaining high standards 
of business conduct and operates under an established 
internal control framework covering ﬁ nancial, operational 
and compliance controls. This is achieved through an 
organisational structure that has clear reporting lines and 
delegated authorities. The management and monitoring of 
risk and performance occurs at multiple levels throughout
the Group. In addition, the Group maintains written 

processes to control expenditure, authorisation limits, 
purchase ordering, sales order intake, project management, 
inventories and assets.

The Board receives monthly ﬁ nancial information which 
includes key performance and risk indicators and the Chief 
Executive Ofﬁ cer and the Director of Financial Control 
(pending start of the new CFO) report on signiﬁ cant changes 
in the business and the external marketplace to the extent 
they represent signiﬁ cant risk. There is an established 
budgetary system with an annual budget approved by 
the Board. The Board reviews the results against budget, 
forecasts and prior year actual ﬁ gures together with other 
business measures on a monthly basis.

The principal treasury related risks are documented and 
approved by the Board. Details of any derivatives and 
ﬁ nancial instruments are set out in notes 17-19 to the 
ﬁ nancial statements.

Corporate culture

The Board leads by example with respect to promoting a 
healthy corporate culture and ensuring that ethical values and 
behaviours are embedded in the business. The processes 
in place for decision making which are documented in its 
committee terms of reference, the Company’s share dealing 
code and the requirement for regular disclosure of interests 
are all examples of processes which require high standards
of behaviour from the Board. 

Employment policies adopted by the Company, such as its 
whistleblowing and anti-bribery policies assist in embedding 
a culture of ethical behaviour and the values set out in its 
corporate social responsibility statement ( www.redcentricplc.
com/about-us/redcentric-and-the-community/corporate-
social-responsiblity ) and Modern Slavery Act statement
( www.redcentricplc.com/about-us/redcentric-and-the-
community/corporate-social-responsiblity/modern-slavery-act ) 
also reinforce this culture.

Relations with shareholders and investors

Copies of the Annual Report and Financial Statements
are issued to all shareholders who have requested them,
and copies are available on the Group’s website
www.redcentricplc.com. The Half Year Report is also available 
on the Group’s website. The Group makes full use of its 
website to provide information to shareholders and other 
interested parties. The Company Secretary also deals with a 
number of written or e-mailed enquiries throughout the year.

Shareholders are given the opportunity to raise questions at 
the Annual General Meeting and the Directors are available 
both prior to and after the meeting for further discussion
with shareholders.

22

Governance

Redcentric Report & Accounts 2019

Corporate governance report continued

During the year, the Chief Executive Ofﬁ cer and the Director of Financial Control met with institutional investors after the 
announcement of the preliminary and interim results. There has also been regular dialogue with shareholders through the 
Group’s corporate brokers, Numis Securities and ﬁ nnCap Limited, and the Group seeks to stay abreast of shareholder 
expectations and reactions through its brokers, registrars, investor roadshows, meetings with key investors and its internal 
investor relations team.

Stephen Vaughan, as Senior Independent Non-Executive Director, is available to shareholders if they wish to raise any matters 
that contact through the normal channels of Non-Executive Chairman, Chief Executive Ofﬁ cer, Chief Financial Ofﬁ cer or 
Company Secretary has failed to resolve or for which such contact is inappropriate.

Substantial shareholders

As at 31 March 2019 and 31 May 2019 (being the latest practicable date before the publication of the report) the Company 
had been notiﬁ ed of the following signiﬁ cant interests in its Ordinary, voting share capital:

Coltrane Asset Management LP

ND Capital Investments Limited

Kestrel Partners LLP

Mr Richard Grifﬁ ths

Slater Investments

Harwood Capital Mgt Group

Eugenia II Investment Holdings

31 March 
2019

Number

31 March 
2019 

%

25 May 
2019

Number

25 May 
2019 

%

33,768,246

23,274,689

21,207,814

16,017,141

8,728,656

7,500,000

5,540,495

22.64

15.61

14.22

10.74

5.85

5.03

3.72

33,768,246

23,274,689

21,399,362

16,250,941

8,728,656

7,525,000

5,540,495

22.64

15.61

14.35

10.90

5.85

5.05

3.72

23

Governance

Redcentric Report & Accounts 2019

Directors’ report

The Directors present their annual report together with the audited ﬁ nancial statements for the year ended 31 March 2019.

Principal activity

The principal activity of the Group during the year was the supply of IT managed services. The Company is a holding company.

The Strategic report on pages 4-18 contains a review of the business, future developments and the principal risks and uncertainties. 

Directors

The following were Directors of Redcentric plc during the year and at the date of approval of these ﬁ nancial statements:

Peter Brotherton 
Chris Cole
Jon Kempster
Stephen Vaughan 
Chris Rigg (appointed 1 February 2019)
Chris Jagusz (resigned 21 November 2018)
Stephen Puckett (resigned 1 February 2019) 

As at 31 March 2019 the Director's beneﬁ cial interests and those of their families in the ordinary share capital of the Company 
were as follows:

Peter Brotherton

Chris Cole

Stephen Vaughan

31 March 
2019

31 March 
2018 

Number of 
shares

Number of 
shares

20,000

20,000

20,000

20,000

20,000

20,000

Relevant Directors will retire in accordance with the terms of the articles of the Company and, being eligible, will offer 
themselves for re-election at the forthcoming Annual General Meeting.

Details of the Directors’ contracts, remuneration and share options granted are set out in the Directors’ Remuneration Report 
on page 28-33.

As permitted by the Articles of Association, the Directors have the beneﬁ t of an indemnity which is a qualifying third-party 
indemnity provision as deﬁ ned by Section 234 of the Companies Act 2006. The indemnity was in force throughout the last 
ﬁ nancial year and is currently in force. The Company also purchased and maintained Directors’ and Ofﬁ cers’ liability insurance 
throughout the ﬁ nancial year in respect of itself and its Directors.

Staff policy

The Group’s employment policies are designed to ensure that they meet the statutory, social and market practices where the 
Group operates. The Group systematically provides employees with information on matters of concern to them, consulting them 
or their representatives regularly, so that their views can be taken into account when making decisions that are likely to affect their 
interests. Employee involvement in the Group is encouraged, as achieving a common awareness on the part of all employees of 
the ﬁ nancial and economic factors affecting the Group plays a major role in maintaining its relationship with its staff.

24

Governance

Redcentric Report & Accounts 2019

Directors’ report continued

The Group is committed to employment policies, which follow best practice, based on equal opportunities for all employees, 
irrespective of sex, race, colour, disability or marital status. The Group gives full and fair consideration to applications for 
employment for disabled persons, having regard to their aptitudes and abilities. Appropriate arrangements are made for 
the continued employment and training, career development and promotion of disabled persons employed by the Group. 
If members of staff become disabled the Group continues employment, either in the same or an alternative position, with 
appropriate retraining being given if necessary.

Employees

The average number of employees employed during the year was as follows:

Directors 

Senior managers 

Other employees 

Total average headcount 

Share scheme

Male

Female

Total

6

6

370

382

0

2

95

97

6

8

465

479

The Group believes that having an effective employee share ownership programme helps to align employees’ interests 
with shareholders, and provides an effective tool in attracting, retaining and motivating staff. In November 2014 the Group 
launched an HMRC approved Redcentric plc Save-As-You-Earn Option Plan where employees contribute a monthly amount 
which is saved over three years to buy shares in the Company at a pre-determined price. 

At 31 March 2019, there was one active plan as follows (the two previous schemes have both now come to maturity).

On 30 August 2017, the Company granted options over a total of 1,223,390 ordinary shares to 91 employees. These options 
are available for exercise from 30 August 2020, with an exercise price of 63p, which is a 20% discount to the average closing 
price on the three days ending 4 August 2017, the last trading date before the launch of the Plan.

As at 31 March 2019, the following options had been granted under the plan:

Grant date

17 December 2014

14 December 2015

30 August 2017

Total

Exercise
price 

Options
granted 

Options 
exercised

Options 
lapsed / 
cancelled

Options 
remaining

107p

154p

63p

1,134,886

163,905

1,223,390

2,522,181

-

-

-

-

(1,134,886)

(163,905)

(248,870)

(1,547,661)

-

-

974,520

974,520

25

Governance

Redcentric Report & Accounts 2019

Directors’ report continued

Annual General Meeting

The Annual General Meeting will be held at midday at CMS Cameron McKenna Nabarro Olswang LLP, Cannon Place,
78 Cannon Street, London, EC4N 6AF on 2 September 2019.

Dividend

The Board re-instated the Company’s dividend policy in FY19 with an interim dividend of 0.4p per share being paid on
21 December 2018, totalling £596k. The ﬁ nal dividend of 1.0p per share will be payable to shareholders on 6 September 2019, 
subject to approval at the Company's Annual General Meeting, based on a record date of 5 July 2019 and ex-dividend date
of 4 July 2019.

Financial risk management objectives and policies

The Company’s ﬁ nancial risk management objectives and policies are described in note 18 to the ﬁ nancial statements.

Disclosure of information to auditors

The Directors who were members of the Board at the time of approving the Directors’ Report are listed on page 24.
Having made enquiries of fellow Directors, each of these Directors conﬁ rms that:

•   To the best of each Director’s knowledge and belief, there is no information relevant to the preparation of their report

of which the Group’s auditors are unaware; and

•   Each Director has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant

audit information and to establish that the Group’s auditors are aware of that information

Subsequent events

There have been no signiﬁ cant events between the balance sheet date and the date of approval of these accounts.

Future developments

Future developments and current trading and prospects are set out in the Chairman’s Statement, Chief Executive’s review
and Financial Review.

By order of the Board

Harn Jagpal

Company Secretary

25 June 2019

26

Governance

Redcentric Report & Accounts 2019

Statement of Directors’ responsibilities

The directors are responsible for keeping adequate 
accounting records that are sufﬁ cient to show and explain 
the Company’s transactions and disclose with reasonable 
accuracy at any time the ﬁ nancial position of the Company 
and enable them to ensure that its ﬁ nancial statements 
comply with the Companies Act 2006. They are responsible 
for such internal control as they determine is necessary 
to enable the preparation of ﬁ nancial statements that are 
free from material misstatement, whether due to fraud or 
error, and have general responsibility for taking such steps 
as are reasonably open to them to safeguard the assets 
of the Group and to prevent and detect fraud and other 
irregularities. 

Under applicable law and regulations, the directors are also 
responsible for preparing a Strategic Report and a Directors’ 
Report that complies with that law and those regulations. 

The directors are responsible for the maintenance and 
integrity of the corporate and ﬁ nancial information included 
on the Company’s website. Legislation in the UK governing 
the preparation and dissemination of ﬁ nancial statements 
may differ from legislation in other jurisdictions.

By order of the Board 

Harn Jagpal

Company Secretary

25 June 2019

The directors are responsible for preparing the Annual 
Report and the Group and Company ﬁ nancial statements in 
accordance with applicable law and regulations. 

Company law requires the directors to prepare Group and 
Company ﬁ nancial statements for each ﬁ nancial year. As 
required by the AIM Rules of the London Stock Exchange 
they are required to prepare the Group ﬁ nancial statements 
in accordance with International Financial Reporting 
Standards as adopted by the European Union (IFRSs as 
adopted by the EU) and applicable law and have elected to 
prepare the Company ﬁ nancial statements in accordance with 
UK accounting standards and applicable law (UK Generally 
Accepted Accounting Practice), including FRS 101 Reduced 
Disclosure Framework.

Under company law the directors must not approve the 
ﬁ nancial statements unless they are satisﬁ ed that they give 
a true and fair view of the state of affairs of the Group 
and Company and of their proﬁ t or loss for that period. 
In preparing each of the Group and Company ﬁ nancial 
statements, the directors are required to: 

•   select suitable accounting policies and then apply

them consistently; 

•   make judgements and estimates that are reasonable, 

relevant, reliable and prudent; 

•   for the Group ﬁ nancial statements, state whether they

have been prepared in accordance with IFRSs as adopted 
by the EU; 

•   for the Company ﬁ nancial statements, state whether 

applicable UK accounting standards have been followed, 
subject to any material departures disclosed and 
explained in the ﬁ nancial statements; 

•   assess the Group and Company’s ability to continue as a 
going concern, disclosing, as applicable, matters related
to going concern; and 

•   use the going concern basis of accounting unless they 
either intend to liquidate the Group or the Company or
to cease operations or have no realistic alternative but to 
do so. 

27

Governance

Redcentric Report & Accounts 2019

Directors’ remuneration report (audited)

Annual statement by the Chairman of the Remuneration Committee

The Remuneration Committee comprises Stephen Vaughan (Chairman), Jon Kempster and Chris Rigg.

The Committee meets at least twice a year and at other times during the year as agreed between the members of the Committee.

Remuneration policy

The Group is committed to maximising shareholder value over time. Each year, the Remuneration Committee reviews the 
incentive and reward packages for the Executive Directors to ensure that they are aligned with the Company’s objectives and 
are appropriate to attract, retain and motivate management behaviour in support of the creation of shareholder value, while at 
the same time ensuring they are not rewarded for failure. 

Terms of reference

The Committee makes recommendations to the Board, within agreed Terms of Reference, on the remuneration and other 
beneﬁ ts, including bonuses and share options, of the Executive Directors. The Terms of Reference includes committee 
oversight of several other signiﬁ cant remuneration matters beyond those of the Executive Directors. In considering the 
remuneration for the year, the Committee consulted with the Executive Directors about its proposals. The Board sets the fees 
payable to the Non-Executive Directors.

Chief Executive 

On 21 November 2018, Chris Jagusz resigned as a director and Chief Executive Ofﬁ ce. Peter Brotherton (formerly Chief 
Financial Ofﬁ cer) has taken on the role of Chief Executive Ofﬁ cer from 22 November 2019 onwards. 

Chief Financial Ofﬁ cer 

The Board are pleased to announce the Dean Barber will be joining the Company as Chief Financial Ofﬁ cer and Executive 
Director with effect from 1 September 2019. The remuneration package offered to the Chief Financial Ofﬁ cer was reviewed
and approved by the Remuneration Committee as part of the recruitment process. 

Basic salary and beneﬁ ts

Basic salaries are reviewed on a discretionary basis.

The beneﬁ ts provided for each Executive Director may include:

i.  life assurance cover of 4 times salary;

ii.  private medical insurance for themselves, their spouse and their children;

iii. a contribution to a private pension plan.

Performance related bonus

The Remuneration Committee determines the criteria for the award of performance bonuses for the Executive Directors in 
advance of each year. The bonuses are non-pensionable. Non-Executive Directors do not receive a bonus.

In addition to the Long-Term Incentive Programme, the two Executive Directors beneﬁ ted from a special bonus scheme which 
would pay out, in the event of a change of control, a cash sum linked to the growth in share price since October 2017, subject 
to an initial uplift requirement. Mr Jagusz’s participation in this scheme lapsed upon his leaving the Company. Post the balance 
sheet date, the Board has amended this scheme to allow for any bonus to be paid in shares, or alternatively with an equivalent 
monetary value at the change of control price, subject to the discretion of the Remuneration Committee at the time. It is 
intended to include the newly recruited Chief Financial Ofﬁ cer in this scheme when he joins the Board.

Share options

Executive Directors are entitled to participate in the Company share option schemes. The Remuneration Committee approves 
the granting of any share options.

28

Governance

Redcentric Report & Accounts 2019

Directors’ remuneration report (audited) continued

Fees

The Board, within the limits stipulated by the Articles of Association and following recommendation by the Executive Directors, 
determines Non-Executive Directors’ fees. The Chairman receives a fee of £70,000 with the other Non-Executive Directors 
receiving a fee of £35,000, with an additional fee of £5,000 for chairing a Board committee.

Recruitment and promotion policy

The Committee proposes an Executive director’s remuneration package for new appointments in line with the principles 
outlined in the table below:

Element of remuneration

Policy

Base salary

Beneﬁ ts

Pension

Annual bonus

Base salaries are set by the Committee on appointment and then normally reviewed 
annually. In setting and reviewing salaries, the Committee considers the responsibilities of 
the role, progression in the role, individual performance, skills, experience and pay levels 
within the Group. 

