R E P O R T & A C C O U N T S
2022
Year ended 31 March 2022 | Redcentric plc
Company Number 08397584
“
The Redcentric
cloud team managed the
seamless migration of our
£100 million e-commerce business.
Redcentric’s cloud solution has
provided The White Company
with a stable and scalable platform
to help grow our business for
many years to come.
”
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
5
6
9
12
22
27
28
31
33
37
41
42
50
52
54
61
65
68
77
78
79
80
82
123
124
125
131
Annual Report and Accounts 2022 F I N A N C I A L
H I G H L I G H T S
Year ended
31 March 2022
(FY22)
Year ended
31 March 2021
(restated1) (FY21)
£93.3m
£83.0m
£23.7m
£15.9m
Total revenue +2.1%
Recurring revenue +1.3%
Adjusted EBITDA -3.5%
Adjusted operating profit +2.2%
£91.4m
£81.9m
£24.6m
£15.6m
m
5
.
6
2
£
.
m
3
9
1
£
.
m
2
7
1
£
.
m
9
6
1
£
.
m
6
6
1
£
.
m
6
5
1
£
p
8
6
7
.
p
5
4
7
.
Adjusted
cash
generated
from
operations
Reported
cash
generated
from
operations
-27.2%
+1.3%
Net debt
-6.9%
Adjusted
basic
earnings
per share
+3.1%
FY22
FY21
4
Highlights
Financial performance measures
Total revenue
Recurring revenue 2
Recurring revenue percentage2
Adjusted EBITDA2
Adjusted operating profit 2
Reported operating profit
Adjusted cash generated from operations2
Reported cash generated from operations
Net debt2
Adjusted net (debt)/cash2
Adjusted basic earnings per share2
Reported basic earnings per share
Percentage change calculated on absolute values
Year ended
31 March
2022 (“FY22”)
Year ended
31 March 2021
(restated1)
(“FY21”)
£93.3m
£83.0m
88.9%
£23.7m
£15.9m
£6.6m
£19.3m
£17.2m
(£16.6m)
(£1.5m)
7.68p
4.43p
£91.4m
£81.9m
89.6%
£24.6m
£15.6m
£12.8m
£26.5m
£16.9m
(£15.6m)
£1.0m
7.45p
5.87p
Change
2.1%
1.3%
(0.7%)
(3.5%)
2.2%
(48.3%)
(27.2%)
1.3%
(6.9%)
(257.7%)
3.1%
(24.5%)
1 See note 34 for an explanation and reconciliation in relation to the prior year restatement following the adoption by the
Redcentric plc group of companies (the “Group”) of the IFRS Interpretations Committee (“IFRIC”) agenda decision on
cloud computing implementation, configuration and customisation costs.
2 This annual report and accounts (“Report”) contains certain financial measures that are not defined or recognised under
IFRS but are presented to provide readers with additional financial information that is evaluated by management and
investors in assessing the performance of the Group.
This additional information presented is not uniformly defined by all companies and may not be comparable with similarly
titled measures and disclosures from other companies. These measures are unaudited and should not be viewed in
isolation or as an alternative to those measures that are derived in accordance with IFRS.
For an explanation of the alternative performance measures used in this report and reconciliations to their most directly
related GAAP measure, please refer to pages 22 to 25.
5
Annual Report and Accounts 2022Strategic report Chairman’s statement
I am very pleased to introduce the annual report and accounts (“Report”) for the Redcentric plc
(“Redcentric” or “Company”) group of companies (the “Group”) for the financial year ended
31 March 2022 (“FY22”).
Overview and financial results
Dividend and share buyback
These results demonstrate the robust nature of the
business. Despite considerable headwinds associated with
the COVID-19 pandemic, materially higher electricity prices,
and substantially increased lead times on equipment orders,
trading for the year was broadly equivalent with the prior
year and remained ahead of the pre COVID-19 period (the
financial year ended 31 March 2020 (“FY20”)).
With the conclusion of the investigation by the Financial
Conduct Authority (“FCA Investigation”), historical
acquisitions fully integrated and efficiency programmes
delivered, the focus of the management team during the
year has been on the long-term growth of the business.
During FY22, two capability acquisitions were completed
and following the year end a further capability acquisition
was completed along with two scale acquisitions. The Piksel
Industry Solutions Limited (“Piksel”), 7 Elements Limited (“7
Elements”) and Sungard consultancy business (“Sungard
Consulting”) capability acquisitions have significantly
enhanced our hyper-cloud, security, and consultancy
product offerings. The capability acquisitions all operate
within the highest growth areas of the market and will be
a significant driver of future growth for the Group. The
Sungard data centre assets (“Sungard DCs”) and 4D Data
Centres Limited (“4D”) scale acquisitions are highly accretive
to the Group, reflecting the operational leverage of the
business whilst also adding c.520 customers into which we
can cross-sell our broad range of products and solutions.
At the start of the financial year ending 31 March 2023
(“FY23”), a new divisional structure was implemented,
significantly strengthening the management team,
positioning the Company for growth, and recognising the
very significant increase in both scale and capability as a
result of the acquisitions undertaken.
Having completed five acquisitions in the last nine months,
the near focus of the board of directors of the Company
(the “Board”) is to ensure that the most recent acquisitions
are fully integrated, and synergies maximised. At the date
of approval of this Report, the Company had drawn £35.5m
of its £80m committed bank facility, and this, along with
the significant cash generation of the business, means the
Group has significant firepower for future acquisitions.
A final dividend of 2.4p per share is recommended by the
Board and will result in a total dividend for FY22 of 3.6p
per share (financial year ended 31 March 2021 “FY21”:
3.6p per share). Subject to approval by shareholders at the
Company’s annual general meeting (“AGM”), this will be
paid on 16 September 2022 to shareholders on the register
at the close of business on 29 July 2022 with shares going
ex-dividend on 28 July 2022. The last day for Dividend
Reinvestment Plan elections is 19 August 2022.
During the year, the FY21 final dividend payment of
£3.7m was paid along with the FY22 interim dividend
payment of £1.9m. In addition, a further £3.0m was returned
to shareholders through share and warrant buybacks.
Returns to shareholders during the year therefore totalled
£8.6m, reflecting continued strong cash generation from
the Group.
The Board intends to continue with the same level of
dividends and selective share buybacks but will review these
policies in light of any large-scale acquisitions.
Board changes and people
On 17 November 2021, I joined the business, replacing Ian
Johnson as Independent Non-Executive Chair of the Board,
Chair of the Nomination Committee and member of the
Remuneration Committee. I am a chartered management
accountant and have been both chair and non-executive
director for a portfolio of companies across the data,
communications, software and financial services sectors
and, between 2014 and 2020, sat on the board of directors
for Nasstar plc.
On the 7 July 2021, Helena Feltham was appointed as
an Independent Non-Executive Director, taking the
responsibilities of Chair of the Remuneration Committee
and becoming a member of the Audit and Nomination
Committees, roles previously held by Stephen Vaughan.
With the publication of this Report, Jon Kempster steps
down from the Board as Chair of the Audit Committee
and Non-Executive Director and the Board is delighted to
welcome Alan Aubrey as a new Non-Executive Director
and Chair of the Audit Committee. Alan brings with him
considerable market knowledge and breadth and depth of
skills and experience. Our thanks and best wishes go to Jon
for his service to the Company.
6
Strategic reportAnnual Report and Accounts 2022
Chairman’s statement (continued)
I would also like to thank the Board for their support in my first seven months, and special thanks to our management and
employees for their hard work and dedication to progress the Company’s performance. I would like to welcome all our new
employees that have joined our Redcentric family through our recent acquisitions.
Outlook
The five acquisitions undertaken in the last nine months add increased capability and an enlarged customer base into the
Group. As we fully integrate our acquired operations, I look forward to building strong relationships with all our customers,
new and old, and I am confident that we can surpass their expectations through the delivery of our enhanced range of
services.
With the considerable progress made in the year, the Board is optimistic for the future of the business.
Nick Bate
Chairman
21 July 2022
7
Annual Report and Accounts 2022Strategic report O U R M I S S I O N
We deliver agile,
available and assured
solutions that help
organisations succeed.
O U R V I S I O N
To be the most trusted
provider of IT managed
services to commercial
and public sector
organisations.
O U R VA L U E S
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.
8
Chief Executive Officer’s review
Overview
Providing focus and structure for growth
FY22 has been a very significant and productive year for
Redcentric. After many years of positioning the business
for growth, we completed two capability acquisitions
within FY22, both of which are trading well and have been
quickly integrated into the business, delivering higher than
anticipated synergy savings. Following the year end, we
have completed a further capability acquisition and two
scale acquisitions. As a result, we have completed five
acquisitions in the last nine months and totally transformed
the Company, adding over six hundred customers to
our existing base and increasing run rate revenues by
approximately 60%.
The acquisitions of Piksel, 7 Elements and Sungard Consulting
have significantly increased our capabilities and revenues
in hyper-cloud, security and consultancy services,
complementing our already significant network revenues,
whilst the scale acquisitions of 4D and Sungard DCs provide
operational leverage and an enlarged customer base for us
to cross-sell our products and services into.
With these acquisitions we believe that we now have the
most comprehensive IT and telecommunications product
and solutions offering in the market.
To ensure that each product category receives dedicated
focus on growth, efficiency and innovation, we have created
a structure that enables us to deploy and manage the
tailored technical skills and expertise required to innovate
across different technologies. A new divisional structure
implemented after the year end has resulted in several new
senior appointments within the organisation representing
a significant step change in the way the business operates.
The dedicated focus that each division receives enables
colleagues to gain improved knowledge of the products
and services within their area, resulting in better quality
customer conversations and improved bid quality.
A new banking facility was agreed on 26 April 2022 which
provides us with significant additional firepower at very
competitive rates of interest to support and accelerate our
acquisition strategy. Under this new four bank syndicate
facility, we have £80m of committed funds available, with a
further £20m accordion facility accessible if required. This
has been well utilised and at 30 June 2022, £34m of the
facility has been drawn to fund acquisitions, leaving sufficient
capacity for further scale and capability opportunities.
As we move into a phase of delivering growth through
M&A, the Board has changed to reflect this, and I am
pleased to welcome Nick Bate and Helena Feltham to the
Board, both of whom bring a wealth of experience relevant
to the Company’s growth strategy, including corporate
M&A transactions.
Business performance
Revenues for the year increased by 2.1% on last year with
recurring revenues accounting for 88.9% of total revenues
marginally down by (0.7)ppts on FY21.
The sale of the business and assets relating to the
Company’s contract with EDF (the “EDF Contract”), which
was not core to the Redcentric business, on 31 March 2021,
for a consideration of £5.75m, had the impact of reducing
revenues for FY22 by £1.0m, whereas the acquisition
of Piksel on 30 September 2021 and the acquisition of
7 Elements on 14 March 2022 contributed £6.0m to
Group revenues.
Underlying organic revenues contracted slightly in FY22
reflecting a market that was still recovering from the
COVID-19 pandemic but follows a year of solid growth in
FY21. Over the two-year period of the COVID-19 pandemic,
the business has grown underlying revenues by 1%, a strong
performance given the significant market and economic
headwinds, with the additional 5.7% of revenue growth
generated by the acquisitions of Piksel and 7 Elements.
As the country started to emerge from the COVID-19
pandemic and the various lockdowns and measures eased,
the business experienced a number of market trends and
evolving customer behaviours:
•
Re-engagement on previously deferred large-scale
IT projects;
• Digital transformation continuing to be a key focus for
customers as they plan for life after COVID-19;
• Cost bases being closely scrutinised resulting in
additional cancellations of non-critical services;
• Customers adapting to changes in workforce by
appraising office space utilisation; and
• A shortage of electrical components affecting both
recurring and non-recurring revenues.
The behaviours described above have led to a subdued
market for most of FY22, with new order intake being
approximately half the pre-COVID-19 levels for the first
three quarters of FY22, and cancellations remaining
at pre-COVID-19 levels. The final quarter of FY22 was
9
Annual Report and Accounts 2022Strategic report Chief Executive Officer’s review (continued)
more positive, with several larger scale projects being
signed, resulting in the order intake levels increasing to
approximately 80% of pre-COVID-19 volumes.
• A new divisional operating structure has been
introduced subsequent to the balance sheet date,
to drive focus and growth across all divisions;
The well documented shortage of hardware technology has
not only meant that we have been unable to satisfy and, in
some cases, accept product orders, but it has also delayed
larger project rollouts that require end user hardware.
Whilst this continues to be a challenge, we are managing
this by working closely with our suppliers to avoid delays to
customer projects.
The outlook following the COVID-19 pandemic continues
to be positive, with an encouraging pipeline including
several discussions at an advanced stage. The additional
capabilities from Piksel, 7 Elements, Sungard Consulting
and Sungard DCs have opened new markets and the recent
acquisitions have brought with them skills that improve the
way we are able to identify customers’ needs and articulate
appropriate solutions.
We are pleased to announce that trading for FY22 was in
line with the expectations of the Board:
•
Revenues of £93.3m (FY21: £91.4m);
• Adjusted EBITDA2 of £23.7m (FY21 restated1: £24.6m);
• Adjusted operating profit2 of £15.9m (FY21 restated1:
£15.6m);
• Adjusted net debt of £1.5m (31 March 2021: net cash
of £1.0m); and
•
Reported operating profit of £6.6m (FY21 restated1:
£12.8m).
1 For an explanation and reconciliation in relation to the prior year
restatement following the Group’s adoption of the IFRIC agenda decision
on cloud implementation, configuration and customisation costs please
see note 34.
2 For an explanation of the alternative performance measures used in
this report, please refer to pages 22 to 25.
The net debt position is after dividend payments of
£5.6m; the disposal of assets relating to the EDF Contract
for £5.8m; share and warrant buybacks of £3.0m; the
acquisitions of Piksel and 7 Elements for a combined cash
cost of £10.4m (net of cash acquired); and a c.£2m working
capital catch up in respect of Piksel to align supplier
payment practices.
Operational highlights
• During FY22, Redcentric completed two capability
acquisitions, both of which are trading well and have
been quickly integrated into the business with higher
than anticipated synergy savings already delivered;
• New sales orders during the second half of the year
improved significantly on the first half and we are now
nearing the levels seen prior to the outbreak of the
COVID-19 pandemic, including the resumption of large-
scale projects;
•
•
•
Retention rates have been broadly consistent with
prior years;
Electricity price increases have added £0.5m to costs
and equipment supply chain issues have resulted in
delays to both recurring and non-recurring revenues;
The Board is cognisant of the continued volatility in
electricity prices and of the sector-wide employment,
retention and salary inflation challenges.
Integration of FY22 acquisitions
Piksel is now fully integrated into the Redcentric business.
Excellent progress has been made in realising synergies
from this acquisition, with c.£1.5m of annualised costs
already eliminated, surpassing the £1.1m of synergies
identified at the time of the acquisition. A further £0.5m
of synergies are anticipated to be realised in FY23.
Good progress has also been made with the 7 Elements
acquisition. For operational independence reasons, we will
maintain 7 Elements as a standalone business but most of
the back-office functions (e.g. finance and human resources)
have already been integrated.
Divisional focus
As highlighted in previous announcements, the preceding
three years have been spent focussing primarily on
delivering integration, optimisation, and efficiency
programmes to ensure that there is a solid and scalable
foundation for future growth. As the business now switches
focus to growth, the organisational structure also needs
to adapt to one that can deliver sustainable and profitable
growth. To that end, the last six months have been spent
designing and implementing an organisational structure that
can deliver the Company’s ambitious growth strategy, by
providing the level of focus required across the key revenue
streams of Cloud, Networks and Collaboration products.
In addition to the appointments directly relating to
the divisions, some central support functions have
been augmented to provide support for the increased
divisional demand.
10
Strategic reportAnnual Report and Accounts 2022
Chief Executive Officer’s review (continued)
This investment is one which sets the Company up for
the future. It recognises the need for dedicated product
expertise and addresses the broadening of our customer
base. With the delivery of this structure, the Company
can not only exploit the significant cross-sell opportunities
that the enlarged customer base brings, but it can also
confidently compete and succeed across all areas of
the market.
Support Services
New positions of Chief Technical Officer (“CTO”) and
Customer Services Director have been created to support
the Company’s growth plans.
The CTO’s role will be to drive product innovation and
increase the automation and efficiency of operational
systems and processes.
Cloud Services
Following the acquisitions of Piksel, Sungard and 4D, the
Company’s cloud services offering has further expanded
its range of cloud hosting solutions, ranging from
colocation through to hybrid and public cloud services.
IT modernisation, digital transformation and dev-ops
skills have also been added, which complete the business’
portfolio of cloud offerings.
The Customer Service Division has been created to bring
customers to the forefront of everything Redcentric does.
By combining the Service Operations, Service Delivery and
Assurance teams from across Redcentric and Piksel into one
division that supports the newly formed business units, we
are able to ensure our customers remain our focus and that
they receive a consistently high level of service across all
group services.
The acquisition of Piksel also gave us increased security
capability and this was further strengthened by the
acquisition of 7 Elements, which adds security and
penetration testing to our portfolio of security services.
Network Services
Network integration and data connectivity solutions are
another of Redcentric’s core strengths, accounting for
one-third of our recurring revenues. Most of the Company’s
customers take some sort of connectivity service, increasing
their stickiness and reducing potential churn.
After the pause of several large potential network projects
in the pipeline during the COVID-19 pandemic period,
the Company is now starting to see a return of such
opportunities. In the second half of the year, notable
successes were a large network cross-sell into the Piksel
customer base and two large public sector network wins.
Collaboration Services
Despite a strong range of collaboration product offerings
and the high number of customers already taking
connectivity from the Company, collaboration services
remain a relatively small proportion of the Group’s recurring
revenue (c.8%). Over the last 12 months Redcentric has
actively looked to strengthen both the product offering
and scale of this area of the business but, to date, no
suitable acquisitions have been found. Whilst the search
for such acquisitions will continue, we have formed a
new Collaboration Services Division to better exploit
the opportunities in this area. A new and experienced
management team is in the process of being set up with a
new managing director and sales director due to join the
business at the end of July 2022.
Outlook
The five acquisitions that have been completed within the
last nine months have totally transformed the business. We
have significantly increased our capabilities in the highest
growing areas of the market by acquiring Piksel, 7 Elements
and Sungard Consulting, whilst increasing our customer
base by over six hundred, including through the addition
of Sungard and 4D data centres. The additional customer
base brings with it a wealth of cross-sell opportunities as
the Redcentric product offering is much wider than both
Sungard and 4D.
During the next six to nine months our focus will be on
fully integrating the acquired businesses and exploiting
the meaningful cross-sell opportunities and synergies that
these acquisitions bring to Redcentric. The new divisional
structure will bring a renewed focus to the organisation and
will ensure that each of the service offerings are fully aligned
and can capitalise on the undoubted market opportunity.
Whilst our focus will be on the successful integration of the
recent acquisitions, we will continue to monitor potential
targets and should a suitable opportunity arise, our strong
balance sheet and access to £66m of undrawn bank facilities
will enable us to react swiftly.
We look forward to capitalising on the very significant
opportunities that come with the recent acquisitions and to
an exciting future.
Peter Brotherton
Chief Executive Officer
21 July 2022
11
Annual Report and Accounts 2022Strategic report Financial review
Financial performance measures
Year ended
31 March
2022 (FY22)
Year ended
31 March
2021 (FY21)
Restated1 Change
Total revenue
Recurring revenue 2
Recurring revenue percentage2
Adjusted EBITDA2
Adjusted operating profit 2
Reported operating profit
£93.3m
£83.0m
88.9%
£23.7m
£15.9m
£6.6m
£91.4m
£81.9m
2.1%
1.3%
89.6%
(0.7%)
£15.6m
2.2%
£12.8m
(48.3%)
Adjusted cash generated from operations2
Reported cash generated from operations
Net debt2
Adjusted net (debt)/cash2
£19.3m
£17.2m
£26.5m
(27.2%)
£16.9m
1.3%
(£16.6m)
(£15.6m)
(6.9%)
(£1.5m)
£1.0m
(257.7%)
Adjusted basic earnings per share2
Reported basic earnings per share
7.68p
4.43p
7.45p
3.1%
5.87p
(24.5%)
Percentage change calculated on absolute values
Year ended
31 March
2021 (FY21)3
£90.4m
£80.9m
89.5%
Change3
3.2%
2.6%
(0.7%)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
£24.6m
(3.5%)
£23.9m
(0.6%)
1 For an explanation and reconciliation in relation to the prior year restatement following the Group’s adoption of the IFRIC agenda decision on cloud
implementation, configuration and customisation costs, please refer to note 34.
2 For an explanation of the alternative performance measures used in this report, please refer to pages 22 to 25.
3 Excluding EDF Contribution following the sale of business and assets associated with the EDF Contract completed on 31 March 2021.
Overview
The business has delivered another set of strong results, showing resilience against challenging market conditions, with the
Group continuing to perform ahead of pre-COVID levels of FY20. The stability in the underlying business has positioned
the Group to begin to implement its acquisition strategy as the Company seeks to capitalise on the market consolidation
opportunity. This year’s accounts include the impact and contributions made by the Piksel and 7 Elements acquisitions
completed in the financial year as well as the disposal of the business and assets related to the EDF Contract completed at
the end of the last financial year. Key considerations in the financial statements include:
1. The acquisition of the entire issued share capital of Piksel by the Company’s trading subsidiary, Redcentric Solutions
Limited (“RSL”), completed on 30 September 2021 for initial cash consideration of US$13.0m (c.£9.5m) of which US$12.0m
(c£8.9m) was payable immediately with US$0.75m (c.£0.55m) being held in escrow for a period of 12 months and $0.25m
(£0.18m) being deferred to offset future costs as part of a transitional services agreement. This acquisition significantly
enhances the Group’s cloud services proposition. The business and assets of Piksel were hived up into RSL on 28 February
2022 and the statutory entity itself now ceases to trade.
2. On 15 March 2022, the acquisition of 7 Elements was completed for £2.4m initial consideration, and contingent
consideration dependent on business performance over the next 12 months with a maximum value of £450k.
7 Elements provides security services across a range of industries and sectors and brings additional capability to the
Group. 7 Elements will continue to operate as a standalone business.
12
Strategic reportAnnual Report and Accounts 2022 Financial review (continued)
3. Subsequent to the year-end, on 26 April 2022, the Group
The key financial highlights are as follows:
•
•
Total revenue growth of 3.2% to £93.3m (FY21: £90.4m
excluding EDF Contribution3).
Recurring revenue2 grew by 2.6% to £83.0m,
with recurring revenue representing 88.9% of the
total revenue (FY21: £80.9m / 89.5% excluding
EDF contribution3).
• Adjusted EBITDA2 of £23.7m is marginally behind
(0.6%) FY21 (excluding EDF Contribution3) reflecting
the challenges caused by increased electricity prices.
• Adjusted operating profit2 increased by £0.3m to
£15.9m (2.2%).
• Net debt at 31 March 2022 was £16.6m, including
£14.1m of IFRS16 lease liabilities that were previously
classified as operating leases under IAS17 and £1.0m
of supplier loans.
•
Reported operating profit reduced by £6.2m to £6.6m
which includes (i) the sale of the business and assets
relating to the EDF Contract in FY21 which resulted in
a profit on disposal of £4.5m and (ii) the release of the
provision relating to the restitution scheme agreed with
the FCA in FY21 for £2.2m.
completed a refinance of its debt facilities that were
due to mature on 30 June 2022. The new debt facilities
consist of an £80m revolving credit facility (“RCF”) and
a £20m accordion facility and are provided by a new four
bank group consisting of NatWest, Barclays, Bank
of Ireland, and Silicon Valley Bank (the “New Facility”).
The New Facility has an initial maturity date of 26 April
2025 with options to extend by a further one or two years.
The borrowing cost of the RCF is determined by the level
of the Company leverage and has a borrowing cost of
175 basis points over SONIA at the Company’s current
leverage levels. An arrangement fee of 75 basis points
will be payable upfront, in addition to a commitment fee
on the undrawn portion of the new RCF, on equivalent
terms to the previous facility. The New Facility provides
the Group with additional liquidity to be used for working
capital purposes and to fund acquisitions, in accordance
with the Group’s stated strategy.
4. The sale of the business and assets relating to the EDF
Contract 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. Under the terms of the EDF Contract, the Company
provided maintenance services to four EDF nuclear power
stations and in FY21, the EDF Contract contributed
£1m to revenue and £0.72m to EBITDA and generated
£0.68m of operating cash flow (“EDF Contribution”). FY21
comparatives3 exclude the EDF Contribution to allow for
more meaningful comparatives.
