Year ended 31 March 2024 | Redcentric plc
Company Number 08397584
2024
REPORT & ACCOUNTS
STRATEGIC REPORT
Highlights
5
Chairman’s Statement
6
Chief Executive Officer’s Review
9
Financial Review
13
Alternative Performance Measures
22
Strategy and Business Model
27
Section 172 Statement
28
Risk Management
32
Corporate Responsibility
34
Sustainability Reporting
38
GOVERNANCE
Introduction to Governance
52
Corporate Governance
53
Board of Directors
59
Audit Committee Report
62
Directors’ Remuneration Report
65
Directors’ Report
71
Statement of Directors’ Responsibilities
75
FINANCIAL STATEMENTS
Independent Auditor’s Report to the Members of Redcentric plc
76
Consolidated Statement of Comprehensive Income
82
Consolidated Statement of Financial Position
83
Consolidated Cash Flow Statement
84
Consolidated Statement of Changes in Equity
85
Notes to the Consolidated Financial Statements
87
Company Balance Sheet
133
Company Statement of Changes in Equity
134
Notes to the Company Financial Statements
135
Directors and Advisers
143
Contents
Annual Report and Accounts 2024
2
Enabling transformation
through managed IT services
Redcentric is a trusted transformation partner –
supporting you with your cloud, communications,
network and cyber security needs.
Annual Report and Accounts 2024
3
Financial highlights
Total revenue
£163.2m
+15.2%
Adjusted
operating profit
£9.7m
+11.8%
Adjusted
EBITDA
£28.3m
+15.6%
Recurring revenue
£149.1m
+16.1%
Recurring revenue
percentage
91.4%
Net debt
£72.4m
-0.9%
Adjusted
basic earnings
per share
1.99p
-25.1%
Highlights
Financial performance measures
Year ended
31 March 2024
(“FY24”)
Year ended
31 March 2023
(“FY23”)
Change
Total revenue
£163.2m
£141.7m
15.2%
Recurring revenue 1
£149.1m
£128.5m
16.1%
Recurring revenue percentage1
91.4%
90.7%
0.7%
Adjusted EBITDA1
£28.3m
£24.5m
15.6%
Adjusted operating profit1
£9.7m
£8.6m
11.8%
Reported operating profit/(loss)
£0.9m
(£8.9m)
109.5%
Reported loss before tax
(£4.7m)
(£12.5m)
62.7%
Adjusted cash generated from operations1
£27.4m
£23.1m
18.7%
Reported cash generated from operations
£23.2m
£14.8m
56.2%
Net debt1
(£72.4m)
(£73.0m)
0.9%
Adjusted net debt1
(£42.0m)
(£35.6m)
(18.0%)
Adjusted basic earnings per share1
1.99p
2.66p
(25.1%)
Reported basic loss per share
(2.20p)
(5.94p)
63.1%
Percentage change calculated on absolute values.
1This 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
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 22-25.
4
5
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Strategic Report
Strategic 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 2024 (“FY24”).
Overview and financial results
With all the original integration programmes materially
completed in FY24, the business has a solid foundation
on which to flourish. Following the acquisitions made in
FY22 and FY23 we are now seeing strong organic growth
across all our core service towers of Cloud, Connectivity
and Communication.
The agile culture within the business has enabled us
to move swiftly and take advantage of the Broadcom
acquisition of VMware, gaining several new customers along
with considerable market share gains. It is also pleasing to
note that several cross-sell opportunities are already being
discussed providing further penetration into our broad
range of products and services.
I am delighted to see that the data centre assets acquired
with Sungard are starting to be recognised by a new larger
customer base as a secure home for their mission critical
infrastructure. Our West Yorkshire facility (previously
referred to as Elland) and London West facility (previously
referred to as London Technology Centre) offer the space,
power and security that is in short supply, particularly in
London. We are very optimistic about the future of these
data centres particularly given demand is being driven by
Artificial Intelligence (“AI”) processing needs that require
high-density, power-hungry equipment, both of which our
primary data centres can cater for.
Electricity costs have featured regularly in the company
updates since the acquisitions completed in FY23. The
management team have worked tirelessly to implement
efficiency measures that help to reduce our electricity
consumption, with the dual purpose of reducing cost
and carbon emissions. These measures have delivered
impressive volume savings of c.40% in the London West
and Woking data centres. This combined with reduced
electricity prices locked in from 1 April 2024 means that
electricity costs are expected to reduce by c.£8m in FY25.
The focus for FY25 will be to continue to drive organic
growth whilst leveraging the fixed cost base, driving further
productivity and efficiency gains. Whilst organic growth
is the priority, the company continually assesses M&A
opportunities in the market, and with £40m of its £80m
committed bank facility drawn at the date of this report the
company has significant firepower should an exceptional
opportunity present itself.
Final dividend
During the year, the board of Directors of the Company
(the “Board”) declared an interim dividend of 1.2 pence
per share (FY23: 1.2 pence per share), with £1.9m paid on
18 April 2024 (FY23: £1.9m).
A final dividend of 2.4p per share is recommended by the
Board and will result in a total dividend for FY24 of 3.6p
per share (financial year ended 31 March 2023 “FY23”:
3.6p per share). Subject to approval by shareholders at
the Company’s annual general meeting (“AGM”), this is
expected to be paid on 24 January 2025 to shareholders
on the register at the close of business on 13 December
2024 with shares going ex-dividend on 12 December 2024.
The last day for Dividend Reinvestment Plan elections is
2 January 2025.
Board changes and people
On 24 July 2023, Helena Feltham, Non-Executive Director,
stepped down from the Board. On behalf of the Board
and all at Redcentric I would like to thank Helena for her
significant contribution over the last two years and wish
her all the very best for the future.
On 1 December 2023, Oliver Scott was appointed as a Non-
Executive Director (non-independent). Oliver is a partner of
Kestrel Partners LLP (“Kestrel”), the independent investment
manager, which Oliver co-founded in 2009. Kestrel is
Redcentric’s largest shareholder. Oliver brings with him
considerable market knowledge alongside a breadth and
depth of skills and experience.
On 13 February 2024, Michelle Senecal De Fonseca was
appointed as a Non-Executive Director and Chair of the
Remuneration Committee. Michelle is an experienced executive
and Non-Executive Director in the technology industry.
On 15 August 2024, Peter Brotherton, Chief Executive
Officer, notified the Board of his intention to retire and
step down from the Board. Peter will remain in post until
a suitable replacement is recruited. Peter joined the group
in November 2016 as Chief Financial Officer before taking
on the role of Chief Executive Officer in November 2018.
Peter initially navigated the business through a challenging
period and more latterly has played a key part in Redcentric’s
growth strategy. On behalf of the Board and all at Redcentric
I would like to thank Peter for his very significant contribution
over the last eight years and wish him all the very best in
his retirement.
Outlook
The business has entered FY25 with a significantly enhanced
scale, strong organic revenue growth, significantly reduced
electricity costs and some very exciting sales prospects.
Management are now focussed on delivering profitable
growth to drive improved margins and cash generation,
whilst ensuring service levels are maintained to limit
customer cancellation and price erosion risks.
The factors above all lead to the Board remaining optimistic
for the future of the business.
Nick Bate
Chairman
15 August 2024
7
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Strategic Report
Strategic Report
6
Strategic execution
FY24 has been marked by significant progress and growth
as we continued to focus on the three operational themes
outlined in the interim results: organic revenue growth,
integration of the acquired businesses and electricity
conservation measures.
The financial results reflect the benefits of the first full year
of trading contribution from the 4D Data Centres and two
Sungard trade and asset acquisitions made in FY23. They
also reflect the slightly delayed implementation of the new
cooling infrastructure at the London West data centre and
the closure costs of the Harrogate data centre.
Organic growth
The sales team continue to exploit the opportunities
arising from the acquisitions made over the previous two
financial years, with the enlarged customer base presenting
new cross-sell opportunities and the new product offerings
providing a wider range of services to the existing
customer base.
On a consistent basis recurring revenues, excluding
revenue from Sungard short term contract cancellations
and Harrogate customer cancellations, which we deem
unrelated to normal trading and are discussed further
below, grew by 9.0% over the prior ten-month period
(Aug-22 to May-23 vs Jun-23 to Mar-24 with Aug-22 being
the first comparable month following the acquisitions) with
net new business gains seen across all service towers.
Revenues from cancelled Sungard short term contracts
amounted to £1.0m in the 12 months ended 31 March
2024 (12 months to 31 March 2023: £6.2m). Whilst it is
disappointing that we did not retain these customers
following our acquisition, cancelled short term customer
contracts were excluded from the calculation of the final
consideration payable, and any remaining Sungard short
term contracts have now been converted into longer
term contracts.
The closure and decommissioning of the Harrogate data
centre was completed at the end of March 2024 in line
with our project plan and expectations. Whilst most of the
customers were successfully migrated to our West Yorkshire
data centre, four of the larger customers unexpectedly
decided to cancel their contracts. The annualised revenue
and EBITDA from these customers totalled £2.6m and
£1.3m respectively. Final annual savings from the closure of
the Harrogate data centre were £1.4m, in line with previous
expectations and comprise lease cash cost savings of £1.0m
and operating costs savings of £0.4m, with these savings
effective from FY25. Although most of the cost savings have
been offset by cancelled customer contracts, the closure
of the data centre will reduce future maintenance capital
expenditure and technical debt.
VMware / Market trends
As the marketplace continually evolves Redcentric is eager
to be at the forefront of any significant changes. The recent
acquisition of VMware by Broadcom continues to present
a substantial opportunity. Redcentric was selected as one
of seven UK Pinnacle partners of VMware, following which
we actively mobilised to acquire a wide base of new end
user clients and historical VM partners. These activities have
proven very successful with a gain of 30 new customers
(of which 29 are service providers) from Q1 FY25. This
represents a material market share gain and importantly
represents significant future cross-sell opportunities.
The successful onboarding of the service providers has
provided a well-formed new route to market for our
wide-ranging portfolio. Proactive engagement with these
new partners is in its initial stages, but is already showing
positive outcomes with an initial 10 active opportunities
under discussion across our portfolio including MS
licensing, Storage as a Service, Infrastructure as a Service
(IaaS), Co-Location and Contact Centre solutions.
The continued emergence of AI is generating considerable
demand for high density data centre space and available
electricity. Our London West and West Yorkshire facilities
have the required infrastructure, space, and available
electricity to make us ideally positioned to meet these
requirements.
Our London West data centre is an Enterprise grade facility
that is built to a capacity of 18MW and has 14MW reserved
on the national grid. Given the scarcity of available power
in London in “Tier 3” equivalent data centres, London West
has become an attractive alternative to the larger scale data
centre providers, and we have recently seen a significant
increase in interest from Enterprise customers requiring high
density infrastructure.
Our West Yorkshire data centre is situated between Leeds
and Manchester and is ideally placed to serve the “Northern
Powerhouse”, with 11MW of power available. There is ample
power capacity and physical space to provide high density
infrastructure.
Chief Executive’s Review
8
9
Annual Report and Accounts 2024
Strategic Report
SD-WAN and Zero Trust
Network Access has been
a game-changer for us.
Network performance is
better and network security
has been enhanced.
“
”
8
Our organic growth strategy can be summarised into
five key focus areas:
1.
Cross-sell multiple products into the recently acquired
customer bases:
•
The majority of the recently acquired customers
take one product only.
2.
Cross-sell of new products into the historic Redcentric
customer base:
•
Hyper-cloud, cyber security and business
recovery products have all been added by the
recent acquisitions.
3.
Cross-sell into the new VMware customer wins:
•
A significant cross-sell opportunity has been
created by the new customer wins.
4.
Attracting new logos:
•
Maximise the exposure opportunities generated
by the new VMware strategic partnership; and
•
Leverage the increased scale and improved
perception to attract new customers.
5.
Leveraging the newly acquired Sungard DCs to attract
largescale AI and Enterprise customer deployments:
•
Our London West and West Yorkshire facilities
are ideally placed to meet demand for AI.
Integration of the acquired businesses
The integration work undertaken in FY24 has concentrated
on three main areas: closure of the Harrogate data centre,
supplier rationalisation and consolidation of cloud platforms.
Closure of the Harrogate data centre
The closure of the Harrogate data centre was completed at
the end of March 2024, with the fully decommissioned building
being handed back to the landlord on the lease end date of
24 March 2024.
Supplier rationalisation
During the year, the supplier base was rationalised with
two large Managed Services contracts insourced and more
favourable terms on a third contract achieved by moving
supplier. This has resulted in combined net annual savings of
£1.1m, being supplier savings of £1.7m offset by additional
staff costs of £0.6m.
Consolidation of cloud platforms
As a result of the acquisitions, we have acquired numerous
cloud and backup platforms which replicate existing
Redcentric platforms. During the year a number of these
platforms were either consolidated or decommissioned
resulting in annualised savings of c.£0.5m. Now that
resource has been freed up from the Harrogate relocation
project, which has seen significant resource and cost drain
in FY24, we expect to launch further and more extensive
consolidation programmes which will result in further
annualised savings of at least £0.6m.
As mentioned above, the acquisition of VMware by
Broadcom has created significant sales opportunities,
however, a material increase in the cost of licenses has also
presented a short-term cost challenge to the business.
The increase in the VMware cost base came at a time for
Redcentric when a programme of platform rationalisation
was in full swing. With this programme progressing well
our VMware license requirements have been dramatically
reduced. This, combined with a large portion of the
increased costs being passed on to customers, has
positioned Redcentric well to effectively manage the
impact of Broadcom licensing changes.
Electricity sourcing & consumption
London West data centre
An investment of £2.2m has been made for new cooling
infrastructure, significantly upgrading the plant at the
recently acquired site.
Whilst all the planned electricity conservation measures
were completed by the year end, the installation of the
cooling infrastructure at the London West site was delayed
by four-and-a-half-months due to the requirement of the
cooling system water to be decontaminated prior to the
installation of the new plant. The plant was eventually
installed in November 2023 and was fully commissioned
by the end of January 2024.
The new system is performing well with non-productive
power savings of c.40% to date, slightly higher than our
original expectations.
Based on the current volume savings and the forward
electricity prices secured, we expect to achieve annualised
volume savings of c.£1.5m, resulting in an impressive
payback of eighteen months and considerable savings over
the course of the assets expected fifteen-year life.
Chief Executive’s Review (continued)
Woking data centre
This is a third-party data centre where we rent a large data
hall rather than actively managing the site ourselves. Our
partners at this site have also recently completed a major
chiller replacement programme with their new plant being
live from 1 September 2023.
This is currently yielding non-productive power savings of
c.40%, in line with our expectations. Based on the current
savings being realised and the anticipated electricity prices,
we expect to achieve annualised savings of c.£1.1m from
this site.
The electricity conservation measures are expected to
generate year on year volume savings of £2.8m. This,
combined with significantly reduced electricity commodity
prices from 1 April 2024, is expected to reduce electricity
charges by £8.1m and will result in FY25 fully reflecting the
benefit of the acquisitions made during FY22 and FY23.
Our electricity contracts have recently been renegotiated
which now expire at the end of September 2028. This
enables us to forward buy power to September 2028
reducing our exposure to commodity price volatility and
providing our customers with a more certain cost base.
Financial results
We are pleased to announce the following results for FY24:
•
Revenues of £163.2m (FY23: £141.7m);
•
Adjusted EBITDA* of £28.3m (FY23: £24.5m);
•
Adjusted operating profit^ of £9.7m (FY23: £8.6m);
•
Reported operating profit of £0.9m (FY23: loss of
£8.9m);
•
Reported loss before tax of £4.7m (FY23: £12.5m);
•
Net debt as at 31 March 2024 of £72.4m (31 March
2023: net debt of £73.0m); and
•
Adjusted net debt as at 31 March 2024 of £42.0m
(31 March 2023: adjusted net debt of £35.6m);
*Adjusted EBITDA is EBITDA excluding exceptional items, share-based
payments and associated National Insurance. Exceptional items are
outlined in Note 9.
^Adjusted operating profit is reported operating profit excluding
amortisation of intangible assets arising on business combinations,
exceptional items and share-based payments.
The net debt position is after dividend payments of £1.4m,
the payments of contingent consideration of £0.9m for
the acquisitions of Sungard DC’s (£0.4m) and 7 Elements
(£0.5m), exceptional items largely relating to integration and
restructuring costs of £4.0m, working capital inflow of £0.1m
and capital expenditure of £10.7m.
Outlook
FY24 was a very productive year with all the original
integration programmes materially completed, generating
cost savings either in line or slightly ahead of our
expectations, albeit with the energy conservation measures
implemented later than anticipated. The business is seeing
strong organic revenue growth and is seizing the potential
opportunities provided by both the Broadcom acquisition
of VMware and the emergence of high-density AI demand.
The Enterprise grade data centre facilities that were part
of the Sungard DC acquisition are proving to be a key
differentiator and are attracting significant interest from
Enterprise clients.
The electricity conservation measures, combined with a
significant proportion of secured lower electricity prices
from 1 April 2024, means that electricity costs (elevated over
the past two financial years as a result of geopolitical events)
are expected to reduce by £8.1m in FY25.
With both the synergy and energy efficiency programmes
completing during FY24, FY25 will be the first full year that
reflects the full benefit of the acquisitions.
The focus for FY25 will be to continue driving organic
recurring revenue and EBITDA growth of at least 5% and
7.5% respectively, whilst leveraging operational gearing to
deliver improved margins and cashflow performance.
Peter Brotherton
Chief Executive Officer
15 August 2024
Chief Executive’s Review (continued)
11
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Strategic Report
Strategic Report
10
Financial Review
Financial performance measures
Year ended
31 March 2024
(“FY24”)
Year ended
31 March 2023
(“FY23”)
Change
Total revenue
£163.2m
£141.7m
15.2%
Recurring revenue 1
£149.1m
£128.5m
16.1%
Recurring revenue percentage1
91.4%
90.7%
0.7%
Adjusted EBITDA1
£28.3m
£24.5m
15.6%
Adjusted operating profit1
£9.7m
£8.6m
11.8%
Reported operating profit/(loss)
£0.9m
(£8.9m)
109.5%
Reported loss before tax
(£4.7m)
(£12.5m)
62.7%
Adjusted cash generated from operations1
£27.4m
£23.1m
18.7%
Reported cash generated from operations
£23.2m
£14.8m
56.2%
Net debt1
(£72.4m)
(£73.0m)
0.9%
Adjusted net debt1
(£42.0m)
(£35.6m)
(18.0%)
Adjusted basic earnings per share1
1.99p
2.66p
(25.1%)
Reported basic loss per share
(2.20p)
(5.94p)
63.1%
Percentage changes calculated on absolute values.
1 For an explanation of the alternative performance measures used in this report, please refer to pages 22-25.
Overview
The results for FY24 represent the first full year of trading of the 4D Data Centres and the two Sungard acquisitions, with
FY23 containing approximately 9 months trading from both acquisitions. The impact of this, coupled with organic growth,
resulted in improvements in total revenue, recurring revenue, adjusted EBITDA and adjusted operating profit. Reported
operating profit has been significantly impacted by the costs of exiting the Harrogate data centre and migrating customers
to other sites, primarily our West Yorkshire data centre. Despite this, reported operating profit has improved by £10.0m
reflecting significant exceptional costs in the prior year related to the acquisition and integration activity, coupled with the
release of £2.1m of contingent consideration in FY24 in relation to the Sungard acquisition following final settlement with
the administrators.
Whilst still recording a reported loss after tax for the year of £3.5m in FY24, this has significantly reduced on FY23 by £5.8m
representing the improved trading performance of the Group at adjusted EBITDA coupled with the materially reduced
exceptional costs following the increased acquisition-related spending in FY23. Net debt has remained broadly stable at
£72.4m (FY23: £73.0m), with adjusted net debt at £42.0m (FY23: £35.6m), reflecting the capex investment in FY24 to deliver
future energy efficiency gains, coupled with the exceptional costs associated with exiting the Harrogate data centre.
12
13
Annual Report and Accounts 2024
Strategic Report
The telephony platform
and analytics has given us
a better understanding of
what’s happening, allowing
us to make decisions which
drive efficiencies and improve
outcomes for patients.
“
”
12
Key considerations in the Financial Statements, but relating principally to the prior year, include:
1.
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 (“RCF”), £7m Asset Financing Facility and a £20m
uncommitted accordion facility and are provided by a new four bank group consisting of NatWest, Barclays, Bank of
Ireland, and Silicon Valley Bank (now under the HSBC group) (the “New Facility”), with the Asset Financing Facility
provided by Lombard. The New Facility had 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. An arrangement
fee of 75 basis points was 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. On 26 March 2024 these debt facilities were extended
at the Group’s request, with a new maturity date of 26 April 2026. As part of this extension of the RCF and Asset
Financing Facility term, there were no material changes to the financial debt covenants or to other terms and
conditions of the agreements.
2.
The acquisition on 7 June 2022 by the Group’s trading subsidiary Redcentric Solutions Limited of the consulting
business from Sungard Availability Services (UK) Limited (in administration) for £4.2m consideration paid 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.
This acquisition is considered to be a linked transaction with the DC acquisition as mentioned in point 4 below.
3.
The acquisition on 27 June 2022 by Redcentric Solutions Limited for 100% of the share capital of 4D Data Centres
Limited (“4D”) for £10.1m 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 synergies expected as the acquisition is integrated into the Group. On 28 February 2023, the
trade, assets and liabilities of 4D were hived into Redcentric Solutions Limited.
4.
The acquisition on 6 July 2022 by Redcentric Solutions Limited of certain business and assets relating to three data
centres “DCs” from Sungard Availability Services (UK) Limited (in administration) for initial consideration of £10.1m
paid in cash and a cash prepayment of £3.4m, with contingent consideration at a maximum potential value of £19.0m
depending on customer retention and certain performance criteria in the 12-month period post-acquisition. During
FY24 the contingent consideration was finalised and £0.4m was paid.
The key financial highlights are as follows:
•
Total revenue growth of 15.2% to £163.2m (FY23: £141.7m).
•
Recurring revenue grew by 16.1% to £149.1m, with recurring revenue representing 91.4% of the total revenue (FY23:
£128.5m/90.7%).
•
Gross profit has increased by 17.0% to £118.0m.
•
Adjusted EBITDA of £28.3m is 15.6% ahead of FY23.
•
Adjusted operating profit increased by £1.1m to £9.7m (11.8% increase).
•
Adjusted net debt as at 31 March 2024 was £42.0m, excluding £30.3m of IFRS16 lease liabilities that were previously
classified as operating leases under IAS17.
•
Reported operating profit increased by £9.8m to £0.9m.
•
Reported loss before tax has reduced by £7.8m to £4.7m (FY23: £12.5m).
Financial Review (continued)
Financial Review (continued)
Revenue
Revenue for FY24 was generated wholly from the UK and is analysed as follows:
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Change
£000
Change
%
Recurring revenue 1
149,091
128,461
20,630
16.1%
Product revenue
5,507
7,144
(1,637)
(22.9%)
Services revenue
8,552
6,069
2,483
40.9%
Total revenue
163,150
141,674
21,476
15.2%
1 For an explanation of the alternative performance measures used in this report, please refer to pages 22-25.
Total revenue increased by £21.5m compared to FY23, impacted by the first full year of revenue generated from FY23
acquisitions of 4D Data Centres and Sungard (FY23 had approximately 9 months of trading of both acquisitions).
Revenue is analysed into the following categories:
•
Recurring revenue has increased 16.1% to £149.1m (FY23: £128.5m) reflecting a full year of revenue generated from
FY23 acquisitions of Sungard and 4D Data Centres (FY23 had approximately 9 months of trading of both acquisitions),
coupled with organic revenue growth.
•
Non-recurring product revenue has decreased £1.6m to £5.5m (FY23: £7.1m), with sales activity focused on higher
margin services revenue (see below).
•
Non-recurring services revenue increased to £8.6m (FY23: £6.1m), reflecting a shift in focus from lower margin
product revenue.
Gross profit
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Change
£000
Change
%
Gross Profit
118,035
100,911
17,124
17.0%
Gross Margin
72.3%
71.2%
N/A
N/A
Gross profit increased by 17.0% (£17.1m) reflecting the Group’s increased revenue and contribution from the full year of
trading from 4D Data Centres and Sungard Consulting acquisitions. Gross Margin % has increased partly due to higher gross
margin recurring revenue from colocation contracts within the 4D Data Centres and Sungard acquisitions, coupled with the
impact of a shift in non-recurring revenues away from product sales to higher margin services revenue.
14
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Strategic Report
Strategic Report
Adjusted operating costs1
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 2024
£000
Year ended
31 March 2023
£000
Change
£000
Change
%
UK employee costs
39,202
34,482
4,720
13.7%
Office and data centre costs
30,702
25,335
5,367
21.2%
Network and equipment costs
14,319
11,824
2,495
21.1%
Other sales, general and administration costs
4,273
3,364
909
27.0%
Offshore costs
1,223
1,414
(191)
(13.5%)
Total adjusted operating costs
89,719
76,419
13,300
17.4%
1 For an explanation of the alternative performance measures used in this report, please refer to pages 22-25.
Total adjusted operating costs for FY24 were 17.4% (£13.3m) higher than prior year, reflecting:
•
Employee costs increased £4.7m (13.7%) primarily due to a first full year of headcount acquired through the 4D Data
Centres and Sungard acquisitions;
•
Office and data centre costs increased by £5.4m (21.2%), primarily due to the impact of increased electricity costs as
several electricity supply contract renewals fell due during the UK energy crisis, and the increase in the number of data
centres through the 4D Data Centres and Sungard acquisitions; and
•
Network and equipment costs increased by £2.5m (21.1%), and other sales, general and administration costs are up
£0.9m (27.0%), both primarily due to the first full year of trading from the 4D Data Centres and Sungard acquisitions.
