20
21
Report & Accounts
Year ended 31 March 2021 | Redcentric plc
Company Number 08397584
2
Contents
Strategic report
Highlights
Chairman’s statement
Chief Executive Officer’s review
Financial review
Alternative performance measures
Strategy and business model
Section 172 statement
Risk management
Corporate Responsibility
Sustainability reporting
Governance
Introduction to governance
Corporate governance
Board of Directors
Audit Committee report
Directors’ remuneration report
Directors’ report
Statement of Directors’ responsibilities
Financial statements
Independent auditor’s report to the members of Redcentric plc
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated cash flow statement
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Company balance sheet
Company statement of changes in equity
Notes to the company financial statements
Directors and advisers
3
4
6
9
14
22
27
28
30
33
38
40
41
50
52
53
60
63
65
73
74
75
76
77
108
109
110
113
Annual Report and Accounts 2021
Financial highlights
Year ended
31 March
2021 (FY21)
£91.4m
£81.9m
£24.6m
£15.2m
Total revenue +4%
Recurring monthly revenue (RMR) +6%
Adjusted EBITDA +19%
Adjusted operating profit +43%
Year ended
31 March
2020 (FY20)
£87.5m
£77.6m
£20.6m
£10.6m
.
m
5
6
2
£
.
m
6
9
1
£
.
m
8
8
1
£
.
m
6
7
1
£
.
)
m
5
4
3
£
(
p
3
2
7
.
p
6
7
4
.
)
.
m
6
5
1
£
(
Adjusted
cash
generated
from
operations
Reported
cash
generated
from
operations
+35%
-6%
Net debt
-55%
Adjusted
basic
earnings
per share
+52%
FY21
FY20
4
Strategic reportAnnual Report and Accounts 2021 Highlights
Financial performance measures
Total revenue
Recurring monthly revenue (RMR)
Recurring revenue percentage
Adjusted EBITDA1
Adjusted operating profit1
Reported operating profit /(loss)
Adjusted cash generated from operations1
Reported cash generated from operations
Net debt
Adjusted net cash/(debt)1
Adjusted basic earnings per share1
Reported basic profit /(loss) per share
Year ended
31 March
2021 (FY21)
Year ended
31 March
2020 (FY20)
Change
£91.4m
£81.9m
90%
£24.6m
£15.2m
£13.0m
£26.5m
£17.6m
£(15.6)m
£1.0m
7.23p
6.01p
£87.5m
£77.6m
89%
£20.6m
£10.6m
£(8.7)m
£19.6m
£18.8m
£(34.5)m
£(13.3)m
4.76p
(7.14)p
4%
6%
1%
19%
43%
n/a
35%
(6%)
(55%)
n/a
52%
n/a
1 This report contains certain financial measures (APMs) that are not defined or recognised under IFRS but are presented
to provide readers with additional financial information that is evaluated by management and investors in assessing the
performance of the Group.
This additional information presented is not uniformly defined by all companies and may not be comparable with similarly
titled measures and disclosures from other companies. These measures are unaudited and should not be viewed in isolation or
as an alternative to those measures that are derived in accordance with IFRS.
For an explanation of the alternative performance measures used in this report and reconciliations to their most directly
related GAAP measure, please refer to page 22.
5
Annual Report and Accounts 2021Strategic report Chairman’s statement
I am very pleased to introduce the Annual Report and Accounts for the Redcentric plc
(“Redcentric” or “Company”) group of companies (the “Group”) for the financial year ended
31 March 2021 (“FY21”).
Overview and financial results
The Chief Executive’s review highlights considerable progress
across all areas of the business in what has been a very
eventful and unprecedented year. I am delighted to say that,
despite the pandemic, the business has made substantial
progress in internal integration and optimisation, continuing
to improve its talent base, increasing its focus on customer
satisfaction and, above all, delivering on our financial targets.
The business has returned to growth with headline revenues
increasing by 4.5% year on year, and recurring revenues
growing by 5.5%, a result which is especially pleasing given
the backdrop of COVID-19. The increase in revenue and
the completion of efficiency programmes have together
contributed to a more substantial increase in profits and
margins, with adjusted EBITDA growing by 19.3% to £24.6m,
representing a top sector decile adjusted EBITDA margin of
26.9%. Strong cash conversion, which is a constant feature
of the business, has enabled the Company to fully repay its
revolving credit facility and led to a reduction in net debt of
£19m and a year-end cash balance of £5.3m. I am particularly
proud that these excellent results are in line with the
expectations that were set prior to the outbreak of COVID-19.
As well as achieving significant progress in financial and
operational performance, this year marked a huge step
forward for the Company with the conclusion of the FCA’s
investigation into historical financial misstatements (“FCA
Investigation”) and the completion of the resulting
restitution scheme.
With the excellent financial performance, completion of
historic acquisition integration programmes, and the removal
of the FCA overhang, the Company is now ideally placed
to embark on the next stage of its development and the
strategy outlined in our interim results. In the current financial
year we expect to start to grow the business by making
acquisitions for both scale and capability.
Dividend and share buyback
Further to the business’s good trading performance and
strong cash generation, and the closure of the Restitution
Scheme, the Board has decided to reinstate a progressive
dividend policy. The Board is therefore recommending to
shareholders the payment of a final dividend of 2.4p per
share which, if approved at the Company’s annual general
meeting (“AGM”), will be paid on 17 September 2021
to shareholders on the register at the close of business on
6 August 2021.
As stated in November 2020, the Board will retain the option
to selectively purchase shares on the open market as and
when it believes it is appropriate.
Board changes and people
I would like to give special thanks to the management
team and employees for their hard work and dedication to
progress the Company’s performance during this difficult
year. The transition to remote working was excellent, with
employees continuing to provide a high level of service
across the customer base and reacting positively to customer
needs, by offering additional services as required to adapt
to the pandemic or allowing payment plans for ongoing
services. In turn, I am delighted that we chose not to take
advantage of the government’s furlough scheme or any other
pandemic related government relief.
David Senior joined the PLC Board as Chief Financial Officer
(“CFO”) on 3 April 2020 replacing Dean Barber who resigned
on the same date. David has had an excellent first year as
CFO and has made a significant contribution to the success
of the Company in this financial year.
On 28 April 2021 Steve Vaughan, Non-Executive Director,
resigned from the Board of Directors of the Company (the
“Board”) and in July 2021 we announced the appointment of
Helena Feltham to the Board. Helena brings a wealth of HR
and people experience and will significantly strengthen the
Board and the remuneration committee.
With historical issues fully resolved, the Company on a firm
financial footing and embarking on its acquisition strategy, I
believe that the Company would benefit from a chairperson
with industry specific experience. With these results, I
therefore announce my intention to stand down from the
Board as soon as a suitable successor is appointed. I have
very much enjoyed my time at the Company and am very
proud of the team’s achievements during my tenure. I am
pleased to be leaving the business in a much improved and
healthy position.
6
Strategic reportAnnual Report and Accounts 2021 Chairman’s statement (continued)
I would like to thank the Board for its support, hard work and dedication during this challenging year and during my tenure
as chairman.
Outlook
The transformation of the business over the last two financial years and these excellent results mean that the Company is now
well positioned to establish itself as a market leader of IT managed services. The business’s strong financial performance,
integrated network and single operating platform put the Company in an excellent position to deliver its strategic objectives,
including the completion of appropriate acquisitions of scale and capability.
Ian Johnson
Non-Executive Chairman
15 July 2021
7
Annual Report and Accounts 2021Strategic report “
The Langleys Solicitors and Redcentric
IT teams worked together in implementing
an innovative new Webex by Cisco webinar
conferencing facility to complement our current
meetings solution. This work was astonishingly
completed in under a day, as a direct response
to the COVID-19 pandemic restrictions, ensuring
our clients’ needs were met in uncertain times.
Our business has been working remotely
throughout the pandemic and continues to
provide our clients with the service they need
and expect. This additional Cisco technology
has enabled our business to provide far reaching
support to clients throughout the country,
delivering much needed assistance and guidance.
This could not have been possible without
the drive and teamwork of our internal IT team
and Redcentric.
”
8
Chief Executive Officer’s review
Overview
The last financial year to 31 March 2021 was a period of very
significant progress for Redcentric, despite the unique and
many challenges presented by the COVID-19 pandemic.
The business has had its best year yet in terms of financial
performance with revenues growing organically by 4.5%
and adjusted EBITDA margins increasing by 3.3% to 26.9%,
resulting in a 19.3% increase in adjusted EBITDA to £24.6m.
Cash generation continued to be excellent with adjusted net
debt reducing by £19.0m, delivering an adjusted net cash
position at the year-end before leases.
We reacted quickly to the COVID-19 pandemic and
deployed most of our employees to remote working almost
immediately following the outbreak. This was achieved with a
minimal amount of disruption and our high levels of customer
service were maintained throughout. We are pleased that we
did not furlough any of our employees at any point during
the pandemic, unlike many of our industry peers.
In June 2020, the Company announced that it had reached
a settlement with the FCA in respect of historical accounting
misstatements. As part of this settlement the Company
launched a restitution scheme to compensate any net
purchases of shares between 9 November 2015 (when the
September 2015 interim results were released) and
6 November 2016 (when the discovery of the accounting
misstatements was announced to the market) (the
“Restitution Scheme”).
The Restitution Scheme closed on 31 October 2020, with
82% of all potential claims settled through cash payments of
£6.6m and the issue of 1.3m new shares.
The closure of the FCA Investigation and Restitution Scheme
represented a pivotal event for the Company allowing
management attention to be solely devoted to running the
business. It also reopens FCA regulated sectors into which
the business’s products can now be sold.
During the year, the company disposed of a small part of the
business that serviced four EDF nuclear power stations for
a consideration of £5.75m. This single contract pre-existed
from the Calyx acquisition and its disposal signifies another
step forward in focussing the business on its core strengths
and activities.
The significant achievements above coupled with the
completion of the integration projects and the launch of
a new ERP system means that the business is very well
positioned for both organic and inorganic growth. Given our
strong balance sheet and unique position in the UK listed
market as a quoted managed services provider of scale, we
expect to make targeted acquisitions moving forward as we
continue to expand our customer reach and our product and
solution portfolio to address the continued expansion in the
cloud services market.
Business performance
Revenues
Revenues for the year are up 4.5% on last year with recurring
revenues accounting for 90% of total revenues and increasing
by 5.5% on the financial year ending 31 March 2020 (“FY20”).
Despite a strong overall performance, the business has been
impacted by delays to customers’ decision making since
the breakout of COVID-19. At the start of the pandemic,
we experienced an immediate impact on our sales pipeline
with customers putting many large IT projects on hold. This
position has persisted throughout the financial year but
during the first half of the financial year we were extremely
successful in replacing these opportunities with solutions that
addressed the new COVID-19 environment; these included:
• A new secure remote access platform which was built
from scratch within three weeks and was rapidly filled
by customers requiring secure access to their mission
critical systems.
• A new Call2Teams product was introduced enabling our
customers’ workforce to make calls from Microsoft Teams
but routed through our Broadsoft IP telephony platform.
• Demand for additional bandwidth and HSCN
connectivity was also high during this period.
In the second half of the financial year, we experienced
less demand for these types of products and services and
the second and third lockdown periods created further
uncertainty and delays into the market. As the country
continues to make good progress on its return to normality,
we are slowly starting to see confidence build back up within
the sector and are witnessing increased interaction with our
existing and potential customers. Given typical prospect to
revenue timescales we expect this to generate improvements
in the second half of FY22.
FY21 was an encouraging year for new logos with more new
names signed up in the last twelve months than in the previous
three years. Sales to these customers were small initially
but history shows that smaller orders generally develop into
significant customer relationships over the long term.
Sales, solutions and customers
As we start to see an increase in activity within our pipeline
we are actively expanding and strengthening our sales
team which will also enable us to exploit opportunities
previously closed to us because of the FCA investigation.
9
Annual Report and Accounts 2021Strategic report Chief Executive Officer’s review (continued)
Three new positions in commercial new business have been
created and key roles in public sector new business and
account management have been replaced. With proven and
experienced individuals recruited, we expect to see a positive
impact on the sales pipeline by H2 FY22.
During the period we have also been busy developing new
products and solutions, with ten new products being added
to our portfolio. These products are spread across the
solution towers and address gaps within our current product,
whilst also satisfying customers’ increasing demand for more
intelligent solutions and offerings.
In April we launched a new secure remote access platform
specifically designed for compliant access to governed
networks such as the HSCN with integrated multi-factor
authentication. In addition to this we increased the capability
in our Secure SD WAN offering with both 5G capable cellular
connectivity (for primary and secondary connectivity) and a
customer management portal offering multi and co-managed
policy delivery from a central location allowing automated,
zero touch build capability and building towards an end to
end, zero trust, security fabric roadmap.
Call2Teams, delivered in summer FY21, offers customers a
cost-effective PSTN break out service from Microsoft Teams
with added call recording, call routing and call reporting and
providing a cost-effective alternative to Microsoft’s in-built
calling plans. Expanding and evolving our voice capability
we also launched a highly flexible and scalable omni channel
contact centre solution for companies of all sizes offering
increased productivity, closer customer contact and improved
service levels.
Operations
During H1 FY21 the network and data centre efficiency
programme was completed, achieving final annualised cost
savings of approximately £4 million, significantly ahead of the
Company’s expectations of £2.8 million when the programme
was launched. As part of this exercise, three third party
data centres in London have been vacated, three network
platforms have been merged into one and our entire tail
circuit estate has been validated. All this was done without
incident and with minimal disruption to customers.
Enterprise resource planning (“ERP”)
The implementation of the finance and operations module
of Microsoft Dynamics 365 (“D365”) on 5 October 2020
was a major accomplishment for the business. This module
integrates seamlessly with the CRM module launched during
the last financial year and provides the business with an end-
to-end ERP system that replaces five legacy systems.
We are starting to see some of the many benefits that this
system facilitates; functionally, we are seeing dramatically
improved management information, which is consistent
throughout the organisation and more practically, our cash
collection has improved, as we are able to issue invoices
quicker and, in some cases, receive payment before invoices
were issued on the old systems.
Refinements to the system and the processes that surround
it are ongoing and we expect to see further productivity
and efficiency benefits during FY22. Additionally, we expect
to be able to improve our customers’ experience through
leveraging functionality within D365 and implementing
significantly improved customer portals, which will enable
customers to access account information and order standard
products and services through a single pane of glass.
HR
During the period, employee engagement has increased
materially and the employee surveys provide clear evidence
of the very significant improvement in this area. Our
employees’ mental health and welfare has been a crucial
area of focus for the company. Multiple initiatives have been
launched throughout the period to ensure our employees
feel valued, appreciated, and remain an integral part of
the business despite being isolated from colleagues. The
company did not take part in the furlough scheme and all
employees remained in full time employment.
Along with this great work the HR team also standardised all
employment contracts, replacing numerous legacy contracts
with one single contract. Work is currently underway to
replace five legacy HR systems (holidays, payroll, sickness,
expenses, travel) with one fully integrated system. This will go
live in stages over the next six months and will yield further
efficiencies and improved management information.
During the year the delivery function has been overhauled
with a new position of Delivery Director created. This new
hire was filled by an external candidate who has restructured
the team, bringing in two very high-quality recruits as his
direct reports. A second wave of restructuring has resulted in
50% of the delivery team being replaced and all project staff
being bought onshore. The team are currently working on
implementing a new workflow software programme which will
yield further benefits in FY22.
Environmental
The company remains cognisant of its responsibilities to
protect the environment and has taken actions during FY21
to reduce its carbon footprint. During the year we undertook
significant investment in new equipment to reduce power
consumption in our data centre facilities. Since the installation
of new chiller units into the Harrogate data centre we have
seen consumption reduce by 6.5%.
10
Strategic reportAnnual Report and Accounts 2021 Chief Executive Officer’s review (continued)
the outbreak of COVID-19. The many challenges associated
with the pandemic were overcome, with customer service
unaffected, no employees furloughed and without taking
advantage of any other government support schemes.
Throughout the COVID-19 pandemic we have experienced
customer delays regarding decisions on large-scale IT
projects. The delays experienced throughout FY21 have
continued into FY22 and hence we expect revenues and
EBITDA in H1 FY22 to be broadly flat, with modest growth
returning in the second half of FY22 once the country returns
to a more normalised position.
Acquisition opportunities for both scale and capability are
a key part of our strategy, and we anticipate completing at
least one acquisition during this financial year.
At the start of the new financial year, we have made
significant investment to assist in the organic and inorganic
growth of the business. Three new sales heads have been
recruited in preparation for the return of large-scale project
opportunities. In addition, we have recently appointed
Oakley Advisory Limited as the Company’s financial adviser
and created a new senior position of Head of Corporate
Development. Both appointments significantly strengthen
our skills, and the additional resource makes us well placed to
deliver the inorganic growth part of our strategy.
The integration and efficiency work carried out over the
last two financial years provides an excellent platform and
template for the integration of future acquisitions. Any scale
acquisition would involve the merging of physical networks,
the merging of network and operational platforms and a
consolidation of data centre space. Our historical success
in these areas therefore provides confidence in our ability
to successfully integrate future acquisitions whilst deriving
significant synergies.
Our strong profitability and cash flows, underpinned by 90%
recurring revenues, enable us to maintain a progressive
dividend policy whilst also pursuing our acquisition strategy.
We look forward to building on a very successful year with
both optimism and confidence.
Peter Brotherton
Chief Executive Officer
15 July 2021
We continue to evaluate technologies that will reduce our
carbon emissions further and are currently in the process
of installing unused pre-owned air handling units into our
Harrogate data centre, which is expected to reduce energy
consumption associated with data centre chilling by c.5%.
Cash flows
Strong cash flows continue to be a consistent feature of the
business. During the year and despite growth in the business
a positive working capital movement of £1.9m was achieved
which helped to generate an adjusted operating cash flow
of £26.5m. The share placing made as part of the restitution
scheme generated cash of £5.8m which was offset by cash
outflows in association with the scheme of £7.4m. During the
year, the company repaid its revolving credit facilities in full
and ended the financial year in positive bank debt position,
reducing total net debt by £19.0m in the period.
Whilst the company initially took advantage of the
government’s VAT deferral scheme, this was repaid in full by
30 September 2020, and no further government schemes
have been utilised in the period.
Sale of non-core business unit
On 31 March 2021, the Company reached agreement with
Thales UK Limited to sell the assets and know-how required
for the provision of maintenance services to four EDF nuclear
power stations. Redcentric previously provided maintenance
services direct to EDF under a ten-year contract (the
“Contract”) which expired on 31 March 2021. In the year to
31 March 2021, the Contract contributed £1m to revenue and
£0.7m to EBITDA and operating cash flow.
Under the terms of the agreement, Thales will pay Redcentric
a fixed consideration of £5.75m, payable in two instalments:
£3.5m has been received on 30 April 2021 and £2.25m will
be received on 30 September 2021. As part of the sale the
five employees that previously worked on the Contract were
transferred to Thales.
Summary and outlook
We have had an extremely productive year with many
historical issues addressed, a return to revenue growth and
the business now delivering sector leading EBITDA less
capex margins. With no net bank debt, an efficient operating
model, a new ERP system and fully integrated network and
platforms, we are now ideally placed to pursue the next stage
of the Company’s development.
The results for FY21 are especially impressive given the
backdrop of the COVID-19 pandemic and the fact that they
are in line with the market expectations that were in place pre
11
Annual Report and Accounts 2021Strategic report We think and
act quickly
We create
excitement through
innovation
We do what
we say we will
We work together
to deliver
a common goal
We are open,
honest and fair
1212
12
“
Quite literally overnight, we had 4,000
staff working from home and then
we diverted every single one of our
inbound numbers using the Redcentric
platform. Redcentric also gave us the
means to turn around a solution and
set us up with an IVR system within
24 hours, which was brilliant, while
Call2Teams played a significant role
in helping Hays staff continue to work
efficiently throughout COVID.
One of the biggest benefits I have
taken from working with Redcentric is
its agility and flexibility. Companies that
are nimble like Redcentric are able to
support their customers so much better.
”
1313
Financial review
Financial performance measures
Total revenue
Recurring monthly revenue (RMR)
Recurring revenue percentage
Adjusted EBITDA1
Adjusted operating profit1
Reported operating profit /(loss)
Adjusted cash generated from operations1
Reported cash generated from operations
Net debt
Adjusted net cash/(debt)1
Adjusted basic earnings per share1
Reported basic profit /(loss) per share
Year ended
31 March
2021 (FY21)
Year ended
31 March
2020 (FY20)
Change
£91.4m
£81.9m
90%
£24.6m
£15.2m
£13.0m
£26.5m
£17.6m
£(15.6)m
£1.0m
7.23p
6.01p
£87.5m
£77.6m
89%
£20.6m
£10.6m
£(8.7)m
£19.6m
£18.8m
£(34.5)m
£(13.3)m
4.76p
(7.14)p
4%
6%
1%
19%
43%
n/a
35%
(6%)
(55%)
n/a
52%
n/a
1 For an explanation of the alternative performance measures used in this report, please refer to page 22.
Overview
The business has performed extremely well during the year with all key financial performance measures moving in the right
direction. With the business returning to revenue growth and the full effect of the efficiency programmes flowing through,
both adjusted EBITDA and cash generation have been outstanding.
In addition to strong trading performance this year’s accounts have been impacted by three non-trading factors that have had
a material impact on the financial statements:
1. The sale of a non-core business unit was completed on 31 March 2021 for a fixed consideration of £5.75m, payable in two
instalments: £3.5m on 30 April 2021 and £2.25m on 30 September 2021. This contract provided maintenance services
to four EDF nuclear power stations and in FY21, this contract contributed £1m to revenue and £0.72m to EBITDA and
generated £0.68m of operating cash flow. As part of the sale the five employees that previously worked on the contract
were transferred to Thales. Goodwill of £1.2m was disposed of.
2. The settlement reached with the FCA resulted in the Restitution Scheme being implemented with an estimated cost of
£11.4m provided for in FY20. Total restitution payments of £8.4m were made, being satisfied by the issue of 1.3m new
shares at a market value of £1.7m and cash payments of £6.7m. To part fund the restitution scheme and the associated
£0.8m of advisory fees, £5.8m was raised from shareholders in July 2020 through an issue of 5.3m new ordinary shares.
3. On 27 August 2020, a modification to the London site lease was agreed with the landlord, incorporating a one-way break
clause at March 2030, with the lease expiry date remaining unchanged at March 2040. The inclusion of this clause triggers
a revision to the lease liability and right of use asset under IFRS 16. On 1 January 2021, a one-way break clause in the
Cambridge site lease was not activated thereby extending the lease expiry date to August 2023. The impact of these
modifications on the financial statements is to reduce both the lease liability and right of use asset by £3.8m and £4.2m
respectively, a £0.2m increase in the dilapidation provision and a £0.6m exceptional charge in the period.
14
Strategic reportAnnual Report and Accounts 2021 Financial review (continued)
The key financial highlights are as follows:
•
•
Total revenue increased by 4.5% to £91.4m (FY20: £87.5m). Recurring monthly revenue grew by 5.5% to £81.9m (FY20:
£77.6m), representing 90% (FY20: 89%) of the total revenue.
The Group reported profit before taxation of £11.5m in FY21 (FY20: loss of £10.6m). Adjusted EBITDA increased by
£4m (19.3%) to £24.6m and adjusted operating profit increased by £4.6m to £15.2m, reflecting increased revenue and
continued improvement to gross profit margin.
• Net debt at 31 March 2020 was £15.6m, including £15.1m of IFRS16 lease liabilities that were previously classified as
operating leases under IAS17 and £1.5m of supplier loans.
Revenue
Revenue for the year ended 31 March 2021 was generated wholly from the UK and is analysed as follows:
Recurring revenue
Product revenue
Services revenue
Total revenue
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
81,897
5,072
4,430
91,399
77,617
5,215
4,653
87,485
Revenue is analysed into the following categories:
•
Recurring monthly revenue has increased to £81.9m (FY20: £77.6m), delivered by a combination of successful Health and
Social Care Network (HSCN) connectivity implementations, and the installation of COVID-19 related services, which tend
to have a shorter order to installation time lag.
• Non-recurring product revenue, which was lower at £5.1m (FY20: £5.2m), has been more volatile since the announcement
of Brexit and more latterly COVID-19, both of which are causing customers to reconsider the timing of large-scale IT
investment decisions.
• Non-recurring services revenue was lower at £4.4m (FY20: £4.7m) due to delay in IT projects and site-access challenges
due to COVID-19.