5. In April 2021, IFRIC published an agenda decision
to clarify the accounting treatment in relation to the
implementation, configuration and customisation costs
incurred in implementing software-as-a-service (“SaaS”)
cloud computing arrangements. Due to the nature of the
decision and the level of investment made by the Group
on its enterprise resource planning system (“Dynamics
365”), the Group’s accounting policy in relation to such
implementation, customisation and configuration costs
has been reviewed and changed to align to the IFRIC
guidance issued. The restatement represents a non-cash
adjustment. The revision to the accounting policy has
been accounted for retrospectively resulting in a prior
year restatement and prior-year comparatives have been
restated where necessary. See note 34 for further details.
13
Annual Report and Accounts 2022Strategic report Financial review (continued)
Revenue
Revenue for FY22 was generated wholly from the UK and is analysed as follows:
Year ended
31 March
2022
Year ended
31 March
2021
Year ended
31 March
20213
Change3
Change3
£000
£000
£000
£000
%
Recurring revenue2
Product sales
Services revenue
Total revenue
82,965
6,187
4,176
93,328
81,897
5,072
4,430
91,399
80,897
5,072
4,430
90,399
2,068
1,115
(254)
2,929
2.6%
22.0%
(5.7%)
3.2%
2 For an explanation of the alternative performance measures used in this report, please refer to pages 22 to 25.
3 Excluding EDF Contribution, as defined on page 13.
Total revenue increased by £1.9m compared to FY21, impacted by: the loss of c£1.0m contribution from EDF3 following
the disposal of the EDF contract, and incremental revenue in FY22 generated by the acquisitions of Piksel and 7 Elements
which added £6.0m to Group revenues. As outlined above, underlying organic revenues contracted slightly in FY22
reflecting a market that was still recovering from the COVID-19 pandemic. However, we are seeing signs of a return to a
more normalised environment.
Revenue is analysed into the following categories:
•
Recurring revenue has increased 2.6% to £83.0m (FY21: £80.9m excluding EDF contribution3).
• Non-recurring product revenue has increased £1.1m to £6.2m (FY21: £5.1m) following a strong FY22 second half (“H2”)
performance as hardware orders signed up during FY21 and first half (“H1”) FY22 which were previously delayed due to
the worldwide shortage in microchips have now been delivered. We still have a high level of product revenue in work in
progress (“WIP”) as we continue to see impacts of the microchip shortage.
• Non-recurring services revenue was lower at £4.2m (FY21: £4.4m), reflecting the continuing lower level of activity on
new projects.
Gross profit
Year ended
31 March
2022
Year ended
31 March
2021
Year ended
31 March
20213
Change3
Change3
£000
£000
£000
£000
Gross Profit
Gross Margin
59,550
63.8%
57,939
63.4%
56,939
63.0%
2,611
n/a
3 Excluding EDF Contribution, as defined on page 13.
%
4.6%
0.8%
Gross profit increased by 4.6% (£2.6m) (excluding EDF contribution3) reflecting the Group’s increased revenue and an
improvement in gross margin to 63.8% (FY21: 63.0% excluding EDF contribution3) due to contribution from higher margin
Piksel & 7 Elements acquisitions.
14
Strategic reportAnnual Report and Accounts 2022 Financial review (continued)
Adjusted operating costs2
The Group’s adjusted operating costs (operating expenditure excluding depreciation, amortisation, exceptional items, other
operating income and share-based payments) are set out in the table below:
Year ended
31 March
2022
Year ended
31 March
2021
Year ended
31 March
20213
Change3
Change3
£000
£000
£000
£000
%
UK employee costs
Office and data centre costs
Network and equipment costs
Other sales, general and administration costs
Offshore costs
21,369
19,700
19,468
1,901
4,411
7,299
1,553
1,205
3,789
6,941
1,428
1,502
3,752
6,933
1,428
1,502
659
366
125
(297)
Total adjusted operating costs
35,837
33,360
33,083
2,754
9.8%
17.6%
5.3%
8.8%
(19.8%)
8.3%
2 For an explanation of the alternative performance measures used in this report, please refer to pages 22 to 25.
3 Excluding EDF Contribution, as defined on page 13.
Total adjusted operating costs for FY22 were 8.3% (£2.8m) higher than prior year (excluding EDF Contribution3), reflecting:
•
•
•
•
employee costs increased £1.9m (9.8%) due to additional employees following the Piksel and 7 Elements acquisitions;
office and data centre costs increased by £0.7m, primarily due to the impact of increased electricity costs as several
electricity supply contracts fell due during the UK energy crisis;
network and equipment costs increased by £0.4m, of which £0.5m is attributable to Piksel;
other sales, general and administration costs are up £0.1m, with £0.2m relating to Piksel, offset by reduced legal costs;
and offshore costs reduced by £0.3m due to reduction in employee costs with the average number of employees
reducing from 126 to 100 following more roles being moved onshore.
Employees
Year-end headcount
UK
India
Total employees
Year ended
31 March
2022
(Number)
Year ended
31 March
2021
(Number)
Variance
(Number)
376
91
467
295
100
395
81
(9)
72
15
Annual Report and Accounts 2022Strategic report Financial review (continued)
Average headcount
UK
India
Total employees
Adjusted EBITDA2
Year ended
31 March
2022
(Number)
Year ended
31 March
2021
(Number)
Variance
(Number)
386
100
486
294
126
420
92
(26)
66
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.
Reported operating profit
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 EBITDA2
EDF Contribution3
Adjusted EBITDA (excluding EDF Contribution)3
Year ended
31 March
2022
Year ended
31 March
2021
(restated1)
£000
£000
6,607
6,498
475
2,745
4,578
20,903
1,629
1,181
23,713
-
23,713
12,782
6,252
670
3,408
4,932
28,044
(4,152)
687
24,579
(725)
23,854
1 For an explanation and reconciliation in relation to the prior year restatement following the Group’s adoption of the IFRIC agenda decision on cloud
implementation, configuration and customisation costs, please refer to note 34.
2 For an explanation of the alternative performance measures used in this report, please refer to pages 22 to 25.
3 Excluding EDF Contribution, as defined on page 13.
Adjusted EBITDA decreased by 3.5% to £23.7m, £0.9m lower than prior year. Excluding the EDF Contribution3, adjusted
EBITDA for FY22 was marginally lower than the prior year (0.6%). FY22 EBITDA includes six months of contribution from the
acquisition of Piksel and one month of contribution from the acquisition of 7 Elements, worth £0.8m in total, which has been
offset by increased electricity costs.
16
Strategic reportAnnual Report and Accounts 2022 Financial review (continued)
Taxation, interest and dividend
The tax charge for the year was a credit of £1.4m (FY21: a charge of £2.3m), comprising an income tax charge of £0.4m
(FY21: £1.2m), and a deferred tax credit of £1.8m (FY21: a charge of £1.1m).
Net finance costs for the year were £1.1m (FY21: £1.5m), including £1.0m (FY21: £1.2m) of interest payable on leases of which
£0.8m (FY21: £1.0m) related to leases previously recognised as operating leases under IAS17.
During the year, the Group paid an interim dividend for FY22 of 1.2p per share, totalling £1.9m as detailed in note 14.
A final dividend payment of 2.4p per share will be paid on 16 September 2022, subject to approval at the Company’s AGM,
to shareholders on the register at the close of business on 29 July 2022 with shares going ex-dividend on 28 July 2022.
The last day for Dividend Reinvestment Plan elections is 19 August 2022.
17
Annual Report and Accounts 2022Strategic report Financial review (continued)
Net debt
During the year, net debt increased by £1.1m to £16.6m as at 31 March 2022, with the movements shown in the tables below:
Year ended
31 March 2022
Year ended
31 March 2021
(restated)1
Operating profit
Depreciation and amortisation
Exceptional items
Share based payments
Adjusted EBITDA2
Working capital movements
Transfer from intangible assets to cost of sales
Non-cash provision 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 receipt / (paid)
Interest paid
Loan arrangement fees / fee amortisation
Finance lease / term loan interest
Effect of exchange rates
Other movements in net debt
Normalised net debt movement2
Cash cost of exceptional items
Share buyback
Non-capitalised finance leases purchases
Acquisition of subsidiaries (net of cash acquired)
Cash received on disposal of non-core business unit
IFRS 16 lease additions
IFRS 16 lease disposals
Remeasurement relating to lease modification
Supplier loans
Dividends
Disposal of treasury shares on exercise of share options
Cash received on exercise of share options
Share issues
(Increase) /Decrease in net debt
Net debt at the beginning of the period
Net debt at the end of the period
£000
6,607
14,296
1,629
1,181
23,713
(4,017)
140
(577)
19,259
81.2%
(2,765)
(438)
-
(3,203)
246
(51)
-
(885)
27
(663)
15,393
(2,091)
(2,666)
(145)
(10,422)
5,750
(2,094)
813
-
-
(5,627)
-
12
1
(16,469)
(1,076)
(15,569)
(16,645)
£000
12,782
15,262
(4,152)
687
24,579
1,881
-
-
26,460
107.7%
(2,307)
(2,235)
1,036
(3,506)
(149)
(398)
(17)
(1,017)
(26)
(1,607)
21,347
(9,514)
-
-
-
-
-
-
3,917
(1,207)
(1,868)
494
36
5,775
(2,367)
18,980
(34,549)
(15,569)
1 For an explanation and reconciliation in relation to the prior year restatement following the Group’s adoption of the IFRIC agenda decision on cloud
implementation, configuration and customisation costs, please refer to note 34.
2 For an explanation of the alternative performance measures used in this report, please refer to pages 22 to 25.
18
Strategic reportAnnual Report and Accounts 2022 Financial review (continued)
As at
31 March
2020
Net cash
Net
non-cash
flow
As at
31 March
2021
Net
cash flow
Net
non-cash
flow
As at
31 March
2022
£000
£000
£000
£000
£000
£000
£000
Cash
RCF
Term Loan
Lease Liabilities
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)
(3,473)
-
532
3,701
760
27
-
(45)
(1,818)
(1,836)
1,804
-
(1,004)
(17,445)
(16,645)
Included in lease liabilities at 31 March 2022 are £14.1m (FY21: £15.1m) of IFRS 16 lease liabilities that were previously
classified as operating leases under IAS17 and £1.0m (FY21: £1.5m) of term loans. Other movements reflect acquisition of
subsidiaries of £10.4m, capital expenditure of £3.2m, £5.6m on dividends, and £2.7m on share buybacks. £2.1m outflow from
exceptional items includes £0.8m acquisition and integration costs.
Following completion of the Sungard DCs and 4D acquisitions, as at 7 July 2022 net debt was £33.1m excluding IFRS16 lease
liabilities and £0.6m of supplier loans.
Trade receivables
In the year, focus remained on maintaining a strong ageing profile with a low level of aged debt. At the year-end, 97% of
debt was current or less than 30 days overdue (FY21: 97%).
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
Provisions
Net trade debtors
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
8,736
1,997
452
80
19
(172)
11,112
(884)
10,228
9,343
600
282
21
21
1
10,268
(1,104)
9,164
Trade debtor days were 36 at 31 March 2022 compared to 34 at 31 March 2021. Trade debtor days are calculated as trade
debtors divided by revenue (incl. VAT) multiplied by 365.
Trade creditor days were 37 at 31 March 2022 compared to 37 as at 31 March 2021. Trade creditor days are calculated as
trade creditors divided by total purchases (cost of sales and operating expenditure) multiplied by 365.
19
Annual Report and Accounts 2022Strategic report Financial review (continued)
Financing
31 March 2022
31 March 2021
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
1,004
17,445
23,449
-
20,000
7,000
27,000
-
5,000
1,004
17,445
18,449
-
-
1,100
1,100
-
-
5,000
-
20,000
5,900
25,900
5,000
1,491
19,328
25,819
-
20,000
5,190
25,190
-
1,491
19,328
20,819
-
-
-
-
5,000
-
-
5,000
-
20,000
5,190
25,190
Total borrowing facilities
50,449
19,549
30,900
51,009
20,819
30,190
Uncommitted facilities represent facilities available to the Group, but which can be withdrawn by the lender and hence are not
within the Group’s control. When the asset financing facility is utilised, a lease is created and hence there is no committed asset
financing facility.
As at 31 March 2022, the Group was party to £32m of banking facilities, comprising an RCF of £5m (£nil utilised at 31 March
2022) with a £20.0m accordion (£nil utilised at 31 March 2022) and a £7.0m Asset Financing Facility (£1.1m utilised at 31 March
2022). As at 31 March 2022, these facilities were due to expire on 30 June 2022.
Subsequent to the year-end, on 26 April 2022, the Group completed a refinance of its debt facilities that were due to mature
on 30 June 2022. The New Facility consists of an £80m RCF and an uncommitted £20m accordion facility and are provided by
a new four bank group consisting of NatWest, Barclays, Bank of Ireland and Silicon Valley Bank. The New Facility has an initial
maturity date of 26 April 2025 with options to extend by a further one or two years.
The borrowing cost of the RCF is determined by the Group’s leverage and has a borrowing cost of 175 basis points over
SONIA at the Group’s current leverage levels, which is a significant improvement to the previous facility. An arrangement fee of
75 basis points will be payable upfront, in addition to a commitment fee on the undrawn portion of the new RCF, on equivalent
terms to the previous facility. The New Facility provides the Group with additional liquidity to be used for working capital
purposes and to fund acquisitions, in accordance with the Group’s stated strategy.
At the date of approval, the Group had drawn £35.5m of the RCF to fund acquisitions after the balance sheet date as detailed
in the business overview of this review.
David Senior
Chief Financial Officer
21 July 2022
20
Strategic reportAnnual Report and Accounts 2022 “
This was an
easy one, as Redcentric
has acted with a competent,
proactive approach, exhibiting
a ‘can do’ attitude throughout
the engagement. It’s always
a pleasure to do business
with a professional
engineering team.
”
21
Alternative performance measures
This Annual Report and Accounts contains certain financial measures that are not defined or recognised under IFRS but are
presented to provide readers with additional financial information that is evaluated by management and investors in assessing
the performance of the Group.
This additional information presented is not uniformly defined by all companies and may not be comparable with similarly
titled measures and disclosures by other companies. These measures are unaudited and should not be viewed in isolation or as
an alternative to those measures that are derived in accordance with IFRS.
Recurring revenue
Recurring revenue is the revenue that annually repeats either under contractual arrangement or by predictable customer habit.
It highlights how much of the Group’s total revenue is secured and anticipated to repeat in future periods, providing a measure
of the financial strength of the business. It is a measure that is well understood by the Group’s investor and analyst community
and is used for internal performance reporting.
Reported revenue
Non-recurring revenue
Recurring revenue
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
93,328
(10,363)
82,965
91,399
(9,502)
81,897
Recurring revenue percentage is the percentage of recurring revenue as a proportion of total revenue.
Recurring revenue makes up 88.9% of total revenue in FY22, a decrease of 0.7ppts from prior year (89.6%).
Maintenance capital expenditure
Maintenance capital expenditure is the capital expenditure that is incurred in support of the Group’s underlying
infrastructure rather than in support of specific customer contracts. This metric shows the level of internal investment the
Group is making through capital expenditure. As the measure explains and analyses routine capital expenditure, land and
buildings (including any associated assets relating to dilapidation provisions) and sale and lease back additions are excluded
due to the infrequency that this expenditure occurs. Customer capital expenditure relates to assets utilised by the Group in
delivering managed services to our customers.
- Property plant and equipment additions – excluding additions on acquisition (note 16)
- Intangible additions – excluding additions on acquisition (note 15)
- Right of use asset additions – excluding land and buildings and sale and leaseback
transaction (note 17)
Reported capital expenditure incurred
Customer capital expenditure incurred (notes 15 & 16)
Maintenance capital expenditure incurred
Year ended
31 March
2022
Year ended
31 March
2021
(restated)1
£000
£000
2,264
502
460
3,226
(1,076)
2,150
1,786
1,047
1,056
3,889
(1,927)
1,962
1 For an explanation and reconciliation in relation to the prior year restatement following the Group’s adoption of the IFRIC agenda decision on cloud
implementation, configuration and customisation costs, please refer to note 34.
22
Strategic reportAnnual Report and Accounts 2022 Alternative performance measures (continued)
Capital expenditure of £3.2m has reduced by £0.7m (FY21: £3.9m) driven by a decrease in customer capital expenditure
(down £0.9m to £1.1m) reflecting the delay in large scale IT projects. Maintenance capital expenditure has increased by
£0.2m to £2.2m up from £2.0m. We will continue to monitor the Group’s capital requirements and invest in the business
when appropriate. Of the £3.2m capital expenditure incurred, £2.8m was paid in cash during the year.
EBITDA and 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.
The Board considers that this metric provides a useful measure of assessing trading performance of the Group as it excludes
items which impact financial performance such as exceptional costs and the amortisation of acquired intangibles arising
from business combinations which varies year on year dependent on the timing and size of any acquisitions.
Reported operating profit
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
EDF Contribution3
Adjusted EBITDA (excluding EDF contribution)3
Year ended
31 March
2022
Year ended
31 March
2021
(restated)1
£000
£000
6,607
6,498
475
2,745
4,578
20,903
1,629
1,181
23,713
-
23,713
12,782
6,252
670
3,408
4,932
28,044
(4,152)
687
24,579
(725)
23,854
1 For an explanation and reconciliation in relation to the prior year restatement following the Group’s adoption of the IFRIC agenda decision on cloud
implementation, configuration and customisation costs, please refer to note 34.
3 Excluding EDF Contribution, as defined on page 13.
Adjusted EBITDA decreased to £23.7m, £0.9m lower than prior year, with adjusted EBITDA margin of 25% (down from 27%).
Excluding the EDF Contribution3, adjusted EBITDA for FY22 was marginally down (0.6%) compared to prior year adjusted
EBITDA of £23.9m. EBITDA includes £0.6m delivered from the Piksel acquisition, offset by increased electricity costs in H2.
23
Annual Report and Accounts 2022Strategic report Alternative performance measures (continued)
Adjusted operating profit
Adjusted operating profit is operating profit excluding amortisation on acquired intangibles, exceptional items and
share-based payments. The same adjustments are also made in determining the adjusted operating profit margin and in
determining adjusted earnings per share (“EPS”).
Reported operating profit
Amortisation of intangible assets arising on business combinations
Exceptional items
Share-based payments
Adjusted operating profit
Year ended
31 March
2022
Year ended
31 March
2021
(restated)1
£000
£000
6,607
6,498
1,629
1,181
12,782
6,252
(4,152)
687
15,915
15,569
1 For an explanation and reconciliation in relation to the prior year restatement following the Group’s adoption of the IFRIC agenda decision on cloud
implementation, configuration and customisation costs, please refer to note 34.
The EPS calculation further adjusts for the tax impact of the operating profit adjustments, presented in note 13. This metric
is used within the Group’s dividend policy and is therefore relevant for our shareholders.
Adjusted operating costs
Adjusted operating costs are operating costs less depreciation, amortisation, exceptional items, share-based payments
and foreign exchange. This metric shows the trading operating expenditure of the Group, excluding non-trading and non-
recurring items which impact financial performance. These are controllable operating costs which provide investors with
useful information about how the Group is managing its expenditure.
Reported operating expenditure
Depreciation of 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
Year ended
31 March
2022
Year ended
31 March
2021
(restated)1
£000
£000
53,046
49,664
(4,578)
(2,745)
(6,498)
(475)
(1,629)
(103)
(1,181)
(4,932)
(3,408)
(6,252)
(670)
4,152
(4,507)
(687)
35,837
33,360
1 For an explanation and reconciliation in relation to the prior year restatement following the Group’s adoption of the IFRIC agenda decision on cloud
implementation, configuration and customisation costs, please refer to note 34.
24
Strategic reportAnnual Report and Accounts 2022 Alternative performance measures (continued)
Adjusted cash generated from operations
Adjusted cash generated from operations is reported cash generated from operations plus the cash cost of exceptional
items. As the Group has been involved in acquisitions and has had other significant, non-repeatable cash impacting items,
this measure allows investors to see the cash generated from operations excluding these items which are one-off by nature
therefore will not repeat in future years.
Reported cash generated from operations
Cash costs of exceptional items
Adjusted cash generated from operations
Year ended
31 March
2022
Year ended
31 March
2021
(restated)1
£000
£000
17,168
2,091
19,259
16,946
9,514
26,460
1 For an explanation and reconciliation in relation to the prior year restatement following the Group’s adoption of the IFRIC agenda decision on cloud
implementation, configuration and customisation costs, please refer to note 34.
Adjusted net (debt)/cash
Adjusted net cash/debt is reported net debt (borrowings net of cash) less supplier loans and less lease liabilities that would
have been classified as operating leases under IAS17 and is a measure reviewed by the Group’s banking syndicate as part of
covenant compliance as detailed in note 24.
Reported net debt
Supplier loans
Lease liabilities that would have been classified as operating leases under IAS 17
Adjusted net (debt)/cash
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
(16,645)
1,004
14,096
(1,545)
(15,569)
1,491
15,058
980
Normalised net debt movement
The normalised net debt movement, as summarised in the net debt table on page 18, details the movement in net debt
before one-off (exceptional) amounts and is therefore a useful indicator to the potential movement in net debt in FY23.
David Senior
Chief Financial Officer
21 July 2022
25
Annual Report and Accounts 2022Strategic report “
We are looking
forward to continuing our
successful partnership with
Redcentric. The team have
shown that they are a supplier
who can provide high standards
of service, and work with
us constructively.
”
2626
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 2022Strategic 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 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 5 to 39 and corporate governance report on pages 41 to 65.
Colleagues
• Colleague briefings – monthly colleague briefing
sessions are held with the operating board of the
Company (“Operating Board”) to enable colleagues to
ask questions and raise issues and for colleagues to be
provided with updates on the business. Since the return
to office working post-COVID-19, we have also held a
number of face-to-face town halls.
•
Performance updates – key performance information
such as trading updates and financial results are always
promptly communicated to colleagues by group wide
internal emails and follow up all employee calls.
• Newscentric – Company information and new product
launches are communicated to colleagues through
a number of means, including via Newscentric, our
colleague newsletter, which is issued quarterly.
• We have continued to progress the action plan
following the most recent colleague survey.
•
Learning management – we have further enhanced
our online learning management system over the last
twelve months, introducing additional learning content.
• We have rolled out a new HR system – Peoplecentric,
providing increased functionality, colleague self-serve
and a one stop shop for all people information with
increased accessibility.
• Colleague recognition – we continue to recognise the
Company’s core values through our recognition scheme
– the Extra Mile Awards.
• We have continued to focus on colleague well-
being and have run a number of initiatives to ensure
our colleagues are kept engaged, supported and
connected to the business.
•
Share schemes – the Company has in place an HMRC
approved Save-As-You-Earn option plan (“SAYE”) to
enable colleagues to become personally invested
as shareholders of the Group. The Company invited
participation at two intervals in the last year.
• Hybrid working – after receiving feedback from our
colleagues ahead of the return to office we agreed and
implemented a hybrid working model, improving work
life balance for our colleagues.
28
•
Further information is included in the corporate
responsibility section of this report on page 33 and
in the corporate governance report on pages 41 to 65.
Customers
• 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 and signpost to important updates, new
solutions and capabilities that customers need to be
aware of.
• Customer surveys – a quarterly net promoter score
(NPS) survey is carried out to gain customer feedback
and test customers’ opinions on service experience.
During the course of the year, the survey has been
adapted and shortened to reduce the time and burden
imposed on customers by completing the surveys whilst
still ensuring valuable feedback could be obtained.
The results of the surveys are discussed at Operating
Board level and also within a dedicated forum where
actions to be taken as a result of feedback are logged
and monitored.
• Monthly and quarterly service reviews – regular service
reviews with customers are led by Service Delivery
Managers and Account Managers, focussed on service
experience and opportunity identification.
• Daily social media updates – the Group’s social media
presence and activity has increased and improved
during the year. At least daily updates are provided
through the Company’s corporate social media
channels (LinkedIn, 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.
• Customer scoring – within the Group’s support
systems 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.
Strategic reportAnnual Report and Accounts 2022 Section 172 statement – our stakeholders (continued)
• Customer service management solution – during the
year, the Group launched a new service management
solution for customers, called SMAX, which replaced
HP service manager. SMAX focusses on providing
an enhanced user experience for customers, with
automated processes, workflows and tasks all designed
with ITIL (Information Technology Infrastructure
Library) industry standards and efficiency in mind. The
new solution has enabled the Group to improve how
customers are supported and provides better visibility
of available services to customers via a customer facing
portal. Phase 1 of the SMAX launch was completed
during the year and further enhancements are planned
for a Phase 2 launch later in 2022.