Employees
Year ended
31 March 2024
(Number)
Year ended
31 March 2023
(Number)
Variance
(Number)
Year-end headcount
UK
562
540
22
India
97
98
(1)
Total employees
659
638
21
Year ended
31 March 2024
(Number)
Year ended
31 March 2023
(Number)
Variance
(Number)
Average headcount
UK
561
491
70
India
98
97
1
Total employees
659
588
71
Financial Review (continued)
Financial Review (continued)
Adjusted EBITDA1
Adjusted EBITDA is EBITDA excluding exceptional items (as set out in Note 9), share-based payments and associated
National Insurance costs. The same adjustments are also made in determining the adjusted EBITDA margin.
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Reported operating profit/(loss)
852
(8,939)
Amortisation of intangible assets arising on business combinations
5,229
8,183
Amortisation of other intangible assets
781
590
Depreciation of property, plant and equipment
6,089
4,636
Depreciation of right-of-use assets
11,777
10,617
EBITDA
24,728
15,087
Exceptional income
(2,100)
-
Exceptional costs (comprised of):
4,550
8,149
Acquisition fees
350
695
Integration costs
3,467
5,965
Restructuring costs
733
-
Costs relating to the settlement of an historical supplier dispute
-
809
Cloud computing costs
-
680
Share-based payments and associated National Insurance
1,138
1,256
Adjusted EBITDA1
28,316
24,492
1 For an explanation of the alternative performance measures used in this report, please refer to pages 22-25.
Adjusted EBITDA increased by 15.6% to £28.3m, £3.8m higher than the prior year. FY24 includes a full year of contribution
from the Sungard and 4D Data Centres acquisitions (FY23: approximately 9 months of contribution).
Taxation, interest and dividends
The tax charge for the year was a credit of £1.2m (FY23: a credit of £3.2m), comprising an income tax charge of £0.2m (FY23:
a charge of £0.1m), and a deferred tax credit of £1.4m (FY23: a credit of £3.3m).
Net finance costs for the year were £5.5m (FY23: £3.5m), including £1.3m (FY23: £1.2m) of interest payable on leases of
which £1.3m (FY23: £1.2m) related to leases previously recognised as operating leases under IAS17.
The Group paid a final dividend in respect of the year to 31 March 2023 of 2.4p per ordinary share, with a total payment
value of £3.8m. This was made up of £1.4m cash with the remainder in dividend shares (see Note 27 for further details).
During the year, the Group paid an interim dividend for FY24 of 1.2p per share, totalling £1.9m as detailed in Note 14 (FY23:
1.2p per share).
A final dividend payment of 2.4p per share will be paid on 24 January 2025, subject to approval at the Company’s AGM, to
shareholders on the register at the close of business on 13 December 2024 with shares going ex-dividend on 12 December
2024. The last day for Dividend Reinvestment Plan elections is 2 January 2025.
16
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Net debt
During the year, net debt decreased from £73.0m to £72.4m as at 31 March 2024, with the movements shown in the tables below:
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Operating profit/(loss)
852
(8,939)
Depreciation and amortisation
23,876
24,026
Exceptional costs
4,550
8,149
Exceptional income
(2,100)
-
Share based payments
1,138
1,256
Adjusted EBITDA1
28,316
24,492
Profit on disposal of fixed assets
(53)
-
Working capital movements
114
(1,410)
Movement on provisions
(978)
-
Adjusted cash generated from operations
27,399
23,082
Cash conversion
96.8%
94.2%
Capital expenditure - cash purchases
(9,259)
(6,374)
Capital expenditure - finance lease purchases
(1,485)
-
Asset financing proceeds
2,419
966
Net capital expenditure
(8,325)
(5,408)
Corporation tax paid
(174)
(670)
Interest paid
(3,615)
(1,795)
Loan arrangement fees/fee amortisation
(209)
(291)
Finance lease interest
(1,328)
(1,248)
Effect of exchange rates
(109)
(101)
Other movements in net debt
(5,435)
(4,105)
Normalised net debt movement1
13,639
13,569
Cash cost of exceptional items
(4,240)
(8,258)
Acquisition of subsidiaries (net of cash acquired)
(890)
(26,606)
IFRS 16 lease additions
(4,237)
(28,314)
IFRS 16 lease additions on acquisition
-
(1,976)
Drawdown on Asset Financing Facility
(2,419)
-
Remeasurement relating to lease modification
-
629
Dividends paid in cash
(1,369)
(5,593)
Disposal of treasury shares on exercise of share options
116
229
(13,039)
(69,889)
Decrease/(increase) in net debt
600
(56,320)
Net debt at the beginning of the period
(72,965)
(16,645)
Net debt at the end of the period
(72,365)
(72,965)
1 For an explanation of the alternative performance measures used in this report, please refer to pages 22-25. Exceptional items are outlined in Note 9.
Financial Review (continued)
Financial Review (continued)
Net debt (continued)
As at
31 March
2022
Net cash
flow
Net non-
cash flow
As at
31 March
2023
Net cash
flow
Net non-
cash flow
As at
31 March
2024
£000
£000
£000
£000
£000
£000
£000
Cash
1,804
(335)
(103)
1,366
1,873
(109)
3,130
RCF
-
(31,537)
(2,094)
(33,631)
(2,712)
(3,542)
(39,885)
Term Loan
(1,004)
533
(24)
(495)
474
-
(21)
Asset Financing
Facility
-
-
-
-
(1,517)
(2,092)
(3,609)
Lease Liabilities
(17,445)
(21,543)
(1,217)
(40,205)
7,728
497
(31,980)
(16,645)
(52,882)
(3,438)
(72,965)
5,846
(5,246)
(72,365)
Included in lease liabilities at 31 March 2024 are £30.3m (FY23: £36.9m) of IFRS 16 lease liabilities that were previously
classified as operating leases under IAS17.
Trade receivables and trade payables
In the year, focus remained on maintaining a strong ageing profile with a low level of aged debt. At the year end, 87% of
gross trade debt was current or less than 30 days overdue (FY23: 96%).
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Current
14,008
18,450
1 to 30 days overdue
2,928
2,212
31 to 60 days overdue
1,794
557
61 to 90 days overdue
383
283
91 to 180 days overdue
320
194
> 180 days overdue
(43)
(240)
Gross trade debtors
19,390
21,456
Provisions
(1,200)
(1,251)
Net trade debtors
18,190
20,205
Trade debtor days were 36 at 31 March 2024 compared to 46 at 31 March 2023. Trade debtor days are calculated as gross
trade debtors divided by revenue (incl. VAT) multiplied by 365.
Trade payable days were 36 at 31 March 2024 compared to 42 as at 31 March 2023. Trade payable days are calculated as
trade payables divided by total purchases (cost of sales and operating expenditure) multiplied by 365.
18
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Strategic Report
Financing
31 March 2024
31 March 2023
Available
Drawn
Undrawn
Available
Drawn
Undrawn
£000
£000
£000
£000
£000
£000
Committed
- Revolving credit facility
80,000
40,000
40,000
80,000
34,000
46,000
- Term Loans
21
21
-
496
496
-
- Leases
35,588
35,588
-
40,204
40,204
-
- Asset Financing Facility
7,000
3,625
3,375
7,000
2,309
4,691
122,609
79,234
43,375
127,700
77,009
50,691
Uncommitted
- Accordion Facility
20,000
-
20,000
20,000
-
20,000
20,000
-
20,000
20,000
-
20,000
Total borrowing facilities
142,609
79,234
63,375
147,700
77,009
70,691
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.
As at 31 March 2024, the Group was party to £87.0m of committed banking facilities, comprising a Revolving Credit Facility
of £80.0m (net £40.0m utilised at 31 March 2024) and a £7.0m Asset Financing Facility (£3.6m utilised at 31 March 2024).
As at 31 March 2024, these facilities are due to expire on 25 April 2026.
The borrowing cost of the RCF is determined by the Group’s leverage and has a borrowing cost of 235 basis points over
SONIA at the Group’s current leverage levels. A commitment fee is payable on the undrawn portion of the RCF at 94 basis
points, being 40% of the borrowing cost.
David Senior
Chief Financial Officer
15 August 2024
Financial Review (continued)
20
21
Annual Report and Accounts 2024
Strategic Report
The Redcentric cloud team
managed the seamless migration
of our £100 million e-commerce
business, providing us with
a stable scalable platform,
to help us to grow our business
for many years to come.
“
”
21
Alternative Performance Measures
This 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 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.
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Reported revenue
163,150
141,674
Non-recurring revenue
(14,059)
(13,213)
Recurring revenue
149,091
128,461
Recurring revenue percentage is the percentage of recurring revenue as a proportion of total revenue.
Recurring revenue makes up 91.4% of total revenue in FY24, an increase of 0.7ppts from prior year (FY23: 90.7%).
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 asset financing additions are excluded due
to the infrequency of this expenditure occurring. Customer capital expenditure relates to assets utilised by the Group in
delivering Managed Services to our customers.
Year ended
31 March
2024
£000
Year ended
31 March
2023
£000
Property plant and equipment additions – excluding additions on acquisition (note 16)
9,318
5,505
Intangible additions – excluding additions on acquisition (note 15)
1,479
869
Right of use asset additions – lease liabilities that would have been classified as finance
leases under IAS 17, excluding asset financing
1,033
391
Reported capital expenditure incurred
11,830
6,765
Customer capital expenditure incurred (notes 15 & 16)
(4,099)
(3,234)
Maintenance capital expenditure incurred
7,731
3,531
Maintenance capital expenditure of £7.7m has increased by £4.2m (FY23: £3.5m) driven by additions to PPE for efficiency
measures in the data centres, primarily at London West. Customer capital expenditure has increased to £4.1m (FY23: £3.2m)
to support revenue growth. We will continue to monitor the Group’s capital requirements and invest in the business
when appropriate.
Alternative Performance Measures (continued)
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.
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Reported operating profit/(loss)
852
(8,939)
Amortisation of intangible assets arising on business combinations
5,229
8,183
Amortisation of other intangible assets
781
590
Depreciation of property, plant and equipment
6,089
4,636
Depreciation of right-of-use assets
11,777
10,617
EBITDA
24,728
15,087
Exceptional income
(2,100)
-
Exceptional costs (comprised of):
4,550
8,149
Acquisition fees
350
695
Integration costs
3,467
5,965
Restructuring costs
733
-
Costs relating to the settlement of an historical supplier dispute
-
809
Cloud computing costs
-
680
Share-based payments and associated National Insurance
1,138
1,256
Adjusted EBITDA
28,316
24,492
Adjusted EBITDA increased to £28.3m, £3.8m higher than prior year, with adjusted EBITDA margin of 17.4% (up from 17.3%).
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”).
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Reported operating profit/(loss)
852
(8,939)
Amortisation of intangible assets arising on business combinations
5,229
8,183
Exceptional costs
4,550
8,149
Exceptional income
(2,100)
-
Share-based payments and associated National Insurance
1,138
1,256
Adjusted operating profit
9,669
8,649
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. Share based payments are removed
for adjusted operating profit as they are not reflective of trading.
22
23
Annual Report and Accounts 2024
Strategic Report
Strategic Report
Annual Report and Accounts 2024
Alternative Performance Measures (continued)
Adjusted operating costs
Adjusted operating costs are operating costs less depreciation, amortisation, exceptional items, share-based payments and
foreign exchange. This metric shows the day-to-day trading operating expenditure of the Group, excluding non-trading and
non-recurring items (items of a nature that the Group does not expect to incur every financial year) which impact financial
performance. These are controllable operating costs which provide investors with useful information about how the Group
is managing its expenditure.
Year ended
31 March
2024
£000
Year ended
31 March
2023
£000
Reported operating expenditure
119,283
109,938
Depreciation of right-of-use assets
(11,777)
(10,617)
Depreciation of property, plant and equipment
(6,089)
(4,636)
Amortisation of intangibles arising on business combinations
(5,229)
(8,183)
Amortisation of other intangible assets
(781)
(590)
Exceptional costs
(4,550)
(8,149)
Other operating income
-
(88)
Share-based payments and associated national insurance
(1,138)
(1,256)
Adjusted operating expenditure
89,719
76,419
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.
Year ended
31 March
2024
£000
Year ended
31 March
2023
£000
Reported cash generated from operations
23,159
14,824
Cash costs of exceptional items
4,240
8,258
Adjusted cash generated from operations
27,399
23,082
Alternative Performance Measures (continued)
Adjusted net debt
Adjusted net 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.
Year ended
31 March
2024
£000
Year ended
31 March
2023
£000
Reported net debt
(72,365)
(72,965)
Term loans
21
495
Lease liabilities that would have been classified as operating leases under IAS 17
30,346
36,891
Adjusted net debt
(41,998)
(35,579)
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 FY25.
David Senior
Chief Financial Officer
15 August 2024
24
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Annual Report and Accounts 2024
Strategic Report
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 Group provides a broad range of Managed Services across its three core specialist areas of Cloud, Connectivity and
Communication, and has formed a divisional structure to ensure each area has dedicated focus with appropriately skilled
resource. To complete our product offering, the Group acquired a cyber security business (7 Elements) in FY23 and has
built additional cyber security capabilities into its product portfolio.
The Group 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.
The Group 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, the Group aims to attract new customers and to deepen and broaden its relationships
with existing customers.
In addition to the organic growth strategy outlined in the Chief Executives’ summary, the Board’s strategy for
growth comprises:
•
identifying acquisition opportunities for increased scale;
•
ongoing investment in expanding and enhancing the Group’s own infrastructure so that it can provide its customers
with the very highest levels of security and service;
•
effective use of the Group’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; and
•
organic revenue growth through cross-selling existing products to existing customers and acquiring new customers
attracted by our comprehensive product set.
The Board believes that the Group’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.
The Group has a strong and reliable set of core infrastructure and has developed a delivery model that provides assurance
and certainty for customers.
26
Redcentric is giving us
a hugely flexible and
functional platform which
we can use as a springboard
to optimise both IT delivery
and care provision.
“
”
26
27
Annual Report and Accounts 2024
Strategic 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 50 and Corporate Governance Report on
pages 53 to 59.
Colleagues:
•
Colleague briefings – the Company continues to
hold monthly colleague briefing sessions 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.
•
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 colleague calls. There
are also a number of communications champions
across the business who meet monthly to ensure the
Company’s commitment to two-way communication
with colleagues is met and continually enhance and
develop its communications strategy.
•
Engagement survey – we completed an all-colleague
opinion survey in FY24 to benchmark the engagement
of our colleagues and support us in the development
of a new action plan which will form the basis of our
people strategy moving forwards.
•
Learning management – the partnership with LinkedIn
learning which was launched in FY23 has been
received positively by colleagues, and we have seen a
strong uptake and utilisation of the programmes and
materials on offer. We have also run further leadership
development programmes for our business leaders.
•
Colleague support – well-being has continued to be
a priority and we have developed and are beginning
to implement a more strategically minded well-being
strategy to support our colleagues.
•
Colleague recognition – our weekly Friday Shout Out
recognition scheme has continued, and it is pleasing
to see the business’ new colleagues taking part in the
opportunity to recognise their colleagues and foster a
sense of collaborative working.
•
Electric car scheme – the Group has seen substantial
uptake in the electric car scheme for colleagues
launched in FY23 and run in conjunction with a
third-party scheme provider, the scheme works to
deliver savings for our colleagues whilst also positively
impacting the environment.
•
Share schemes – the Company has in place a HMRC
approved Save-As-You -Earn option plan (“SAYE”)
to enable colleagues to become personally invested
as shareholders of the Group. The Company invites
participation on an annual basis.
•
Further information is included in the Corporate
Responsibility section of this Report on pages 34-37
and in the Corporate Governance Report on pages
53-59.
Customers
•
Customer surveys – there is an NPS survey programme
run by the Company’s service delivery management
team to customers directly following a service review
– this ensures a high return rate and continuous
feedback from our customers. The results are discussed
in monthly service improvement meetings with all
department heads, in order that any trends and areas
of focus can be addressed.
•
Monthly and quarterly service reviews – regular service
reviews are held with customers, led by service delivery
managers and account managers, with a focus on
service experience and further support customers
may require.
•
RAG Reviews – Service delivery managers record their
perception of the customer experience each month
for their customers in the preceding period. This is
captured into a RAG dashboard (Red, Amber, Green)
which is reviewed monthly to identify and overcome
any potential service issues.
Section 172 Statement – Our Stakeholders (continued)
Customers (continued)
•
Customer Success Forum – We have recently launched
a senior management focused Customer Success
forum. This is an internal monthly forum designed to
identify any potential barriers to customer success,
and to work collaboratively on any business wide
improvement initiatives.
•
Daily social media updates – the Group’s social media
presence and activity has continued to increase and
improve during the year. At least daily updates are
provided through the Company’s corporate social
media channels (LinkedIn, X and Facebook) and contain
key updates and customer case studies. These are
shared by customer facing employees, with the sharing
of such information now included in the KPIs for such
employees, to ensure as wide a reach as possible to
keep customers appraised of the Company’s news
and offering.
•
Customer effort scoring – within the Group’s support
systems, the Group reaches out to customers on
an ongoing basis 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.
•
Customer service management solution – SMAX
continues to be the primary platform for day-to-day
interaction with customers. There have been a large
number of enhancements to ticket automation carried
out in FY24 to ensure tickets reach the correct team
as quickly as possible to improve resolution times.
There have also been several reporting enhancements
implemented to enable better visibility of tickets
for customers.
•
Targeted customer marketing and communications
– during the year, the Group’s marketing team has
continued to enhance 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. A new monthly
newsletter has also been developed, named “Engage”,
which is sent to all customer contacts; it shares industry
news, operational updates, innovation stories and
introduces relevant offers and solutions to ensure
customers remain informed of the growing portfolio.
There is also a focus on the teams they have access to
as part of being a valued Redcentric customer.
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.
•
Following the appointment of a new procurement
and supply chain Director in the year, a new vendor
management framework has been implemented and
rolled out across all strategic vendors to drive both
supply chain effectiveness and efficiencies but also to
enhance the mutual supplier value creation through
innovation and collaboration with ‘ecosystem’ partners.
•
There is a particular emphasis on key strategic partners,
each of whom participate in quarterly partner events
on top of normal annual reviews within the Group’s
strategic value framework, where product leads, sales
and marketing, procurement and operations teams
collaborate to further both revenue opportunities and
customer value propositions.
•
As part of the Group’s commitment to work in line
with the ten principles of the United Nations Global
Compact, we have issued an externally facing
sustainable supply chain policy document and are
building ESG measurements into our quarterly strategic
vendor assessment criteria.
•
All major sourcing initiatives also now include an
environmental impact assessment criterion acting
alongside more traditional quality and value for money
qualifying criteria.
•
Supply contract consolidation has been completed
following the acquisitions completed in prior financial
years, and any legacy strategic suppliers have been
identified and elevated into the Group’s strategic
value framework to ensure the best relationships
are maintained.
•
The Company also continues to give additional focus
to suppliers in the faster growing sectors of our market,
such as Cloud Security and Managed Services, driven
by customer requirements; this has culminated in the
Company being recognised by VMware’s acquiring
owner Broadcom as a Pinnacle Partner in the UK, one of
only 7 in the UK and recognising the Company as one
of its top 100 global partners.
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Section 172 Statement – Our Stakeholders (continued)
Suppliers (continued)
•
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;
-
HPE – Silver PRSP (Partner Ready Service Provider);
-
Citrix – CSPP (Citrix Solutions Provider Programme);
-
VMware by Broadcom – Pinnacle Partner;
-
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. A full schedule of
roadshows took place once again in FY24.
•
The Company’s AGM is a key opportunity for
engagement between the Board and shareholders,
particularly private shareholders. At its most recent
AGM, Redcentric was pleased to once again provide
the opportunity to hold a face-to-face meeting, but
shareholders were also again given the opportunity to
submit questions for the Board ahead of the AGM in
the event they were unable 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 53-59.
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.
•
The Company continues to see the benefits of the
energy conservation measures introduced in relation
to its data centres, with all major initiatives completed
in the year, such as the full commissioning of cooling
plant at our London West site. In addition, a significant
step to reduce the Group’s data centre footprint was
achieved in FY24 through completion of the project to
close the Harrogate data centre and consolidate into
the more efficient West Yorkshire site.
•
The Group’s hybrid working policy has continued to
positively impact environmental performance through
reduced office space, energy usage and travel.
•
The Group’s electric car salary sacrifice scheme, open to
all colleagues as part of its commitment to reduce the
Group’s carbon footprint, continues to see strong uptake.
•
In FY24, the Group’s Sustainability Committee
continued to regularly meet to discuss environmental,
social and governance (“ESG”) issues, with
representation from across the business. The
committee, together with assistance from third-party
experts appointed specifically to assist with the Group’s
ESG initiatives, has continued to further build on the
initial work undertaken in FY22/23 and continues to
assess the Group’s position on ESG issues and develop
the roadmap and actions for delivering the Group’s
ESG strategy.
•
Redcentric has continued to engage with third-party
specialists to support the Group in calculating Scope 3
emissions and developing its net zero strategy. Once
again producing a Task Force for Climate-Related
Financial Disclosures (“TCFD”) report, which can be found
on pages 38-50 of this Report. The Group continues its
commitment to the environment and in support of the
Government’s UK-wide target to reach net zero by 2050
and the Group is pleased to have produced the TCFD as
part of our statutory reporting requirements.
Further information is included in the Sustainability section
of the Report on pages 38-50.
Our customers
We use our expertise to help our commercial customers
to deliver great customer experience, to innovate and to
grow profitably.
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Risk Management
The Board takes risk management very seriously and adopts
a simple and consistent approach to the identification,
monitoring and management of risk across our entire
business. Risk management underpins our product
enhancements, business growth and most importantly
maintains stakeholder confidence.
The Group has a strong framework that is embedded
within the business, managing risks smartly to achieve its
ambitions safely, delivering on strategies, supporting the
business model, protecting all assets and leading the way
to a sustainable future are all underpinned by a strong risk
averse culture.
How do we manage our risks?
Risks are managed on a tiered hierarchy, with each
division of the business owning and managing risk to their
respective 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 corporate risk. This allows the right level
of visibility, ownership, and management in the right places
with complete consistency and transparency throughout.
Alongside divisional risk, there are also function specific
registers, tailored to the recording, understanding
and mitigation of environmental, sustainability, quality
management, business continuity and information / cyber
security risk, all of which are actively owned and managed
by internal teams.
All employees are encouraged to identify, record, monitor
and manage risks at local level, empowered to take
ownership whilst management oversight is maintained and
continued, with regular and independent reviews at all levels.
Our principal risks
Sustainability
The Environment
The Board takes into consideration both main areas of
environmental risk, these being the direct and indirect
impact on environmental and social areas by Group
activities, and the second being the potential impact or
influence on the Group and its customers by external
environmental issues.
Regarding the Group’s impact on the environment, this
includes the social, geographical, direct and indirect
emissions and overall sustainability of its sites, people,
products and processes. As customers seek to reduce their
own emissions, demand for the Group’s propositions and
services change, the Board recognises the importance of
our corporate responsibilities to do everything possible to
reduce the impact that both Redcentric and its customers
have on the environment.
The second environmental focus being the potential impact
to Group functions based on external environmental factors
and how they may be changing – including environmental
disaster – that may impact on its ability to maintain services
and keep customers, sites and workforce safe. This is an
increasing risk and gains a lot of focus by the Board as the
physical impacts of climate change and the actions taken by
governments and society to try and limit global warming.
The Group operates a dedicated in-house ESG committee
and maintains an environment specific aspects and
opportunities register to both understand and mitigate
risks to our own continuity through external environmental
impacts. The Group is also certified to a recognised
environment management standard and maintains an
annual set of environmental objectives used to measure and
maximise power efficiency across sites, reduce business
travel, reduce use of paper and physical peripheries, reduce
waste and proactively offset carbon emissions through
carbon reduction planning strategies.
The impact of environmental risks has also been considered
when preparing the FY24 financials. When undertaking the
going concern assessment management have factored in
a downside scenario to reflect reduced energy efficiency
savings in sustained periods of hot weather (see Note 1.1
for further details). Also, in reviewing the value of intangible
assets and property plant and equipment, consideration
has been given to any impacts of climate-related risks to fair
values or the useful economic lives of assets. Management
have deemed these risks as not material for FY24.
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, the Group maintains continuity plans across all
areas, performing regular, top-down assessment of business
impact through potential loss of people, processes, tools
or sites alongside our fully resilient technical landscape,
including regular testing of back-up and recovery plans. This
all helps to bolster understanding and maximise availability
wherever possible for the Group and its customers.
Risk Management (continued)
Technology
Information and Cyber-security
The market for the Group’s services is in a state of constant
innovation and change, alongside a huge growth in
capability through acquisition and an ever-changing and
closely monitored geo-political climate, all of which naturally
increases the cyber-risk landscape for the Group and its
customers. The Group monitor all short and medium-term
implications alongside maintaining constant, pro-active
vigilance against such risks, driven from the top down from
policy through process and procedure into technology,
automation, monitoring and alerting capabilities.