Gross profit
Gross profit increased by 5.0% (£2.8m) reflecting the Group’s increased revenue and an improvement in gross margin to 63.4%
(FY20: 63.1%). Of the £2.8m gross profit increase, £2.5m was achieved through revenue growth with the remaining £0.3m due
to gross margin improvement. Of the 0.3% gross margin improvement, 1.3% is driven by the network restructuring programme
which offsets 0.5% reduction due to the loss of high margin Crown Hosting contracts and 0.5% reduction due to slightly lower
margins on services installed and churn on renewals.
15
Annual Report and Accounts 2021Strategic report Financial review (continued)
Adjusted operating costs
The Group’s adjusted operating costs (operating expenditure excluding depreciation, amortisation, exceptional items and
share-based payments) are set out in the table below:
Year ended
31 March
2021
Year ended
31 March
2020
Change
£000
£000
£000
Change %
UK staff costs
Office and data centre costs
Network and equipment costs
Other sales, general and administration costs
Offshore costs
19,700
19,738
3,789
6,940
1,428
1,502
4,393
6,680
1,887
1,886
(38)
(604)
260
(459)
(384)
Total adjusted operating costs
33,359
34,584
(1,225)
0%
(14%)
4%
(24%)
(20%)
(4%)
Employees
Year-end headcount
UK
India
Total employees
Average headcount
UK
India
Total employees
Year ended
31 March
2021
Year ended
31 March
2020
Variance
295
100
395
298
144
442
(3)
(44)
(47)
Year ended
31 March
2021
Year ended
31 March
2020
Variance
294
126
420
311
151
462
(17)
(25)
(42)
Total adjusted operating costs for FY21 were 3.5% (£1.2m) lower than prior year, reflecting:
•
•
•
•
office and data centre costs reduced by £0.6m, primarily reflecting the data centre restructuring programme;
network and equipment costs increased by £0.3m, primarily due to increased software and licences costs a result of
additional licensing to support the enhanced IaaS platform and a period dual running following the implementation of
a new ERP system;
other sales, general and administration costs down £0.5m, largely due to reduced travel and entertainment costs which
have been impacted by COVID-19; and
offshore costs reduced by £0.4m due to reduction in staff costs with the average number of employees reducing from
151 to 126 as a result of delivery restructuring.
16
Strategic reportAnnual Report and Accounts 2021 Financial review (continued)
Adjusted EBITDA
Adjusted EBITDA is EBITDA excluding exceptional items (as set out in note 9), share-based payments and associated
National Insurance. The same adjustments are also made in determining the adjusted EBITDA margin. Items are only classified
as exceptional due to their nature or size, and the Board considers that this metric provides the best measure of assessing
underlying trading performance.
Reported operating profit / (loss)
Amortisation of intangible assets arising on business combinations
Amortisation of other intangible assets
Depreciation on tangible assets
Depreciation on ROU assets
EBITDA
Exceptional items
Share-based payments and associated National Insurance
Adjusted EBITDA
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
12,998
6,252
1,085
3,408
4,932
28,675
(4,782)
687
24,580
(8,737)
6,252
1,197
6,373
2,441
7,526
12,516
562
20,604
Adjusted EBITDA increased by 19.3% to £24.6m, £4.0m higher than prior year, reflecting growth in revenues, increased gross
margin and the full year impact of operational efficiencies largely delivered during FY20.
Taxation, interest and dividend
The tax charge for the year was £2.3m (FY20: £0.0m credit), comprising an income tax charge of £1.2m (FY20: £0.8m), a current
year deferred tax charge of £0.8m (FY20: £0.8m credit) and a deferred tax charge in respect of prior years of £0.3m (FY20: £0.0m).
Net finance costs for the year were £1.5m (FY20: £1.9m), including £1.2m of interest payable on leases of which £1.0m related
to leases previously recognised as operating leases under IAS17.
During the year, the Company paid an interim dividend for FY21 of 1.2p per share, totalling £1.9m.
A final dividend payment of 2.4p per share will be paid on 17 September 2021, subject to approval at the Company’s Annual
General Meeting. The shares will have an ex-dividend date of 5 August 2021 and a record date of 8 August 2021.
17
Annual Report and Accounts 2021Strategic report Financial review (continued)
Net debt
During the year, net debt reduced by £19.0m to £15.6m as at 31 March 2021, with the movements shown in the tables below:
Adjusted EBITDA
Effect of exchange rates
Working capital movements
Adjusted cash generated from operations
Cash conversion
Capital expenditure – cash purchases
Capital expenditure – finance lease purchases
Proceeds from sale and lease back of assets
Net capital expenditure
Corporation tax
Interest paid
Loan arrangement fees/fee amortisation
Finance lease/term loan interest
Effect of exchange rates
Other movements in net debt
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
24,580
20,604
-
1,881
26,461
107.7%
(2,937)
(2,235)
1,036
(4,136)
(149)
(398)
(17)
(1,017)
(27)
(1,608)
13
(970)
19,647
95%
(4,233)
(2,402)
-
(6,635)
(660)
(610)
(51)
(1,377)
(13)
(2,711)
Normalised net debt movement
20,717
10,301
Lease liabilities adopted under IFRS 16
Cash costs of exceptional items
Remeasurement related to lease modification
Supplier loans
Share issues
Share buy-back
Sale of treasury shares
Cash received on exercise of share options
Dividends
Decrease/(Increase) in net debt
Net debt at the beginning of the period
Net debt at the end of the period
18
-
(8,884)
3,917
(1,207)
5,775
-
494
36
(1,868)
(1,737)
(23,013)
(817)
-
-
-
(724)
-
-
(2,731)
(27,285)
18,980
(16,984)
(34,549)
(15,569)
(17,565)
(34,549)
Strategic reportAnnual Report and Accounts 2021 Financial review (continued)
As at
31 March
2019
Net cash
Net
non-cash
flow
As at
31 March
2020
Net
cash flow
Net
non-cash
flow
As at
31 March
2021
£000
£000
£000
£000
£000
£000
£000
Cash
RCF
Term Loan
Lease Liabilities
7,206
(19,432)
(363)
(4,976)
(17,565)
(3,483)
7,000
212
6,234
9,963
(13)
(51)
-
(26,883)
(26,947)
3,710
(12,483)
(151)
(25,625)
(34,549)
1,567
12,500
212
4,527
18,806
(27)
(17)
(1,552)
1,770
174
5,250
-
(1,491)
(19,328)
(15,569)
Included in lease liabilities at 31 March 2021 are £15.1m of IFRS 16 lease liabilities that were previously classified as operating
leases under IAS17 and £1.5m of term loans. Other movements reflect capital expenditure of £4.1m, £1.9m on dividends and
£8.9m on exceptional items including £6.6m paid out under the restitution scheme partly funded through a £5.8m share issue.
During the year, the RCF was repaid in full and £12.5m of unutilised bank facility was cancelled, leaving a total facility at 31
March 2021 of £32m with a termination date of 30 June 2022. The facilities comprise a Revolving Credit Facility of £5m (£nil
utilised at 31 March 2021) with a £20.0m accordion (£nil utilised at 31 March 2021) and a £7.0m Asset Financing Facility (£1.8m
utilised at 31 March 2021).
Trade Debtors
In the year, focus remained on collecting legacy debt to improve the ageing profile. At the year-end, debt over 90 days old has
reduced by 93% year on year, whilst debt greater than 180 days has reduced by 98%.
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
Provision
Net trade debtors
Trade debtor days were 30 at 31 March 2021 compared to 38 at 31 March 2020.
Trade creditor days were 37 at 31 March 2021 compared to 40 as at 31 March 2020.
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
9,343
600
282
21
21
1
10,268
(1,104)
9,164
10,993
1,656
593
220
288
63
13,813
(1,438)
12,375
19
Annual Report and Accounts 2021Strategic report Financial review (continued)
Financing
31 March 2021
31 March 2020
Available
Drawn
Undrawn
Available
£000
£000
£000
£000
Drawn
£000
Undrawn
£000
Committed
Revolving credit facility
Term loans
Leases
Uncommitted
Bank overdraft
Accordion facility
Asset financing facility
5,000
1,491
19,328
25,819
-
20,000
5,190
25,190
-
5,000
1,491
19,328
20,819
-
-
-
-
-
-
5,000
-
20,000
5,190
25,190
17,500
151
25,625
43,276
5,000
20,000
3,853
28,853
12,483
151
25,625
38,259
-
-
-
-
5,017
-
-
5,017
5,000
20,000
3,853
28,853
Total borrowing facilities
51,009
20,819
30,190
72,129
38,259
33,870
Uncommitted facilities represent facilities available to the Group but which can be withdrawn by the lender and hence are not
within the Group’s control. When the asset financing facility is utilised a lease is created and hence there is no committed asset
financing facility.
During the year, the Group cancelled £12.5m of unutilised facility reducing the committed level from £17.5m to £5.0m and
thereby saving £95k in annualised commitment fees.
David Senior
Chief Financial Officer
15 July 2021
20
Strategic reportAnnual Report and Accounts 2021 “
Howdens and the Redcentric IT teams
worked closely together daily – firstly to put
remote-working solutions in place and then
providing support with daily changes to our
call routing. We shared the call routing plan for
the next trading day and relied on the team at
Redcentric to put large-scale revisions of the call
routing in place using scripts – without which we
could not have kept up with the pace of change.
We now have a defined blueprint for different
types of remote-working scenarios. We have many
solutions in the armoury for different situations,
which gives us greater flexibility and the ability
to react much faster going forward.
”
2121
Alternative performance measures
This Annual Report and Accounts contains certain financial measures (“APMs”) that are not defined or recognised under IFRS
but are presented to provide readers with additional financial information that is evaluated by management and investors in
assessing the performance of the Group.
This additional information presented is not uniformly defined by all companies and may not be comparable with similarly
titled measures and disclosures by other companies. These measures are unaudited and should not be viewed in isolation or as
an alternative to those measures that are derived in accordance with IFRS.
Recurring monthly revenue
Recurring revenue is the revenue that annually repeats either under contractual arrangement or by predictable customer habit.
It highlights how much of the Group’s total revenue is secured and anticipated to repeat in future periods, providing a measure
of the financial strength of the business. It is a measure that is well understood by the Group’s investor and analyst community
and is used for internal performance reporting.
Reported revenue
Non-recurring revenue
Recurring revenue
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
91,399
(9,502)
81,897
87,485
(9,868)
77,617
Recurring revenue makes up 90% of total revenue in FY21, an increase of 1% from prior year (89%).
Maintenance capital expenditure
Maintenance capital expenditure is the capital expenditure that is incurred in support of the Group’s underlying infrastructure
rather than in support of specific customer contracts.
Reported capital expenditure incurred
Customer capital expenditure incurred
Maintenance capital expenditure incurred
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
4,522
(1,927)
2,595
6,922
(2,470)
4,452
Of the £4.5m capital expenditure incurred, £2.9m was paid in cash during the year. Following the completion of network and
platform upgrades in FY20 maintenance capital expenditure has reduced by £1.8m to £2.6m. We will continue to monitor the
business’s capital requirements and invest in the business when appropriate.
Customer capital expenditure has decreased by £0.5m to £1.9m reflecting the delay in large scale IT projects.
22
Strategic reportAnnual Report and Accounts 2021 Alternative performance measures (continued)
Adjusted EBITDA
Adjusted EBITDA is EBITDA excluding exceptional items (as set out in note 9), share-based payments and associated National
Insurance. The same adjustments are also made in determining the adjusted EBITDA margin. Items are only classified as
exceptional due to their nature or size, and the Board considers that this metric provides the best measure of assessing
underlying trading performance.
Reported operating profit /(loss)
Amortisation of intangible assets arising on business combinations
Amortisation of other intangible assets
Depreciation on tangible assets
Depreciation on ROU assets
EBITDA
Exceptional items
Share-based payments and associated National Insurance
Adjusted EBITDA
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
12,998
6,252
1,085
3,408
4,932
28,675
(4,782)
687
24,580
(8,737)
6,252
1,197
6,373
2,441
7,526
12,516
562
20,604
Adjusted EBITDA increased to £24.6m, £4.0m higher than prior year, with adjusted EBITDA margin of 27% (up from 24%).
Of this increase, £2.5m relates to revenue growth and £0.2m relates to gross margin improvements with the remaining increase
representing operational efficiencies.
Adjusted operating profit
Adjusted operating profit is operating profit / (loss) excluding amortisation on acquired intangibles, exceptional items and
share-based payments. The same adjustments are also made in determining the adjusted operating profit margin and in
determining adjusted earnings per share (“EPS”). The Board considers this adjusted measure of operating profit to provide the
best metric of assessing underlying performance as it excludes exceptional items and the amortisation of acquired intangibles
arising from business combinations which varies year on year dependent on the timing and size of any acquisitions.
Reported operating profit/(loss)
Amortisation of intangible assets arising on business combinations
Exceptional items
Share-based payments
Adjusted operating profit
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
12,998
6,252
(4,782)
687
15,155
(8,737)
6,252
12,516
562
10,593
The EPS calculation further adjusts for the tax impact of the operating profit adjustments, presented in note 13.
23
Annual Report and Accounts 2021Strategic report Alternative performance measures (continued)
Adjusted operating costs
Adjusted operating costs are operating costs less depreciation, amortisation, exceptional items, share-based payments and
foreign exchange.
Reported operating expenditure
Depreciation ROU assets
Depreciation of tangible assets
Amortisation of intangibles arising on business combinations
Amortisation of other intangible assets
Exceptional items
Other operating income
Share-based payments
Adjusted operating expenditure
Adjusted cash from operations
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
49,448
(4,932)
(3,408)
(6,252)
(1,085)
4,782
(4,507)
(687)
63,925
(2,441)
(6,373)
(6,252)
(1,197)
(12,516)
-
(562)
33,359
34,584
Adjusted cash from operations is reported cash from operations plus the cash cost of exceptionals.
Reported cash from operations
Cash costs of exceptional items
Adjusted cash from operations
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
17,577
8,884
26,461
18,817
817
19,634
24
Strategic reportAnnual Report and Accounts 2021 Alternative performance measures (continued)
Adjusted net cash/(debt)
Adjusted net cash/debt is reported net debt less supplier loans and less lease liabilities that would have been classified as
operating leases under IAS 17.
Reported net debt
Supplier loans
Lease liabilities that would have been classified as operating leases under IAS 17
Adjusted net cash/(debt)
David Senior
Chief Financial Officer
15 July 2021
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
(15,569)
(34,549)
1,491
15,058
980
151
21,057
(13,341)
25
Annual Report and Accounts 2021Strategic report To be the most trusted
provider of IT Managed
Services to commercial
and public sector
organisations.
We deliver agile,
available and assured
solutions that help
organisations succeed.
Our values support our strategic
objectives and sit at the heart
of our business and our culture.
We work hard to integrate our
values into everything we do.
26
Strategy and business model
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-premises solutions and mobile
access to secure services.
Redcentric positions itself in the market as being able to combine the benefits of proprietary network and data centres with a
flexible 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.
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:
•
•
•
identify acquisition opportunities for both scale and capability;
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
benefit 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 financial 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.
27
Annual Report and Accounts 2021Strategic report Section 172 statement – our stakeholders
The Board recognises its duty to consider the needs
and concerns of the Group’s key stakeholders during its
discussions and decision-making. The Board has had
regard to the importance of fostering relationships with
its stakeholders as set out below and also detailed in the
strategic report and corporate governance report of this
Annual report. More information on how the Directors have
discharged their duties under section 172 of the Companies
Act 2006 is also available in the strategic report on pages 4
to 39 and Corporate Governance report on pages 40 to 63.
• New vision, mission and values – these have been
developed in consultation with colleagues to align all
colleagues to a common vision, mission statement and
set of core values.
•
•
Share schemes – the Company has in place a Save As
You Earn Option Plan to enable colleagues to become
personally invested as shareholders of the Group.
Further information is included in the Corporate
Responsibility section on page 33 and in the Corporate
Governance report on pages 40 to 63.
Colleagues
• Colleague briefings – monthly colleague briefing
Customers
sessions are held with the Operating Board to enable
colleagues to ask questions and raise issues and for
colleagues to be provided with updates on the business.
•
Performance updates – key performance information
such as trading updates and financial results are always
promptly communicated to colleagues.
• Newscentric – Company information and new product
launches are communicated to employees through
a number of means, including via Newscentric, our
colleague newsletter, which is issued every two months.
• Colleague survey – colleagues were surveyed for the
first time in a number of years in FY20 and an action
plan has been developed in response to some of the key
themes coming out of that. A further “pulse” survey was
undertaken in December 2020 to track the effectiveness
of the action plan and to take a temperature check of
engagement levels.
•
•
Learning management – an online learning management
system has been operational over the last twelve months
and has become an established tool, providing access to
online training.
Performance management portal – a Group-wide online
objectives and feedback system has been in place for the
last year and a new approach to year end performance
and development reviews has been introduced.
• Monthly newsletter – an electronic newsletter is sent
out in the final week of every month to the primary
and technical contacts within the customer database to
communicate key announcements, thought leadership
material and new solutions customer advocacy.
• Customer surveys – a quarterly net promoter score (NPS)
survey is carried out to gain customer feedback and
test customers’ opinions on service experience. A key
service improvement plan is developed from the results
of the survey following discussion of the outputs at
management level. The implementation of the new ERP
system in FY21 has allowed for surveys to be carried out
through an improved “Voice of the Customer” tool and
this is also regularly used for one-off surveys to capture
feedback in relation to specific solutions.
• Monthly and quarterly service reviews – regular service
reviews with customers are led by Service Delivery
Managers and Account Managers, focused on service
experience and opportunity identification.
• Daily social media updates – at least daily updates are
provided through the Company’s corporate social media
channels (w, Twitter and Facebook) and contain key
updates and customer case studies. These are shared by
customer facing employees to ensure as wide a reach as
possible to keep customers appraised of the Company’s
news and offering.
• Colleague recognition – the Company’s core values
• Customer scoring – within the Group’s support systems
have been embedded into the Group’s new Colleague
Recognition Scheme – The Extra Mile Awards.
• COVID-19 – as a result of the pandemic the Group
run a survey to assess how colleagues were managing
operating from home. The Group has also introduced a
number of wellbeing initiatives for colleagues over the
last 12 months.
the Group reaches out to customers to score the support
service they have received, with follow up actions taken
by the support team based on each customer’s score
and requirements.
28
Strategic reportAnnual Report and Accounts 2021 Section 172 statement – our stakeholders (continued)
Suppliers
•
•
•
•
•
The Board is committed to building trusted partnerships
with the Group’s suppliers, which are crucial to delivering
many of our commitments. Through these partnerships,
the Group delivers value and quality to its customers,
and helps its partners to develop and grow.
The Group has in place a programme which ensures
regular engagement and communication with all
suppliers but particularly key strategic partners, including
an annual review and other regular check-ins which
include all relevant departments across the Company.
The Company has given additional focus to its cloud and
security suppliers to meet changes and recent trends in
customer requirements.
The Company has put focused effort in working
with suppliers to review their contractual terms
including terms and conditions of trading, modern
slavery processes, anti-bribery compliance and ISO
requirements.
Some of the Group’s strategic partnerships are
listed below:
- Microsoft – Cloud Productivity (GOLD) Cloud Platform
(GOLD) Datacentre (SILVER); Application Development
(SILVER); Application Integration (SILVER); Collaboration
and Content (SILVER);
- Cisco – GOLD;
- Hewlett Packard Enterprise (HPE) - Silver PRSP (Partner
Ready Service Provider);
- Citrix – CSPP (Citrix Solutions Provider Programme);
and
- Veeam partner.
Shareholders
• Analysts and investor meetings – the Chief Executive
Officer and Chief Financial Officer hold analyst and
investor roadshow meetings throughout the year,
particularly following the release of the Company’s
interim and full year results and feedback from those
meetings is shared with the Board. In FY21, a full
schedule of roadshows took place remotely.
•
The AGM is a key opportunity for engagement between
the Board and shareholders, particularly private
shareholders. In FY21, a face-to-face AGM could not
take place but shareholders were given the opportunity
to submit questions for the Board ahead of the AGM
and answers to such questions made available on the
Company’s website.
• Annual report and accounts – the Group’s Annual Report
and Accounts is made available to all shareholders both
online and in hard copy where requested.
29
• Group website – all presentations and announcements
and other key shareholder information is available on
the investor section of the Group’s website.
•
Further information is included in the Corporate
Governance report on pages 40 to 63.
Environment
•
The Company has maintained its ISO 14001:2015
environmental management accreditation, through which
it manages the environmental aspects of the business,
fulfils legal and regulatory requirements, and identifies
risk and opportunities for improvement. In FY21 the
Group introduced a compulsory training module for
employees on the Group’s Learning Management
System in order to increase awareness of the Company’s
environmental impact and actions.
• As part of implementing and maintaining the ISO 14001
Environmental Management System, the Group has
identified the significant environmental aspects of the
business, driving the objectives of reducing energy use,
company travel and the use of paper and consumables.
•
•
•
•
In FY21, the Group has taken actions to reduce its
carbon footprint and continues to evaluate technologies
to reduce carbon emissions. Significant investment
has been made in new equipment to reduce power
consumption in the Group’s data centre facilities and the
Group is in the process of installing unused preowned air
handling units into its Harrogate data centre. The Group
has also introduced movement sensor lighting in its
offices and data centres.
Travel reduction in FY21 was aided by the COVID-19
pandemic but has in any event been a focus area, with
working patterns reviewed in such a way to positively
impact environmental performance.
The move to having a paperless office working
environment has also been aided by the pandemic and
has significantly reduced the Group’s environmental
impact and this project will be completed in the
coming year.
Projects have been initiated to create assessment criteria
and a formal process for evaluating the reusability of
“end of life” equipment to enable proper allocation and
measurement of WEEE (Waste Electrical and Electronic
Equipment Waste) by the Group.
•
Further information is included in the Sustainability
section of the report on page 38.
Annual Report and Accounts 2021Strategic report •
•
•
•
the demotivational effect of general anxiety and concern;
the need to establish new client communication channels
with clients who are also working remotely;
team members being incapacitated or having to care for
other family members;
the slowdown in recruitment, although this is likely to be
partially offset by lower attrition;
Risk to IT & security
•
•
a possible breach of IT security through remote working,
although robust measures have been taken to mitigate
this risk;
the IT team being less able to respond efficiently and
promptly to regular hardware and software problems due
to the nature of remote working;
•
loss of capacity in the IT team due to illness.
Mitigating activities
The duration and extent of the economic consequences
of the pandemic are currently unknown and this makes
predicting future demand for the Group’s offerings difficult.
However, the Board believes that the Group is well placed
to withstand the current challenges and risks. The Group’s
IT systems are sufficiently flexible to enable remote working
by the majority of colleagues both in the UK and India.
During March, in close co-operation with colleagues, we
moved to working from home across the Group with very
little disruption.
On 1 March 2021 the Company repaid its revolving credit
facility in full and ended the year with positive bank debt and
the Group is cash-generative. An undrawn facility of £5m
remains in place until 30th June 2022.
Our principal risks
Market and economic conditions
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 efficiencies in the
business without impacting levels of service.
Risk management
The Redcentric risk framework enables a consistent
approach to how we identify, manage and monitor risks
across everything that we do and allows us to underpin our
company values and strategies for success.
We have recently implemented enhancements to our risk
framework to allow the leadership team to have a higher
level of confidence, increased knowledge and capability to
seamlessly deliver our strategies and maintain continued
focus on our customers.
How do we manage our risks?
Risks are managed on a tiered hierarchy, with each functional
tower of the business owning and managing risk to their
direct areas, measured scientifically and consistently
throughout. High value risks are cascaded upwards to
operating Board level and then beyond that to Group
level alongside principal risks. This allows the right level of
visibility, ownership, and management in the right places with
complete consistency and transparency.
Management oversight is performed bi-weekly, monthly and
quarterly at the various levels, agreeing actions, priorities or
acceptance through relevant joint forum attendance.
COVID-19
The COVID-19 pandemic has created an unprecedented
and constantly changing challenge to all businesses with
no clear end point. Whilst overall the Group has a relatively
low risk, high visibility business model, which is adaptable to
homeworking, we believe the risks to the Group posed by
the COVID-19 pandemic are as set out below.
Trading risk
•
although the Group’s strong recurring revenues support
longer term visibility of sales, we have experienced some
customers deciding to defer large-scale IT projects until
some economic certainty returns. Reluctance to move
critical IT infrastructure during this period has, however,
also had a beneficial effect on levels of contract churn;
liquidity risk
•
uncertainty remains around the wider economic impact
of the pandemic and customers’ ability to continue to
trade throughout the pandemic;
Risk of loss of efficiency
•
•
the short-term disruption of moving people from offices
to working from home;
lower productivity at home due to poorer connectivity,
less communication between team members and
possible distractions such as family;
30
Strategic reportAnnual Report and Accounts 2021 Risk management (continued)
Technology and cyber-security
Loss of major contract
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 significant
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.