•
Targeted customer marketing and communications
– during the year, the Group’s marketing team has
enhanced its customer communications and the
way in which campaigns, product launches and
solution migrations are communicated. Targeted and
personalised communications are agreed between
the Group’s marketing team and customers’ account
and service delivery managers, to ensure that the
right customers are informed and guided through any
changes which may affect them.
Suppliers
•
•
•
•
The Board is committed to fostering and developing
effective partnerships with the Group’s suppliers, based
on forward planning, collaboration and trust. These
supplier partnerships are crucial in delivering many
of our services and in developing them further. The
supplier partnerships help the Group deliver value and
quality to its customers and help its partners to develop
and grow.
The Group has in place an annual programme of regular
engagement and communication with all suppliers.
There is a particular emphasis on key strategic partners,
each of which has an annual review and other regular
check-ins which involve all relevant departments across
the Company.
The Company has given additional focus to the
suppliers taken on following the acquisition of Piksel
and those whose business has grown as a result of the
acquisition, notably carriers and AWS.
The Company has also given additional focus to
suppliers in the faster growing sectors of our market,
such as cloud, security and managed services, driven by
customer requirements.
•
The Company continues to work with its supplier base
in reviewing 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 – Application Development, Application
Integration, Cloud Platform, Cloud Productivity,
DevOps (all GOLD); Content and Collaboration,
Data Platform, Datacentre, Security (all SILVER);
- Cisco – GOLD;
- Hewlett Packard Enterprise (HPE) – SILVER
PRSP (Partner Ready Service Provider);
- Citrix – CSPP (Citrix Solutions Provider Programme);
- VM Ware;
- Fortinet;
- British Telecom and;
- Virgin Media Business.
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 FY22, a full
schedule of roadshows took place once again, albeit
remotely.
•
The Company’s AGM is a key opportunity for
engagement between the Board and shareholders,
particularly private shareholders. In FY22, Redcentric
was pleased to once again be able to hold a face-to-
face AGM but shareholders were also once again given
the opportunity to submit questions for the Board
ahead of the AGM in the event they were unable or
unwilling to attend in person.
• 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.
• 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 41 to 65.
29
Annual Report and Accounts 2022Strategic report Section 172 statement – our stakeholders (continued)
Environment
•
•
•
The Company has maintained its ISO 14001:2015 environmental management accreditation, through which it enhances
environmental performance, fulfils its compliance obligations, and achieves its environmental objectives.
In FY22, the Group achieved its environmental objectives under ISO 14001:2015, surpassing the targeted annual
reduction in the significant environmental aspects of office space energy usage, company car mileage, and paper and
consumables.
Following the proven success of homeworking throughout the pandemic, a hybrid working policy was permanently
introduced across the Group, which has continued to positively impact environmental performance through reduced
office space energy usage and travel.
• During the year, Redcentric launched an electric car salary sacrifice scheme, open to all colleagues, as part of its
commitment to reduce the Group’s carbon footprint.
•
•
In FY22, Redcentric created the new position of Head of Corporate Development, which is a role dedicated to
environmental, social and governance (“ESG”) issues and the Group’s acquisition strategy. An initial assessment of
the Group’s position on ESG issues was undertaken and a roadmap with clear milestones for setting and delivering an
updated ESG strategy has been developed.
Redcentric has, further to its initial ESG assessment, engaged a third-party specialist to support the Group in calculating
Scope 3 emissions, developing a net zero strategy, and working towards producing its first voluntary Task Force for
Climate-Related Financial Disclosures (“TCFD”) report. This is a significant step in Redcentric’s commitment to the
environment and in support of the Government’s UK-wide target to reach net zero by 2050.
•
Further information is included in the sustainability section of the Report on page 37.
30
Strategic reportAnnual Report and Accounts 2022 Risk management
Redcentric continues to take a consistent approach to the
identification, monitoring and management of risk across
everything that we do, underpinning company values and
allowing our strategies to succeed.
We have continued to evolve our risk management
framework, maintaining confidence levels across our
leadership team. Providing the capability to seamlessly
continue to focus on our customers alongside delivering
strategies for product enhancement and business growth.
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.
All Redcentric employees are encouraged to identify, record,
monitor and manage risks at local level, empowered to
take ownership whilst management oversight is maintained
throughout with continued regular review at all levels.
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. The
Board considers the Group is relatively protected against
significant customer risk due to the Group’s diverse customer
base, however loss of a major contract remains a principal
risk, as discussed below. At the date of approval of these
financial statements the macro-economic conditions remain
unpredictable and as such is seen as an increasing risk to the
business which the Board continue to closely review.
Technology and cyber-security
The market for the Group’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 an ever-increasing
risk of cyber-attack. Alongside maintaining constant,
pro-active vigilance against such risks, Redcentric maintains
31
membership of some of the highest levels of security
accreditation as part of the service it offers its customers.
We have a continued focus and a strategy of increasing
security capability both internally and offered to our
customers.
Business transformation through growth
With a strategy for growth, we ensure that acquisitions
are handled appropriately from the outset. Acquiring
differing businesses with differing technologies, people,
competencies and processes creates risk to both customers
and services being acquired, and the Group’s existing
operating model. Given the Group’s strategy and appetite
for acquisitions, as demonstrated through activity in FY22,
this is considered an increasing risk. The Group considers
this risk split into three main areas with the following
mitigations in place:
• Acquisition target risk – the risk that the Group is
unable to identify suitable acquisition targets. This
risk is managed by a combination of internal resource
dedicated to identifying targets complemented by
strong relationships with external advisors.
• Acquisition integration risk – the risk that completed
acquisitions are not integrated into the underlying
business in an efficient or effective way leading to
potential loss of customers and employees from
the acquired business. The risk is managed by
detailed planning, including active participation from
the vendors to ensure acquisitions are integrated
effectively.
•
Post-acquisition performance risk – the risk that the
acquired business may not perform as well as expected
or synergies may not be delivered as planned. This has
the potential to adversely impact both cashflow and
profits post acquisition. Due diligence and integration
planning help manage this risk including the use of
experts throughout the acquisition process.
Following acquisitions, growth management provides
an ongoing risk that, given recent acquisitions is also
considered to be increasing. The Group manages this risk
by regular reviews of the operational structure and resource
required to deliver to customers without degrading service.
Going forward this will be reviewed annually as part of the
budgeting process and also subsequent to any acquisition.
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 its competitors are much larger with considerable scale
Annual Report and Accounts 2022Strategic report 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
proactively offset our carbon emissions.
As discussed in the sustainability reporting section of this
report (page 37), the Group are proactively monitoring this
emerging risk and taking steps to ensure it’s well placed to
manage the potential impacts.
Workforce
As a service provider the Group is dependent on the skill
and experience of its established workforce. The Group
could be adversely impacted if employee levels are not
maintained. The Group aims to recruit suitably skilled and
experienced employees by offering a challenging and
rewarding work environment with appropriate remuneration
packages relative to their skills and experience. The Group
has offices in multiple locations which helps to access talent
pools in various locations across the country.
Risk management (continued)
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. Capability and scale acquisitions are both
expected to further strengthen the Group’s positioning
within the marketplace through competitive pricing (scale)
and additional services (capability).
Business continuity
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 the Group’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.
Loss of major contract
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, holds regular customer meetings by account teams
and aligns service delivery to sales in order to support
both ours 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 therefore the Group considers this an
emerging risk. 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.
32
Strategic reportAnnual Report and Accounts 2022 Corporate responsibility
Our colleagues
Listening to our colleagues
Throughout FY22, colleagues have continued with
their outstanding response to the COVID-19 pandemic
and challenges this has brought. Ongoing service and
support to our customers has remained at the excellent
pre-pandemic levels and we have continued to work in
partnership with all our customers to ensure they have been
given the individual support they needed according to their
varying challenges and needs.
Our teams have really stepped up to the ongoing demands
placed on them over the last 12 months and have continued
to develop new and innovative solutions to support our
customers with the emerging challenges facing them
post COVID-19. We have continued to ensure we focus on
investing in our existing people and the support provided
to them and at the same time are delighted to welcome a
number of new colleagues to the Group as a result of the
exciting acquisitions of Piksel and 7 Elements that took
place in FY22. Our focus is now on ensuring that our new
colleagues are integrated into our wider business.
In FY22 and partly as a result of the acquisition of Piksel we
made the decision to fundamentally re-shape the operating
structure of our business to ensure we are set up to meet
our future growth plans and further enhance the service we
give to our customers. This structure is to be implemented
in FY23. We have moved to a divisional structure which puts
our customers and delivery for our customers at the heart
of our business creating three business divisions – Cloud,
Collaboration and Connectivity. In addition, we have taken
the opportunity to create a dedicated and standalone
Customer Services function focussed on meeting our
customer needs and invested in new CTO capability which
will allow us to continue the transformation of our business
both internally for colleagues and externally for customers.
We have continued to focus on our employment proposition
and we have invested heavily in a new end to end HR
system enabling employees to take control of their working
experiences at Redcentric. We have also moved to a hybrid
working model which has been positively received by all our
colleagues and had enabled us to expand our talent pool
more widely.
I would like to send my personal thanks to each and every
colleague, old and new for their continued support over the
last 12 months. Our colleagues are Redcentric, and your
fantastic efforts over the last 12 months supporting both our
customers and our colleagues are very much appreciated.
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 and in FY21
we updated that survey. We will be running a further survey
early in FY23 to ensure we get an updated view on how our
colleagues are feeling in the post-COVID-19 workplace.
We listened to colleague feedback and have been
progressing a number of initiatives over the last 12 months
as part of our ongoing response.
As a direct result we have launched/continued to embed the
following initiatives:
Our new Group-wide vision, mission and values which have
now been embedded in our performance and recognition
schemes and rolled out to our new colleagues.
A new online learning management system with additional
content to support our colleague’s development and
continued investment in supporting our colleagues in
achieving industry recognised accreditations that are critical
to our business.
Transition of our previous online performance and
development and recognition systems to form part of
Peoplecentric, our new HR system, enabling colleagues with
easy one-stop access to their objective and development
actions, as well as the ability to quickly recognise colleagues
more easily.
Transition to a hybrid working model over the last few
months, giving colleagues additional flexibility to work
where they will best achieve their daily activities.
Continuation of our internal communications strategy
aiming to keep colleagues connected to our business, a new
internal communications strategy with monthly all colleague
calls, our colleague newsletter ‘Newscentric’, weekly
colleague shout outs to recognise the great achievements
of our colleagues and the introduction of a colleague
communication forum.
Over the last 12 months we have also recognised 48
colleagues through our “Extra Mile” recognition scheme.
Our employee engagement index remains at 71% (from
FY21) and we will shortly be running a further engagement
survey to understand the progress made over the last six
months and agree the critical actions and focus areas for
the year ahead. Our commitment is to continue listening to
our colleagues and working with them to make Redcentric
a great place to work.
33
Annual Report and Accounts 2022Strategic report Corporate responsibility (continued)
Wellbeing
Focusing on the wellbeing of our colleagues continued to be top of our agenda as we transitioned back into the workplace.
We have maintained a programme of on-going activity supported by our mental health first aiders which provides access
to support for all colleagues in a number of different ways, including our time to talk service, access to our Employee
Assistance scheme and on-going mailshots promoting key well-being events and activities.
We have continued to run a number of campaigns for colleagues including:
• Monthly quiz
•
Volunteering events
• Charity support
• Health and wellbeing calendar
• Mental health webinars
• Mindfulness programme
We meet with our mental health first aiders on a monthly basis and will maintain this approach moving forwards.
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
12
364
382
0
2
5
97
104
2
6
17
461
486
Our gender pay report at the snapshot date of 5 April 2021 showed that the overall difference between men and women’s
earnings at Redcentric was 21% (mean) (FY20 – 24% mean) which is a significant improvement on the previous year’s report.
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. The majority of females in our business sit within the two lowest pay
quartiles of the business which has negatively impacted our gender pay gap.
We have continued to focus on initiatives to increase the diversity of our business over the last year and are pleased that
this has had a positive impact. We have appointed a number of females into senior roles across the business. We are
confident that we will make further progress in addressing our gender pay gap as we continue to focus on development and
progression opportunities for the future.
34
Strategic reportAnnual Report and Accounts 2022 Corporate responsibility (continued)
Apprenticeship programme
Over the last 12 months we have also continued investment in apprenticeship programmes across differing areas of our
business for both new joiners into our business and existing colleagues. These programmes have focussed 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 nine apprenticeship programmes currently underway with an additional
number successfully completed within the financial year. We are working more closely than ever with local schools and
apprentice providers to increase visibility of these opportunities and have undertaken a number of work experience
placements and attended virtual school events to ensure we are promoting opportunities locally. This is an area we are
committed to maintaining and growing given the benefits to our local communities and our business.
We plan to launch a graduate scheme across the business in FY23, partnering with local universities, with a view to
promoting the Company’s profile and attracting fresh talent.
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 employees.
In November 2014 the Group launched its SAYE option plan where colleagues contribute a monthly amount which is saved
over 3 years to buy shares in the Company at a pre-determined price.
The most recent grants were made on 27 August 2021 and 23 December 2021, with the Company granting options over a
total of 881,622 ordinary shares. These options are available for exercise from 1 October 2024 and 1 February 2025, with an
exercise price of 108.33p and 99.87p respectively.
As at 31 March 2022, the following options were outstanding under the plan:
Grant date
Exercise
price (p)
Opening
options
Options
granted
Options
exercised
21 August 2019
02 September 2020
27 August 2021
23 December 2021
Total
COVID-19
63.1p
119.60p
108.33p
99.87p
434,145
460,077
-
-
n/a
894,222
-
-
255,060
626,562
881,622
Options
lapsed /
cancelled
(62,375)
(215,924)
(86,062)
(11,533)
Options
remaining
369,393
241,311
168,998
615,029
(2,377)
(2,842)
-
-
(5,219)
(375,894)
1,394,731
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 24 months both in the UK and India.
Given the success of remote working and how well our colleagues responded to this, where we can we have changed our
work approach and have moved to a hybrid working model which is operating successfully across both the UK and India.
We have invested in new office space in both the UK and India to deliver a workplace of the future, creating modern and
collaborative workspaces for our colleagues.
Charitable activity
Despite the lockdown restrictions, which have been in place at various points, we have continued to support a number of
both virtual and face to face volunteering challenges and fundraising events.
These include litter picking support in conjunction with Harrogate Council, maintenance of our Trees for Life partnership and
encouragement of our colleagues to get involved in supporting the Mission Christmas volunteering campaign.
35
Annual Report and Accounts 2022Strategic report Corporate responsibility (continued)
From a charity perspective we have maintained our support and commitment to a number of key charities through
colleague fundraising initiatives including:
•
•
•
Red Nose Day & Children in Need
Press up challenge (sales team)
Easter egg appeal
• Mission Christmas – presents for children
• Action for India
• Macmillan coffee morning
We also continue to support local volunteering activity and fundraising by encouraging all colleagues to use their
day’s paid volunteering albeit this has proved more challenging locally given the COVID-19 pandemic.
We are continuing to evolve our national corporate social responsibility (“CSR”) strategy to support our key customers
in their local areas.
Health & Safety
Redcentric is committed to maintaining high standards of health and safety. New starters receive health and safety training
through our online 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 approach to the COVID-19 pandemic has ensured the ongoing safety of all our colleagues throughout the period of
the pandemic and we have followed all government guidelines.
We continue to adopt a cautious approach with increased cleaning in place across all sites and asking colleagues to remain
away from the workplace in the event they or a close contact has COVID-19.
Our approach has been appreciated by our colleagues with 95% advocacy in our approach to the management of
the pandemic.
36
Strategic reportAnnual Report and Accounts 2022 Sustainability reporting
Sustainability reporting
Environmental management
We are committed to being a socially, economically, and
environmentally responsible business. This is reflected in
our actions and our corporate policies. During the year, an
initial assessment of the Group’s position on environmental,
social, and governance issues was undertaken and a
roadmap with clear milestones for setting and delivering
an updated ESG strategy has been developed. We have
engaged a third-party specialist who will be supporting us
in calculating our scope 3 emissions, creating a net zero
strategy, and working towards producing our first voluntary
task force on climate-related disclosures report.
Redcentric has maintained its ISO 14001:2015 certification
in the period and continues to drive the objectives
of its environmental management system to improve
environmental performance. As part of the focus on
improving environmental performance, Redcentric
reports on the annual movement in the Group’s
significant environmental aspects of office space energy
usage, company car mileage, and the use of paper and
consumables. In FY22, Redcentric set targets to reduce
office space energy usage by 3%, and company car mileage
and the use of paper and consumables by 5%.
Furthermore, baseline data has been captured in FY22
measuring power efficiency of the data centres and the level
of WEEE (Waste Electrical and Electronic Equipment). These
measures will be added to the significant environmental
aspects ISO 14001:2015 reporting in FY23.
Voluntary TCFD report
To demonstrate our commitment to taking climate change
seriously, we are working towards producing our first Task
Force on Climate-Related Financial Disclosures (”TCFD”)
for FY23, one year ahead of mandatory regulation for
our Company. The TCFD guidelines provide a framework
for companies to use when reporting on the risks and
opportunities presented to their business by climate
change. The recommendations are split into four sections:
Governance, Strategy, Risk Management and Metrics and
Targets. These will guide us in developing our internal
management of climate-related risks and opportunities.
Planning for net zero
The UK Government has set a target of net zero for the
UK by 2050. This means at least a 100% reduction in
greenhouse gas emissions compared to 1990 levels. This
target aims to limit global warming to below 2°C, ideally
as near to 1.5°C as possible.
We want to do our part in ensuring this target is met.
In FY23, we will be putting in place our net zero strategy.
Our carbon reduction plan will include both short and long-
term carbon reduction targets, and our progress will be
reported annually.
Scope 3 carbon footprint
The first step on our path to net zero is calculating our
scope 3 carbon footprint. This covers all emissions resulting
from sources we do not directly own. The Greenhouse
Gas (“GHG”) Protocol splits them into fifteen categories,
including purchased goods and services, employee
commuting and waste generated in operations. We
already calculate scope 3 grey fleet emissions as part of
our streamlined energy and carbon reporting (“SECR”).
It is important to calculate our scope 3 emissions as this
is generally the largest portion of a company’s carbon
emissions. Once we understand the full extent of our carbon
emissions, we can then make plans for reducing them.
37
Annual Report and Accounts 2022Strategic report Sustainability reporting (continued)
Scope of ISO 14001:2015 Performance reporting
Office space energy usage and paper and consumables are currently measured for Redcentric’s Harrogate head office only.
Company car mileage currently excludes the activity of newly acquired colleagues in relation to Piksel and 7 Elements.
The intensity ratio for office space energy use has been updated to kWh per m² in the period to provide a consistent
approach with the SECR reporting measures.
For comparative purposes, the annual reduction reported for the year ended 31 March 2022 compares the figures for the
period to pre COVID-19 levels (the twelve months to 31 March 2020). Whilst neither of the respective periods were entirely free
from disruption, the twelve months to 31 March 2020 is deemed the most appropriate benchmark given that there was minimal
activity in terms of office occupancy, travel and the use of paper and consumables in the twelve months to 31 March 2021.
Office space energy usage (Avg kWh per m2)
Company car mileage (Avg miles per person)
Paper and consumables (units)
Carbon footprint
Annual reductions
Year ended
31 March 2022
Year ended
31 March 2020
44%
55%
79%
47%
69%
79%
In accordance with the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013, we report on GHG
emissions as part of the strategic report.
The method used to calculate 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 FY22 and FY21 have been externally verified by Inspired Energy plc.
Year ended
31 March 2022
Year ended
31 March 2021
23
-
4,017
51
74
4,091
19,225
52
-
4,639
26
78
4,717
20,204
Scope 1
Scope 2 (market-based emissions)
Scope 2 (location-based emissions)
Scope 3
Total market-based emissions
Total location-based emissions
Total energy consumption in the UK
tonnes of CO2e
tonnes of CO2e
tonnes of CO2e
tonnes of CO2e
tonnes of CO2e
tonnes of CO2e
MWh
38
Strategic reportAnnual Report and Accounts 2022 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 2022
Year ended 31 March 2021
m2
kWh /m2
tCO2e/m2
m2
kWh/m2
tCO2e/m2
Floor area weighted values
8,853
2,172
0.46
8,856
2,281
0.53
The Strategic Report on pages 5 to 20 is signed on behalf of the Board by
Peter Brotherton
Chief Executive Officer
21 July 2022
39
Annual Report and Accounts 2022Strategic report
P R O A C T I V E
We think and
act quickly
T R U S T E D
We do what
we say we will
T R A N S PA R E N T
We are open,
honest and fair
40
I N S P I R E D
We create
excitement through
innovation
C O L L A B O R AT I V E
We work together
to deliver a
common goal
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 Chair 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 matter. At the date of this Report we believe that we are fully
in compliance with the Code.
This section of the Report sets out how the Group has applied and complies with the principles of the 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.
Nick Bate
Chairman
21 July 2022
41
Annual Report and Accounts 2022Governance 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 31 to 33. Following the assignment of a new senior owner to manage the
Group’s risk register in FY21, the Group’s risk management framework has evolved somewhat in
FY22. There is now a tiered management of risk, with functional towers owning and managing
their direct risks, and a consistent and scientific measurement of risks across all functions in order
that the highest risks can be escalated to the Operating Board and fed through to the Group’s
corporate risk 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 continues to be committed to engaging with its shareholders to ensure that the
strategy and business model and key events of the Company are clearly shared and understood.
The Board believes that the disclosures of this Report provide information necessary for
shareholders to assess the Group’s performance, business model and strategy. Hard copies of
the Report 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 the shareholders and other
interested parties.
The Company uses regulatory announcement through RNS to ensure that important news is
shared with all shareholder and potential shareholders in a clear and uniform way and often issues
announcements beyond those it is obliged to make.
The Executive Directors are also in regular contact with the Company’s shareholders and brief the
Board on feedback and any shareholder issues. In FY22, 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 broker,
finnCap Limited (“finnCap”), who keep the Board abreast of shareholder expectations and
reactions and assist in setting up meetings with potential investors. 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 Chair 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.
42
Annual Report and Accounts 2022Governance Corporate governance (continued)
Governance
Principle
Application
Principle 3
Take into account
wider stakeholder
and social
responsibilities
and their
implications for
long-term success
We are pleased to once again be able to welcome shareholders in person to our AGM this year,
particularly following the constraints faced in recent years due to the COVID-19 pandemic.
In any event, once again, to ensure that shareholders who are unable or would rather not attend the
AGM 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 2 September 2022 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 2021 AGM.
The Board recognises that the long-term success of the business relies on a number of key
stakeholders, as described on pages 28 to 30, including colleagues and customers, and that
engagement with these key stakeholders is fundamental to helping the Board make the best
business decisions.
Colleagues
The dedication and skill of 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. This year, having continued to step up to demands post-pandemic, and with
the addition of new colleagues through the acquisitions of Piksel and 7 Elements, this has been
especially important.
The Group has continued to work on its employment proposition during the year and
implemented an end to end HR system, Peoplecentric, which allows colleagues to take control
of their working experience. We have also continued to listen carefully to colleague voices and
as a result implemented a permanent hybrid working pattern, which has increased flexibility for
colleagues and also enabled the Group to expand its talent pool.
Recognising the need, however, for modern, attractive and collaborative environments for
colleagues where they are office based and to attract the highest calibre candidates, investments
have been made in new offices in both the UK and India.
The Group’s vision, mission and values, which were launched in FY21, have been embedded and
the hard work on colleague wellbeing has been continued, supported by the Group’s qualified
Mental Health First Aiders.
There has been a continued focus on the Group’s apprenticeship programme in the year across a
number of areas of the business and strong partnerships have been formed with local schools and
apprentice providers.
As detailed on page 35 the Group also has in place an SAYE option plan to enable colleagues
to become personally invested as shareholders of the Company. In FY22, the Group invited
colleagues to join the plan at two intervals, to ensure that colleagues joining by acquisition had
the opportunity to invest, and as a result the Company granted options over a total of 881,622
ordinary shares under this scheme.
43
Annual Report and Accounts 2022Governance Corporate governance (continued)
Governance
Principle
Application
Customers
The Group’s extensive customer services, which are detailed on the Group’s website at
www.redcentricplc.com/services , 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 it proposition to customers through monthly newsletters, regular
customer surveys, monthly and quarterly service reviews and through its social media channels.
In FY22 the Group has worked hard to make its communications with customers more meaningful
and targeted and the launch of phase one of its new customer service management solution has
been a key step in enhancing customers’ experiences with the Group.
The Board also considers its 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 page 28 of this report.
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.