The overall security stance continues to evolve, both
internally and externally facing in order to meet the ever-
increasing threats placed upon the industry in general and
globally. The focus here and current mitigations not only
allows the Group to protect itself in the best ways possible,
but also offers this capability directly to customers, helping
them with their own internal risk.
The Group maintains membership of some of the highest
levels of security accreditation as part of the service it offers its
customers. In the past year it has also implemented a revised
Cyber Security Group Committee to further review and assist
internal and external threats, risk, capability and strategy.
Financial Control
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 well protected against
significant customer risk due to the Group’s diverse and
broad ranging customer base, however loss of a major
contract remains a principal risk, as discussed below.
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 maintain Sales Management
Plans, hold regular customer meetings by account teams,
aligns service delivery to sales in order to support both
the Group’s and its customers strategies. The Group also
operates a meaningful and accurate customer satisfaction
methodology with feedback loop.
Capability
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 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 throughout the growth strategies
have greatly strengthened the Group’s positioning within
the marketplace, allowing more competitive pricing (scale)
and additional service offerings (capability).
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 continually strives 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.
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FY24 has been focused on bringing our business together as one team following the acquisitions
of FY22 and FY23. We have made massive strides forward in this and I’m delighted to say that
all our new colleagues have now been aligned into our respective business units and we are now
operating as a combined business supporting all our customers to deliver a great service for
them and their customers.
We undertook a further review of our leadership operating
structures in September 2023, resulting in a number of
changes to our Operating Board structure and roles to set
us up for the future. Further consolidating our teams brings
massive benefits as we work on continuing to further enhance
our collaboration across our business units and teams.
We have specifically been focused over the last 12 months
on creating a consistent data centre operating model,
replicated across all our data centres sites and in also
evolving and refining our customer support teams to
ensure we deliver a seamless customer experience for all
our valued customers. Our service delivery teams have,
likewise, been aligned to our sales team, meaning we can
work hand in hand across both service support and account
management to best meet our customers’ needs.
We have also onboarded a small number of new colleagues
from existing service providers as we bring additional
services in house, enabling this expertise to be delivered for
our customers internally and shared across the
wider business.
We are committed to the continuation of our hybrid working
model, ensuring we give our colleagues the much-needed
opportunity for collaboration opportunities and the ability
for focused work time, combining the best of both working
practices. Following the move of the Harrogate Data Centre
to our leading-edge West Yorkshire facility, we have also
invested in an exciting new office environment for our
Harrogate based colleagues, which will open in FY25.
It has been another very busy year for all our colleagues as
we have broken the back of our integration activity, which
now gives us the opportunity to further focus on growing
the business in the year ahead. I’d like to thank all our
colleagues for their significant efforts and support over the
last year, whether this be on integration or business as usual
activities. We would not have delivered this strong set of
results without their support, knowledge and contributions.
Listening to our colleagues
In FY20 we launched an ongoing listening programme to
ensure we had the opportunity to hear and understand
the views of each and every colleague in our business. As
a result of this programme, we have already introduced a
number of new people programmes and initiatives over
the last four years and we will continue to evolve these in
tandem with feedback from our teams.
We are committed to continuing to listen to the views of our
colleagues and launched our latest colleague survey, running
across all colleagues and business heritages in July 2023.
I am delighted to be able to say that over the last two years
we have increased levels of engagement to 73%, which
given the acquisition and integration challenges,
is an impressive outcome, significantly ahead of
the external benchmark.
We are implementing group wide and divisional specific
responses to the feedback and have introduced and will
continue to introduce a number of initiatives in response to
the feedback from our colleagues.
Some of these include:
•
The launch of LinkedIn learning across the business to
support the performance and personal development of
our colleagues, which has seen an impressive uptake;
•
A revision to our online performance and development
and recognition systems which form part of
Peoplecentric, our HR system, enabling colleagues
with easy one-stop access to their objective and
development actions, as well as the ability to quickly
recognise other colleagues more easily;
•
Continued access to hybrid working, giving colleagues
additional flexibility to work where they will best
achieve their daily activities;
•
A new externally hosted whistleblowing helpline to
give our colleagues enhanced confidence in raising and
reporting any areas of concern confidentially;
•
Continued access to all our internal communications,
keeping our teams connected and engaged with
monthly all colleague calls and our weekly recognition
shout outs;
•
The launch of our Brand champions who are committed
to promoting and supporting Redcentric;
Corporate Responsibility
Our Colleagues
Listening to our colleagues (continued)
•
Launch of our new Diversity and Inclusion forum to
ensure equal opportunities for all across our business
and ensure an inclusive working environment; and
•
Investment in upgrades to our office spaces
and environment.
Wellbeing
The physical, emotional and financial wellbeing of our
colleagues continues to be a key priority for us, and this has
been recognised within the survey feedback and we have a
dedicated programme of activity to ensure we continue to
support the wellbeing of all colleagues, across a number of
differing needs.
Physical Wellbeing
All colleagues have access to our private medical and
permanent health insurance schemes to give peace of mind
and security, with the knowledge help is there if required. In
addition, we offer a scheme supporting discounts on dental
care, physiotherapy and a range of other health discounts
for our colleagues. We have run a number of education
programmes over the last 12 months including online fitness
and eating healthily, men’s mental and physical health and
the menopause.
Emotional Wellbeing
We have continued and will continue to run our time to talk
programme which comprises of a number of access routes
for mental health support, led by a number of qualified
mental health first aiders. We have also trained a number of
additional colleagues as Mental Health First Aiders. Time
to talk gives access to our mental health first aider team,
access to our employee assistance scheme and supports
a number of mental health initiatives including access to
workshops including, personal resilience, managing stress,
help for sleep, mindfulness and many more.
Financial Wellbeing
Financial wellbeing is becoming increasing important to
our colleagues and we have continued to offer a number
of schemes to help our colleagues make their money go
further including:
•
Continued access to our Perks scheme which
gives access to a large number of online and high
street discounts;
•
Continued access to a Tastecard scheme, with
discounts on a large number of food chains, retailers
and theme parks;
•
Continued access to discounted programme of
mortgage advice to give colleagues better access to
financial advice; and
•
Continued access to an electric car scheme partnership
delivered via a salary sacrifice programme which
enables colleagues to save money on car leases whilst
also ensuring we continue to support the environment.
We will continue to look for additional options to support
our colleagues over the next 12 months.
All our colleagues also have access to our Employee
Assistance programme which offers help and support
across a number of key areas, including external counselling
support and basic financial advice.
Equality and diversity
Creating a diverse, inclusive and great place for our
colleagues to work is top of the Group’s people agenda.
The Group actively supports the principle of equal
opportunities in employment and is committed to ensuring
that individuals are treated fairly, with respect and are
valued. The Group 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 the Group 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.
We have now established a new diversity, equality and
inclusion forum and created a new diversity and inclusion
policy aimed to ensure we support these principles across
the business. Our recruitment processes have been
reviewed to ensure we recruit from a diverse workforce, and
we will be rolling out diversity and inclusion training across
the business in the next financial year.
Corporate Responsibility
Our Colleagues (continued)
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Gender diversity
The average number of employees employed during the year was as follows:
Male
Female
Total
Executive Directors
2
0
2
Ops Board
5
2
7
Senior managers
28
6
34
Other employees
500
116
616
Total average headcount
535
124
659
Whilst the gender profile of the company is in line with the industry, we are doing a number of things to address the
male/female imbalance as outlined in the section below.
Gender pay report
Our gender pay report at the snapshot date of 5 April
2023 showed that the overall difference between men
and women’s earnings at the Group was 25% (mean), which
is a slight increase on the previous year’s report of 22%.
This increase has been driven by the acquisition of the
Sungard businesses and is something we are committed
to improving.
Our gender pay gap continues to be driven by an imbalance
of male and female colleagues at different levels across the
organisation. The majority of females in our business continue
to sit within the two lowest pay quartiles of the business
which has a significant impact on our gender pay gap. We
have however, seen a slight increase in the % of females in
the top quartile of our business and this is something we are
committed to continue making progress on.
We are continuing to focus on initiatives to improve our
gender pay gap including:
•
Gender balanced interview panels and shortlists;
•
An increase in female hires to the Company;
•
Our Diversity and Inclusion forum;
•
Family flexible policies and working patterns;
•
Launch of our sales apprenticeship programme; and
•
Working closely with local schools and colleges.
Apprenticeship programmes
We have continued to support apprenticeship programmes
across the business in FY24 supporting the development
of our future talent pipeline and building the skills and
capabilities of our colleagues. We currently have 16
apprentices in the business, representing a mix of both
new and existing colleagues. The majority of our
apprentices over the last year are in sales, finance and
business development.
We are also continuing to work closely with local schools,
colleges and apprenticeship providers to attract local
talent into our business. We are still delivering our work
experience programme giving local students access
to and an understanding of our business and the
work environment.
Share scheme
The Group is a strong believer that having an effective
employee share ownership programme helps to align
colleagues’ interests with those of our shareholders
and plays a key part in the attraction and retention of
colleagues. In November 2014 the Group launched its
SAYE option plan where colleagues contribute a monthly
amount of up to £500 across all schemes which is saved
over three years to buy shares in the Company at a pre-
determined price.
Corporate Responsibility
Our Colleagues (continued)
The most recent grant was made on the 2 October 2023, with the Company granting options over a total of 352,068
ordinary shares. These options are available for exercise from 31 October 2026, with an exercise price of 101.33p.
As at 31 March 2024, the following options were outstanding under the plan:
Grant date
Exercise price
(p)
Opening
options
Options
granted
Options
exercised
Options
lapsed/
cancelled
Options
remaining
02-Sept-2020
119.60p
143,577
-
(96,019)
(13,545)
34,013
27-Aug-2021
108.33p
93,238
-
-
(1,826)
91,412
23-Dec-2021
99.87p
496,873
-
-
(62,718)
434,155
26-Aug-2022
96.07p
474,522
-
-
(98,549)
375,973
02-Oct-2023
101.33p
-
352,068
-
(12,446)
339,622
Total
n/a
1,208,210
352,068
(96,019)
(189,084)
1,275,175
Charitable activity
We continue to be committed to supporting local charities
and communities through FY24 and it is really pleasing to
see our colleagues continuing and further embracing our
support for charities and local/national fund raising.
We have an ongoing partnership with Generation, a national
charity which supports underprivileged young adults into
the workplace.
From a charity perspective we have maintained our support
and commitment to a number of key charities through
colleague fundraising initiatives including:
•
Mission Christmas
•
Macmillan coffee morning
•
Children’s Heart Surgery Fund
•
Charity Walks
•
Yorkshire Three Peaks raising over £13,000 for
Children’s Heart Surgery Fund
We continue to support local volunteering activity and
fundraising by encouraging all colleagues to use their
day’s paid volunteering leave to support causes close to
their heart and we have seen a higher than ever uptake
of volunteering days. In addition, colleagues are keen
to support their own charities via a number of personal
fundraising activities and we have seen an increase in this
over the last 12 months.
We are also continuing to evolve our national corporate
social responsibility (“CSR”) strategy to support our key
customers in their local areas and are proud to be doing so.
Health and safety
The Group 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. There was
one RIDDOR (Reporting of Injuries, Diseases and Dangerous
Occurrences Regulations) accident reported during the year.
All our offices and sites have been assessed through the
course of the year and we are confident all sites comply
with all health and safety requirements. We have introduced
new lone working technology with an external partner,
SoloProtect to safeguard any lone workers and this has
been rolled out across the Company. Additional training
has been made available for our data centre and facilities
colleagues to support their ability to operate in a safe and
compliant manner.
Corporate Responsibility
Our Colleagues (continued)
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Sustainability Reporting
Within the Group, we recognise the importance of addressing the potential risks and opportunities presented by climate
change. We are committed to being responsible and sustainable in our operations, as an IT Managed Services company.
We are captured under The Companies (Strategic Report) (Climate-related Financial Disclosure) Regulations 2022. Therefore,
we have produced a climate related financial disclosure and aligned it with the Task Force on Climate-related Financial
Disclosures (TCFD). It is important to us to disclose on the four TCFD recommendations Pillars: Governance, Strategy, Risk
Management and Metrics and Targets and the 11 recommendations, to communicate our climate change management
to our external stakeholders. This is the first financial year that we have been legally required to produce climate related
financial discloses. In the last financial year, we produced a voluntary TCFD report. Also, we disclose our energy usage and
carbon emissions in a report following the Streamlined Energy & Carbon Reporting (SECR) regulation, thereby abiding by
the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. Further,
our Net Zero target and strategy enable us to align with the UK’s 2050 net zero targets, supporting our monitoring and
managing of our emissions across the Group.
The TCFD Framework
Climate change presents noteworthy trials for businesses, compelling them to adopt measures that mitigate risks and adapt
to the existing changes. By doing so, companies can cultivate operations that are both sustainable and resilient. The Task
Force on Climate-related Financial Disclosures (TCFD) was instituted by the Financial Stability Board (FSB) in 2015 with the
purpose of formulating a series of recommendations for companies to divulge climate-related risks and opportunities.
The TCFD has gained support from a wide array of organisations, including the G20, the International Monetary Fund (IMF),
and the World Bank. An increasing number of companies are now embracing the practice of disclosing climate-related
information in accordance with the TCFD framework. This framework is designed to aid companies in comprehending and
managing climate-related risks and opportunities. It facilitates investors and other stakeholders in grasping the financial
impacts of climate change and represents a significant stride towards tackling this issue.
The TCFD framework encompasses 11 recommendations that are categorised into four key themes: Governance, Strategy,
Risk Management and Metrics and Targets. By adhering to these recommendations, the Group can identify, evaluate, and
address climate-related risks and opportunities that impact our operations.
About us
The Group is a provider of IT Managed Services. We deliver highly available Cloud, Communications, Network and Cyber
Security solutions that help public and private sector organisations succeed. Founded in 1997, we have fast and secure data
centres in 10 locations around the UK.
Our Vision
•
A trusted cloud and communications transformation partner, underpinned by strong networking and security services.
Our Mission
•
We deliver agile, available and assured solutions that help organisations succeed.
Our Values
•
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.
Proactive
We think and act quickly
Inspired
We create excitement
through innovation
Trusted
We do what we say
we will
Collaborative
We work together to
deliver a common goal
Transparent
We are open, honest
and fair
Sustainability Reporting (continued)
Governance
The Group remains committed to a rigorous and reliable approach to identifying, monitoring and managing risk across all
aspects of our business. Our consistent risk management approach is grounded in our core values and supports our overall
business strategies, to ensure their success. The below table shows Redcentric’s governance structure.
The Board of Directors
Details of the Board of Directors and their experience can be found at pages 60-61.
The Board is responsible for the Group’s response to climate change. They ensure that appropriate climate management
practices are integrated into our future business operations and financial strategy. The Board provides oversight on climate-
related risks and opportunities and annually evaluates progress in this area. The Board are supported by our third-party ESG
specialists, Inspired Energy, who provide expertise on climate change to support this process.
The Board has the ultimate responsibility for our response to climate change, with oversight on climate-related risks and
opportunities, which is bi-annually reviewed at Board meetings at a minimum. This is led by our Chief Executive Officer
(“CEO”), Peter Brotherton, and Chief Finance Officer (“CFO”), David Senior, who hold responsibility for overseeing
sustainability and regularly communicating our priorities with both the Board and key stakeholders. During FY24 ESG criteria
were introduced in the remuneration structure of Operations Board to ensure ESG strategy is aligned with individual and
management objectives. The Board is supported by the Committee, which aims to update the Board quarterly through
the Managing Director of Connectivity and Communications (Nick Helman), who is a part of the Committee, enabling the
Board to monitor and oversee progress against goals and targets associated with climate change throughout the year.
These updates, including the updated climate risk register, enable the Board to consider climate-related issues that the
Committee has identified as relevant to Redcentric during the review of Redcentric’s business strategy and major action
plans. Inspired Energy provided training in March 2024 on climate change and the emerging vital themes, ensuring the
Committee can identify and monitor changes as they arise and remain competitive within our field. This training has been
shared with the Board as part of their climate risk register sign-off to ensure they understand the context of the risks with
up-to-date information.
The Committee was established in FY23, which has been delegated responsibility for reviewing and monitoring
sustainability performance by the Board. The Committee has also delegated responsibility for identifying, assessing and
managing climate-related risks and opportunities which is conducted annually. The Committee hosted three meetings in
FY24. Attendance was made up of our members, 18 senior managers and Directors of the Group, covering key departments
of our business. In the most recent Committee meeting (14 March 2024) Inspired Energy supported us with our annual
climate scenario analysis, attended by one Board member and the wider Sustainability Committee. This resulted in an
updated climate risk register, which ties in with the overall Redcentric risk register and assessment process, however, it is a
separate document due to the nature and timeframes considered in the climate risk register. We will review the possibility of
integrating the two risk registers in FY25.
Peter Brotherton
Chief Executive
Officer
Katie Collins
Human Resources
Director
Nick Helman
Managing Director –
Connectivity and
Communications
Sustainability
Committee (CSD is
executive sponsor)
David Senior
Chief Financial
Officer
Kieran Brady
Group Sales and
Marketing Director
Paul Marding
Chief Technology
Officer
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Sustainability Reporting (continued)
Risk Management
In our second year of following the TCFD recommendations (FY23 being voluntary adoption), we have continued to follow a
tiered hierarchy for risk management, to ensure climate risks and opportunities are integrated seamlessly into our overall risk
management. Each risk and opportunity are allocated a risk owner to oversee during the year, and feedback is provided to
the Committee during annual reviews, to ensure ownership is taken by the most appropriate team and the risk is managed
as effectively as possible. Consideration of integrating our climate risk register into the corporate risk register will be a
priority in FY25 following the climate risk registers introduction of the central register format and risk levels at the beginning
of the next financial year (FY25).
We are confident in our ability to respond and adapt to climate-related risks, whilst appreciating the size of impact climate-
related risks will have on businesses in the UK in the coming years. To keep on top of this we have a dynamic, detailed risk
management framework that enables us to consider emerging climate-related risks with a business focus. The following
steps guide our climate risk management, which has been created in line with TCFD best practice guidance.
Identify
Our third-party ESG specialists provided an updated climate scenario analysis in FY24. Subsequently, we identified
changes in the vulnerabilities in our sites, which we plan to conduct annually, to monitor any changes in vulnerabilities and
opportunities, so we can act. In this financial year’s assessment, we identified three material physical risks, one material
transition risk and three opportunities with varying impacts across our 10 sites. This included our key suppliers’ 22 sites
within climate scenario analysis, with 22 of our suppliers vulnerable to climate-related risks and opportunities assessed to
consider the impact of climate across our supply chain.
Assess
Within our annual physical and transition climate risk management workshops conducted with our third-party ESG
specialists, Inspired Energy, in March 2024 (the transition workshop fell just outside the financial year April 2024), we
discussed the impact of each risk and opportunity on the business across three scenarios (<2°C, 2-3°C and >3°C) and three
timeframes (short (2023-2027), medium (2028-2037) and long-term (2038-2052)), analysing how each risk and opportunity
may affect Redcentric’s operations, especially sites which are particularly vulnerable. Once discussing each risk and
opportunity, an individual magnitude and likelihood score was assigned to each climate-related risk and opportunity
(see Tables 7-9) based on the expertise shared by our ESG specialists.
Appraise
Following the initial scoring, we discussed all mitigation measures that took place, to reduce the impact of the risk and take
advantage of the opportunities. The mitigation identification is supplemented by a broader internal stakeholder review
conducted by our ESG specialists of Redcentric’s risks and mitigations to supplement the climate management system
beyond the direct risk owners in the Sustainability Committee.
Considering all mitigation and adaptation measures in place, the Group reassessed the magnitude and likelihood of the risks
and opportunities based on the true vulnerabilities, giving a final residual risk score which falls under risk levels of very low,
low, medium, high and very high (classification of the risks can be found within Tables 4,5 and 6).
Following the climate risk management workshops, we updated our climate risk management framework that feeds into our
business’s existing risk management process, to ensure that our operations remain resilient to climate change. For the next
climate-related financial disclosure report, we intend to perform detailed financial modelling of the climate-related risks with
specific Redcentric-focused estimates of the size of financial impact beyond the consideration in Tables 7-9.
Address
The risks and opportunities that were deemed material were assessed, and additional mitigation control measures were
introduced to manage opportunities and minimise the risks. These actions will be considered at the next annual risk meeting
where progress will be reported. The overall business represented by the Committee is responsible for managing the scope
1, 2 and 3 reductions in line with our net zero strategy. As identified in our physical and transition risks, management of our
scope 1 and 2 emissions is a key approach to prevent the most serious impacts of climate change.
The final result of the four-part risk management system is an updated risk register, for which the Committee
holds responsibility.
Sustainability Reporting (continued)
Strategy
Climate Change has been categorised as a principal risk to Redcentric’s overall business since August 2021, where
the Group’s overarching Risk Committee (material risks are a medium risk or higher) rated climate change as material
to the business. Climate change has already impacted our operations and is deemed a material risk. Managing and
mitigating these issues through a clear strategy ensures that our growth plan, customer delivery, and shareholders’
returns are not affected.
Annually, our compliance team refine our risk matrix, to identify any emerging risks or opportunities for the business
adequately. This is conducted through climate scenario analysis, where all Redcentric’s sites (10) and key supplier sites
(22) are considered over three warming pathways and time horizons. Through this analysis, we can adapt and mitigate the
risks climate change poses for our operations. This financial year, we have included key suppliers in our climate scenario
analysis, to consider the whole supply chain impact and indirect risks and opportunities that Redcentric may experience due
to climate change. Climate-related risks and opportunities which have been considered material (risk rating of a medium or
higher impact) are outlined in Tables 7, 8 and 9. This information feeds directly into our operations and financial planning.
Climate Scenarios
The three warming scenarios used in our analysis are based on the predicted increase in global average temperatures by
2100, compared to the pre-industrial era. Our climate modelling was conducted to align with the UK net zero target by
2050. Each scenario highlights significant points where parts of the climate cannot return to normal, known as a tipping
point. Tipping points are elements of the Earth’s system that have the potential to change abruptly in response to warming.
A small change marks a point of no return and permanently alters our climate.
Climate scenarios are future projections of our climate, considered under differing potential warming pathways. Climate
scenarios are a culmination of several climate models and internationally established frameworks. These include the
International Energy Agency’s World Energy Models (“WEM”), the Shared Socioeconomic Pathways (“SSPs”): Climate
Natural Catastrophe Damage Model, the Coordinated Regional Climate Downscaling Experiment (CORDEX) regional
climate forecasts, and Integrated Assessment Models (“IAM”). While these models offer detailed insights into potential
futures, their accuracy is not guaranteed. Discrepancies between model predictions and real-world observations are
common when evaluating our climate, potential exaggerations or underestimations of climate variables may occur.
Table 1: A table to show the three warming pathway scenarios.
Scenario Warming Pathways
Below 2oC (“Proactive”) Scenario:
Organisations adhere to a coordinated and orderly transition to a low-carbon economy, aligning closely with the Paris
Agreement and Science Based Targets Initiative (1.5°C), for an orderly and coordinated transition to a low-carbon economy.
Under the proactive scenario, Redcentric will likely be exposed to more regulatory and consumer demands, with the
opportunity to shift operations further towards lower-emission and energy-efficient business operations to meet market needs.
Between 2-3oC (“Reactive”) Scenario:
Policies and legislation are introduced with a staggered effect, with inconsistent levels of action being taken that align
with current forecasts.
Redcentric may experience the effects of climate tipping points and the impacts of severe physical risks across several sites.
Above 3oC (“Inactive”) Scenario:
Minimal climate action is taken, and emissions go unchecked, resulting in a worst-case climate scenario.
The inactive scenario appears to be the most impactful on Redcentric’s business model, forcing us to adapt to physical
climate risks, likely without green financing opportunities at a significant cost. In addition, it may be too late to benefit from
the opportunities we highlighted in Table 8 in this scenario.
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Sustainability Reporting (continued)
Strategy (continued)
Climate Scenarios (continued)
Table 2: A table to show the three-time horizons.
Time Horizons
Short-term (2023-2027):
The greatest changes would be in the proactive scenario over this time period, in the next few years. Although, we do not have
any material risks in this time horizon. Therefore, there is no major potential impact on Redcentric in the short-term scenario.
Medium-term (2028-2037):
This scenario aligns with our near-term scope 1, 2 and 3 targets outlined in the Metrics and Targets section. In this period,
physical impacts would be experienced, and in the reactive scenarios, policies will tighten.
Long-term (2038-2052):
This scenario is consistent with our net zero target and the UK Government’s net zero pledge by 2050. The greatest physical
impacts would be experienced in this period in the inactive scenario. This period is where most of our material physical risks
are likely to be experienced.
Redcentric aims to conduct climate scenario analysis on our sites every financial year, to update our knowledge and
categorisation of our physical and transition risks. This financial year we conducted our physical climate risk workshop with
the Committee in March 2024. However, due to staff constraints, the transition climate risk workshop was not conducted
until April 2024, which falls into the following financial year.
During these sessions using last year’s data alongside updated site data and 22 of our key supplier sites, we discussed and
rated our risks and opportunities, providing a risk rating for each based on the likelihood and magnitude of impact with
our 5x5 RAG (red, amber and green) rating system (Tables 3, 4 and 5) to provide a potential impact figure. The Committee
discussed the current mitigation measures and reassessed the likelihood and magnitude of each climate-related risk and
opportunity to consider a more accurate risk score. The scores identified post-mitigation measures which are disclosed with
each risk and opportunity. Risks that were considered material (risk rating of a medium or higher impact) are outlined in
Tables 6, 7 and 8. We will endeavour to undergo this analysis annually.