Competition and market pressures
Redcentric operates in a highly competitive marketplace
and, while the Board believes that the Group enjoys
significant 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 profitability.
The Group monitors competitors’ activity and constantly
reviews its own services and prices to ensure a competitive
position in the market is maintained.
Failure to successfully manage our large, significant and
complex clients could lead to a loss of significant revenue
and possible reputational damage. To address this risk,
Redcentric pro-actively maintains Sales Management Plans,
hold regular customer meetings by account teams, aligns
Service Delivery to sales in order to support both our and our
customers’ strategies. The Group also operates a meaningful
and accurate customer satisfaction methodology with
feedback loop.
Environmental impact
The physical impacts of climate change and the actions
taken by governments and society to try and limit global
warming may impact our ability to conduct business and
secure assets. As our customers seek to reduce their own
emissions, demand for our propositions and services may
also change; the Board recognises the importance of our
corporate responsibilities to do everything possible to reduce
the impact Redcentric has on the environment. The Group
is managed to a recognised environment management
standard and maintains an annual set of environmental
objectives to measure and maximise power efficiency across
sites, reduce business travel, reduce use of paper and
physical peripheries, reduce waste and has introduced a
proactive carbon offset initiative.
Business continuity
Brexit
The Board has assessed the impact of Brexit on the Group
and do not believe it represents a material risk to the Group.
The Board believes 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 a variety of risks to business continuity
through infrastructure failure, loss of physical site, logical
access failures and impact to its people. A critical element
of Redcentric’s operating methodologies and procedures
is to mitigate such risks through the careful construction,
maintenance and management of all elements of business
continuity, adhering to industry standard methodology.
Operating regular externally audited exercises, maintaining
continuity plans across all areas alongside our fully resilient
technical landscape with regular testing of back-up and
recovery plans.
31
Annual Report and Accounts 2021Strategic report “
Redcentric has played an important
role in helping us to design and
develop our infrastructure, and has
helped us set up our cloud-based
services, which provide the foundation
for us to be flexible, innovative and
support different ways of delivering
education for students. At the start
of COVID, we already had the IT
infrastructure in place to ensure we
could make remote learning possible –
securely and efficiently.
”
3232
As a direct result of the feedback we received we have
launched the following initiatives:
• Our new company vision, mission and values
• A new on-line learning management system to support
our colleagues development
• A new on-line performance and development system
to ensure all colleagues are clear about their objectives
and have the opportunity to have great performance and
development conversations and receive timely feedback
from both colleagues and peers
• A more flexible working week, with an early finish on
a Friday
• A new internal communications strategy with monthly
all colleague calls, our new colleague newsletter
‘Newscentric’, weekly colleague shout outs and set up a
Colleague Communication Forum
• Our Extra Mile recognition scheme which recognises
the outstanding contribution of our colleagues on a
monthly basis
Over the last 12 months we have increased our employee
engagement from 68% to 71% and we believe it is critical to
continue listening to our colleagues on an on-going basis.
We ran a temperature check survey in December 2020 which
showed significant improvements in all areas surveyed and
has enabled us to further develop our action plans for FY22.
Our commitment is to continue to listen to our colleagues
and evolve our people plans accordingly.
Wellbeing
Whilst a priority before, the importance of ensuring the
wellbeing of every colleague has come even more to the
forefront over the last 12 months and we are committed as a
business to ensuring we provide support for all colleagues in
a variety of different ways.
We have trained 23 colleagues from across our business
to become qualified Mental Health First Aiders and this
has been communicated widely across the business and
ensured that all colleagues have easy access to our Employee
Assistance Programme.
Corporate responsibility
Our colleagues
Throughout FY21 the response of each and every one of our
colleagues to the COVID-19 pandemic has been outstanding,
ensuring that our customers had the products and solutions
in place quickly to adapt to the changing working landscape,
whilst also adapting to new ways of working themselves. Our
colleagues sit at the heart of our business and are critical
to our success moving forwards and I am pleased that we
have made a number of key investments in our people
propositions over the last 12 months and will continue to do
so over the year ahead.
Our customers have recognised the solutions, and
service they have received over the last 12 months and we
continue to receive positive feedback on the support our
colleagues provide.
Through FY21 we have also continued the work started in
FY19 and 20 to re-shape our business and we have made
a number of internal changes to ensure we are best set
up to deliver great service to our customers, including the
onshoring of all delivery resource to the UK team.
Over the last 12 months we have also continued to simplify
our employment proposition and have undertaken a terms
and conditions harmonisation programme. This programme
saw all colleagues move to a standardised contract with
aligned terms and conditions following historic differences as
a result of previous acquisitions.
I would personally like to thank each and every one of our
colleagues for the significant efforts they have made over
what has been an unprecedented year, especially given
the challenges of adapting to remote working whilst also
managing home and family commitments over this period.
Everyone has shown huge commitment to both our business
and our customers working together across teams to deliver.
I would especially like to thank those colleagues who have
continued to operate from the office or from our customers
sites to ensure we maintained our high levels of delivery for
our customers.
Having a say on what matters
In FY20 we launched our first All Colleague Opinion Survey
to ensure our colleagues had the opportunity to have their
say on their working experiences at Redcentric. We listened
to their feedback and have been progressing a number of
colleague initiatives over the last 12 months as part of our
response to this feedback.
33
Annual Report and Accounts 2021Strategic report Corporate responsibility (continued)
In addition to the options we have put in place to protect our colleagues’ mental health, we have also been focused on
running a number of internal campaigns to provide additional support including:
•
Set up of a wellbeing teams channel
• Weekly yoga and mindfulness workshops delivered by qualified instructors
• Weekly colleague quizzes
• Weekly coffee shop dials-in
•
•
•
Photo and caption competitions
Tea & Talk and Sleep Awareness days
Regular check-in surveys
Well-being will continue to be a priority for the business over the year ahead and we will be working closely with our
colleagues to support them back into the workplace over the coming months once safe to do so.
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 is disadvantaged on any of the above grounds.
Every possible step is 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.
Gender diversity
The average number of employees employed during the year was as follows:
Executive Directors
Ops Board
Senior managers
Other employees
Total average headcount
Gender pay report
Male
Female
Total
2
4
9
305
320
0
2
5
93
100
2
6
14
398
420
Our gender pay report at the snapshot date of 5 April 2020 showed that the overall difference between men and women’s
earnings at Redcentric was 24% (mean).
This shows an improvement on the April 2019 figures, however like most organisations in our industry, our gender pay gap is
driven by a continued imbalance of male and female colleagues at different levels across the organisation. 62% of females in
our business sit within the two lowest pay quartiles of the business which has negatively impacted our gender pay gap.
This was an expected outcome given the focus we have put on building female representation through targeted recruitment, an
increase in apprenticeship programmes and internal development to build a longer-term pipeline of females within our business.
We are confident that this will change as we continue to focus on development and progression opportunities for the future.
34
Strategic reportAnnual Report and Accounts 2021 Corporate responsibility (continued)
Apprenticeship programme
Over the last 12 months we have also increased our investment in apprentice programmes across differing areas of our
business for both new joiners into our business and existing colleagues. These programmes have focused on building a
pipeline of talent into our business to support a number of our functions, including customer services, finance, procurement,
project management and engineering and we have 12 apprenticeship programmes currently underway. We are working more
closely than ever with local schools and apprentice providers to increase visibility of these opportunities. This is an area we are
committed to maintaining and growing given the benefits to our local communities.
Our first Future Leaders programme has now concluded with five colleagues successfully gaining Level 3 Team Leader
qualifications. Based on the success of this programme we will be running a further Team Leader and Manager programme
in FY22.
We are also working closely with local schools and colleges to support work experience opportunities and educational
events and will be supporting a number of careers events later this year. Work has commenced on the design of a Graduate
programme which we plan to launch in the second half of FY22.
Share scheme
The Group is a strong believer that having an effective employee share ownership programme helps to align colleagues’
interests with shareholders, and continues to provide an effective tool in attracting, retaining and motivating staff. In November
2014 the Group launched a HMRC approved Redcentric plc Save As You Earn Option Plan where colleagues contribute a
monthly amount which is saved over three years to buy shares in the Company at a pre-determined price.
The most recent grant was made on 3 September 2020, with the Company granting options over a total of 521,782 ordinary
shares. These options are available for exercise from 1 October 2023, with an exercise price of 119.60p.
As at 31 March 2021, the following options were outstanding under the plan:
Grant date
Exercise
price (p)
Opening
options
Options
granted
Options
exercised
30 August 2017
21 August 2019
63.0p
63.1p
2 September 2020
119.60p
845,973
479,785
-
Total
COVID-19
n/a
1,325,758
-
-
521,782
521,782
(843,116)
(3,169)
(6,020)
(852,305)
Options
lapsed /
cancelled
(2,857)
(31,061)
(49,665)
(83,583)
Options
remaining
-
445,555
466,097
911,652
Our transition to working remotely has been incredibly successful and we have ensured our colleagues have the tools,
technology and support to operate effectively from home. We have through the launch of our new communications strategy
ensured that we have kept connected to all our colleagues over the last 12 months both in the UK and India.
We have undertaken a number of surveys to ensure our colleagues have the right support in place both from the Company and
their Managers and have developed a specific wellbeing strategy to safeguard the wellbeing of all our colleagues.
Our offices have been adapted to ensure compliance with COVID-19 guidelines and we are currently planning a safe return to
our offices from July 2021 to enable our colleagues and teams to re-connect. We are reimbursing all of our Indian colleagues
for the cost of vaccination.
The recent colleague pulse survey showed 94% advocacy from our UK based colleagues in the actions we have taken and the
way we have managed through the COVID-19 pandemic.
35
Annual Report and Accounts 2021Strategic report Corporate responsibility (continued)
Given the success of remote working and how our colleagues
have responded to this over the last 12 months we will be
changing our future working approach. Our plan is to move
to a hybrid working model once we have completed a return
to the office, with colleagues wherever possible being given
the opportunity to work from home two days a week.
We are also really pleased to re-confirm that as a business
we have not made use of the government’s furlough scheme,
choosing instead to focus our colleagues on providing
outstanding support for customers and accelerating the
delivery of key strategic objectives over the last 12 months.
This has given us a strong foundation for the year ahead.
Charitable activity
Despite the lockdown restrictions, throughout 2020 and
early 2021 we have taken part in numerous virtual charity
challenges and fundraising events.
•
•
Recently we asked colleagues to support a Yorkshire
Easter Egg Appeal for the Yorkshire Children’s Trust and
together we donated over 120 Easter eggs which were
distributed across the county to children in need.
10 Million Step Challenge – in May and June 2020 all
colleagues had the opportunity during the first lockdown
to record ‘steps’ walked, run and distanced cycled. We
raised a total of £1,356 for the NHS charities.
• We’ve continued to support Sue Ryder Wheatfields
Hospice and in 2020 reached an amazing milestone with
them. Since 2017, we’ve donated a total of £20,400.90
through monthly pay day raffles and fundraisers.
•
In August 2020, we took part in ‘Boycott Your Bed’ for
Action for Children, raising £450 for vulnerable children
in the UK. This involved our colleagues camping out in
an unusual location for the night, whilst taking part in a
live streamed event.
• A ‘virtual coffee morning’ was held for Macmillan and we
raised an amazing £338.
• We raised £640 in November for Children in Need by
sponsoring the Annual Duck Race online and wearing
our onesies to work for the day.
•
For our Christmas Charity Challenge in 2020 we asked
colleagues to donate Christmas gifts for local children
who would otherwise not receive anything on Christmas
day. This was a great success, and we had a whole
meeting room full of presents to distribute out to
children in Yorkshire.
Once the COVID-19 restrictions are lifted further, we are
looking to arrange team-building volunteering days for
colleagues to take part in, supporting local communities with
various projects.
We also continue to support local volunteering activity and
fund raising by encouraging all colleagues to use their days
of paid volunteering, albeit this has proved more challenging
locally given the COVID-19 pandemic.
We have also developed a national corporate social
responsibility (“CSR”) strategy to support our key customers
in their local areas and will be rolling this out in the new
financial year.
Health & Safety
Redcentric is committed to maintaining high standards of
health and safety. New starters receive health and safety
training through our learning management system during
their induction period and refresher training is provided to all
colleagues every twelve months. No RIDDOR (Reporting of
Injuries, Diseases and Dangerous Occurrences Regulations)
accidents were reported during the year.
Our response to the COVID-19 pandemic has clearly been a
priority and we have been committed to ensuring the safety
of all our colleagues and customers over the last 12 months.
All colleagues who are able to have been working from home
since the start of the pandemic and we have introduced
guidelines for any colleagues in the office and for any visitors
to the office in line with the working safely during coronavirus
guidelines. Engineers visiting customer sites for essential
activities have all been provided with PPE and have been given
the appropriate tools to conduct COVID-19 risk assessments
ahead of any site visits to ensure their on-going safety.
Our offices have been adapted to ensure we are able
to maintain the current social distancing guidelines and
additional cleaning measures, temperature checking, and
cleaning/sanitiser stations have been put in place.
We are working closely with our colleagues to ensure we
achieve a safe return to the office once the Government
guidelines change and in the interim we will continue to
adhere to all guidelines in place as we have done over the
last 12-month period.
36
Strategic reportAnnual Report and Accounts 2021 “
Within a few days we had
550 staff working from
home, with most staff diverting
office landlines to mobiles.
It was a seamless transition.
Our contact centre is key to our
business. Within a day, we got
our call centre and switchboard
up and running from home
and were able to carry on
business as usual.
”
373737
Sustainability reporting
Environmental management
Implementing and maintaining the ISO 14001 Environmental Management System has allowed Redcentric to identify the
significant aspects of its business, driving the objectives in the first three years of certification to reduce energy use, company
travel and the use of paper and consumables.
We have progressed from the initial baselining of metrics, in the first year, to a commitment of undefined reduction in the
second year, whilst the third year targeted a reduction of 3%.
Annual reductions
Year ended 31 March 2020 to
Year ended 31 March 2021
Year ended 31 March 2019 to
Year ended 31 March 2020
43%
69%
79%
14%
41%
24%
Electricity usage
Company car mileage
Paper
Carbon footprint
In accordance with the Companies Act 2006 (strategic report and Directors’ report) Regulations 2013, we report on our
greenhouse gas (“GHG”) emissions as part of the strategic report.
The method used to calculate our emissions is based on the Government’s Environmental Reporting Guidelines (2019),
including streamlined energy and carbon reporting guidance, and used the government GHG Conversion Factors for Company
Reporting (Full Set 2019 version 1.0). The reported emission sources include those which we are responsible for, as required
under the Companies Act 2006 (strategic report and Directors’ report) Regulations 2013, with the exception of the following
which were excluded from this report:
•
•
liquefied petroleum gas consumed by mechanical handling (small forklift truck) due to immateriality; and
voluntary scope 3 emissions
The emissions for FY21 and FY20 have been externally verified by Energy Management Limited.
Year ended
31 March 2021
Year ended
31 March 2020
Scope 1
Scope 2
Scope 3
Total emissions
Total energy consumption in the UK
Thousand tonnes of CO2e
Thousand tonnes of CO2e
Thousand tonnes of CO2e
Thousand tonnes of CO2e
Thousand kWh
52
4,639
26
4,717
20,204
0
5,182
275
5,457
21,426
38
Strategic reportAnnual Report and Accounts 2021 Sustainability reporting (continued)
The most appropriate intensity metric for calculating the ratio is considered to be the floor area of the occupied office
buildings and spaces.
Year ended 31 March 2021
Year ended 31 March 2020
m2
kWh /m2
tCO2e/m2
m2
kWh/m2
tCO2e/m2
Floor area weighted values
8,856
2,281
0.53
8,856
2,419
0.62
The strategic report on pages 4 to 39 is signed on behalf of the Board by
Peter Brotherton
Chief Executive Officer
15 July 2021
39
Annual Report and Accounts 2021Strategic report Introduction to governance
The Board recognises the importance of high standards of corporate governance and integrity. It is committed to effective
corporate governance as the basis for delivering long-term value growth and for meeting shareholder expectations for
proper oversight and leadership of the business. I am responsible, as Chairman of the Board, for corporate governance within
Redcentric and the Board is committed to maintaining a strong governance and ethical structure that supports and sustains
its decision making. We believe that having good corporate governance is fundamental to pursue success for the Group and
its stakeholders. As such, the Company has adopted the Quoted Companies Alliance Code for Small & Mid-sized Quoted
Companies 2018 (the “Code”) as its benchmark for governance matters. At the date of this report we believe that we are fully
in compliance with the Code.
This section of the Annual Report and Accounts sets out how the Group has applied and complies with the principles of the
QCA Code. We will continue to review and update our approach and will update our Corporate Governance statement in the
AIM Rule 26 section of the Group’s website.
Ian Johnson
Chairman
15 July 2021
40
Annual Report and Accounts 2021Governance Corporate governance
Governance
Principle
Application
Principle 1
Establish a
strategy and
business model
which promotes
long-term value
for shareholders
The Group’s business model and strategy is discussed within the Chief Executive Officer’s Review
on pages 9 to 11 and also on page 27.
Details of the key risks and challenges facing the Group and the high-level management of such
are outlined on pages 30 to 31. Following the overhaul of the Group’s risk register last year, this
year a new senior owner has been assigned to manage the register. As a result there is now regular
group wide engagement with, and review of, the register by all senior managers, with individual
departmental registers being maintained and feeding into a master register and corporate register.
The corporate risk register is shared and refined with the Audit Committee and Board at key
intervals in the year.
Principle 2
Seek to
understand and
meet shareholder
needs and
expectation
The Group is committed to engaging with its shareholders to ensure that the strategy and business
model are clearly shared and understood. The Board believes that the disclosures of this Annual
Report and Accounts provide information necessary for shareholders to assess the Group’s
performance, business model and strategy. Hard copies of the Annual Report and Accounts are
issued to all shareholders that have requested them and copies are also available on the Group’s
website. The Group’s half year report is also available on the Group’s website and the Group makes
full use of the website to provide information to its shareholders and other interested parties.
The Executive Directors are in regular contact with the Company’s shareholders and brief the
Board on feedback and any shareholder issues. In FY21, remote investor briefings and roadshows
were held at regular intervals, including following announcement of the preliminary and interim
results, and other ad-hoc one-to-one meetings with key investors and potential investors were also
held through the year to discuss the Group’s strategy and shareholder expectations, amongst
other things.
There is also regular dialogue with shareholders through the Company’s corporate brokers, finnCap
Limited, who keep the Board abreast of shareholder expectations and reactions. Any reports from
analysts that refer to the Company or cover the sector are circulated to the Board to support their
understanding of the views of the investment community. finnCap, as broker, provides feedback
directly to the Board from shareholder meetings and events such as the investor day. An update on
key shareholding changes and any relevant investor sentiment is also provided in each Board report
and Board meeting.
There is an increasingly well-utilised dedicated investor relations contact email address by which
shareholders or investors may contact the Company (investorrelations@redcentricplc.com) and the
Company Secretary also deals with a number of written queries throughout the year along with the
Company’s registrar, Link Asset Services.
The Chairman and other Non-Executive Directors will always make themselves available to
shareholders. The AGM is a key opportunity for this, with shareholders being given the opportunity
to raise questions during the AGM and the Board being available both prior to and after the meeting
for further discussion with shareholders. We are keen to welcome shareholders in person to our
AGM this year, particularly given the constraints we faced in 2020 due to the COVID-19 pandemic.
At the time of writing this Report, it is possible under guidelines for us to hold the AGM in person.
We are therefore proposing to hold the AGM in person and to welcome the maximum number
of shareholders possible within safety constraints and in accordance with government guidelines.
However, the Company will continue to monitor the impact of COVID-19 and how government
guidance may change restrictions or implement further measures relating to the holding of general
meetings. If it becomes necessary or appropriate to revise the arrangements, further information will
be made available on the Company’s website at www.redcentricplc.com and by RIS announcement.
41
Annual Report and Accounts 2021Governance Corporate governance (continued)
Governance
Principle
Application
Principle 3
Take into account
wider stakeholder
and social
responsibilities
and their
implications for
long-term success
In any event, once again, to ensure that shareholders have the ability to ask questions of the Board,
the Board shall accept any questions relating to the business being dealt with at the AGM which
are submitted by shareholders in advance to the Company. Any such questions should be sent
to investorrelations@redcentricplc.com so as to be received by no later than 5 p.m. on Friday 3
September 2021 and the Company will publish questions and responses on the Group’s website in
advance of the AGM.
The voting record at the Company’s general meetings is monitored and we are pleased that all
resolutions were passed by shareholders at the 2020 AGM.
The Board recognises that the long-term success of the business relies on its customers and
colleagues as described on pages 9 to 11 and pages 33 to 36 and that engagement with these key
stakeholders is fundamental to helping the Board make the best business decisions.
Colleagues
The dedication and skill of our colleagues is fundamental to the Group’s operation and success and,
as such, we are committed to colleague engagement and listening to and acting on feedback from
colleagues. Following on from the appointment of a new HR Director in FY20 the Group has taken
strides to ensure it is a great place to work. Further to the launch of the first colleague engagement
survey for many years in FY20, a number of key initiatives were launched in the year including
new Group vision, mission and values, a new online learning management system, a new online
performance and development system, a more flexible working week (with an early Friday finish)
and a new colleague recognition scheme.
A new internal communication strategy has also been launched, with monthly all colleague
calls, a new colleague newsletter, weekly colleague “Shout Outs” and a new Colleague
Communication Forum.
Colleague wellbeing has been placed at the forefront of the Group in FY21 with a commitment to
the provision of support for colleagues in a variety of ways, including the training of a number of
colleagues to become qualified Mental Health First Aiders, weekly yoga and mindfulness workshops
led by qualified instructors, regular check-in surveys, weekly quizzes, remote “coffee shops” and
Tea & Talk and Sleep Awareness days.
As detailed on page 35 the Group also has in place a Save As You Earn Option Plan to enable
colleagues to become personally invested as shareholders of the Company. In FY21, the Company
granted options over a total of 521,782 ordinary shares under this scheme.
Customers
The Group’s extensive customer services, which are detailed on the Group’s website at
www.redcentricplc.com/customer-support, are core to the Group’s customer proposition and the
Group is in regular dialogue with its existing and potential customers in order that it may understand
and respond to their ongoing and future requirements. The Group also keeps abreast of customer
needs and communicates its proposition to customers through monthly newsletters, regular customer
surveys, monthly and quarterly service reviews and through its social media channels.
The Board also considers it shareholders, suppliers and the environment to be key stakeholders and
details of how the Group fosters relationships with these stakeholders and considers their needs are
set out in the Section 172 statement on pages 28 to 29 of this report.
42
Annual Report and Accounts 2021Governance Corporate governance (continued)
Governance
Principle
Application
Principle 4
Embed effective
risk management,
considering both
opportunities
and threats,
throughout the
organisation
As set out in the Audit Committee report on page 52, the Board is committed to ensuring that risk
management forms part of the way the Group works and is embedded in the business. The risk
register of the Group has been assigned to a new internal owner in the year and new departmental
registers are now fed into a master register, which is regularly reviewed by senior managers and which
in turn feeds into a corporate risk register before being reported to, and reviewed by, the Board.
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 Operating Board. However, the internal control system is
designed to manage rather than eliminate risk and can therefore only provide reasonable and not
absolute assurance against material misstatement or loss. The Board considers that the internal
controls in place are appropriate for the size, complexity and risk profile of the Group and have
been improved in the year with the implementation of the finance and operations module of
the new ERP system, D365. The principal elements of the Group’s internal control system cover
financial, operational and compliance controls and include:
- close management of the day-to-day activities of the Group by the Executive Directors;
- an established budgetary system with the preparation and approval of an annual budget by the
Board and regular monitoring and review of performance against budget, forecasts and prior year;
- detailed monthly reporting to the Board (including financial information, performance against
budget and key performance and risk indicators) whereby the Executive Directors report on
significant changes to the business and external marketplace to the extent they represent
significant risk;
- an organisational structure that has clear reporting lines and delegated authorities;
- management and monitoring of risk and performance at multiple levels throughout the Group;
- strengthened finance and legal functions that maintain processes and systems to enhance the
control environment, including the control of expenditure, authorisation limits, purchase ordering,
sales order intake, contract review and approval; and
- the principle treasury related risks are documented and approved by the Board.