Following the assignment of a new senior owner to manage the Group’s risk register in FY21,
the Group’s risk management framework has evolved somewhat in FY22. There is now a tiered
management of risk, with functional towers owning and managing their direct risks, and a
consistent and scientific measurement of risks across all functions in order that the highest risks
can be escalated to the Operating Board and fed through to the Group’s corporate risk register.
The corporate risk register is shared and refined with the Audit Committee and Board at key
intervals in the year, coordinated by the Chief Financial Officer, and with reporting on mitigating
actions as well as the risks.
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.
Further enhancements have been made to Dynamics 365, the finance and operations module,
which was implemented in FY21, which is expected to strengthen the control environment. The
Board acknowledges that there is a requirement for continuous improvement to the control
environment, particularly as the Group continues on its acquisition strategy, and improvement
plans are being developed, documenting short and longer term plans to address risks and
control weaknesses. The principal elements of the Group’s internal control system cover financial,
operational and compliance controls and include:
1. close management of the day-to-day activities of the Group by the Executive Directors;
2. 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;
3. detailed monthly reporting to the Board, both at Group and, in FY23, at divisional level
(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;
44
Annual Report and Accounts 2022Governance Corporate governance (continued)
Governance
Principle
Application
Principle 5
Maintain the
board as a
well-functioning,
balanced team
led by the chair
4. an organisational structure that has clear reporting lines and delegated authorities, particularly
with the new divisional structure that was put in place at the start of FY23;
5. management and monitoring of risk and performance at multiple levels throughout the Group;
and
6. continually improving finance, legal and assurance and compliance 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.
The Group also works hard to maintain a number of ISO accreditations it has achieved over
a number of years, 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.
The composition of the Board is detailed on pages 50 and 51.
The Board delegates specific responsibilities to the Board committees. The composition of the
committees can be found on page 50.
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. Following Ian Johnson’s resignation, Nick Bate
joined the Board as the Company’s Non-Executive Chair, Chair of the Nomination Committee
and member of the Renumeration Committee. With the publication of this Report, Jon Kempster
steps down from the Board as Chair of the Audit Committee and Non-Executive Director and the
Board is delighted to welcome Alan Aubrey as a new Non-Executive Director and Chair of the
Audit Committee. Alan brings with him considerable market knowledge and breadth and depth
of skills and experience.
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 Chair 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.
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 49.
The Board recently concluded an external assessment of its performance, and more detail is
provided below against Principle 7.
45
Annual Report and Accounts 2022Governance Corporate governance (continued)
Governance
Principle
Application
Principle 6
Ensure that
between them
the directors have
the necessary
up-to-date
experience, skills
and capabilities
Principle 7
Evaluate board
performance
based on clear
and relevant
objectives,
seeking
continuous
improvement
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 Nick Bate has
extended the breadth of experience on the Board and the appointment of Alan Aubrey further
enhances its capabilities and complements the skills and experience of the current Directors.
Directors are responsible for ensuring their continuing professional development to maintain their
effective skills and knowledge.
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 in most areas
but highlighted some skill sets which could form part of the specification for any future Board
appointments, some of which are already enhanced by the appointment of Alan Aubrey.
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 was the Company’s Senior Independent Director during FY22 and provided a sounding
board for the Chairman and also served as an intermediary for the other directors where required.
Alan Aubrey will take over the role of Senior Independent Director.
External advisers or consultants have been engaged by the Board in respect of a review of its
remuneration policies, in relation to implementation of the Company’s acquisition strategy and in
relation to the appointment of both Nick Bate and Alan Aubrey to the Board, all being significant
matters.
On appointment to the Board, new directors receive a tailored induction pack and introductions
to relevant personnel within the Group.
The Board recently carried out its first externally facilitated evaluation in a number of years.
The assessment was conducted by EquityCulture Ltd and comprised the following elements:
- completion of a questionnaire specifically drafted for the Company based on discussions with
the Chair and Company Secretary. The questionnaire covered areas including investor relations,
Board meetings and administration, Board composition, structure and relationships, corporate
strategy, operation of Board committees, risk and succession planning;
- 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;
- production of a report by EquityCulture Ltd, summarising the key outputs from the evaluation
and suggesting a number of action points for the Board to consider;
- a Board discussion facilitated by the Chair on the outputs of the questionnaire and skills matrix
and potential resulting actions for the coming year.
46
Annual Report and Accounts 2022Governance Corporate governance (continued)
Governance
Principle
Application
Principle 8
Promote a
corporate culture
that is based on
ethical values and
behaviours
A number of specific actions were agreed by the Board, which the Board believes will assist in
improving Board performance and these will be implemented during the year. The actions relate
to the following areas:
- timings, location and format of Board meetings and reports;
- review of Board composition;
- ongoing review of the Group’s strategy;
- review and update of the Company’s investor relations and communications policy;
- ongoing review of the Group’s risk register, risk appetite and effectiveness of controls;
- detailed review of 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 ongoing disclosure of interests, are all
examples of processes which require high standards of behaviour from the Board.
Employment policies adopted by the Group assist in embedding a culture of ethical behaviour
and the values set out in its corporate social responsibility statement. During the year, a refreshed
compliance and anti-bribery policy was launched across the Group and also a new Modern
Slavery Act policy to sit alongside the Group’s Modern Slavery statement – the continued work on
such policies also reinforces the culture of ethical values and behaviours.
The Group is pleased that in FY22, despite COVID-19-related restrictions continuing to be
imposed at several points, it has been able to support a number of virtual and face to face
volunteering and fundraising events, including litter picking in conjunction with Harrogate
Council, maintenance of its Trees for Life partnership and the Mission Christmas volunteering
campaign. Several local and national charities have been supported through the year by
colleague fundraising, including Macmillan Cancer Support, Action for India, Red Nose Day and
Children in Need.
All colleagues are granted a day’s paid volunteering and the Group encourages colleagues to use
this day to take part in local volunteering activity.
Further details of the Group’s charitable activity is set out on pages 35 and 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 eight times a year in accordance with its scheduled meeting calendar and
this schedule is supplemented with additional meetings as and when required and monthly Board
reports circulated in respect of the previous month. The attendance by each Board member at
meetings held in the year is shown in the table on page 49.
At each scheduled meeting, the Board considers and reviews the trading performance of the
Group for the previous month. 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 Chair for each meeting and papers are
distributed several days ahead of meetings taking place.
47
Annual Report and Accounts 2022Governance 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 Nick Bate (Chair) (having replaced Ian Johnson during
the year), Jon Kempster (to be replaced by Alan Aubrey) and Helena Feltham. The Committee
meets at least once a year and further 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 Nick Bate as Non-Executive Chair as detailed above and also in the appointment of Alan
Aubrey as Non-Executive Director and Chair of the Audit Committee which was announced
following the year end.
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, 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,
monthly colleague briefing sessions and the Peoplecentric newsletter, all as referred to above.
48
Annual Report and Accounts 2022Governance Corporate governance (continued)
The following table details the attendance of the Board members at regular scheduled Board meetings and at all committee
meetings held during FY22 which they were eligible to attend.
Position
(at 31 March
2021)
(Outgoing
Chair)
Non-
Executive
Director
Chief
Executive
Officer
Chief
Financial
Officer
Non-
Executive
Director
Chair
Name
Ian
Johnson
Jon
Kempster
Peter
Brotherton
David
Senior
Helena
Feltham
Nick
Bate
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Total
Attended
Total
Attended
Total
Attended
Total
Attended
5
8
8
8
7
3
5
8
8
8
7
3
-
6
-
-
6
-
-
6
-
-
6
-
2
4
-
-
4
2
1
4
-
-
4
2
3
5
-
-
3
2
3
4
-
-
3
2
49
Annual Report and Accounts 2022Governance Non-Executive Directors
Non-Executive Directors
Nick Bate
Independent Non-Executive
Chair of the Board
Appointment date:
17 November 2021
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: Nick is an
experienced chair and non-executive director of a portfolio
of companies across the data, communications, software and
financial services sectors, and most recently sat on the board
of directors for Nasstar plc for over 6 years. Nick has a
proven track record in delivering successful growth through
the application of his financial, commercial and operational
skills and strong experience in corporate M&A transactions.
Nick is a chartered management accountant.
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. She also spent time in executive search with
Odgers Berndtson, covering senior appointments across
both public and private sectors. She 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 independent non-executive chair; 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. He 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 2022Governance Executive Directors
Executive Directors
Peter Brotherton
Chief Executive Officer
Appointment date: 28
November 2016. Peter served
as Chief Financial Officer of the
Company from 28 November
2016 to 21 November 2018
and then as Interim Chief
Executive Officer 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. David holds
no external appointments.
51
Annual Report and Accounts 2022Governance
Audit Committee report
The Audit Committee Report which describes the work of
the Committee in the last year.
The Committee reports on all such matters to the Board.
Governance
During the year the Audit Committee consisted of Jon
Kempster, as Chair of the Committee, and Non-Executive
Director, Helena Feltham (who replaced Stephen Vaughan in
this role in July 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 six times. Attendance
details for the meetings are provided during FY22 on page 49.
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;
reviewing the scope and results of the external annual
audit by the Auditor, their effectiveness, independence
and objectivity;
reviewing the nature and extent of any non-audit
services provided by 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. The Audit Committee acknowledges
that there is a requirement for continuous improvement
to the control environment particularly as the Group
continues on its acquisition strategy, improvement plans
are being developed documenting short and longer term
plans to address risks and control weaknesses. Following
the assignment of a new senior owner to manage the
Group’s risk register in FY21, the Group’s risk management
framework has evolved somewhat in FY22. There is now a
tiered management of risk, with functional towers owning
and managing their direct risks, and a consistent and
scientific measurement of risks across all functions in order
that the highest risks can be escalated to the Operating
Board, coordinated by the Chief Financial Officer and
fed through to the Group’s corporate risk register. The
corporate risk register is shared and refined with the
Committee at key intervals in the year with reporting on key
risks and mitigating actions.
External audit
The Audit Committee approved 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 Director’s 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. During the year, Christopher Vaulks has taken
on the audit engagement leader role from Johnathan Pass.
Johnathan had been the engagement lead since 2017 and
has therefore rotated off the audit after five years, in line
with KPMG’s rotation policies. 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.
52
Annual Report and Accounts 2022Governance Audit Committee report (continued)
Significant reporting issues and judgements
The significant estimates and judgements made in preparing these financial statements relate to the accounting treatment
of cloud customisation and configuration costs. Management have considered the IFRIC agenda decision made in April
2021 and have accordingly made a restatement to the prior year results as detailed in note 34. In addition estimates have
been made in valuation of intangible assets and fair value adjustments resulting from the acquisitions completed in the year.
Further information is included in note 2.
Jon Kempster
Chair of the Audit Committee
21 July 2022
53
Annual Report and Accounts 2022Governance Directors’ remuneration report – annual statement
On behalf of the Board, I am pleased to present the
Directors’ Remuneration Report for FY22. As the Company
is listed on the Alternative Investment Market (“AIM”),
we are required to comply with AIM Rule 19 in respect
of remuneration disclosures. However, following a recent
review, we have decided to provide additional disclosures
to those required by AIM Rule 19 on a voluntary basis, in
line with AIM best practice, to enable shareholders to better
understand and consider our remuneration arrangements.
This report is divided into three sections, these being:
•
•
•
This Annual Statement, which summarises the
Committee and its work, remuneration outcomes
in respect of the year just ended and how the
Remuneration Policy will be operated for the
forthcoming financial year;
The Remuneration Policy Report, which summarises the
Company’s Remuneration Policy; and
The Annual Report on Remuneration, which discloses
how the Remuneration Policy was implemented in FY22
in detail and how the Policy will operate for FY23.
Committee members
The Remuneration Committee is chaired by Helena Feltham
as independent Non-Executive Director and also consists
of Jon Kempster (to be replaced by Alan Aubery) and
Nick Bate. The Committee meets at least twice a year
and at other times during the year as agreed between the
members of the Committee. The attendance record for the
meetings held in the year is included on page 49. Steve
Vaughan was chair of the Remuneration Committee until
he stepped down on 27 April 2021. Following this, Jon
Kempster was interim chair of the Remuneration Committee
until Helena Feltham’s appointment to the Board and as
chair of the Remuneration Committee on 7 July 2021.
Committee responsibilities
The Group is committed to maximising shareholder
value over time. Each year the Remuneration Committee
reviews the incentive and reward packages for the Chair,
Executive Directors and senior executives to ensure that
they are aligned with the Group’s strategic objectives and
financial performance, and are appropriate to attract,
retain and motivate management behaviour in support
of the Company’s culture and beliefs and 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 Board (excluding the Non-Executive
Directors) 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.
54
Advisors to the Committee
FIT Remuneration Consultants LLP was appointed to provide
independent advice to the Remuneration Committee as
and when required in respect of remuneration quantum
and structure and developments in governance and best
practice more generally. FIT is a member and signatory
of the Remuneration Consultants Group and voluntarily
operates under the Code of Conduct in relation to executive
remuneration consulting in the UK, details of which can be
found at www.remunerationconsultantsgroup.com
Implementation of the Remuneration Policy for the year
ended 31 March 2022
•
Salaries for the CEO and CFO were increased to
£355,000 and £200,000 respectively from 1 October
2021. These increases reflect the strong performance
by Peter Brotherton and David Senior in their roles
and ensures we are paying our strong leadership team
competitively;
•
Executive Directors received a workforce aligned
pension at 5% of salary;
• As a result of missing the financial targets, no annual
bonus was payable to the CEO or CFO for the year
ended 31 March 2022; and
•
Long Term Incentive Plan (“LTIP”) awards were granted
to the CEO and CFO in November 2021 over shares
with a value equal to 200% of salary with the first 100%
of salary based on absolute Total Shareholder Return
(“TSR”) between 5% and 10% p.a. and the additional
100% of salary based on stretch absolute TSR targets
of 10% to 15% p.a.
Implementation of the Remuneration Policy for the year
ending 31 March 2023
•
•
The CEO and CFO will continue to receive base salaries
of £355,000 and £200,000 respectively;
Pension provision will continue at 5% of salary in line
with the workforce provision;
• Annual bonus potential will continue to be capped
at 100% of salary for FY23. 80% of the bonus will be
payable against financial targets (based on sliding scale
revenue, profit and cash targets) and 20% will be based
on personal/strategic targets; and
•
2022 LTIP awards will be granted to Executive Directors
in line with the annual grant policy. Details of the
awards, and performance targets will be detailed in the
RNS issued immediately following the grant date.
Annual Report and Accounts 2022Governance Directors’ remuneration report annual – statement (continued)
As a Committee, we recognise the need to foster good relations with our shareholders and encourage open dialogue.
The Chair of the Remuneration Committee is available for discussion with institutional investors concerning the Company’s
approach to remuneration at any time. We trust you will find the new format of this Report to be informative and look
forward to receiving your support at our forthcoming AGM.
Helena Feltham
Chair of the Remuneration Committee
21 July 2022
55
Annual Report and Accounts 2022Governance Directors’ remuneration policy
This section sets out the Directors’ Remuneration Policy (“Policy”). In order to deliver the Group’s strategy, the primary
objectives of our Policy are:
•
•
•
to operate a transparent, simple and effective remuneration structure which encourages the delivery of Group targets in
accordance with our business plan and strategy;
to attract, motivate and retain the best people of the highest calibre by providing competitive and appropriate short-
and long-term variable pay which is dependent upon challenging performance conditions; and
to promote the Company’s culture and beliefs and promote the long-term success of the Group and ensure that our
policy is aligned with the interests of, and feedback from, our shareholders.
Summary of Directors’ Remuneration Policy
Component
Base salary
Purpose and link
to strategy
To provide a
competitive base
salary to attract,
motivate and retain
directors with the
experience and
capabilities to achieve
the strategic aims.
Operation
Normally reviewed annually after
considering pay levels at comparably
sized listed companies and sector peers,
the performance, role and responsibility of
each Director, market conditions and the
Company’s performance and the level of
pay across the Group as a whole.
Maximum
Performance
n/a
n/a
Benefits
Pension
Annual
bonus
LTIP
To provide market-
competitive benefits
package.
Life assurance cover of four times salary,
private medical insurance for themselves,
their spouse and their children.
n/a
n/a
To provide an
appropriate level of
retirement benefit.
Workforce aligned pension which may be
paid as a pension and/or cash allowance
if annual or lifetime limits are met.
Currently 5%
of salary.
n/a
To reward
performance against
annual targets which
support the strategic
direction of Group.
Awards are based on annual performance
measured against targets for revenue growth,
profitability and cash generation. Any bonus
over 50% of salary normally deferred into
shares for two years.
100% of salary
maximum
opportunity.
To drive and reward
the achievement of
longer-term objectives
and align management
with shareholders.
Conditional shares and/or nil cost or nominal
cost share options. Vesting is normally
subject to the achievement of challenging
performance conditions based around total
shareholder return, normally over a period
of three years. Dividend equivalents may be
awarded to the extent awards vest. Awards
may be subject to malus/clawback provisions
at the discretion of the Committee.
Up to 200% of
salary
Sliding scale
financial and/
or personal/
strategic
targets
Performance
metrics will
be linked
to financial
and/or share
price and/
or strategic
performance
All-
employee
share
awards
To align management
with employees and
shareholders.
Awards will be consistent with prevailing
HMRC tax favoured all-employee share plans.
Prevailing
HMRC limits
n/a
56
Annual Report and Accounts 2022Governance Directors’ remuneration policy (continued)
Non-
Executive
Directors
The Committee
determines the
Chair’s fee. Fees for
the Non-Executive
Directors are agreed
by the Chair and Chief
Executive Officer.
Fees are reviewed annually taking into
account the level of responsibility, relevant
experience. Fees may include a basic fee and
additional fees for further responsibilities. Fees
are normally paid in cash. Travel and other
reasonable expenses incurred in the course of
performing their duties may be reimbursed.
n/a
n/a
Service contracts and non-executive letters of appointment
The details of the Executive and Non-Executive Directors’ service contracts and appointment letters are summarised below:
Executive Directors
Peter Brotherton
David Senior
Non-Executive Directors
Nick Bate
Jon Kempster
Helena Feltham
Date of appointment
Contractual
notice period
(months)
Length of service at
31 March 2022
28 November 2016
3 April 2020
17 November 2021
10 January 2017
7 July 2021
6
6
3
3
3
5 years 4 months
1 years 11 months
4 months
5 years 2 months
8 months
The service contracts and letters of appointment continue in force until notice in writing is given by either the Company or
the Director.
57
Annual Report and Accounts 2022Governance Annual report on remuneration
Single total figure of remuneration for Directors
The remuneration of the Directors in respect of FY22 was as follows:
Basic salary,
allowances,
and fees
Year
£000
Annual
bonus
£000
Pension
£000
Share-based
payments
£000
Executive
Peter Brotherton4
David Senior 5
Non-Executive Directors
Nick Bate
(appointed 17 November 2021)
Helena Feltham
(appointed 7 July 2021)
Jon Kempster
Former Directors
Ian Johnson
(resigned 17 November 2021)
Dean Barber
(appointed 2 September 2019,
resigned 3 April 2020)
Stephen Vaughan
(resigned 17 April 2021)
Total
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
FY22
FY21
328
300
180
146
31
-
37
-
49
45
54
85
-
4
11
45
690
625
-
150
-
80
-
-
-
-
-
-
-
-
-
-
-
-
-
230
Total
£000
863
672
293
265
31
-
37
-
49
45
54
85
-
4
11
45
15
10
8
7
-
-
-
-
-
-
-
-
-
-
-
-
520
212
105
32
-
-
-
-
-
-
-
-
-
-
-
-
23
17
625
244
1,338
1,116
4 On 23 November 2021 Peter Brotherton exercised options over 298,879 ordinary shares of 0.1p each at a price of £1.24 resulting in a gain of £370,493.
The share-based payments charge for the year includes £149,996 in relation to an allotment of shares to Peter Brotherton. The allotment was made for over
achievement against bonus targets in the financial year ended 31 March 2021 and the allotted shares cannot be sold for a period of 2 years from issue.
5 On 23 November 2021 David Senior exercised options over 20,000 ordinary shares of 0.1p each at a price of £1.24 resulting in a gain of £24,792.
The share-based payments charge for the year includes £79,950 in relation to an allotment of shares to David Senior. The allotment was made for over
achievement against bonus targets in the financial year ended 31 March 2021 and the allotted shares cannot be sold for a period of 2 years from issue.
58
Annual Report and Accounts 2022Governance Annual report on remuneration (continued)
Executive Director’s share options in the Company
Details of share options in the Company held by the Directors during the year are as follows:
Peter Brotherton
David Senior
Balance at
31 March
2021
(number of
shares)
Exercise
price (p)
Granted
(number of
shares)
Forfeited /
expired
(number of
shares)
(a)
(b)
(d)
(c)
(f)
(c)
(b)
(d)
(e)
0.1
0.1
0.1
0.1
99.9
0.1
0.1
0.1
0.1
298,879
379,267
242,915
-
-
921,061
20,000
100,000
129,555
-
249,555
-
-
-
554,326
18,023
572,349
-
-
-
312,296
312,296
-
-
-
-
-
-
-
-
-
-
-
Balance at
31 March
2022
(number of
shares)
-
379,267
242,915
554,326
18,023
Exercised
(number of
shares)
(298,879)
-
-
-
-
(298,879)
1,194,531
(20,000)
-
-
-
(20,000)
-
100,000
129,555
312,296
541,851
(a) The options were granted on 26 November 2018 under the Company’s LTIP. The options vested post the release of the
Group’s results for FY21 subject to the achievement of performance conditions related to the growth in earnings per share
and were exercised on 23 November 2021.
(b) 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 FY22 subject to the achievement of performance conditions related to the growth in share price.
(c) The options were granted on 27 June 2018 under the Company’s LTIP. The options vested post the release of the Group’s
results for FY21 subject to the achievement of performance conditions related to the growth in earnings per share and were
exercised on 23 November 2021.
(d) 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 FY23 subject to the achievement of performance conditions related to the growth in share price.
(e) The options were granted on 18 November 2021 under the Company’s LTIP. The options will vest three years from grant
subject to absolute TSR targets. For awards up to 100% of salary, 25% will vest for TSR of 5% p.a. increasing pro-rata to
100% vesting for TSR of 10% p.a. For awards between 100% and 200% of salary, 0% will vest for TSR of 10% p.a. increasing
pro-rata to 100% vesting for TSR of 15% p.a.
(f) The options were granted on 23 December 2021 under the SAYE option plan under which employees contribute a monthly
amount which is saved over three years to buy shares. The options are exercisable from 1 February 2025. There are no
performance conditions.
59
Annual Report and Accounts 2022Governance Annual report on remuneration (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 2022
Interests in
ordinary
shares at
31 March 2021
Interests in share-
based incentive
options at
31 March 2022
Interests in share-
based incentive
options at
31 March 2021
Executive
Peter Brotherton
David Senior
Non-Executive
Nick Bate
Helena Feltham
Jon Kempster
438,571
56,550
228,571
14,550
1,194,531
541,851
921,061
249,555
-
-
10,249
-
-
-
-
-
-
-
-
-
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.
Employee expenditure
Distributions to shareholders
Average number of employees
Revenue
Adjusted EBITDA (restated1)
Year ended
31 March 2022
Year ended
31 March 2021
£000
22,851
5,627
486
93,328
23,713
£000
21,210
1,868
420
91,399
24,579
Change
%
7.7%
201.2%
15.7%
2.1%
(3.5%)
1For an explanation and reconciliation in relation to the prior year restatement following the Group’s adoption of the IFRIC
agenda decision on cloud implementation, configuration and customisation costs, please refer to note 34.
Share price
The market price of the Company’s shares on 31 March 2022 was 113.25p per share. The highest and lowest market prices
during the year were 147p and 108.75p respectively.
Helena Feltham
Chair of the Remuneration Committee
21 July 2022
60
Annual Report and Accounts 2022Governance Directors’ report
The Directors present their annual report together with the audited financial statements for FY22.
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 January 2022. Following good trading performance and strong cash
generation, the Board has decided to maintain its dividend policy. The Directors will therefore be recommending the payment
of a final dividend of 2.4p per share in respect of FY22 to shareholders which, if approved at the AGM, will be paid on 16
September 2022 to shareholders on the register at the close of business on 29 July 2022. With the shares going ex-dividend
on 28 July 2022. The last day for Dividend Reinvestment Plan elections is 19 August 2022.