Beneﬁ ts as provided to current Executive Directors. Beneﬁ ts for each Executive Director 
may include life assurance cover of 4 times salary and private medical insurance for 
themselves, their spouse and their children.

A contribution to a private pension plan.

The Remuneration Committee determines the criteria for the award of performance 
bonuses. An annual bonus would operate in the same way as current Executives and would 
be pro-rated to reﬂ ect the period of employment.

Long-term incentives

Executive Directors are entitled to participate in the Company share options schemes.
The Remuneration Committee approves the granting of any share options.

Service contracts

The Chief Executive Ofﬁ cer and Chief Financial Ofﬁ cer have service contracts with a provision for termination notice period of 
six months (twelve months in the event of a takeover).

Non-Executive Directors have letters of appointment. Appointments can be terminated with six months’ notice.
The remuneration of the Non-Executive Directors takes the form solely of fees which are not pensionable.

The details of the Executive and Non-Executive Directors’ service contracts are summarised below:

Executive Directors

Peter Brotherton

Chris Jagusz (resigned 21 November 2018)

Non-Executive Directors

Chris Cole

Stephen Puckett (resigned 1 February 2019)

Jon Kempster 

Stephen Vaughan

Chris Rigg

*12 months in the event of a takeover.

Date of contract

Notice period 
(months)

Length of service at 
31 March 2019

28 November 2016

2 October 2017

1 September 2014

17 November 2014

10 January 2017

13 June 2017

21 January 2019

6*

6

6

6

6

6

6

2 years 4 months

4 years 7 months

4 years 2 months

2 years 2 months

1 year 9 months

2 months

The service contracts continue until notice on either side is given.

29

Governance

Redcentric Report & Accounts 2019

Directors’ remuneration report (audited) continued

Service contracts (continued)

The Executive directors’ salaries as at 31 March 2019 are set out in the table below:

Executive Directors

Peter Brotherton

Chairman and Non-Executive Directors’ fees

Salary 
31 March
2019

£000

Salary 
31 March
2018

£000

300

200

The Board, within the limits stipulated by the Articles of Association and following recommendation by the Executive Directors, 
determines Non-Executive Directors’ fees. The Chairman receives a fee of £70,000 with the other Non-Executive Directors 
receiving a fee of £40,000.

Chris Cole

Jon Kempster

Stephen Vaughan

Chris Rigg (appointed 1 February 2019)

Annual fee 
31 March
2019 

£000

Annual fee 
31 March
2018

£000

70

40

40

40

70

35

28

-

Directors may claim reasonable business expenses within the terms of the Group’s expense policy and be reimbursed on the 
same basis as all employees. The Group may reimburse business expenses which are in future classiﬁ ed as taxable beneﬁ ts
by HMRC. 

Total remuneration for the Chief Executive Ofﬁ cer

The table below shows the total remuneration ﬁ gure for the Chief Executive Ofﬁ cer over a ﬁ ve-year performance period.
The total remuneration ﬁ gure includes bonus and beneﬁ ts. 

Year

2019

2018

2017

2016

2015

Executive

Peter Brotherton
Chris Jagusz*

Chris Jagusz 
Fraser Fisher**

Fraser Fisher

Fraser Fisher
Tony Weaver †

Tony Weaver

Total single
ﬁ gure

£000

100
207

154
209

369

266
120

204

* Chris Jagusz was Chief Executive Ofﬁ cer until his resignation on 21 November 2019. Peter Brotherton was appointed interim Chief Executive Ofﬁ cer
at this time.

**Fraser Fisher was Chief Executive Ofﬁ cer until his resignation on 20 October 2017. Chris Jagusz was appointed Chief Executive Ofﬁ cer at this time.

† Tony Weaver was Chief Executive Ofﬁ cer until his resignation on 1 November 2016. Fraser Fisher was appointed Chief Executive Ofﬁ cer at this time.

30

Governance

Redcentric Report & Accounts 2019

Directors’ remuneration report (audited) continued

The remuneration of the Directors in respect of the year was as follows:

Payment 
in lieu of 
notice

Holiday

Pension

Share 
based 
payments*

£000

£000

£000

£000

2019 
Total

£000

2018
Total**

£000

Basic 
salary, 
allowances 
and fees

£000

236

224

-

70

40

36

7

33

-

646

Executive

Peter Brotherton

Chris Jagusz
(resigned 21-Nov-18)

Fraser Fisher
(resigned 20-Oct-17)

Non-Executive 

Chris Cole

Stephen Vaughan

Jon Kempster

Chris Rigg
(appointed 1-Feb-19)

Stephen Puckett
(resigned 1-Feb-19)

David Payne
(resigned 31-Mar-18)

Total

Bonus

£000

40

-

-

-

-

-

-

-

-

-

155

-

-

-

-

-

-

-

40

155

-

4

-

-

-

-

-

-

-

4

12

131

419

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

12

131

383

-

70

40

36

7

33

-

988

254

154

427

70

28

35

-

40

55

1,063

*  Any share-based payments issued to Chris Jagusz in FY19 lapsed upon his departure, therefore the expense was written back and there was net nil impact 

to the P&L.

**  In addition to the 2018 remuneration as above, share-based payments totalling £335k were issued to the Executive Directors.

Details of share options in the Company held by the Directors during the year are as follows (audited):

Exercise 
Price (p) 

Balance
31 March 
2018

Granted

Forfeited /
Expired

Exercised

(a)

(b)

(c)

(d)

(e)

nil

nil

nil

63p

nil

349,800

161,905

192,481

28,571

-

382,957

-

-

-

298,879

298,879

(349,800)

-

-

-

-

80p

581,968

-

(581,968)

-

-

-

-

-

-

Balance
31 March 
2019

-

161,905

192,481

28,571

298,879

681,836

-

Chris Jagusz

Peter Brotherton

Fraser Fisher

Further information regarding the options noted above is set out below:

(a)  The options were granted on 29 December 2017 under the Company's Long-Term Incentive Plan ("LTIP"). The options 
will vest post the release of the Company's results for the year ended 31 March 2019 subject to the achievement of 
performance conditions related to the growth in earnings per share.

(b)  The options were granted on 29 June 2017 under the Company's Long-Term Incentive Plan ("LTIP"). The options will vest 
post the release of the Company's results for the year ended 31 March 2020 subject to the achievement of performance. 
conditions related to the growth in earnings per share. Fraser Fisher's options lapsed on him leaving the Company.

31

Governance

Redcentric Report & Accounts 2019

Directors’ remuneration report (audited) continued

(c)  The options were granted pursuant to the Company's HMRC approved Save-As-You-Earn Option Plan 2017 under 

which employees contribute a monthly amount the Company's results for the year ended 31 March 2020 subject to the 
achievement of performance conditions related to the growth in earnings per share. 

(d)  The options were granted on 26 November 2018 under the Company's Long-Term Incentive Plan ("LTIP"). The options 
will vest post the release of the Company's results for the year ended 31 March 2021 subject to the achievement of 
performance conditions related to the growth in earnings per share. 

(e)  The options were granted under the Group’s EMI scheme on 15 November 2013. The latest vesting date for the options 

was 8 February 2019 and have therefore lapsed as performance conditions were not met. 

Directors’ interests in shares

The interests (both beneﬁ cial and family interests) of the directors in ofﬁ ce at the date of this report in the share capital of the 
Company were as follows: 

                          Interests in ordinary shares £0.001

At 31 March
2019

At 31 March
2018

20,000

-

20,000

20,000

-

60,000

20,000

7,953

20,000

20,000

100,626

168,579

Interests in 
share based
incentives

Options
(unvested)

681,836

-

-

-

-

681,836

Executive

Peter Brotherton 

Chris Jagusz

Non-Executive 

Chris Cole

Stephen Vaughan

David Payne 

Total

Remuneration policy for Executive Directors compared to other employees

The table below shows the movement in the salary, beneﬁ ts and annual bonus for the Chief Executive Ofﬁ cer (CEO) between 
the current and previous ﬁ nancial year compared to that of the total amounts for all employees of the Group for each of these 
elements of pay. 

Chief Executive Ofﬁ cer 

Salary

Beneﬁ ts

Annual Bonus

Average of all employees

Salary

Beneﬁ ts

Annual Bonus

2019

£000

300

12

40

33

2

1

2018

£000

342

11

-

37

1

1

% change

  (12.3)%

9.1%*

100.0%

(10.8)%

100.0%

(0.0)%

*In the 2018 ﬁ nancial year the Chief Executive Ofﬁ cer received a car allowance as part of his remuneration package.

32

Governance

Redcentric Report & Accounts 2019

Directors’ remuneration report (audited) continued

Relative importance of the spend on pay

The table below shows the total pay for all Redcentric’s employees compared to other key ﬁ nancial indicators. Additional 
information on the number of employees, total revenue and underlying proﬁ t has been provided for context. 

Employee costs

Dividends to shareholders

Corporation tax

Average number of employees

Revenue 

Adjusted EBITDA

Share price

2019

£000

20,507

597

604

479

93,260

16,714

2018

£000

23,292

-

(1,004)

501

99,990

18,085

% change

(12.0)%

100.0%

(160.2)%

(4.4)%

(6.7)%

(7.6)%

The market price of the Company’s shares on 31 March 2019 was 76p per share. The highest and lowest market prices during 
the year were 106p and 65p respectively. 

Stephen Vaughan

Chairman, Remuneration Committee 

On behalf of the Board

25 June 2019

33

Governance

Redcentric Report & Accounts 2019

Independent auditor’s report to the members of Redcentric plc

1. Our opinion is unmodiﬁ ed 

We have audited the ﬁ nancial statements of Redcentric plc ("the Company") for the year ended 30 March 2019 which comprise 
the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes 
in Equity, Consolidated Statement of Financial Position, Consolidated Cash Flow Statement, Company Balance Sheet, Company 
Statement of Changes in Equity, and the related notes, including the accounting policies in note 1.  

In our opinion:

•   the ﬁ nancial statements give a true and fair view of the state of the Group's and of the parent Company's affairs as at

31 March 2019 and of the Group's loss for the year then ended;

•   the group ﬁ nancial statements have been properly prepared in accordance with International Financial Reporting Standards 

as adopted by the European Union;

•   the parent Company ﬁ nancial statements have been properly prepared in accordance with UK accounting standards, 

including FRS 101 Reduced Disclosure Framework; and

•  the ﬁ nancial statements have been prepared in accordance with the requirements of the Companies Act 2006. 

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law.
Our responsibilities are described below. We have fulﬁ lled our ethical responsibilities under, and are independent of the Group 
in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that 
the audit evidence we have obtained is a sufﬁ cient and appropriate basis for our opinion. 

Overview

Materiality: group ﬁ nancial statements 
as a whole

£524,000 (2018: £549,000)

0.56% of group revenue (2018: 0.55% of group revenue)

98% (2018: 97%) of total proﬁ ts and losses that made up
group loss before tax

Key audit matters

The impact of uncertainties due to the UK exiting
the European Union on our audit

Going concern

Provision for credit notes

Recoverability of parent company investment
in subsidiaries  

vs 2018

    ▲

    ▲

     ▼

Coverage

New

Recurring risks

34

   
Governance

Redcentric Report & Accounts 2019

Independent auditor’s report to the members of Redcentric plc continued

2. Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgment, were of most signiﬁ cance in the audit of the ﬁ nancial 
statements and include the most signiﬁ cant assessed risks of material misstatement (whether or not due to fraud) identiﬁ ed by 
us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below the key audit matters in arriving at our audit opinion
above. These matters were addressed in the context of our audit of the ﬁ nancial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.

The risk

Our response

The impact of uncertainties due to the UK exiting the 
European Union on our audit
Refer to pages 5-7 – Chief Executive's review

We developed a standardised ﬁ rm-wide approach the 
consideration of the uncertainties arising from Brexit in 
planning and performing our audits.

Unprecedented levels of uncertainty: All audits assess 
and challenge the reasonableness of estimates, in particular 
as described in the recoverability of parent company 
investment in subsidiaries and related disclosures, and the 
appropriateness of the going concern basis of preparation 
of the ﬁ nancial statements (see below). All of these depend 
on assessments of the future economic environment and 
the Group's future prospects and performance.

Brexit is one of the most signiﬁ cant economic events for the 
UK and at the date of this report its effects are subject to 
unprecedented levels of uncertainty of outcomes, with the 
full range of possible effects unknown. 

Our procedures included:

•   Our Brexit knowledge: We considered the directors' 

assessment of Brexit-related sources risk for the Group's 
business and ﬁ nancial resources, compared with our 
own understanding of the risks. We considered the 
directors' plans take action to mitigate the risks.

•   Sensitivity analysis: When addressing the 

recoverability of parent company investment in 
subsidiaries and other areas that depend on forecasts, 
we compared the directors' analysis our assessment of 
the full range of reasonably possible scenarios resulting 
from Brexit uncertainty and, where forecast cash ﬂ ows 
are required to be discounted, considered adjustments 
to discount rates for the level of remaining uncertainty.

•  Assessing transparency: As well as assessing 
individual disclosures as part of our procedures 
recoverability of parent company investment 
subsidiaries we considered all of the Brexit related 
disclosures together, including those in the strategic 
report, comparing the overall picture against our 
understanding of the risks.

However, no audit should be expected to predict the 
unknowable factors or all possible future implications for a 
Group and this is particularly the case in relation to Brexit.

35

Governance

Redcentric Report & Accounts 2019

Independent auditor’s report to the members of Redcentric plc continued

The risk

Our response

Going concern 
Refer to page 45 – Accounting Policy 

Disclosure quality 

The ﬁ nancial statements explain how the Board has formed 
a judgement that it is appropriate to adopt the going 
concern basis of preparation for the Group. 

That judgement is based on an evaluation of the inherent 
risks to the Group's business model and how those risks 
might affect the Group's ﬁ nancial resources or ability to 
continue operations over a period of at least a year from 
the date of approval of the ﬁ nancial statements. 

The risks most likely to adversely affect the Group's 
available ﬁ nancial resources over this period were:

•   The level of external ﬁ nancing facilities and the ability

of the group to renew-these facilities when they fall due 
for renewal in November 2020. 

•   Meeting management forecasts, including the 
uncertainty around the impact of Brexit on
consumer conﬁ dence.

There are also less predictable but realistic second order 
impacts, such as the impact of Brexit, which could result in a 
rapid reduction of available ﬁ nancial resources. 

The risk for our audit was whether or not those risks were 
such that they amounted to a material uncertainty that may 
have cast signiﬁ cant doubt about the ability to continue as 
a going concern. Had they been such, then that fact would 
have been required to have been disclosed.

Our procedures included:

•  Funding assessment: Assessed the committed level 
of ﬁ nancing available to the Group for at least the 
next 12 months through consideration of the facility 
agreement. We challenged the directors' assumptions 
by considering our own expectations based on our 
knowledge of the entity and experience of the
industry in which it operates. Additionally considered 
the re ﬁ nancing risk of the group on cessation of the 
current ﬁ nancing agreement through inquiry with the 
relevant banks. 

•   Historical comparison: Considered the Group's 
historical forecast accuracy, by assessing actual 
performance against previous forecasts, in particular 
concerning previous accuracy of forecasting revenue. 

•   Sensitivity analysis: Considered sensitivities over the 
level of available ﬁ nancial resources indicated by the 
Group's ﬁ nancial forecast taking account of reasonably 
possible (but not unrealistic) adverse effects that could 
arise from these risks individually and collectively. 

•   Evaluating directors' intent: Evaluating the intent of 
the directors and the achievability of the actions they 
would take to improve the position should certain risks 
materialize including looking at the history of similar 
actions being taken. 

•  Assessing transparency: Assessed the completeness 

and accuracy of the matters covered in the going 
concern disclosure by evaluating the reasonableness of 
risks and uncertainties speciﬁ ed by the disclosure
against our ﬁ ndings from our evaluation of 
management's assessment of going concern.