The Group has also worked hard over some time to attain a number of ISO accreditations, detailed
at www.redcentricplc.com/about-us/accreditations-frameworks, and has a number of policies and
procedures in place in order to fulfil the requirements of and maintain these accreditations.
43
Annual Report and Accounts 2021Governance Corporate governance (continued)
Governance
Principle
Application
Principle 5
The composition of the Board is detailed on pages 50 and 51.
Maintain the
board as a
well-functioning,
balanced team
led by the chair
Principle 6
Ensure that
between them
the directors have
the necessary
up-to-date
experience, skills
and capabilities
The Board delegates specific responsibilities to the Board committees. The composition of the
committees and how they discharge their responsibilities can be found on page 47.
Part of the role of the Board’s Nomination Committee is to keep the composition of the Board
under review as the Group’s business evolves. The Board is delighted to have diversified its
composition following the appointment of Helena Feltham as a new Non-Executive Director
and Chair of the Remuneration Committee. Helena brings with her considerable HR and people
experience and significantly strengthens the Company’s Remuneration Committee. With the
publication of this Report, Ian Johnson, Non-Executive Chairman announces his intention to step
down on the appointment of a suitable successor. Recruitment of a successor is under way and will
be announced in due course. At the start of the year, the Company announced the replacement of
Dean Barber by David Senior as an Executive Director on the Board and CFO. David has had a very
successful first year as CFO and has made a significant contribution to the success of the Company
in FY21.
The Board is satisfied that it has an appropriate balance between independence and knowledge
of the Group to enable it to discharge its duties and responsibilities effectively. All Directors are
encouraged and expected to use their independent judgement and to challenge matters where
required, both strategic and operational.
The Executive Directors of the Company are employed on a full-time basis. Non-Executive Directors
are required to devote such time to the Group’s affairs as necessary to discharge their duties and
this may change from time to time. In addition to scheduled Board meetings, members are required
to attend other ad hoc Board meetings, committee meetings, the AGM 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. Non-Executive Directors are required to obtain the agreement of the Chairman
before accepting additional commitments that may affect the time that they are able to devote to
their role as a Non-Executive Director. Further details of external appointments of the Board are
included in their biographies on pages 50 and 51. In addition to being Non-Executive Chairman
of the Company, Ian Johnson is Executive Chairman of Circassia plc and Non-Executive Director of
Ergomed plc. Ian has, nonetheless, been able to devote sufficient time to the Group to date and
the Board will continue to monitor this until his retirement from the Board.
Details of the number of regular scheduled meetings of the Board and committees, together with
the attendance record for each Board member, are set out on page 48.
The Board recently concluded an assessment of its performance and more detail is provided below
against Principle 7.
Directors’ details and biographies are on pages 50 and 51. The Board considers that it has sufficient
skills and experience to enable it to execute its duties and responsibilities effectively given the
nature and size of the Group. As mentioned above, the appointment of Helena Feltham and
David Senior to the Board has extended the breadth of experience on the Board and enhanced its
capabilities and the Board will be mindful of appointing a new Non-Executive Chairman whose skills
and knowledge complement those of the current Directors. Directors are responsible for ensuring
their continuing professional development to maintain their effective skills and knowledge.
44
Annual Report and Accounts 2021Governance Corporate governance (continued)
Governance
Principle
Application
As part of the Board performance assessment recently concluded, details of which are set out below,
each Board member provided information on their individual skills and experience in areas relevant
to the Group. This exercise indicated a high level of capability and also provided insight on additional
areas that could potentially form part of the specification for any future Board appointments.
The Board receives monthly reports on the Group’s operational and financial performance as
mentioned above, and formal agendas and reports are also circulated to the Board in advance
of meetings. The Board has access to the advice and services of the Company Secretary, who is
responsible for ensuring that Board procedures are followed, and applicable rules and regulations
are adhered to. Directors are able to obtain further advice or seek clarity on issues raised in reports
or at meetings from within the Group or from external sources. The Board also has a procedure
whereby any Director may seek, through the Company Secretary, independent professional advice
in furtherance of their duties, if necessary, at the Group’s expense. Jon Kempster is the Company’s
Senior Independent Director and provides a sounding board for the Chairman and also serves as an
intermediary for the other Directors where required.
External advisers or consultants have been engaged by the Board in respect of the FCA Investigation
and the implementation of the Restitution Scheme, and in relation to the formal sales process which
took place in the year, all being significant matters. Since the year end, the Nomination Committee
has engaged consultants in relation to the appointment of a new Non-Executive Chairman and the
Board has also appointed Oakley Advisory as financial adviser to assist with the implementation of the
acquisition strategy of the Company.
On appointment to the Board, new Directors receive a tailored induction pack and introductions to
relevant personnel within the Group.
45
Annual Report and Accounts 2021Governance Corporate governance (continued)
Governance
Principle
Principle 7
Evaluate board
performance
based on clear
and relevant
objectives,
seeking
continuous
improvement
Principle 8
Promote a
corporate culture
that is based on
ethical values and
behaviours
Application
The Board recently carried out its annual evaluation. The assessment was internally facilitated and
comprised the following elements:
- a questionnaire completed by every Board member covering Board and Committee structure,
processes, agendas and priorities. Each Board member’s assessment of their individual
performance and feedback on each other was also sought. The questionnaire was based on one
designed by external consultants with considerable experience of Board reviews, but tailored to
meet the specific circumstances of the Group;
- completion of a skills matrix by each Board member, as referred to under Principle 6 above, to
identify areas of expertise on the Board and additional areas that the Board could consider in
relation to future appointments;
- a Board discussion facilitated by the Company Secretary on the outputs of the questionnaire and
skills matrix.
In addition to the appointment of Helena Feltham and recruitment of a new non-executive
chairman, the processes identified a number of other actions which the Board believes will assist in
improving Board performance and these will be implemented during the year, including:
- new processes for monitoring and reporting on the Board’s communications with investors;
- an increase in the number of regular, scheduled Board meetings to eight per calendar year,
supplemented by ad hoc additional meetings as necessary and monthly written Board reports;
- a review of executive remuneration to be led by Helena Feltham with the assistance of
remuneration advisors; and
- a refreshed approach to Board succession planning.
The Board aims to lead 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 Group, 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 and Modern Slavery Act statement also reinforce this culture.
The Group is proud that in FY21, despite the restrictions caused by the COVID-19 pandemic, it has
worked with a number of local and national charities including Macmillan Cancer Support, Yorkshire
Children’s Trust, the NHS, Sue Ryder, Action for Children and Children in Need. Further details of the
Group’s charitable activity is set out on page 36.
Principle 9
Maintain
governance
structures and
processes that
are fit for purpose
and support good
decision-making
by the board
The business and management of the Group are the collective responsibility of the Board. The
Board meets at least six times a year in accordance with its scheduled meeting calendar and this
schedule is supplemented with additional meetings as and when required. The attendance by each
Board member at meetings held in the year is shown in the table on page 48.
At each scheduled meeting, the Board considers and reviews the trading performance of the
Group. The Board and its Committees receive appropriate and timely information prior to each
meeting in accordance with a reporting timetable agreed with the Board and Operating Board.
A formal agenda is agreed with the Chairman for each meeting and papers are distributed several
days ahead of meetings taking place.
46
Annual Report and Accounts 2021Governance Corporate governance (continued)
Governance
Principle
Application
The Board has a formal written schedule of matters reserved for its review and approval including
approval of the annual budget, major capital expenditure and interim and annual results. All specific
actions arising are documented following each Board and Committee meeting, followed up by the
Executive Directors and Company Secretary and then reviewed at the next meeting.
Board committees
The Board is supported by the Audit, Nomination and Remuneration Committees. A report on
the composition, responsibilities and key activities of the Audit Committee are set out in the Audit
Committee report and in the Directors’ remuneration report for the Remuneration Committee.
The Nomination Committee consists of Ian Johnson (Chairman), Jon Kempster and Helena
Feltham. The Committee meets at least once a year and as required, particularly as and when
necessary to identify and nominate for approval by the Board, candidates for Board appointments.
The Committee engages external consultants when appropriate to assist in the search for and
selection of new Board members. During the year, the Nomination Committee was involved in
the appointment of David Senior as a Director and Chief Financial Officer as detailed above and
following the year end, it has been involved in identifying the need for a new Non-Executive
Director and Chairman and the appointment of Helena Feltham to the Board.
The Committee has terms of reference in place which have been formally approved by the Board
and once a year it reviews the structure, size and composition (including diversity) of the Board,
considers succession planning and reviews the leadership needs of the organisation.
Operating Board
Authority for execution of approved policies, business plan and daily running of the business is
delegated to the Executive Directors together with the Operating Board of the Group, which
manages and monitors operational performance across the business and ensures effective
decision-making. The Operating Board meets on a weekly basis and provides written reports to the
Executive Directors on a monthly basis shortly before each Board meeting to ensure that the Board
has the most up to date information possible.
Principle 10
Communicate
how the company
is governed and
is performing
by maintaining
a dialogue with
shareholders and
other relevant
stakeholders
The Board communicates with its shareholders in a range of ways including through the Annual
Report and Accounts, interim and full-year results announcements, further trading updates where
required and appropriate, the AGM, investor roadshows and one-to-one meetings with major
existing shareholders or potential new shareholders. The Group’s website (www.redcentricplc.com),
particularly the investor section of the site, also provides a range of corporate information for
shareholders, investors and the public, including all Company announcements and presentations.
Group performance information is communicated to colleagues, within the limitations imposed
by the Company’s public company disclosure obligations, in a number of ways, including regular
colleague-wide email communications from the Executive Directors and Operating Board and the
monthly colleague briefing sessions referred to above.
47
Annual Report and Accounts 2021Governance Corporate governance (continued)
The following table details the attendance of the Board members at regular scheduled Board and Committee meetings held
during FY21.
Position
(at 31 March
2021)
Chairman
Non-Executive
Director
Non-Executive
Director
Name
Ian
Johnson
Stephen
Vaughan
Jon
Kempster
Peter
Brotherton
Chief
Executive
Officer
Dean
Barber 1
David
Senior 2
Chief Financial
Officer
Chief Financial
Officer
Main Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Total
Attended
Total
Attended
Total
Attended
Total
Attended
6
6
6
6
-
6
6
6
6
6
-
6
-
3
3
-
-
-
-
3
3
-
-
-
2
2
2
-
-
-
2
2
2
-
-
-
1
1
1
-
-
-
1
1
1
-
-
-
1Resigned with effect from 3 April 2020 2Appointed with effect from 3 April 2020
48
Annual Report and Accounts 2021Governance “
Great job at turning this
around in the same day
during these challenging
times. Our organisation
is working flat-out with
home-working requests
and such timely service to
create our Fortinet VPN
account is truly supportive.
”
4949
Board of Directors
Non-Executive Directors
Ian Johnson
Independent Non-Executive
Chairman of the Board
Appointment date:
16 October 2019
Committee membership:
Chair of the Nomination
Committee and member of
the Remuneration Committee
Helena Feltham
Independent Non-Executive
Director
Appointment date:
7 July 2021
Committee membership:
Chair of the Remuneration
Committee and a member
of the Audit and Nomination
Committees
Experience and external appointments: Ian has served
on the boards of a number of public and private companies
and has a strong track record in building shareholder value.
Ian was founder and Chief Executive Officer of Biotrace
International plc until December 2006, Non-Executive
Chairman of Celsis Group Ltd from 2009 until 2015, Chairman
of Cyprotex plc until 2016, Chairman of Quantum Pharma
plc until 2017 and Executive Chairman of Bioquell plc from
2016 until 2019. Ian is currently also a Non-Executive Director
of Ergomed plc, a provider of specialised services to the
pharmaceutical industry, Executive Chairman of Circassia
Pharmaceuticals plc, a specialty pharmaceutical company,
and a Director of Klenitise Limited.
Experience and external appointments: Helena has
previously held executive roles at B&Q plc and was People
Director at Jack Wills, Woolworths South Africa and Marks
and Spencer. Helena also spent time in executive search with
Odgers Berndtson, covering senior appointments across both
public and private sectors. Helena has served as a
Non-Executive Director in the NHS, as an Independent
Director of the Assembly of Wales and as a Justice of the
Peace. Helena currently holds Non-Executive roles with Ted
Baker plc, where she is Senior Independent Director and
Chair of the Nomination Committee; Dogwoof, a film and
distribution company; and The Retail Trust.
Jon Kempster
Independent Non-Executive
Director and Senior
Independent Director
Appointment date:
10 January 2017
Committee membership:
Chair of the Audit Committee &
a member of the Remuneration
and Nomination Committees
Experience and external appointments: Jon is an ACA
qualified chartered accountant and was previously the
Chief Financial Officer at Frasers Group plc, Utilitywise plc,
Wincanton plc, Low and Bonar plc, Linden Group plc and
Fii Group plc. Jon is also currently an Independent
Non-Executive Director of Ted Baker plc, the global lifestyle
brand, Bonhill Group plc, the digital media and events
company, FireAngel Safety Technology Group plc, supplier
of home fire safety products and Serinus Energy plc,
international oil company.
50
Annual Report and Accounts 2021Governance Board of Directors (continued)
Executive Directors
Peter Brotherton
Chief Executive Officer
Appointment date: 28
November 2016. Peter served
as CFO of the Company
from 28 November 2016
to 21 November 2018 and
then as Interim CEO from 22
November 2018 to 28 May
2019, when he was appointed
as Chief Executive Officer.
Experience and external appointments: Peter has over
25 years’ experience across a number of senior finance roles.
Peter’s two previous roles were as Chief Financial Officer of
Gametech and Chief Financial Officer at PKR Group. Prior to
those two roles, from 2011 to 2014, Peter was Chief Financial
Officer 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 financial control
function. Peter also had senior finance roles at Varla (UK)
Limited, Cell Structures Group plc and spent five years at
Kingston Communications plc, becoming Director of Finance.
Peter qualified as an ACA chartered accountant at KPMG.
Peter holds no external appointments.
David Senior
Chief Financial Officer
Appointment date:
3 April 2020
Experience and external appointments: David served in
the role of Finance Director of the Group since 2017, prior
to his appointment as Chief Financial Officer. During his
time with the Group to date, David has been instrumental
in building a strong finance team and made a significant
contribution to the commercial successes of the Group over
the last 3 years. David is a chartered certified accountant with
20 years of experience in finance, including in several senior
positions with Wolseley plc.
51
Annual Report and Accounts 2021Governance
Audit Committee report
The Audit Committee report which describes the work of the
Committee in the last year.
Governance
The Audit Committee consists of Jon Kempster, as Chair of
the Committee, and Non-Executive Director, Helena Feltham.
Stephen Vaughan formed part of the Committee until his
retirement as a Non-Executive Director from the Board on
27 April 2021.
The Committee meets at least three times a year at
appropriate intervals in the financial reporting and audit
cycle, and at other times during the year as agreed between
the members of the Committee or as required. The Executive
Directors are not members of the Committee but attend
Committee meetings by invitation, as necessary, to facilitate
its business. The Committee also meets the external auditor
at least once a year, without management present, to discuss
their remit and any issues arising from the previous audit.
During the year, the Committee met three times. Attendance
details for the regular scheduled meetings are provided on
page 48.
Key responsibilities
The Committee’s terms of reference are available on the
Investor section of the Group’s website. In accordance with
the terms, the Committee’s responsibilities include:
• monitoring the integrity of the financial statements of the
Group, including all formal announcements relating to
financial performance;
reviewing and reporting to the Board on significant
financial reporting issues and judgements contained in
any announcements of financial performance;
reviewing the effectiveness of internal financial controls
and internal control and risk management systems and
the need for an internal audit function;
reviewing the adequacy of arrangements for the raising
of concerns about possible wrongdoing, procedures
for detecting fraud and systems and controls for the
prevention of bribery
the recommendation of, appointment, re-appointment,
and removal of the external Auditor;
•
•
•
•
•
•
Internal control and risk management
The Audit Committee supports the Board in reviewing the
risk management methodology and the effectiveness of
internal control. During the year, the Group has improved
its approach to risk assessment with the assignment to a
new owner and as a result now has departmental risk
registers which feed into a master register which is reviewed
by senior management and Operating Board and in turn
feeds into a corporate register. The management of the
master and corporate risk register is coordinated by the Chief
Financial Officer with regular reviews at Operating Board
level and reports on key risks and mitigating actions to
the Committee.
External audit
The Audit Committee approves the appointment and
remuneration of the external auditor and the Chief Financial
Officer monitors the level and nature of non-audit services
and specific assignments are flagged 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 Auditor. The Committee maintains regular dialogue
with the external auditor on ways to improve the efficiency
and effectiveness of the external audit process.
The responsibilities of the Board and external auditor in
connection with the Group’s financial statements are set out
in the Statement of Directors’ Responsibilities and Auditor’s
report respectively and details of the services provided by
and fees payable to the auditor are included in note 8 to the
Consolidated Financial Statements.
KPMG LLP were appointed as the Group’s Auditor on
15 May 2017. There is an active, ongoing dialogue between
the Committee and the external auditor to ensure there is a
clear roadmap of actions to improve the effectiveness and
efficiency of the external audit process.
Significant reporting issues and judgements
The significant estimates and judgements made in connection
with the preparation of the financial statements are the credit
note provision and going concern which are considered in
notes 1.1 and 2 to the Consolidated Financial Statements
reviewing the scope and results of the external
annual audit by the Auditor, their cost effectiveness,
independence and objectivity;
Jon Kempster
Chair of the Audit Committee,
15 July 2021
reviewing the nature and extent of any non-audit services
provided by the external Auditor.
The Committee reports on all such matters to the Board.
52
Annual Report and Accounts 2021Governance Directors’ remuneration report
The Remuneration Committee is chaired by Helena Feltham
as independent Non-Executive Director and also consists of
Jon Kempster and Ian Johnson, who are also independent
Non-Executive Directors. Helena was appointed as
Chairperson of the Committee on 7 July 2021, following Jon
Kempster serving as chair of the Committee on an interim
basis after Stephen Vaughan’s resignation from the Board on
27 April 2021. The Committee meets at least twice a year
and at other times during the year as agreed between the
members of the Committee. The Remuneration Committee
met eight times during FY21. The attendance record for the
regular scheduled meetings is included on page 48.
Responsibilities
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 Group’s strategic
objectives and financial performance, and are appropriate to
attract, retain and motivate management in support of the
creation of shareholder value.
The Committee has formal terms of reference which can
be found in the investor section of the Group’s website.
The Committee makes recommendations to the Board,
within its terms of reference, on the remuneration and
other benefits, including bonuses and share options, of the
Executive Directors. The terms of reference also include
committee oversight of several other significant remuneration
matters beyond those of the Executive Directors, including
the remuneration and retention of key Operating Board
members. In considering remuneration for the year, the
Committee consulted with the Executive Directors about
its proposals. The Board sets the annual base fees payable
to the Non-Executive Directors and they do not receive any
additional benefits, nor are they eligible to participate in any
pension, bonus or share-based incentive arrangements.
Chief Executive Officer
Peter Brotherton (formerly Chief Financial Officer), who was
Interim Chief Executive Officer from 22 November 2018,
was appointed as permanent Chief Executive Officer on 28
May 2019. The remuneration package of the Chief Executive
Officer was reviewed and approved by the Remuneration
Committee on his permanent appointment.
Chief Financial Officer
Dean Barber was appointed as Chief Financial Officer with
effect from 2 September 2019 and his remuneration package
was reviewed and approved by the Remuneration Committee
as part of the recruitment process. David Senior replaced
Dean Barber as Chief Financial Officer on 3 April 2020,
and his remuneration was reviewed and approved by the
Remuneration Committee as part of his appointment.
Basic salary and benefits
Basic salaries are reviewed on a discretionary basis.
The benefits provided for each Executive Director include:
I. life assurance cover of 4 times salary;
II. private medical insurance for themselves, their spouse and
their children; and
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.
In addition to the Long-Term Incentive Programme, the
Executive Directors participate in a special bonus scheme
which will pay out, in the event of a change of control, either
shares in the Company or an equivalent monetary value at
the change of control price, subject to the discretion of the
Remuneration Committee at the time and also subject to an
initial uplift requirement. Dean Barber’s participation in this
scheme lapsed upon his leaving the Group and David Senior
has now been included in this scheme.
Share options
Executive Directors participate in the Company’s share option
schemes and the Remuneration Committee approves the
granting of any share options.
53
Annual Report and Accounts 2021Governance Directors’ remuneration report (continued)
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
Base salaries are set by the Committee on appointment and then 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.
Benefits
Executive Directors are entitled to life assurance cover of four times salary and private medical insurance
for themselves, their spouse and their children.
Pension
Executive Directors are entitled to receive pension contributions from the Company.
Annual bonus
The Remuneration Committee determines, at the start of the financial year, the criteria for the award
of a discretionary annual performance bonus. Performance is measured over the full financial year and
appropriate clawback provisions are in place in relation to any payments made.
Long-term
incentives
Executive Directors are entitled to participate in the Company’s Long-Term Incentive Plan (LTIP) and Save
As You Earn (“SAYE”) Option Plan. The Remuneration Committee approves the granting of any share
options under the Long-Term Incentive Plan and the Board approves the issue of invitations to apply for
SAYE options.
Service contracts
The Chief Executive Officer and Chief Financial Officer have service contracts with a provision for a termination notice period of
six months, increased to twelve months in the event of a takeover.
Non-Executive Directors have letters of appointment. Appointments can be terminated with six months’ notice save for the
Chairman, whose appointment may be terminated on twelve months’ notice. The remuneration of the Non-Executive Directors
takes the form of an annual fee which is not pensionable.
The details of the Executive and Non-Executive Directors’ service contracts and appointment letters are summarised below:
Date of appointment
Contractual
notice period
(months)
Length of service at
31 March 2021
28 November 2016
3 April 2020
17 October 2019
10 January 2017
13 June 2017
61
61
12
6
6
4 years 4 months
11 months
1 year 5 months
4 years 2 months
3 years 9 months
Executive Directors
Peter Brotherton
David Senior
Non-Executive Directors
Ian Johnson
Jon Kempster
Stephen Vaughan
112 months in the event of a takeover.
The service contracts and letters of appointment continue in force until notice in writing is given by either the Company or
the Director.
54
Annual Report and Accounts 2021Governance Directors’ remuneration report (continued)
The Executive Directors’ salaries as at 31 March 2021 are set out in the table below:
Peter Brotherton
David Senior
Chairman and Non-Executive Directors’ fees
Salary
Year ended
31 March 2021
Salary
Year ended
31 March 2020
£000
300
160
£000
300
-
The Board, within the limit authorised by the Company’s Articles of Association and following recommendation by the
Executive Directors, determines Non-Executive Directors’ fees. The Chairman receives a fee of £85,000 and during FY21, the
other Non-Executive Directors received a fee of £40,000, with an additional fee of £5,000 for chairing a Board committee.
With effect from 1 July 2021, the fee received by Non-Executive Directors has increased to £45,000, with the additional fee of
£5,000 for chairing a Board committee remaining unchanged.
Ian Johnson (appointed 17 October 2019)
Jon Kempster (Chair of Audit Committee)
Stephen Vaughan (Chair of Remuneration Committee)
Chris Cole (resigned 17 October 2019)
Chris Rigg (resigned 31 December 2019)
Annual fee
Year ended
31 March 2021
Annual fee
Year ended
31 March 2020
£000
£000
85
45
45
-
-
-
40
40
70
40
Directors may claim reasonable business expenses in accordance with the Group’s expense policy and be reimbursed on the
same basis as all colleagues. The Group may reimburse business expenses which are in future classified as taxable benefits
by HMRC.
Total remuneration for the Chief Executive Officer
The table below shows the total remuneration figure for the Chief Executive Officer over a five-year performance period.
The total remuneration figure includes bonus and benefits.
Year ended 31 March
2021
2020
2019
2018
2017
Executive
Peter Brotherton
Peter Brotherton
Peter Brotherton
Chris Jagusz1
Chris Jagusz
Fraser Fisher2
Fraser Fisher
Total single figure
£000
672
489
100
207
154
209
369
1 Chris Jagusz was Chief Executive Officer until his resignation on 22 November 2019. Peter Brotherton was appointed interim Chief Executive Officer
at this time.
2 Fraser Fisher was Chief Executive Officer until his resignation on 20 October 2017. Chris Jagusz was appointed Chief Executive Officer at this time.