Table 3: A table to show our likelihood rating process.
Rating
Likelihood Rating Description
5 – Very High
It is almost certain that the risk will occur, as there are no controls in place, or it has
happened in the past.
4 – High
It is highly possible that the risk will occur, as there is limited or no mitigation in place.
3 – Medium
It is possible that the risk will occur, as only some mitigation is in place.
2 – Low
It is unlikely that the risk will manifest, as good mitigation levels are in place and tested
(where possible).
1 – Very Low
It is highly improbable that the risk will occur, as the controls in place are considered
excellent.
Sustainability Reporting (continued)
Strategy (continued)
Climate Scenarios (continued)
Table 4: A table to show the magnitude rating process.
Risk Value
Operational
Financial
Legal
Compliance
Reputational
damage
1 – Very Low
No impact.
No financial
impact.
None.
None.
None.
2 – Low
Minor impact on
operations.
Minor
financial
impact.
None.
None.
Staff aware, loss
of morale, single
customer aware.
3 – Medium
Some impact on
operational functions
that may be visible to staff
or customers.
Some
financial
loss.
Breach of laws,
regulations or
contracts, leading
to litigation or
prosecution and
fines.
Potential breach of
some compliance
obligations
or major non-
conformance.
Multiple
customers and
businesses
aware, local
media coverage.
4 – High
Operations unable to
function adequately
to meet some internal
or customer service
requirements.
Significant
financial
loss.
Breach of laws,
regulations or
contracts, leading
to litigation or
prosecution and
significant fines.
Breach of
compliance
obligations leading
to potential loss of
certification.
Widespread
local or limited
national media
coverage.
5 – Very High
Business threatened
due to the inability to
support staff or customers
at a wholesale level,
breaches of Service Level
Agreements (SLAs), huge
levels of critical service
downtime etc.
Major
financial
losses/
business
threatened
Breach of laws or
regulations leading
to prosecution and
imprisonment.
Loss of one or
more certified
obligations or
frameworks leading
to potential loss
of large revenue
streams and/or
fines.
Widespread
national media
coverage.
Table 5: A table to show the risk rating scale.
Rating
Measure
Rating Description
Low
1 - 24
No further activity necessary.
The low level of risk does not justify additional controls being put in
place.
Medium
25 - 48
Management will apply their judgement as to whether the risks are
acceptable.
Controls will be applied as appropriate.
High
49 - 75
Management will select appropriate controls.
Tables 6 to 8 show the climate-related risks and opportunities, which were rated medium or higher and deemed material
to Redcentric’s business operations, based on the ratings described in Tables 3, 4 and 5. The transition risks impact the
overall business, whilst the physical (divided by acute and chronic) risks impact specific locations (Table 7). Six physical risks,
thirteen transition risks and five opportunities were assessed during this process (of a medium risk or higher to Redcentric).
One transition risk, three physical risks and three opportunities were deemed material.
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Sustainability Reporting (continued)
Strategy (continued)
Climate Scenarios (continued)
Table 6: A table showing the transition risks (risks related to the transition to a low-carbon economy) which may impact
Redcentric over time.
Climate-related Risk
Potential Impact Area
Risk Mitigation
1.1 Legal – Reporting
requirements will
increase due to
climate change
Scenario: <2°C
and 2-3°C
Timeframe:
Short – Medium
term (2023-2037)
Risk Level: Medium
Leading up to the UK net zero target of 2050, it is
likely that stricter regulations (such as SECR, Energy
Saving Opportunity Scheme (ESOS), etc.) are going
to be required of businesses, to monitor and reduce
energy usage and emissions. Compliance costs
including consultancy fees and internal resources
will rise with increased regulation. Emission reporting
may require verification, accelerating calculation
turnaround, with higher costs. Non-compliance
could lead to litigation and reputational damage.
While the Task Force on Nature-related Financial
Disclosures (TNFD) regulations are currently
voluntary, stakeholders may anticipate mandatory
implementation. In the EU, proposed legislation
aims to restrict misleading climate claims and
introduce a Carbon Border Adjustment Mechanism
(CBAM). Similar measures are under consideration
in the UK, potentially taking effect in 2026.
Financial impact area: Expenditure in directly
incurred costs.
Our ESG team will research opportunities
to reduce energy use from our data centres
and discuss any emerging regulations on
products and services.
However, due to the nature of our business
focusing more on providing services over
products, we do not anticipate this risk to
have a big impact.
We have worked with third-party ESG
specialists who keep us updated on any
new or proposed regulations from the
perspective of climate change.
Related Metrics: Scope 1, 2 and 3
emissions and Net Zero Strategy.
Table 7: A table showing the physical risks (related to the physical impacts of climate change) that may impact Redcentric
over time.
Climate-
related Risk
Potential Impact Area
Risk Mitigation
1.1 Physical Risk –
Acute – Severity
of flooding will
increase
Scenario: 2-3°C
and >3°C
Timeframe:
Medium – Long
Term (2028-2052)
Risk Level: Medium
A total of ten Redcentric sites were
considered under our climate scenario
analysis and seven sites (including
Cambridge, West Yorkshire and London West)
were classified as vulnerable to the impacts
of flooding. Possibility of short circuits which
can cause serious damage, fires or small-scale
explosions. The effects of water and moisture
can cause long-term damage, resulting in
insulation damage, corrosion, cable and
equipment failure. Damages could require
equipment to be replaced, leading to an
increase in capital spend. Reliance on local
electricity supply to power data centres could
lead to disruptions in operations. In addition,
fourteen of our key suppliers (64%) were
found to be vulnerable to flooding, showing
our risk across the business, which requires
us to consider our mitigations with this
information to ensure preparedness.
Financial impact area: Expenditure in
directly incurred costs.
We proactively monitor extreme weather events and
receive updates from the environmental agency,
which helps us act upon alerts and extreme weather
warnings. Annual BCDR (Business Continuity and
Disaster Recovery) Crisis Management Exercises
were held in February 2024. These exercises
considered flooding as the theoretical crisis event
and included all the teams into its scope.
Our staff can work from home if necessary. Some
of our sites have mitigation measures, to deal with
flooding events, or are situated on elevated ground,
thereby reducing the impact. We have ensured we
are comprehensively covered by insurance on the
sites most at risk from flooding. In the long-term,
we will ensure that drainage systems at our sites are
well maintained and serviced. To reduce the physical
effects of floods at these sites, adequate upkeep
of drainage networks will be conducted along with
continuous robust flood risk assessments.
Related Metrics: Scope 1, 2 and 3 emissions and
Net Zero Strategy.
Sustainability Reporting (continued)
Strategy (continued)
Climate Scenarios (continued)
Table 7 continued: A table showing the physical risks (related to the physical impacts of climate change) that may impact
Redcentric over time.
Climate-related Risk
Potential Impact Area
Risk Mitigation
1.2 Physical Risk –
Acute – Extreme
Heat
Scenario: 2-3°C
and >3°C
Timeframe: Short-
Long term
(2023-2052)
Risk Level: Medium
All ten of our sites and 22 of our supplier’s
sites are vulnerable to the impacts of
extreme heat. Extreme heat can reduce staff
productivity and cause physical damage to
facilities, resulting in profit loss. Increased
demand for cooling, such as air-conditioning,
raises energy costs and emissions in sites
such as Shoreditch. Employees may seek
companies with cooling during heatwaves.
Construction materials may change
properties in extreme heat. Power disruptions
can harm customers, and data centres may
overload, leading to outages and data loss.
Financial impact area: Expenditure in directly
incurred costs.
Data centres must be cooled to operate under
their capacity, which is optimal. We are currently
on a programme of equipping our data centres
to deal with the increasing heatwaves over the
medium to long-term. This has and will continue
to require capital expenditure investment to
deliver, however two of our biggest sites, London
West and Woking, have seen this investment in
FY24. This enhanced cooling infrastructure will
see both reduced carbon emissions and reduced
operating costs during warmer periods.
Related Metrics: Scope 1 and 2 emissions and
Net Zero Strategy.
1.3 Physical Risk –
Chronic –
Rising Mean
Temperatures
Scenario: 2-3°C
and >3°C
Timeframe: Long –
Term (2038-2052)
Risk Level: Medium
All ten of our sites from Reading to West
Yorkshire are vulnerable to the impacts
of rising mean temperatures. Damage to
property and disruption to maintenance
services can incur financial losses. Costs
arise from installing and maintaining air
conditioning, to meet new building standards
for comfortable working temperatures.
Increased energy usage and cooling needs
escalate expenses. Heat-related illnesses
cause absenteeism, reducing productivity.
Globally, up to 2% of working hours are
lost annually, due to extreme temperatures,
impacting efficiency. Temperature fluctuations
can impair computing capacities, posing
potential revenue challenges for Redcentric.
This may be further impacted by supply chain
issues with difficulty in securing stock with all
22 of our suppliers being vulnerable to rising
mean temperatures.
Financial impact area: Expenditure in directly
incurred costs.
Data centres must be cooled to operate under
their capacity, which is optimal. We are currently
on a programme of equipping our data centres
to deal with the increasing heatwaves over the
medium to long-term. This has and will continue
to require capital expenditure investment to
deliver, however two of our biggest sites, London
West and Woking, have seen this investment in
FY24. This enhanced cooling infrastructure will
see both reduced carbon emissions and reduced
operating costs during warmer periods.
Outside of the data centres, our presence is
mainly limited to the office space in Harrogate
and York, which is comparatively small, and
impact expected to be minimal. A large
proportion of the workforce work remotely.
Geographically speaking whilst globally extreme
heat can cause workforce issues, it is not
expected that a 2-3 °C increase in the UK would
have a material impact on the workforce and its
productivity. Management of the impacts will
be conducted on a case-by-case basis that is
monitored where weather warnings are given,
and support provided for employees through
their managers as the first port of call.
Related Metrics: Scope 1 and 2 emissions and
Net Zero Strategy.
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Sustainability Reporting (continued)
Strategy (continued)
Climate Scenarios (continued)
Table 8: A table showing the climate opportunities which may impact Redcentric.
Climate-related
Opportunity
Potential Impact Area
Opportunity Management
1.1 Resource
Efficiency –
Use of energy-
efficient
technology
Scenario:
<2°C and
2-3°C
Timeframe: Short-
Medium term
(2023-2037)
Opportunity
Level: Medium
We have initiated our net zero journey, by collaborating
with third-party ESG specialists, to establish achievable
GHG targets, aligned with the UK’s 2050 net zero strategy.
We can deploy energy-efficient technology throughout
our operations. Although this technology may involve high
capital costs, it enhances process efficiencies, resulting
in reduced energy consumption and lower energy costs.
The resultant energy savings yield rapid payback periods,
generating net financial gains over the technology’s lifespan.
Investing in water and energy efficiency technology, can
bolster operational resilience, particularly in sites vulnerable
to flooding and water stress. Additional strategies such as
borehole implementation and natural cooling methods like
greenery-covered walls and roofs contribute to efficient water
usage and temperature regulation.
Financial impact area: Reduction in operating expenses
because of increased efficiency (e.g., energy costs).
We can position ourselves to be ready
for changing customer demands
as we are on our net zero journey.
Substituting current technology in data
centres would come at a cost to the
business. However, we are undergoing
measures to improve energy efficiency
by 40%. The replacement of inefficient
water chillers with gel cooling in the
London West site will be progressed
in FY25, significantly accelerating
consumption reduction.
Related Metrics: Scope 1 and 2
emissions and Net Zero Strategy.
1.2 Product and
Services – New low-
emission product
and service lines
Scenario:
<2°C and -3°C
Timeframe: Short
– Medium term
(2023-2037)
Opportunity Level:
Medium
Organisations that innovate and develop new low-
emission products and services, may improve their
competitive position and capitalise on shifting consumer
and producer preferences. Consumer goods and services
place greater emphasis on a product’s carbon footprint in
its marketing and labelling (e.g., travel, food, beverage
and consumer staples, mobility, printing, fashion, and
recycling services). Producer goods highlight the reduction
of emissions (e.g., adoption of energy-efficiency measures
along the supply chain).
Financial impact area: New revenue streams.
Our marketing teams host quarterly
events tailored to specific sectors,
engaging current and potential
customers to better understand their
needs. The takeaways from events are
communicated across the business.
This helps to have a fair understanding
of the changing market demands
and then to offer any changes to our
services accordingly.
Related Metrics: Scope 1.
1.3 Resilience –
The business is
adapted and
positioned to
deal with climate
change
Scenario:
<2°C and 2-3°C
Timeframe: Short-
Medium term
(2023-2037)
Opportunity Level:
Medium
The concept of climate resilience involves organisations
developing adaptive capacity to respond to climate
change to better manage the associated risks and seize
opportunities, including the ability to respond to transition
risks and physical risks. Opportunities related to resilience
may be especially relevant for organisations with long-
lived fixed assets or extensive supply or distribution
networks (those that depend critically on utility and
infrastructure networks or natural resources in their value
chain and those that may require longer-term financing
and investment).
Financial impact area: Expenses for developing an
adaptive strategy.
We have initiated our net zero journey,
by collaborating with third-party ESG
specialists, to establish achievable
carbon targets, aligned with the UK’s
2050 net zero strategy. We have hosted
workshops, to understand our risks and
how we can adopt mitigation measures
for physical and transition risks. We will
publish a TCFD report, to communicate
our efforts to stakeholders annually. We
created the Committee in FY23 and
established a net zero strategy with an
aim to validate near-term and long-
term targets with the Science Based
Target initiative (SBTi) in FY25.
Related Metrics: Scope 1, 2 and 3
emissions and Net Zero Strategy.
Sustainability Reporting (continued)
Strategy (continued)
Climate Scenarios (continued)
Our climate scenario analysis physical and transition risks workshops completed across March and April 2024 will result in
an updated risk register to reflect any changes of the vulnerabilities of our sites and business overall from climate change.
Within the risk register, we categorise the financial impact area to ensure that the risks are considered when undergoing
financial planning and relevant strategies. In addition, the risk owners set are relevant to the business area the risk or
opportunities will most likely impact, enabling their individual budgets to be informed by this knowledge. This is an example
of where we implement the TCFD principle of strong governance from the top down of our risk management, to assist us
with our everyday business as well as our annual reporting.
Overall, we feel that we are well prepared and resilient to the transition to a low carbon economy consistent with a 2°C
scenario, with only one material transition risk and three physical risks identified in the workshops. Our strong mitigation
measures established as a result of having analysed our risks in the previous financial year will have even greater oversight in
FY25 with the climate risk registers integration into the company wide register.
Metrics & Targets
Our goal for the world is to be net zero by FY50. Net zero requires a concerted effort over time to eliminate GHG emissions,
with compensatory measures as a final step for any emissions that can’t be reduced. The SBTi net-zero standard requires
a 90% reduction in emissions prior to any residual offsets, up to 10% of the baseline, being offset using carbon removal
offsets. This is supported by our roadmap to meet our target, with interim targets and a strategy to ensure we meet these
reductions:
1.
Net-zero (at least 90% absolute reduction) Scope 1, 2 and 3 emissions by FY50, from a FY22 base year.
2.
86% of suppliers (by spend) covering Scope 3 Category 1 and Category 2 will have science-based targets by FY28.
3.
42% absolute reduction in Scope 1 and 2 emissions by FY30, from a FY22 base year.
Our Scope 1 and 2 emissions have a separate target to our scope 3 due to the complexity of collating scope 3 data, the
breadth it covers and the time it will take to reduce. To achieve our targets for scope 1 and 2 we would need an annual
average reduction of 5% per year and for Scope 3 of 4% per year (this was calculated as part of the Net Zero Strategy). We
currently only disclose on Transportation (Category 6) of Scope 3, and our Scope 3 emissions are under 40% of our total
emissions. Our full relevant Scope 3 emissions across categories 1-15 will be reported next financial year (FY25).
We summarise our energy usage, associated emissions, energy efficiency actions and energy performance for the Group,
under the government policy Streamlined Energy and Carbon Reporting (“SECR”), as implemented by the Companies
(Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018. We do not currently
have wider environmental targets. For example, we currently do not have targets for waste and water. Although, we aim to
reduce our overall negative environmental impact, they are not currently material to the business.
We define the emissions discussed as Scope 1 as our direct emissions from sources we own; Scope 2 our indirect emissions
from our purchased utilities and Scope 3 all other emissions resulting from our activities. The management of scopes 1 and 2
will enable us to manage all risks in Tables 6 and 7 whilst enabling us to take advantage of most opportunities in Table 8.
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Sustainability Reporting (continued)
Metrics & Targets (continued)
The data below (including the Scope 1, 2 and 3 consumption and CO2e emissions data) was developed and calculated using
the GHG Protocol –A Corporate Accounting and Reporting Standard, Greenhouse Gas Protocol –Scope 2 Guidance and
Environmental Reporting Guidelines: Including Streamlined Energy and Carbon Reporting Guidance. We are currently only
disclosing under Category 7 (employee commuting) as required by SECR. These calculations were conducted by, but not
assured by, Inspired Energy.
Table 9: A table to show the Group’s total energy consumption (kWh) for SECR.
Utility and Scope
FY24 Consumption (kWh)
FY22* Consumption (kWh)
Scope 1 Total
322,523
90,796
Gaseous and other fuels (Scope 1)
270,212
90,796
Transportation (Scope 1)
52,311
N/a**
Scope 2 Total
89,569,095
18,916,332
Grid-Supplied Electricity (Scope 2)
89,569,095
18,916,332
Scope 3 Total
351,866
218,058
Transportation (Scope 3)
351,866
218,058
Total
90,243,484
19,225,186
*FY22 is the base year.
**The base year of FY22 Consumption (kWh) did not have Scope 1 transport, as company cars were introduced after this baseline financial year.
We are currently off target from our original net zero target reductions against our base year of FY22 due to significant
changes to our business scale and composition following the acquisitions across FY22 and FY23, particularly with respect
to 4D Data Centres and Sungard, which have given us a significantly larger data centre portfolio. A revision of our metrics
and targets will be conducted with the support of our third-party ESG consultants next financial year (FY25) to ensure they
reflect the Group’s current scale.
Redcentric’s Scope 1 direct and Scope 3 indirect emissions (combustion of natural gas and transportation fuels) for this
reporting year are 129.29 tCO2e, resulting from the direct combustion of 674,389 kWh of fuel. This represents a carbon
reduction of 53.88% from last year ending March 2023 (Table 10). We use our energy consumption as a KPI in relation to our
climate risks, for example, our risk 1.2 of Extreme Heat, which will increase our scope 1 and 2 emissions.
Scope 2 indirect emissions (purchased electricity) for this reporting year are 18,547.46 tCO2e, resulting from the
consumption of 89,569,095 kWh of electricity purchased and consumed in day-to-day business operations. This represents
a carbon increase of 42.95% from FY23 (Table 10) reflecting 12 months of emissions from the Sungard and 4D Data Centre
sites (approx. 9 months in FY23).
Sustainability Reporting (continued)
Metrics & Targets (continued)
Table 10: A table to show the Group’s total emissions over the past three financial years (SECR data) (tCO2e).
Utility and Scope
FY24 Emissions
(tCO2e)
FY23 Emissions
(tCO2e) restated*
FY22 Emissions
(tCO2e)
% Change
between FY24
and FY22
Location-based
Location-based
Location-based
Scope 1 Total
48.27
231.20 (191.40*)
23.27
107.4%
Gaseous and other fuels
(Scope 1)
35.78
191.40
23.27
53.8%
Transportation (Scope 1)
12.49
39.80 (0.0*)
N/a**
N/a**
Scope 2 Total
18,547.46
12,974.92 (10,055.40*)
4,016.50
361.8%
Grid-Supplied Electricity
(Scope 2)
18,547.46
12,974.92 (10,055.40*)
4,016.50
361.8%
Scope 3 Total
81.02
49.14 (88.94*)
50.86
59.3%
Transportation (Scope 3)
81.02
49.14 (88.94*)
50.86
59.3%
Total
18,676.75
13,255.27 (10,335.74*)
4,090.63
356.6%
* FY23 figures have been restated due to data improvements and a widening of scope cover. The amount in brackets is the original FY23 figure.
See detail at end of Metrics and Targets section, page 50.
**The base year of FY22 Consumption (kWh) did not have Scope 1 broken down by transport, as company cars were introduced after this
financial year.
Fuels emissions (Scope 1) have decreased in FY24 by 79% compared to the previous reporting year. Redcentric reduced its
oil usage in FY24 as a result of reduced testing of generators at its Data Centres, which is the key driver to oil usage.
Electricity (Scope 2) has increased by 42.95% compared to the last reporting year. The highest electricity consumption was
observed at the London West and Woking sites. The key driver to increased Electricity usage year on year has been the full
year effect of the Sungard and 4D Data Centres acquisition, for which there are only 9 months of usage in the prior year.
As both acquisitions came with significant Data centre estates (including London West and Woking), they have resulted in
significant increase in electricity usage compared to FY23.
Transport emissions have increased in FY24 by 5.14% compared to the previous reporting year. The observed increase in
figures can be attributed to the cumulative effect of the acquisitions over the full year, as well as increased travel between
Redcentric’s larger data centre estate.
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49
Sustainability Reporting (continued)
Metrics & Targets (continued)
Table 11: The Group’s UK Location-based emissions intensity metric
Utility and Scope
FY24
FY23 restated*
% Change
All Scopes tCO2e per m2
0.6606
0.4689 (0.34*)
+40.9%
* FY23 intensity metric has been restated; see detail below. The amount in brackets is the original FY23 figure.
Following a detailed investigation of Redcentric’s portfolio, energy consumption and emissions, three additional sites have
been included in the FY23 calculations and the electricity usage have been restated accordingly.
In addition, increased data knowledge has meant FY23’s transport emissions (Scope 3) have been divided into Scope 1 and
Scope 3, providing a fairer representation of fuel usage. As a result, both Scope 1 and Scope 3 figures have been restated
for the previous period. Following a revision of the property portfolio area from 29,960m2 to 28,271m2 (primarily to exclude
car parking space previously included) the reported intensity metric has been restated for FY23.
Energy efficiency measures ongoing and undertaken throughout FY24 in line with the Group’s commitment to emission
reductions are outlined below.
Redcentric upgraded its cooling system at its London West site in this reporting year. Three existing chillers were replaced
with new ones with built-in dry air coolers. This upgrade has improved cooling efficiency, reduced energy consumption,
and lowered cooling costs. The new chillers will provide better cooling performance while using less energy, resulting in
a sustainable and cost-effective solution for Redcentric.
In this reporting year, Redcentric has procured an electric van. Choosing an electric van will lead to reduced emissions,
combating air pollution and climate change, and promoting sustainability by decreasing reliance on fossil fuels and
supporting renewable energy sources.
Measures prioritised for implementation in FY25 include the replacement of certain Uninterruptible Power Supply (UPS)
systems across our Data Centre estate. The Group plan to move two Megavolt Amps (MVA) of capacity to a more efficient
UPS system. In addition, we plan to consolidate data halls and associated power supply to reduce the number of UPSs in
service, thereby reducing overall power consumption and emissions.
Peter Brotherton
Chief Executive Officer
15 August 2024
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50
One of the advantages of
having worked with Redcentric
for some years is that we
have built up a great degree
of mutual trust. Redcentric
understands very clearly what it
is we’re trying to create here.
“
”
51
Introduction to Governance
The Board recognises the importance of high standards of corporate governance and integrity. It is committed to effective
corporate governance as the basis for delivering long-term value growth and for meeting shareholder expectations for
proper oversight and leadership of the business. I am responsible, as Chairman of the Board, for corporate governance
within the Group and the Board is committed to maintaining a strong governance and ethical structure that supports and
sustains its decision making. We believe that having good corporate governance is fundamental to pursue success for the
Group and its stakeholders. As such, the Company has adopted the Quoted Companies Alliance Code for Small & Mid-sized
Quoted Companies 2018 (the “Code”) as its benchmark for governance matters. At the date of this Report, we believe that
we are fully in compliance with the Code and were also fully compliant for the comparative period.
This section of the Report sets out how the Group has applied and complies with the principles of the QCA Code. We will
continue to review and update our approach and will update our Corporate Governance statement in the AIM Rule 26
section of the Group’s website.
Nick Bate
Chairman
15 August 2024
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’s Review on
pages 9-11.
Details of the key risks and challenges facing the Group and the high-level management of such are
outlined on pages 32-33. The Group continues to operate a tiered hierarchy for risk management,
with functional management of direct risks and consistent measures across all functions, and escalation
of significant value risks, along with principal corporate risks, 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 Group
also took the decision to appoint Oliver Scott, partner at Kestrel which is the Company’s largest
shareholder, as a Non-Executive Director (non-independent) of the Company in December 2023. 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 announcements 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 FY24, 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, Cavendish
Capital Markets Limited (“Cavendish”), 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. Cavendish, as broker, provides feedback directly to the Board from
shareholder meetings and events such as the investor days. An update on key shareholding changes
and any relevant investor sentiment is also provided in each Board report and Board meeting.
There is a 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 Group.
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. We are pleased to once again be able to welcome shareholders
in person to our AGM this year. 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 20 September 2024 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 2023 AGM.