36

Governance

Redcentric Report & Accounts 2019

Independent auditor’s report to the members of Redcentric plc continued

The risk

Our response

Provision for credit notes (£1.5m; 2018: £1.0m)

Our procedures included:

Refer to page 47 (Accounting policy) and page 61-62
(Financial disclosures)

Processing error: 
The group sells to a large customer base. The group has 
a history of issuing invoices for the incorrect products or/
and amounts and hence has been issuing material levels 
of credit notes to correct for these. At the period end, 
management corrects for the issue of the incorrect invoicing 
by recording a credit note provision against revenue and 
trade receivables. The credit note provision is based on the 
value of credit notes that the Group expects to subsequently 
issue to correct for the estimated unresolved invoicing issues 
to date. Management generates the credit note provision 
by assessing historic level of credit notes raised against the 
related invoiced amounts, taking into consideration changes 
in the current period. 

There is a risk that the credit note provision recorded by 
management to correct for the inaccurate invoicing may 
be materially understated, resulting in revenue and trade 
receivables being misstated. 

In the prior year, the key audit matter also included provision 
for impairment of trade receivables. Given the low risk of 
customer non payment of valid invoices, the key audit matter 
this year focusses only on the element relating to correction 
of processing error.

Recoverability of parent company investment
in subsidiaries (£101.9m; 2018: £101.6m)

Refer to page 76 (Financial disclosures).

Subjective estimate: 
The carrying amount of the parent company's investments 
in subsidiaries are signiﬁ cant and at risk of irrecoverability 
due to weakening demand in certain areas of the business. 
This estimated recoverable amount of these balances is 
subjective due to the inherent uncertainty in forecasting 
trading conditions and cash ﬂ ows used in the forecasts for 
the subsidiary companies. 

The effect of these matters is that, as part of our risk 
assessment for audit planning purposes, we determined 
that the value in use of the company's investment had a 
high degree of estimation uncertainty, with a potential 
range of reasonable outcomes greater than our materiality 
for the ﬁ nancial statements as a whole. In conducting our 
ﬁ nal audit work, we reassessed the degree of estimation 
uncertainty over the carrying amount of investment to be 
less than that materiality. 

•   Tests of details: Assessing the basis and calculation of 
the credit note provision against our knowledge of the 
business and our understanding and evaluation of the 
invoicing process; 

•   Historical comparisons: Evaluating the historic level of 
credit notes raised against total revenue to assess the 
appropriateness of the applied rate of credit notes to 
total revenues in the year;

•  Tests of details: Assessing the level of post year end 
credit notes, to determine the extent to which the 
provision is utilised post year end and the adequacy
of the year end;

•   Tests of details: Agreeing a sample of trade receivables 

at the year end to post year end cash receipts;

•   Tests of details: Agreeing a sample of trade 

receivables at the year end to conﬁ rmations of balances 
from customers.

Our procedures included:

•   Benchmarking assumptions: Challenging the 

assumptions used in the cash ﬂ ows included in the 
forecasts based on our knowledge of the Group and the 
markets in which the subsidiaries operate;

•  Historical comparisons: Assessing the reasonableness 
of the forecasts by considering the historical accuracy of 
the previous forecasts;

•  Our sector experience: Evaluating the current level 
of trading, including identifying any indication of a 
downturn in activity, by examining the post year end 
management accounts and considering our knowledge 
of the Group and the market;

•  Assessing transparency: Assessing the adequacy 

of the parent company's disclosures in respect of the 
investment in subsidiaries.

37

Governance

Redcentric Report & Accounts 2019

Independent auditor’s report to the members of Redcentric plc continued

3. Our application of materiality and an overview of the scope of our audit 

Materiality for the Group ﬁ nancial statements as a whole was set at £524,000 (2018: £549,000), determined with reference to 
a benchmark of total revenues of £93.3m (2018: £100.0 million) (of which it represents 0.56% (2018: 0.55%)). We consider total 
revenues to be the most appropriate benchmark as it provides a more stable measure year on year than group loss before tax. 

We agreed to report to the Audit Committee any corrected or uncorrected identiﬁ ed misstatements exceeding £26,200 (2018: 
£27,000), in addition to other identiﬁ ed misstatements that warranted reporting on qualitative grounds. 

Materiality for the parent company ﬁ nancial statements as a whole was set at £523,000 (2018: £548,000), determined with 
reference to a benchmark of total assets, of which it represents 0.5% (2018: 0.5%). 

Of the Group's 3 (2018: 3) reporting components, we subjected 2 (2018: 2) to full scope audits tor Group purposes. 

The components within the scope of our work accounted for the percentages is shown in the table below. 

For the residual 1 component, we performed analysis at an aggregated Group level to re-examine our assessment that there 
were no signiﬁ cant risks of material misstatement within these. 

The work on all 3 (2018: 3) components was performed by the Group team. 

The component materialities were £422,000 to £523,000 (2018 ranged from £215,000 to £548,000), having regard to the mix 
of size and risk proﬁ le of the Group across the components. 

2019

£000

93,300

524

523

422-523

26.2

2019

%

100%

-

-

98%

-

2%

99%

-

1%

2018

£000

100,000

549

549

215-548

26.2

2018

%

100%

-

-

97%

-

3%

100%

-

-

Total revenues

Group materiality

Whole ﬁ nancial statements materiality

Range of materiality at three components

Misstatements reported to the audit committee

Group revenue

Full scope for group audit purposes

Speciﬁ ed risk-focused audit procedures

Residual components

Total losses and proﬁ ts that make up loss before tax

Full scope for group audit purposes

Speciﬁ c risk-focused audit procedures

Residual components

Group total assets

Full scope for group audit purposes

Speciﬁ ed risk-focused audit procedures

Residual components

38

Governance

Redcentric Report & Accounts 2019

Independent auditor’s report to the members of Redcentric plc continued

4. We have nothing to report on going concern 

The Directors have prepared the ﬁ nancial statements on the 
going concern basis as they do not intend to liquidate the 
Company or the Group or to cease their operations, and as 
they have concluded that the Company's and the Group's 
ﬁ nancial position means that this is realistic. They have also 
concluded that there are no material uncertainties that could 
have cast signiﬁ cant doubt over their ability to continue as a 
going concern for at least a year from the date of approval of 
the ﬁ nancial statements ("the going concern period"). 

Strategic report and directors' report
Based solely on our work on the other information:

•   we have not identiﬁ ed material misstatements in the 

Strategic report and the Directors' report;

•   in our opinion the information given in those reports 
for the ﬁ nancial year is consistent with the ﬁ nancial 
statements; and

•   in our opinion those reports have been prepared in 

accordance with the Companies Act 2006.

Our responsibility is to conclude on the appropriateness of 
the Directors' conclusions and, had there been a material 
uncertainty related to going concern, to make reference to 
that in this audit report. However, as we cannot predict all 
future events or conditions and as subsequent events may 
result in outcomes that are inconsistent with judgements that 
were reasonable at the time they were made, the absence 
of reference to a material uncertainty in this auditor's report 
is not a guarantee that the Group and the Company will 
continue in operation. 

We identiﬁ ed going concern as a key audit matter (see 
section 2 of this report). Based on the work described in our 
response to that key audit matter, we are required to report 
to you if: 

We have concluded that the use of the going concern basis 
of accounting is inappropriate or there is an undisclosed 
material uncertainty that may cast signiﬁ cant doubt over the 
use of that basis for a period of at least a year from the date 
of approval of the ﬁ nancial statements. 

We have nothing to report in these respects. 

5.  We have nothing to report on the other 

information in the Annual Report 

The directors are responsible for the other information 
presented in the Annual Report together with the ﬁ nancial 
statements. Our opinion on the ﬁ nancial statements does 
not cover the other information and, accordingly, we do not 
express an audit opinion or, except as explicitly stated below, 
any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in 
doing so, consider whether, based on our ﬁ nancial statements 
audit work, the information therein is materially misstated 
or inconsistent with the ﬁ nancial statements or our audit 
knowledge. Based solely on that work, we have not identiﬁ ed 
material misstatements in the other information.

6.  We have nothing to report on the other 
matters on which we are required to 
report by exception 

Under the Companies Act 2006, we are required to report to 
you if, in our opinion: 

•   adequate accounting records have not been kept by the 
parent Company, or returns adequate for our audit have 
not been received from branches not visited by us; or 

•   the parent Company ﬁ nancial statements are not in 

agreement with the accounting records and returns; or 

•   certain disclosures of Directors’ remuneration speciﬁ ed by 

law are not made; or 

•   we have not received all the information and explanations 

we require for our audit. 

We have nothing to report in these respects. 

7. Respective responsibilities 

Directors’ responsibilities
As explained more fully in their statement set out on
page 27, the Directors are responsible for: the preparation 
of the ﬁ nancial statements including being satisﬁ ed that 
they give a true and fair view; such internal control as they 
determine is necessary to enable the preparation of ﬁ nancial 
statements that are free from material misstatement, whether 
due to fraud or error; assessing the Group and parent 
Company’s ability to continue as a going concern, disclosing, 
as applicable, matters related to going concern; and using 
the going concern basis of accounting unless they either 
intend to liquidate the Group or the parent Company or to 
cease operations, or have no realistic alternative but to do so. 

39

Governance

Redcentric Report & Accounts 2019

Independent auditor’s report to the members of Redcentric plc continued

Auditor’s responsibilities 
Our objectives are to obtain reasonable assurance about 
whether the ﬁ nancial statements as a whole are free from 
material misstatement, whether due to fraud or error, and to 
issue our opinion in an auditor’s report. Reasonable assurance 
is a high level of assurance, but does not guarantee that an 
audit conducted in accordance with ISAs (UK) will always 
detect a material misstatement when it exists. Misstatements 
can arise from fraud or error and are considered material 
if, individually or in aggregate, they could reasonably be 
expected to inﬂ uence the economic decisions of users taken 
on the basis of the ﬁ nancial statements. 

8. The purpose of our audit work and to whom 
we owe our responsibilities 

This report is made solely to the Company’s members, 
as a body, in accordance with Chapter 3 of Part 16 of the 
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those 
matters we are required to state to them in an auditor’s report 
and for no other purpose. To the fullest extent permitted by 
law, we do not accept or assume responsibility to anyone 
other than the Company and the Company’s members, as a 
body, for our audit work, for this report, or for the opinions
we have formed. 

A fuller description of our responsibilities is provided on the 
FRC’s website at www.frc.org.uk/auditorsresponsibilities. 

John Pass (Senior Statutory Auditor) 

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants 

1 Sovereign Square, Sovereign Street,

Leeds LS1 4DA

25 June 2019

40

Financial Statements

Redcentric Report & Accounts 2019

Consolidated Income Statement for the year ended 31 March 2019

Revenue

Cost of sales

Gross proﬁ t

Operating expenditure

Operating (loss) / proﬁ t

Analysed as:

Adjusted EBITDA*

Depreciation

Amortisation of intangibles

Exceptional costs

Share-based payments

Interest payable

Interest receivable

Loss on ordinary activities before taxation

Tax credit / (charge) on proﬁ t on ordinary activities

Proﬁ t / (loss) for the year (attributable to owners of the parent)

Earnings per share

Basic earnings per share

Diluted basic earnings per share

Note

10

11

5

22

6

6

8

9

9

2019

£000

93,260

(36,895)

56,365

2018

£000

99,990

(39,996)

59,994

(56,650)

(59,054)

(285)

940

16,714

(7,330)

(7,392)

(1,911)

(366)

(285)

(1,091)

13

(1,363)

(604)

(1,967)

18,085

(7,769)

(7,136)

(1,672)

(568)

940

(1,452)

19

(493)

1,004

511

(1.32)p

(1.32)p

0.34p

0.34p

* Earnings before interest, tax, depreciation, amortisation, exceptional costs and share-based payments. 

The above consolidated income statement should be read in conjunction with the accompanying notes.

41

Financial Statements

Redcentric Report & Accounts 2019

Consolidated Statement of Comprehensive Income

Proﬁ t / (Loss) for the year

Exchange differences arising on re-translation of foreign subsidiary

Total comprehensive income

Consolidated Statement of Changes in Equity

2019

£000

(1,967)

8

(1,959)

2018

£000

511

(45)

466

Called up 
share 
capital

£000

Share 
premium 

£000

Capital 
redemption 
reserve

£000

Retained 
earnings

£000

Total 
equity

£000

149

65,395

(9,454)

20,639

76,729

-

-

-

-

-

-

-

149

149

-

149

-

-

-

-

-

-

-

-

193

-

-

-

-

-

-

-

-

-

-

511

(45)

466

-

-

534

-

511

(45)

466

193

-

534

-

65,588

(9,454)

21,639

77,922

65,588

(9,454)

21,639

77,922

-

65,588

-

(9,454)

-

-

-

-

-

-

-

-

-

-

(74)

21,565

(1,967)

8

(74)

77,848

(1,967)

8

(1,959)

(1,959)

(597)

353

(597)

353

149

65,588

(9,454)

19,362

75,645

At 31 March 2017  

Proﬁ t for the year

Other comprehensive loss – before tax

Total comprehensive income

Transactions with owners:

Issue of new shares

Dividends to shareholders

IFRS 2 Charge

Deferred tax on SBP

At 31 March 2018

At 1 April 2018 (reported)

Adjustment on initial application
of IFRS 15

At 1 April 2018 (after IFRS adoption)

Proﬁ t for the year

Other comprehensive loss – before tax

Total comprehensive income

Transactions with owners:

Dividends to shareholders

IFRS 2 Charge

At 31 March 2019

The accompanying notes form an integral part of the ﬁ nancial statements.

42

Financial Statements

Redcentric Report & Accounts 2019

Consolidated Statement of Financial Position as at 31 March 2019

Assets

Non-current assets

Property plant and equipment

Intangible assets

Deferred tax asset

Current assets

Inventories

Trade and other receivables

Cash and short-term deposits

Total assets

Current liabilities

Trade creditors and other payables

Borrowings

Provisions

Non-current liabilities

Borrowings

Provisions

Deferred tax liability

Total liabilities

Net assets

Equity and liabilities

Equity

Called up share capital

Share premium account

Capital redemption reserve

Retained earnings

Total equity

Note

2019 

£000

 2018

£000

10

11

8

12

13

14

16

21

16

21

8

20

18,133

75,802

142

94,077

357

22,103

7,206

29,666

20,238

82,486

-

102,724

666

26,120

6,089

32,875

123,743

135,599

22,297

3,056

149

21,715

881

-

23,460

3,125

-

30,671

376

45

48,098

57,677

75,645

77,922

149

65,588

(9,454)

19,362

75,645

149

65,588

(9,454)

21,639

77,922

The notes on pages 45 to 73 are an integral part of these ﬁ nancial statements. The consolidated ﬁ nancial statements of 
Redcentric Plc (Registration Number 08397584) on pages 41 to 44 were approved by the Board on 25 June 2019 and are 
signed on its behalf by:

Peter Brotherton, Director

43

Financial Statements

Redcentric Report & Accounts 2019

Consolidated Cash Flow Statement for the year ended 31 March 2019

2019 

£000

2018

£000

Cash ﬂ ows from operating activities

Loss before taxation

Net ﬁ nance expense

Operating proﬁ t

Depreciation and amortisation

Exceptional costs

Share based payments

Operating cash ﬂ ow before exceptional costs and movements in working capital

Loss on sale of ﬁ xed asset

Exceptional costs and NI on share based payments

Operating cash ﬂ ow before movements in working capital 

Decrease (increase) in inventories

Decrease (increase) in trade and other receivables

(Decrease) increase in trade and other payables

Cash generated from operations

Corporation tax (paid) / received

Net cash inﬂ ow from operating activities

Cash ﬂ ows from investing activities

Proceeds on disposal of property, plant and equipment

Purchase of tangible ﬁ xed assets

Purchase of intangible ﬁ xed assets

Net cash outﬂ ow from investing activities

Cash ﬂ ows from ﬁ nancing activities

Dividends paid to shareholders

Interest paid

Bank fees

Repayment of borrowings / ﬁ nance leases

(Repayment) of revolving credit facility

Proceeds of issue of shares less costs of issue

Net cash (outﬂ ow) / inﬂ ow from ﬁ nancing activities

Net increase in cash and cash equivalents

Opening cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Effect of exchange rates

Cash and cash equivalents 

(1,363)

1,078

(285)

14,722

1,911

366

16,714

(42)

(1,668)

15,004

309

5,775

(1,467)

19,621

(1,873)

17,748

665

(4,665)

(564)

(4,564)

(597)

(1,044)

-

(1,918)

(8,500)

-

(12,059)

1,125

6,089

1,125

(8)

7,206

(493)

1,433

940

14,905

1,672

568

18,085

-

(3,002)

15,083

(432)

1,079

3,912

19,642

217

19,859

-

(6,778)

-

(6,778)

-

(1,196)

(50)

(323)

(10,000)

193

(11,376)

1,705

4,340

1,705

44

6,089

In addition to cash purchases, an additional £1.3m of capital expenditure was funded via ﬁ nance leases creating a non-cash 
movement. Total gross capital expenditure in year was £6.0m, and total net capex was £5.4m after disposals.