55
Annual Report and Accounts 2021Governance Directors’ remuneration report (continued)
Single total figure of remuneration for Directors (audited)
The remuneration of the Directors in respect of the year was as follows:
Basic salary,
allowances,
and fees
£000
Bonus
£000
Pensions
£000
Share-based
payments
£000
Executive
Peter Brotherton1
David Senior 2
(appointed 3-April-20)
Dean Barber
(appointed 2-Sept-19,
resigned 3-April-20)
Non-Executive
Ian Johnson
(appointed 16-Oct-19)
Stephen Vaughan
Jon Kempster
Chris Cole
(resigned 16-Oct-19)
Chris Rigg
(resigned 31-Dec-19)
300
146
4
85
45
45
-
-
150
80
-
-
-
-
-
-
10
7
-
-
-
-
-
-
212
32
-
-
-
-
-
-
FY21
Total
£000
672
265
FY20
Total
£000
529
-
1
107
85
45
45
-
-
39
49
44
41
30
1 Includes travel allowance of £1k. On 20 November 2020 Peter Brotherton exercised options over 28,571 ordinary shares of 0.1p each at a price of 63p
resulting in a gain of £17,000. On 22 December 2020 Peter Brotherton exercised nil-cost options over 192,481 ordinary shares of 0.1p each resulting in
a gain of £212,000. On 26 September 2019 Peter Brotherton exercised nil-cost options over 161,905 ordinary shares of 0.1p each resulting in a gain
of £143,000.
2 On 20 November 2020 David Senior exercised options over 28,571 ordinary shares of 0.1p each at a price of 63p resulting in a gain of £17,000.
On 22 December 2020 David Senior exercised nil-cost options over 29,100 ordinary shares of 0.1p each resulting in a gain of £32,000.
56
Annual Report and Accounts 2021Governance Directors’ remuneration report (continued)
Executive Director’s share options in the Company (audited)
Details of share options in the Company held by the Directors during the year are as follows (audited):
Exercise
price (p)
Balance at
31 March
2020
Granted
Forfeited /
expired
Exercised
Balance at
31 March
2021
Peter Brotherton
David Senior
Dean Barber
(a)
(b)
(c)
(d)
(g)
(b)
(e)
(f)
(d)
(g)
(h)
Nil
63
Nil
Nil
Nil
63
Nil
Nil
Nil
Nil
192,481
28,571
298,879
379,267
-
899,198
28,571
29,100
20,000
100,000
-
177,671
-
-
-
-
242,915
242,915
-
-
-
-
129,555
129,555
-
-
-
-
-
-
-
-
-
-
-
-
(192,481)
(28,571)
-
-
-
(221,052)
(28,571)
(29,100)
-
-
-
(57,671)
-
-
298,879
379,267
242,915
921,061
-
-
20,000
100,000
129,555
249,555
Nil
175,750
-
(175,750)
-
-
(a) The options were granted on 29 June 2017 under the Company’s LTIP. The options vested post the release of the Group’s
results for the year ended 31 March 2020 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 HMRC approved Save-As-You-Earn Option Plan 2014
under which employees contribute a monthly amount which is saved over 3 years to buy shares. The options were
exercisable from 30 August 2020. There were no performance conditions.
(c) The options were granted on 26 November 2018 under the Company’s LTIP. The options will vest post the release of the
Group’s results for the year ended 31 March 2021 subject to the achievement of performance conditions related to the
growth in earnings per share.
(d) The options were granted on 28 June 2019 under the Company’s LTIP. The options will vest post the release of the Group’s
results for the year ended 31 March 2022 subject to the achievement of performance conditions related to the growth in
share price.
(e) The options were granted on 4 December 2017 under the Company’s LTIP. The options vested post the release of the
Group’s results for the year ended 31 March 2020 subject to the achievement of performance conditions related to the
growth in earnings per share.
(f) The options were granted on 27 June 2018 under the Company’s LTIP. The options will vest post the release of the Group’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 on 8 December 2020 under the Company’s LTIP. The options will vest post the release of the
Group’s results for the year ended 31 March 2023 subject to the achievement of performance conditions related to the
growth in share price.
(h) The options were granted on 3 September 2019 under the Company’s LTIP. The options will vest post the release of the
Group’s results for the year ended 31 March 2022 subject to the achievement of performance conditions related to the
growth in share price.
57
Annual Report and Accounts 2021Governance Directors’ remuneration report (continued)
Directors’ interests in shares
The interests (both beneficial and family interests) of the Directors in office at the date of this report in the share capital of the
Company were as follows:
Interests in
ordinary
shares at
31 March 2021
Interests in
ordinary
shares at
31 March 2020
Interests in share-
based incentive
options at
31 March 2021
Interests in share-
based incentive
options at
31 March 2020
Executive
Peter Brotherton
David Senior
Non-Executive
Stephen Vaughan
Jon Kempster
228,571
14,550
20,000
10,249
20,000
-
20,000
10,249
921,061
249,555
899,198
177,671
-
-
-
-
Remuneration policy for Executive Directors compared to other employees
The table below shows the movement in the salary, benefits and annual bonus for the Chief Executive Officer between the
current and previous financial year compared to that of the total amounts for all employees of the Group for each of these
elements of pay.
Chief Executive Officer
Salary
Benefits
Annual Bonus
Average of all employees
Salary
Benefits
Annual Bonus
Year ended
31 March 2021
Year ended
31 March 2020
£000
£000
300
11
150
38
2
2
300
11
80
36
2
1
Change
%
0.0%
0.0%
87.5%
5.6%
0.0%
100%
58
Annual Report and Accounts 2021Governance Directors’ remuneration report (continued)
Relative importance of spend on pay
The table below shows the Group’s expenditure on shareholder distributions (including dividends) and total employee pay
expenditure. Additional information on the number of employees, total revenue and underlying profit has been provided
for context.
Year ended
31 March 2021
Year ended
31 March 2020
£000
21,210
1,868
420
91,399
24,476
£000
20,230
2,731
462
87,485
20,695
Change
%
4.8%
(31.6%)
(9.1%)
4.5%
18.3%
Employee expenditure
Distributions to shareholders
Average number of employees
Revenue
Adjusted EBITDA
Share price
The market price of the Company’s shares on 31 March 2021 was 130.0p per share. The highest and lowest market prices
during the year were 158.0p and 96.0p respectively.
Helena Feltham
Chair of the Remuneration Committee
15 July 2021
59
Annual Report and Accounts 2021Governance Directors’ report
The Directors present their annual report together with the audited financial statements for FY21.
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 4-39 contains a review of the business, future developments and the principal risks
and uncertainties.
Dividends
An interim dividend of 1.2p per ordinary share was paid in December 2020. Following good trading performance, strong cash
generation and the closure of the Restitution Scheme, the Board has decided to reinstate a progressive dividend policy. The
Directors will therefore be recommending the payment of a final dividend of 2.4p per share in respect of FY21 to shareholders
which, if approved at the AGM, will be paid on 17 September 2021 to shareholders on the register at the close of business on
6 August 2021.
Substantial shareholders
As at 31 March 2021 and 30 June 2021 (being the latest practicable date before the publication of this report) the Company
had been notified of the following significant interests in 3% or more in its ordinary shares:
Kestrel Investment Partners
ND Capital Investments Ltd
Lombard Odier Asset Mgt
Slater Investments
Harwood Capital
Mr Richard Griffiths
Chelverton Asset Mgt
Artemis Investment Mgt
31 March 2021
31 March 2021
30 June 2021
31 June 2021
Number
28,247,439
24,840,868
19,416,844
18,587,657
18,192,500
8,582,000
8,125,000
4,838,447
%
18.09
15.91
12.44
11.91
11.65
5.50
5.20
3.10
Number
28,038,649
24,840,868
20,037,810
18,587,657
17,294,188
8,353,500
8,125,000
4,838,447
%
17.99
15.91
12.83
11.90
11.08
5.35
5.20
3.10
As of 30 June 2021, the Company’s issued share capital is 156,165,710 ordinary shares.
Directors and their interests
The following were Directors of Redcentric plc during the year and at the date of approval of these financial statements:
•
•
Ian Johnson
Peter Brotherton
• Dean Barber (resigned 3 April 2020)
• David Senior (appointed 3 April 2020)
•
•
Jon Kempster
Stephen Vaughan (resigned 28 April 2021)
• Helena Feltham (appointed 7 July 2021)
60
Annual Report and Accounts 2021Governance Directors’ report (continued)
Details of Directors’ remuneration, service agreements and
interests in the share capital of the Company are provided in
the Directors’ remuneration report on pages 53-59. Details
of the Directors’ contracts, remuneration and share options
granted are also set out in the Directors’ remuneration report,
on pages 53-59.
Going concern
The Group’s activities and an outline of the developments
taking place in relation to its services and marketplace are
considered in the strategic report on pages 4 to 39.
A commentary on the revenue, trading results and cash flows
is provided in the financial review on pages 14 to 20.
Relevant Directors will retire in accordance with the terms of
the Articles of Association of the Company and, being eligible,
will offer themselves for re-election at the forthcoming AGM.
Note 3 to the financial statements sets out the Group’s
financial risks.
Directors’ indemnities and liability insurance
As permitted by the Articles of Association, the Directors
have the benefit of an indemnity which is a qualifying third-
party indemnity provision as defined by Section 234 of the
Companies Act 2006. The indemnity was in force throughout
the last financial year and is currently in force. The Company
also purchased and maintained Directors’ and Officers’ liability
insurance throughout the financial year in respect of itself and
its Directors.
Employees
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 colleagues
with information on matters of concern to them (including
through Group-wide announcements and all employee calls),
consulting them or their representatives regularly (including
through colleague forums, roadshows, the Company’s
newsletter and the colleague survey), so that their views can be
considered when making decisions that are likely to affect their
interests. Colleague involvement in the Group’s performance
is encouraged (including through employee share schemes
such as the Save As You Earn Scheme), as achieving a common
awareness on the part of all colleagues of the financial and
economic factors affecting the Group plays a major role in
maintaining its relationship with its staff.
The Group is committed to employment policies, which follow
best practice, based on equal opportunities for all colleagues,
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.
For further information on our colleagues see page 33 of our
Corporate Responsibility statement.
The Group is forecast to be profitable and is cash generative
with high and continuing levels of recurring revenue and high
levels of cash conversion expected for the foreseeable future.
The Directors have prepared cash flow forecasts which indicate
that, taking account of reasonably possible downsides and
the impact of COVID-19 on the operations and its financial
resources, the Group and the Company will have sufficient
funds to meet its liabilities as they fall due for that period.
The Directors’ forecasts have been built from the detailed
Board approved budget for the year ending 31 March 2022.
The forecasts include a number of assumptions in relation
to order intake, renewal and churn rates and EBITDA
margin improvements.
Whilst the Group’s trading and cash flow forecasts have been
prepared using current trading assumptions, the operating
environment presents a number of challenges which could
negatively impact the actual performance achieved. These
risks include, but are not limited to, achieving forecast levels of
order intake, the impact on customer confidence as a result of
general economic conditions and Brexit and achieving forecast
margin improvements.
The Group has not observed any material impact in trading
performance due to COVID-19. However, due to the
uncertainty over the duration and extent of the impact
of COVID-19, the Directors have modelled a severe but
plausible downside scenario when preparing the forecasts.
This downside scenario assumes significant economic
downturn, impacting new order intake, and an additional
3-month lockdown from December 2021 to February 2022
with no new order intake during this period. In this scenario,
recurring monthly order intake is forecast to reduce by 59%
compared to FY21, product and services revenues reduce
by 22% compared to FY21 and customer loss through
insolvency increases (particularly in the retail, hospitality, and
leisure sectors). Under the downside scenario modelled, the
forecasts demonstrate that Group is expected to maintain
sufficient liquidity. The Directors therefore remain confident
that the Group has adequate resources to continue to meet its
liabilities as and when they fall due within the period of at least
12 months from the date this Report.
61
Annual Report and Accounts 2021Governance Directors’ report (continued)
Purchase of own shares
Disclosure of information to the auditor
The Directors of the Company at the date of approval of
these financial statements confirm, as far as they are aware,
that there is no relevant audit information of which the
auditor is unaware. The Directors have individually confirmed
that they have taken all reasonable steps that they ought to
have taken as Directors in order to make themselves aware
of any relevant audit information and to establish that it has
been communicated to the auditor.
Subsequent events
Following the end of FY21, the Company took action to
dissolve a number of dormant subsidiaries as referred to
in notes 29 and 31 of the financial statements.
There have been no other significant events between the
balance sheet date and the date of approval of these accounts.
By order of the Board
Harn Jagpal
Company Secretary
15 July 2021
The authority to make purchases of the Company’s shares
on its behalf was given by resolution of the shareholders
at the Company’s 2019 and 2020 AGM, and in September
2019 the Company announced that it had approved a share
buyback programme of the Company’s ordinary shares
for an aggregate purchase price of up to £2 million (the
“Programme”). The Company announced shortly after the
end of FY20 that the Programme would be temporarily halted
until such time as the outlook around COVID-19 became
more certain and in November 2020, in the announcement
of its audited results for the six months to 30 September
2020, the Company announced that it would reinstate the
Programme. No share buybacks were made during FY21 but
the Board will retain the option to selectively purchase shares
on the market as and when it believes it is appropriate.
Annual General Meeting
The 2021 AGM will be held at the offices of finnCap plc
at 1 Bartholomew Close, London EC1A 7BL at 12:30 on
9 September 2021 and the Board is keen to welcome
shareholders in person this year given the constraints faced
in 2020 due to the COVID-19 pandemic. The Company will,
however, continue to monitor the impact of COVID-19 and
government guidance relating to restrictions and measures
in relation to the holding of general meetings. If it becomes
necessary or appropriate to revise current arrangements
for welcoming shareholders in person, further information
will be made available on the Company’s website and by
RIS announcement. The notice convening the AGM and
what shareholders should do to register their intention to
attend and/or vote by proxy are contained in a separate
circular to shareholders and on the Group’s website at
www.redcentricplc.com/investors/shareholder-documents.
Corporate governance
The Group’s statement on corporate governance can be
found in the Corporate Governance section of this Annual
Report and Accounts and which forms part of this Directors’
report and is incorporated by reference.
The Group’s financial risk management objectives and
policies are described in note 3 to the financial statements.
62
Annual Report and Accounts 2021Governance Statement of Directors’ responsibilities
necessary to enable the preparation of financial 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 financial information included
on the company’s website. Legislation in the UK governing
the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
By order of the Board
Harn Jagpal
Company Secretary
15 July 2021
The Directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and
parent Company financial statements for each financial year.
Under the AIM Rules of the London Stock Exchange they
are required to prepare the Group financial statements
in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006
and applicable law and they have elected to prepare the
parent Company financial statements in accordance with UK
accounting standards and applicable law, including FRS 101
Reduced Disclosure Framework.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
parent Company and of the Group’s profit or loss for that
period. In preparing each of the Group and parent Company
financial 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 financial statements, state whether they
have been prepared in accordance with international
accounting standards in conformity with the
requirements of the Companies Act 2006;
for the parent Company financial statements, state
whether applicable UK accounting standards have been
followed, subject to any material departures disclosed
and explained in the financial statements;
assess the Group and parent 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 parent
Company or to cease operations, or have no realistic
alternative but to do so.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the parent Company’s transactions and disclose with
reasonable accuracy at any time the financial position of the
parent Company and enable them to ensure that its financial
statements comply with the Companies Act 2006. They are
responsible for such internal control as they determine is
63
Annual Report and Accounts 2021Governance “
Redcentric stood up the IaaS platform
incredibly quickly, allowing our team to
focus on getting the WebV EPR solution
implemented, enabling patient records
to be digitised at this critical time, when
our IT team was extremely busy with our
COVID-19 response.
We were impressed with the speed with
which Redcentric responded and turned
around the IaaS platform. Having initially
agreed a 10 day turnaround to set up our
hosted servers, Redcentric achieved it
in less than six days. It really showed its
commitment to getting a solution in place
at this critical time.
”
64
64
Independent auditor’s report
to the members of Redcentric plc
1.Our opinion is unmodified
We have audited the financial statements of Redcentric plc (“the Company”) for the year ended 31 March 2021 which comprise
the Consolidated Statement of Comprehensive Income, Consolidated Statement of Financial Position, Consolidated Cash Flow
Statement, Consolidated Statement of Changes in Equity, Company Balance Sheet, Company Statement of Changes in Equity
and the related notes, including the accounting policies in note 1 to both the consolidated financial statements and company
financial statements.
In our opinion:
•
•
•
the financial 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 2021 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006;
the parent Company financial statements have been properly prepared in accordance with UK accounting standards,
including FRS 101 Reduced Disclosure Framework; and
•
the financial 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 fulfilled 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 sufficient and appropriate basis for our opinion.
Overview
Materiality: group financial
statements as a whole
£731,000 (2020: £518,000)
0.8% (2020: 0.6%) of Group revenue
Coverage
99% (2020: 99%) of total profits and losses that make up Group profit (2020: loss)
before tax
Key audit matters
Recurring risks
Going concern
Provision for credit notes
New: Recoverability of parent Company’s investment in subsidiaries
s
vs 2020
65
Annual Report and Accounts 2021Financial statements
Independent auditor’s report
to the members of Redcentric plc
2. Key audit matters: including our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified
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. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In
arriving at our audit opinion above, the key audit matters, in decreasing order of audit significance, were as follows:
The risk
Our response
Going
concern
Refer to
pages 77-78
(accounting
policy).
Disclosure quality:
Our procedures included:
The financial statements explain how the Board
has formed a judgement that it is appropriate
to adopt the going concern basis of preparation
for the Group and parent Company.
That judgement is based on an evaluation of
the inherent risks to the Group’s and parent
Company’s business model and how those
risks might affect the Group’s and the parent
Company’s financial resources or ability to
continue operations over a period of at least
a year from the date of approval of the
financial statements.
The risks most likely to adversely affect the
Group’s and the parent Company’s available
financial resources over this period were:
•
•
The level of external financing facilities
and the ability of the Group to operate
within the liquidity and covenant
parameters within these financing
facilities; and
The impact of a depression in demand
and the risk of credit losses arising from
customers facing disruption as a result
of COVID-19.
There are also less predictable but realistic
second order impacts, such as the impact of
COVID-19 on operations in the UK and India,
and the impact of Brexit and the erosion of
customer or supplier confidence, which
could result in a rapid reduction of available
financial 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
significant 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.
• Funding assessment: We assessed the committed level
of financing available to the Group and forecast covenant
headroom for at least the next 12 months through
consideration of the facility agreement. We critically
assessed the Directors’ forecasts, specifically surrounding
the Group’s ability to meet covenants in place. We
assessed the level of funding available to the Group
taking into account cash resources at the balance sheet
date and the impact of post balance sheet events such as
performance to date, the expiry of existing bank facilities
on 30 June 2022;
• Historical comparisons: We analysed the Directors’
previous profit forecasts against actual outcomes to assess
historical forecasting accuracy and assist our challenge of
the 2022/2023 forecasts prepared by the Directors;
• Key dependency assessment: We identified the critical
factors in determining whether there is a risk of business
failure based on our detailed knowledge of the business
and specific risk assessments for the impact of COVID-19
and Brexit, taking input from the Directors where
appropriate;
• Sensitivity analysis: We considered sensitivities over
the level of available financial resources indicated by the
Group’s cash flow forecasts taking account of reasonably
possible (but not unrealistic) adverse effects that could
arise from these risks individually and collectively,
including the modelling of a period of COVID-19 related
disruption through to March 2022, after which point the
cash flow forecast models a gradual recovery;
• Evaluating Directors’ intent: We evaluated the achievability
of the actions the Directors consider they would take to
improve the position should the risks materialise. We
considered the impact of specific mitigations such as
reductions in operating expenditure; and;
• Assessing transparency: We assessed the completeness
and accuracy of the matters covered in the going concern
disclosure by evaluating the reasonableness of risks and
uncertainties specified by the disclosure against our
findings from our evaluation of the Directors’ assessment
of going concern.
66
Annual Report and Accounts 2021Financial statements Independent auditor’s report
to the members of Redcentric plc
The risk
Our response
Processing error and subjective estimate
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 these. The Group
corrects for the issue of 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. The Directors
generate the credit note provision by
assessing historic levels of credit notes raised
against the related invoices amounts, taking
into account consideration changes in the
current financial period.
There is a risk that the credit note provision
recorded by the Directors to correct for
the inaccurate invoicing may be materially
understated resulting in revenue and trade
receivables being misstated.
Forecast-based valuation
We do not consider the recoverable amount
of this investment to be at a high risk of
significant misstatement, or to be subject to a
significant level of judgement. However, due
to its materiality in the context of the parent
Company financial statements as a whole, this
is considered to be the area which had the
greatest effect on our overall parent
Company audit.
Provision for
credit notes
(provision: £0.9
million; 2020:
£1.2 million)
Refer to pages
83 (accounting
policy) and pages
99-100 (financial
disclosures).
Recoverability
of parent
Company’s
investment in
subsidiaries
(£103.0 million;
2020: £102.4
million)
Refer to page
110 (accounting
policy) and page
110 (financial
disclosures).
We performed the detailed tests below rather than
seeking to rely on any of the Group’s controls because
our knowledge of the design of these controls
indicated that we would not be able to obtain the
required evidence to support reliance
on controls.
Our procedures included:
•
Test of detail: We assessed 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: We evaluated the 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; and
•
Test of detail: We assessed 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 provision.
We performed the detailed tests below rather than
seeking to rely on any of the Group’s controls
because our knowledge of the design of these
controls indicated that we would not be able to
obtain the required evidence to support reliance
on controls.
Our procedures included:
• Our sector experience: We critically assessed
the reasonableness of the key assumptions used
in the forecast based valuation, in particular those
relating to forecast EBITDA growth, long term
growth rates and the discount rate in comparison
to external and internal evidence;
•
Sensitivity analysis: We performed breakeven
analysis on the assumptions noted above;
• Historical comparisons: We assessed the
reasonableness of the forecasts by considering the
historical accuracy of the previous forecasts; and
• Assessing transparency: We assessed whether
the parent Company’s disclosures in relation
to recoverability assessment reflected the risks
inherent in the recoverable amount of the parent
Company’s cost of investment in subsidiaries.
67
Annual Report and Accounts 2021Financial statements Independent auditor’s report
to the members of Redcentric plc
Performance materiality was set at 65% (2020: 65%) of
materiality for the financial statements as a whole, which
equates to £475,150 (2020: £336,700) for the Group and
£336,050 (2020: £336,050) for the parent Company. We
applied this percentage in our determination of performance
materiality based on the level of identified misstatements and
control deficiencies during the prior period.
We agreed to report to the Audit Committee any corrected
or uncorrected identified misstatements exceeding £36,550
(2020: £25,900), in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Of the Group’s 3 (2020: 3) reporting components, we
subjected 2 (2020: 2) to full scope audits for group purposes.
The components within the scope of our work accounted for
the percentages illustrated opposite.
For the residual 1 (2020: 1) component, we performed
analysis at an aggregated Group level to re-examine our
assessment that there were no significant risks of material
misstatement within these.
The work on all 3 (2020: 3) components was performed by
the Group team.
The component materialities ranged from £517,000 to
£579,500 (2020: £492,100 to £517,000), having regarded
the mix of size and risk profile of the Group across the
components.
In the prior year we reported a key audit matter in respect
of the impact of uncertainties due to the UK exiting the
European Union. Following the trade agreement between the
UK and the EU, and the end of the EU-exit implementation
period, the nature of these uncertainties has changed. We
continue to perform procedures over material assumptions
in forward looking assessments such as going concern and
impairment tests, but however, we no longer consider the
effect of the UK’s departure from the EU to be a separate key
audit matter.
We continue to perform procedures over the outcome of
the FCA investigation. However, following the closure of
the restitution scheme in the year, we have not assessed
this matter as one of the most significant risks in our current
year audit and, therefore, it is not separately identified in our
report this year.
3. Our application of materiality and an overview
of the scope of our audit
Materiality for the Group financial statements as a whole was
set at £731,000 (2020: £518,000), determined with reference
to a benchmark of total revenue of £91.4 million (2020:
£87.5 million) (of which it represents 0.8% (2020: 0.6%)).
We consider total revenues to be the most appropriate
benchmark as it provides a more stable measure year on year
than Group profit or loss before tax.
We revised our evaluation of materiality as the audit
progressed, by applying a revised percentage of 0.8%
instead of 0.6% to the total revenue benchmark. We revised
our evaluation because the risk profile in the Group had
reduced following closure of the restitution scheme, as set
out in section 2 of this report.
Materiality for the parent Company financial statements as a
whole was set at £517,000 (2020: £517,000), determined with
reference to a benchmark of parent Company total assets, of
which it represents 0.5% (2020: 0.5%).