Substantial shareholders
As at 31 March 2022 and 30 June 2022 (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:
31 March 2022
31 March 2022
30 June 2022
31 June 2022
Number
%
Number
%
Kestrel Investment Partners
ND Capital Investments Ltd
Lombard Odier Asset
Management
Slater Investments
Harwood Capital
Chelverton Asset Management
Artemis Investment Management
28,641,651
24,840,868
23,108,945
18,587,657
16,996,500
9,000,000
4,838,447
18.50%
16.04%
14.93%
12.01%
10.98%
5.81%
3.13%
29,106,076
24,840,868
23,214,575
18,587,657
17,084,000
8,845,000
4,838,447
18.80%
16.04%
14.99%
12.00%
11.03%
5.71%
3.12%
As of 30 June 2022, the Company’s issued share capital is 154,838,973 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 (resigned 17 November 2021)
• Nick Bate (appointed 17 November 2021)
•
Peter Brotherton
• David Senior
•
•
Jon Kempster
Stephen Vaughan (resigned 27 April 2021)
• Helena Feltham (appointed 7 July 2021)
61
Annual Report and Accounts 2022Governance 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 54-60. Details
of the Directors’ contracts, remuneration and share options
granted are also set out in the Annual report on remuneration,
on pages 54-60.
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.
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 SAYE), 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 employees.
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 pages 33 to 36
of our Corporate Responsibility statement.
62
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 12 to 20.
Note 3 to the financial statements sets out the Group’s
financial risks. 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 consolidated financial statements have been prepared and
approved by the Directors in accordance with applicable law
and UK-adopted international accounting standards.
The financial statements are prepared on a going concern
basis which the Directors believe to be appropriate for the
following reasons.
The Directors have prepared cash flow forecasts for a period
of twelve months from the date of approval of these financial
statements which indicate that, taking account of reasonably
possible downsides on the operations and its financial
resources, the Group and the Company will have sufficient
funds to meet its liabilities as they fall due for that period, and
will comply with its debt covenants over that period.
The Directors’ forecasts have been built from the detailed
Board approved budget for the year ending 31 March 2023,
and draft budget for 31 March 2024. The forecasts include a
number of assumptions in relation to order intake, renewal and
churn rates, EBITDA margin improvements and the impact of
post year end acquisitions.
Whilst the Group’s trading and cash flow forecasts have been
prepared using current trading assumptions, the operating
environment presents a number of challenges which could
negatively impact the actual performance achieved. These
risks include, but are not limited to, achieving forecast levels
of order intake, the impact on customer confidence as a result
of general economic conditions, inflationary pressures and
the achievability of actions the Directors consider they would
take should further risks materialise. In making their going
concern assessment in light of these risks, the Directors have
also modelled a severe but plausible downside scenario when
preparing the forecasts.
The downside scenario assumes significant economic
downturn over FY23, impacting new order intake alongside
cost inflation, supply chain delays and loss of a key customer.
In this scenario, recurring monthly order intake is forecast to
reduce by 25% compared to base case budget and product
Annual Report and Accounts 2022Governance Directors’ report (continued)
and services revenues reduce by 19% compared to base
case budget incorporating both potential supply chain issues
and reduced investment from our customer base. Under the
downside scenario modelled, the forecasts demonstrate that
the Group is expected to maintain sufficient liquidity and will
continue to comply with the relevant debt covenants after
management have taken the mitigating actions which are
within the Group’s control including delaying any potential
FY23 interim dividend and the rephasing of discretionary
capital expenditure. The Directors therefore remain confident
that the Group has adequate resources to continue to meet its
liabilities as and when they fall due within the period of at least
twelve months from the date this Report.
The Group’s financial risk management objectives and
policies are described in note 3 to the financial statements.
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.
Purchase of own shares
Subsequent events
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 £2million (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. During the year the Company recommenced
the Programme and obtained approval from the Board to
increase the aggregate consideration payable under the
Programme to £5 million in total. As a result, 2,160,500
shares with a nominal value of 0.1p each were repurchased
during the year for a total consideration of £2.7m. Several
share options exercised during the year were settled using
treasury shares meaning the number of shares held in
treasury at 31 March 2022 was 2,170,203.
Annual General Meeting
The 2022 AGM will be held at the offices of finnCap plc
at 1 Bartholomew Close, London EC1A 7BL at 12:30 on 7
September 2022. 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 Report
and forms part of this Directors’ Report and is incorporated
by reference.
63
Subsequent to the year end, on 26 April 2022, the Group
completed a refinance of its debt facilities that were due
to mature on 30 June 2022. The New Facility consists of
an £80m RCF and a £20m accordion facility and provided
by a new four bank group consisting of NatWest, Barclays,
Bank of Ireland and Silicon Valley Bank. The New Facility
has an initial maturity date of 26 April 2025 with options to
extend by a further one or two years. The borrowing cost of
the RCF is determined by the level of the Group’s leverage
and has a borrowing cost of 175 basis points over SONIA
at the Group’s current leverage levels. An arrangement fee
of 75 basis points will be payable upfront, in addition to a
commitment fee on the undrawn portion of the new RCF,
on equivalent terms to the previous facility. The Group is
required to comply with financial covenants for adjusted
leverage (net debt2 to adjusted EBITDA2), cashflow cover
(adjusted cashflow to debt service, where adjusted cashflow
is defined as adjusted EBITDA2 less tax paid, dividend
payments, IFRS16 lease repayments and cash capital
expenditure) and provisions relating to guarantor coverage
such that guarantors must exceed a prescribed threshold of
the Group’s gross assets, revenue and Adjusted EBITDA2.
Covenants are tested quarterly each year. The New Facility
provides the Group with additional liquidity to be used
for working capital purposes and to fund acquisitions, in
accordance with the Group’s stated strategy.
On 7 June 2022, RSL acquired the consulting business of
Sungard AS for £4.2m consideration in cash. On 27 June
2022, RSL acquired the entire issued share capital of 4D
for £10.5m consideration paid in cash. On 6 July 2022,
RSL completed the acquisition of Sungard DCs for an
initial consideration of £10.12m. Further details of these
acquisitions can be found at note 35.
Annual Report and Accounts 2022Governance Directors’ report (continued)
The Group is undertaking an exercise to establish the fair value of the net assets acquired in each of these post year end
acquisitions. However, due to the timing of the acquisitions this exercise is ongoing and it is not possible to provide further
detail at this stage.
On 8 July 2022 the Group settled a supplier dispute resulting in the payment of contract termination fees (£0.4m) and legal
fees (£0.1m) which will be accounted for as exceptional items in FY23.
2For an explanation of the alternative performance measures used in this report, please refer to pages 22-25.
By order of the Board
Harn Jagpal
Company Secretary
21 July 2022
64
Annual Report and Accounts 2022Governance Statement of Directors’ responsibilities
The Directors are responsible for preparing this Report and
the Group and 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 UK-adopted international accounting
standards 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.
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
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
21 July 2022
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 UK-adopted
international accounting standards;
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.
65
Annual Report and Accounts 2022Governance • T R A N S F O R M I N G A N D M A N A G I N G •
Your mission-critical IT infrastructure
• T R U S T E D PA R T N E R •
to over 1,500 public and private sector organisations,
providing all their cloud, connectivity, communication
and cyber security needs.
K E E P I N G
20,000
customer
S I T E S
CO NNEC TED
SECU R E LY
CO N N EC T I N G
30,000
remote workers
H E L P I N G O V E R
400
O R G A N I S AT I O N S
confidently move
TO THE CLOUD
66
P R O V I D I N G
ASSURANCE
TO 100S
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across 1,500 racks
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97,000
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• T R U S T E D PA R T N E R •
to over 1,500 public and private sector organisations,
providing all their cloud, connectivity, communication
and cyber security needs.
W I T H S O L U T I O N S
D E L I V E R E D AC R O S S
O U R O W N :
100GB network
Voice and IaaS platforms
Multiple UK-based Tier 3
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S U P P O R T E D B Y
O U R O W N :
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UK-based support team
Highly skilled and accredited
teams, based in our offices
throughout the UK
67
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 2022 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 2022 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with UK-adopted international
accounting standards;
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
£755,000 (2021: £731,000)
0.8% (2021: 0.8%) of Group revenue
Coverage
93.7% (2021: 99%) of total profits and losses that make up Group profit before tax
Key audit matters
Recurring risks
New: Revenue recognition
Event driven
Recoverability of parent Company’s investment in subsidiaries
New: Identification and valuation of intangible assets acquired in
business combinations
vs 2021
s
2. Key audit matters: 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:
68
Annual Report and Accounts 2022Financial statements
Independent auditor’s report
to the members of Redcentric plc (continued)
The risk
Our response
Revenue
recognition
(£93.3 million;
2021: £91.4 million)
Refer to pages
83 & 84
(accounting policy)
and page 92
(financial
disclosures)
Inappropriate revenue
recognition as a result of
fraud, and the impact on
resulting accrued and
deferred income
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:
We have assessed the level of
risk to be consistent with the
prior period, however given
the removal of going concern
and credit note provision as key
audit matters, the audit effort
over this risk has increased
relative to others.
We have identified incentives/
pressures on management to
achieve bonus targets and/or
investor expectations which
increase the risk of fraudulent
revenue recognition.
Results for any given financial
reporting period are expected
to be affected by the revenue
recognition policies in place for
each revenue stream and the
accurate accrual and deferral
of related amounts at the
year-end. There is a risk that
amounts recorded in revenue
in the year could be subject to
manipulation.
Additionally, for each of the
Group’s revenue streams
there are manual aspects
of the revenue recognition
process, particularly relating
to the accrual and deferral
of revenue amounts at the
year end. There is a resulting
risk that revenue transactions
around the year-end might be
fraudulently recorded, such
that revenue is not recognised
in line with relevant accounting
standards, and in particular that
accrued income recorded at
the year end does not exist and
deferred income is incomplete.
• Substantive analytical procedure: we performed a revenue
predictive analysis, forming an expectation of the Group’s total
revenue with reference to cash receipts in the year, adjusting
for working capital, accrued and deferred income and other
expected adjustments and compared this to the amount of
revenue recognised in the year.
• Tests of detail:
- for a sample of revenue transactions recognised one month
either side of the balance sheet date, we assessed whether
revenue was recognised in the appropriate period by
comparing to supporting documentation such as invoices,
correspondence with customers, and contracts;
- for a sample of credit notes raised in the month after the
balance sheet date, we assessed whether the credit note
related to revenue recognised in the year and if this was
indicative of inappropriate revenue recognition through
inquiry and inspection of source documentation;
- for a sample of customer balances, we assessed the
appropriateness of deferred and accrued income at the
year-end through inspection of contracts, invoices, customer
confirmations and recalculations;
- Given the substantive analytical procedure above was
performed by reference to cash receipts in the year, we
assessed the year-end bank reconciliations, and obtained
bank confirmations to obtain audit evidence over the Group’s
cash balance and to assess the appropriateness of any
significant reconciling items as such items may be indicative
of inappropriate revenue recognition; and
- For unexpected revenue journal postings (where the opposite
side of the journal was posted to an account which would
not be expected based on our understanding of business
processes and transaction flows), we assessed the nature
of the posting and obtained supporting documentation
where available.
• Enquiry of customers: for a sample of the Group’s customers,
we issued customer confirmation requests to corroborate the
year-end accrued income balance directly with the customer.
• Assessing transparency: We considered the adequacy of the
Group’s disclosures in respect of revenue disaggregation by
product/service line and timing of revenue recognition.
69
Annual Report and Accounts 2022Financial statements Independent auditor’s report
to the members of Redcentric plc (continued)
The risk
Our response
Identification
and valuation
of intangible
assets acquired
in business
combinations
(Valuation of
intangible
assets acquired
(£10.7m including
goodwill) in
respect of the
Piksel Industry
Solutions
business
combination)
Refer to page 52
(Audit Committee
Report), page 86
(accounting
policy) and
pages 116-
118 (financial
disclosures).
Subjective estimate
and valuation
During the year the Group
completed the acquisition of
Piksel Industry Solutions Limited.
This was a material acquisition
for the Group, with total
consideration of £12.7m.
The Group has performed
fair value assessments of the
identified acquired intangible
assets. The identification of
acquired intangible assets
involves judgement and the
assessment of the fair value
of intangible assets acquired
involves estimation uncertainty,
including forecasting future
performance on a market
participant basis.
There is a high degree of
subjectivity in assessing certain
assumptions applied by the
Group in the discounted cash
flow models used to calculate
the acquisition date fair value of
these assets, including discount
rate, royalty rates and customer
growth and attrition rates.
The effect of these matters
is that, as part of our risk
assessment, we determined that
the valuation of the identified
acquired intangible assets has
a high degree of estimation
uncertainty, with a potential
range of reasonable outcomes
greater than our materiality
for the financial statements
as a whole.
We performed the tests below rather than seeking to rely on any
of the Group’s controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through
the detailed procedures described.
Our procedures included:
• Test of detail: we inspected the share purchase agreement,
due diligence documents, board minutes and market
announcements and assessed whether Group’s acquisition
workings accurately reflected these and additionally
compared the intangibles identified by management to our
understanding of the rationale for the purchase based on our
inspection of these documents.
• Assessment of experts: we assessed the competence,
capabilities and objectivity of the external valuation experts
engaged by the Group to assist in estimating the fair value of
material intangible assets acquired by performing independent
research on the qualifications and experience of management’s
expert and evaluating the engagement terms.
• Our valuation expertise: we involved our own valuation
specialists to assist us in assessing completeness of the
intangible assets identified, the appropriateness of valuation
methodologies applied, and to challenge on key assumptions
used such as discount rate, useful economic life estimates,
royalty rate, contributory asset charges, attrition rate and
terminal growth rate. We challenged the approach to
contributory asset charges determination and discount rate
selection through an independent recalculation.
• Benchmarking assumptions: we challenged the discount rate
and terminal growth rate by comparing to externally derived
market data.
• Assessing transparency: we considered the adequacy of the
Group’s disclosures in respect of the business combination and
the valuation of the identified intangible assets.
70
Annual Report and Accounts 2022Financial statements Independent auditor’s report
to the members of Redcentric plc (continued)
The risk
Our response
Recoverability of
parent Company’s
investment in
subsidiaries
(£104.1 million; 2021:
£103.0 million)
Refer to page 125
(accounting policy)
and page 127
(financial
disclosures).
Low risk, high value
The carrying amount of
the parent Company’s
investments in subsidiaries
represents 100% (2021:
100%) of the Company’s
total assets.
Their recoverability is not
at a high risk of significant
misstatement or subject
to significant judgement.
However, due to their
materiality in the context of
the parent Company financial
statements, this is considered
to be the area that had the
greatest effect on our overall
parent Company audit.
We performed the tests below rather than seeking to rely on any
of the Company’s controls because the nature of the balance is
such that we would expect to obtain audit evidence primarily
through the detailed procedures described.
Our procedures included:
- Tests of detail: Comparing the carrying amount of 100% of
investments with the relevant subsidiary’s draft balance sheet
to identify whether their net assets, being an approximation
of their minimum recoverable amount, were in excess of their
carrying amount and assessing whether those subsidiaries have
historically been profit-making.
- Test of detail: Comparing the carrying amount of investments
with an estimate of value in use based on forecast future
cashflows.
- Benchmarking assumptions: Challenging the Group’s
assumptions in relation to key inputs to the value in use
assessment such as projected growth and discount rates to
externally derived data.
- Comparing valuations: We compared the carrying amount
of the Parent Company’s investments to the Group’s market
capitalisation.
We continue to perform procedures over going concern. However, as the risks relating to Covid-19 have reduced year on
year and the Group completed its refinancing exercise in April 2022, we have not assessed going concern as one of the most
significant risks in our current year audit and, therefore, it is not separately identified in our report this year.
Additionally, we continue to perform procedures over the provision for credit notes. However, following continued
improvements in the rate of billing errors and a corresponding reduction in estimation uncertainty, we have not assessed
this as one of the most significant risks in our current year audit and, therefore, it also is not separately identified in our
report this year.
71
Annual Report and Accounts 2022Financial statements Independent auditor’s report
to the members of Redcentric plc (continued)
3. Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at £755,000 (2021: £731,000), determined with reference
to a benchmark of total revenue of £93.3 million (2021: £91.4 million), of which it represents 0.8% (2021: 0.8%). We consider
total revenue to be the most appropriate benchmark as it provides a more stable measure year on year than group profit
before tax, and is reflective of the size and complexity of the Group.
Materiality for the parent Company financial statements as a whole was set at £514,000 (2021: £517,000), determined with
reference to a benchmark of parent Company total assets, of which it represents 0.5% (2021: 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.
Performance materiality was set at 65% (2021: 65%) of materiality for the financial statements as a whole, which equates to
£490,000 (2021: £475,150) for the Group and £334,000 (2021: £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 £37,750
(2021: £36,550), in addition to other identified misstatements that warranted reporting on qualitative grounds.
Of the Group’s 6 (2021: 3) reporting components, we subjected 1 (2021: 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 5 (2021: 1) components, 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 the 1 (2021: 2) component, and the audit of the parent Company, was performed by the Group team.
Component materiality was £612,000 (2021: component materialities ranged from £517,000 to £579,500), having regard to
the mix of size and risk profile of the Group across the components.
The scope of the audit work performed was predominately substantive as we placed limited reliance upon the Group’s
internal control over financial reporting.
72
Annual Report and Accounts 2022Financial statements Independent auditor’s report
to the members of Redcentric plc (continued)
Total revenue
£93.3m (2021: £91.4m)
Group materiality
£755,000 (2021: £731,000)
£755,000
Whole financial statements materiality
(2021: £731,000)
£490,000
Whole financial statements
performance materiality (2021: £475,150)
£612,000
Materiality at 1 in scope component
(2021: ranged from £517,000 to £579,500)
Total revenue
Group materiality
£37,750
Misstatements reported to the
audit committee (2021: £36,550)
Group revenue
Total losses and profits that
made up group profit before tax
Group total assets
5%
95%
(2021: 100%)
100%
95%
Full scope for group audit purposes 2022
Full scope for group audit purposes 2021
Residual components
6%
1%
94%
(2021: 99%)
99%
94%
73
1%
1%
99%
(2021: 99%)
99%
99%
Annual Report and Accounts 2022Financial statements Independent auditor’s report
to the members of Redcentric plc (continued)
4. Going concern
Our conclusions based on this work:
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”).
We used our knowledge of the Group, its industry, and the
general economic environment to identify the inherent risks
to its business model and analysed how those risks might
affect the Group’s and parent Company’s financial resources
or ability to continue operations over the going concern
period. The risks that we considered most likely to adversely
affect the Group’s and parent Company’s available financial
resources and metrics relevant to debt covenants over this
period were:
•
•
•
The level of external financing facilities available and
the ability of the Group to operate within the liquidity
and covenant parameters of these financing facilities;
The impact of reduced customer demand and the risk
of credit losses and/or customer attrition resulting from
macro-economic pressures on the Group’s customers
such as cost inflation; and
The achievability of actions the directors consider
they would take to improve the position should risks
materialise, taking into account the extent to which the
directors can control the timing and outcome of these.
We also considered less predictable but realistic second
order impacts, such as the impact of supply chain
disruption, the erosion of customer or supplier confidence,
and outcomes of contingent matters disclosed in Notes 9
and 36 which could result in a rapid reduction of available
financial resources.
We considered whether these risks could plausibly affect
the liquidity or covenant compliance in the going concern
period by assessing the directors’ sensitivities over the level
of available financial resources and covenant thresholds
indicated by the Group’s financial forecasts taking account
of severe, but plausible adverse effects that could arise from
these risks individually and collectively.
We considered whether the going concern disclosure in
note 1 to the financial statements gives a full and accurate
description of the directors’ assessment of going concern.
74
– 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 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 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. Our risk assessment
procedures included:
•
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, Audit Committee, and Remuneration
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.
Annual Report and Accounts 2022Financial statements Independent auditor’s report
to the members of Redcentric plc (continued)
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,
in particular the risk that Group management may be in a
position to make inappropriate accounting entries; and the
risk that revenue is overstated through recording revenues
in the wrong period.
We did not identify any additional fraud risks.
We performed procedures including:
•
Identifying journal entries and other adjustments
to test for full scope components based on risk
criteria and comparing the identified entries to
supporting documentation. These included those
journals with unexpected account pairings or posted
to unusual accounts;
• Assessing if any bias is present in significant
management judgements in relation to cloud
computing implementation, customisation and
configuration costs;
• Assessing significant accounting estimates for bias;
•
•
Evaluating the business purpose for significant unusual
transactions; and
Performing procedures over revenue recognition as
disclosed in section 2 of this report.
Identifying and responding to risks of material misstatement
related to 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 from inspection of the Group’s legal correspondence
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.
The potential effect of these laws and regulations on the
financial statements varies considerably.
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 and corruption, employment law, data
protection regulations, 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 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.
We discussed with the audit committee matters related
to actual or suspected breaches of laws or regulations,
for which disclosure is not necessary, and considered any
implications for our audit.
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.
75
Annual Report and Accounts 2022Financial statements Independent auditor’s report
to the members of Redcentric plc (continued)
6. We have nothing to report on the other
information in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the 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.
8. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page
65, the directors are responsible for: the preparation of the
76
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
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.
Christopher Vaulks (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
21 July 2022
Annual Report and Accounts 2022Financial statements Consolidated statement of comprehensive income
for the year ended 31 March 2022
Revenue
Cost of sales
Gross Profit
Operating expenditure
Other operating income
Adjusted EBITDA2
Depreciation of property, plant and equipment
Amortisation of intangibles
Depreciation of right of use assets
Exceptional items
Share-based payments
Operating profit
Finance income
Finance costs
Profit before taxation
Income tax credit /(expense)
Profit for the period attributable to owners of the parent
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Currency translation differences
Deferred tax movement on share options
Total comprehensive profit for the period
Earnings per share
Basic earnings per share
Diluted earnings per share
Year ended
31 March
2022
Year ended
31 March
2021
(restated1)
Note
£000
£000
6
7
16
15
17
9
28
10
10
12
93,328
(33,778)
59,550
(53,046)
103
23,713
(2,745)
(6,973)
(4,578)
(1,629)
(1,181)
91,399
(33,460)
57,939
(49,664)
4,507
24,579
(3,408)
(6,922)
(4,932)
4,152
(687)
6,607
12,782
-
(1,071)
5,536
1,404
6,940
-
(1,460)
11,322
(2,311)
9,011
(26)
58
6,972
103
(224)
8,890
13
13
4.43p
4.36p
5.87p
5.79p
The notes on pages 82 to 122 are an integral part of these consolidated financial statements.
1 See note 34 for an explanation and reconciliation in relation to the prior year restatement arising from a change in
accounting policy following the Group’s adoption of the IFRIC agenda decision on cloud implementation, configuration and
customisation costs.
2 For an explanation and reconciliation of the alternative performance measures used in this report, please refer to page 22.
77
Annual Report and Accounts 2022Financial statements Consolidated statement of financial position
as at 31 March 2022
31 March
2022
31 March
2021
(restated1)
31 March
2020
(restated1)
Note
£000
£000
£000
Non-Current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Corporation tax receivable
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Corporation tax payable
Bank and term loans
Leases liabilities
Provisions
Contingent consideration
Non-current liabilities
Deferred tax liability
Bank and term loans
Lease liabilities
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
20
22
24
24
26
23
24
24
26
27
27
27
67,726
5,372
17,038
3,999
94,135
1,393
22,123
-
1,804
25,320
119,455
61,280
5,834
18,787
1,403
87,304
1,061
25,663
-
5,250
31,974
119,278
68,415
8,475
26,010
2,324
105,224
891
23,261
346
3,710
28,208
133,432
(24,053)
(22,459)
(24,311)
(800)
(508)
(4,086)
-
(422)
(641)
(487)
(3,735)
(574)
-
-
(12,598)
(3,528)
(12,122)
-
(29,869)
(27,896)
(52,559)
-
(496)
(13,359)
(3,883)
(17,738)
(47,607)
-
(1,004)
(15,593)
(2,695)
(19,292)
(47,188)
-
(36)
(22,097)
(2,531)
(24,664)
(77,223)
71,848
72,090
56,209
157
73,267
(9,454)
(2,673)
10,551
71,848
156
73,267
(9,454)
(32)
8,153
72,090
149
65,734
(9,454)
(724)
504
56,209
The notes on pages 82 to 122 are an integral part of these consolidated financial statements.
1 See note 34 for an explanation and reconciliation in relation to the prior year restatement arising from a change in
accounting policy following the Group’s adoption of the IFRIC agenda decision on cloud implementation, configuration and
customisation costs.