The accompanying notes form an integral part of the ﬁ nancial statements.

44

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019

1 Accounting policies – Group

Redcentric plc is a public limited company incorporated and 
domiciled in England and Wales, whose shares are publicly 
traded on the 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 activity of the Group is the supply of IT 
managed services.

that overall facility headroom and covenant headroom both 
remain strong.

The Group will continue to cancel unutilised tranches of 
the bank facility underpinned by the continuing strength of 
forecast cash generation and the Group will undergo a full 
reﬁ nancing process well in advance of the expiration of the 
current bank facilities in November 2020. The Directors are 
not aware of any facts or circumstances that would prevent 
this reﬁ nancing process from being successful.

The principal accounting policies, which have been applied 
consistently in the preparation of these consolidated ﬁ nancial 
statements throughout the period and by all subsidiary 
companies, are set out below:

Having undertaken this assessment, the directors consider it 
appropriate to adopt the going concern basis of accounting 
when preparing the ﬁ nancial statements.

1.1 Basis of preparation

The consolidated ﬁ nancial statements of Redcentric plc
have been prepared on the going concern basis and in
accordance with EU adopted International Financial 
Reporting Standards (IFRS), IFRIC interpretations and the 
Companies Act 2006 applicable to companies reporting 
under IFRS. The consolidated ﬁ nancial statements have
been prepared under the historical cost convention.

As at 31 March 2019, the Group had committed revolving 
credit facilities of £25m (2018: £40m) and an overdraft facility 
of £2m (2018: £2m), of which £19.5m (2018: £28m) of the 
revolving credit facility and £nil (2018: £Nil) of the overdraft 
was drawn. During the year, the continuing strength of 
operating cash ﬂ ows enabled the Group to cancel £15m
of unutilised facility. As at 31 March 2019, these facilities were 
due to expire on April 2 2020. Subsequent to the year end the 
Group cancelled a further £2.5m of unutilised facility, leaving 
the committed revolving facility of £22.5m. On 14 June 2019 
these facilities were extended to 30 November 2020, with all 
terms and covenants remaining the same until this time.

The Directors have taken note of the guidance issued by 
the Financial Reporting Council on the Going Concern Basis 
of Accounting in determining that this is the appropriate 
basis of preparation of the ﬁ nancial statements and have 
considered a number of factors. 

The Group’s business activities and markets in which it 
operates are set out in the Strategic Report. The sectors in 
which the Group is particularly well represented are diverse 
and a high proportion of the Group’s revenue is recurring in 
nature, which provides good visibility and resilience of future 
revenue and cash-ﬂ ows.

Taking into account all available information about the future 
for a period of at least, but not limited to, twelve months 
from the date of approval of the ﬁ nancial statements, the 
Directors have reviewed cash forecasts as well as performing 
reasonable downside sensitivity analysis (which demonstrate 

The preparation of ﬁ nancial statements in conformity with 
IFRS requires the use of certain critical accounting estimates. 
It also requires management to exercise its judgement in 
the process of applying the Group’s accounting policies. The 
areas involving a higher degree of judgement or complexity, 
or areas where assumptions and estimates are signiﬁ cant to 
the consolidated ﬁ nancial statements are disclosed in note 
1.25 in the accounting policies.

1.2 Basis of consolidation

Subsidiaries are all entities (including structured 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 to account for 
business combinations. The consideration transferred for 
the acquisition of a subsidiary is the fair values of the assets 
transferred, the liabilities incurred to the former owners of 
the acquiree 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. Identiﬁ able assets acquired and liabilities and 
contingent liabilities assumed in a business combination are 
measured initially at their fair values 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 recognised amounts of acquiree’s identiﬁ able
net assets. 

Acquisition-related costs are expensed as incurred
Intercompany transactions, balances and unrealised gains 
on transactions between group companies are eliminated. 
Unrealised losses are also eliminated. When necessary, 
amounts reported by subsidiaries have been adjusted to 
conform with the group’s accounting policies.

45

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

1.3 Intangible assets

Goodwill
Goodwill arises on the acquisition of subsidiaries and 
represents the excess of the consideration transferred, the 
amount of any non-controlling interest in the acquiree and 
the acquisition-date fair value of any previous equity interest 
in the acquiree over the fair value of the identiﬁ able net 
assets acquired. If the total of consideration transferred, non-
controlling interest recognised and previously held interest 
measured at fair value is less than the fair value of the net 
asset of the subsidiary, in the case of a bargain purchase, the 
difference is recognised directly to the income statement. 

For the purposes of impairment testing, goodwill acquired 
in a business combination is allocated to each of the cash-
generating units (CGUs), or groups of CGUs, that is expected 
to beneﬁ t from the synergies of the combination. Each unit or 
group of units to which the goodwill is allocated represents 
the lowest level within the entity at which the goodwill is 
monitored for internal management purposes. Goodwill is 
monitored at the operating segment level. 

Goodwill impairment reviews are undertaken annually 
or more frequently if events or changes in circumstances 
indicate a potential impairment. The carrying value of the 
CGU containing the goodwill is compared to the recoverable 
amount, which is the higher of value in use and the fair 
value less costs of disposal. Any impairment is recognised 
immediately as an expense and is not subsequently reversed.

Other intangible assets
Other intangible assets are carried at cost less accumulated 
amortisation and impairment losses (note 1.5).

Other intangible assets acquired separately from a business 
are carried initially at cost. An intangible asset acquired 
as part of a business combination is recognised outside 
goodwill if the asset is separable or arises from contractual or 
other legal rights and its fair value can be measured reliably.

Intangible assets with a ﬁ nite life are amortised on a straight-
line basis over their expected useful lives, as follows:

Customer contracts
and related relationships 

Trademarks  

Software Licences 

5-15 years

5 years

 5 years (or over the contract 
term if shorter)

costs meeting the recognition criteria in IAS 38, including 
commercial feasibility, would be capitalised.

1.4 Property, plant and equipment

Property, plant and equipment are stated at cost less 
accumulated depreciation and any impairment in value (note 
1.5). The cost includes the original price of the asset and the 
cost attributable to bringing the asset to its current working 
condition for its intended use. 

Depreciation, down to residual value, is calculated on a 
straight-line basis over the estimated useful life of the asset 
which is reviewed on an annual basis. 

Ofﬁ ce ﬁ xtures and ﬁ ttings 

4-5 years

Leasehold improvements 

15 years

Vehicles and computer  
equipment 

3-5 years (or over the contract
term if shorter)

An item of property, plant and equipment is de-recognised 
upon disposal or when no future economic beneﬁ ts are 
expected to arise from the continued use of the asset. Any 
gain or loss arising on de-recognition of the asset (calculated 
as the difference between the net disposal proceeds and 
the carrying amount of the item) is included in the income 
statement in the period the item is de-recognised.

1.5 Impairment of assets

Goodwill is reviewed for impairment annually or more 
frequently if events or changes in circumstances indicate that 
the carrying value may be impaired. As at the acquisition 
date any goodwill acquired is allocated to each of the cash 
generating units expected to beneﬁ t from the business 
combination’s synergies. Impairment is determined by 
assessing the recoverable amount of the cash generating unit 
to which the goodwill relates. When the recoverable amount 
of the cash generating unit is less than the carrying amount, 
including goodwill, an impairment loss is recognised.

Other intangible assets and property, plant and equipment 
are reviewed for impairment whenever events or changes 
in circumstances indicate the carrying values may not be 
recoverable. In addition, the carrying value of capitalised 
development expenditure is reviewed for impairment 
annually. If any such indication exists and where the carrying 
amounts exceed the estimated recoverable amount, the 
assets or cash generating units are written down to their 
recoverable amount.

Impairment and amortisation charges are included within the 
administrative expenses line in the income statement.

Internally generated intangibles
Any internally generated intangibles as a result of research 
and development are not capitalised as they are not 
deemed to be material. Any signiﬁ cant internal development 

The recoverable amount of intangible assets and property, 
plant and equipment is the greater of fair value less costs to 
sell and value in use. In assessing value in use, the estimated 
future cash ﬂ ows are discounted to their present value using a 
pre-tax discount rate that reﬂ ects current market assessments 
of the time value of money and the risks speciﬁ c to the asset. 

46

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

For an asset that does not generate largely independent cash 
inﬂ ows, the recoverable amount is determined by the cash 
generating unit to which the asset belongs. Fair value less 
costs to sell is, where known, based on actual sales price net 
of costs incurred in completing the disposal.

Non-ﬁ nancial assets that were impaired in the previous 
periods are annually reviewed to assess whether the 
impairment is still relevant. 

1.6 Share capital

Ordinary shares are classiﬁ ed as equity. Incremental costs 
directly attributable to the issue of new shares or options are 
shown in equity as a deduction from proceeds.

1.7 Leases

Leases where the lessor retains substantially all the risks
and beneﬁ ts of ownership of the asset are classiﬁ ed as 
operating leases.

Operating lease payments are recognised as an expense
in the income statement on a straight-line basis over the 
lease term.

Assets funded through ﬁ nance leases are capitalised as 
property, plant and equipment and depreciated over the 
shorter of their useful economic life and the lease term.
The resulting lease obligations are included in borrowings 
net of ﬁ nance charges. Interest costs on ﬁ nance leases are 
charged to the income statement.

1.8 Current and deferred income tax

Current tax assets and liabilities are measured at the amount 
expected to be recovered from or paid to the taxation 
authorities, based on tax rates and laws that are enacted or 
substantively enacted by the balance sheet date.

•  deferred income tax assets are recognised only to the 
extent that it is probable that taxable proﬁ ts will be 
available against which deductible temporary differences 
carried forward tax credits or tax losses can be utilised.

1.9 Trade and other receivables

IFRS 9 Financial Instruments was issued by the IASB in July 
2014 and is effective for the Company for the year ended 
31 March 2019. Applying IFRS 9 has resulted in changes 
to the measurement and disclosure of ﬁ nancial instruments 
and introduced a new expected loss impairment model. 
Regarding impairment, the Company has applied the IFRS 9 
approach to measuring expected credit losses which uses 
a lifetime expected loss allowance for all assets held at 
amortised cost. 

We have revised the methodologies we use to impair 
ﬁ nancial assets to reﬂ ect the forward-looking ‘expected 
credit loss’ model introduced by IFRS 9, in contrast to the 
backward-looking ‘incurred credit loss’ model used under 
IAS 39. In order to assess the impact of IFRS 9 the Company 
reviewed the last 12 months of actual debtor impairment 
when calculating the impact of the expected credit loss. The 
Company now recognises a loss allowance for all expected 
credit losses on initial recognition of trade receivables. 
Providing for loss allowances on our existing ﬁ nancial assets 
has not had a material impact on the ﬁ nancial statements. 

The Group’s trade and other receivables are non-interest 
bearing.

1.10 Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise 
cash at bank and in hand and short-term deposits with an 
original maturity of three months or less, net of outstanding 
bank overdrafts.

Deferred income tax is provided for on all temporary 
differences at the balance sheet date between the tax 
bases of assets and liabilities and their carrying amounts for 
ﬁ nancial reporting purposes, with the following exceptions:

1.11 Foreign currencies

The functional and presentation currency of Redcentric plc is 
Pounds Sterling (£) and the Group conducts the majority of 
its business in Sterling.

•  where the temporary difference arises from the initial 
recognition of goodwill or an asset or liability in a 
transaction that is not a business combination that at the 
time of the transaction affects neither accounting nor 
taxable proﬁ t or loss;

•  in respect of taxable temporary differences associated with 
investments in subsidiaries, where the timing of the reversal 
of the temporary differences can be controlled and it is 
probable that the temporary differences will not reverse in 
the foreseeable future; and

Transactions in foreign currencies are initially recorded in 
the functional currency by applying the rate of exchange 
ruling at the date of the transaction. Monetary assets and 
liabilities denominated in foreign currencies are retranslated 
at the functional currency rate of exchange ruling at the 
balance sheet date. All differences are taken to the income 
statement, except for differences on monetary assets and 
liabilities that form part of the Group’s net investment in a 
foreign operation. These are taken directly to equity until 
the disposal of the net investment, at which time they are 
recognised in the proﬁ t or loss.

47

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

1.12 Trade payables

Trade payables are stated at their nominal value, recognised 
initially at fair value and subsequently valued at amortised cost.

1.13 Accruals and deferred income

The liability for costs which have been incurred in an 
accounting period but for which no invoice has been received 
are recognised in the period the costs relate to. Income 
which has been invoiced in advance of its recognition criteria 
being met is recognised on the balance sheet as deferred 
income until the recognition criteria are met.

1.14 Provisions

Provisions are recognised when the Group has a present 
obligation (legal or constructive) as a result of a past event, 
it is probable that an outﬂ ow of resources embodying 
economic beneﬁ ts will be required to settle the obligation, 
and a reliable estimate can be made of the amount of the 
obligation.

If the effect of the time value of money is material, 
provisions are determined by discounting the expected 
future cash ﬂ ows at a pre-tax rate that reﬂ ects current 
market assessments of the time value of money and, where 
appropriate, the risks speciﬁ c to the liability.

Dilapidations
The dilapidation provisions are built up over the life of the 
associated lease based on estimates of costs of work required 
to fulﬁ l the Group’s contractual obligation under the lease 
agreements to return the property to the same condition as 
at the commencement of the lease.

1.15 Pensions

The Group operates a deﬁ ned contribution scheme. Pension 
costs are charged directly to the income statement in the 
period to which they relate on an accruals basis. The Group 
has no further payment obligations once contributions have 
been paid.

1.16 Share-based payment transactions

The cost of equity-settled transactions with employees is 
measured by reference to the fair value of the award at 
the date at which they are granted and is recognised as an 
expense over the vesting period, which ends on the date at 
which the relevant employees become fully entitled to the 
award. Fair value is determined by an external valuer using 
an appropriate pricing model for which the assumptions 
are approved by the Directors. In valuing equity-settled 
transactions, only vesting conditions linked to the market 
price of the shares of the Company are considered.

No expense is recognised for awards that do not ultimately 
vest, except for awards where vesting is conditional upon a 
market condition, which are treated as vesting irrespective 
of whether or not the market condition is satisﬁ ed, provided 
that all other performance conditions are satisﬁ ed.

48

At each balance sheet date before vesting, the cumulative 
expense is calculated, representing the extent to which the 
vesting period has expired and management’s best estimate 
of the achievement or otherwise of non-market conditions, 
number of equity instruments that will ultimately vest or in 
the case of an instrument subject to a market condition, be 
treated as vesting described above. The movement in the 
cumulative expense since the previous balance sheet date is 
recognised in the income statement, with a corresponding 
entry in equity.

Where the terms of an equity-settled award are modiﬁ ed 
or a new award is designated as replacing a cancelled or 
settled award, the existing charge is recognised immediately. 
In addition, an expense is recognised over the remainder 
of the new vesting period for the incremental fair value of 
any modiﬁ cation, based on the difference between the fair 
value of the original award and the fair value of the modiﬁ ed 
award, both as measured on the date of the modiﬁ cation.
No reduction is recognised if this difference is negative.

Where an equity-settled award is cancelled, it is treated as if 
it had vested on the date of cancellation, and any expense 
not yet recognised for the award is recognised immediately. 
Any compensation paid up to the fair value of the award at 
the cancellation or settlement date is deducted from equity, 
with any excess over fair value being treated as an expense in 
the income statement.