In line with our audit methodology, our procedures on
individual account balances and disclosures were performed
to a lower threshold, performance materiality, so as to reduce
to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a
material amount across the financial statements as a whole.
68
Annual Report and Accounts 2021Financial statements Independent auditor’s report
to the members of Redcentric plc (continued)
Total revenues
£91.4m (2020: £87.5m)
Group materiality
£731,000 (2020: £518,000)
£731,000
Whole financial statements materiality
(2020: £518,000)
£475,150
Whole financial statements performance
materiality (2020: £336,700)
£579,500
Range of materiality at 2
components (£517,000-£579,500)
(2020: £492,100 to £517,000)
Total revenues
Group materiality
£36,550
Misstatements reported to the audit committee
(2020: £25,900)
Group revenue
Total losses and profits that
make up profit before tax
Group total assets
100%
(2020 100%)
100%
100%
Full scope for Group audit purposes 2021
Full scope for Group audit purposes 2020
Residual components
99%
(2020 99%)
99%
99%
69
99%
(2020 99%)
99%
99%
Annual Report and Accounts 2021Financial statements Independent auditor’s report
to the members of Redcentric plc
4. Going concern
Our risk assessment procedures included:
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the
Group or the parent Company or to cease their operations,
and as they have concluded that the Group and the parent
Company’s financial position means that this is realistic.
They have also concluded that there are no material
uncertainties that could have cast significant doubt over their
ability to continue as a going concern for at least a year from
the date of approval of the financial statements (“the going
concern period”).
An explanation of how we evaluated management’s
assessment of going concern is set out in the related key
audit matter in section 2 of this report.
Our conclusions based on this work:
• we consider that the Directors’ use of the going concern
basis of accounting in the preparation of the financial
statements is appropriate;
• we have not identified, and concur with the Directors’
assessment that there is not, a material uncertainty
related to events or conditions that, individually or
collectively, may cast significant doubt on the Group’s
or the parent Company’s ability to continue as a going
concern for the going concern period; and
• we found the going concern disclosure in note 1 to
be acceptable.
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 above conclusions are not
a guarantee that the Group or the parent Company will
continue in operation.
5. Fraud and breaches of laws and regulations –
ability to detect
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud (“fraud
risks”) we assessed events or conditions that could indicate
an incentive or pressure to commit fraud or provide an
opportunity to commit fraud.
•
Enquiring of Directors and the Audit Committee, and
inspection of policy documentation as to the Group’s
high-level policies and procedures to prevent and detect
fraud, as well as whether they have knowledge of any
actual, suspected or alleged fraud;
•
Reading Board and Audit Committee minutes;
• Considering remuneration incentive schemes and
performance targets for management; and
• Using analytical procedures to identify any unusual or
unexpected relationships.
We communicated identified fraud risks throughout the
audit team and remained alert to any indications of fraud
throughout the audit.
As required by auditing standards, and taking into account
possible pressures to meet profit targets, we perform
procedures to address the risk of management override of
controls and the risk of fraudulent revenue recognition.
We did not identify any additional fraud risks.
We performed procedures including:
•
•
Identifying journal entries and other adjustments to
test (for all full scope components subject to audit as
disclosed in section 3 of this report) based on risk criteria
and comparing the identified entries to supporting
documentation. These included those posted to unusual
accounts; and
Performing procedures over revenue recognition for all
full scope components including substantive procedures
in respect of revenue transactions either side of the
balance sheet date and post year-end credit notes.
Identifying and responding to risks of material misstatement
due to non-compliance with laws and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the
financial statements from our general commercial and sector
experience and through discussion with the Directors and
other management (as required by auditing standards), and
discussed with the Directors and other management the
policies and procedures regarding compliance with laws
and regulations.
We communicated identified laws and regulations
throughout our team and remained alert to any indications of
non-compliance throughout the audit.
70
Annual Report and Accounts 2021Financial statements Independent auditor’s report
to the members of Redcentric plc
The potential effect of these laws and regulations on the
financial statements varies considerably.
6. We have nothing to report on the other
information in the Annual Report
Firstly, the Group is subject to laws and regulations that
directly affect the financial statements including financial
reporting legislation (including related companies legislation),
distributable profits legislation and taxation legislation and
we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial
statement items.
Secondly, the Group is subject to many other laws and
regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures in the
financial statements, for instance through the imposition of
fines or litigation.
We identified the following areas as those most likely to have
such an effect: health and safety, anti-bribery, employment
and social legislation, data protection laws, environmental
protection legislation and contract legislation. Auditing
standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry
of the Directors and other management and inspection of
regulatory and legal correspondence, if any. Therefore if
a breach of operational regulations is not disclosed to us
or evident from relevant correspondence, an audit will not
detect that breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some
material misstatements in the financial statements, even
though we have properly planned and performed our audit
in accordance with auditing standards. For example, the
further removed non-compliance with laws and regulations
is from the events and transactions reflected in the financial
statements, the less likely the inherently limited procedures
required by auditing standards would identify it.
In addition, as with any audit, there remained a higher risk
of non-detection of fraud, as these may involve collusion,
forgery, intentional omissions, misrepresentations, or the
override of internal controls. Our audit procedures are
designed to detect material misstatement. We are not
responsible for preventing non-compliance or fraud and
cannot be expected to detect non-compliance with all laws
and regulations.
The Directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial 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 financial
statements audit work, the information therein is materially
misstated or inconsistent with the financial statements or
our audit knowledge. Based solely on that work we have not
identified material misstatements in the other information.
Strategic report and Directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the
strategic report and the Directors’ report;
•
•
in our opinion the information given in those reports
for the financial year is consistent with the financial
statements; and
in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
7. 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 financial statements are not in
agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified
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.
71
Annual Report and Accounts 2021Financial statements Independent auditor’s report
to the members of Redcentric plc
8. Respective responsibilities
9. 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.
Johnathan Pass (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
15 July 2021
Directors’ responsibilities
As explained more fully in their statement set out on page
63, the Directors are responsible for: the preparation of the
financial statements including being satisfied that they give a
true and fair view; such internal control as they determine is
necessary to enable the preparation of financial 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.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial 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 influence the economic decisions of users taken
on the basis of the financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
72
Annual Report and Accounts 2021Financial statements Consolidated statement of comprehensive income
for the year ended 31 March 2021
Revenue
Cost of sales
Gross Profit
Operating expenditure
Other operating income
Adjusted EBITDA1
Depreciation of property, plant and equipment
Amortisation of intangibles
Depreciation of right of use assets
Exceptional items
Share-based payments
Operating profit /(Loss)
Finance income
Finance costs
Profit/(Loss) on ordinary activities before taxation
Income tax (expense) /credit
Profit / (Loss) for the period attributable to owners of the parent
Other comprehensive income
Items that may be classified to profit or loss:
Currency translation differences
Deferred tax movement on share options
Total comprehensive Profit /(Loss) for the period
Earnings per share
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Year ended
31 March
2021
Year ended
31 March
2020
Note
£000
£000
6
7
16
15
17
9
26
10
10
12
91,399
(33,460)
57,939
(49,448)
4,507
24,580
(3,408)
(7,337)
(4,932)
4,782
(687)
87,485
(32,297)
55,188
(63,925)
-
20,604
(6,373)
(7,449)
(2,441)
(12,516)
(562)
12,998
(8,737)
-
(1,460)
11,538
(2,311)
9,227
5
(1,881)
(10,613)
13
(10,600)
103
(224)
9,106
13
-
(10,587)
13
13
6.01p
5.93p
(7.14)p
(7.14)p
The notes on pages 77 to 107 are an integral part of these consolidated financial statements.
1 For an explanation of the alternative performance measures used in this report, please refer to page 22.
73
Annual Report and Accounts 2021Financial statements
Consolidated statement of financial position
as at 31 March 2021
31 March
2021
31 March
2020
Note
£000
£000
Non-Current assets
Intangible assets
Tangible assets
Right-of-use assets
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Corporation tax receivable
Cash and short-term deposits
Total assets
Current liabilities
Trade and other payables
Corporation tax payable
Borrowings
Leases
Provisions
Non-current liabilities
Deferred tax liability
Borrowings
Leases
Provisions
Total liabilities
Net assets
Equity
Called up share capital
Share premium account
Common control reserve
Own shares held in treasury
Retained earnings
Total Equity
15
16
17
18
19
21
22
22
24
22
22
24
25
25
25
65,929
5,834
18,787
561
91,111
1,061
25,663
-
5,250
31,974
123,085
68,415
12,909
26,010
1,482
108,816
891
23,261
346
3,710
28,208
137,024
(22,459)
(24,311)
(641)
(487)
(3,735)
(574)
(27,896)
-
(1,004)
(15,593)
(2,695)
(19,292)
(47,188)
75,897
156
73,267
(9,454)
(32)
11,960
75,897
-
(12,598)
(3,528)
(12,122)
(52,559)
-
(36)
(22,097)
(2,531)
(24,664)
(77,223)
59,801
149
65,734
(9,454)
(724)
4,096
59,801
The notes on pages 77 to 107 are an integral part of these consolidated financial statements. The financial statements of
Redcentric Plc (Registration Number 08397584) on pages 73 to 76 were approved by the Board on 15 July 2021 and are
signed on its behalf by:
David Senior
Chief Financial Officer
74
Annual Report and Accounts 2021Financial statements Consolidated cash flow statement
for the year ended 31 March 2021
Year ended
31 March
2021
Year ended
31 March
2020
Note
£000
£000
Profit /(Loss) before taxation
Net finance costs
Operating Profit /(Loss)
Adjustment for non-cash items
Depreciation and amortisation
Exceptional items
Share-based payments
Operating cash flow before exceptional items and movements in working capital
10
15,16,17
9
26
11,538
1,460
12,998
15,677
(4,782)
687
24,580
(8,884)
15,696
(15)
4,432
(2,536)
17,577
(149)
17,428
(1,541)
(1,397)
(2,938)
14
(1,868)
22
-
494
36
1,036
(1,415)
(4,481)
(12,500)
5,775
(12,923)
1,567
3,710
(27)
5,250
(10,613)
1,876
(8,737)
16,263
12,516
562
20,604
(817)
19,787
(534)
(1,779)
1,343
18,817
(660)
18,157
(3,943)
(290)
(4,233)
(2,731)
(724)
-
-
-
(1,825)
(5,127)
(7,000)
-
(17,407)
(3,483)
7,206
(13)
3,710
Cash costs of exceptional items
Operating cash flow before changes in working capital
Changes in working capital
(Increase) / Decrease in inventories
Decrease / (Increase) in trade and other receivables
(Decrease) / Increase in trade and other payables
Cash generated from operations
Tax paid
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible fixed assets
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Share buy-back
Disposal of treasury shares on exercise of share options
Cash received on exercise of share options
Sale and leaseback
Interest paid
Repayment of leases and loans
Repayment of borrowings
Issue of shares
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period
Effect of exchange rates
Cash and cash equivalents at end of the period
The notes on pages 77 to 107 are an integral part of these consolidated financial statements.
75
Annual Report and Accounts 2021Financial statements Consolidated statement of changes in equity
for the year ended 31 March 2021
Share
Capital
£000
Share
Premium
Common
Control
Reserve
Own Shares
Held in
Treasury
Retained
Earnings
£000
£000
£000
£000
Total
Equity
£000
Balance at 1 April 2019
149
65,588
(9,454)
Adjustment on initial application
of IFRS 16
Adjusted as at 1 April 2019
(Loss) for the period
Transactions with owners
Share-based payments
Share buyback
Issue of new shares
Dividends paid (note 14)
Other comprehensive income
Currency translation differences
At 31 March 2020
Profit for the period
Transactions with owners
Share-based payments
Issue of new shares
Dividends paid (note 14)
Share option exercises
Other comprehensive income
Deferred tax movement on share options
Currency translation differences
-
-
-
-
-
(724)
-
-
-
-
149
-
-
65,588
(9,454)
-
-
-
-
-
-
-
-
-
146
-
-
-
-
-
-
-
-
149
65,734
(9,454)
(724)
-
-
7
-
-
-
-
-
-
7,533
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
692
-
-
19,362
75,645
(2,260)
17,102
(10,600)
(2,260)
73,385
(10,600)
484
-
(146)
(2,731)
(13)
4,096
9,227
582
-
(1,868)
(198)
224
(103)
484
(724)
-
(2,731)
(13)
59,801
9,227
582
7,540
(1,868)
494
224
(103)
At 31 March 2021
156
73,267
(9,454)
(32)
11,960
75,897
The notes on pages 77 to 107 are an integral part of these consolidated financial statements.
76
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021
1 Summary of significant accounting policies
Redcentric plc is a public limited company incorporated and
domiciled in England and Wales, whose shares are publicly
traded on the AIM division of the London Stock Exchange.
Redcentric plc was incorporated on 11 February 2013 and
admitted to AIM on 24 April 2013.
The principal accounting policies applied in the preparation
of these consolidated financial statements are set out below.
These policies have been applied consistently to all periods
covered.
1.1 Basis of preparation
The consolidated financial statements have been prepared
and approved by the Directors in accordance with applicable
law and international accounting standards in conformity
with the requirements of the Companies Act 2006 (“Adopted
IFRS”).
The financial statements are prepared on a going concern
basis which the Directors believe to be appropriate for the
following reasons.
The Directors have prepared cash flow forecasts for a period
of 12 months from the date of approval of these financial
statements which indicate that, taking account of reasonably
possible downsides including the impact of COVID-19 on
the operations and its financial resources, the Group and the
Company will have sufficient funds to meet its liabilities as
they fall due for that period.
The Directors forecasts have been built from the detailed
Board approved budget for the year ending 31 March 2022.
The forecasts include a number of assumptions in relation
to order intake, renewal and churn rates and EBITDA
margin improvements.
Whilst the Group’s trading and cash flow forecasts have been
prepared using current trading assumptions, the operating
environment presents a number of challenges which could
negatively impact the actual performance achieved. These
risks include, but are not limited to, achieving forecast
levels of order intake, the impact on customer confidence
as a result of general economic conditions and Brexit, the
potential impact of COVID-19 on the Group’s key operating
locations in the UK and India, and achieving forecast margin
improvements.
The uncertainty as to the future impact on the Group of
the COVID-19 outbreak has been considered as part of
the Directors’ consideration of the going concern basis
of preparation. Thus far, the Group has not observed any
material impact in trading performance due to COVID-19.
However, due to the uncertainty over the duration and extent
of the impact of COVID-19, the Directors have modelled a
severe but plausible downside scenario when preparing the
forecasts. The Directors have also considered the impact of
the ongoing COVID-19 challenges in India on the employees
and business operations.
The downside scenario assumes significant economic
downturn over FY22, impacting new order intake, and an
additional 3-month lockdown occurs from December 2021 to
February 2022 with no new order intake during this 3-month
period. In this scenario, recurring monthly order intake is
forecast to reduce by 59% compared to FY21, product and
services revenues reduce by 22% compared to FY21 and
customer loss through insolvency increases (particularly in the
retail, hospitality, and leisure sectors). Under the downside
scenario modelled, the forecasts demonstrate that Group
is expected to maintain sufficient liquidity. The Directors
therefore remain confident that the Group has adequate
resources to continue to meet its liabilities as and when they
fall due within the period of at least 12 months from the date
this Report.
1.2 Changes In accounting policy and disclosure
Adopted IFRS not yet applied
There are no new standards, amendments to existing
standards or interpretations that are not yet effective that
are expected to have a material impact on the Group. Such
developments are routinely reviewed by the Group and its
financial reporting systems are adapted as appropriate.
1.3 Basis of consolidation
The Group financial statements consolidate those of the
Company and of its subsidiary undertakings drawn up to
31 March 2021.
Subsidiaries are all entities over which the group has control.
The group controls an entity when the group is exposed to,
or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its
power over the entity. Subsidiaries are fully consolidated from
the date on which control is transferred to the group. They
are deconsolidated from the date that control ceases.
The group applies the acquisition method of accounting
to account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair
value of the assets transferred, the liabilities incurred, and
the equity interests issued by the group. The consideration
77
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-
related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in
a business combination are measured initially at their fair value at the acquisition date. The group recognises any non-
controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net assets.
The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value
of the separable identifiable net assets acquired and liabilities incurred or assumed at the acquisition date is recorded as
purchased goodwill. Provision is made for any impairment. Accounting policies previously applied by acquired subsidiaries are
changed as necessary to comply with accounting policies adopted by the Group.
Intra-group transactions, balances and unrealised gains and losses on transactions between group companies are eliminated
on consolidation.
1.4 Segmental reporting
IFRS 8 requires operating segments to be identified based on internal financial information reported to the chief operating
decision-maker for decision-making purposes. The Group considers that this role is performed by the main Board. The Board
believes that the Group continues to comprise a single reporting segment, being the provision of managed services
to customers.
1.5 Revenue recognition
IFRS 15 ‘Revenue from contracts with customers’ requires “performance obligations” to be identified at the inception of the
contract for each of the distinct goods or services that have been promised to the customer. The following table summarises
the performance obligations we have identified for our major revenue lines and provides information on the time of when they
are satisfies 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 identified for each
distinct service for which the customer has
contracted and are considered to be satisfied 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) to the customer as a one-off,
distinct sale.
Revenues for product sales are recognised in
full in the income statement upon delivery to
the customer.
Performance obligations are satisfied at the point
in time that control passes to the customer.
Amongst other factors the Group has pricing
and fulfilment risk and as such is considered to
be principal in these transactions.
78
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
Revenue Line
Performance obligation
Revenue recognition policy
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.
Services Revenue
Provision of professional services, consultancy,
and engineering services in order to setup and
install a customer managed service.
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.
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 2021 is £123m. Of this, £119m relates to revenue for recurring managed services. In comparison, revenue expected
to be recognised in future periods for performance obligations that were not complete (or partially complete) as at 31 March
2020 was £140m. Of this, £133m related 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.
1.6 Exceptional items
Exceptional items are items of income and expense which are material and, due to their nature or size, are presented
separately on the face of the income statement in order to provide a better understanding of the Group’s underlying financial
performance. Exceptional items are excluded from the Group’s alternative performance measures (APMs), as defined on page
22, and are disclosed in detail in note 9.
1.7 Share-based payments
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 satisfied, provided that all other
performance conditions are satisfied.
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Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
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 modified
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 modification, based on the difference between the fair
value of the original award and the fair value of the modified
award, both as measured on the date of the modification. 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 costs of equity-settled transactions with employees are
settled by Redcentric Solutions Limited on behalf of the
parent Company and added to the cost of the investment in
the parent Company.
The Group does not operate any cash settled share-based
payment schemes.
1.8 Taxation
The taxation expense charged in the Group statement of
comprehensive income represents the sum of the current tax
expense and the deferred tax expense.
The current tax payable is based on the taxable profit for the
year. Taxable profit differs from accounting profit as reported
in the Group statement of comprehensive income because
it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that
are never taxable or deductible. The Group liability for current
tax is measured using tax rates that have been enacted or
substantively enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable
on differences between the carrying amount of assets and
liabilities in the financial statements and the corresponding
tax bases used in the computation of taxable profit and
is accounted for using the balance sheet liability method.
Deferred 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 financial reporting
purposes, with the following exceptions:
• 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 profit 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
deferred income tax assets are recognised only to the
extent that it is probable that taxable profits will be
available against which deductible temporary differences
carried forward tax credits or tax losses can be utilised.
1.9 Foreign currencies
The functional and presentation currency of Redcentric plc is
Pounds Sterling (£) and the Group conducts the majority of its
business in Sterling.
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 profit or loss.
1.10 Pensions
The Group operates a defined contribution scheme. Pension
costs are charged directly to the income statement in the
period to which they relate on an accrual’s basis. The Group
has no further payment obligations once contributions have
been paid.
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for the year ended 31 March 2021 (continued)
1.11 Intangible assets
a) 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 identifiable 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.
Intangible assets with a finite life are amortised on a straight-
line basis over their expected useful lives, as follows:
Customer contracts and related relationships – 5-15 years
- Trademarks – 5 years
- Software licences – 5 years (or over the contract term
if shorter)
- ERP systems – 6 years
Impairment and amortisation charges are included within
operating expenditure in the income statement.
c) Internally generated intangibles
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 benefit 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.
Expenditure on software development is capitalised as an
intangible asset only if it meets the recognition criteria set
out in IAS 38 Intangible Assets, requiring it to be probable
that the expenditure will generate future economic benefits
and can be measured reliably. To meet these criteria, it is
necessary to be able to demonstrate, among other things,
the technical feasibility of completing the intangible asset so
that it will be available for use or sale.
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.
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 benefit 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.
b) Other intangible assets
Other intangible assets are carried at cost less accumulated
amortisation and impairment losses.
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.
Development expenditure directed towards incremental
improvements in existing products, remedial work and other
maintenance activity does not qualify for recognition as an
intangible asset.
1.12 Property, plant and equipment
Property, plant and equipment are stated at cost less
accumulated depreciation and any impairment in value.
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.
- Office fixtures and fittings – 4-5 years
- Leasehold improvements – 15 years (or over the lease term
if shorter)
- Vehicles and computer equipment – 3-5 years (or over
the contract term if shorter)
For property, plant and equipment funded through leases,
where there is reasonable certainty that the Group obtains
ownership by the end of the lease term, depreciation is
provided on a straight-line basis over the useful life,
otherwise it’s provided over the shorter of the useful life and
the lease term.
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Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
An item of property, plant and equipment is de-recognised
upon disposal or when no future economic benefits 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.
1.13 Impairment of property, plant and equipment and
intangible assets excluding goodwill
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. 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.
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 flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset.
For an asset that does not generate largely independent cash
inflows, 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-financial assets that were impaired in the previous
periods are annually reviewed to assess whether the
impairment is still relevant.
1.14 Inventories and cost of sales
Inventories are stated at the lower of cost and net realisable
value. Cost corresponds to purchase cost determined by the
first in first out (FIFO) method.
1.15 Leases
IFRS 16 has introduced a single on-balance sheet accounting
model for lessees. When entering into a new contract, the
Group assesses whether it is, or contains, a lease. A lease
conveys a right to control the use of an identified asset for a
period of time in exchange for consideration.
The Group recognises a right of use asset and a lease liability
at the lease commencement date. The right of use asset is
initially measured at cost, and subsequently at cost less any
accumulated depreciation and impairment losses, adjusted
for certain remeasurements of the lease liability. Depreciation
is provided on a straight-line basis over the life of the lease,
or the useful economic life if that is shorter.
Obligations to restore the underlying asset to the condition
required by the terms and conditions of the lease are
recognised and measured under IAS 37 Provisions,
Contingent Liabilities and Contingent Assets, and included in
the related right-of-use asset.
The lease liability is initially measured at the present value of
the lease payments that are not paid at the commencement
date and discounted using the interest rate implicit in the
lease or, more typically, the Group’s incremental borrowing
rate (when the implicit rate cannot be readily determined).
The lease liability is subsequently increased by the interest
cost on the lease liability and decreased by lease payments
made. It is remeasured when there is a change in future lease
payments arising from a change in an index or rate,
or changes in the Group’s assessment of whether a purchase,
extension or termination option is reasonably certain to
be exercised.
The Group adopts recognition exemptions for short-term
(less than 12 months) on property and low value on a lease by
lease basis. The Group classifies payments of lease liabilities
(principal and interest portions) as part of financing activities.
Payments of short-term, low value and variable lease
components are classified within operating activities.
1.16 Financial instruments
a) Financial assets
The Group classifies its financial assets as loans and
receivables measured at amortised cost.
Loans and receivables are non-derivative financial assets with
fixed 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 classified 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.
Trade receivables
Trade receivables are amounts due from customers for goods
sold and services provided in the ordinary course of business.
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment.
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Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
In recognising any provision for impairment, the Group
applies the IFRS 9 approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all
assets held at amortised cost. The Group recognises a loss
allowance for all expected credit losses on initial recognition
of trade receivables.
The Group’s trade and other receivables are non-interest
bearing.
Cash and cash equivalents
Cash and cash equivalents on the balance sheet comprise
cash at bank and in hand and short-term deposits with an
original maturity of three months or less.
b) Financial liabilities
Trade payables
Trade payables are stated at their nominal value, recognised
initially at fair value and subsequently valued at amortised cost.
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 outflow of resources embodying economic
benefits 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 flows
at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks
specific to the liability.
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 finance cost line in the income statement.
Loans are carried at fair value of initial recognition, net of
unamortised issue costs of debt. These costs are amortised
over the loan term.