The financial statements of Redcentric Plc (Registration Number 08397584) on pages 77 to 80, and the notes to these financial
statements on pages 82 to 122 were approved by the Board on 21 July 2022 and are signed on its behalf by:
David Senior
Chief Financial Officer
78
Annual Report and Accounts 2022Financial statements Consolidated cash flow statement for the year ended 31 March 2022
Year ended
31 March
2022
Year ended
31 March
2021 (restated1)
Profit before taxation
Finance costs
Operating profit
Adjustment for non-cash items
Depreciation and amortisation
Exceptional items
Share-based payments
Operating cash flow before exceptional items and movements in working capital
Transfer from intangible assets to cost of sales
Non-cash provision movements
Cash costs of exceptional items
Operating cash flow before changes in working capital
Changes in working capital
Increase in inventories
Decrease in trade and other receivables
Decrease in trade and other payables
Cash generated from operations
Tax received/(paid)
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Disposal of non-core contracts
Acquisition of subsidiaries (net of cash acquired)
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
Repayment of term loans
Drawdown of borrowings
Repayment of borrowings
Issue of shares
Net cash used in financing activities
Net (decrease)/increase 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
Note
10
15,16,17
9
28
9
7
14
27
24
24
24
24
£000
5,536
1,071
6,607
14,296
1,629
1,181
23,713
140
(577)
(2,091)
21,185
(185)
559
(4,391)
17,168
246
17,414
(2,264)
5,750
(10,422)
(501)
(7,437)
(5,627)
(2,666)
-
12
-
(936)
(3,745)
(487)
4,500
(4,500)
1
(13,448)
(3,471)
5,250
25
1,804
£000
11,322
1,460
12,782
15,262
(4,152)
687
24,579
-
-
(9,514)
15,065
(15)
4,433
(2,537)
16,946
(149)
16,797
(1,541)
-
-
(767)
(2,308)
(1,868)
-
494
36
1,036
(1,415)
(4,325)
(156)
7,000
(19,500)
5,775
(12,923)
1,566
3,710
(26)
5,250
The notes on pages 82 to 122 are an integral part of these consolidated financial statements.
1 See note 34 for an explanation and reconciliation in relation to the prior year restatement arising from a change in accounting policy
following the Group’s adoption of the IFRIC agenda decision on cloud implementation, configuration and customisation costs.
79
Annual Report and Accounts 2022Financial statements Consolidated statement of changes in equity
for the year ended 31 March 2022
Share
Capital
Share
Premium
Common
Control
Reserve
Own Shares
Held in
Treasury
Retained
Earnings
£000
£000
£000
£000
£000
At 31 March 2020 – as previously reported
Prior year restatement1
1 April 2020 – (restated1)
Profit for the period (restated1)
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
At 31 March 2021 (restated1)
At 31 March 2021 – as previously reported
Prior year restatement
At 1 April 2021 (restated1)
Profit for the period
Transactions with owners
Share-based payments
Share buyback (note 27)
Issue of new shares
Dividends paid (note 14)
Share option exercises
Other comprehensive income
Deferred tax movement on share options
Currency translation differences
149
-
149
65,734
(9,454)
-
-
65,734
(9,454)
-
-
7
-
-
-
-
-
-
7,533
-
-
-
-
-
-
-
-
-
-
-
156
156
-
156
73,267
73,267
-
(9,454)
(9,454)
-
73,267
(9,454)
-
-
-
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(724)
-
(724)
-
-
-
-
692
-
-
(32)
(32)
-
(32)
-
-
(2,666)
-
-
25
-
-
4,096
(3,592)
504
9,011
582
-
(1,868)
(198)
224
(103)
8,153
11,960
(3,807)
8,153
6,940
1,067
-
-
(5,627)
(14)
58
(26)
Total
Equity
£000
59,801
(3,592)
56,209
9,011
582
7,540
(1,868)
494
224
(103)
72,090
75,897
(3,807)
72,090
6,940
1,067
(2,666)
1
(5,627)
11
58
(26)
At 31 March 2022
157
73,267
(9,454)
(2,673)
10,551
71,848
The notes on pages 82 to 122 are an integral part of these consolidated financial statements.
1 See note 34 for an explanation and reconciliation in relation to the prior year restatement arising from a change in
accounting policy following the Group’s adoption of the IFRIC agenda decision on cloud implementation, configuration and
customisation costs.
80
“
Redcentric is a name
we can trust, and a name
our NHS customers trust.
You bring in a great service,
and a great team behind
that as well.
”
8181
Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
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.
customer confidence as a result of general economic
conditions, inflationary pressures and the achievability of
actions the directors consider they would take should further
risks materialise. In making their going concern assessment
in light of these risks, the Directors have also modelled a
severe but plausible downside scenario when preparing
the forecasts.
The principal accounting policies applied in the preparation
of these consolidated financial statements are set out below.
These policies have been applied consistently in the current
and prior period, within the exception of the changes in
accounting policy following the IFRIC agenda decision of
April 2021 in relation to costs incurred on cloud computing
configuration and implementation costs (see note 34).
These financial statements are presented in pound sterling,
being the currency of the primary economic environment in
which the Group operates.
The financial statements are prepared on the historical cost
basis except that contingent consideration is measured at
fair value.
1.1 Basis of preparation
The consolidated financial statements have been prepared
and approved by the directors in accordance with applicable
law and UK-adopted international accounting standards.
The financial statements are prepared on a going concern
basis which the directors believe to be appropriate for the
following reasons.
The Directors have prepared cash flow forecasts for a period
of 12 months from the date of approval of these financial
statements which indicate that, taking account of reasonably
possible downsides on the operations and its financial
resources, the Group and the Company will have sufficient
funds to meet its liabilities as they fall due for that period,
and will comply with its debt covenants over that period.
The Directors’ forecasts have been built from the detailed
Board approved budget for the year ending 31 March 2023,
and draft budget for 31 March 2024. The forecasts include
a number of assumptions in relation to order intake, renewal
and churn rates, EBITDA margin improvements and the
impact of post year end acquisitions.
Whilst the Group’s trading and cash flow forecasts have
been prepared using current trading assumptions, the
operating environment presents a number of challenges
which could negatively impact the actual performance
achieved. These risks include, but are not limited to,
achieving forecast levels of order intake, the impact on
The downside scenario assumes significant economic
downturn over FY23, impacting new order intake alongside
cost inflation, supply chain delays and loss of a key
customer. In this scenario, recurring monthly order intake is
forecast to reduce by 25% compared to base case budget.
Product and services revenues reduce by 19% compared
to base case budget incorporating both potential supply
chain issues and reduced investment from our customer
base. Under the downside scenario modelled, the forecasts
demonstrate that the Group is expected to maintain
sufficient liquidity and will continue to comply with the
relevant debt covenants after management have taken
the mitigating actions which are within the Group’s control
including delaying any potential FY23 interim dividend and
the rephasing of discretionary capital expenditure. The
Directors therefore remain confident that the Group has
adequate resources to continue to meet its liabilities as and
when they fall due within the period of at least 12 months
from the date this report.
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.
Application of IFRIC agenda decision
In April 2021, the IFRS Interpretations Committee (IFRIC)
published an agenda decision clarifying the accounting
treatment of costs incurred in relation to the customisation
and configuration of implementing Software-as-a-Service
(SaaS) cloud computing arrangements:
- Amounts paid to the cloud vendor for configuration and
customisation costs incurred that are not distinct from
access to the cloud software are expensed over the SaaS
contract term
- In limited circumstances, some configuration and
customisation costs incurred in relation to SaaS
arrangements may give rise to an identifiable intangible
asset, for example where code is created and controlled by
the entity.
82
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
- In all other instances, customisation and configuration
costs will be expensed as the related services are received.
Following this publication, the Group reviewed the
accounting treatment applied to applicable arrangements
taking into account factors such as the nature and terms
of the relevant arrangements, ownership of intellectual
property rights, the ability to restrict access of others, the
ability to remove software applications from the cloud and
run them independently, and the ability to determine when
and how frequently updates are applied.
See notes 15 and 34 for further details.
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.
1.3 Basis of consolidation
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 satisfied and the related revenue
recognition policy. The Group does not consider that there
are any significant judgements made in concluding when a
customer obtains control of a promised good or service.
The Group financial statements consolidate those of the
Company and of its subsidiary undertakings drawn up to
31 March 2022.
Subsidiaries are all entities over which the Group has control.
The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with
the entity and has the ability to affect those returns through
its power over the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases.
The Group applies the acquisition method of accounting to
account for business combinations. The acquisition date is
defined as the date on which control is transferred to the
Group. The consideration transferred for the acquisition
of a subsidiary is the fair value of the assets transferred,
the liabilities incurred, and the equity interests issued by
the Group. The consideration transferred includes the fair
value of any asset or liability resulting from a contingent
consideration arrangement. Acquisition-related costs are
expensed as incurred. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair value at the
acquisition date. The Group recognises any non-controlling
interest in the acquiree on an acquisition-by-acquisition
basis, either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net assets.
The excess of the consideration transferred and the amount
of any non-controlling interest in the acquiree over the
fair value of the separable identifiable net assets acquired
and liabilities incurred or assumed at the acquisition date
is recorded as purchased goodwill. Provision is made for
any impairment. Accounting policies previously applied by
acquired subsidiaries are changed as necessary to comply
with accounting policies adopted by the Group.
83
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
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.
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 of the revenue recognition point are recognised as deferred income within trade and other
payables and amounts billed in arrears are accrued income within trade and other receivables. Revenue expected to be
recognised in future periods for performance obligations that are not complete (or partially complete) as at 31 March
2022 is £117m. Of this, £108m 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 2021
was £123m. Of this, £119m related to revenue for recurring managed services. 30 days standard payment terms are offered
to customers.
The Group pays commission to its sales teams for new contracts and renewals with the associated cost recognised over the
life of the contract in accordance with IFRS15. Commission payments paid in advance are recognised as a contract assets in
within trade and other receivables.
84
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
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 an understanding of the Group’s 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.
Amounts included in exceptional items may also represent
true ups presented as exceptional in prior periods.
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.
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
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Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
•
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.
a charge or credit to profit or loss. Measurement period
adjustments are adjustments that arise from additional
information obtained during the ‘measurement period’ (which
cannot exceed one year from the acquisition date) about
facts and circumstances that existed at the acquisition date.
1.9 Foreign currencies
The functional and presentation currency of Redcentric plc
is Pound 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.
1.11 Business combinations
Business combinations are accounted for by applying the
acquisition method at the accounting date, which is the
date on which control is transferred to the Group. The
Group controls an entity when the Group is exposed to, or
has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its
power over the entity.
Where an acquisition involves a potential payment of
contingent consideration the cost is estimated based on
its acquisition date fair value and is included as part of the
consideration transferred in a business combination. To
estimate the fair value an assessment is made as to the
amount of additional consideration that is likely to be paid
with reference to the associated criteria. Where a change is
made to the fair value of contingent consideration within the
initial measurement period as a result of new or additional
information that existed at the acquisition date the change
is accounted for as a retrospective adjustment to goodwill.
Any change as a result of events that occurred after the
acquisition date then the adjustment is accounted for as
Costs related to acquisitions, other than those associated
with the issue of debt or equity securities, are expensed
as incurred.
1.12 Subsidiaries
Subsidiaries are entities controlled by the Group. The
Financial Statements of subsidiaries are included in the
consolidated financial statements from the date that control
is established to the date control ceases.
Control is achieved where the acquiring Company has
the power to govern the financial and operating policies
of an investee entity therefore obtaining benefits from
its activities. Intercompany transactions and outstanding
balances are eliminated on consolidation.
1.13 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.
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.
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.
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Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
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.
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
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.
Development expenditure directed towards incremental
improvements in existing products, remedial work and other
maintenance activity does not qualify for recognition as an
intangible asset.
1.14 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 – 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.
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.
1.15 Impairment of property, plant and equipment, right
of use assets and intangible assets excluding goodwill
Other intangible assets, property, plant and equipment
and right of use assets are reviewed for impairment
whenever events arise 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, property,
plant and equipment and right of use assets 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.
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for the year ended 31 March 2022 (continued)
Non-financial assets that were impaired in the previous
periods are annually reviewed to assess whether the
impairment is still relevant.
1.16 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. Provision is made,
where necessary, for slow-moving, obsolete and defective
inventories.
1.17 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.
Cost of the right-of-use asset consists of the initial lease
liability plus any lease payments made to the lessor
before the commencement date (less any lease incentives
received), plus the initial estimate of restoration costs and
any initial direct costs incurred by the lessee.
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.
1.18 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.
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.
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for the year ended 31 March 2022 (continued)
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.
1.19 Supplier rebates
Supplier rebates are accounted for inline with the
contractual terms and conditions attached to each
agreement and only recognised once any associated
performance criteria have been satisfied.
1.20 Dividends
Dividends payable to equity shareholders are included in
the financial statements within ‘other creditors’ when a final
dividend is approved by shareholders in a general meeting.
Interim dividends to equity shareholders approved by
the board during the financial year are not included in the
financial statements until paid.
1.21 Research and Development costs
Expenditure on research activities is recognised in the
Income Statement as an expense as incurred. Expenditure
on development activities is capitalised as “development
costs” if the product or process is technically and
commercially feasible, if the Group has the technical ability
and sufficient resources to complete development, if
future economic benefits are probable and if the Group
can measure reliably the expenditure attributable to the
89
intangible asset during its development. Development
activities involve a plan or design for the production of new
or substantially improved products or processes.
2 Critical accounting judgements and key
sources of estimation uncertainty
Judgements
Information regarding critical accounting judgements made
in applying the accounting policies that have the most
significant effects on the values recognised in the Group
financial statements are as follows:
Intangible assets relating to cloud customisation and
configuration costs
Judgement is required in assessing whether the Group
has control over the resources defined in the arrangement
when costs are incurred in relation to implementation,
customisation and configuration costs as part of a cloud
based service agreement.
Management has considered the IFRS Interpretations
Committee (IFRIC) agenda decision of April 2021 which
clarified the accounting treatment in relation to these costs.
As a result of the adoption of this guidance a prior year
restatement has been made as detailed in notes 15 and 34.
Estimates
Information about estimation uncertainties that have the
greatest risk of resulting in a material adjustment to the
carrying value of assets and liabilities within the next
financial year are addressed below:
Valuation of intangible assets and fair value adjustments
on acquisition
As the Group continues with its acquisition strategy there
is a requirement to fair value the assets and liabilities
of any business acquired during the financial year. The
measurement period will end when the Group receives
the information it was seeking about the facts and
circumstances that existed at the date of acquisition
or learns that this information is not available. The
measurement period cannot be longer than 12 months from
the date of acquisition. The Group is required to identify,
assess and value the intangible assets within the acquired
business at the time of acquisition. When reviewing the
existence of intangible assets consideration is required as
to the potential intangible assets arising such as customer
relationships.
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
2 Critical accounting judgements and key
sources of estimation uncertainty (continued)
The estimation of the value of any potential identified
intangible assets, such as customer relationships requires
estimates of the expected future cashflows that will be
derived from the existing relationships, and the associated
useful life, with a suitable discount rate required to calculate
the present value. The methods and assumptions included
in determining the fair values of acquired intangibles are
therefore complex and subject to estimation uncertainty.
Details regarding the process applied in establishing the
value of intangible assets and fair value adjustments on
acquisitions completed in the year are detailed in note 32.
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 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.
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for the year ended 31 March 2022 (continued)
4 Capital risk management
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 15.
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 2021: immaterial).
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.
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 2022
was 0.0x (31 March 2021 – 0.0x).
The bank facilities referred to in Note 24 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 maintaining the same
level of dividend. A final dividend of 2.4p (£3.7m) has been
recommended to the shareholders.
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 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
6 Revenue
Revenue for the year ended 31 March 2022 was generated wholly from the UK and is analysed as follows:
Recurring revenue
Product revenue
Services revenue
Total revenue
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
82,965
6,187
4,176
93,328
81,897
5,072
4,430
91,399
Revenue is analysed into the following categories:
•
Recurring revenue, which was higher at £83.0m (FY21: £81.9m).
• Non-recurring product revenue, which was higher at £6.2m (FY21: £5.1m).
• Non-recurring services revenue which was lower at £4.2m (FY21: £4.4m).
6.1 Contract balances
The following table provides information about receivables, contract assets and contract liabilities from contract
with customers.
Receivables, included in trade and other receivables, net of provisions
Accrued income, included in trade and other receivables
Deferred income, included in trade and other payables
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
10,228
2,626
(7,530)
9,164
1,999
(7,471)
There were no material impairment losses recorded during the year or the prior year. Of the balances included at
31 March 2021 £8.3m is included within revenue in FY22.
£2.0m of the accrued income balance at 31 March 2021 is included in revenue in FY22 and £6.3m of deferred revenue at
31 March 2021 is recognised as revenue in FY22.
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Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
7 Operating profit
The following costs are considered to be significant items within operating profit.
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 losses /(gains)
Expense in relation to short-term and low value leases not recognised under IFRS 16
Employee benefits expense, excluding share-based compensation
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
6,498
475
2,745
4,578
1,181
74
27
21,670
37,248
6,252
670
3,408
4,932
687
(52)
31
20,294
36,222
1 See note 34 for an explanation and reconciliation in relation to the prior year restatement following the Groups adoption of
the IFRIC agenda decision on cloud computing implementation, configuration and customisation costs.
Operating income is broken down as follows:
Other income
Proceeds from sale of non-core business unit
Disposal of goodwill
Other associated costs
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
103
-
-
-
103
-
5,750
(1,185)
(58)
4,507
Other income in FY21 relate to amounts due on disposal of the non-core business contract (note 9). Full proceeds were
received in FY22.
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Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
8 Auditor’s remuneration
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
Audit of Subsidiaries (including overseas subsidiaries)
Total audit
Tax compliance services
Tax advisory services
Services relating to taxation
Other non-audit services not covered above
Total non-audit services
Total fees
9 Exceptional items
Included within administrative expenses:
Employee restructuring
(Release)/addition of Insurance adviser provision including professional fees
Onerous service contracts
Circuit termination charges
Restitution provision
Lease modification
Business sale process
Profit upon sale of non-core business unit
Acquisition fees and integration costs
Historic Share warrant exercise
Legal fees related to the defence of an ongoing supplier dispute
Impairment of intangible assets
Cloud configuration and customisation costs
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
30
288
318
3
1
4
-
4
322
25
226
251
11
13
24
3
27
278
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
159
(483)
-
-
-
(119)
70
-
971
310
119
205
397
1,629
393
610
148
4
(2,172)
649
93
(4,507)
-
-
-
-
630
(4,152)
1 See note 34 for an explanation and reconciliation in relation to the prior year restatement following the Groups adoption of
the IFRIC agenda decision on cloud computing implementation, configuration and customisation costs.
94
Annual Report and Accounts 2022Financial statements
Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
9 Exceptional items (continued)
Employee restructuring costs relate to a rationalisation
programme across various departments during the year
as a result of efficiencies delivered through the continued
integration of the Group’s ERP system launched in FY21 and
were cash costs in FY22 and FY21.
Acquisition and integration costs were incurred in relation
to the purchase of Piksel Industry Solutions Limited and 7
Elements Limited during the year (note 32) and relate to
legal and advisor fees and due diligence costs and other
direct costs incurred in integrating the two businesses into
the Group. Cash costs were £837k.
During the year options were exercised by Barclays Bank
PLC over warrants with an exercise price of 36p, settled
in cash, resulting in an expense of £310,000 (note 28).
The warrants were issued on demerger in April 2013 for
warrants previously held in Redstone PLC, and could have
been converted to shares at any time before the sale of
the entire share capital of the company. Redcentric plc was
created when Redstone plc demerged its network-based
management service business. Cash costs were £310k.
Legal fees related to the defence of a supplier dispute were
charged by the Group’s advisors during the year. Cash costs
were £119k.
Cloud configuration and customisation costs relate to
expenditure previously capitalised in relation to the Group’s
implementation and development of its ERP system
(Microsoft Dynamics 3651) – this was a cash costs in
both years.
The insurance advisor provision costs in the prior year
represent a provision booked for costs repayable on advisor
fees in relation to the FCA Investigation which has been
released in FY22 as repayment is not considered probable.
Cash costs were £44k (FY21 - £17k).
The onerous service contract cost in the prior year relate to
costs associated with third party service arrangements no
longer utilised (or in the process of being ceased) by the
business. This was a cash cost in FY22 of £47k (FY21
of £23k).
Circuit termination charges in the prior year relate to
cancellation costs incurred on unused circuits / connections
cancelled during the year, as part of the Group’s network
rationalisation review. This was non-cash in FY21.
The Restitution scheme provision in the prior year related
to the provision released upon closure of the scheme. The
scheme originally related to an estimate of the costs to
settle with net purchasers of ordinary shares in the Company
between 9 November 2015 and 7 November 2016 as agreed
with the FCA. The cash cost in FY21 was £7.73m.
Lease modification costs represent legal and advisor fees
incurred in relation to a new leasehold property in York prior
to the lease being signed (£30k), residual costs incurred
after the business terminated a lease in the prior year (£79k)
and a credit relating to the early termination of the office
lease in Hyderabad (£228k). This was a cash cost in FY22 of
£109k (FY21 - £nil).
Business sale process costs were incurred as a result of the
sales process during FY21. Cash costs were £70k in FY22
(FY21 - £721k).
Profit upon sale of non-core business unit in the prior
year resulted from the sale of assets and knowhow for the
provision of maintenance services to EDF nuclear power
stations. The total consideration was £5.75m and was a
received in cash in FY22 (no cash impact in FY21).
95
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
10 Finance income and costs
Finance income
Other interest receivable
Finance costs
Interest payable on bank loans and overdrafts
Interest payable on leases
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
-
-
(81)
(990)
(1,071)
(295)
(1,165)
(1,460)
Interest payable on leases includes £0.8m (FY21: £1.0m) 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
2022
Year ended
31 March
2021
£000
£000
346
79
61
486
288
73
59
420
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
18,682
1,969
1,181
848
12
159
17,440
1,819
687
610
32
393
22,851
20,981
Operations
Selling and distribution
Administration
Employee 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
96
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (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 along with exec and non-exec directors.
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
Basic salary, allowances, fees and other employment expenses
1,878
1,292
Bonus and other benefits
Share based payments
Pension costs
11.2 Director’s remuneration
The remuneration of the Directors in respect of the year was as follows:
306
593
63
501
405
53
2,840
2,251
Basic salary,
allowances,
and fees
£000
Bonus
£000
Pension
£000
Share-
based
payments
£000
FY22
Total
£000
FY21
Total
£000
Executive
Peter Brotherton1
David Senior 2 (appointed 3-Apr-20)
Dean Barber (resigned 3-Apr-20)
Non-Executive
Ian Johnson (resigned 17-Nov-21)
Stephen Vaughan (resigned 27-Apr-21)
Jon Kempster
Nick Bate (appointed 17-Nov-21)
Helena Feltham (appointed 7-Jul-21)
328
180
-
54
11
49
31
37
-
-
-
-
-
-
-
-
15
8
-
-
-
-
-
-
520
105
-
-
-
-
-
-
863
293
-
54
11
49
31
37
672
265
4
85
45
45
-
-
1 On 23 November 2021 Peter Brotherton exercised options over 298,879 ordinary shares of 0.1p each at a price of £1.24
resulting in a gain of £370,493. The share-based payments charge for the year includes £149,996 in relation to the gain
from an allotment of shares to Peter Brotherton. The allotment was made for over achievement against bonus targets in the
financial year ended 31 March 2021 and the allotted shares cannot be sold for a period of 2 years from issue.
2 On 23 November 2021 David Senior exercised options over 20,000 ordinary shares of 0.1p each at a price of £1.24 resulting
in a gain of £24,792. The share-based payments charge for the year includes £79,950 in relation to the gain from an
allotment of shares to David Senior. The allotment was made for over achievement against bonus targets in the financial
year ended 31 March 2021 and the allotted shares cannot be sold for a period of 2 years from Issue.
97
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
11 Employees (continued)
Details of share options in the Company held by the Directors during the year are as follows (audited):
Peter Brotherton
David Senior
Number of
shares
31 March
2021
Number
of shares
granted
Number
of shares
Forfeited /
expired
Exercise
price (p)
(a)
(b)
(d)
(e)
(f)
(c)
(b)
(d)
(e)
0.1
0.1
0.1
0.1
99.9
0.1
0.1
0.1
0.1
298,879
379,267
242,915
-
-
921,061
20,000
100,000
129,555
-
249,555
-
-
-
554,326
18,023
572,349
-
-
-
312,296
312,296
-
-
-
-
-
-
-
-
-
-
-
Number
of shares
exercised
(298,879)
-
-
-
-
Number of
shares
31 March
2022
-
379,267
242,915
554,326
18,023
(298,879)
1,194,531
(20,000)
-
-
-
-
100,000
129,555
312,296
(20,000)
541,851
(a) The options were granted on 26 November 2018 under the Company’s LTIP. The options vested post the release of the
Group’s results for FY21 subject to the achievement of performance conditions related to the growth in earnings per
share and were exercised on 23 November 2021.