The Group does not operate any cash settled share-based 
payment schemes.

1.17 Financial assets

The Group classiﬁ es its ﬁ nancial assets as loans and 
receivables measured at amortised cost.

Loans and receivables are non-derivative ﬁ nancial assets with 
ﬁ xed or determinable payments which are not quoted in an 
active market. They are included in current assets, except for 
maturities greater than 12 months after the balance sheet 
date which are classiﬁ ed as non-current assets. The Group’s 
loans and receivables comprise ‘trade and other receivables’, 
‘cash and cash equivalents’, and other receivables which are 
expected to be settled in cash.

1.18 Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at fair value less 
directly attributable transaction costs. After initial recognition, 
interest-bearing loans and borrowings are subsequently 
measured at amortised cost using the effective interest method. 
Gains and losses arising on the repurchase, settlement or 
otherwise cancellation of liabilities are recognised in the ﬁ nance 
cost line in the income statement.

1.19 Finance costs

Loans are carried at fair value of initial recognition, net of 
unamortised issue costs of debt. These costs are amortised 
over the loan term. 

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

All other borrowing costs are recognised in the income statement on an accruals basis, using the effective rate method.

1.20 Revenue

IFRS 15 ‘Revenue from contracts with customers’ is effective for periods beginning on or after 1st January 2018. The Company 
has adopted IFRS 15, ‘Revenue from Contracts with Customers’, for the year ending 31 March 2019. This establishes a 
comprehensive framework for determining whether, how much and when revenue is recognised. As permitted by the standard, 
the Company has applied IFRS 15 using the cumulative effect method and therefore the comparative information has not been 
restated and continues to be reported under IAS 18. The overall impact on reserves as at the transition date is not signiﬁ cant. 
Further details relating to IFRS 15 are disclosed in note 28.

The standard requires revenue earned from contracts to be recognised in line with performance obligations based on a
ﬁ ve-step model.

On inception of the contract we identify a “performance obligation” for each of the distinct goods or services we have 
promised to provide to the customer. The following table summarises the performance obligations we have identiﬁ ed for our 
major revenue lines and provides information on the time of when they are satisﬁ es and the related revenue recognition policy.

Revenue line

Performance obligation

Revenue recognition policy

Recurring 
revenue

Provision of managed services to the customer. 
All of the revenue in this category is contracted. 
and includes a full range of managed support, 
maintenance, subscription and service agreements. 

Performance obligations are identiﬁ ed for each 
distinct service for which the customer has 
contracted and are considered to be satisﬁ ed over 
the time period that these services are delivered.

Revenue for these types of services is recognised 
evenly over the period of the agreement as the 
services are provided. 

Product revenue

Provision of third-party hardware (e.g phone 
handsets, routers) and licences to the customer 
as a one-off, distinct sale.

Revenue for product sales are recognised in
full in the income statement upon delivery to
the customer.

Performance obligations are satisﬁ ed at the point 
in time that control passes to the customer. 

Revenue for product sales are recognised in full 
in the income statement upon delivery to the 
customer. Amongst other factors the company 
has pricing and fulﬁ lment risk and as such is 
considered to be principal in these transactions.

Services revenue

Provision of professional services, consultancy and 
engineering services in order to setup and install a 
customer managed service. 

Services revenue is recognised from the date of 
installation of a managed service and recognised 
evenly over the period of the agreement. 

For distinct separable services revenue is 
recognised at the point of completion.

Installation is typically intrinsically linked to the 
provision of the managed services (in recurring 
revenue above) these services do not represent 
separate performance obligations and are 
therefore combined with the associated service 
performance obligation. 

The Group also provides certain services that 
are non-complex and distinct from the provision 
of the underlying managed service contract. 
The completion of these services is a separate 
performance obligation.

49

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

1.23 Holiday pay accrual

It is the Group policy to accrue for holiday pay to the extent 
of the total amount that would be paid out if all employees of 
the Group left the business at its reporting date. At 31 March 
2019, the holiday pay accrual was £0.2m.

1.24 Segmental reporting

The Chief Operating Decision Maker (“CODM") has been 
identiﬁ ed as the Group Chief Executive and the Chief 
Financial Ofﬁ cer. The CODM reviews the Group’s internal 
reporting in order to assess performance and allocate 
resources. Management has determined the operating 
segments based on these reports.

The Board believes that the Group comprises a single 
reporting segment, that being the provision of managed 
services to customers. Whilst the Board still reviews revenue 
streams of three categories separately (recurring, product and 
service), the operating costs and operating asset base used 
to derive these revenue streams are the same for all three 
categories and are presented as such in the Group’s internal 
reporting to the CODM.

The Executive Board assess the performance of the operating 
segment based on adjusted EBITDA. Information provided to 
the Executive Board is measured in a manner consistent with 
that in the Financial Statements.

1.25 Critical accounting estimates and assumptions

Estimates and judgements are continually evaluated and are 
based on historical experience and other factors, including 
expectations of future events that are believed to be 
reasonable under the circumstances.

There are no material obligations in respect of returns, 
refunds or warranties.

The Group recognises revenue based on the stand-alone 
selling price of each performance obligation. Determining 
the selling price is typically driven by list prices. 

Payments received in advance are recognised as contract 
liabilities and amounts billed in arrears are contract assets. 
Revenue expected to be recognised in future periods for 
performance obligations that are not complete (or partially 
complete) as at 31 March 2019 is £139m. Of this, £120m 
relates to revenue for recurring managed services. 

Incremental revenues are generated based on usage for calls 
and data. The entity has a right to consideration from the 
customer at an amount that corresponds directly with the 
value to the customer of the entity’s performance completed 
to date, therefore the entity recognises the revenue to the 
extent to which it has a right to invoice.

1.21 Other income

Finance income
Income is recognised on an accrual basis using the effective 
interest method.

1.22 Exceptional costs

It is the policy of the Group to identify certain costs 
separately on the face of the Income Statement in order that 
the underlying proﬁ tability of the business can be clearly 
understood. These costs are identiﬁ ed as Exceptional costs, 
and comprise;

(a)  Professional fees incurred in sourcing and completing 
acquisitions and disposals including legal expenses

(b)  Professional fees incurred in restructuring and

reﬁ nancing acquisitions.

(c)   Integration costs which are incurred by the Group when 
integrating one trading business into another, including 
rebranding of acquired businesses.

(d)  Redundancy costs, including employment related costs of 
staff made redundant up to the date of their leaving as a 
consequence of integration.

(e)  Property costs such as lease termination penalties and 
vacant property provisions and third-party advisor fees. 

(f)   Non-cash accounting charges relating to aligning 

accounting policies of acquired businesses with the
Group where traditional fair value accounting methods
are not appropriate.

(g) Other exceptional costs.

For further detail refer to note 5.

50

Financial Statements 

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by deﬁ nition, 
seldom equal the related results. The estimates and assumptions that have a signiﬁ cant risk of causing a material adjustment to 
the carrying amounts of assets and liabilities within the next ﬁ nancial year are:

Area

Judgement

Recoverability of 
debtors due to 
billing inaccuracies

The group has a large customer base and historically a material number of credit notes have been 
raised by the group due to issues in the accuracy of invoicing to customers.

A credit note provision is estimated at the period end to account for revenue which has been 
recognised in the year, but for which a credit note will subsequently be raised post year end.

The provision has been calculated based on empirical analysis of credit notes issued against revenue 
recognised over a period of two years with adjustments made based on management’s knowledge of 
speciﬁ c items in the customer base.

Deferred tax

Deferred tax assets are recognised only to the extent that it is probable that future taxable proﬁ ts will 
be available against which the temporary differences can be utilised. Recognition, therefore, involves 
estimates regarding the prudent forecasting of future taxable proﬁ ts of the business and in applying 
an appropriate risk adjustment factor.

1.26 IFRS 16 Leases (effective date 1 January 2019)

IFRS 16 "Leases" provides guidance on the classiﬁ cation, recognition and measurement of leases to help provide useful 
information to the users of ﬁ nancial statements. The main aim of this standard is to ensure all leases will be reﬂ ected on 
the Consolidated Balance Sheet, irrespective of substance over form. The new standard will replace IAS 17 "Leases" and is 
effective for annual periods beginning on or after 1 January 2019 unless adopted early. IFRS 16 is expected to have a material 
impact on the amounts recognised in the Group's consolidated ﬁ nancial statements. On adoption of IFRS 16 the Group will 
recognise within the balance sheet a right of use asset and lease liability for all applicable leases. Within the income statement, 
rent expense will be replaced by depreciation and interest expense. This will result in a decrease in operating expenses and an 
increase in ﬁ nance costs.

Management have reviewed all possible leases that could be affected by IFRS 16 including property, leased cars, leased 
network contracts, third party tail circuit contracts, etc. It was deemed that for anything related to the network and tail circuits 
connecting to it, any one company does not have substantially all of the economic beneﬁ ts resulting from the asset and 
therefore a ”lease", under the IFRS 16 deﬁ nition, does not exist.

Therefore, applicable leases will include all rented ofﬁ ce and data centre space as well as leased company cars. 

The Company will adopt IFRS 16 on a modiﬁ ed retrospective basis. Upon transition, a lease liability will be recognised based 
on future lease payments discounted an at appropriate borrowing rate. Additionally, a right-of-use asset will be recognised 
equivalent to the lease liability.

The following practical expedients will also be utilised upon transition:

-   Low-value leases (under £5,000) will be excluded from IFRS 16 accounting and will continue to be recognised as an 

operating lease

-  Contracts expiring within 12 months of the transition date will continue to be recognised as an operating lease for FY20

-  Leases of intangible assets such as licences will continue to be accounted for under IAS 38.

Based on the work done to date of IFRS 16, it is expected that the resulting lease liability and right-of-use asset to be 
recognised upon transition will be in the region of £25 million to £35 million.

The adoption of this standard is expected to impact alternative performance measures, such as EBITDA, that are used by the 
Group and the Group’s ongoing review of IFRS 16 indicates that the ﬁ nancial impact will result in an increase in EBITDA of 
between £3 million and £5 million.

Details of the Group’s operating leases, currently accounted for under IAS 17 Leases, can be found in note 15.

51

Financial Statements 

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

2 Segment reporting

IFRS 8 requires operating segments to be identiﬁ ed on the basis of the internal ﬁ nancial information reported to the Chief 
Operating Decision Maker (CODM). The Group’s CODM is deemed to be the Executive Directors on the Board, who are 
primarily responsible for the allocation of resources to segments and the assessment of performance of the segments. 
The CODM assess proﬁ t performance principally through adjusted proﬁ t measures consistent with those disclosed in the 
Annual Report and Accounts. 

The Board believes that the Group comprises a single reporting segment, that being the provision of managed services to 
customers. Whilst the Board still reviews revenue streams of three categories separately (recurring, product and service), the 
operating costs and operating asset base used to derive these revenue streams are the same for all three categories and are 
presented as such in the Group’s internal reporting to the CODM.

Recurring revenue is derived from the provision of the Group’s services to customers under long-term agreements, including 
data, connectivity, hosting, cloud and support services. Services revenue is derived from the provision of consultancy or 
installation services regarding the provision and set-up of a new service.

Revenue for the year ended 31 March 2019 was generated wholly from the UK, and all non-current assets are based in the UK:

Recurring revenue

Product revenue

Services revenue

Total revenue

3 Operating proﬁ t

The following costs are considered to be signiﬁ cant items within operating proﬁ t.

Amortisation of acquired intangible assets

Amortisation of intangible assets: owned

Amortisation of intangible assets: leased

Depreciation – owned assets

Depreciation – assets held under ﬁ nance lease

Share-based payments

Operating lease payments

Employee beneﬁ ts expense, excluding share-based compensation 

Year ended 
31 March 
2019

Year ended 
31 March 
2018 

£000

£000

80,544

5,810

6,906

93,260

2019

£000

6,252

1,005

135

5,066

2,264

366

3,424

21,027

87,065

7,180

5,745

99,990

2018

£000

6,252

859

25

5,174

2,595

568

2,837

23,860

52

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

4 Auditors’ remuneration

Below are the fees payable to the auditors and their associates:

Audit services – KPMG

Fees payable to Company auditor and its associates for the audit of parent company 
and consolidated ﬁ nancial statements 

The audit and interim review of Company’s subsidiaries

Total audit fees

Fees payable to Company auditor and its associates for other services: 

Tax compliance services

Tax advisory services

Total tax fees

Other non-audit services

Total

5 Exceptional costs

2019

£000

2018

£000

25

131

156

20

20

40

16

202

24

115

139

15

-

15

-

154

In accordance with the Group’s policy of separately identifying exceptional costs, the following charges were recognised in
the year: 

Professional fees associated with the forensic review and Financial 
Conduct Authority (FCA) investigation

Staff restructuring

Integration costs

Vacant property provisions

Total

Year ended
31 March
2019

Year ended 
31 March 
2018

£000

£000

554

804

-

553

1,911

672

868

132

-

1,672

Overall, the level of exceptional items has increased from £1.7m to £1.9m. The key movements are as follows:

•   Professional fees associated with the forensic review and FCA investigation – these costs relate to legal advice received in 
respect of the ongoing FCA investigation. Whilst the Company is still incurring these costs, they are steadily reducing.

•   Staff restructuring costs – as part of the overall cost base review and movement of UK roles to India. This restructuring 

resulted in 20 redundancies.

•   Post the integration of City Lifeline, there have been no further costs of this nature. All the group companies are now

fully integrated.

•   Vacant property provision relates to closure of the Theale ofﬁ ce. All staff have been transferred to the data centre

in Reading.

53

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

6 Finance costs

Year ended 
31 March
2019

£000

Year ended 
31 March
2018

£000

(13)

(19)

947

93

51

1,091

1,078

2019 

£000

18,173

1,907

366

581

21,027

2019

310

103

66

479

2019

329

150

479

1,241

143

68

1,452

1,433

2018

£000

20,655

2,240

568

397

23,860

2018

367

81

53

501

2018

362

139

501

Interest receivable

Other interest receivable

Interest payable

Interest payable on bank loans and overdrafts

Interest payable on ﬁ nance leases

Amortisation of loan arrangement fees

Net ﬁ nancing costs

7 Employee beneﬁ ts expense

Staff costs for the year, including Executive Directors, amounted to:

Wages and salaries

Social security costs

Share options granted to Directors and employees

Pension costs

Total

Average monthly number of people (including Executive Directors) employed:

Operations

Selling and distribution

Administration

During the year 39 heads transferred from operations to selling and distribution. 

These numbers as split as follows:

UK

India

54

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

Employee beneﬁ ts expense (continued)

The remuneration of the Directors in respect of the year was as follows:

Payment 
in lieu of 
notice

Holiday

Pension

Share 
based 
payments*

£000

£000

£000

£000

2019 
Total

£000

2018
Total**

£000

Basic 
salary, 
allowances 
and fees

£000

236

224

-

70

40

36

7

33

-

646

Executive

Peter Brotherton

Chris Jagusz
(resigned 21-Nov-18)

Fraser Fisher
(resigned 20-Oct-17)

Non-Executive 

Chris Cole

Stephen Vaughan

Jon Kempster

Chris Rigg
(appointed 1-Feb-19)

Stephen Puckett
(resigned 1-Feb-19)

David Payne
(resigned 31-Mar-18)

Total

Bonus

£000

40

-

-

-

-

-

-

-

-

-

155

-

-

-

-

-

-

-

40

155

-

4

-

-

-

-

-

-

-

4

12

131

419

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

12

131

383

-

70

40

36

7

33

-

988

254

154

427

70

28

35

-

40

55

1,063

*  Any share-based payments issued to Chris Jagusz in FY19 lapsed upon his departure, therefore the expense was written back and there was net nil impact 

to the P&L.

**  In addition to the 2018 remuneration as above, share-based payments totalling £335k were issued to the Executive Directors.