2 Critical accounting judgements and key sources
of estimation uncertainty
Judgements
The Group adopted IFRS 16 for the first time in FY20.
Judgement is applied in determining whether a contract
contains a lease and the anticipated tenure of these
leases – whether or not break clauses will be exercised has
been determined based on our historical experience and
expectations for future trading and capacity requirements.
Further judgements have been made with regard to discount
rates applied, determining appropriate bonds, property asset
premiums and in applying the portfolio expedient to enable
the same discount rate to be applied across cars and other
non-property leases.
The Group recognises an intangible asset in relation to the
development, configuration and customisation of application
software to the extent that costs can be separately identified
and attributed to particular software programs, measured
reliably and the group has the right to the economic benefits
of the software asset developed. Judgement is applied
in determining whether the Group has control over the
development, configuration and customisations to which the
Group has been granted a perpetual license. The Directors
recognise that there is evolving guidance in relation to the
wider application of IAS 38 Intangible Assets specifically in
the context of the configuration or customisation costs in a
cloud computing arrangement and insofar as it is relevant,
they will continue to consider the appropriateness of the
Group’s accounting policy.
Estimates
Credit note provisioning remains a key source of estimation
uncertainty that could result in a material change to the
revenue recognised. 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
specific items in the customer base. The provision recognised
at 31 March 2021 is £0.9m (31 March 2020: £1.2m). During
the year £1.0m of new provision has been created and £1.3m
utilised through actual credit notes raised. An increase of
0.5% in the estimate would have resulted in a £457k increase
in the provision as at 31 March 2021.
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Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
A deferred tax asset of £0.7m (31 March 2020: £2.4m) is
recognised in relation to tax losses from historic acquisitions.
Deferred tax assets are recognised only to the extent that it
is probable that future taxable profits will be available against
which the temporary differences can be utilised. Recognition,
therefore, involves estimates regarding the prudent
forecasting of future taxable profits of the business and in
applying an appropriate risk adjustment factor.
3 Financial risk management
The objectives of the Group’s treasury activities are to
manage financial risk, secure cost-effective funding where
necessary and minimise adverse effects of fluctuations in the
financial markets on the value of the Group’s financial assets
and liabilities, on reported profitability and on cash flows of
the Group.
The Group’s principal financial instruments for fundraising
are bank borrowings, overdraft facilities and loans.
The Group has various other financial instruments such as
cash, trade receivables and trade payables that arise directly
from its operations.
The Group’s activities expose it to a variety of financial
risks: market risk (including foreign exchange, cash flow
interest rate risk, and price risk), credit risk, and liquidity risk.
The Group’s overall risk management programme focuses
on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the Group’s financial
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 each specific risk area.
a) Foreign exchange risk
The Group mainly operates within the UK with foreign
exchange risk arising from certain transactions with
counterparties denominated in foreign currencies. This is not
a significant risk for the Group.
b) Cash flow interest rate 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 flow interest rate risk. During the
year ended 31 March 2010 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 refinancing, renewal of existing positions,
alternative financing and hedging. Based on these scenarios,
the Group calculates the impact on profit or loss of a defined
interest rate shift and manages its cash flow interest rate
risk accordingly.
Based on the simulations performed, the impact on post-tax
profit and equity of a +/– 1% shift in the interest rate would
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.
c) Price risk
The Group is not exposed to significant commodity or
security price risk.
d) 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 and reviewed 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.
Liquidity risk
Management monitors rolling forecasts of the Group’s
undrawn borrowing facility and cash and cash equivalents
based on expected cash flow. The Group’s liquidity
management policy involves projecting cash flows and
considering the level of liquid assets necessary to meet these.
4 Capital risk management
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 fixed asset investments. Consequently, the Group
is financed predominantly by equity.
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Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
4 Capital risk management (continued)
5 Segment reporting
IFRS 8 requires operating segments to be identified based on
internal financial information reported to the chief operating
decision-maker (CODM) for decision-making purposes. The
Group considers that this role is performed by the main
Board. The Board believes that the Group continues to
comprise a single reporting segment, being the provision
of managed services to customers. The CODM assesses
profit performance principally through an adjusted EBITDA
measure, as defined on page 23.
Whilst the Board reviews the Group’s three revenue streams
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.
Non-current assets held outside the UK are immaterial
(31 March 2020: immaterial).
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 defined 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 2021 was 0.0x (31
March 2020 – 0.8x).
The bank facilities referred to in Note 22 contain various
covenants relating to EBITDA, interest cover, net debt and
cash flow, which the Group monitors on a monthly basis.
The Group adopts a risk-averse position with respect to
borrowings and maintains a significant amount of headroom
in its bank facilities to ensure that any unexpected situations
do not create financial stress.
The Board remains committed to a progressive dividend
policy. a final dividend of 2.4p (£3.7m) has been
recommended to the shareholders. It is the Board’s intention
to continue with a progressive (50% of adjusted earnings)
dividend policy in FY22 and beyond.
The Group grants share options to Directors and other
selected employees. However, these do not have a significant
impact on the Group’s capital structure.
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Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
6 Revenue
Revenue for the year ended 31 March 2021 was generated wholly from the UK and is analysed as follows:
Recurring revenue
Product revenue
Services revenue
Total revenue
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
81,897
5,072
4,430
91,399
77,617
5,215
4,653
87,485
Revenue is analysed into the following categories:
•
Recurring monthly revenue, higher at £81.9m (FY20: £77.6m).
• Non-recurring product revenue, which was lower at £5.1m (FY20: £5.2m), continued to be impacted by customers delaying
discretionary spending due to the economic uncertainty.
• Non-recurring services revenue was lower at £4.4m (FY20: £4.7m).
6.1 Contract balances
The following table provides information about receivables, contract assets and contract liabilities from contract with customers.
Receivables, which are included in trade and other receivables
Accrued income
Deferred income
There were no material impairment losses recorded during the year or the prior year.
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
9,164
1,999
(7,471)
12,375
1,849
(9,685)
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Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
7 Operating profit
The following costs are considered to be significant items within operating profit/(loss).
Amortisation of acquired intangible assets
Amortisation of intangible assets: owned
Depreciation: owned assets
Depreciation and Amortisation of ROU assets: Leased
Share-based payments
Net foreign exchange (gains) /losses
Expense in relation to short-term and low value leases not recognised under IFRS 16
Employee benefits expense, excluding share-based compensation
Operating income is broken down as follows:
Proceeds from sale of non-core business unit
Disposal of goodwill
Other associated costs
8 Auditor’s remuneration
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
6,252
1,085
3,408
4,932
687
(52)
31
20,294
36,637
6,252
1,197
6,373
2,441
562
-
34
20,133
36,992
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
5,750
(1,185)
(58)
4,507
-
-
-
-
Total fees payable by the Group during the year to KPMG LLP in respect of the audit and other services provided were
as follows:
Audit of these financial statements
Amounts payable to the Group’s auditor and associated companies in respect of:
- Audit of the financial statements of subsidiaries of the Company
- Tax compliance services
- Tax advisory services
- All other services
87
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
25
226
11
13
3
278
25
169
11
11
-
216
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
9 Exceptional items
Staff restructuring
Insurance adviser provision
Vacant property lease provisions net of costs
Onerous service contracts
Circuit termination charges
Restitution provision
Professional fees associated with the FCA Investigation
Lease modification
Business sale process
Profit upon sale of non-core business unit
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
393
553
-
148
4
(2,172)
57
649
93
(4,507)
(4,782)
465
-
(141)
1,155
163
11,429
(555)
-
-
-
12,516
Staff restructuring costs relate to a rationalisation programme principally impacting the Delivery department.
The insurance adviser cost represents a provision booked for costs repayable on adviser fees in relation to the FCA investigation.
The Theale office was closed during the year to 31 March 2019 and a £553k provision created to cover anticipated expenditure
up to the end of the contractual term to 29th September 2023. Early surrender of the lease negotiated during the prior year
resulting in a £156k provision release offset by £15k of costs.
The onerous service contract cost relates to the costs associated with third party service arrangements no longer utilised (or in
the process of being ceased) by the business.
Circuit termination charges relate to cancellation costs incurred on unused circuits / connections cancelled during the year, as
part of the Group’s network rationalisation review.
The Restitution Scheme provision from the prior year constitutes the amount that had been agreed with the FCA to settle with
net purchasers of ordinary shares in the Company between 9 November 2015 and 7 November 2016. During the year the
scheme was closed resulting in a net £2,172k provision release.
Lease modification costs represent the impact of the re-negotiation of the lease of the London data centre.
Business sale process costs were incurred as a result of the sales process during the year which concluded during the year.
Profit upon sale of non-core business unit is net credit resulting from the sale of the assets and knowhow for the provision of
maintenance services to EDF nuclear power stations to Thales UK Limited. The total consideration received was £5,750,000 in
cash. No cash or cash equivalent was within the business over which control was lost. Goodwill of £1,185,000 was disposed of
as part of the transaction.
88
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
10 Finance income and costs
Finance income
Other interest receivable
Finance costs
Interest payable on bank loans and overdrafts
Interest payable on leases
Amortisation of loan arrangement fees
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
-
5
(240)
(1,165)
(55)
(1,460)
(610)
(1,220)
(51)
(1,881)
Interest payable on leases includes £1.0m (FY20: £1.1m) of interest on leases previously classified as operating leases under IAS17.
11 Employees
The average monthly number of people (including Executive Directors) employed by the Group during the year was as follows:
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
288
73
59
420
296
108
58
462
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
17,440
1,819
17,396
1,648
687
610
32
393
562
624
-
465
20,981
20,695
Operations
Selling and distribution
Administration
Staff costs were:
Wages and salaries
Social security costs
Share options granted to Directors and employees
Pension costs
Payments in lieu of notice and redundancy not included within exceptional items
Payments in lieu of notice and redundancy included within exceptional items
89
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
11 Employees (continued)
11.1 Key management compensation
Key management personnel are those persons having authority and responsibility for planning, controlling and directing the
activities of the entity either directly, or indirectly. The following table details the compensation of key management personnel,
being senior management that sit on the Operating Board of the Group.
Basic salary, allowances and fees
Bonus and other benefits
Share based payments
Pension costs
Payments in lieu of notice and redundancy
11.2 Director’s remuneration
The remuneration of the Directors in respect of the year was as follows:
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
1,292
1,021
501
405
53
-
102
241
17
154
2,251
1,535
Basic salary,
allowances,
and fees
£000
Bonus
£000
Pension
£000
Share-based
payments
£000
FY21
Total
£000
FY20
Total
£000
Executive
Peter Brotherton1
David Senior 2 (appointed 3-Apr-20)
Dean Barber (appointed 2-Sept-19,
resigned 3-Apr-20)
Non-Executive
Ian Johnson (appointed 16-Oct-19)
Stephen Vaughan
Jon Kempster
Chris Cole (resigned 16-Oct-19)
Chris Rigg (resigned 31-Dec-19)
300
146
1
85
45
45
-
-
150
80
-
-
-
-
-
-
10
7
-
-
-
-
-
-
212
32
-
-
-
-
-
-
672
265
1
85
45
45
-
-
529
-
107
39
49
44
41
30
1 Includes travel allowance of £1k. On 20 November 2020 Peter Brotherton exercised options over 28,571 ordinary shares of
0.1p at each a price of 63p resulting in a gain of £17,000. On 22 December 2020 Peter Brotherton exercised nil-cost options
over 192,481 ordinary shares of 0.1p each resulting in a gain of £212,000. On 26 September 2019 Peter Brotherton exercised
nil-cost options over 161,905 ordinary shares of 0.1p each resulting in a gain of £143,000.
2 On 20 November 2020 David Senior exercised options over 28,571 ordinary shares of 0.1p each at a price of 63p resulting in
a gain of £17,000. On 22 December 2020 David Senior exercised nil-cost options over 29,100 ordinary shares of 0.1p each
resulting in a gain of £32,000.
90
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
11 Employees (continued)
Details of share options in the Company held by the Directors during the year are as follows (audited):
Exercise
price (p)
Balance at
31 March
2020
Granted
Forfeited /
expired
Exercised
Balance at
31 March
2021
Peter Brotherton
David Senior
Dean Barber
(a)
(b)
(c)
(d)
(g)
(b)
(e)
(f)
(d)
(g)
(h)
Nil
63
Nil
Nil
Nil
63
Nil
Nil
Nil
Nil
192,481
28,571
298,879
379,267
-
899,198
28,571
29,100
20,000
100,000
-
177,671
-
-
-
-
242,915
242,915
-
-
-
-
129,555
129,555
-
-
-
-
-
-
-
-
-
-
-
-
(192,481)
(28,571)
-
-
-
(221,052)
(28,571)
(29,100)
-
-
-
(57,671)
-
-
298,879
379,267
242,915
921,061
-
-
20,000
100,000
129,555
249,555
Nil
175,750
-
(175,750)
-
-
(a) The options were granted on 29 June 2017 under the Company’s LTIP. The options vested post the release of the Group’s
results for the year ended 31 March 2020 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 HMRC approved Save-As-You-Earn Option Plan 2014
under which employees contribute a monthly amount which is saved over 3 years to buy shares. The options were
exercisable from 30 August 2020. There were no performance conditions.
(c) The options were granted on 26 November 2018 under the Company’s LTIP. The options will vest post the release of the
Group’s results for the year ended 31 March 2021 subject to the achievement of performance conditions related to the
growth in earnings per share.
(d) The options were granted on 28 June 2019 under the Company’s LTIP. The options will vest post the release of the Group’s
results for the year ended 31 March 2022 subject to the achievement of performance conditions related to the growth in
share price.
(e) The options were granted on 4 December 2017 under the Company’s LTIP. The options vested post the release of the
Group’s results for the year ended 31 March 2020 subject to the achievement of performance conditions related to the
growth in earnings per share.
(f) The options were granted on 27 June 2018 under the Company’s LTIP. The options will vest post the release of the Group’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 on 8 December 2020 under the Company’s LTIP. The options will vest post the release of the
Group’s results for the year ended 31 March 2023 subject to the achievement of performance conditions related to the
growth in share price.
(h) The options were granted on 3 September 2019 under the Company’s LTIP. The options will vest post the release of the
Group’s results for the year ended 31 March 2022 subject to the achievement of performance conditions related to the
growth in share price.
91
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
12 Income tax expense
Income tax
UK current year tax charge
Overseas current year tax charge
Adjustment in respect of prior years
Total income tax
Deferred tax
Current year
Adjustment in respect of prior years
Total deferred tax
Total tax charge /(credit) in consolidated statement of comprehensive income
Other Comprehensive Income items
Deferred Tax
Factors affecting the tax charge for the year
Profit /(loss) before taxation
Taxation at the average UK corporation tax rate of 19.0% (FY20: 19.0%)
Tax effects of:
- Expenses not allowable in determining taxable profit
- Adjustment in respect of prior years
- Non-taxable income
- Share options
- R&D Tax Credit
- Deferred tax rate change
- Effect of overseas tax rates
Tax (credit) / charge for the year
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
1,152
69
(54)
1,167
769
375
1,144
2,311
844
102
(148)
798
(796)
(15)
(811)
(13)
(224)
-
11,538
2,192
(10,613)
(2,016)
289
321
(513)
6
-
-
16
2,311
2,206
(163)
-
-
(40)
(22)
22
(13)
A UK corporation rate of 19% (effective 1 April 2020) was substantively enacted on 17 March 2020, reversing the previously
enacted reduction in the rate from 19% to 17%. This increased the Group’s future current tax charge accordingly. The deferred
tax asset at 31 March 2021 has been calculated at 19% (2020: 19%).
An increase in the UK corporation rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021.
This will increase the Group’s future current tax charge accordingly and increase the deferred tax asset by £177k.
In addition to the net deferred tax asset there is an unrecognised deferred tax asset on tax losses of £1.35m. These losses have
not been recognised as there remains an uncertainty about the availability of these losses going forwards. An increase in the
UK corporation rate from 19% to 25% (effective 1 April 2023) as noted above would increase the unrecognised deferred tax
asset to £1.78m (i.e. an increase of £426k).
92
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
13 Earnings per share (EPS)
The calculation of basic and diluted EPS is based on the following earnings and number of shares.
Earnings
Statutory earnings
Tax charge
Amortisation of acquired intangibles
Share-based payments
Exceptional items
Adjusted earnings before tax
Notional tax charge at standard rate
Adjusted earnings
Weighted average number of ordinary shares
In issue
Held in treasury
For basic EPS calculations
Effect of potentially dilutive share options
For diluted EPS calculations
EPS
Basic
Adjusted
Basic diluted
Adjusted diluted
14 Dividends
Final dividend for the year ended 31 March 2019
Interim dividend for the year ended 31 March 2020
Interim dividend for the year ended 31 March 2021
93
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
9,227
2,311
6,252
687
(4,782)
13,695
(2,602)
11,093
(10,600)
(13)
6,252
562
12,516
8,717
(1,656)
7,061
Number
Number
‘000
‘000
153,930
149,311
(439)
(822)
153,491
148,489
2,215
-
155,706
148,489
Pence
6.01p
7.23p
5.93p
7.12p
Pence
(7.14)p
4.76p
(7.14)p
4.68p
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
-
-
1,868
1,868
1,492
1,239
-
2,731
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
14 Dividends (continued)
The Group paid a final dividend in respect of the year to 31 March 2019 of 1.00p per ordinary share, with a total payment
value of £1.5m.
The Group paid an interim dividend for the year ended 31 March 2020 of 0.83p per ordinary share, with a total payment
value of £1.2m.
In light of the Restitution Scheme and the continued uncertainty resulting from the ongoing COVID-19 pandemic, the Board
decided not to recommend payment of a final dividend to shareholders for FY20.
The Group paid an interim dividend for the year ended 31 March 2021 of 1.2p per ordinary share, with a total payment value
of £1.9m.
A final dividend payment of 2.4p per share will be paid on 17 September 2021, subject to approval at the Company’s Annual
General Meeting. The shares will have an ex-dividend date of 5 August 2021 and a record date of 8 August 2021.
15 Intangible assets
Cost
At 1 April 2019
Reclassification to right of use (note 17)
Adjusted 1 April 2019
Additions
At 31 March 2020
Reclassification from property plant
& equipment (note 16)
Additions
Disposals
Exchange differences
At 31 March 2021
Accumulated amortisation and impairment
At 1 April 2019
Reclassification to right of use (note 17)
Adjusted 1 April 2019
Charged in year
Write-off
At 31 March 2020
Charged in year
Disposals
At 31 March 2021
Net book value
At 31 March 2021
At 31 March 2020
At 31 March 2019
Customer
contracts
and related
relationships
Trademarks
Software and
licences
£000
£000
£000
Goodwill
£000
43,269
62,284
43,269
62,284
-
-
43,269
62,284
-
-
(1,185)
-
-
-
-
-
275
275
-
275
-
-
-
-
6,331
(1,240)
5,091
578
5,669
4,434
1,677
(130)
(1)
Total
£000
112,159
(1,240)
110,919
578
111,497
4,434
1,677
(1,315)
(1)
42,084
62,284
275
11,649
116,292
32,065
-
32,065
6,252
-
38,317
6,252
-
44,569
17,715
23,967
30,219
-
-
-
-
-
-
-
-
-
42,084
43,269
43,269
94
275
-
275
-
-
275
-
-
275
-
-
-
4,017
(788)
3,229
1,197
64
4,490
1,085
(56)
5,519
6,130
1,179
2,314
36,357
(788)
35,569
7,449
64
43,082
7,337
(56)
50,363
65,929
68,415
75,802
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
15 Intangible assets (continued)
Customer contracts have a weighted average remaining amortisation period of 3 years and 11 months (FY20: 4 years and
11 months).
During the year, the Group’s new ERP system, Microsoft Dynamics 365 went live. As a result, and in the context of evolving
guidance in relation to configuration or customisation costs in a cloud computing arrangement (see note 2), £4,434,000 of
asset previously recognised within tangible assets was reclassified to intangible assets.
On initial application of IFRS 16 ‘Leases’, the Group continued to present assets that were previously recognised under
IAS17 as finance leases within property plant and equipment and intangible assets. The carrying value at 31 March 2020 was
£2,826,000 within property plant and equipment and £452,000 within intangible assets. In the current year, all right of use
assets have been presented separately in note 17 and therefore these amounts have been reclassified along with the assets
that were newly recognised from 1 April 2019 on initial application of IFRS 16.
The Company has assessed that the trading operations of the business constitute only one cash generating unit.
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 annually for impairment and, to confirm whether an
impairment of the goodwill is necessary, management compares the carrying value to the value in use.
The value in use has been calculated using budgeted cash flow projections to the period of 31 March 2023, extrapolated for
a further three years by an average annual revenue growth rate of 1.5% (FY20: 2.0%). A terminal value based on a perpetuity
calculation using a 0.0% real growth rate was then added (FY20: 0.0% growth).
In addition to revenue growth, the key assumptions used in the impairment testing were as follows:
• Gross margin percentage reducing to 60.5% (FY20: 63.1%)
• Operating costs increasing by 1.5% (FY20: 1.0%)
•
Pre-tax discount rate of 8.3% (FY20: 9.2%) (post tax rate of 7.0% (FY20: 8.6%) estimated using a weighted average cost of
capital, adjusted to reflect current market assessments of the time value of money and the risks specific to the Group; and
•
Terminal growth rate percentage of 0.0% (FY20: 0.0%).
A reasonably possible adverse movement in any of the above key assumptions made would not give rise to impairment.
95
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
16 Property, plant and equipment
Cost
At 1 April 2019
Reclassification to right of use (note 17)
Adjusted balance at 1 April 2019
Additions
Disposals
Exchange differences
At 31 March 2020
Reclassification to intangibles (note 15)
Additions
Disposals
Exchange differences
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Reclassification to right of use (note 17)
Adjusted balance at 1 April 2019
Charged in year
On disposals
Exchange differences
At 31 March 2020
Charged in year
On disposals
Exchange differences
At 31 March 2021
Net book value
At 31 March 2021
At 31 March 2020
At 31 March 2019
Leasehold
improvements
Office
fixtures and
fittings
Vehicles &
computer
equipment
£000
£000
£000
13,734
(55)
13,679
134
(6,285)
-
7,528
-
404
(129)
-
1,494
(23)
1,471
129
(569)
2
1,033
-
442
(103)
(9)
33,987
(5,191)
28,796
3,711
(6,500)
(14)
25,993
(4,434)
940
(816)
(24)
Total
£000
49,215
(5,269)
43,946
3,974
(13,354)
(12)
34,554
(4,434)
1,786
(1,048)
(33)
7,803
1,363
21,659
30,825
10,123
(6)
10,117
626
(6,285)
-
4,458
458
-
-
4,916
2,887
3,070
3,611
1,095
(8)
1,087
135
(569)
-
653
148
-
(8)
793
570
380
399
19,864
(2,428)
17,436
5,612
(6,500)
(14)
16,534
2,802
(32)
(22)
31,082
(2,442)
28,640
6,373
(13,354)
(14)
21,645
3,408
(32)
(30)
19,282
24,991
2,377
9,459
14,123
5,834
12,909
18,133
During the year, the Group’s new ERP system, Microsoft Dynamics 365 went live. As a result, and in the context of evolving
guidance in relation to configuration or customisation costs in a cloud computing arrangement (see note 2), £4,434,000 of
asset previously recognised within tangible assets was reclassified to intangible assets.
On initial application of IFRS 16 ‘Leases’, the Group continued to present assets that were previously recognised under
IAS17 as finance leases within property plant and equipment and intangible assets. The carrying value at 31 March 2020 was
£2,826,000 within property plant and equipment and £452,000 within intangible assets. In the current year, all right of use
assets have been presented separately in note 17 and therefore these amounts have been reclassified along with the assets
that were newly recognised from 1 April 2019 on initial application of IFRS 16.
96
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
17. Right of use assets
Most of the Group’s right-of-use assets are associated with our leased property portfolio.