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Governance
Governance
Helping organisations succeed with solutions that deliver
assured availability, smarter working and organisational agility.
Connectivity
Communication
Cloud
Cyber Security
Corporate Governance (continued)
Governance
Principle
Application
Principle 3
Take into account
wider stakeholder
and social
responsibilities
and their
implications for
long-term success
The Board recognises that the long-term success of the business relies on a number of key
stakeholders, as described on pages 28-30 and pages 34-37, including colleagues and customers
and that engagement with these key stakeholders is fundamental to helping the Board make the best
business decisions.
COLLEAGUES
Having the right colleagues in the right places continues to be critical to the success of the wider
business. Our commitment to ensuring we maintain a high-performance culture driven by the
engagement of our colleagues continued through FY24.
We ran our first combined Group engagement survey in June 2023, with an incredibly strong
engagement index of 73%, outperforming the general workforce engagement index of 65%. Whilst this
is clearly something to celebrate, we are also committed to a continued focus on the engagement of
our colleagues and improvement in their working environment and we are now delivering against both
Group and local action plans to maintain and improve our engagement levels.
FY23 was focused on the initial integration of our new colleagues, FY24 has been focused on the
creation of a “one Redcentric” team and culture.
In FY24 the Group has invested in improvements in our sites and physical working environment,
creating spaces which enhance and support our colleagues’ productivity. We have maintained our
approach to hybrid working which has given access to a broader and better national talent pool.
Our colleagues have embraced the access to LinkedIn Learning launched in FY23, and the Group
believes this solution is critical to both enabling our colleagues to improve their ways of working as
well as to develop wider skills for the future.
The physical, emotional and financial well-being of colleagues continued to be a key focus for the
Group in FY24 and we expect this to continue into FY25. We have developed and enhanced our
well-being strategy, maintaining multiple areas of support for colleagues, including access to an EAP
scheme, mental health support, access to health schemes and discounts, shopping discounts and
support and an ongoing programme of webinars across a variety of subjects.
We have continued to invest in the future of the business and ensure we support young people
into work through additional apprenticeship programmes, there are currently eighteen apprentices
in the Group.
In addition, we have seen a further increase in the volunteering days taken by our colleagues over
the last 12 months as we continue with our commitment to giving back to our communities.
As outlined on page 37, the Group has continued with its SAYE scheme, giving colleagues the
opportunity to become personally invested in the Company. In FY24, the Company granted options
over a total of 352,068 ordinary shares under this scheme.
CUSTOMERS
The Group’s extensive customer services, which are detailed on the Group’s website at
https://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 its proposition to customers through regular customer surveys, monthly and
quarterly service reviews and through its social media channels. In FY24 the Group introduced monthly
customer newsletters to keep customers abreast of new services from the Group, general industry
trends and to update on other areas of interest.
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 28-30 of this Report.
Corporate Governance (continued)
Governance
Principle
Application
Principle 4
Embed effective
risk management,
considering both
opportunities and
threats, throughout
the organisation
As set out in the Audit Committee Report on page 62, the Board is committed to ensuring that risk
management forms part of the way the Group works and is embedded in the business, coordinated by
the Chief Financial Officer, and with reporting on mitigating actions as well as the risks.
The key risks and challenges facing the Group and the high-level management of such are outlined on
pages 32-33. The Group continues to operate a tiered hierarchy for risk management, with functional
management of direct risks and consistent measures across all functions, and escalation of significant
value risks, along with principal corporate risks, 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 for each risk.
There continues to be close focus on emerging climate change related risks with the TCFD
recommendations being integrated into the Group’s risk management framework. These risks are
managed by the Group’s Sustainability Committee, which provides regular reports to the Board.
The Board has overall responsibility for the Group’s system of internal control and for reviewing its
effectiveness. The implementation and maintenance of the risk management and internal control
systems are the responsibility of the Operating Board. However, the internal control system is designed
to manage rather than eliminate risk and can therefore only provide reasonable and not absolute
assurance against material misstatement or loss. The Board considers that the internal controls in
place are appropriate for the size, complexity and risk profile of the Group. Enhancements continue to
be made to D365, the Group’s ERP system, overseen by the Group’s Chief Technology Officer, which
shall further strengthen the control environment. Work has continued throughout the year to improve
the control environment, both through the integration of the acquisitions completed in FY23 and
continuous development and implementation of 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 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;
4.
an organisational structure that has clear reporting lines and delegated authorities,
and which aligns with the divisional structure implemented 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 https://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.
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Governance
Governance
Corporate Governance (continued)
Governance
Principle
Application
Principle 5
Maintain the
Board as a well-
functioning,
balanced team led
by the chair
The composition of the Board is detailed on page 60-61.
The Board delegates specific responsibilities to the Board committees. The composition of the
committees and how they discharge their responsibilities can be found on page 60-61.
Part of the role of the Board’s Nomination Committee, chaired by Nick Bate, is to keep the composition
of the Board under review as the Group’s business evolves. Following Helena Feltham’s resignation
part way through FY24, the Company commenced a recruitment process for a new Non-Executive
Director and chair of the Remuneration Committee, which was led by Nick Bate, and culminated in
Michelle Senecal De Fonseca joining the Board as Non-Executive Director and Chair of the Company’s
Remuneration Committee. Michelle brought with her considerable knowledge of the technology,
telecoms, and cloud industries, as well as significant expertise in company remuneration policies
and processes. The appointment of Oliver Scott as a Non-Executive Director (non-independent)
during the year also further enhances the Group’s knowledge of the technology investment space
and public markets.
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 and has the appropriate
frameworks in place to ensure that this is the case. All Directors are encouraged and expected to use
their independent judgement and to challenge matters where required, both strategic and operational.
Whilst Oliver Scott is not considered independent as a result of being a partner of Kestrel, one of
Redcentric’s largest shareholders, the Board is satisfied that it has a suitable Board composition and
governing principals to ensure appropriate levels of independence.
The Executive Directors of the Company are employed on a full-time basis. Non-Executive Directors
are required to devote such time to the Group’s affairs as necessary to discharge their duties and
this may change from time to time. In addition to scheduled Board meetings, members are required
to attend other ad hoc Board meetings, committee meetings, the AGM and any other business or
general meetings as required. Board members are also required to consider all relevant papers before
each meeting and to devote additional time in respect of preparation and ad hoc matters which
may arise. Non-Executive Directors are required to obtain the agreement of the Chairman before
accepting additional commitments that may affect the time that they are able to devote to their role as
a Non-Executive Director. Further details of external appointments of the Board are included in their
biographies on page 60-61.
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 59.
The Board recently concluded an assessment of its performance, and more detail is provided below
against Principle 7.
Corporate Governance (continued)
Governance
Principle
Application
Principle 6
Ensure that
between them the
Directors have the
necessary up-to-
date experience,
skills and
capabilities
Directors’ details and biographies are on page 60-61. The Board considers that, with the appointment
of two new Non-Executive Directors during FY24, it has further developed its skills and experience,
enabling it to execute its duties and responsibilities effectively and appropriately given the nature and
size of the Group. Directors are responsible for ensuring their continuing professional development to
maintain their effective skills and knowledge.
As part of the Board performance assessment concluded in FY23, 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.
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. Alan Aubrey was the Company’s Senior Independent
Director during FY24 and provided a sounding board for the Chairman and also served as an
intermediary for the other Directors where required.
External advisers or consultants have been engaged by the Board in respect of its remuneration
policies and in relation to the appointment of Michelle Senecal De Fonseca to the Board.
On appointment to the Board, new Directors receive a tailored induction pack and introductions to
relevant personnel within the Group.
Principle 7
Evaluate Board
performance
based on clear and
relevant objectives,
seeking continuous
improvement
The Board last carried out its periodic evaluation in FY23. This assessment was internally facilitated and
comprised the following elements:
-
a questionnaire completed by every Board member covering Board and Committee structure,
processes, agendas and priorities. Each Board member’s assessment of their individual performance
and feedback on each other was also sought. The questionnaire was based on ones designed by
external consultants with considerable experience of Board reviews, but tailored to meet the specific
circumstances of the Group;
-
completion of a skills matrix by each Board member, as referred to under Principle 6 above, to
identify areas of expertise on the Board and additional areas that the Board could consider in
relation to future appointments;
-
review by the Board of the consolidated outputs of the questionnaire and skills matrix, facilitated by
the Company Secretary and Chairman.
In addition to the appointment of a new a new Non-Executive Director and Chair of the Remuneration
Committee, the processes identified a number of other actions which the Board believes will assist in
improving Board performance and these will be implemented during the year, including:
-
timings of Board reports prior to meetings;
-
ongoing review of Board composition;
-
ongoing review and update of the Company’s investor relations and communications policy;
-
review of the Group’s ESG strategy and priorities;
-
ongoing review of succession planning.
The next evaluation will be completed during the course of FY25.
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Governance
Governance
Corporate Governance (continued)
Governance
Principle
Application
Principle 8
Promote a
corporate culture
that is based on
ethical values and
behaviours
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. Ongoing training on the Group’s
compliance and anti-bribery policy and the Group’s Modern Slavery Act policy continue to reinforce the
culture of ethical values and behaviours.
The Group is pleased that in FY24 there has been an increase in charitable activity across the Group,
with a number of volunteering challenges and fundraising events. This activity includes maintenance of
the Trees For Life partnership, a partnership with Generation (which supports underprivileged young
adults into the workplace), the Mission Christmas volunteering campaign, Easter Egg appeal and
charity walks. Several local and national charities have been supported through the year by colleague
fundraising, including Macmillan Cancer Support and The Children’s Heart Surgery Fund.
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. We are delighted that FY24 has continued to see a strong
take up of the Company volunteering day as our colleagues support their chosen causes.
Further details of the Group’s charitable activity is set out on page 37.
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 eleven times a year at various Company locations 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 annual calendar includes
presentations from all members of the Operating Board through the course of the year. The attendance
by each Board member at meetings held in the year is shown in the table below.
At each scheduled meeting, the Board considers and reviews the trading performance of the Group for
the previous month together with additional topics based on the annual Board calendar. 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.
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), Alan Aubrey, Oliver Scott and Michelle
Senecal De Fonseca (both of whom joined during the year). 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 Michelle Senecal De Fonseca as Non-
Executive Director and Chair of the Remuneration Committee.
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.
Corporate Governance (continued)
Governance
Principle
Application
Principle 9 cont
Maintain
governance
structures and
processes that
are fit for purpose
and support good
decision-making by
the Board
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 and monthly colleague
briefing sessions. The Company also ran its latest colleague survey in FY24, the results and proposed
outputs of which were reported to colleagues through the all colleague briefing sessions.
Further details of how the Company maintains a dialogue with customers and suppliers, both being key
stakeholders, are set out in the section 172 statement at pages 28-30 of this Report.
Board of Directors
The following table details the attendance of the Board members at regular scheduled Board and Committee meetings held
during FY24 which they were eligible to attend.
Name
Position
(at 31
March
2024)
Main Board
Audit Committee
Remuneration
Committee
Nomination
Committee
Total
Attended
Total
Attended
Total
Attended
Total
Attended
Nick Bate
Chair
13
13
2
2
5
5
2
2
Alan Aubrey
NED
13
13
2
2
5
5
2
2
Helena Feltham
(Resigned 24
July 2023)
NED
4
4
-
-
4
4
2
2
Oliver Scott
(Appointed 1
December 2023)
NED
4
4
-
-
-
-
-
-
Michelle Senecal
De Fonseca
(Appointed 13
February 2024)
NED
2
2
-
-
-
-
-
-
Peter Brotherton
CEO
13
13
-
-
-
-
-
-
David Senior
CFO
13
13
-
-
-
-
-
-
58
59
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Governance
Governance
Corporate Governance (continued)
Nick Bate, Independent Non-Executive Chairman of the Board
Appointment date: 17 November 2021
Committee membership: Chair of the Nomination Committee, member of
the Remuneration Committee and interim member of the Audit Committee
Experience and external appointments: Nick is an experienced chairman
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 six 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.
Alan Aubrey, Independent Non-Executive Director (and Senior
Independent Director)
Appointment date: 21 July 2022
Committee membership: Chair of the Audit Committee, interim Chair of
the Remuneration Committee and a member of the Nomination Committee
Experience and external appointments: Alan is an experienced executive
and Non-Executive Director, having been CEO of IP Group plc from 2006 to
2021 and having served as Non-Executive Chair of Ceres Power Holdings plc
and Proactis Holdings plc and Non-Executive Director of Avacta Group plc.
Alan currently serves as Non-Executive Chair of DeepMatter Group plc and
OxCCU Limited, and on the board of Trellix Limited and Rio AI Limited. Alan
has also formerly served on the boards of several large private companies,
including Oxford Nanopore and Oxford Sciences Innovation plc, and served as
a Non-Executive Director and Chair of the Audit Committee of the Department
of Business, Innovation, University and Skills (‘DIUS’, now the Department of
Business, Energy and Industrial Strategy, ‘BEIS’) of the UK government.
Oliver Scott, Non-Executive Director (non-independent)
Appointment date: 1 December 2023
Committee membership: Member of the Audit, Remuneration and
Nomination Committees
Experience and external appointments: Oliver is a partner of Kestrel, the
independent investment manager, which Oliver co-founded in 2009. Kestrel
is Redcentric’s largest shareholder. Prior to Oliver’s co-founding of Kestrel,
Oliver spent 20 years advising smaller quoted and unquoted companies,
latterly as a Director of KBC Peel Hunt Corporate Finance. Oliver is currently
a Non-Executive Director of Smoove PLC and K3 Business Technology PLC,
and was previously a Non-Executive Director of Idox PLC, IQGeo Group PLC
and KBC Advanced Technology PLC.
Non-Executive Directors
Corporate Governance (continued)
Non-Executive Directors (continued)
Michelle Senecal De Fonseca, Independent Non-Executive Director
Appointment date: 13 February 2024
Committee membership: Chair of the Remuneration Committee and
a member of the Audit and Nomination Committees
Experience and external appointments: Michelle is an experienced
executive and Non-Executive Director in the technology industry, having
been managing Director for Vodafone’s cloud and hosting services
business, and serving as area vice president for sales and services for
Northern Europe at Citrix before becoming its global vice president for
strategic alliances. Michelle also currently serves as a Non-Executive
Director on the boards of FDM Group, Alphawave IP Group PLC, ASU
Global Foundation UK Limited and Women in Telecom & Technology.
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 Officer 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. David is a chartered certified accountant with
20 years of experience in finance, including in several senior positions
with Wolseley plc.
60
61
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Governance
Governance
Governance
At the beginning of the year the Audit Committee was
chaired by Alan Aubrey and also contained Helena Feltham.
Nick Bate replaced Helena Feltham on the Committee on
an interim basis on 18 July 2023 in advance of her
resignation from the Board on 24 July 2023. Following his
appointment to the Board, Oliver Scott was appointed to
the Audit Committee from 1 December 2023. In addition,
following her appointment to the Board, Michelle Senecal
de Fonseca was also appointed to the Audit Committee
from 13 February 2024.
The Committee meets at least twice 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 twice. Attendance
details for the regular scheduled meetings are provided
on page 59.
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.
The Committee reports on all such matters to the Board.
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 following acquisitions
completed by the Group in last few years and as such,
as part of integration of acquired businesses, there are
ongoing plans to address risk and control weaknesses
identified. The Group continues to operate a tiered
hierarchy for risk management, with functional management
of direct risks and consistent measures across all functions,
and escalation of significant value risks, along with principal
corporate risks, 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 for each risk.
In FY24, having identified climate change as a principal
risk for the first time in FY22 and developed an initial
assessment of this risk in FY23, there has been a continued
focus on emerging climate change related risks with the
TCFD recommendations being integrated into the Group’s
risk management framework. These risks are managed by
the Group’s Sustainability Committee, initially formed in
FY23, which provides quarterly reports to the Board.
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.
Audit Committee Report
External audit (continued)
The responsibilities of the Board and external auditor in
connection with the Group’s Financial Statements are set
out in the Statement of Directors’ Responsibilities and
Auditor’s Report respectively and details of the services
provided by and fees payable to the auditor are included in
Note 8 to the Consolidated Financial Statements.
KPMG LLP were appointed as the Group’s Auditor on 15
May 2017. This is the third year that Christopher Vaulks has
been the engagement leader.
Financial reporting
The Committee reviewed the full year results including
the annual report and accounts, the preliminary results
announcement and the report from the external auditor.
In reviewing the statements and determining whether they
were fair, balanced and understandable, the committee
considered the work and recommendations of management
as well as the report from the external auditor.
The Committee considered the appropriateness of
accounting policies, including critical accounting
judgements. To do this, the Committee reviewed the
information provided by management and the views from
the external auditors on the accounting treatments and
judgements in the FY24 Financial Statements.
In the prior financial year there were significant reporting
issues and judgements involving estimation uncertainty
to be considered by the Committee primarily stemming
from the Group’s acquisitions made in FY23; Sungard
Data Centres, Sungard Consulting and 4D Data Centres,
including accounting for the two Sungard acquisitions
as a single transaction and estimating the fair value of
consideration transferred and the fair value of the intangible
assets and property, plant and equipment acquired of those
same business combinations.
In preparing the FY24 Financial Statements the key
judgements that could have a material effect on the
amounts recognised in these Financial Statements relate
to going concern and presentation of exceptional items.
Both are addressed below.
Going concern
The Committee have reviewed the reports and financial
models from management on the going concern
assumptions when considering the FY24 results and the
Group’s financial performance and compliance with banking
covenants for a period of at least 12 months from the date
of approval of the Financial Statements. The Committee
notes the extension of the Group’s banking facilities by one
year to April 2026, agreed with the lending parties in March
2024, as well as the agreed revision of certain measures
within the banking covenants at June and September 2024
agreed in June 2024.
Internal financial projections and the results of stress testing
the financial models were reviewed, with management
applying severe but plausible downside scenarios (see Note
1.1 for further details). The Committee have assessed the
factors considered both in the base cost financial models
and in the severe but plausible downside scenarios and
deemed them appropriate in the context of the current
trading environment. The committee notes that the primary
factor in the going concern assessment continues to be
compliance with the banking covenants.
The Committee concluded that these Financial Statements
are appropriate to be prepared on a going concern basis
and are satisfied with the detail and transparency of the
basis of preparation disclosure and the judgement involved
in determining that there is no material uncertainty.
Exceptional items
The Committee have reviewed management’s analysis of
exceptional items and the presentation of those within
these Financial Statements in the context of the Group’s
accounting policy, as well as in the context of the definition
of exceptional items for the purposes of the banking
facility agreement. The committee is satisfied that the
costs presented as exceptional items within these Financial
Statements are appropriate under all definitions.
Alan Aubrey
Chair of the Audit Committee
15 August 2024
Audit Committee Report (continued)
63
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Governance
Governance
62
Introduction
On behalf of the Board, I am pleased to present the Directors’ Remuneration Report for the year ended 31 March 2024, my
first as Chair of the Remuneration Committee. 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, we also provide additional voluntary
disclosures in line with AIM best practice, to enable shareholders to better understand and consider our remuneration
arrangements. This report is divided into three sections being:
•
The Annual Statement, which summarises the Committee and its work.
•
The Directors’ Remuneration Policy, which summarises the Company’s Remuneration Policy; and
•
The Annual Report on Remuneration, which discloses how the Remuneration Policy was implemented in FY24 in detail
and how the Policy will operate for FY25.
As a Committee, we recognise the need to foster good relations with our shareholders and encourage open dialogue.
As such, I am available for discussion with institutional investors concerning the Company’s approach to remuneration
at any time. We trust you will find this Report to be informative and look forward to receiving your support at our
forthcoming AGM.
Michelle Senecal de Fonseca
Chair of the Remuneration Committee
15 August 2024
Annual Statement
Committee members
At the beginning of the year the Remuneration Committee was chaired by Helena Feltham as independent Non-Executive
Director. Alan Aubrey was appointed interim chair of the Remuneration Committee from 18 July 2023 (following Helena’s
resignation from the Board) to 13 February 2024 (following the appointment of Michelle Senecal de Fonseca to the Board
as independent Non-Executive Director and chair of the Remuneration Committee). 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 59.
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 Chairman, 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 or incentive arrangements.
Advisors to the Committee
FIT Remuneration Consultants LLP continues to provide independent advice to the Remuneration Committee 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.
Directors’ Remuneration Report – Annual Statement
64
65
Annual Report and Accounts 2024
Governance
We value the continuity of our
relationship with Redcentric.
We know we can trust the
team at Redcentric and that
they will do the right thing
for Heathrow.
“
”
64
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
Purpose and link to
strategy
Operation
Maximum
Performance
Base salary
To provide a competitive
base salary to attract,
motivate and retain
Directors with the experi-
ence and capabilities to
achieve the strategic aims.
Reviewed annually after considering pay
levels at comparably sized listed companies
and sector peers, the performance, role
and responsibility of each Director, market
conditions, the Company’s performance and
the level of pay across the Group as a whole.
n/a
n/a
Benefits
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
Pension
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
Annual
bonus
To reward performance
against annual targets
which support the strategic
direction of Group.
Cash bonus of up to 60% based on financial
and strategic targets and a share bonus of up
to 40% also based on financial and strategic
targets, paid in the event of exceptional
performance against targets.
100% of
salary
Sliding scale
financial and
strategic
targets
Performance
-related
bonus
To drive and reward the
achievement of longer-
term objectives and
align management with
shareholders.
Special bonus scheme which will pay out in
the event of a change of control, subject to the
discretion of the Remuneration Committee.
n/a
Metrics will
be linked to
financial and/
or share price
and/or strategic
performance
LTIP
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, 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.
200% of
salary
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
Non-
Executive
Directors
The Committee determines
the Chairman’s fee. Fees for
the Non-Executive Directors
are agreed by the Chairman
and Chief Executive.
Fees are reviewed annually taking into
account the level of responsibility and 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
Directors’ Remuneration Report – Annual Statement
(continued)
Service contracts
The details of the Executive and Non-Executive Directors’ service contracts and appointment letters are summarised below:
Date of appointment
Contractual
notice
period
(months)
Length of service
contract at
31 March 2024
Executive Directors
Peter Brotherton
David Senior
28 November 2016
3 April 2020
6
6
7 years 4 months
3 years 11 months
Non-Executive Directors
Nick Bate
Alan Aubrey
Oliver Scott
Michelle Senecal de Fonseca
17 November 2021
21 July 2022
1 December 2023
13 February 2024
3
3
3
3
2 year 4 months
1 year 8 months
4 months
1 month
The service contracts and letters of appointment continue in force until notice in writing is given by either the Company or
the Director.
Implementation of the Remuneration Policy for the year ended 31 March 2024
•
The salaries for the CEO and CFO were increased to £383,993 and £220,000 respectively from the 1 July 2023;
•
Executive Directors received a workforce aligned pension at 5% of salary;
•
Following an assessment of personal performance against strategic targets and also performance against the Group’s
overall strategic and integration objectives, the CEO and CFO received cash annual bonus awards of 30% and 34.5% of
salary respectively post year end.
•
Long Term Incentive Plan (“LTIP”) awards were granted to the CEO and CFO in September 2023 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 2025
•
The CEO will receive a revised salary of £384,000 and the CFO will receive a revised salary of £235,000, both with effect
from 01 July 2024;
•
Pension provision will continue at 5% of salary in line with the workforce provision;
•
Annual cash bonus potential will continue to be capped at 50% of salary for FY24. 60% of the bonus will be payable
against financial targets and 40% will be based on strategic targets. A share bonus of up to 50% of salary will be
payable in the event of exceptional performance against financial and strategic targets; and
•
2024 LTIP awards will be granted to Executive Directors in line with the annual grant policy over shares with a value
equal to 200% of salary with the first 100% of the award based 50% on Total Shareholder Return (“TSR”) between 5%
and 10% p.a. and 50% on an adjusted EPS achieved within range of 5.0p and 7.0p the second 100% based 50% on
stretch absolute TSR targets of 10% to 15% p.a. and 50% on an adjusted EPS of 9.0p or greater. Details of the awards
will be set out in the RNS issued immediately following the grant date.
Directors’ Remuneration Report – Annual Statement
(continued)
66
67
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Governance
Governance
Annual Report on Remuneration
Single total figure of remuneration for Directors
The remuneration of the Directors in respect of FY24, with prior year comparatives, was as follows:
Year
Base Salary
/ Fees
Annual Bonus
Pension
Share-
based
payments
Total
£000
£000
£000
£000
£000
Executive
Peter Brotherton
FY24
382
114
43
-
539
FY23
368
54
16
393 2
831
David Senior
FY24
215
74
11
-
300
FY23
200
24
11
104 3
339
Non-Executive Directors
Nick Bate
FY24
85
-
-
-
85
FY23
85
-
-
-
85
Alan Aubrey
FY24
50
-
-
-
50
FY23
38
-
-
-
38
Oliver Scott
FY24
8
-
-
-
8
(appointed 1 December 2023)
FY23
-
-
-
-
-
Michelle Senecal de Fonseca
FY24
7
-
-
-
7
(appointed 13 February 2024)
FY23
-
-
-
-
-
Former Directors
Helena Feltham
FY24
16
-
-
-
16
(resigned 24 July 2023)
FY23
50
-
-
-
50
Jon Kempster
FY24
-
-
-
-
-
(resigned 21 July 2022)
FY23
25
-
-
-
25
Total
FY24
789
188
54
-
1,031
FY23
741
78
27
497
1,343
1.