(b) 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 FY22 subject to the achievement of performance conditions related to the growth in share price.
(c) The options were granted on 27 June 2018 under the Company’s LTIP. The options vested post the release of the Group’s
results for FY21 subject to the achievement of performance conditions related to the growth in earnings per share and
were exercised on 23 November 2021.
(d) 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 FY23 subject to the achievement of performance conditions related to the growth in share price.
(e) The options were granted on 18 November 2021 under the Company’s LTIP. The options will vest three years from grant
subject to absolute TSR targets. For awards up to 100% of salary, 25% will vest for TSR of 5% p.a. increasing pro-rata
to 100% vesting for TSR of 10% p.a. For awards between 100% and 200% of salary, 0% will vest for TSR of 10% p.a.
increasing pro-rata to 100% vesting for TSR of 15% p.a.
(f) The options were granted on 23 December 2021 under the SAYE option plan under which employees contribute a
monthly amount which is saved over three years to buy shares. The options are exercisable from 1 February 2025.
There are no performance conditions.
98
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (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
Effect of changes in tax rates
Total deferred tax
Total tax (credit) /charge in consolidated statement of comprehensive income
Other Comprehensive Income items
Deferred Tax
Factors affecting the tax charge for the year
Profit before taxation
Taxation at the average UK corporation tax rate of 19.0% (FY21: 19.0%)
Tax effects of:
- Expenses not allowable in determining taxable profit
- Adjustment in respect of prior years
- Non-taxable income
- Share options
- Fixed assets transferred in
- Reversal of uncertain tax position
- Prior year adjustment on provision
- Tax rate changes
- Effect of overseas tax rates
Tax (credit) / charge for the year
Year ended
31 March
2022
Year ended
31 March
2021
(restated)1
£000
£000
1,739
32
(1,371)
400
(1,214)
196
(786)
(1,804)
(1,404)
1,152
69
(54)
1,167
769
375
-
1,144
2,311
58
(224)
5,536
1,052
308
(1,175)
(381)
(32)
(58)
(323)
(21)
(786)
12
(1,404)
11,322
(2,151)
330
321
(513)
6
-
-
-
-
16
2,311
A reduction in the UK corporation tax rate from 19% to 17% (effective 1 April 2020) was substantively enacted on 6 September
2016. The March 2020 Budget announced that a rate of 19% would continue to apply with effect from 1 April 2020, and this
change was substantively enacted on 17 March 2020. 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 company’s future current tax charge accordingly.
The deferred tax asset at 31 March 2022 has been calculated based on these rates, reflecting the expected timing of reversal
of the related temporary/timing differences (2021: 19%).
Included within the adjustment in respect of prior years is an additional deduction of £1.6m which has been recognised in
FY22 relating to previous expenses not deducted. The amount was not previously recognised due to uncertainty about the
availability of these losses which has now been confirmed.
99
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (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 (credit)/charge
Amortisation of acquired intangibles
Share-based payments
Exceptional items
Adjusted earnings before tax
Notional tax charge
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
Year ended
31 March
2022
Year ended
31 March
2021
(restated1)
£000
£000
6,940
(1,404)
6,498
1,181
1,629
14,844
(2,820)
12,024
9,011
2,311
6,252
687
(4,152)
14,109
(2,681)
11,428
Number
Number
000
000
156,992
153,930
(420)
(439)
156,572
2,803
159,375
153,491
2,215
155,706
Pence
4.43p
7.68p
4.36p
7.54p
Pence
5.87p
7.45p
5.79p
7.34p
In line with the Group’s policy, the notional tax charge above is calculated at a standard rate of 19% (2021 – 19%).
1 See note 34 for an explanation and reconciliation in relation to the prior year restatement following the Group’s adoption of
the IFRIC agenda decision on cloud computing implementation, configuration and customisation costs.
100
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
14 Dividends
Interim dividend for the year ended 31 March 2021
Final dividend for the year ended 31 March 2021
Interim dividend for the year ended 31 March 2022
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
-
3,749
1,878
5,627
1,868
-
-
1,868
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.
The Group paid a final dividend in respect of the year to 31 March 2021 of 2.4p per ordinary share, with a total payment value
of £3.7m
The Group paid an interim dividend for the year ended 31 March 2022 of 1.2p per ordinary share, with a total payment value
of £1.9m.
A final dividend of 2.4p per share is recommended by the Board and will be paid on 16 September 2022, subject to approval
at the Company’s AGM, to shareholders on the register at 29 July 2022 (ex-dividend date 28 July 2022).
101
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
15 Intangible assets
Customer
contracts
and related
relationships
Trademarks
Software and
licences
£000
£000
£000
Goodwill
£000
Cost
At 1 April 2020
Additions (restated1)
Disposals
Exchange differences
At 31 March 2021 (restated1)
Additions
Additions on acquisition (note 32)
Disposals
Exchange differences
At 31 March 2022
43,269
62,284
275
-
(1,185)
-
42,084
-
10,332
-
-
-
-
-
62,284
-
2,746
-
-
52,416
65,030
Accumulated amortisation and impairment
At 1 April 2020
Charged in year (restated1)
Disposals
At 31 March 2021
Charged in year
Disposals
At 31 March 2022
-
-
-
-
-
-
-
At 31 March 2022
At 31 March 2021 (restated1)
52,416
42,084
38,317
6,252
-
44,569
6,324
-
50,893
14,137
17,715
-
-
-
275
-
174
-
-
449
275
-
-
275
174
-
449
-
-
Total
£000
111,497
1,047
(1,315)
(1)
111,228
502
13,283
(1,548)
-
5,669
1,047
(130)
(1)
6,585
502
31
(1,548)
-
5,570
123,465
4,490
670
(56)
5,104
475
(1,182)
4,397
1,173
1,481
43,082
6,922
(56)
49,948
6,973
(1,182)
55,739
67,726
61,280
Customer contracts have a weighted average remaining amortisation period of 4 years and 4 months (FY21: 3 years and
11 months).
Software and licences includes £0.1m (FY21 - £0.6m) of additions in relation to customer capital expenditure.
1Application of IFRIC agenda decision
During the year and following the release of the IFRIC guidance issued in April 2021 in relation to Software-as-a-Service
(SaaS) cloud computing implementation costs, the Group has reviewed its accounting policy in relation to the customisation
and configuration costs previously capitalised. Following this review costs capitalised in the year to 31 March 2020 of £4.4m
have now been expensed and amortisation of £0.4m previously charged on these assets in the year has been reversed.
In addition, £0.6m of costs previously capitalised in the year ended 31 March 2021 have been expensed and associated
amortisation of £0.4m reversed. See note 34 for further details on the prior year restatement.
102
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
15 Intangible assets (continued)
Goodwill and intangible assets are allocated to cash generating units (CGUs) in order to be assessed for potential
impairment. CGUs are defined by accounting standards as the lowest level of asset groupings that are capable of generating
separately identifiable cashflows independently of other CGUs. During the year, and as a result of the acquisitions
completed, the Group has considered the following:
- Following the hive out of trade and assets from Piksel Industry Solutions Limited into Redcentric Solutions Limited on
28 February 2022, the acquisition does not result in a separate CGU.
- The acquisition of 7 Elements Limited on 14 March 2022 results in a new CGU “Security Services”.
The CGUs and allocation of Goodwill to those CGUs is shown below:
IT Managed Service
Security Services
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
50,765
1,651
52,416
42,084
-
42,084
Goodwill is tested annually for impairment and, to confirm whether an impairment of the goodwill is necessary, management
compares the carrying value to the value in use. Other intangible assets are tested for impairment whenever events or a
change in circumstances indicate carrying values may no longer be recoverable.
The value in use has been calculated using budgeted cash flow projections to the period of 31 March 2024, extrapolated for
a further three years by an average annual revenue growth rate of 2.0% (FY21: 1.5%). A terminal value based on a perpetuity
calculation using a 0.0% real growth rate was then added (FY21: 0.0% growth).
In addition to revenue growth, the key assumptions used in the impairment testing were as follows:
• Gross margin percentage reducing to 63% (FY21: 60.5%)
• Operating costs increasing by 1.5% (FY21: 1.5%)
•
Pre-tax discount rate of 11.8% (FY21: 8.3%) (post tax rate of 7.2% (FY21: 7.0%) 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 consistent with the market the entity operates in.
A reasonably possible adverse movement in any of the above key assumptions made would not give rise to impairment.
103
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
16 Property, plant and equipment
Cost
At 1 April 2020 (restated)1
Additions
Disposals
Exchange differences
At 31 March 2021 (restated)1
Additions
Additions on acquisition (note 32)
Disposals
Exchange differences
At 31 March 2022
Accumulated depreciation
At 1 April 2020 (restated)1
Charged in year
On disposals
Exchange differences
At 31 March 2021
Charged in year
On disposals
Exchange differences
At 31 March 2022
Net book value
At 31 March 2022
At 31 March 2021
Leasehold
improvements
Office
fixtures and
fittings
Vehicles &
computer
equipment
£000
£000
£000
7,528
404
(129)
-
7,803
527
11
-
-
1,033
21,559
442
(103)
(9)
1,363
107
27
(331)
16
940
(816)
(24)
21,659
1,630
-
(25)
-
Total
£000
30,120
1,786
(1,048)
(33)
30,825
2,264
38
(356)
16
8,341
1,182
23,264
32,787
4,458
458
-
-
4,916
533
-
-
5,449
2,892
2,887
653
148
-
(8)
793
141
(316)
4
622
560
570
16,534
2,802
(32)
(22)
19,282
2,071
(9)
-
21,645
3,408
(32)
(30)
24,991
2,745
(325)
4
21,344
27,415
1,920
2,377
5,372
5,834
Vehicles and computer equipment includes £1.0m (FY21 - £1.3m) relating to customer capital expenditure.
1 The cost of property, plant and equipment (PPE) at 1 April 2020 has been restated due to a change in accounting policy
following the Group’s adoption of the IFRIC agenda decision on cloud implementation, configuration and customisation
costs. In FY21 costs were reclassified from PPE to intangible assets. Following the change in accounting policy and
subsequent restatement, these assets have been expensed to the income statement retrospectively resulting in a restatement
of the cost and net book value of assets in FY20. For further details please see note 34.
104
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (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 2020
Additions
Remeasurement
At 31 March 2021
Additions
Disposals
At 31 March 2022
Accumulated depreciation
At 1 April 2020
Charged in year
At 31 March 2021
Charged in year
Disposals
At 31 March 2022
Net book value
At 31 March 2022
At 31 March 2021
Office
fixtures and
fittings
Vehicles &
computer
equipment
£000
£000
29,889
-
(4,383)
25,506
2,947
(1,479)
26,974
9,721
2,540
12,261
2,252
(893)
13,620
9,615
2,092
-
11,707
460
(231)
11,936
3,773
2,392
6,165
2,326
(239)
8,252
Total
£000
39,504
2,092
(4,383)
37,213
3,407
(1,710)
38,910
13,494
4,932
18,426
4,578
(1,132)
21,872
13,354
13,245
3,684
5,542
17,038
18,787
Of the £3,407k right of use assets acquired in the year, £438k was funded using leases that would have previously been
classified as finance leases under IAS17 (FY21: £2,092k).
105
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
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
Year ended
31 March
2022
Year ended
31 March
2021
(restated1)
£000
£000
(3,114)
7,113
3,999
(3,362)
4,765
1,403
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
Opening balance
Recognised in the income statement
Movements arising on acquisitions (note 32)
Adjustment in relation to prior year
Deferred tax liabilities relate to intangible assets from business acquisitions.
18.2 Deferred tax assets
3,362
(895)
686
(39)
3,114
Share-based
payments
Tax losses
Property,
plant and
equipment
Other
timing
differences
£000
£000
£000
£000
India
£000
Cost
At 1 April 2020 (restated)1
Adjustment upon transition to IFRS 16
Recognised in income statement
Adjustment in relation to prior year
At 31 March 2021 (restated)1
Deferred tax acquired (note 32)
Recognised in income statement
Recognised in other comprehensive
income
Adjustment in relation to prior year
At 31 March 2022
47
-
-
-
47
-
-
-
-
47
153
20
224
-
397
-
92
58
(26)
521
2,410
(1,633)
-
(154)
623
1,331
461
-
(435)
1,980
3,773
(273)
-
(248)
3,252
52
264
-
(299)
3,269
491
(72)
-
27
446
20
288
-
542
1,296
4,550
(1,188)
-
-
3,362
Total
£000
6,874
(1,958)
224
(375)
4,765
1,403
1,105
58
(218)
7,113
1 See note 34 for an explanation and reconciliation in relation to the prior year restatement arising from a change in
accounting policy following the Group’s adoption of the IFRIC agenda decision on cloud implementation, configuration and
customisation costs
106
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
19 Inventories
Goods for resale
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
1,393
1,061
Goods for resale includes components required to deliver managed services to customers. The cost of inventories charged to
cost of sales in the year totalled £4.7m (FY21 £4.7m)
20 Trade and other receivables
The amounts of the maximum exposure to credit risk at the reporting date are as follows:
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
2022
Year ended
31 March
2021
£000
£000
11,112
(884)
10,228
737
6,434
2,098
2,626
10,268
(1,104)
9,164
5,825
6,579
2,096
1,999
22,123
25,663
The commission contract asset arose on the adoption of IFRS 15. For the year ended 31 March 2022 the impairment for this
contract asset was immaterial (FY21: immaterial). Other receivables in FY21 relate to amounts due on disposal of the non-core
business unit (note 9).
There is £immaterial (FY21: £immaterial) expected credit loss against other receivables.
21 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
107
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
10,228
737
1,804
12,769
9,164
5,825
5,250
20,239
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
21 Credit quality of financial assets (continued)
21.1 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.
The amounts of the maximum exposure to credit risk at the reporting date are 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
2022
Year ended
31 March
2021
£000
£000
8,736
1,997
452
80
19
(172)
11,112
(884)
10,228
9,343
600
282
21
21
1
10,268
(1,104)
9,164
As at 31 March 2022, trade receivables of £85k were provided for (31 March 2021: £165k). £799k has been provided for within
the credit note provisions (31 March 2021: £939k). No provision has been made against accrued income in the year ended 31
March 2022 (31 March 2021: £nil).
Trade debtor days were 36 at 31 March 2022 compared to 34 at 31 March 2021. Trade debtor days are calculated as trade
debtors divided by revenue (incl. VAT) multiplied by 365.
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
Provision in
relation to
FY19
Provision in
relation to
FY20
Provision in
relation to
FY21
Provision in
relation to
FY22
Total
provision
£000
£000
£000
£000
£000
£000
At 1 April 2020
Creation of provision
Utilisation of provision
At 31 March 2021
Creation of provision
Utilisation of provision
At 31 March 2022
7
-
(4)
3
-
-
3
825
-
(499)
326
-
(292)
34
606
-
(465)
141
-
(116)
25
108
-
1,272
(638)
634
-
(344)
290
-
-
-
-
832
(300)
532
1,438
1,272
(1,606)
1,104
832
(1,052)
884
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
21 Credit quality of financial assets (continued)
21.2 Cash and cash equivalents
The Group’s cash is held at accounts with Barclays Bank PLC and HSBC UK Bank PLC, both of which have a Standard and
Poor’s rating of A.
22 Trade and other payables
Trade payables
Other payables
Taxation and social security
Accruals
Deferred income
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
8,910
1,130
2,433
4,050
7,530
8,470
243
2,390
3,885
7,471
24,053
22,459
Trade creditor days were 37 at 31 March 2022 compared to 37 as at 31 March 2021. Trade creditor days are calculated as trade
creditors divided by total purchases (cost of sales and operating expenditure) multiplied by 365.
Of the deferred income balance of £7.5m at 31 March 2021, £6.3m has been recognised as revenue in the year ended
31 March 2022.
23 Contingent consideration
Contingent consideration due on acquisitions within one year:
- 7 Elements Limited
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
422
422
-
-
Contingent consideration for 7 Elements Limited is based on the directors’ best estimate of future payments due at 31 March
2023 as detailed in note 32. Contingent consideration is level 3 within the fair value hierarchy.
109
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
24 Borrowings
Current
Lease liabilities
Term loans
Non-current
Lease liabilities
Term loans
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
4,086
508
4,594
13,359
496
13,855
3,735
487
4,222
15,593
1,004
16,597
At 31 March 2022, the Group was party to £32m of bank facilities with a maturity date of 30 June 2022. The facilities comprise
a Revolving Credit Facility of £5m (£nil utilised at 31 March 2022) with a £20.0m Accordion facility (£nil utilised at 31 March
2022) and a £7.0m Asset Financing Facility (£1.1m utilised at 31 March 2022).
Term loans constitute financing arrangements for services and include a supplier loan of £822k for an unsecured 3 year
maintenance contract.
The RCF was provided jointly by Barclays Bank PLC and The Royal Bank of Scotland PLC, with Lombard Technology Services
Ltd providing the Asset Financing Facility.
Covenants within the RCF agreement included cash flow cover, interest cover and adjusted leverage. The Group reported
performance against these covenants at quarterly intervals throughout the year. Subsequent to the balance sheet date, on
26 April 2022, the Group completed a refinance of its debt facilities that were due to mature on 30 June 2022. No security is
provided in regards to the RCF. See note 35 for further details.
Lease liabilities are comprised of secured and unsecured agreements. Secured lease liabilities of £3.3m and secured term loans
are secured against assets included within ROU assets with a carrying value of £3.7m (FY21 £5.5m).
110
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
24 Borrowings (continued)
24.1 Reconciliation of net debt
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
4,500
(4,500)
86
(86)
-
-
-
-
2,675
-
(813)
(3,745)
797
(797)
(1,883)
19,328
17,445
-
(487)
45
(45)
(487)
1,491
1,004
7,000
(19,500)
295
(295)
-
(12,500)
12,500
-
1,945
(3,917)
-
(4,325)
1,107
(1,107)
(6,297)
25,625
19,328
1,496
(156)
13
(13)
1,340
151
1,491
1,804
(16,645)
5,250
(15,569)
Revolving credit facility
Drawdown on facility
Repayment of facility
Finance costs in relation to RCF (non-cash)
Interest paid
Release of deferred arrangement fees
Movement in revolving credit facility
Opening balance
Closing balance
Lease liabilities
New leases entered into (non-cash)
IFRS16 leases modifications (non-cash)
Leases terminated (non-cash)
Principal element of lease payments
Interest element of lease payments
Interest cost (cash)
Movement in lease liabilities
Opening balance
Closing balance
Term loans
New Loans (non-cash)
Repayment of loans
Finance costs in relation to term loans (non-cash)
Interest paid
Movement in term loans
Opening balance
Closing balance
Cash
Net debt
All lines included above are cash unless otherwise stated.
111
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
24 Borrowings (continued)
24.2 Terms and repayment schedule
RCF
Term loans
Leases
24.3 Leases liabilities
Currency
£000
Nominal
interest rate
£000
GBP
GBP
GBP
LIBOR + 2.40%
0.0 - 2.0%
0.0% - 7.5%
Year of
maturity
£000
2022
2023-25
2022-35
Present
value as at
31 March
2022
Future lease
payments as
at 31 March
2022
Present
value as at
31 March
2021
Future lease
payments as
at 31 March
2021
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
4,086
7,593
5,766
17,445
868
1,638
795
3,301
4,954
9,231
6,561
3,735
9,566
6,027
20,746
19,328
900
1,805
985
3,690
4,635
11,371
7,012
23,018
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.
25 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 2022
Leases
Term loans
Trade payables
Other payables
At 31 March 2021
Leases
Term loans
Trade payables
Other payables
Less than
1 year
£000
1-5
years
£000
More
than
5 years
£000
Total
£000
4,086
508
8,910
1,130
7,593
496
-
-
5,766
17,445
-
-
-
1,004
8,910
1,130
14,634
8,089
5,766
28,489
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
112
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
26 Provisions
At 1 April 2020
Additional provisions created during the period
Released during the period
Utilised during the period
At 31 March 2021
Additional provisions created during the period
Provisions acquired from business combination
Released during the period
Utilised during the period
At 31 March 2022
FY22 Analysed as:
Current
Non-current
FY21 Analysed as:
Current
Non-current
Restitution
Scheme
provision
Scheme
fees
provision
Dilapidations
provision
Onerous
service contract
provision
Total
provision
£000
£000
£000
£000
£000
11,429
130
(2,172)
(9,387)
-
-
-
-
-
-
-
-
-
-
-
-
-
553
-
-
553
-
-
(527)
(26)
-
-
-
-
553
-
553
2,526
333
(164)
-
2,695
1,189
-
-
(1)
3,883
-
3,883
3,883
-
2,695
2,695
698
21
(193)
(505)
21
-
577
-
(598)
-
-
-
-
21
-
21
14,653
1,037
(2,529)
(9,892)
3,269
1,189
577
(527)
(625)
3,883
-
3,883
3,883
574
2,695
3,269
The Scheme fees provision represents costs which were potentially repayable on adviser fees in relation to the FCA
Investigation. This provision was released in FY22 as repayment is no longer considered probable.
The dilapidations provision represents the estimated costs associated with returning certain leasehold properties to
the original condition upon exiting the lease. Given there is estimation in determining the quantum of provisions to
be recognised a third-party expert was engaged to determine appropriate estimates. After initial measurement, any
subsequent adjustments to the dilapidations provision will be recorded against the original amount included in right of use
assets with a corresponding adjustment to future depreciation charges. The utilisation of the dilapidations provision will be
in line with the end of the leasehold properties lease terms to which the provisions relate.
The onerous service contract provision relates to the costs associated with third party services arrangements no longer
utilised by the business and service contracts with customers where the Group estimates the cost to fulfil the contract will
exceed the benefit.
113
Annual Report and Accounts 2022Financial statements
Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
27 Share capital
At 1 April 2020
New shares issues
At 31 March 2021
New shares issued
At 31 March 2022
Ordinary shares of 0.1p each
Share
premium
Number
£000
£000
149,310,713
6,854,997
156,165,710
826,272
156,991,982
149
7
156
1
157
65,734
7,533
73,267
-
73,267
During the year the Company purchased, and held in treasury, 2,170,203 of its ordinary share capital (FY21: nil) for total
proceeds of £2,666,246 (FY21: £nil). The total shares held in treasury at 31 March 2022 was 2,170,203 at an average cost of
£1.23 per share therefore a value of £2,672,777. (31 March 2021: 33,284).
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.
The common control reserve represents the difference between the net assets acquired and the fair value of consideration
transferred on the acquisition of Redcentric Holdings Limited via demerger from Redstone plc in 2013.
28 Share-based payments
At 31 March 2022, 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.
Save As You Earn (SAYE)
The Group operates a HMRC approved SAYE option plan under which it 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 plan
National Insurance arising on share options
114
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
858
209
114
1,181
430
152
105
687
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
28 Share-based payments (continued)
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
(number)
SAYE
(number)
Total
(number)
WAEP
(pence)
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
Issued in the period
Forfeited in the period
Cancelled in the period
Exercised in the year
Lapsed in the year
2,582,830
1,325,758
521,782
3,908,588
1,343,859
822,077
(323,750)
-
(323,750)
21.1p
46.5p
0.1p
-
(46,655)
(46,655)
119.6p
(233,611)
(854,647)
(1,088,258)
-
2,847,546
1,965,877
(295,851)
(52,016)
894,222
876,638
(52,016)
3,741,768
2,842,515
-
(295,851)
49.6p
76.9p
22.1p
9.6p
0.1p
-
(366,395)
(366,395)
103.7p
(836,272)
-
(5,219)
(4,515)
(841,491)
0.7p
(4,515)
119.6p
Balance at 31 March 2022
3,681,300
1,394,731
5,076,031
26.1p
During the year options were exercised by Barclays Bank PLC over warrants with an exercise price of 36p, settled in cash,
resulting in an expense of £310,000 (included in exceptional costs – note 9). The warrants were issued on demerger in April
2013 for warrants previously held in Redstone PLC, and could have been converted to shares at any time before the sale
of the entire share capital of the company. Redcentric plc was created when Redstone PLC demerged its network-based
management service business.