Details of share options in the Company held by the Directors during the year are as follows:

Chris Jagusz

Peter Brotherton

Fraser Fisher

(a)

(b)

(c)

(d)

(e)

Granted

Forfeited /
Expired

Exercised

Exercise 
Price (p) 

nil

nil

nil

63p

nil

Balance
31 Mar 
2018

349,800

161,905

192,481

28,571

-

382,957

-

-

-

-

298,879

298,879

(349,800)

-

-

-

-

-

80p

581,968

-

(581,968)

Balance
31 Mar 
2019

-

161,905

192,481

28,571

-

681,836

-

-

-

-

-

-

-

-

Further information regarding the options above is set out below.

(a)  The options were granted on 29 December 2017 under the Company's Long-Term Incentive Plan ("LTIP"). The options 
will vest post the release of the Company's results for the year ended 31 March 2019 subject to the achievement of 
performance conditions related to the growth in earnings per share.

55

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

(b)  The options were granted on 29 June 2017 under the Company's Long-Term Incentive Plan ("LTIP"). The options will vest 
post the release of the Company's results for the year ended 31 March 2020 subject to the achievement of performance 
conditions related to the growth in earnings per share. Fraser Fisher's options lapsed on him leaving the Company.

(c)  The options were granted pursuant to the Company's HMRC approved Save-As-You-Earn Option Plan 2017 under 

which employees contribute a monthly amount the Company's results for the year ended 31 March 2020 subject to the 
achievement of performance conditions related to the growth in earnings per share. 

(d)  The options were granted on 26 November 2018 under the Company's Long-Term Incentive Plan ("LTIP"). The options 
will vest post the release of the Company's results for the year ended 31 March 2021 subject to the achievement of 
performance conditions related to the growth in earnings per share. (g) The options were granted pursuant to the 
Company's HMRC approved Save-As-You-Earn Option Plan 2014 under which employees contribute a monthly amount the 
Company's results for the year ended 31 March 2018 subject to the achievement of performance conditions related to the 
growth in earnings per share. Fraser Fisher's options lapsed on him leaving the Company.

(e)  The options were granted under the Group’s EMI scheme on 15 November 2013. The latest vesting date for the options 

was 8 February 2019 and have therefore lapsed as performance conditions were not met. 

Share price

The market price of the Company’s shares on 31 March 2019 was 76p per share. The highest and lowest market prices during 
the year were 106p and 65p respectively.

Key management personnel

Key management personnel are those persons having authority and responsibility for planning, controlling and directing the 
activities of the entity either directly, or indirectly. As the remuneration of the Executive Directors and Non-Executive Directors 
are disclosed above, the following table details the compensation of other key management personnel, being senior managers 
and functional directors that sit on the Operating Board of the Company.

Basic salary, allowances and fees

Bonus and other beneﬁ ts

Share related charges

Pension costs

8 Tax on proﬁ t on ordinary activities

(a) Tax on proﬁ t on ordinary activities

Current income tax: 

Current income tax 

Adjustment in relation to prior year

Overseas tax

Deferred tax: 

Origination and reversal of timing differences – Deferred tax asset /(liability): prior year adjustment

Origination and reversal of timing differences – Deferred tax liability: current year

Total income tax (credit) reported in the income statement

2019

£000

765

121

85

29

1,000

2018

£000

331

696

53

(1,014)

(1,070)

(1,004)

2019

£000

602

90

98

568

(754)

604

The tax charge for the year was £0.6m (FY18: credit of £1.0m) which was made up of a corporation tax charge of £0.8m
(FY18: charge of £1.1m) and a deferred tax credit of £0.2m (FY18: credit of £2.1m).

56

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

Tax on proﬁ t on ordinary activities (continued) 

The corporation tax charge comprises a current year corporation tax charge of £0.6m, a prior year corporation tax charge
of £0.1m and an overseas tax charge of £0.1m.

(b) Reconciliation of the total income tax charge/(credit)
The tax on the Group’s proﬁ t before tax differs from the theoretical amount that would arise using the weighted average tax 
rate applicable to proﬁ ts of the consolidated entities as follows:

Loss before taxation

Proﬁ t multiplied by the UK standard rate of corporation tax of 19%

Expenses not deductible for tax purposes

Share scheme deduction under Part 12 CTA 2009

Movement in unprovided tax losses

Adjustment in relation to prior year

Effect of tax rate change

Impact of overseas tax rates

Fixed asset timing difference

Total income tax (credit) reported in the income statement

(c) Deferred tax

Deferred tax liability

Deferred tax assets

Net deferred tax asset / (liability) at 31 March

(d) Deferred tax liability

Opening balance

Recognised in the income statement

At 31 March 

2019

£000

(1,363)

(259)

94

(10)

-

658

87

34

-

604

2018

£000

(493)

(94)

53

(12)

(1,000)

92

28

8

(79)

(1,004)

2019

£000

2018

£000

(5,134) 

(6,197) 

5,276

142

6,152

(45)

2019

£000

6,197

(1,063)

5,134

2018

£000

7,267

(1,070)

6,197

Deferred tax liabilities arose in respect of the amortisation of intangible assets recognised on acquisitions made. 

(e) Deferred tax assets

Share 
based 
Payments 
temporary 
differences

India – 
deferred tax 
asset

Property, 
plant and 
equipment 
temporary 
differences

Other 
timing 
differences

Tax losses

£000

£000

£000

£000

£000

At 31 March 2018

Recognised in income statement

Adjustment in relation to prior year

At 31 March 2019

11

5

28

44

57

9

(30)

36

3,206

(223)

(203)

2,867

(100)

(363)

2,780

2,404

11

1

-

12

Total

£000

6,152

(308)

(568)

5,276

57

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

Deferred tax assets have been recognised where it is the view of the Directors that it is probable that there will be future 
sustainable taxable proﬁ ts from which prior tax losses can be offset. This is based on projections of future taxable proﬁ ts and 
indicators such as the level of orders that support the Directors’ projections. There would have to be a material change in the 
Groups’ trading activity for the Directors to reassess the recoverability of the asset.

Deferred tax assets have been netted off with deferred tax liabilities on the face of the Balance sheet. This is because the 
Group has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets 
and the deferred tax liabilities relate to income taxes levied by the same taxation authority, being the UK’s HMRC. The Group 
operates as one tax group and settles its tax liabilities on a net basis. This is not expected to change in the foreseeable future.

The adjustment in relation to prior year relates to the resubmission of the FY15 and FY16 tax computations. The group is made 
up several historical acquisitions some of which have tax losses brought forward. The reassessment of the level of losses carried 
forward that are deemed to be recoverable against future proﬁ ts has resulted in a prior year corporation tax adjustment. 
Additionally, during the year, work was undertaken to review the tax treatment of ﬁ xed assets and ﬁ nance leases resulting in a 
reassessment to the estimate calculated for deferred tax on ﬁ xed assets.

9 Earnings per share 

Basic earnings per share has been calculated using loss after tax for the year of £2.0m (2018: proﬁ t after tax £0.5m) and a 
weighted average number of shares of 149,135,316 (2018: 148,890,948). The dilutive effect of share options at 31 March 2019 
increased the weighted average number of shares to 151,410,501 (2018: 149,871,477). 

In addition, the Board uses adjusted earnings per share ﬁ gure, which has been calculated to reﬂ ect the underlying performance 
of the business. This measure is derived as follows:

Statutory earnings

Tax charge / (credit)

Amortisation of acquired intangibles

Share based payments

Exceptional costs

Adjusted earnings before tax

Notional tax charge at standard rate of 19%

Adjusted earnings

Weighted average number of shares in issue

Weighted dilutive effect of options and warrants in issue

Diluted weighted average number of shares in issue

Statutory basic earnings per shares

Statutory diluted earnings per shares

Adjusted basic earnings per share

Adjusted diluted earnings per share

Amortisation charge per P&L

Amortisation of software

Customer contracts and related relationships

2019

£000

(1,967)

604

6,252

366

1,911

7,166

(1,362)

5,804

2018

£000

511

(1,004)

6,252

568

1,672

7,999

(1,520)

6,479

149,135,316

148,890,948

1,140,709

980,529

150,276,025

149,871,477

(1.32)p

(1.32)p

3.89p

3.86p

7,392

(1,140)

6,252

0.34p

0.34p

4.35p

4.32p

7,136

(884)

6,252

The Board feels that the adjusted EBITDA and adjusted EPS measures give a better view of the ongoing performance of the 
business as these measures exclude exceptional costs.

58

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

10 Property, plant and equipment 

Cost

At 31 March 2018

Reclassiﬁ cation

Additions

Disposals

Exchange differences

At 31 March 2019

Accumulated depreciation

At 31 March 2018

Reclassiﬁ cation

Charge for the year ended 31 March 2019

Disposals

Exchange differences

At 31 March 2019

Net book amount 

At 31 March 2019

At 31 March 2018

Leasehold 
improvements

Ofﬁ ce ﬁ xtures 
and ﬁ ttings

Vehicles & 
computer 
equipment

£000

£000

£000

13,896

1,372

(274)

112

-

-

-

159

(37)

-

29,837

274

5,723

(1,849)

2

Total

£000

45,105

-

5,994

(1,886)

2

13,734

1,494

33,987

49,215

9,526

(272)

869

-

-

1,002

-

115

(22)

-

14,339

272

6,346

(1,092)

1

24,867

-

7,330

(1,114)

1

10,123

1,095

19,864

31,082

3,611

4,370

399

370

14,123

15,498

18,133

20,238

Included in vehicle and computer equipment are assets held under ﬁ nance leases with a carrying value of £3.7m at 31 March 
2019 (2018: £4.9m). Of the £6.0m ﬁ xed assets acquired in the year, £1.3m were funded using ﬁ nance leases (2018: £3.0m).

59

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

11 Intangible assets 

Cost

At 31 March 2017

Additions

FOREX difference on carrying value

At 31 March 2018

Additions

Exchange differences

At 31 March 2019

Accumulated amortisation and impairment

At 31 March 2017

Amortisation charge for the year ended 
31 March 2018

Impairment

At 31 March 2018

Amortisation charge for the year ended 
31 March 2019

Exchange differences

Write-off

At 31 March 2019

Customer 
contracts 
and related 
relationships

Trademarks

Software
and licences

£000

£000

£000

Goodwill

£000

Total

£000

43,269

62,300

275

4,700

110,544

-

-

-

(16)

-

-

913

-

913

(16)

43,269

62,284

275

5,613

111,441

-

-

-

-

-

-

717

1

717

1

43,269

62,284

275

6,331

112,159

-

-

-

-

-

-

-

19,596

6,217

-

25,813

6,252

-

32,065

36,471

30,219

240

35

-

275

-

-

1,983

21,819

884

-

7,136

-

2,867

28,955

1,141

7,393

(1)

10

(1)

10

275

4,017

36,357

-

-

2,746

2,314

82,486

75,802

Carrying amount at 31 March 2018

Carrying amount at 31 March 2019

43,269

43,269

Included in software and licences are intangibles assets held under ﬁ nance leases with a carrying value of £0.4m at 31 March 2019 
(2018: £0.4m). Of the £0.7m intangible assets acquired in the year, £0.2m were funded using ﬁ nance leases (2018: £0.4m).

The Company has assessed that the trading operations of the business only constitute one cash generating unit.

Customer contracts have a weighted average remaining amortisation period of 5 years and 11 months (2018: 6 years and
11 months). 

Intangible assets are reviewed for impairment at least annually or more frequently if events or changes in circumstances 
indicate that the carrying value may be impaired. Goodwill is tested for impairment at least annually.

The recoverable amount was based on the value in use calculation using forecast cash ﬂ ow projections to the period of
31 March 2022 and extrapolated for a further two years by growth rates applicable. A terminal value based on a perpetuity 
calculation using a 2.5% real growth was then added. Discount rates were then applied to these projections reﬂ ecting 
management's expected risk proﬁ le.

In addition to revenue growth, the key assumptions used in the impairment testing were as follows:

•  Gross margin percentage of c.61% reducing to c.54%; 

•  Pre-tax discount rate of 8.7% (post tax 8.7%); and

•  Terminal growth rate percentage of 2.5%. 

60

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

Intangible assets (continued)

The assumption of margins remaining ﬂ at after the 3 year management forecast period is based on the assumption that
a mix of cost savings in service delivery will be offset by competitive market inﬂ uences, which is in line with
management’s experience. 

A pre-tax discount rate of 8.7% (post-tax 8.7%) was applied which reﬂ ects management’s risk-adjusted estimate of the 
weighted average cost of capital. There is a signiﬁ cant element of recurring revenue through maintenance contracts and this 
reduces the risk inherent in the business.

Over the ﬁ ve-year period, revenues are projected to grow at an average of 5.8%. The ﬁ rst three years were derived from 
management's forecast based on management’s past experience and the detailed analysis of market trends.

A reasonably possible adverse movement in any of the above key assumptions made would not give rise to impairment. 

12 Trade and other receivables

Trade receivables 

Less: credit note provision

Trade receivables – net 

Other receivables 

Prepayments 

Commission contract asset

Accrued income 

Corporation Tax

2019 

£000

13,112

(1,521)

11,591

194

6,133

2,040

1,949

196

22,103

2018

£000

16,779

(981)

15,798

265

7,211

-

2,846

-

26,120

As at 31 March 2019, trade receivables of £1.5m (2018: £1.0m) were impaired and fully provided for.

The Directors monitor the quality of the receivables not impaired and believe them to be recoverable. The non-impaired 
receivables are fully performing and relate to independent customers with no history of default. The individually impaired 
receivables relate to receivables over 365 days, customers in ﬁ nancial difﬁ culty, customer acceptance issues and
cancelled contracts. 

As at 31 March 2019, net trade receivables of £4.5m (2018: £4.5m) were past due. In the table below, these comprise the 
receivables over 30 days, which relate to a number of independent customers for whom there is no recent history of default. 
The ageing analysis of trade receivables is as follows:

The commission contract asset has arisen as part of the adoption of IFRS 15. For the year ending 31 March 2019 the 
impairment for this contract asset was nil.

Year ended
31 March 2019

Year ended
31 March 2018

Current

1 to 30 days overdue

31 to 60 days overdue

61 to 90 days overdue

91 to 180 days overdue

> 180 days overdue

Gross trade debtors

Credit note provision

Net trade debtors

£’000

9,074

2,628

505

99

390

416

13,112

(1,521)

11,591

£’000

11,323

1,951

1,417

550

945

593

16,779

(981)

15,798

61

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

Trade and other receivables (continued)

The provision is calculated by management on a speciﬁ c basis based on their best estimate of recoverability taking into 
account the age and speciﬁ c circumstances relating to the debtor. The maximum exposure to credit risk at the reporting date 
is the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security. The carrying 
amounts of the Group’s trade and other receivables are denominated in pounds.

Movements on the Group credit note provision against trade receivables as at 31 March 2019 are as follows:

At 31 March 2018

Top up of provision in relation to FY18

Utilisation of credit note provision in relation to FY18

Remaining provision relating to FY18

Creation of credit note provision in FY19

Utilisation of credit note provision in relation to FY19

Other provisions created in FY19

Remaining provision relating to FY19

At 31 March 2019

No impairment has been posted to accrued income in the year ended 31 March 2019.

13 Cash and cash equivalents

Cash at bank

£000

981

574

(1,337)

218

2,513

(1,465)

255

1,303

1,521

2019

£000

2018

£000

7,206

6,089

The Group’s cash is held at accounts with Barclays Bank PLC, which has a Standard and Poor’s rating of A.

14 Trade and other payables

Current

Trade payables

Other payables

Taxation and social security

Accruals

Deferred income

Corporation Tax

2019

£000

6,603

275

3,249

3,028

9,142

-

2018

£000

9,005

27

2,490

2,705

8,343

890

22,297

23,460

Of the deferred income balance on £8.3m at 31 March 2019, £7.9m has been recognised as revenue in the FY19 accounts.

62

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

15 Commitments and contingencies

a) Operating leases
Future aggregate minimum annual lease payments under non-cancellable operating leases as at 31 March are as follows:

Not later than 1 year 

After 1 year but not more than 5 years 

After 5 years 

2019

£000

2,982

11,169

18,514

32,665

2018

£000

2,881

11,095

20,942

34,918

The Group’s operating leases relate to property, motor vehicles and ofﬁ ce equipment, and have remaining terms of between
2 and 22 years. The amount recognised as an expense in the year is £2.4m (2018: £2.8m). 