The annual bonus plan for FY24 was based on sliding scale Group adjusted EBITDA (40%), Group Net Debt (20%) and Strategic targets (40%).
Following an assessment of personal performance against strategic targets and also performance against the Group’s overall strategic and
integration objectives, the CEO and CFO received cash annual bonus awards of 30% and 34.5% of salary respectively. As the awards are below
the 50% of salary deferral threshold, the bonus awards were paid in cash.
2.
On 14 September 2022, Peter Brotherton exercised options over 379,267 ordinary shares of 0.1p each at a price of 103.5 pence per ordinary
share resulting in a pre-tax gain of £392,541.
3.
On 14 September 2022, David Senior exercised options over 100,000 ordinary shares of 0.1p each at a price of 103.5 pence per ordinary share
resulting in a pre-tax gain of £103,500.
Directors’ Remuneration Report – Annual Statement
(continued)
Executive Director’s share awards in the Company
Details of share options in the Company held by the Directors during the year are as follows:
Exercise
price (p)
Balance,
31 March 2023
(number)
Granted
(number)
Cancelled
/ lapsed
(number)
Balance,
31 March 2024
(number)
Peter Brotherton
(a)
0.1
242,915
-
(242,915)
-
(b)
0.1
554,326
-
-
554,326
(c)
99.9
18,023
-
-
18,023
(e)
0.1
621,250
-
-
621,250
(f)
0.1
-
605,620
-
605,620
1,436,514
605,620
(242,915)
1,799,219
David Senior
(a)
0.1
129,555
-
(129,555)
-
(b)
0.1
312,296
-
-
312,296
(d)
96.1
18,736
-
-
18,736
(e)
0.1
333,334
-
-
333,334
(f)
0.1
-
347,030
-
347,030
793,921
347,030
(129,555)
1,011,396
(a) Granted on 8 December 2020 under the Company’s Long Term Incentive Plan (“LTIP”). These options failed to vest following the publication
of the Company’s results for the year ended 31 March 2023 due to the vesting condition over Company share price growth not being met.
(b) Granted on 18 November 2021 under the Company’s LTIP. The options will vest three years from grant subject to absolute Total Shareholder
Return (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.
(c) Granted on 23 December 2021 under the HMRC-approved Save-As-You-Earn (“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.
(d) Granted on 26 August 2022 under the HMRC-approved Save-As-You-Earn (“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 October 2025. There are no performance conditions.
(e) Granted on 12 October 2022 under the Company’s LTIP. The options will vest three years from grant subject to absolute Total Shareholder Return
(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) Granted on 19 September 2023 under the Company’s LTIP. The options will vest three years from grant subject to absolute Total Shareholder
Return (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.
On 4 March 2024 the Executive Directors were awarded a cash-settled share-share based bonus scheme which will pay
out in the event of a change of control of the Company within 12 months, subject to the discretion of the Remuneration
Committee. A Stochastic model has been used to measure the fair value of this cash-settled share-based payment
transaction. No expense has been recognised at the year end as the fair value of the scheme (£6k impact for FY24) is not
considered material.
Directors’ Remuneration Report – Annual Statement
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Annual Report and Accounts 2024
Governance
Governance
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 2024
(number)
Interests in
ordinary shares at
31 March 2023
(number)
Interests in share-
based incentive
options at
31 March 2024
(number)
Interests in share-
based incentive
options at
31 March 2023
(number)
Executive
Peter Brotherton
452,479
437,136
1,799,219
1,436,514
David Senior
113,090
106,550
1,011,396
793,921
Non-Executive
Nick Bate
49,009
40,000
-
-
Alan Aubrey
76,407
40,650
-
-
Oliver Scott1
-
-
-
-
Michelle Senecal de Fonseca
-
-
-
-
1Oliver Scott is a beneficial owner of Kestrel Opportunities, who held 16,715,305 ordinary shares in the Company as at 31 March 2024.
Relative importance of spend on pay
The table below shows the Group’s expenditure on shareholder distributions (including dividends) and total employee
pay expenditure. Additional information on the number of employees, total revenue and underlying profit has been
provided for context.
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Change
%
Employee expenditure
38,399
34,479
11.4%
Distributions to shareholders
3,752
5,593
(32.9%)
Average number of employees
659
588
12.1%
Revenue
163,150
141,674
15.2%
Adjusted EBITDA
28,316
24,492
15.6%
Share price
The market price of the Company’s shares on 31 March 2024 was 127.25p per share. The highest and lowest market prices
during the FY24 were 133.76p and 101.41p respectively.
Michelle Senecal de Fonseca
Chair of the Remuneration Committee
15 August 2024
Directors’ Remuneration Report – Annual Statement (continued)
The Directors presents their annual report together with the audited Financial Statements for FY24.
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 5-50 contains a review of the business, future developments and the principal risks
and uncertainties.
Dividends
A final dividend payment of 2.4p per share is expected to be paid on 24 January 2025, subject to approval at the Company’s
AGM, to shareholders on the register at the close of business on 13 December 2024 with shares going ex-dividend on 12
December 2024. The last day for Dividend Reinvestment Plan elections is 2 January 2025.
Substantial shareholders
As at 31 March 2024 and 31 July 2024 (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 2024
(number)
31 March 2024
%
31 July 2024
(number)
31 July 2024
%
Kestrel Investment Partners
32,710,733
20.67%
32,707,577
20.67%
Lombard Odier Asset Management
25,494,432
16.11%
25,071,779
15.84%
ND Capital Investments Ltd
25,320,355
16.00%
25,531,554
16.13%
Slater Investments
18,278,131
11.55%
18,280,768
11.55%
Harwood Capital
17,502,695
11.06%
17,480,000
11.04%
Chelverton Asset Management
5,807,856
3.67%
5,610,000
3.54%
As of 31 July 2024, the Company’s issued share capital is 158,884,919 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:
•
Nick Bate
•
Alan Aubrey
•
Helena Feltham (resigned 24 July 2023)
•
Oliver Scott (appointed 1 December 2023)
•
Michelle Senecal De Fonseca (appointed 13 February 2024)
•
Peter Brotherton
•
David Senior
Details of Directors’ remuneration, service agreements and interests in the share capital of the Company are provided in the
Directors’ Remuneration Report on pages 65-70. Details of the Directors’ contracts, remuneration and share options granted
are also set out in the Annual report on remuneration, on pages 66-69.
All 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’ Report
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Governance
Governance
Directors’ indemnities and liability insurance
As permitted by the Articles of Association, the Directors
have the benefit of an indemnity which is a qualifying
third-party indemnity provision as defined by Section 234
of the Companies Act 2006. The indemnity was in force
throughout the last financial year and is currently in force.
The Company also purchased and maintained Directors’
and Officers’ liability insurance throughout the financial year
in respect of itself and its Directors.
Employees
The Group’s employment policies are designed to ensure
that they meet the statutory, social and market practices
where the Group operates. The Group systematically
provides colleagues with information on matters of concern
to them (including through Group-wide announcements and
all employee calls), consulting them or their representatives
regularly (including through colleague forums, roadshows,
the Company’s newsletter and the colleague survey), so that
their views can be considered when making decisions that
are likely to affect their interests. Colleague involvement in
the Group’s performance is encouraged (including through
employee share schemes such as the Save-As-You-Earn
Scheme), as achieving a common awareness on the part of
all colleagues of the financial and economic factors affecting
the Group plays a major role in maintaining its relationship
with its 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 34-37
of our Corporate Responsibility statement.
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 5-50.
A commentary on the revenue, trading results and cash
flows is provided in the financial review on pages 13-20.
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 Group and Company meets their day to day working
capital requirements from the Group’s operational cash
flows, a Revolving Credit Facility, Asset Financing Facility
and leasing arrangements (see Note 24). The Revolving
Credit Facility is an £80.0m facility (net £40.0m utilised at
31 March 2024), while the Asset Financing Facility is a £7.0m
facility (increased to £10.0m in August 2024). £3.6m utilised
at 31 March 2024. In March 2024 the Revolving Credit
Facility and Asset Financing Facility were extended at the
Group’s request, with a new maturity date of 26 April 2026.
The Directors have prepared cash flow forecasts for a
period of at least 12 months from the date of approval of
these Financial Statements (the “going concern assessment
period”) 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 their liabilities as they fall due for that period,
and will comply with debt covenants over that period.
The Group is required to comply with financial debt
covenants for adjusted leverage (net debt to adjusted
EBITDA), cashflow cover (adjusted cashflow to debt service,
where adjusted cashflow is defined as adjusted EBITDA
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 EBITDA. The guarantors are Redcentric plc
and Redcentric Solutions Limited. Covenants are tested
quarterly each year.
During FY24 the Group has continued to invest heavily in
integration and efficiency programmes which are expected
to deliver significant benefits to the business from FY25
onward. In addition, a significant proportion of the Group’s
focus has been on the Harrogate data centre relocation
in favour of delivering other projects including the further
consolidation of cloud platforms. In anticipation of the
effect of these factors on continued covenant compliance,
particularly as the covenant tests are on a rolling 12-month
basis, in June 2024 the Directors reached agreement with
the banking syndicate to apply less stringent debt covenant
requirements for the quarters ended June and September
2024, despite not anticipating a breach at these quarters.
The purpose of this amendment was to provide additional
headroom on covenants in the event of a severe but
plausible downside scenario, and to provide additional
Directors’ Report (continued)
Going concern (continued)
flexibility around the timing and financing of capital
expenditure for new customer projects. There were no
other material changes to the terms and conditions of the
borrowings because of this amendment. All requirements
within the borrowings facility agreement and subsequent
amendments have been adhered to in the respective
quarters, with the banking syndicate further agreeing not to
apply a clause relating to the retrospective inclusion of the
January 2024 dividend into the December 2023 covenant
calculation. This clause is no longer applicable from April
2024 onwards.
The Directors’ forecasts in respect of the going concern
assessment period have been built from the detailed Board
approved budget for the year ending 31 March 2025, and a
forecast for the year ending 31 March 2026, and the going
concern assessment takes account of the debt covenant
requirements.
The forecasts include a number of assumptions in relation
to order intake, renewal and churn rates, EBITDA margin
improvements, the full year impact of energy efficiency
investment and improved electricity pricing (a significant
proportion of which is locked in through FY25 at forward rates
favourable to those achieved in FY24). Revenue assumptions
reflect levels achieved in FY24 plus organic growth, and have
been adjusted for the enlarged customer base and additional
products following the acquisitions made in FY23.
Whilst the Group’s trading and cash flow forecasts have been
prepared using current trading assumptions, the operating
environment continues to present several challenges which
could negatively impact the actual performance achieved.
These risks include, but are not limited to, achieving
forecast levels of new order intake, the impact on customer
confidence as a result of general economic conditions,
inflationary cost pressures including unexpected one-off
cost impacts, and the efficacy of energy efficiency measures
under a prolonged period of hot weather. In making
their going concern assessment in light of these risks,
the Directors have also modelled a combined severe but
plausible downside scenario when preparing the forecasts.
The downside scenario assumes significant economic
downturn over FY25 and into FY26, primarily impacting
recurring new order intake and non-recurring product and
services revenues as the Directors note the uncertainties
surrounding the timing and extent of non-recurring revenue
from quarter to quarter. In this scenario, recurring monthly
order intake is forecast to reduce by 30% compared to
base case budget and product and services non-recurring
revenues reduce by 20% compared to base case budget
incorporating potential supply chain issues, reduced
investment from our existing customer base and failure to
expand market share as planned. In addition, the downside
scenario also assumes the new business obtained does not
achieve the gross margin planned, with a 10% reduction
to the planned gross margin achievement across all new
recurring revenue modelled.
An additional factor that can impact the revenue and gross
margin assumptions in the going concern assessment
period is the level of customer cancellations (of an individual
service or product). Whilst known, near-term customer
cancellations have been modelled, coupled with an
underlying level of customer cancellations based on historic
trends, there remains a risk that unexpected, medium to
large customer cancellations could occur in the near-term.
The Group is protected contractually to a large extent with
notice periods and cancellation clauses, however a residual
risk remains. An additional level of customer cancellations
has therefore been modelled each quarter in the downside
scenario to reflect this risk.
Following the energy efficiency measures delivered in FY24,
electricity volumes are significantly more predictable than
they have been historically. In addition, power prices are
90% fixed (at current volumes) through to September 2025.
However there remains a risk that periods of sustained
higher summer temperatures, considering the impacts of
wider climate-related factors, could increase energy usage at
sites where new efficiency measures have been introduced,
but not tested, at these prolonged higher temperatures.
A 5% increase in forecasted usage has been modelled across
a period of three months over the summer to reflect this risk.
With respect to the remaining operating cost base, whilst
the Board approved forecast contains detailed, itemised cost
forecasts (including inflation), there remains a risk inherent
within the industry related to the complex cost base and
significant volumes of services procured that unexpected
costs and/or unexpected cost increases can at times occur.
In the severe but plausible downside scenario, an additional
quarterly cost shock has been modelled to reflect this risk.
In preparing the cash flow forecasts and analysis relating
to debt covenant compliance through the going concern
assessment period, the Directors have considered the
nature of exceptional items and are satisfied that such items
meet the Group’s accounting policy and borrowings facility
agreement definition of exceptional items.
Given external market analysis indicates an expectation that
interest rates have stabilised, no sensitivity on interest rates
has been included in the plausible downside scenario. Both
the base case and severe but plausible downside forecast
scenarios continue to model the payment of dividends,
including a final FY24 dividend payment in January 2025.
The Directors will continue to monitor the impact and timing
of dividend payments in the normal course of their quarterly
liquidity and debt covenant compliance monitoring.
Directors’ Report
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Governance
Governance
Going concern (continued)
In addition to the base case and severe but plausible
downside forecasts, the Directors have modelled an overlay
scenario in anticipation of an EBITDA enhancing, significant
new customer contract. This contract would necessitate
certain upfront capital expenditure, with revenues following
later in the forecast period when services commence. As
a result, in August 2024 agreement was reached with the
Group’s lenders to increase the Asset Financing Facility
limit to £10.0m. The overlay scenario models the impacts
of this potential new contract into the base case and severe
but plausible downside forecasts, including the timing and
financing of related capital expenditure, and the resulting
impacts on debt covenant compliance.
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 without management taking
mitigating actions. While not modelled, mitigating actions
which are within the Group’s control would also be available
in the event of a severe downside. Such actions include,
but are not limited to, the rephasing of discretionary capital
expenditure, further usage of the Asset Financing Facility
beyond that forecast currently (headroom at the date of
approval of these Financial Statements is £3.1m) and further
management of discretionary cost areas such as marketing,
training and travel.
The Directors therefore remain confident that the Group
and Company have adequate resources to continue to meet
their liabilities as and when they fall due within the period of
at least 12 months from the date of this Report.
Purchase of own shares
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 £2m
(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 results for the six months to 30
September 2020, the Company announced that it would
reinstate the Programme. During FY22 the Company
recommenced the Programme and obtained approval from
the Board to increase the aggregate consideration payable
under the Programme to £5m in total, resulting in 2,160,500
shares repurchased and a closing balance of 2,170,203
shares at the end of FY22. No further purchases were made
in FY23 and FY24, though several share options exercised
during the year were settled using treasury shares meaning
the number of shares held in treasury at 31 March 2024 was
632,703 (31 March 2023: 728,722).
Annual General Meeting
The 2024 AGM will be held at the offices of Cavendish
Capital Markets Limited at 1 Bartholomew Close, London
EC1A 7BL at 11:00 on 26 September 2024. 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 https://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.
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.
Subsequent events
On the 14 August 2024 a modification to the bank facilities
was agreed to increase the Asset Financing Facility to
£10.0m to ensure adequate credit availability for future
investment relating to new customer contracts. All other
elements of the facility remained the same. There have been
no other significant events between the balance sheet date
and the date of approval of these accounts.
By order of the Board
David Senior
Company Secretary
15 August 2024
Directors’ Report (continued)
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.
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.
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
David Senior
Company Secretary
15 August 2024
Statement of Directors’ Responsibilities
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Governance
Governance
1.
Our opinion is unmodified
We have audited the financial statements of Redcentric
plc (“the Company”) for the year ended 31 March 2024
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 2024 and of the
Group’s loss 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 other entities of public
interest. We believe that the audit evidence we have
obtained is a sufficient and appropriate basis for our
opinion.
Independent
auditor’s report
to the members of Redcentric plc
Overview
£1.4m (2023: £1.1m)
0.86% (2023: 0.78%) of Group
Revenue
Materiality:
Group financial
statements as a whole
75% (2023: 96%) of Group loss
before tax
Coverage
Key audit matters
vs 2023
◄►
Revenue Recognition
Recurring risks
Going concern
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:
[We continue to perform procedures over [identify key audit matter]. However, following [explain why risk is less significant this year], we
have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately identified in our
report this year.]
Our response
The risk
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:
— Tests of detail:
•
for a sample of revenue transactions
recognised in the one month period prior to
the balance sheet date, we assessed whether
revenue was recognised in the appropriate
period by comparing to supporting
documentation such as invoices, contracts and
customer correspondence, and assessed
whether such revenue was recognised in line
with the Group’s accounting policies;
•
for a sample of customer balances, we
assessed the appropriateness of deferred
income at the year‐end through inspection of
contracts, invoices, customer correspondence
and recalculations;
•
we assessed the extent to which credit notes
raised in the two month period after the
balance sheet date may relate to revenue
recognised in the year, comparing these
amounts to the Group’s credit note and
inaccurate billing provisions, and assessing if
this was indicative of inappropriate revenue
recognition;
•
we tested year‐end bank reconciliations,
obtained bank confirmations as audit evidence
over the Group’s cash balance, and evaluated
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), and
unexpected journal postings by the executive
directors and senior management, we assessed
the nature of the posting and obtained
supporting documentation.
— Assessing transparency: we considered the
adequacy of the Group’s disclosures in respect of
revenue recognition policies and the timing of
revenue recognition.
Revenue recognition cut‐off
We identified potential incentives and
pressures on the Directors relating to
investor expectations, compliance with debt
covenants and the achievement of
remuneration and other strategic business
targets which increase the risk of fraudulent
revenue recognition, and in particular the
overstatement of recurring revenues in the
period.
Results for any given financial reporting
period are expected to be affected by the
revenue recognition policies in place,
particularly for the Group’s recurring
revenue stream which represents 91.4% of
the Group’s total revenues, and the accurate
deferral of related amounts at the balance
sheet date. There is a risk that amounts
recorded in recurring revenue could be
subject to manipulation, particularly through
the inappropriate recognition and deferral of
amounts at the year end. There are manual
aspects to the recurring revenue recognition
process, which provide an opportunity for
fraudulent revenue recognition over the cut‐
off period.
There is a resulting risk that recurring
revenue transactions in the one month
period before the balance sheet date could
be fraudulently recorded, such that revenue
is not recognised in line with the Group’s
accounting policies, and that related
deferred income amounts recorded at the
balance sheet date are incomplete.
Recurring revenue recognition
(£149.1 million; 2023: £128.5
million)
Refer to pages 89 ‐ 91 (accounting
policy) and note 6 (financial
disclosures)
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Financial Statements
Financial Statements
Our response
The risk
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. Our procedures also included:
— Funding assessment: we read the borrowing facilities
agreement and subsequent amendment letters to
understand the terms, including covenant requirements.
We reperformed the key financial covenant calculations at
the measurement points throughout the going concern
assessment period, assessing compliance at these dates.
We considered the adjustments made in the adjusted
cashflow and adjusted EBITDA measures for the covenant
calculations, considering the appropriateness of such
adjustments compared to the borrowing agreements and
historically accepted practice with the lenders. In doing so,
we assessed the classification of exceptional items in the
context of the borrowing agreement definition, evaluating
the impacts on debt covenant calculations.
— Historical comparisons: we assessed the ability of the
Group to accurately forecast by comparing actual
performance to forecasts, including for adjusted EBITDA,
levels of new order intake and non‐recurring revenues
compared to previous projections.
— Test of detail: we critically assessed the cash flow forecasts
by considering the appropriateness of key assumptions
used in preparing those projections, with a focus on
revenue growth and new order intake, electricity volume
and price assumptions, and the timing and extent of
cashflows, including capital expenditure and dividend
payments. In assessing the timing and extent of capital
expenditure, we considered the upfront capital investment
required to take on a significant new customer contract.
— Sensitivity analysis: we critically challenged the downside
sensitivities applied in the downside forecast scenario,
assessing whether these represented severe but plausible
scenarios based on our knowledge of the business and
considering the most recent trading results. We performed
additional stress testing over the remaining covenant
headroom levels under a severe but plausible downside
scenario.
— Evaluating directors’ intent: we evaluated the achievability
of the actions the directors have modelled in the base case
and severe but plausible downside scenario, including
utilisation of the Group’s asset financing facility and the
timing of dividend payments, taking into account the extent
to which the directors can control the timing and outcome
of these.
— Assessing transparency: we assessed whether the matters
included in the going concern disclosure in note 1.1 give a
full and accurate description of the directors’ assessment,
including the judgements made, identified risks and
mitigating actions.
Disclosure quality
The financial statements explain how the Board has
formed a judgement that it is appropriate to adopt
the going concern basis of preparation for the
Group and parent Company.
That judgement is based on an evaluation of the
inherent risks to the Group’s and Company’s
business model and how those risks might affect
the Group’s and Company’s financial resources or
ability to continue operations over a period of at
least a year from the date of approval of the
financial statements.
The risks most likely to adversely affect the Group’s
and Company’s available financial resources and/or
metrics relevant to debt covenants over this period
were:
•
The inability to achieve the growth and new
order intake targets in the base case
forecasts;
•
A reduction in non‐recurring revenues
resulting from a loss of customer confidence,
and uncertainties over the timing and extent
of non‐recurring revenues from quarter to
quarter;
•
The timing and extent of cash outflows
relating to capital expenditure and dividends,
and their resulting impacts on debt covenant
compliance; and
•
The classification of certain costs as
exceptional items, which are excluded from
adjusted EBITDA and are not defined by
IFRSs, and the resulting impacts on the
Group’s debt covenant calculations.
There are also less predictable but realistic second
order impacts, such as the erosion of customer
confidence resulting in increased cancellation rates
for recurring revenues, which could result in a rapid
reduction of available financial resources.
The risk is shown as reducing as there is a greater
level of headroom on the Group’s debt covenants
throughout the going concern assessment period
when compared to the prior year, and there is
reduced uncertainty around other risks identified
in the prior year including the failure to achieve
forecast energy efficiencies, and adverse impacts
from inflationary pressures, such as interest rates.
The risk for our audit was whether or not those
risks were such that they amounted to a material
uncertainty that may have cast significant doubt
about the ability to continue as a going concern.
Had they been such, then that fact would have
been required to have been disclosed.
Going Concern
(Group and parent
Company)
See note 1.1 to the
Group Financial
Statements
Refer to page 63 (Audit
Committee Report), and
pages 72 ‐ 74 (Directors’
Report).
The valuation of intangible assets acquired in the Sungard and 4D Data Centres acquisitions and valuation of certain property, plant and
equipment acquired as part of the Sungard business combination was a key audit matter in the prior year. However, due to these acquisitions
completing in the prior period, there is no remaining judgement or estimation uncertainty relating to these acquisitions, and therefore we have
not assessed this as one of our most significant risks in the current year audit.
The recoverability of the parent Company’s investment in subsidiaries was a parent Company key audit matter in the prior year. However, during
the audit we concluded that our work in respect of going concern had a greater effect on the overall parent Company audit strategy, and
allocation of resources. As a result of this, and the inclusion of going concern as a Group and parent Company key audit matter, we have not
assessed the recoverability of the parent Company’s investment in subsidiaries as one of our most significant risks in the current year audit of the
parent Company.
96
3
100
Group loss before tax
Group total assets
100%
(2023: 99%)
87
9
75
75%
(2023: 96%)
100
0
100
0
100%
(2023: 100%)
Key:
Full scope for group audit purposes 2024
Full scope for group audit purposes 2023
Specified risk‐focused audit procedures 2023
Residual components
Group revenue
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 £1.4m (2023: £1.1m), determined with reference to a
benchmark of total revenue of £163.1m (2023: £141.7m), of
which it represents 0.86% (2023: 0.78%). We consider total
revenue to be the most appropriate benchmark as it provides a
more stable measure year on year than group loss 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 £0.8m (2023: £0.52m), determined with
reference to a benchmark of parent Company total assets, of
which it represents 0.75% (2023: 0.49%).
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 75% (2023: 65%) of
materiality for the financial statements as a whole, which
equates to £1.05m (2023: £0.715m) for the Group and £0.6m
(2023: £0.34m) for the parent Company. We applied this
percentage in our determination of performance materiality
because we did not identify any factors indicating an elevated
level of risk.
We agreed to report to the Audit Committee any corrected or
uncorrected identified misstatements exceeding £70,000
(2023: £55,000), in addition to other identified misstatements
that warranted reporting on qualitative grounds.
Of the Group’s 5 (2023: 6) reporting components, we
subjected 1 (2023: 1) to full scope audits for group purposes
and 0 (2023: 1) to specified risk‐focused audit procedures.