Cost
At 1 April 2019
Recognition of ROU asset on initial application of IFRS 16
Reclassification from Property plant and equipment (note 16)
Reclassification from intangibles (note 15)
Adjusted balance at 1 April 2019
Additions
Remeasurement
At 31 March 2020
Additions
Remeasurement
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Recognition of ROU asset on initial application of IFRS 16
Reclassification from Property plant and equipment (note 16)
Reclassification from intangibles (note 15)
Adjusted balance at 1 April 2019
Charged in year
At 31 March 2020
Charged in year
At 31 March 2021
Net book value
At 31 March 2021
At 31 March 2020
Office
fixtures and
fittings
Vehicles &
computer
equipment
£000
£000
-
27,858
-
-
27,858
-
2,031
29,889
-
(4,383)
25,506
-
7,823
-
-
7,823
1,898
9,721
2,540
12,261
-
736
5,269
1,240
7,245
2,370
-
9,615
2,092
-
11,707
-
-
2,442
788
3,230
543
3,773
2,392
6,165
Total
£000
-
28,594
5,269
1,240
35,103
2,370
2,031
39,504
2,092
(4,383)
37,213
-
7,823
2,442
788
11,053
2,441
13,494
4,932
18,426
13,245
20,168
5,542
5,842
18,787
26,010
Of the £2,092k right of use assets acquired in the year, £1,036k were funded as part of the sale and leaseback transaction and
the remaining £1,056k funded using other leases (FY20: £2,370k).
On initial application of IFRS 16 ‘Leases’, the Group continued to present assets that were previously recognised under
IAS17 as finance leases within property plant and equipment and intangible assets. The carrying value at 31 March 2020 was
£2,826,000 within property plant and equipment and £452,000 within intangible assets. In the current year, all right of use
assets have been presented separately in this note and therefore these amounts have been reclassified along with the assets
that were newly recognised from 1 April 2019 on initial application of IFRS 16.
The Group entered into a sale and leaseback transaction with Lombard Technology Services Limited for various equipment,
software and ancillary costs used and incurred in the business. This was entered into as part of the Group’s combined debt
strategy. The leaseback has a remaining term of five years at the date of application.
97
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
The remeasurement represents:
•
•
the modification to the London site lease incorporating a one-way break clause at March 2030 resulting in a reduction in
the lease liability of £4.2m, a reduction in the asset of £4.7m an increase in the dilapidation provision of £0.2m and an
exceptional charge of £0.7m;
the modification to the Cambridge site lease following the decision not to activate the break clause resulted in an increase
in the lease liability of £0.3m and an increase in the right-of-use asset of £0.3m.
18 Deferred tax
Certain deferred tax assets and liabilities have been offset on the face of the consolidated statement of financial position.
The following is the analysis of the deferred tax balances (before offset) for financial reporting purposes:
Deferred tax liabilities
Deferred tax assets
18.1 Deferred tax liabilities
Opening balance
Recognised in the income statement
Deferred tax liabilities relate to intangible assets from business acquisitions.
18.2 Deferred tax assets
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
(3,362)
3,923
561
(4,550)
6,032
1,482
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
4,550
(1,188)
3,362
5,134
(584)
4,550
Share-based
payments
Tax losses
Property,
plant and
equipment
Other
timing
differences
£000
£000
£000
£000
India
£000
Cost
At 1 April 2019
Adjustment upon transition to IFRS 16
Recognised in income statement
Adjustment in relation to prior year
At 31 March 2020
Recognised in income statement
Recognised in other comprehensive
income
Adjustment in relation to prior year
At 31 March 2021
44
-
3
-
47
-
-
-
47
2,780
2,404
-
(365)
(5)
2,410
(1,633)
-
(154)
623
-
527
-
2,931
(273)
-
(248)
2,410
12
530
(51)
-
491
(72)
-
27
446
36
-
127
(10)
153
20
224
-
397
98
Total
£000
5,276
530
241
(15)
6,032
(1,958)
224
(375)
3,923
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
19 Trade and other receivables
Trade receivables
Less: provision for impairment of trade receivables and credit notes
Trade receivables – net
Other receivables
Prepayments
Commission contract asset
Accrued income
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
10,268
(1,104)
9,164
5,825
6,579
2,096
1,999
13,813
(1,438)
12,375
664
5,639
2,734
1,849
25,663
23,261
The commission contract asset arose on the adoption of IFRS 15. For the year ended 31 March 2021 the impairment for this
contract asset was immaterial (FY20: immaterial).
There is an £immaterial (FY20: £immaterial) expected credit loss against other receivables.
20 Credit quality of financial assets
The amounts of the maximum exposure to credit risk at the reporting date are as follows:
Trade receivables
Other receivables
Cash and cash equivalents
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
9,164
5,825
5,250
20,239
12,375
664
3,710
16,749
20.1 Credit quality of trade receivables
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 financial difficulty, customer acceptance issues and
cancelled contracts.
99
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
The ageing analysis of trade receivables is as follows:
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
Provision
Net trade debtors
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
9,343
600
282
21
21
1
10,268
(1,104)
9,164
10,993
1,656
593
220
288
63
13,813
(1,438)
12,375
As at 31 March 2021, trade receivables of £165k were provided for (31 March 2020: £246k). £939k has been provided for
within the credit note provisions (31 March 2020: £1,192k). No provision has been made against accrued income in the year
ended 31 March 2021 (31 March 2020: £nil).
The provision is calculated by management on a specific basis based on their best estimate of recoverability considering the
age and specific 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.
Movements on the Group bad debt and credit provisions were as follows:
Provision in
relation to
FY18 and
earlier
£000
218
36
(247)
7
-
(4)
3
Provision in
relation to
FY19
Provision in
relation to
FY20
£000
1,303
10
(707)
606
-
(465)
141
£000
-
1,736
(911)
825
-
(499)
326
Provision in
relation to
FY21
£000
-
-
-
-
1,272
(638)
634
Total
provision
£000
1,521
1,782
(1,865)
1,438
1,272
(1,606)
1,104
At 1 April 2019
Creation of provision
Utilisation of provision
At 31 March 2020
Creation of provision
Utilisation of provision
At 31 March 2021
20.2 Cash and cash equivalents
The Group’s cash is held at accounts with Barclays Bank PLC, which has a Standard and Poor’s rating of A.
100
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
21 Trade and other payables
Trade payables
Other payables
Taxation and social security
Accruals
Deferred income
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
8,470
243
2,390
3,885
7,471
7,661
198
2,596
4,171
9,685
22,459
24,311
Of the deferred income balance of £9.7m at 31 March 2020, £8.1m has been recognised as revenue in the year ended
31 March 2021.
Of the deferred income balance of £9.1m at 31 March 2019, £6.9m has been recognised as revenue in the year ended
31 March 2020.
22 Borrowings
Current
Lease liabilities
Term loans
Bank loan
Unamortised loan arrangement fee
Non-current
Lease liabilities
Term loans
Bank loan
Unamortised loan arrangement fee
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
3,735
487
-
-
3,528
115
12,500
(17)
4,222
16,126
15,593
1,004
-
-
22,097
36
-
-
16,597
22,133
At 31 March 2021, the Group was party to £32m of bank facilities with a termination date of 30 June 2022. The facilities
comprise a Revolving Credit Facility of £5m (£nil utilised at 31 March 2021) with a £20.0m accordion (£nil utilised at 31 March
2021) and a £7.0m Asset Financing Facility (£1.8m utilised at 31 March 2021).
Term loans constitute financing arrangements for services. Term loans include a supplier loan of £1,207k for a 3 year
maintenance contract.
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.
101
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
22.1 Reconciliation of net debt
As at
31 March
2019
Net cash
flow
Net
non-cash
flow
As at
31 March
2020
Net cash
flow
Net
non-cash
flow
£000
£000
£000
£000
£000
£000
Cash
RCF
Term Loan
Lease Liabilities
7,206
(19,432)
(363)
(4,976)
(17,565)
(3,483)
7,000
212
6,234
9,963
(13)
(51)
-
(26,883)
(26,947)
3,710
(12,483)
(151)
(25,625)
(34,549)
1,567
12,500
212
4,527
18,806
(27)
(17)
(1,552)
1,770
174
22.2 Terms and repayment schedule
RCF
Term loans
Leases
22.3 Leases
Currency
£000
Nominal
interest rate
£000
GBP
GBP
GBP
LIBOR + 2.40%
0.0 - 2.0%
1.4 - 7.5%
As at
31 March
2021
£000
5,250
-
(1,491)
(19,328)
(15,569)
Year of
maturity
£000
2022
2021-24
2021-35
Present
value as at
31 March
2021
Future lease
payments as
at 31 March
2021
Present
value as at
31 March
2020
Future lease
payments as
at 31 March
2020
Finance
charges
Finance
charges
£000
£000
£000
£000
£000
£000
Not later than 1 year
After 1 year but not more than 5 years
After more than 5 years
3,735
9,566
6,027
19,328
900
1,805
985
3,690
4,635
11,371
7,012
23,018
3,528
9,395
12,702
25,625
1,229
3,198
4,530
8,957
4,757
12,593
17,232
34,582
The lease for the Shoreditch data centre contains a break clause in March 2030. Potential future undiscounted lease payments
not included in the reasonably certain lease term, and hence not included in lease liabilities, total £9,500,000.
102
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
23 Liquidity risk
The table below analyses the Group’s financial 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 flows. Balances within 12 months equal their carrying balances as the impact of discounting is not significant.
At 31 March 2021
Bank loans
Leases
Term loans
Trade payables
Other payables
At 31 March 2020
Bank loans
Leases
Term loans
Trade payables
Other payables
Less than
1 year
£000
1-5
years
£000
More
than
5 years
£000
Total
£000
-
3,735
487
8,470
242
-
9,566
1,004
-
-
-
-
6,027
19,328
-
-
-
1,491
8,470
242
12,934
10,570
6,027
29,531
12,500
-
-
3,528
115
7,661
198
9,395
12,702
36
-
-
-
-
-
12,500
25,625
151
7,661
198
24,002
9,431
12,702
46,135
Borrowings exclude unamortised loan arrangement fee of £nil (FY20: £17,000).
24 Provisions
Restitution
Scheme
provision
Scheme
fees
provision
Dilapidations
provision
Onerous
service contract
provision
Total
provision
£000
£000
£000
£000
£000
At 1 April 2019
-
Additional provisions created during the period
11,429
Released during the period
Utilised during the period
At 31 March 2020
Additional provisions created during the period
Released during the period
Utilised during the period
At 31 March 2021
Analysed as:
Current
Non-current
-
-
11,429
130
(2,172)
(9,387)
-
-
-
-
103
-
-
-
-
-
553
-
-
553
553
-
553
496
2,030
-
-
2,526
333
(164)
-
2,695
-
2,695
2,695
534
833
(156)
(513)
698
21
(193)
(505)
21
1,030
14,292
(156)
(513)
14,653
1,037
(2,529)
(9,892)
3,269
21
-
21
574
2,695
3,269
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
The Restitution Scheme provision related to the settlement agreed with the FCA in respect of certain historical accounting
misstatements that were uncovered by the Company in November 2016. As part of this settlement, the Company agreed to
implement a Restitution Scheme to compensate net purchasers of ordinary shares in the Company between 9 November 2015
and 6 November 2016. The amount represented management’s best estimate of the cost to the Group. The uncertainty in the
value arose as a result of the fact that claimants have the option to opt for a cash payment, a share payment or a split payment.
All outflows associated with the Restitution Scheme were made by January 2021 with the remaining balance released.
The Scheme fees provision represents costs repayable on adviser fees in relation to the FCA investigation.
The dilapidations provision represents the estimated costs associated with returning certain leasehold properties to the original
condition upon exiting the lease. Given there is estimation in determining the quantum of provisions to be recognised a third-
party expert was engaged to determine appropriate estimates.
The onerous service contract provision relates to the costs associated with third party services arrangements no longer utilised
by the business. All remaining outflows will occur within 1 year.
25 Share Capital
At 1 April 2019
New shares issues
At 31 March 2020
New shares issued
At 31 March 2021
Ordinary shares of 0.1p each
Share
premium
£000
£000
£000
149,135,316
175,397
149,310,713
6,854,997
156,165,710
149
-
149
7
156
65,588
146
65,734
7,533
73,267
Of the 6,854,997 ordinary shares of 0.1p each issued during the year, 5,250,000 were issued for proceeds of £5,775,000.
57,142 shares were issued for £36,000. 1,314,244 shares were issued in respect of the Restitution Scheme, utilising £1,729,000
of the provision. The remaining 233,611 were issued at 0.1p each.
During the year the Company purchased, and held in treasury, nil of its ordinary share capital (FY20: 822,427) for total proceeds
of £nil (FY20: £724,000). The total shares held in treasury at 31 March 2021 was 33,284 (31 March 2020: 822,427).
The number of shares 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.
26 Share-based payments
At 31 March 2021, the Group had the following share-based payment arrangements in place:
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.
104
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
26 Share-based payments (continued)
Save As You Earn (SAYE)
The Group operates a HMRC approved SAYE scheme which offers its UK based colleagues the opportunity to participate in a
share purchase plan. To participate in the plan, the colleagues 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 colleagues are entitled to purchase shares using funds saved at a price 20% below the market price at grant date. Only
colleagues 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. Colleagues 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.
The Group recognised the following expense for its share-based payments:
Equity-settled share-based charge on LTIP scheme
Equity-settled share-based charge on SAYE scheme
National Insurance arising on share options
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
430
152
105
687
362
122
78
562
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. The following table illustrates the number and
weighted average exercise prices (WAEP) of, and movements in, share options during the year.
LTIP
SAYE
Total
WAEP
Balance at 31 March 2019
Issued in the period
Forfeited in the period
Cancelled in the period
Exercised in the year
Lapsed in the year
Balance at 31 March 2020
Issued in the period
Forfeited in the period
Cancelled in the period
Exercised in the year
Lapsed in the year
Balance at 31 March 2021
1,275,600
1,667,517
(92,619)
-
(161,905)
(105,763)
974,520
488,342
-
(49,126)
(13,492)
(74,486)
2,582,830
1,325,758
822,077
(323,750)
521,782
2,250,120
2,155,859
(92,619)
(49,126)
(175,397)
(180,249)
3,908,588
1,343,859
27.7p
14.4p
0.1p
63.0p
4.9p
38.8p
21.1p
46.5p
0.1p
-
(323,750)
-
(46,655)
(46,655)
119.6p
(233,611)
(854,647)
(1,088,258)
-
(52,016)
(52,016)
2,847,546
894,222
3,741,768
49.6p
76.9p
22.1p
As at 31 March 2021 the Company had a total of 350,000 (31 March 2020: 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.
105
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
26 Share-based payments (continued)
The weighted average remaining contractual life for the share options outstanding at 31 March 2021 is 6 years and 11 months
(31 March 2020: 6 years and 5 months). The range of exercise prices for options outstanding at the end of the year was 0.1p to
119.6p. Share options outstanding at the end of the year with approximate remaining average life are as follows:
Exercise price
0p
63p
63p
120p
Number,
year ended
31 March 2021
Life at
31 March 2021
Number,
year ended
31 March 2020
Life at
31 March 2020
2,847,546
8 years, 4 months
2,582,830
8 years, 10 months
-
434,145
460,077
-
2 years, 0 months
3 years, 0 months
845,973
479,785
-
0 years, 11 months
3 years, 0 months
-
3,741,768
6 years, 11 months
3,908,588
6 years, 5 months
The following table illustrates the status of the options outstanding at the end of the year:
31 March 2021
Number of
options
31 March 2021
WAEP
31 March 2020
Number of
options
31 March 2020
WAEP
-
2,847,546
894,222
3,741,768
0.0p
0.1p
92.0p
22.4p
0
2,582,830
1,325,758
3,908,588
0p
0p
63p
21p
Performance conditions satisfied
Subject to performance conditions
Save-As-You-Earn
Outstanding at the end of the year
27 Capital commitments
The Group had no contracted but not provided for capital commitments at 31 March 2021 (31 March 2020: £nil).
28 Pensions
The Group operates a defined contribution pension scheme for eligible employees. The charge for the year ended 31 March
2021 was £610,000 (FY20: £624,000). At the year-end there was a pension’s creditor of £0.1m (2020: £0.1m).
106
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2021 (continued)
29 Subsidiaries
The undertakings whose results and financial position are consolidated within the Group financial statements at 31 March 2021
are as follows:
Principal activity
Country of
incorporation
% of ordinary
share capital
owned
Held directly by Redcentric plc
Redcentric Holdings Limited (dissolved 6 July 2021)
Dormant
England and Wales
Redcentric Solutions Limited
Held indirectly
Redcentric Solutions Private Limited
Redcentric Support Services Private Limited
Redcentric MS Limited (dissolved 1 June 2021)
Redcentric Managed Solutions Limited (dissolved 1 June 2021)
Redcentric Communications Limited (dissolved 1 June 2021)
Hotchilli Internet Limited
Managed
Services
England and Wales
Support services
Support services
India
India
Dormant
Dormant
Dormant
Dormant
England and Wales
England and Wales
England and Wales
England and Wales
Calyx Managed Services Limited (dissolved 1 June 2021)
Dormant
England and Wales
City Lifeline Limited (dissolved 1 June 2021)
Dormant
England and Wales
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
All companies have a registered office of Central House, Beckwith Knowle, Harrogate HG3 1UG, except Redcentric Solutions
Private Limited and Redcentric Support Services Private Limited which have a registered office at # 606-611, 6th Floor,
Manjeera Trinity Corporate, JNTU – Hitech City Road, Kukatpally, Hyderabad – 72.
30 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 on pages 53-59 and compensation of key management
personnel is disclosed in note 11.
There were no other transactions with related parties in the year to 31 March 2021.
31 Subsequent events
Subsequent to 31 March 2021, a corporate simplification exercise was completed which resulted in the dissolution of six
dormant companies within the Group, being Redcentric Holdings Limited, Redcentric MS Limited, Redcentric Managed
Solutions Limited, Redcentric Communications Limited, Calyx Managed Services Limited and City Lifeline Limited.
107
Annual Report and Accounts 2021Financial statements Company Balance Sheet
as at 31 March 2021
Fixed assets
Investments
Current liabilities
Creditors – amounts falling due within one year
Provisions
Net current liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Share option reserve
Own shares held in treasury
Retained earnings
Total shareholders’ funds
Year ended
31 March
2021
Year ended
31 March
2020
Note
£000
£000
2
3
4
102,983
102,402
(21,633)
(554)
(22,187)
(15,726)
(11,429)
(27,155)
80,796
75,247
156
73,267
6,776
(32)
629
80,796
149
65,734
6,194
(724)
3,894
75,247
The notes on pages 110 to 112 are an integral part of these financial statements.
The financial statements of Redcentric Plc (Registration Number 08397584) on pages 87 to 88 were approved by the Board
on 15 July 2021 and are signed on its behalf by:
David Senior
Chief Financial Officer
108
Annual Report and Accounts 2021Financial statements Company Statement of Changes in Equity
as at 31 March 2021
Called
up Share
Capital
Share
Premium
£000
£000
Share
option
reserve
£000
Own shares
held in
treasury
Retained
Earnings
£000
£000
Total
Equity
£000
149
65,588
5,856
-
-
-
-
-
-
-
146
-
-
-
-
(146)
-
484
149
65,734
6,194
-
-
7
-
-
-
-
7,533
-
-
156
73,267
-
-
-
-
582
6,776
-
-
-
-
(724)
-
(724)
-
-
-
692
-
(32)
18,054
(11,429)
89,647
(11,429)
(2,731)
(2,731)
-
-
-
3,894
(1,199)
(1,868)
-
(198)
-
629
-
(724)
484
75,247
(1,199)
(1,868)
7,540
494
582
80,796
Balance at 1 April 2019
Loss for the period
Transactions with owners
Dividend paid to shareholders
Issue of new shares
Share buy-back
Share-based payments
At 31 March 2020
Loss for the period
Transactions with owners
Dividend paid to shareholders
Issue of new shares
Share option exercises
Share-based payments
At 31 March 2021
109
Annual Report and Accounts 2021Financial statements Notes to the Company Financial Statements
1 Accounting policies
These financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework
(“FRS 101”). In preparing these financial statements, the Company applies the recognition, measurement and disclosure
requirements of international accounting standards in conformity with the requirements of the Companies Act 2006 (“Adopted
IFRSs”), but makes amendments where necessary in order to comply with Companies Act 2006.
In these financial 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 fixed assets, intangible assets and investments;
disclosures in respect of transactions with wholly owned subsidiaries;
disclosures in respect of capital management;
the effects of new but not yet effective IFRS;
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 financial statements of the 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 indefinite life
intangible assets;
• 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, unless otherwise stated, have been applied consistently to all periods presented in these
financial statements.
1.1 Basis of preparation
For details of the parent company basis of preparation, please refer to note 1.1 of the Group accounting policies on page 77.
2 Investments
Investments in subsidiaries
Capital contribution related to share-based payments for subsidiaries
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
96,062
6,921
96,062
6,340
102,983
102,402
The Company has assessed that the trading operations of the business constitute only one cash generating unit.
110
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements (continued)
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 annually for impairment and, to confirm whether an
impairment of the goodwill is necessary, management compares the carrying value to the value in use.
The value in use has been calculated using budgeted cash flow projections to the period of 31 March 2023, extrapolated for
a further three years by an average annual revenue growth rate of 1.5% (FY20: 2.0%). A terminal value based on a perpetuity
calculation using a 0.0% real growth rate was then added (FY20: 0.0% growth).
In addition to revenue growth, the key assumptions used in the impairment testing were as follows:
• Gross margin percentage reducing to 60.5% (FY20: 63.1%)
• Operating costs increasing by 1.5% (FY20: 1.0%)
•
Pre-tax discount rate of 8.3% (FY20: 9.2%) (post tax rate of 7.0% (FY20: 8.6%) estimated using a weighted average cost of
capital, adjusted to reflect current market assessments of the time value of money and the risks specific to the Group; and
•
Terminal growth rate percentage of 0.0% (FY20: 0.0%).
A reasonably possible adverse movement in any of the above key assumptions made would not give rise to impairment.
The subsidiary undertakings of the Company are disclosed in note 29 to the consolidated financial statements.
3 Creditors – amounts falling due within one year
Amounts owed to subsidiaries
Year ended
31 March
2021
Year ended
31 March
2020
£000
£000
21,633
15,726
Amounts due to Group undertakings are unsecured, interest-free and have no fixed payment terms.
4 Provisions
Scheme
Fees
provision
Restitution
Scheme
provision
£000
£000
-
-
-
-
554
-
-
554
11,429
-
11,429
11,429
130
(9,387)
(2,172)
-
Additional provision created during the period
At 1 April 2019
Additional provision created during the period
At 31 March 2020
Additional provisions created during the period
Utilised during the period
Released during the period
At 31 March 2021
111
Annual Report and Accounts 2021Financial statements Notes to the consolidated financial statements (continued)
The Restitution Scheme provision related to the settlement agreed with the FCA settlement in respect of certain historical
accounting misstatements that were uncovered by the Company in November 2016. As part of this settlement, the Company
agreed to implement a Restitution Scheme to compensate net purchasers of ordinary shares in the Company between 9
November 2015 and 6 November 2016. The amount represented management’s best estimate of the cost to the Group.
The uncertainty in the value arose as a result of the fact that claimants have the option to opt for a cash payment, a share
payment or a split payment. All outflows associated with the Restitution Scheme were made by January 2021 with the
remaining balance released.
The Scheme fees provision represents costs repayable on adviser fees in relation to the FCA investigation.
5 Share capital
Details of the share capital of the company are disclosed in note 25 to the consolidated financial statements. During the prior
year the Company purchased, and held in treasury, 822,427 of its ordinary share capital for total proceeds of £724,000. At 31
March 2021, 33,284 treasury shares remained representing 0.0% of the Company’s issued share capital.
6 Auditors’ remuneration
The Company audit fee is £25,000 (FY20: £25,000). This fee was borne by another Group company.
7 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 of the consolidated financial statements on pages 53 to 59.
There were no other transactions with related parties in the year to 31 March 2021.
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Annual Report and Accounts 2021Financial statements Annual Report and Accounts 2021
Directors and advisers
Directors
Nominated adviser and broker
Executive
Peter Brotherton – Chief Executive Officer
David Senior – Chief Financial Officer
Non-Executive
Ian Johnson
Jon Kempster
Helena Feltham
Company Secretary
Harn Jagpal
Company number
08397584
Registered Office
Central House
Beckwith Knowle
Harrogate HG3 1UG
Auditor
KPMG LLP
1 Sovereign Square
Sovereign Street
Leeds LS1 4DA
finnCap plc
60 New Broad Street
London EC2M 1JJ
Registrars
Link Asset Services
Arlington Business Centre
Millshaw Park Lane
Leeds LS11 0PA
Financial adviser
Oakley Advisory
3 Cadogan Gate
London
SW1X 0AS
Legal advisors to the Group
Clarion Solicitors
Elizabeth House
13-19 Queen Street
Leeds LS1 2TW
Printed in the United Kingdom
on FSC certified paper
113
Head office
Central House
Beckwith Knowle
Harrogate
HG3 1UG
T 0800 983 2522
E sayhello@redcentricplc.com
W www.redcentricplc.com