None of the above leases are sublet by the Group. There are no contingent rent arrangements and the Group does not have 
a purchase option with respect to the above leases. The lease terms can only be extended if the terms of the underlying 
contracts are approved by both the Group and the lessor.

(b) Capital commitments
The Group had no contracted but not provided for capital commitments at 31 March 2019 (2018: £nil).

16 Borrowings

Non-current

Bank loan

Finance leases

Term loans

Unamortised loan arrangement fee

Total non-current

Current

Finance leases

Term Loans

Total current

2019

£000

2018

£000

19,500

2,214

69

(68)

28,000

2,807

-

(136)

21,715

30,671

2,762

294

3,056

3,125

-

3,125

At 31 March 2019, the Group was party to £53.0m of bank facilities with a termination date of 1 April 2020. The facilities 
comprise a Revolving Credit Facility (“RCF”) of £25.0m (£19.5m utilised at 31 March 2019) with a £20.0m accordion
(£nil utilised at 31 March 2019), a £2.0m Overdraft Facility (£nil utilised at 31 March 2019) and a £6.0m Asset Financing Facility. 

The RCF has been provided jointly by Barclays Bank PLC and The Royal Bank of Scotland PLC, with Lombard Technology 
Services Ltd providing the Asset Financing Facility and Barclays Bank PLC the Overdraft Facility.

Post the year-end the Banks have agreed to extend the current facilities by 8 months to 30 November 2020, with all terms
and covenants remaining the same until this time. The Company will undergo a full reﬁ nancing process at the start of FY21.

63

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

Borrowings (continued)

Reconciliation of net debt:

Instrument

Cash

RCF

Term loan

Finance lease

Total

As at
31 March
2018

£000

6,089

(27,864)

-

(5,932)

(27,707)

Net
cash
ﬂ ow

£000

1,125

8,500

(66)

(885)

8,674

Net
non-cash
ﬂ ow

As at
31 March 
2019

£000

£000

(8)

(68)

(297)

(2,291)

(2,664)

7,206

(19,432)

(363)

(4,976)

(17,565)

Fair value of non-current borrowings
The carrying amounts and fair value of the non-current borrowings are as follows:

Non-current

Bank loan

Carrying
value
2019

£000

Fair
value
2019

£000

Carrying
value
2018

£000

Fair
value
2018

£000

19,432

18,793

27,864

26,001

Fair values are based on discounted cash ﬂ ows, using an effective interest rate based on the borrowing rates at 31 March 2019 
of 3.4% (2018: 3.4%).

Finance leases

Present 
value 
2019 

Finance 
charges 
2019

Future lease 
payments 
2019

£000

£000

£000

Not later than 1 year

After 1 year but not more than 5 years

2,762

2,214

4,976

61

77

138

2,823

2,291

5,114

17 Financial instruments by category

Present 
value 
2018

£000

3,125

2,807

5,932

Finance 
charges 
2018

Future lease 
payments 
2018

£000

£000

68

21

89

3,193

2,828

6,021

The objectives of the Group’s treasury activities are to manage ﬁ nancial risk, secure cost-effective funding where necessary and 
minimise adverse effects of ﬂ uctuations in the ﬁ nancial markets on the value of the Group’s ﬁ nancial assets and liabilities, on 
reported proﬁ tability and on cash ﬂ ows of the Group.

The Group’s principal ﬁ nancial instruments for fundraising are bank borrowings, overdraft facilities and loans. The Group has 
various other ﬁ nancial instruments such as cash, trade receivables and trade payables that arise directly from its operations.

64

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

Financial instruments by category (continued)

Assets

Trade receivables

Other receivables

Cash and cash equivalents

Total

Liabilities

Trade payables

Other payables

Borrowings

Total

Carrying 
value 
2019

£000

Fair 
value
2019

£000

Carrying 
value 
2018

£000

11,591

194

7,206

18,991

6,603

274

24,771

31,648

11,591

194

7,206

18,991

6,603

274

24,771

31,648

15,798

265

6,089

22,152

9,005

27

33,796

42,828

Fair 
value 
2018

£000

15,798

265

6,089

22,152

9,005

27

33,796

42,828

18 Financial risk management

The Group’s activities expose it to a variety of ﬁ nancial risks: market risk (including foreign exchange, fair value interest rate risk, 
cash ﬂ ow interest rate risk, and price risk), credit risk, and liquidity risk. The Group’s overall risk management programme focuses 
on the unpredictability of ﬁ nancial markets and seeks to minimise potential adverse effects on the Group’s ﬁ nancial performance. 
Risk management is carried out centrally under policies approved by the Board of Directors. The Board provides principles for 
overall risk management, as well as policies covering speciﬁ c areas, such as foreign exchange risk, interest rate risk, credit risk, 
use of derivative ﬁ nancial instruments and non-derivative ﬁ nancial instruments, and investments of excess liquidity.

(a) Market risk
(i) Foreign exchange risk
The Group mainly operates within the UK and foreign exchange risk arises from certain transactions with counterparties 
denominated in foreign currencies. This is not a signiﬁ cant risk for the Group. 

(ii) Cash ﬂ ow risk
The Group receives interest on cash and cash equivalents and pays interest on its borrowings.

Borrowings at variable rates expose the Group to cash ﬂ ow interest rate risk. During the year ended 31 March 2019 the Group’s 
borrowings at variable rate were denominated in Pounds Sterling with interest linked to Sterling interest rates.

The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into consideration 
reﬁ nancing, renewal of existing positions, alternative ﬁ nancing and hedging. Based on these scenarios, the Group calculates 
the impact on proﬁ t or loss of a deﬁ ned interest rate shift and manages its cash ﬂ ow interest rate risk accordingly. 

Based on the simulations performed, the impact on post-tax proﬁ t and equity of a +/– 1% shift in the interest rate would be
not be material. The simulation is done on a quarterly basis to verify that the maximum loss potential is within the limit given
by management.

(iii) Price risk
The Group is not exposed to signiﬁ cant commodity or security price risk.

65

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

Financial risk management (continued)

(b) Credit risk
Credit risk arises from cash and cash equivalents, as well as credit exposures to customers. Individual risk limits are set based on 
internal and external ratings in accordance with limits set by the divisions and review by the Board where appropriate. The utilisation 
of credit limits is regularly monitored with appropriate action taken by management in the event of a breach of credit limit.

(c) Liquidity risk
Management monitors rolling forecasts of the Group’s undrawn borrowing facility and cash and cash equivalents based on 
expected cash ﬂ ow. The Group’s liquidity management policy involves projecting cash ﬂ ows and considering the level of liquid 
assets necessary to meet these.

The table below analyses the Group’s ﬁ nancial liabilities into relevant maturity groupings based on the remaining period at the 
balance sheet date to the contractual maturity date. These amounts disclosed in the table are the contracted undiscounted 
cash ﬂ ows. Balances within 12 months equal their carrying balances as the impact of discounting is not signiﬁ cant.

At 31 March 2019

Borrowings

Finance leases

Term loans

Trade and other payables

At 31 March 2018 

Borrowings 

Finance leases

Trade and other payables 

19 Capital risk management

Within 1 year

£000

1-5 years

£000

Total 

£000

-

2,762

294

6,602

-

2,828

8,752

19,500

2,214

69

-

28,000

3,104

-

19,500

4,976

363

6,602

28,000

5,932

8,752

The Group’s objectives when managing capital are to safeguard the Group’s future growth and its ability to continue as a going 
concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. 
The Group operates in the managed services sector which, generally, does not require substantial ﬁ xed asset investments. 
Consequently, the Group is ﬁ nanced predominantly by equity. 

In order to maintain or adjust the capital structure the Group has previously both issued new shares and borrowed using bank 
facilities. The Group monitors capital on the basis of the ratio of net bank debt to adjusted EBITDA. Net debt is calculated as 
total bank borrowings (including ‘current and non-current borrowings’ as shown in the consolidated balance sheet) less cash 
and cash equivalents, and adjusted EBITDA is deﬁ ned as earnings before interest, tax, depreciation, amortisation, exceptional 
costs and share-based payments. The Group’s strategy is to maintain the ongoing ratio at below 2.5x, although the bank 
facilities can accommodate a higher ratio. The ratio was comfortably below this level throughout the year, and at 31 March 
2019 was 1.1x (2018 – 1.5x). 

The bank facilities referred to in Note 16 contain various covenants relating to EBITDA, interest cover, net debt and cash 
ﬂ ow, which the Group monitors on a monthly basis. The Group adopts a risk-averse position with respect to borrowings 
and maintains a signiﬁ cant amount of headroom in its bank facilities to ensure that any unexpected situations do not create 
ﬁ nancial stress.

The Group has committed to a progressive dividend policy, and intends to return a proportion of free cash-ﬂ ow to 
shareholders each year in the form of dividends, whilst retaining a prudent amount of capital in the business to fund potential 
future expansion and to provide operational ﬂ exibility. The Group also grants share options to Directors and other selected 
employees. However, these do not have a signiﬁ cant impact on the Group’s capital structure.

66

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

20 Called up share capital

At 31 March 2017

New shares issued

At 31 March 2018

New shares issued

At 31 March 2019

Allotted and fully paid 
Number

148,859,173

276,143

149,135,316

-

149,135,316

£000

149

-

149

-

149

The number of share authorised is the same as the number of shares issued. Ordinary shareholders have the right to attend, 
vote and speak at meetings, receive dividends, and receive a return on assets in the case of a winding up. 

Share issues

During the year the following shares were issued:

Issued on the exercise of share options

21 Provisions

At 31 March 2018

Additional provisions created during the year

Utilised during the year

At 31 March 2019

Current and non-current analysis of provisions:

2019
Number

2018
Number

-

-

276,143

276,143

Dilapidations 
provision

Vacant property 
provision

Total 
provision 

£000

£000

£000

376

120

-

496

-

538

(4)

534

376

658

(4)

1,030

2019
current

£000

-

149

149

2019
Non-current

2019
Total provision

£000

496

385

881

£000

496

534

1,030

2018
Current

£000

2018
Non-current

2018
Total provision

£000

£000

-

-

-

376

-

376

376

-

376

Dilapidations 

Vacant Property

Total

67

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

Contingent liabilities

In March 2017 the FCA notiﬁ ed the Company that it had commenced an investigation following the historic overstatement of 
net assets and proﬁ ts as described in the Company's announcements on 7 November 2016, 13 and 23 December 2016 and 
following the completion of an independent forensic review commissioned by the Board of Redcentric.

The FCA investigation is still ongoing and has not yet reached its conclusion. At this time, the FCA has not communicated 
how it intends to proceed and what, if any, action it might bring against the Company. Until such stage as the FCA’s intentions 
becomes clear, the Directors are not able to judge whether a ﬁ ne will be likely and therefore whether we would need to make 
a relevant provision in the accounts. We continue to cooperate as fully as we can with the investigation and whilst the overall 
timing is out of our control, we are seeking to expedite it as soon as practicably possible. 

22 Share-based payment plans

During the year the Group recognised an expense for the following share-based payments:

Equity-settled share-based charge arising from share options*

National insurance and other charges arising on share options

Total

2019

£000

354

12

366

2018

£000

534

34

568

*  This is an IFRS 2 charge arising from share options issued in terms of a share-based payment plan. The following table illustrates the number and weighted 

average exercise prices (WAEP) of, and movements in, share options during the year. 

Options

Outstanding at the start of the year

Issued in the year

Exercised in the year

Cancelled in the year

Lapsed / forfeit in the year

Outstanding at the end of the year

2019 
Number of 
options

9,923,121

914,209

-

(100,483)

(8,486,727)

2,250,120

2019
WAEP

72.2

0.1

-

70.4

76.3

27.7

2018
Number of 
options

10,037,417

2,752,820

(276,143)

(2,590,973)

9,923,121

2018
WAEP

80.4

28.0

70.0

57.1

72.2

The weighted average fair value of the options granted in the year ended 31 March 2019 was 0.1p (2018: 28.0p) per option. 
During the year ended 31 March 2019 there were new grants of 914,209 options (2018: 2,752,820 options) which were issued 
under the Company’s Long-Term Incentive Plan (“LTIP”).

The weighted average remaining contractual life for the share options outstanding at 31 March 2019 is 5 years and 10 months 
(2018: 5 years and 2 months). The range of exercise prices for options outstanding at the end of the year was 0p to 154p. 
Share options outstanding at the end of the year with approximate remaining average life are as follows:

Number 
31 March 2019

Life at 
31 March 2019

Number
31 March 2018

Life at 
31 March 2018

1,275,600

949,398

-

-

25,122

2,250,120

8 years, 10 months

1 years, 11 months 

-

-

0 years, 6 months

5 years, 10 months

845,621

1,167,678

7,581,968

294,669

33,185

9 years, 2 months

2 years, 11 months 

5 years, 3 months

0 years, 6 months

1 years, 6 months

9,923,121

5 years, 2 months

Range
of prices

0p

63p

80p

107p

154p

68

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

Share-based payment plans (continued)

The following table illustrates the status of the options outstanding at the end of the year:

Options

Performance conditions satisﬁ ed

Subject to performance conditions

Save-As-You-Earn

Outstanding at the end of the year

2019 
Number 
of options

0

1,275,600

974,520

2,250,120

2019
WAEP

0p

0p

65p

28p

2018 
Number 
of options

0

8,427,589

1,495,532

9,923,121

2018
WAEP

0p

69p

74p

72p

The fair value of the equity-settled share options granted is estimated as at the date of grant using a binomial model, taking 
into account the terms and conditions upon which the options were granted.

SAYE schemes

Director and senior manager schemes

MXC options

Employers NI

2019
£000

133

221

-

12

366

2018
£000

224

162

148

34

568

At 31 March 2019, the Group had the following share-based payment arrangements:

i.   Long-Term Incentive Plan (LTIP)

The Group operates a Long-Term Incentive Plan (LTIP) under which the Executive directors and key management personnel 
are awarded nil cost options that will vest subject to the achievement of performance conditions relating to the growth in 
earnings per share.

ii.   Save As You Earn (SAYE)

The Group operates a HMRC approved SAYE scheme which offers its UK based employees the opportunity to participate 
in a share purchase plan. To participate in the plan, the employees are required to save an amount of their gross monthly 
salary, up to a maximum of £500 per month, for a period of 36 months. Under the terms of the plan, at the end of the three-
year period the employees are entitled to purchase shares using funds saved at a price 20% below the market price at grant 
date. Only employees who remain in service and save the required amount of their gross monthly salary for 36 consecutive 
months will become entitled to purchase the shares. Employees who cease their employment, do not save the required 
amount of their gross monthly salary in any month before the 36-month period expires, or elect not to exercise their options 
to purchase shares will be refunded their saved amounts.

69

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

Share-based payment plans (continued)

EMI

LTIP

SAYE

MXC

Total

Balance at 31 March 2017

1,308,111

919,048

810,258

7,000,000

10,037,417

Issued in the year

Forfeited in the year

Cancelled in the year

Exercised in the year

Lapsed in the year

Balance at 30 March 2018

Issued in the period

Forfeited in the period

Cancelled in the period

Exercised in the year

Lapsed in the year

1,529,430

1,223,390

-

(538,116)

-

-

-

-

-

(276,143)

(450,000)

581,968

-

-

-

-

(1,602,857)

-

-

-

845,621

914,209

-

-

-

1,495,532

7,000,000

9,923,121

-

(130,905)

(100,483)

-

-

-

-

-

914,209

(130,905)

(100,483)

-

-

-

-

-

-

2,752,820

(1,602,857)

(538,116)

(276,143)

(450,000)

(581,968)

(484,230)

(289,624)

(7,000,000)

(8,355,822)

Balance at 30 March 2019

-

1,275,600

974,520

-

2,250,120

As at 31 March 2019 the Company had a total of 350,000 warrants in issue with an exercise price of 36p. The warrants were 
issued to Barclays Bank PLC on demerger in April 2013 in exchange for warrants previously held in Redstone Plc, and can be 
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 services business.