The components within the scope of our work accounted for
the percentages illustrated opposite. As group loss before tax
is smaller this year, the profits and losses in respect of the
residual components represent a higher percentage of group
loss before tax. The profits and losses in respect of residual
components for the year ended 31 March 2024 are less than
group materiality. The remaining 25% (2023: 4%) of group loss
before tax is represented by 4 (2023: 4) reporting
components, none of which individually represented more
than 1% (2023: 1%) of total group revenue or total group
assets. The group loss before tax coverage is higher in the
prior year reflecting the larger overall group loss before tax in
2023 (of which residual components formed a smaller
proportion), and a change in methodology in calculating the
loss before tax attributable to residual components.
For the residual 4 (2023: 4) 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 (2023: 2) components, and the audit of the
parent Company, was performed by the Group team.
Component materiality was £1.2m (2023: component
materialities ranged from £0.4m to £0.8m, 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.
Total revenue
£163.1m (2023: £141.7m)
Group materiality
£1.4m (2023: £1.1m)
Total revenue
Group materiality
£1.4m
Whole financial
statements materiality (2023:
£1.1m)
£1.05m
Whole financial
statements performance
materiality (2023: £0.715m)
£1.2m
Materiality at 1 component
(£1.2m)
(2023: range of materiality at 2
components £0.39m to £0.8m)
£70,000
Misstatements reported to the
audit committee (2023: £55,000)
78
79
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
4.
Going concern
The directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Group
or the Company or to cease their operations, and as they have
concluded that the Group’s and the Company’s financial position
means that this is realistic. They have also concluded that there
are no material uncertainties that could have cast significant
doubt over their ability to continue as a going concern for at least
a year from the date of approval of the financial statements (“the
going concern period”).
An explanation of how we evaluated management’s assessment
of going concern is set out in the related key audit matter in
section 2 of this report.
Our conclusions based on this work:
— we consider that the directors’ use of the going concern basis
of accounting in the preparation of the financial statements is
appropriate;
— we have not identified, and concur with the directors’
assessment that there is not, a material uncertainty related to
events or conditions that, individually or collectively, may
cast significant doubt on the Group’s or Company's ability to
continue as a going concern for the going concern period; and
— we found the going concern disclosure in note 1.1 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.
Further detail in respect of the revenue recognition cut‐off risk is
set out in the key audit matter disclosures in section 2 of this
report.
We performed procedures including:
— Identifying journal entries and other adjustments to test
based on certain risk criteria, and comparing the identified
entries to supporting documentation. This included those
journals with unexpected account pairings or posted by
unexpected users;
— Assessing if any bias is present in the significant judgement in
relation to the classification of exceptional items, which are
excluded from adjusted EBITDA; and
— Performing procedures over revenue recognition as disclosed
in section 2 of this report.
Identifying and responding to risks of material misstatement due
to non‐compliance with laws and regulations
We identified areas of laws and regulations that could reasonably
be expected to have a material effect on the financial statements
from our general commercial and sector experience and through
discussion with the directors and other management (as required
by auditing standards), and from inspection of the Group’s legal
and regulatory 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.
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.
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, performance
targets and strategic business objectives for the directors; and
— Using analytical procedures to identify any unusual or
unexpected relationships.
We communicated identified fraud risks throughout the audit team
and remained alert to any indications of fraud throughout the
audit.
As required by auditing standards, and taking into account possible
pressures to meet profit targets in a given year, 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.
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.
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 75,
the directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing
the Group and, parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless
they either intend to liquidate the Group or the parent Company
or to cease operations, or have no realistic alternative but to do
so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor’s report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
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
Quayside House
110 Quayside
Newcastle upon Tyne
Tyne and Wear
NE1 3DX
15 August 2024
80
81
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
Note
Year ended
31 March
2024
£000
Year ended
31 March
2023
£000
Revenue
6
163,150
141,674
Cost of sales
(45,115)
(40,763)
Gross profit
118,035
100,911
Operating costs
(119,283)
(109,938)
Other operating income
7
-
88
Gain on settlement of contingent consideration
9
2,100
-
Adjusted EBITDA1
28,316
24,492
Depreciation of property, plant and equipment
16
(6,089)
(4,636)
Amortisation of intangibles
15
(6,010)
(8,773)
Depreciation of right-of-use assets
17
(11,777)
(10,617)
Exceptional costs
9
(4,550)
(8,149)
Exceptional income
9
2,100
-
Share-based payments
28
(1,138)
(1,256)
Operating profit /(loss)
852
(8,939)
Finance costs
10
(5,502)
(3,530)
Loss before taxation
(4,650)
(12,469)
Income tax credit
12
1,209
3,219
Loss for the period attributable to owners of the parent
(3,441)
(9,250)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Currency translation differences
(117)
(97)
Deferred tax movement on share options
-
47
Total comprehensive loss for the period
(3,558)
(9,300)
Earnings per share
Basic loss per share
13
(2.20p)
(5.94p)
Diluted loss per share
13
(2.20p)
(5.94p)
1 For an explanation and reconciliation of the alternative performance measures used in this report, please refer to pages 22-25.
The Notes on pages 87-131 are an integral part of these Consolidated Financial Statements.
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2024
Note
31 March 2024
£000
31 March 2023
£000
Non-Current Assets
Intangible assets
15
78,883
83,217
Property, plant and equipment
16
21,422
17,131
Right-of-use assets
17
37,478
46,282
Trade and other receivables
20
3,307
-
Deferred tax asset
18
2,503
1,076
143,593
147,706
Current Assets
Inventories
19
4,187
3,716
Trade and other receivables
20
33,543
39,254
Corporation tax receivable
53
48
Cash and cash equivalents
3,130
1,366
40,913
44,384
Total Assets
184,506
192,090
Current Liabilities
Trade and other payables
22
42,154
43,578
Bank loans and asset financing
24
1,149
475
Lease liabilities
24
8,903
10,804
Provisions
26
892
1,841
Contingent consideration
23
-
2,990
53,098
59,688
Non-Current Liabilities
Bank loans and asset financing
24
42,366
33,651
Lease liabilities
24
23,077
29,400
Provisions
26
11,482
11,160
76,925
74,211
Total Liabilities
130,023
133,899
Net Assets
54,483
58,191
Equity
Called up share capital
27
159
157
Share premium account
27
75,649
73,267
Common control reserve
(9,454)
(9,454)
Own shares held in treasury
27
(779)
(898)
Retained earnings
(11,092)
(4,881)
Total Equity
54,483
58,191
The Notes on pages 87-131 are an integral part of these Consolidated Financial Statements.
The Financial Statements of Redcentric Plc (Registration Number 08397584) on pages 82-85, and the Notes to these
Financial Statements on pages 87-131 were approved by the Board on 15 August 2024 and are signed on its behalf by:
David Senior
Chief Financial Officer
Consolidated Statement of Financial Position
as at 31 March 2024
82
83
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
Note
Year ended
31 March
2024
£000
Year ended
31 March
2023
£000
Loss before taxation
(4,650)
(12,469)
Finance costs
10
5,502
3,530
Operating profit/(loss)
852
(8,939)
Adjustment for non-cash items
Depreciation and amortisation
15,16,17
23,876
24,026
Profit on disposal of property, plant and equipment
(53)
-
Exceptional income
9
(2,100)
-
Exceptional costs
9
4,550
8,149
Share-based payments
28
1,138
1,256
Operating cash flow before exceptional items and movements in working capital
28,263
24,492
Cash costs of exceptional items
9
(4,240)
(8,258)
Cash costs of provisions
(978)
-
Operating cash flow before changes in working capital
23,045
16,234
Changes in working capital
Increase in inventories
(471)
(2,324)
Decrease/(increase) in trade and other receivables
2,411
(15,463)
(Decrease)/increase in trade and other payables
(1,826)
16,377
Cash generated from operations
23,159
14,824
Tax paid
(174)
(670)
Net cash generated from operating activities
22,985
14,154
Cash flows from investing activities
Purchase of property, plant and equipment
(9,265)
(5,505)
Acquisition of subsidiaries (net of cash acquired)
(890)
(26,606)
Purchase of intangible assets
(1,479)
(869)
Net cash used in investing activities
(11,634)
(32,980)
Cash flows from financing activities
Dividends paid
14
(1,369)
(5,593)
Disposal of treasury shares on exercise of share options
116
229
Financing of property, plant and equipment
2,419
966
Interest paid on bank loans, term loans and asset financing
(3,569)
(1,771)
Interest paid on leases
(1,328)
(1,218)
Repayment of leases
24
(10,638)
(6,901)
Repayment of asset financing liabilities
24
(635)
-
Repayment of term loans
24
(474)
(508)
Drawdown of bank loans
24
16,500
55,500
Repayment of bank loans
24
(10,500)
(21,500)
Payment of loan arrangement fees
-
(713)
Net cash used in financing activities
(9,478)
18,491
Net increase/(decrease) in cash and cash equivalents
1,873
(335)
Cash and cash equivalents at beginning of period
1,366
1,804
Effect of exchange rates
(109)
(103)
Cash and cash equivalents at end of the period
3,130
1,366
The Notes on pages 87-131 are an integral part of these Consolidated Financial Statements.
Consolidated Cash Flow Statement
for the year ended 31 March 2024
Share
capital
Share
premium
Common
control
reserve
Own
shares
held in
treasury
Retained
earnings
Total
equity
£000
£000
£000
£000
£000
£000
At 1 April 2022
157
73,267
(9,454)
(2,673)
10,551
71,848
Loss for the period
-
-
-
-
(9,250)
(9,250)
Transactions with owners
Share-based payments (Note 28)
-
-
-
-
1,044
1,044
Dividends paid (Note 14)
-
-
-
-
(5,593)
(5,593)
Share option exercises
-
-
-
1,775
(1,546)
229
Deferred tax relating to prior periods
-
-
-
-
(37)
(37)
Other comprehensive income
Deferred tax movement on share options
-
-
-
-
47
47
Currency translation differences
-
-
-
-
(97)
(97)
At 31 March 2023
157
73,267
(9,454)
(898)
(4,881)
58,191
Loss for the period
-
-
-
-
(3,441)
(3,441)
Transactions with owners
Share-based payments (Note 28)
-
-
-
-
1,053
1,053
Issue of new shares (Note 27)
2
2,382
-
-
-
2,384
Dividends paid (Note 14)
-
-
-
-
(3,752)
(3,752)
Share option exercises
-
-
-
119
(3)
116
Deferred tax movement on share options
-
-
-
-
78
78
Deferred tax relating to prior periods
-
-
-
-
(29)
(29)
Other comprehensive income
Currency translation differences
-
-
-
-
(117)
(117)
At 31 March 2024
159
75,649
(9,454)
(779)
(11,092)
54,483
The Notes on pages 87-131 are an integral part of these Consolidated Financial Statements.
Consolidated Statement of Changes in Equity
for the year ended 31 March 2024
84
85
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
Working with the cloud team
at Redcentric and our other
development partners, we
have been able to move critical
business processes from traditional
architectures to AWS RDS, enabling
us to continue to develop and scale
our All4 product, as our registered
users base exceeds 22 million.
“
”
1 Summary of significant accounting policies
Redcentric plc is a public limited company incorporated and
domiciled in England and Wales, whose shares are publicly
traded on the AIM division of the London Stock Exchange.
Redcentric plc was incorporated on 11 February 2013 and
admitted to AIM on 24 April 2013.
The Group Financial Statements have been prepared and
approved by the Directors in accordance UK-adopted
international accounting standards (“UK-adopted IFRS”).
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.
These Financial Statements are presented in pound sterling,
being the currency of the primary economic environment in
which the Group operates. All amounts have been rounded
to the nearest thousand (£’000), unless otherwise indicated.
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 Financial Statements are prepared on a going concern
basis which the Directors believe to be appropriate for the
following reasons.
The Group and Company meets their day to day working
capital requirements from the Group’s operational cash flows,
a Revolving Credit Facility, Asset Financing Facility and leasing
arrangements (see Note 24). The Revolving Credit Facility
is an £80.0m facility (net £40.0m utilised at 31 March 2024),
while the Asset Financing Facility is a £7.0m facility (increased
to £10.0m in August 2024). £3.6m of the Asset Financing
Facility was utilised at 31 March 2024. In March 2024 the
Revolving Credit Facility and Asset Financing Facility were
extended at the Group’s request, with a new maturity date
of 26 April 2026.
The Directors have prepared cash flow forecasts for a
period of at least 12 months from the date of approval of
these Financial Statements (the “going concern assessment
period”) 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 their liabilities as they fall due for that period,
and will comply with debt covenants over that period.
The Group is required to comply with financial debt
covenants for adjusted leverage (net debt to adjusted
EBITDA), cashflow cover (adjusted cashflow to debt service,
where adjusted cashflow is defined as adjusted EBITDA 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
EBITDA. The guarantors are Redcentric plc and Redcentric
Solutions Limited. Covenants are tested quarterly each year.
During FY24 the Group has continued to invest heavily in
integration and efficiency programmes which are expected to
deliver significant benefits to the business from FY25 onward.
In addition, a significant proportion of the Group’s focus has
been on the Harrogate data centre relocation in favour of
delivering other projects including the further consolidation
of cloud platforms. In anticipation of the effect of these
factors on continued covenant compliance, particularly as
the covenant tests are on a rolling 12-month basis, in June
2024 the Directors reached agreement with the banking
syndicate to apply less stringent debt covenant requirements
for the quarters ended June and September 2024, despite
not anticipating a breach at these quarters. The purpose
of this amendment was to provide additional headroom on
covenants in the event of a severe but plausible downside
scenario, and to provide additional flexibility around the
timing and financing of capital expenditure for new customer
projects. There were no other material changes to the
terms and conditions of the borrowings because of this
amendment. All requirements within the borrowings facility
agreement and subsequent amendments have been adhered
to in the respective quarters, with the banking syndicate
further agreeing not to apply a clause relating to the
retrospective inclusion of the January 2024 dividend into the
December 2023 covenant calculation. This clause is no longer
applicable from April 2024 onwards.
The Directors’ forecasts in respect of the going concern
assessment period have been built from the detailed Board
approved budget for the year ending 31 March 2025, and a
forecast for the year ending 31 March 2026, and the going
concern assessment takes account of the debt covenant
requirements.
The forecasts include a number of assumptions in relation
to order intake, renewal and churn rates, EBITDA margin
improvements, the full year impact of energy efficiency
investment and improved electricity pricing (a significant
proportion of which is locked in through FY25 at forward
rates favourable to those achieved in FY24). Revenue
assumptions reflect levels achieved in FY24 plus organic
growth, and have been adjusted for the enlarged customer
base and additional products following the acquisitions
made in FY23.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024
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1.1 Basis of preparation (continued)
Whilst the Group’s trading and cash flow forecasts have
been prepared using current trading assumptions, the
operating environment continues to present several
challenges which could negatively impact the actual
performance achieved. These risks include, but are not
limited to, achieving forecast levels of new order intake,
the impact on customer confidence as a result of general
economic conditions, inflationary cost pressures including
unexpected one-off cost impacts, and the efficacy of
energy efficiency measures under a prolonged period of hot
weather. In making their going concern assessment in light
of these risks, the Directors have also modelled a combined
severe but plausible downside scenario when preparing
the forecasts.
The downside scenario assumes significant economic
downturn over FY25 and into FY26, primarily impacting
recurring new order intake and non-recurring product and
services revenues as the Directors note the uncertainties
surrounding the timing and extent of non-recurring revenue
from quarter to quarter. In this scenario, recurring monthly
order intake is forecast to reduce by 30% compared to
base case budget and product and services non-recurring
revenues reduce by 20% compared to base case budget
incorporating potential supply chain issues, reduced
investment from our existing customer base and failure to
expand market share as planned. In addition, the downside
scenario also assumes the new business obtained does not
achieve the gross margin planned, with a 10% reduction
to the planned gross margin achievement across all new
recurring revenue modelled.
An additional factor that can impact the revenue and gross
margin assumptions in the going concern assessment
period is the level of customer cancellations (of an individual
service or product). Whilst known, near-term customer
cancellations have been modelled, coupled with an
underlying level of customer cancellations based on historic
trends, there remains a risk that unexpected, medium to
large customer cancellations could occur in the near-term.
The Group is protected contractually to a large extent with
notice periods and cancellation clauses, however a residual
risk remains. An additional level of customer cancellations
has therefore been modelled each quarter in the downside
scenario to reflect this risk.
Following the energy efficiency measures delivered in FY24,
electricity volumes are significantly more predictable than
they have been historically. In addition, power prices are
90% fixed (at current volumes) through to September 2025.
However, there remains a risk that periods of sustained
higher summer temperatures, considering the impacts
of wider climate-related factors, could increase energy
usage at sites where new efficiency measures have been
introduced, but not tested, at these prolonged higher
temperatures. A 5% increase in forecasted usage has been
modelled across a period of three months over the summer
to reflect this risk.
With respect to the remaining operating cost base, whilst
the Board approved forecast contains detailed, itemised
cost forecasts (including inflation), there remains a risk
inherent within the industry related to the complex cost
base and significant volumes of services procured that
unexpected costs and/or unexpected cost increases can
at times occur. In the severe but plausible downside
scenario, an additional quarterly cost shock has been
modelled to reflect this risk. In preparing the cash flow
forecasts and analysis relating to debt covenant compliance
through the going concern assessment period, the Directors
have considered the nature of exceptional items and are
satisfied that such items meet the Group’s accounting
policy and borrowings facility agreement definition of
exceptional items.
Given external market analysis indicates an expectation that
interest rates have stabilised, no sensitivity on interest rates
has been included in the plausible downside scenario. Both
the base case and severe but plausible downside forecast
scenarios continue to model the payment of dividends,
including a final FY24 dividend payment in January 2025.
The Directors will continue to monitor the impact and timing
of dividend payments in the normal course of their quarterly
liquidity and debt covenant compliance monitoring.
In addition to the base case and severe but plausible
downside forecasts, the Directors have modelled an overlay
scenario in anticipation of an EBITDA enhancing, significant
new customer contract. This contract would necessitate
certain upfront capital expenditure, with revenues following
later in the forecast period when services commence. As
a result, in August 2024 agreement was reached with the
Group’s lenders to increase the Asset Financing Facility
limit to £10.0m. The overlay scenario models the impacts
of this potential new contract into the base case and severe
but plausible downside forecasts, including the timing and
financing of related capital expenditure, and the resulting
impacts on debt covenant compliance.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
1.1 Basis of preparation (continued)
Under the downside scenario modelled, and including the
new customer contract overlay, the forecasts demonstrate
that the Group is expected to maintain sufficient liquidity
and will continue to comply with the relevant debt
covenants without management taking mitigating actions.
While not modelled, mitigating actions which are within the
Group’s control would also be available in the event of a
severe downside. Such actions include, but are not limited
to, the rephasing of discretionary capital expenditure, and
further management of discretionary cost areas such as
marketing, training and travel.
The Directors therefore remain confident that the Group
and Company have adequate resources to continue to meet
their liabilities as and when they fall due within the period of
at least 12 months from the date of this Report.
1.2 Changes in accounting policy and disclosure
The amendment to IAS 12 Income Taxes for assets
and liabilities arising from a single transaction has
been recognised in the current year with the prior year
comparative restated, refer to note 18. There is no
requirement for a full retrospective application.
Adopted IFRS not yet applied
There are no new standards, amendments to existing
standards or interpretations that are not yet effective that
are expected to have a material impact on the Group. Such
developments are routinely reviewed by the Group and its
financial reporting systems are adapted as appropriate.
1.3 Basis of consolidation
The Group Financial Statements consolidate those of the
Company and of its subsidiary undertakings drawn up to
31 March 2024.
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.
Intra-group transactions, balances and unrealised gains
and losses on transactions between group companies are
eliminated on consolidation.
1.4 Segmental reporting
IFRS 8 requires operating segments to be identified based
on internal financial information reported to the chief
operating decision-maker for decision-making purposes.
The Group considers that this role is performed by the main
Board. The Board believes that the Group continues to
comprise a single reporting segment, being the provision of
Managed Services to customers.
1.5 Revenue recognition
IFRS 15 ‘Revenue from contracts with customers’ requires
“performance obligations” to be identified at the inception
of the contract for each of the distinct goods or services
that have been promised to the customer. The following
table summarises the performance obligations that 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.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
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1.5 Revenue recognition (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, license
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.
Performance obligations are satisfied at the point in
time that control passes to the customer.
Revenues for product sales are recognised
in full in the Statement of Comprehensive
Income upon delivery to the customer.
Amongst other factors the Group has
pricing, credit and fulfilment risk and as
such is considered to be principal in these
transactions.
Services Revenue
Provision of professional services including consultancy
services, and engineering services in respect of setups
and installation of a customer managed service.
Installation is typically intrinsically linked to the
provision of the Managed Services (in recurring revenue
above), so 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.
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
of the performance obligation (e.g. upon
delivery to the customer).
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
2024 is £306m. This expectation is informed by existing customer contracts, and the expected term of services based on
management’s expectation of anticipated renewal dates. Of this, £299m 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 2023 was £219m. Of this, £215m related to revenue for recurring Managed Services.
30 days standard payment terms are offered to customers.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
1.5 Revenue recognition (continued)
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 contract acquisition assets within trade and other
receivables. Amortisation of the associated contract
acquisition asset is recognised within operating costs
within the Statement of Comprehensive Income.
Incremental revenues are generated based on usage for
calls and data. Some managed service contracts contain
an element of usage-based charges, and customers may
request additional services or changes in scope, both
resulting in additional charges. Usage-based charges are
typically billed in arrears, in the period subsequent to which
the usage takes place, and revenue is therefore accrued
in the month which usage takes place. For changes in scope
or additional services, a new distinct contract is entered
into, with revenue recognised as above.
Also recognised in product revenue are a small number
of sales recognised under bill and hold arrangements.
The Group have applied the criteria defined in IFRS 15,
in particular: the reason for the bill-and-hold arrangement
is substantive, the product can be identified separately as
belonging to the customer; the product is ready for physical
transfer to the customer; and the Group cannot use the
product of direct it to another customer.
1.6 Exceptional items
Exceptional items are items of income and expense
which are material and, due to their nature or expected
infrequency of the events giving rise to them, are presented
separately on the face of the Statement of Comprehensive
Income in order to provide a further understanding of
the Group’s financial performance. Exceptional items
are excluded from the Group’s alternative performance
measures (APMs), as defined on pages 22-25, 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
Equity-settled transactions
The cost of equity-settled transactions with employees
is measured by reference to the fair value of the award at
the date at which they are granted and is recognised as an
expense over the vesting period, which ends on the date at
which the relevant employees become fully entitled to the
award. Fair value is determined by an external valuer using
an appropriate pricing model for which the assumptions
are approved by the Directors. In valuing equity-settled
transactions, only vesting conditions linked to the market
price of the shares of the Company are considered.
No expense is recognised for awards that do not ultimately
vest, except for awards where vesting is conditional upon a
market condition, which are treated as vesting irrespective
of whether or not the market condition is 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 Statement of Comprehensive Income,
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 Statement of Comprehensive Income.
In respect of equity-settled transactions with employees,
Redcentric plc grants rights to its equity instruments to
employees of the Group. The Group’s subsidiaries are the
receiving entities for such arrangements as they receive the
related services from employees, however such awards are
ultimately settled by Redcentric plc as the parent Company.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
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1.8 Taxation
The taxation expense charged in the Consolidated
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 Consolidated Statement of Comprehensive
Income because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The
Group liability for current tax is measured using tax rates
that have been enacted or substantively enacted by the
balance sheet date.
Deferred tax is the tax expected to be payable or
recoverable on differences between the carrying amount
of assets and liabilities in the Financial Statements and the
corresponding tax bases used in the computation of taxable
profit and is accounted for using the balance sheet liability
method. Deferred tax is provided for on all temporary
differences at the balance sheet date between the tax
bases of assets and liabilities and their carrying amounts for
financial reporting purposes, with the following exceptions:
•
where the temporary difference arises from the initial
recognition of goodwill or an asset or liability in a
transaction that is not a business combination that at
the time of the transaction affects neither accounting
nor taxable profit or loss;
•
in respect of taxable temporary differences associated
with investments in subsidiaries, where the timing
of the reversal of the temporary differences can be
controlled and it is probable that the temporary
differences will not reverse in the foreseeable future;
and
•
deferred income tax assets are recognised only to
the extent that it is probable that taxable profits will
be available against which deductible temporary
differences carried forward tax credits or tax losses can
be utilised.
The carrying amount of deferred tax assets is reviewed
at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be
utilised. Unrecognised deferred tax assets are re-assessed
at each reporting date and are recognised to the extent that
it has become probable that future taxable profits will allow
the deferred tax asset to be recovered.
In assessing the recoverability of deferred tax assets,
the Group relies on the same forecast assumptions
used elsewhere in the Financial Statements and in other
management reports, which, among other things, reflect
the potential impact of climate-related development on
the business.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply when the related asset is
realised or the liability is settled, based on tax rates and tax
laws that have been enacted or substantively enacted at the
reporting date.
Deferred tax is charged or credited in the Consolidated
Statement of Comprehensive Income, except where the
underlying transaction relates directly to equity.
The Group offsets deferred tax assets and deferred tax
liabilities if and only if it has a legally enforceable right to
set off current tax assets and current tax liabilities and the
deferred tax assets and deferred tax liabilities relate to
income taxes levied by the same taxation authority and the
Group intends to settle current tax liabilities and assets on
a net basis.
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 Statement of Comprehensive
Income, 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 profit or loss.
1.10 Pensions
The Group operates a defined contribution scheme.