The weighted average remaining contractual life for the share options outstanding at 31 March 2022 is 6 years and 9 months
(31 March 2021: 6 years and 11 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
120p
108p
100p
Number,
year ended
31 March 2022
Life at
31 March 2022
Number,
year ended
31 March 2021
Life at
31 March 2021
3,681,300
8 years, 5 months
2,847,546
8 years, 4 months
369,393
241,311
168,998
615,029
1 year, 0 months
2 years, 0 months
3 years, 0 months
3 years, 4 months
434,145
460,077
2 years, 0 months
3 years, 0 months
-
-
-
-
5,076,031
6 years, 9 months
3,741,768
6 years, 11 months
115
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
28 Share-based payments (continued)
The following table illustrates the status of the options outstanding at the end of the year:
31 March 2022
Number of
options
31 March 2022
WAEP
31 March 2021
Number of
options
31 March 2021
WAEP
-
3,681,300
1,394,731
5,076,031
0.0p
0.1p
94.6p
26.1p
-
2,847,546
894,222
3,741,768
0.0p
0.1p
92.2p
22.1p
Performance conditions satisfied
Subject to performance conditions
Save-As-You-Earn
Outstanding at the end of the year
29 Capital commitments
The Group had no contracted but not provided for capital commitments at 31 March 2022 (31 March 2021: £nil) included
within trade and other payables.
30 Pensions
The Group operates a defined contribution pension scheme for eligible employees. The charge for the year ended 31 March
2022 was £0.8m (FY21: £0.6m). At the year- end there was a pension’s creditor of £0.2m (2021: £0.1m).
31 Subsidiaries
The undertakings whose results and financial position are consolidated within the Group financial statements at 31 March 2022
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
Piksel Industry Solutions Limited
7 Elements Limited
Hotchilli Internet Limited
Managed Services
England and Wales
Support services
Support services
India
India
Dormant
England and Wales
Security services
Scotland
Dormant
England and Wales
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 8th Floor, My Home Twitza,
Plot No. 30/A Sy No. 83/1, TSIIC Knowledge City, Raidurg, Hyderabad Rangareddy Telangana 500081 INDIA and 7 Elements
Limited which has a registered office of 4-5 Lochside Way, Edinburgh Park, Edinburgh EH12 9DT, Scotland.
32 Acquisition of subsidiary
Piksel Industry Solutions Limited
On 30 September 2021, the Group acquired 100% of the issued share capital of Piksel Industry Solutions Limited “Piksel”
obtaining control at this date. The acquisition is in line with the Group’s strategy to grow its operations, both organically
116
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
32 Acquisition of subsidiary (continued)
and through acquisitions. Piksel is a provider of IT modernisation and digital transformation services focussing primarily on
the public cloud. Taking control of Piksel significantly enhances Redcentric’s service offerings in both cloud and security and
provides a complementary customer base with excellent cross-sell opportunities. The Group also expects to reduce costs
through cost synergies as Piksel is integrated into the Group.
The following table summarises the acquisition date fair value of each major class of consideration transferred:
Cash6
Novation of Intercompany loans7
Deferred consideration8
£000s
9,459
3,069
183
12,711
6 Of the total cash consideration, $750k (£549k) is to be held in Escrow for a period of 12 months after which time the balance will be released to the
vendor less any claims made by the Group to offset undisclosed liabilities
7 An intercompany receivable balance between Piksel and the seller was novated to the acquiring group company (Redcentric Solutions Limited) as part
of the acquisition.
8 Deferred consideration is to offset against future costs incurred as part of the transitional services agreement between Piksel and the seller.
The Group incurred acquisition-related costs of £948,000 on legal fees, due diligence costs and direct integration costs
relating to systems migration etc. These costs have been included in exceptional costs (note 9).
The following table summarises the recognised amounts of assets and liabilities assumed as the date of acquisition:
Tangible fixed assets
Customer relationships
Other intangible assets
Trade and other receivables
Cash and cash equivalents
Intercompany loans
Corporation tax receivable
Deferred tax
Trade and other payables
Deferred income
Payroll and social security creditors
VAT liability
Onerous contract provisions
Total identifiable net assets acquired
Goodwill
Total consideration
Note
Book value
Fair value
adjustments
£000
38
-
28
2,418
965
3,069
557
1,403
(2,940)
(1,817)
(345)
(344)
(577)
2,455
£000
-
1,868
174
-
-
-
-
(467)
-
-
-
-
-
1,575
16
15
15
18
26
15
Final fair
value
£000
38
1,868
202
2,418
965
3,069
557
936
(2,940)
(1,817)
(345)
(344)
(577)
4,030
8,681
12,711
The goodwill arising on acquisition represents future income from new customers, the potential to cross-sell existing
Group products to the established Piksel customer base as well and the assembled workforce which increases the Group’s
competence in key growth areas of the managed IT services sector allowing the Group to provide additional services to its
existing customer base, together with the benefits to the Group in merging the business with its existing infrastructure and the
anticipated future operating synergies from the new combination.
117
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
32 Acquisition of subsidiary (continued)
The fair value of the acquired customer relationships is £1.9m. To estimate the fair value of the customer relationships
intangible asset, a multi-period excess earnings method “MEEM” approach has been adopted, this approach considers the
present value of net cash flows expected to be generated by the customer relationships, by excluding any cash flows related
to contributory assets.
The fair value of financial assets acquired includes trade receivables with a fair value of £1.1m comprised of the gross amount
due under contracts, all of which is expected to be collectable.
On 28 February 2022 the trade, assets and liabilities of Piksel were hived out to the Group’s trading subsidiary Redcentric
Solutions Limited. For the 5 months ended 28 February 2022, Piksel contributed revenue of £4.9m and profits, before
allocation of group overheads, share based payments and tax, of £0.3m to the Group’s results.
7 Elements Limited
On 14 March 2022 the Group acquired 100% of the issued share capital on 7 Elements Limited “7 Elements” obtaining control
at this date. 7 Elements is an industry-leading provider of security testing, incident response management and bespoke
security consultancy services. The acquisition significantly enhances the Group’s service portfolio with additional capacity
within the increasingly important security market. The acquisition is in line with the Group’s strategy to grow its operations,
both organically and through acquisitions. The following table summarises the acquisition date fair value of each major class of
consideration transferred:
Cash9
Contingent consideration (note 23)10
£000
2,409
422
2,831
9 Of the cash consideration of £2.4m above, £0.13m was paid after the year end.
10 The contingent consideration is payable on the performance of the business over the next thirteen months (to the financial year ended 31 March 2023)
“earn out”. Payment will be due immediately once performance criteria have been satisfied over this period. The potential undiscounted amounts of
the contingent payment are between £nil and £450,000. In considering the fair value, management assessed recent trading performance and expected
performance once 7 Elements has been integrated into the Group against the criteria of the earn out.
The Group incurred acquisition-related costs of £23,000 on legal fees and due diligence costs. These costs have been
included in exceptional costs (note 9).
The following table summarises the recognised amounts of assets and liabilities assumed as the date of acquisition:
Other intangible assets
Customer relationships
Trade and other receivables
Cash & cash equivalents
Trade and other payables
Payroll and social security creditors
Deferred Tax
VAT liability
Corporation tax liability
Total identifiable net assets acquired
Goodwill
Total consideration
Note
Book value
Fair value
adjustments
£000
3
-
168
465
(11)
(1)
-
(50)
(52)
522
£000
-
878
-
-
-
-
(220)
-
-
658
15
15
18
15
118
Final fair
value
£000
3
878
168
465
(11)
(1)
(220)
(50)
(52)
1,180
1,651
2,831
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
32 Acquisition of subsidiary (continued
The goodwill arising on acquisition represents future income from new customers, the potential to cross-sell existing group
products to established 7 Elements customer base and the assembled workforce which increases the Group’s competence in
key growth areas of the managed IT services sector.
The fair value of the acquired customer relationships is £878,000. To estimate the fair value of the customer relationships
intangible asset, a multi-period excess earnings method “MEEM” approach has been adopted, this approach considers the
present value of net cash flows expected to be generated by the customer relationships, by excluding any cash flows related to
contributory assets.
The fair value of financial assets acquired includes trade receivables with a fair value of £159,000 comprised of the gross
amount due under contracts, all of which is expected to be collectable.
7 Elements earned revenue of £104,000 and delivered profits, before allocation of group overheads, share-based payments
and tax of £54,000 in the period since acquisition.
Unaudited pro-forma full year information
The following unaudited pro-forma summary presents the Group as if the business acquired during FY22 had been part
of the Group since 1 April 2021. This includes the results of the acquired business, depreciation of the acquired assets
and an amount of £160,000 relating to the amortisation of the acquired intangible assets recognised on acquisition. This
information is presented purely for illustrative purposes and does not necessarily reflect the actual underlying results that
would have occurred.
Revenue
Profit
33 Related parties
Pro-forma
year ended
31 March 2022
£000
100,169
6,903
Directors’ emoluments are disclosed in the Annual Remuneration Report on page 58 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 2022.
34 Prior year restatement
In April 2021, the IFRS Interpretations Committee (IFRIC) published an agenda decision to clarify the accounting treatment
in relation to the configuration and customisation costs incurred in implementing Software-as-a-Service (SaaS) cloud
computing arrangements, issuing the following conclusions:
- Any amounts for configuration and customisation to the cloud vendor, that are not distinct from access to the cloud
software should be expensed over the SaaS contract term
- Any code that is created and controlled by the entity may give rise to an identifiable intangible asset, however this is
expected to be in very limited circumstances
- In all other instances, cloud configuration and customisation costs should be expensed as the configuration and
customisation services are received.
119
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
34 Prior year restatement (continued)
Due to the nature of this decision combined with the level of investment made by the Group on its ERP system (Microsoft
Dynamics 365), the Group’s accounting policy in relation to cloud implementation, customisation and configuration costs
has been reviewed and amended to align with the issued IFRIC guidance. The revision to the accounting policy has been
accounted for retrospectively resulting in a prior year restatement and represents a non-cash adjustment.
The Group identified £4.4m of assets in FY20, £0.6m of additions in FY21 and a further £0.4m of costs incurred in FY22
that relate to configuration and customisation costs which should now be expensed after further consideration of the IFRIC
guidance. In FY21 in relation to these assets, £0.4m of amortisation was charged, which is to be reversed.
These costs give rise to a reduction in the tax charge for the year ended 31 March 2020 of £842k and corresponding increase
to the deferred tax asset.
The affected financial statement line items are as follows:
31 March
2021
(previously
reported)
Restatement
31 March
2021
(restated)
£000
£000
£000
(7,337)
4,782
12,998
11,538
(2,311)
9,227
9,106
6.01
5.93
415
(630)
(216)
(216)
-
(216)
(216)
(0.14)
(0.14)
(6,922)
4,152
12,782
11,322
(2,311)
9,011
8,890
5.87
5.79
31 March
2021
(previously
reported)
Restatement
31 March
2021
(restated)
£000
£000
£000
65,929
561
91,111
75,897
11,960
75,897
(4,649)
842
(3,807)
(3,807)
(3,807)
(3,807)
61,280
1,403
87,304
72,090
8,153
72,090
Income Statement Impact
Included within admin expenses:
Amortisation of intangible fixed assets
Exceptional items
Operating profit
Profit /(loss) on ordinary activities before taxation
Income tax (expense)/credit
Profit /(loss) for the period attributable to owners of the parent
Total Comprehensive income/(loss) for the period
Basic earnings /(loss) per share
Diluted earnings/(loss) per share
Statement of Financial Position
Intangible assets
Deferred Tax Assets
Total non-current assets
Net assets
Retained earnings
Total equity
120
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
34 Prior year restatement (continued)
Statement of Cash Flows Impact
Operating profit/(loss)
Depreciation and amortisation
Exceptional items
Exceptional items (cash)
Operating cash flow before changes in working capital
Net cash generated from operating activities
Purchase of intangibles
Net cash used in investing activities
31 March
2021
(previously
reported)
Restatement
31 March
2021
(restated)
£000
£000
£000
12,998
15,677
(4,782)
(8,884)
15,696
17,428
(1,397)
(2,938)
(216)
(415)
630
(630)
(630)
(630)
630
630
12,782
15,262
(4,152)
(9,514)
15,066
16,798
(767)
(2,308)
In accordance with IAS 1, a third balance sheet has been prepared to illustrate the impact to the opening balance sheet
for the year ended 31 March 2021. Costs that the Group identified that were previously capitalised under cloud computing
arrangements in FY20 totalling £4.4m have been expensed and the associated amortisation charge of £0.4m has been reversed.
The opening balance sheet of the prior year has therefore been restated for these adjustments with the affected financial
statement line items as follows:
Statement of financial position impact
Tangible assets
Deferred tax assets
Total non-current assets
Net assets
Retained Earnings
1 April 2020
(previously
reported)
Restatement
1 April 2020
(restated)
£000
£000
£000
12,909
1,482
108,816
59,801
4,096
(4,434)
842
(3,592)
(3,592)
(3,592)
8,475
2,324
105,224
56,209
504
121
Annual Report and Accounts 2022Financial statements Notes to the consolidated financial statements
for the year ended 31 March 2022 (continued)
synergies expected as the acquisition is integrated into the
Group. Management consider signing of the share purchase
agreement (SPA) on 27 June 2022 as the change of control
and therefore acquisition date for the transaction. No costs
in relation to this acquisition have been incurred in the year.
On 6 July 2022 the Group’s trading subsidiary Redcentric
Solutions Limited acquired certain business and assets
relating to three data centres “DCs” from Sungard
Availability Services (UK) Limited (in administration) for initial
consideration of £10.1m with contingent consideration with
a maximum potential value of £19m depending on customer
retention and certain performance criteria.
The Group is undertaking an exercise to establish the
fair value of the net assets acquired in each of these post
year end acquisitions. However, due to the timing of the
acquisitions this exercise is ongoing and it is not possible to
provide further detail at this stage.
On 8 July 2022 the Group settled a supplier dispute
resulting in the payment of contract termination fees (£0.4m)
and legal fees of (£0.1m) which will be accounted for as
exceptional items in FY23.
2 For an explanation of the alternative performance measures used in this
report, please refer to page 22.
36 Contingent liability
During the FCA investigation the Group made a claim
under its insurance policy in relation to defence costs for
which a provision was recognised in the prior year of £0.5m
for costs potentially repayable (the “scheme fees provision”).
Following professional advice and further developments
in the year, the Group no longer consider repayment of
these fees to be probable. As a result, the related provision
has been released and a contingent liability is disclosed for
the £0.5m.
35 Subsequent events
Subsequent to the year-end, on 26 April 2022, the Group
completed a refinance of its debt facilities that were due to
mature on 30 June 2022. The new debt facilities consist of
an £80m Revolving Credit Facility and a £20m accordion
facility and are provided by a new four bank group
consisting of NatWest, Barclays, Bank of Ireland and Silicon
Valley Bank. The New Facility has an initial maturity date of
26 April 2025 with options to extend by a further one or two
years. The borrowing cost of the RCF is determined by the
level of the Group’s leverage and has a borrowing cost of
175 basis points over SONIA at the Group’s current leverage
levels. An arrangement fee of 75 basis points will be payable
upfront, in addition to a commitment fee on the undrawn
portion of the new RCF, on equivalent terms to the previous
facility. The Group is required to comply with financial
covenants for adjusted leverage (net debt2 to adjusted
EBITDA2), cashflow cover (adjusted cashflow to debt service,
where adjusted cashflow is defined as adjusted EBITDA2
less tax paid, dividend payments, IFRS16 lease repayments
and cash capital expenditure) and provisions relating to
guarantor coverage such that guarantors must exceed a
prescribed threshold of the Group’s gross assets, revenue
and Adjusted EBITDA2. Covenants are tested quarterly each
year. The New Facility provides the Group with additional
liquidity to be used for working capital purposes and to fund
acquisitions, in accordance with the Group’s stated strategy.
No security has been provided with regards to the RCF.
On 7 June 2022 the Group’s trading subsidiary Redcentric
Solutions Limited acquired the consulting business from
Sungard Availability Services (UK) Limited (in administration)
for £4.2m consideration in cash. The business provides
services in respect of business continuity, cloud and
infrastructure, cyber resilience, disaster recovery and hybrid
cloud transformation services alongside the provision and
operation of Cloud related services. Management consider
the signing of the Agreement for the sale of assets as the
change of control and therefore acquisition date for the
transaction. No costs in relation to this acquisition have
been incurred in the year.
On 27 June 2022 the Group’s trading subsidiary Redcentric
Solutions Limited acquired 100% of the issued share capital
of 4D Data Centres Limited for £10.5m consideration
paid in cash. The business provides colocation, cloud
and connectivity services to mid-market customers. The
primary purpose of the business combination is to scale
the Group’s existing revenues in this area with significant
122
Annual Report and Accounts 2022Financial statements Company Balance Sheet
as at 31 March 2022
Fixed assets
Investments
Deferred tax
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
2022
Year ended
31 March
2021
Note
£000
£000
2
3
4
5
104,051
102,983
406
-
104,457
102,983
(16,242)
(21,633)
-
(554)
(16,242)
(22,187)
88,215
80,796
157
73,267
7,843
(2,673)
9,621
88,215
156
73,267
6,776
(32)
629
80,796
The notes on pages 125 to 129 are an integral part of these financial statements.
The financial statements of Redcentric Plc (Registration Number 08397584) on pages 123 to 124 were approved by the Board
on 21 July 2022 and are signed on its behalf by:
David Senior
Chief Financial Officer
123
Annual Report and Accounts 2022Financial statements Company Statement of Changes in Equity
for the year ended 31 March 2022
Called
up Share
Capital
Share
Premium
£000
£000
Share
option
reserve
£000
Own shares
held in
treasury
Retained
Earnings
£000
£000
149
65,734
6,194
(724)
Balance at 1 April 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
Profit for the period
Transactions with owners
Dividend paid to shareholders
Issue of new shares
Share option exercises
Share buyback
Share-based payments
At 31 March 2022
Total
Equity
£000
75,247
(1,199)
(1,868)
7,540
494
582
80,796
14,633
3,894
(1,199)
(1,868)
-
(198)
-
629
14,633
(5,627)
(5,627)
-
(14)
-
-
1
11
(2,666)
1,067
(2,673)
9,621
88,215
-
-
-
692
-
(32)
-
-
-
25
(2,666)
-
-
-
7
-
-
-
-
7,533
-
-
156
73,267
-
-
1
-
-
-
-
-
-
-
-
-
157
73,267
-
-
-
-
582
6,776
-
-
-
-
-
1,067
7,843
124
Annual Report and Accounts 2022Financial statements Notes to the Company Financial Statements
for the year ended 31 March 2022
1 Accounting policies
These separate financial statements of the Company are presented as required by the Companies Act 2006. The Company
meets the definition of a qualifying entity under FRS 100 ‘Application of Financial Reporting Requirements’ issued by the
Financial Reporting Council (FRC). Accordingly, 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 UK-adopted international accounting standards
(“Adopted IFRSs”),but makes amendments where necessary in order to comply with Companies Act 2006 and has set
out below where advantage of the FRS 101 disclosure exemptions has been taken. These policies have all been applied
consistently throughout the year unless otherwise stated.
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 Investments
Investments in subsidiaries are carried at cost less impairment which is based on the fair value at acquisition. Investments 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.
1.2 Income taxes
The taxation expense charged in the 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 liability for current tax is
measured using tax rates that have been enacted or substantively enacted by the balance sheet date.
125
Annual Report and Accounts 2022Financial statements Notes to the Company Financial Statements
for the year ended 31 March 2022
1 Accounting policies (continued)
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.
1.3 Dividends
Dividends payable to equity shareholders are included in the financial statements within ‘other creditors’ when a final
dividend is approved by shareholders in a general meeting. Interim dividends to equity shareholders approved by the board
during the financial year are not included in the financial statements until paid.
Dividends receivable from the Company’s investments are recorded in the Company income statement once the dividend
has been declared and approved by the board.
1.4 Provisions
Provisions are recognised when the Company 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.
1.5 Treasury shares
Redcentric Plc shares held by the Company are deducted from equity as “treasury shares” and are recognised at cost.
Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds
from sale and the original cost being taken to reserves. No gain or loss is recognised in the Income Statement on the
purchase, sale, issue or cancellation of equity shares.
1.6 Share based payments
The cost of equity-settled transactions with employees of the Group 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 in the subsidiary company 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.
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.
126
Annual Report and Accounts 2022Financial statements Notes to the Company Financial Statements
for the year ended 31 March 2022
Accounting policies (continued)
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 group 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 Company does not operate any cash settled share-based payment schemes.
1.7 Key judgements and sources of estimation uncertainty
There were no critical accounting judgements that would have a material effect on the amounts recognised in the
Company’s financial statements or key sources of estimation uncertainty at the balance sheet date that would have a
significant risk of causing a material adjustment to the carrying value of assets and liabilities within the next financial year.
Impairment reviews show significant headroom and there are no additional indicators to suggest that the Company’s
investments should be impaired.
2 Investments held as fixed assets
Investments in subsidiaries
Capital contribution related to share-based payments for subsidiaries
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
96,062
7,989
96,062
6,921
104,051
102,983
All of the Company’s investments are unlisted. Details of subsidiary undertakings are included in note 31 of the Group
financial statements.
The Company’s investments have been tested for impairment and, to confirm whether an impairment 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 2024, extrapolated for
a further three years by an average annual revenue growth rate of 2.0% (FY21: 1.5%). A terminal value based on a perpetuity
calculation using a 0.0% real growth rate was then added (FY21: 0.0% growth).
127
Annual Report and Accounts 2022Financial statements Notes to the Company Financial Statements
for the year ended 31 March 2022
2 Investments held as fixed assets (continued)
In addition to revenue growth, the key assumptions used in the impairment testing were as follows:
• Gross margin percentage increasing to 63% (FY21: 60.5%)
•
•
Operating costs increasing by 1.5% (FY21: 1.5%)
Pre-tax discount rate of 11.8% (FY21: 8.3%) (post tax rate of 7.2% (FY21: 7.0%) 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 consistent with the market the entity operates in.
A reasonably possible adverse movement in any of the above key assumptions made would not give rise to impairment.
3 Deferred tax
Deferred tax asset on tax losses
4 Creditors – amounts falling due within one year
Amounts owed to subsidiaries
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
406
406
-
-
Year ended
31 March
2022
Year ended
31 March
2021
£000
£000
16,242
21,633
Amounts due to Group undertakings are unsecured, interest-free and have no fixed payment terms.
128
Annual Report and Accounts 2022Financial statements Notes to the Company Financial Statements
for the year ended 31 March 2022
5 Provisions
At 1 April 2020
Additional provision created during the period
Utilised during the period
Released during the period
At 31 March 2021
Additional provisions created during the period
Utilised during the period
Released during the period
At 31 March 2022
Scheme
Fees
provision
Restitution
Scheme
provision
£000
£000
-
554
-
-
554
-
(26)
(528)
-
11,429
130
(9,387)
(2,172)
-
-
-
-
-
The scheme fees provision represented costs repayable on adviser fees in relation to the FCA Investigation. The provision
was released in FY22 as repayment is no longer considered probable.
6 Share capital
Details of the share capital of the company are disclosed in note 27 to the consolidated financial statements. During the
year the Company purchased, and held in treasury, 2,170,203 of its ordinary share capital (FY21: nil) for total proceeds of
£2,666,246 (FY21: £nil). The total shares held in treasury at 31 March 2022 was 2,170,203 (31 March 2021: 33,284).
7 Auditor’ remuneration
The Company audit fee is £30,000 (FY21: £25,000). This fee was borne by another Group company.
8 Related parties
The Company has taken exemption not to disclose transactions with entities wholly owned by the Group.
Directors’ emoluments are disclosed in the Annual Report on Remuneration of the consolidated financial statements on
page 58.
There were no other transactions with related parties in the year to 31 March 2022.
9 Contingent liabilities
During the FCA investigation the Group made a claim under its insurance policy in relation to defence costs for which
a provision was recognised in the prior year of £0.5m for costs potentially repayable (the “scheme fees provision”).
Following professional advice and further developments in the year, the Group no longer consider repayment of these fees
to be probable. As a result, the related provision has been released and a contingent liability is disclosed for the £0.5m.
129
Annual Report and Accounts 2022Financial statements “
From the signing of
the contract, through
to delivery, Redcentric’s
turnaround was very quick.
Redcentric delivered
exactly what was promised
and delivered ahead
of schedule.
”
130
Directors and advisers
Directors
Executive
Peter Brotherton – Chief Executive Officer
David Senior – Chief Financial Officer
Non-executive
Nick Bate
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
Nominated adviser and broker
finnCap Limited
1 Bartholomew Close
London
EC1A 7BL
Registrars
Link Asset Services
Arlington Business Centre
Millshaw Park Lane
Leeds
LS11 0PA
Financial adviser
Oakley Advisory
3 Cadogan Gate
London
SW1X 0AS
Legal adviser
Clarion Solicitors
Elizabeth House
13-19 Queen Street
Leeds
LS1 2TW
131
Annual Report and Accounts 2022Financial statements Head Office
Central House
Beckwith Knowle
Harrogate
HG3 1UG
T 0800 983 2522
E sayhello@redcentricplc.com
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