23 Pensions
The Group operates a deﬁ ned contribution pension scheme for eligible employees. The charge for the year ended 31 March 
2019 was £0.5m (2018: £0.4m). At the year-end there was a pension’s creditor of £0.1m (2018: £0.1m).

24 Subsidiaries
As at 31 March 2019, the Group had the following subsidiary undertakings:

Principal activity

Country of incorporation

% Ordinary share 
capital owned

Held directly by Redcentric plc 

Redcentric Holdings Limited

Redcentric Solutions Limited

Held indirectly 

Dormant*

England and Wales 

Managed Services

England and Wales

Redcentric Solutions Private Limited

Support services

India

Redcentric MS Limited

Redcentric Managed Solutions Limited

Redcentric Communications Limited

Hotchilli Internet Limited

Redcentric US Limited

Calyx Managed Services Limited

City Lifeline Limited

City Lifeline Data Centre Limited**

Dormant*

Dormant*

Dormant*

Dormant*

Dormant* 

Dormant* 

Dormant* 

Dormant*

England and Wales

England and Wales

England and Wales

England and Wales

USA

England and Wales

England and Wales

England and Wales

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

All of the Company’s subsidiaries have been consolidated in the Group ﬁ nancial statements. All of the Group companies have 
a registered ofﬁ ce of Central House, Beckwith Knowle, Harrogate HG3 1UG, except Redcentric Solutions Private Limited which 
has a registered ofﬁ ce at 606-611, 6th Floor, Manjeera Trinity Corporate, JNTU – Hitech City Road, Kukatpally, Hyderabad – 72 
and Redcentric US Limited which has a registered ofﬁ ce at 874 Walker Road, Suite C, Dover, Kent, USA 19904.

*  The companies marked with an asterisk are exempt from ﬁ ling audited accounts under s394A of the Companies Act 2006 as they have been dormant 

throughout the period.

** Dissolved 11/07/2017

70

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

25 Related parties

The Group has taken exemption not to disclose transactions with entities wholly-owned by the Group.

Directors' emoluments are disclosed in the Remuneration Report.

Compensation of key management personnel is disclosed in note 7.

There were no other transactions with related parties in the year to 31 March 2019. 

26 Dividends

Amounts recognised as distributions to Shareholders in year:
Interim dividend for year ended 31 March 2019 of 0.4p (2018: nil) per share

2019

£000

597

597

2018

£000

Nil

Nil

The Company paid an interim dividend in respect of the year to 31 March 2019 of 0.4p per ordinary share, with a total 
payment value of £0.6m.

27 Subsequent events

Post the year-end the Banks have agreed to extend the current facilities by 8 months to 30 November 2020, with all terms and 
covenants remaining the same until this time. The Company will undergo a full reﬁ nancing process at the start of FY21. 

28 IFRS 15 (revenue from contracts with customers) restatement

There were two main changes to the Company accounts when prepared under IFRS 15. The ﬁ rst was in relation to recognition 
of revenue for Customer Premises Equipment (i.e routers) and the second was in relation to commission payments made to 
members of the Sales department. The Company has chosen to adopt the modiﬁ ed retrospective method of transition which 
allows for the recognition of the cumulative effect of applying the standard through opening retained earnings.

Customer Premises Equipment (CPE)
Prior to IFRS 15 adoption, CPE set up and activation revenue was recognised up front upon installation. Under IFRS 15 this
has now been amended so that all revenue received in relation to CPE set up and activation is now recognised over the life 
of the relevant customer contract. The impact of this has been a reduction in reported revenue and an equivalent increase in 
deferred income.

Sales Commission Payments
Prior to IFRS 15 adoption, the policy was to recognise the commission expense in the income statement in the period in which 
it was paid via payroll. Under IFRS 15 sales commission costs are now recognised across the life of the contract to which the 
commission relates. This restatement has had a positive earnings impact alongside an impact on the statement of ﬁ nancial 
position to reﬂ ect a contract asset for commission costs to be recognised over the term of the contract. The Company is 
also now recognising the liability for future commission payments due as a result of commission already earned (for example 
through multi-year payments).

71

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

IFRS 15 (revenue from contracts with customers) restatement (continued)

The following tables show, for the year ended 31 March 2019, the impact on the ﬁ nancial statements had IFRS 15 not been 
adopted. There was no net impact on the key cash ﬂ ow headings i.e net cash ﬂ ow from operating activities, investing activities 
or ﬁ nancing activities.

Income statement for the year ended 31 March 2019 prepared under IFRS 15 and IAS 18

2019
(reported)

£000

Adjustments
under IFRS 15

2019 
(under IAS 18)

£000

£000

Revenue

Cost of sales

Gross proﬁ t

Operating expenditure

Operating loss

Analysed as:

Adjusted EBITDA

Depreciation

Amortisation of intangibles

Exceptional costs

Share-based payments

Interest payable

Interest receivable

Loss on ordinary activities before taxation

93,260

(36,895)

56,365

(56,650)

(285)

16,714

(7,330)

(7,392)

(1,911)

(366)

(285)

(1,091)

13

(1,363)

(207)

-

(207)

(336)

(543)

(543)

-

-

-

-

(543)

-

-

93,053

(36,895)

56,158

(56,986)

(828)

16,171

(7,330)

(7,392)

(1,911)

(366)

(828)

(1,091)

13

(543)

(1,906)

72

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Consolidated Financial Statements year ended 31 March 2019 – continued

Statement of ﬁ nancial position at 31 March 2019 prepared under IFRS 15 and IAS 18

Assets

Non-current assets

Property plant and equipment

Intangible assets

Deferred tax asset

Current assets

Inventories

Trade and other receivables

Cash and short-term deposits

As at 31 March 
2019
(reported)

Adjustments
under IFRS 15

As at 31 March 
2019 
(under IAS 18)

£000

£000

£000

18,133

75,802

142

94,077

357

22,103

7,206

29,666

-

-

-

-

-

(1,875)

-

(1,875)

18,133

75,802

142

94,077

357

20,228

7,206

27,791

Total assets

123,743

(1,875)

121,868

Current liabilities

Trade creditors and other payables

Borrowings

Provisions

Non-current liabilities

Borrowings

Provisions

Deferred tax liability

Total liabilities

Net assets

Equity and liabilities

Equity

Called up share capital

Share premium account

Capital redemption reserve

IFRS 15 revaluation reserve

Retained earnings

Total equity

22,297

3,056

149

21,715

881

-

48,098

75,645

149

65,588

(9,454)

(75)

19,437

75,645

(1,407)

-

-

-

-

-

20,889

3,057

149

21,715

881

-

(1,407)

46,691

(468)

75,177

-

-

-

75

(543)

(468)

149

65,588

(9,454)

-

18,894

75,177

73

Financial Statements

Redcentric Report & Accounts 2019

Company Balance Sheet as at 31 March 2019

Fixed assets

Investments

Current liabilities

Creditors – amounts falling due within one year

Net current liabilities

Net assets

Capital and reserves

Called up share capital

Share premium account

Share option reserve

Retained earnings

Total shareholders’ funds

Note

2019

£000

2018 

£000

2

3

4

101,918

101,565

(12,271)

(12,271)

(11,680)

(11,680)

89,647

89,885

149

65,588

5,856

18,054

89,647

149

65,588

5,503

18,645

89,885

The notes on pages 45 to 78 are an integral part of these ﬁ nancial statements. The ﬁ nancial statements on pages 41 to 44 
were approved by the Board on 25 June 2019 and are signed on its behalf by: 

Peter Brotherton, Director

74

Financial Statements

Redcentric Report & Accounts 2019

Company Statement of Changes in Equity

Called up 
share capital

£000

Share 
premium 

£000

Share option 
reserve 

£000

Reserves

£000

Total 
equity

£000

At 31 March 2017

149

65,395

4,969

18,645

89,158

Transactions with owners:

Issue of new shares

Share Based Payments (SBP)

At 31 March 2018

Transactions with owners:

Write off

Dividends to shareholders

Share Based Payments (SBP)

At 31 March 2019

-

-

149

-

-

-

193

-

65,588

-

-

-

149

65,588

-

534

5,503

-

-

353

5,856

-

-

193

534

18,645

89,885

6

(597)

6

(597)

353

18,054

89,647

75

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Company Financial Statements

1 Accounting policies (FRS 101)

The Company has elected to prepare the ﬁ nancial statements under FRS 101.

In these ﬁ nancial statements, the Company has applied the exemptions available under FRS 101 in respect of the following 
disclosures: 

•  a Cash Flow Statement and related notes; 

•  Comparative period reconciliations for share capital, tangible ﬁ xed assets, intangible assets and investment properties; 

•  Disclosures in respect of transactions with wholly owned subsidiaries; 

•  Disclosures in respect of capital management; 

•  The effects of new but not yet effective IFRSs;

•  Disclosures in respect of the compensation of Key Management Personnel; and

•  Disclosures of transactions with a management entity that provides key management personnel services to the Company.

As the consolidated ﬁ nancial statements of [ultimate parent undertaking] include the equivalent disclosures, the Company has 
also taken the exemptions under FRS 101 available in respect of the following disclosures:

•  IFRS 2 Share Based Payments in respect of group settled share-based payments

•   Certain disclosures required by IAS 36 Impairment of assets in respect of the impairment of goodwill and indeﬁ nite life 

intangible assets; 

•   Disclosures required by IFRS 5 Non-current Assets Held for Sale and Discontinued Operations in respect of the cash ﬂ ows 

of discontinued operations; 

•   Certain disclosures required by IFRS 3 Business Combinations in respect of business combinations undertaken by the 

Company [in the current and prior periods including the comparative period reconciliation for goodwill; and] 

•   Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial

Instrument Disclosures.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in 
these ﬁ nancial statements.

2 Investments

Investments in subsidiaries

Capital contribution related to share-based payments for subsidiaries 

2019

£000

96,062

5,856

101,918

2018

£000

96,062

5,503

101,565

The investment in the underlying subsidiaries has been considered by management to assess possible impairment at the 
year end. The investment recoverable amount was based on the value in use calculation using forecast cash ﬂ ow projections 
to the period of 31 March 2022 and extrapolated for a further two years by growth rates applicable. A terminal value based 
on a perpetuity calculation using a 2.5% real growth was then added. Discount rates were then applied to these projections 
reﬂ ecting management's expected risk proﬁ le. 

In addition to revenue growth, the key assumptions used in the impairment testing were as follows:

•  Gross margin percentage of c.61% reducing to c.54%;  

•  Pre-tax discount rate of 8.7% (post tax 8.7%); and

•  Terminal growth rate percentage of 2.5%

76

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Company Financial Statements continued

Investments (continued)

The assumption of margins remaining ﬂ at after the 3 year management forecast period is based on the assumption that a mix of 
cost savings in service delivery will be offset by competitive market inﬂ uences, which is in line with management’s experience.  

A pre-tax discount rate of 8.7% (post-tax 8.7%) was applied which reﬂ ects management’s risk-adjusted estimate of the 
weighted average cost of capital. There is a signiﬁ cant element of recurring revenue through maintenance contracts and this 
reduces the risk inherent in the business.

Over the ﬁ ve-year period, revenues are projected to grow at an average of 5.8%. The ﬁ rst three years were derived from 
management's forecast based on management’s past experience and the detailed analysis of market trends.

A reasonably possible adverse movement in any of the above key assumptions made would not give rise to an impairment of 
the investment value at the year end.

At 31 March 2019, the Company had the following subsidiary undertakings:

Principal activity

Country of incorporation

% Ordinary share 
capital owned

Held directly by Redcentric plc 

Redcentric Holdings Limited

Redcentric Solutions Limited

Held indirectly 

Dormant* 

England and Wales 

Managed Services

England and Wales

Redcentric Solutions Private Limited

Support services

India

Redcentric MS Limited

Redcentric Managed Solutions Limited

Redcentric Communications Limited

Hotchilli Internet Limited

Redcentric US Limited

Calyx Managed Services Limited

City Lifeline Limited

City Lifeline Data Centre Limited**

Dormant*

Dormant*

Dormant*

Dormant*

Dormant*

Dormant*

Dormant*

Dormant*

England and Wales

England and Wales

England and Wales

England and Wales

USA

England and Wales

England and Wales

England and Wales

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

*  The companies marked with an asterisk are exempt from ﬁ ling audited accounts under s394A of the Companies Act 2006 as they have been dormant 

throughout the period.

** Dissolved 11 July 2017.

All of the Group companies have a registered ofﬁ ce of Central House, Beckwith Knowle, Harrogate HG3 1UG, except 
Redcentric Solutions Private Limited which has a registered ofﬁ ce of 606-611, 6th Floor, Manjeera Trinity Corporate, JNTU – 
Hitech City Road, Kukatpally, Hyderabad – 72 and Redcentric US Limited which has a registered ofﬁ ce at 874 Walker Road, 
Suite C, Dover, Kent, USA 19904.

The Company does not have any associate operations.

3 Creditors – amounts falling due within one year

2019

£000

2018 

£000

Amounts owed to subsidiaries

12,271

11,680

Amounts due to Group undertakings are unsecured, interest-free and have no ﬁ xed payment terms.

77

Financial Statements

Redcentric Report & Accounts 2019

Notes to the Company Financial Statements continued

4 Called up share capital

At 31 March 2017

New shares issued

At 31 March 2018

New shares issued

At 31 March 2019

Allotted and
fully paid
Number

148,859,173

276,143

149,135,316

-

149,135,316

£000

149

-

149

-

149

The number of share authorised is the same as the number of shares issued. Ordinary shareholders have the right to attend, 
vote and speak at meetings, receive dividends, and receive a return on assets in the case of a winding up. 

Share issues
During the year the following shares were issued: 

Issued on the exercise of share options

2019
Number

-

-

2018 
Number

276,143

276,143

As at 31 March 2019 the Company had a total of 350,000 warrants in issue with an exercise price of 36p. The warrants were 
issued to Barclays Bank PLC on demerger in April 2013 in exchange for warrants previously held in Redstone Plc, and can be 
converted to shares at any time before the sale of the entire share capital of the Company.

5 Auditors’ remuneration

The Company audit fee is £25,000 (2018: £24,000). This fee was borne by another Group company.

6 Related parties

The Group has taken exemption not to disclose transactions with entities wholly owned by the Group.

Directors' emoluments are disclosed in the Remuneration Report.

There were no other transactions with related parties in the year to 31 March 2019. 

78

Advisers

Company Secretary

Harn Jagpal

Registered Ofﬁ ce
Central House
Beckwith Knowle
Harrogate HG3 1UG

Nomad and Joint Broker
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT

Joint Broker

ﬁ nnCap Ltd
60 New Broad Street
London EC2M 1JJ

Financial PR

Tulchan Communications LLP
85 Fleet Street
London EC4Y 1AE

Registrar

Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU

Solicitors

CMS Cameron McKenna
Nabarro Olswang LLP
Cannon Place
78 Cannon Street
London EC4N 6AF

Addleshaw Goddard LLP
3 Sovereign Square
Sovereign Street
Leeds LS1 4ER

Auditors

KPMG LLP (UK)
1 Sovereign Square 
Sovereign Street 
Leeds LS1 4DA

Principal Bankers 

Barclays Bank PLC 
Churchill Place
Canary Wharf
London E14 5RB

Company number

08397584

Redcentric Report & Accounts 2019

79

HARROGATE (HEAD OFFICE)
Central House
Beckwith Knowle
Harrogate HG3 1UG

LONDON
Lifeline House
80 Clifton Street
London EC2A 4HB

HYDE
Unit B, SK14 Industrial Park 
Broadway 
Hyde
SK14 4QF

INDIA
606-611, 6th Floor
Manjeera Trinity Corporate 
JNTU – Hitech City Road
Kukatpally, Hyderabad – 72

CAMBRIDGE
Newton House
Cambridge Business Park
Cowley Road
Cambridge CB4 0WZ

READING
3-5 Worton Drive
Reading
RG2 0TG

0800 983 2522 
sayhello@redcentricplc.com
www.redcentricplc.com