Pension costs are charged directly to the Statement of
Comprehensive Income in the period to which they relate
on an accrual’s basis. The Group has no further payment
obligations once contributions have been paid.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
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.
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.
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
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.
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.
For the year ended 31 March 2024 the following companies
are exempt from audit under s479A of the Companies Act
2006 (the Act) as Redcentric plc will provide a guarantee
under s479C of the Act and their results are included in its
Consolidated Financial Statements.
•
Piksel Industry Solutions Limited (03048367)
•
7 Elements Limited (SC382475)
•
4D Data Centres Limited (04592242)
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
Statement of Comprehensive Income.
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.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
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1.13 Intangible assets (continued)
a) Goodwill (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 CGUs expected to benefit from the business
combination’s synergies. Impairment is determined by
assessing the recoverable amount, which is the higher of
value in use and the fair value less costs of disposal, of the
CGU to which the goodwill relates. When the recoverable
amount of the CGU is less than the carrying amount, an
impairment loss is recognised.
b) Other intangible assets
Other intangible assets are carried at cost less accumulated
amortisation and impairment losses.
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.
Customer relationships acquired as part of a business
combination are capitalised at fair value at the date of
acquisition and amortised on a straight-line basis over the
estimated useful life of the customer relationship. An annual
impairment review is undertaken in line with that of goodwill
noted above.
Intangible assets with a finite life are amortised on a
straight-line basis over their expected useful lives, as
follows:
Customer contracts and
5 – 15 years
related relationships
Trademarks and brands
5 years
Software and licences
5 years (or over the contract
term if shorter)
Impairment and amortisation charges are included within
operating expenditure in the Statement of Comprehensive
Income.
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.
Assets under construction are recognised at cost.
Depreciation commences when the asset is ready for
intended use.
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 Statement of Comprehensive Income in the period the
item is de-recognised.
In reviewing the value of property, plant and equipment,
consideration for any impacts of climate-related risks to
fair values or the useful economic lives of assets is deemed
not material.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
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.
Non-financial assets that were impaired in the previous
periods are annually reviewed to assess whether the
impairment is still relevant.
Whilst the Group is committed to net zero and
acknowledges there will be future cash outflows
associated with achieving this, there is no expectation
that it will materially impact the carrying value of its asset
base, particularly given the relative short-term useful
economic lives.
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 a corresponding asset included in the related right-of-
use asset. Dilapidation provisions are discounted to
present value at the year end and subsequent unwinding
of the discounting is recorded in the Statement of
Comprehensive Income.
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.
Asset financing
Where the Group finances assets using the Asset Financing
Facility, the Group gives consideration as to whether a sale
of the asset has taken place under IFRS 15, and therefore
whether a sale and leaseback transaction exists. Where a
sale of the underlying asset is not deemed to have taken
place, then the related asset is included within property,
plant and equipment, with the corresponding liability
reflected as an other financial liability within borrowings,
measured in accordance with IFRS 9.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
94
95
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
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 using an allowance matrix to measure the
expected credit losses of trade receivables from individual
and corporate customers. Loss rates are calculated using a
‘roll rate’ method based on the probability of a receivable
progressing through successive stages of delinquency to
write-off. Given the similar characteristics of the product
and service types, geographic region and type of customer
relationship, all customers in each ageing bracket have had
the same rate applied.
The Group’s trade and other receivables are non-interest
bearing.
Cash and cash equivalents
Cash and cash equivalents on the Statement of Financial
Position comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or less.
b) Financial liabilities
Trade payables
Trade payables are stated at their nominal value,
recognised initially at fair value and subsequently
valued at amortised cost.
Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation,
and a reliable estimate can be made of the amount of
the obligation.
If the effect of the time value of money is material,
provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and, where
appropriate, the risks specific to the liability.
Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at fair
value less directly attributable transaction costs. After
initial recognition, interest-bearing loans and borrowings
are subsequently measured at amortised cost using the
effective interest method. Gains and losses arising on
the repurchase, settlement or otherwise cancellation of
liabilities are recognised in the finance cost line in the
Statement of Comprehensive Income.
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 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.
1.20 Research and development costs
Expenditure on research activities is recognised in the
Statement of Comprehensive Income 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 intangible asset during
its development. Development activities involve a plan or
design for the production of new or substantially improved
products or processes.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
1.21 Allocation of costs
Cost of sales are those costs which are directly attributable
to the business in order to generate revenue, which includes
costs of hardware and software sold to customers, freight
and delivery, reseller commissions and set-up costs.
Operating costs are all other expenses relating to the
underlying business, which includes staff costs, legal and
professional fees, office costs, amortisation of contract
acquisition assets, marketing and advertising.
2 Critical accounting judgements, key
sources of estimation uncertainty and other
areas of estimation
In the application of the Group’s accounting policies,
which are described in Note 1, the Board are required to
make judgements, estimates and assumptions about the
carrying amounts of assets and liabilities, without clear
direction from other sources. The estimates and associated
assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed
on an ongoing basis and are consistent with the Group’s
risk management and climate-related commitments
where appropriate. Revisions to accounting estimates are
recognised in the period in which the estimate is revised
if the revision only affects that period, or in the period of
the revision and future periods if the revision affects both
current and future periods.
Judgements
The Group has identified the following items as a critical
accounting judgement which would have a significant
impact to the amounts recognised in the Financial
Statements for the year ended 31 March 2024.
Exceptionals items
The Group presents separately, on the face of the
Consolidated Statement of Comprehensive Income,
material items of income and expenses, which, because
of their nature and expected infrequency of events
giving rise to them, merit separate presentation to allow
shareholders to understand better the elements of the
Company’s underlying financial performance. An element
of management judgment is required in identifying these
exceptional items. Additional information is included in
Note 9.
Going concern
Management have prepared reports and financial models
on the going concern assumptions when considering
the FY24 results and the Group’s financial performance
and compliance with banking covenants for a period
of at least 12 months from the date of approval of the
Financial Statements. In addition, internal financial
projections including stress testing have been prepared,
with management applying severe but plausible downside
scenarios. An element of judgement is involved in
determining that there is no material uncertainty over
the Group continuing as a going concern. Additional
information is included in Note 1.1.
Estimates
There are no major sources of estimation uncertainty at the
end of the reporting period, that have a significant risk of
resulting in a material adjustment to the carrying amounts of
assets and liabilities within the next financial year.
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.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
96
97
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
3 Financial risk management (continued)
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. The Group has entered into contracts
with energy brokers and has agreed own-use commodity
prices for a significant proportion of its expected electricity
volumes, which significantly reduces its exposure to
price volatility.
d) Credit risk
Credit risk arises from cash and cash equivalents, as well
as credit exposures to customers. Individual risk limits are
set based on internal and external ratings and reviewed by
the Board where appropriate. The utilisation of credit limits
is regularly monitored with appropriate action taken by
management in the event of a breach of credit limit.
Liquidity risk
Management monitors rolling forecasts of the Group’s
undrawn borrowing facility and cash and cash equivalents
based on expected cash flow. The Group’s liquidity
management policy involves projecting cash flows and
considering the level of liquid assets necessary to meet these.
4 Capital risk management
The Group’s objectives when managing capital are to
safeguard the Group’s future growth and its ability to
continue as a going concern in order to provide returns for
shareholders and to maintain an optimal capital structure to
reduce the cost of capital.
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 Statement of Financial Position) 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. The
ratio was below this level throughout the year, and at 31
March 2024 was 2.3x (31 March 2023: 1.8x).
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 headroom in its bank facilities
to ensure that any unexpected situations do not create
financial stress. Refer to Note 1.1.
5 Segment reporting
IFRS 8 requires operating segments to be identified based
on internal financial information reported to the chief
operating decision-maker (CODM) for decision-making
purposes. The Group considers that this role is performed
by the main Board. The Board believes that the Group
continues to comprise a single reporting segment, being
the provision of Managed Services to customers. The
CODM assesses profit performance principally through an
adjusted EBITDA measure, as defined on page 23.
Whilst the Board reviews the Group’s three revenue streams
separately (recurring, product and service), the operating
costs and operating asset base used to derive these
revenue streams are the same for all three categories and
are presented as such in the Group’s internal reporting to
the CODM.
Non-current assets held outside the UK are immaterial
(31 March 2023: immaterial).
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
6 Revenue
Revenue for the year ended 31 March 2024 was generated wholly from the UK and is analysed as follows:
Year ended
31 March
2024
£000
Year ended
31 March
2023
£000
Recurring revenue
149,091
128,461
Product revenue
5,507
7,144
Services revenue
8,552
6,069
Total revenue
163,150
141,674
Revenue is analysed into the following categories:
•
Recurring revenue, which was higher at £149.1m (FY23: £128.5m).
•
Non-recurring product revenue, which was lower at £5.5m (FY23: £7.1m).
•
Non-recurring services revenue, which was higher at £8.6m (FY23: £6.1m).
The year-on-year increases noted in recurring revenue and non-recurring service revenue are in part attributable to the full
year impact of prior year acquisitions (see Note 32) coupled with organic growth in the existing business. The reduction in
non-recurring product revenue is attributable to reduced projects in FY24 with the focus being on higher margin services
revenues.
6.1 Contract balances
The following table provides information about receivables, contract assets and contract liabilities from contracts with
customers:
Year ended
31 March
2024
£000
Year ended
31 March
2023
£000
Receivables, included in trade and other receivables, net of provisions (Note 21)
18,190
20,205
Accrued income, included in trade and other receivables (Note 20)
5,194
4,568
Deferred income, included in trade and other payables (Note 22)
(9,983)
(8,331)
There were no material impairment losses recorded during the year or the prior year.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
98
99
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
7 Operating profit
The following costs/(income) are considered to be significant items within operating profit:
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Amortisation of acquired intangible assets
5,229
8,183
Amortisation of intangible assets: owned
736
590
Amortisation of intangible assets: financed
45
-
Depreciation: owned assets
6,000
4,636
Depreciation: financed
89
-
Depreciation of right-of-use assets: leased
11,777
10,617
Share-based payments and associated National Insurance
1,138
1,256
Net foreign exchange losses
86
11
Employee benefits expense, excluding share-based compensation
37,261
33,223
Gain on settlement of contingent consideration (Note 9)
(2,100)
-
Exceptional costs (Note 9)
4,550
8,149
Other operating income is broken down as follows:
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Income from Transition Service Agreement
-
88
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:
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Audit of these Financial Statements
50
45
Audit of subsidiaries (including overseas subsidiaries)
421
364
Additional audit fees in relation to business combinations audit work
-
100
Total audit
471
509
Other non-audit services not covered above
14
1
Total non-audit services
14
1
Total fees
485
510
£0.1m of additional audit fees were agreed in FY24 in respect of the FY23 Financial Statements audit. This amount is not
reflected in the table above.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
9 Exceptional items
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Included within operating costs:
Acquisition related professional and legal fees
350
695
Integration costs
3,467
5,965
Restructuring costs
733
-
Costs relating to the settlement of a historical supplier dispute
-
809
Cloud computing costs
-
680
Total exceptional costs
4,550
8,149
Presented separately in the Consolidated Statement of Comprehensive Income:
Gain on settlement of contingent consideration
(2,100)
-
Total exceptional income
(2,100)
-
Current year
Exceptional costs
Acquisition related professional and legal fees of £0.4m (FY23: £0.7m) are for professional services linked to the significant
acquisitions of certain business and assets relating to three data centres from Sungard Availability Services (UK) Limited
(“Sungard”), the consulting business from Sungard and 100% of the issued share capital of 4D Data Centres Limited during
the previous year. These costs, though incurred in FY24, relate to the acquisition projects and include valuation services
in respect of establishing the fair value of acquired assets and other associated professional fees. Cash costs were £0.4m
(FY23: £0.7m).
Integration costs of £3.5m (FY23: £6.0m) principally relate to the exit of the Harrogate data centre and relocation of both
customer and internal platforms to our West Yorkshire data centre in Elland, which accounted for £2.6m of the integration
costs. This activity was intrinsically linked to the integration of the Sungard and 4D Data Centre acquisitions, which left the
Group with significant data centre capacity that required consolidation. Following a period of assessment of which data
centres would best serve the Group going forward, it was determined the Harrogate data centre and adjoining office space
would be exited at the end of the current lease on the 24 March 2024.
The relocation of the Harrogate data centre was a significant undertaking for the Group, involving dedicated resource for
up to 12 months, including staff that were seconded to the project, and diverted away from other value-adding activities,
for most or all of their time before returning to their existing roles following the project’s completion. It is expected that
£0.7m of cost allocated to integration costs in FY24 in respect of this move relates to staff costs which would have been
included within adjusted operating profit in the prior year. In total, £1.4m of third-party expenditure across contract resource
and other directly associated spend and £1.2m of staff salaries, bonuses and associated taxes were spent on the move to
migrate activities to the West Yorkshire data centre. In addition, £1.0m of cost was incurred to restore the Harrogate site
to its original condition following the customer migration. These costs, where they relate to restoration and dilapidations
activity, are shown as a utilisation of the existing dilapidations provision for this site (Note 26).
The remaining £0.9m of integration costs presented within exceptional costs include £0.7m incurred to decommission
presences in two third-party data centres inherited from acquisitions as part of the ongoing strategy to consolidate the
estate and £0.2m related to staff costs performing other integration work to migrate legacy platforms.
Cash costs relating to exceptional integration costs in the year were £3.1m (FY23: £6.0m).
Restructuring costs include £0.5m of staff costs associated with a management restructure for staff who have subsequently
left the business, and £0.2m of related legal fees. Cash costs were also £0.7m.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
100
101
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
9 Exceptional items (continued)
Exceptional income
During FY24, the consideration for the Sungard acquisition was finalised. £2.5m of contingent consideration was recognised
as a liability in the prior year based on the expectations at prior year balance sheet date. The final position has now been
crystallised on the anniversary of date of the acquisition, in line with the purchase agreement. During FY24, the final
settlement totalled £0.4m, and therefore an exceptional £2.1m credit has been recognised as a gain on settlement of
contingent consideration in line with the prior year subsequent events disclosure. This is presented separately on the face of
the Consolidated Statement of Comprehensive Income.
Prior year
Exceptional costs
Acquisition related professional and legal fees of £0.7m in FY23 were for professional services linked to the three
acquisitions in the prior year, as explained above. Cash costs were £0.7m.
The integration costs in FY23 relate to costs incurred in integrating the three businesses (Sungard data centres, Sungard
Consulting and 4D Data Centres) into the Group during FY23 and include costs relating to the TSA (Transition Service
Agreement) (£1.4m), migrating customers (£1.2m) and employee restructuring relating to employees who had subsequently
left the business (£3.3m). There was also £0.1m of professional fees directly relating to the incremental financial statement
audit procedures completed on the acquisition accounting.
In the prior year, costs relating to the settlement of a historical supplier dispute totalled £0.6m for the crystallisation of the
settlement and £0.2m charged by the Group’s legal advisors in respect of this matter. Cash costs were £0.8m.
Cloud computing costs of £0.7m in the prior year related to expenditure to achieve the original implementation scope of
the Group’s major ERP implementation programme, and the continued remediation of the Group’s ERP system (Microsoft
Dynamics 365) to resolve a number of implementation related process and system deficiencies that required correcting post
initial implementation. Cash costs were £0.7m.
10 Finance costs
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Finance costs
Interest payable on bank loans, term loans and asset financing
3,604
1,827
Interest payable on leases
1,328
1,218
Amortisation of loan arrangement fees
209
291
Other interest payable
361
194
5,502
3,530
Interest payable on leases includes £1.3m (FY23: £1.2m) of interest on leases previously classified as operating leases
under IAS17.
Other interest payable relates to interest on contingent consideration and dilapidation provisions.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
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 2024
£000
Year ended
31 March 2023
£000
Operations
483
429
Selling and distribution
91
83
Administration
85
76
659
588
Employee costs were:
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Wages and salaries
31,901
27,978
Social security costs
3,497
3,251
Share-based payments and associated National Insurance
1,138
1,257
Pension costs
1,387
1,263
Payments in lieu of notice and redundancy not included within exceptional items
54
277
Payments in lieu of notice and redundancy included within exceptional items
422
453
38,399
34,479
The payments in lieu of notice and redundancy included within exceptional items are within the integration related costs.
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 executive and
Non-Executive Directors.
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Basic salary, allowances, fees and other employment expenses
1,717
1,667
Bonus and other benefits
271
123
Share-based payments charge
678
601
Pension costs
104
91
2,770
2,482
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
102
103
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
11 Employees (continued)
11.2 Directors’ remuneration
The remuneration of the Directors in respect of the year was as follows:
Basic Salary,
allowances,
and fees
Bonus
Pension
Share-
based
payments
FY24
Total
FY23
Total
£000
£000
£000
£000
£000
£000
Executive
Peter Brotherton
382
114
43
-
539
831
David Senior
215
74
11
-
300
339
Non-Executive
Alan Aubrey
50
-
-
-
50
38
Jon Kempster (resigned 21 July 2022)
-
-
-
-
-
25
Nick Bate
85
-
-
-
85
85
Helena Feltham (resigned 24 July 2023)
16
-
-
-
16
50
Oliver Scott (appointed 1 December 2023)
8
-
-
-
8
-
Michelle Senecal De Fonseca (appointed
13 February 2024)
7
-
-
-
7
-
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
Multiple
UK-based Tier 3
designed data
centres
Own 100GB
network
Voice & IaaS
platforms
24/7 network
& security
operations
centre
Offices
throughout
the UK
UK-based
support team
We offer end-to-end management, total control, accountability
and a single point of contact for our solutions delivered across our
own network, platforms and data centres.
11 Employees (continued)
11.2 Directors’ remuneration (continued)
Details of share options in the Company held by the Directors during the year are as follows (audited):
Exercise
price (p)
Balance,
31 March 2023
(number)
Granted
(number)
Cancelled
/ lapsed
(number)
Balance,
31 March 2024
(number)
Peter Brotherton
(a)
0.1
242,915
-
(242,915)
-
(b)
0.1
554,326
-
-
554,326
(c)
99.9
18,023
-
-
18,023
(e)
0.1
621,250
-
-
621,250
(f)
0.1
-
605,620
-
605,620
1,436,514
605,620
(242,915)
1,799,219
David Senior
(a)
0.1
129,555
-
(129,555)
-
(b)
0.1
312,296
-
-
312,296
(d)
96.1
18,736
-
-
18,736
(e)
0.1
333,334
-
-
333,334
(f)
0.1
-
347,030
-
347,030
793,921
347,030
(129,555)
1,011,396
(a) These options were granted on 8 December 2020 under the Company’s Long Term Incentive Plan (“LTIP”). These options failed to vest
following the publication of the Company’s results for the year ended 31 March 2023 due to the vesting condition over Company share price
growth not being met.
(b) These options were granted on 18 November 2021 under the Company’s LTIP. The options will vest three years from grant subject to absolute
Total Shareholder Return (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.
(c) These options were granted on 23 December 2021 under the HMRC-approved Save-As-You-Earn (“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.
(d) These options were granted on 26 August 2022 under the HMRC-approved Save-As-You-Earn (“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 October 2025. There are no
performance conditions.
(e) These options were granted on 12 October 2022 under the Company’s LTIP. The options will vest three years from grant subject to absolute Total
Shareholder Return (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) These options were granted on 19 September 2023 under the Company’s LTIP. The options will vest three years from grant subject to absolute Total
Shareholder Return (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.
On 4 March 2024 the executive Directors were awarded a cash-settled share-share based bonus scheme which will pay out
in the event of a change of control within 12 months, subject to the discretion of the Remuneration Committee. A Stochastic
model has been used to measure the fair value of this cash-settled share-based payment transaction. No expense has been
recognised at the year end as the fair value of the scheme (£6k impact for FY24) is not considered material.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
104
105
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
12 Income tax credit
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Income tax
UK current year tax charge
167
108
Adjustment in respect of prior years
2
(7)
Total income tax
169
101
Deferred tax
Current year
(853)
(2,437)
Adjustment in respect of prior years
(525)
(31)
Effect of changes in tax rates
-
(852)
Total deferred tax
(1,378)
(3,320)
Total tax credit in Consolidated Statement of Comprehensive income
(1,209)
(3,219)
Other comprehensive income items
Deferred tax
-
47
Factors affecting the tax charge for the year
Loss before taxation
(4,650)
(12,469)
Taxation at the average UK corporation tax rate of 25.0% (FY23: 19.0%)
(1,163)
(2,369)
Tax effects of:
-Expenses not allowable in determining taxable profit
647
430
-Adjustment in respect of prior years
(523)
(38)
-Non-taxable income
(238)
(239)
-Share options
129
(172)
-Tax rate changes
-
(503)
-Super deduction adjustment
-
(292)
-Amounts not recognised
-
(90)
-Effect of overseas tax rates
(61)
54
Tax credit for the year
(1,209)
(3,219)
An increase in the UK corporation rate from 19% to 25% (effective 1 April 2023) was substantively enacted on 24 May 2021. The deferred tax asset
at 31 March 2024 has been calculated using the corporation tax rate of 25% (FY23: 25%).
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
13 Earnings per share (EPS)
The calculation of basic and diluted EPS is based on the following earnings and number of shares.
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Earnings
Statutory loss
(3,441)
(9,250)
Tax credit
(1,209)
(3,219)
Amortisation of acquired intangibles
5,229
8,183
Share-based payments
1,138
1,256
Exceptional costs
4,550
8,149
Exceptional income
(2,100)
-
Adjusted earnings before tax
4,167
5,119
Notional tax charge
(1,042)
(973)
Adjusted earnings
3,125
4,146
Weighted average number of ordinary shares
Number
‘000
Number
‘000
In issue
157,371
156,992
Held in treasury
(693)
(1,391)
For basic EPS calculations
156,678
155,601
Effect of potentially dilutive share options
5,129
3,678
For diluted EPS calculations
161,807
159,279
EPS
Pence
Pence
Basic
(2.20p)
(5.94p)
Adjusted
1.99p
2.66p
Basic diluted
(2.20p)
(5.94p)
Adjusted diluted
1.93p
2.60p
In line with the Group’s policy, the notional tax charge above is calculated at a standard rate of 25% (FY23: 19%).
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
106
107
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
14 Dividends
Year ended
31 March 2024
£000
Year ended
31 March 2023
£000
Final dividend for the year ended 31 March 2022
-
3,719
Interim dividend for the year ended 31 March 2023
-
1,874
Final dividend for the year ended 31 March 2023
3,752
-
3,752
5,593
The Group paid an interim dividend for the year ended 31 March 2023 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 2023 of 2.4p per ordinary share, with a total payment
value of £3.8m. This was made up of £1.4m cash with the remainder in dividend shares (see Note 27 for further details).
The Group paid an interim dividend for the year ended 31 March 2024 of 1.2p per ordinary share, with a total payment value
of £1.9m. This was paid on 18 April 2024.
A final dividend payment of 2.4p per share is expected to be paid on 24 January 2025, subject to approval at the Company’s
AGM, to shareholders on the register at the close of business on 13 December 2024 with shares going ex-dividend on 12
December 2024. The last day for Dividend Reinvestment Plan elections is 2 January 2025.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
15 Intangible assets
Goodwill
Customer
contracts
and related
relationships
Trademarks
and brands
Software
and licences
Total
£000
£000
£000
£000
£000
Cost
At 1 April 2022
52,416
65,030
449
5,570
123,465
Additions
-
-
-
869
869
Additions on acquisition (Note 32)
8,224
15,100
200
-
23,524
Disposals
-
-
-
(135)
(135)
Exchange differences
-
-
-
(1)
(1)
At 31 March 2023
60,640
80,130
649
6,303
147,722
Additions
-
-
-
1,479
1,479
Disposals
-
-
-
(393)
(393)
Transfers from property, plant and equipment
-
-
-
261
261
At 31 March 2024
60,640
80,130
649
7,650
149,069
Accumulated amortisation and impairment
At 1 April 2022
-
50,893
449
4,397
55,739
Charged in year
-
7,983
200
590
8,773
Disposals
-
-
-
(7)
(7)
At 31 March 2023
-
58,876
649
4,980
64,505
Charged in year
-
5,229
-
781
6,010
Disposals
-
-
-
(393)
(393)
Transfers from property, plant and equipment
-
-
-
64
64
At 31 March 2024
-
64,105
649
5,432
70,186
At 31 March 2024
60,640
16,025
-
2,218
78,883
At 31 March 2023
60,640
21,254
-
1,323
83,217
Amortisation of customer contracts has decreased by £2.8m to £5.2m in FY24. This is because one large customer contract
was fully amortised at the end of FY23, while a second was fully amortised during FY24.
Customer contracts have a weighted average remaining amortisation period of 8 years and 9 months (FY23: 8 years and 6
months). There are no indicators of impairment at 31 March 2024.
Software and licences include £1.3m (FY23: £0.6m) of additions in relation to customer capital expenditure.
Included within software and licences is £0.5m (FY23: £nil) of assets financed under the Group’s Asset Financing Facility. The
Directors have exercised judgement in determining that there has been no sale of these assets under IFRS15 and therefore
the assets are financed rather than representing a sale and leaseback arrangement.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
The latest development on the IVR and call routing is
the result of Redcentric listening to our requirements
and developing to our needs. It’s key to our working
relationship and why we value Redcentric.
“
”
109
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
108
15 Intangible assets (continued)
Goodwill has been allocated to one cash-generating unit (CGU) at 31 March 2024 whereas in the prior year goodwill was
allocated to two CGUs being IT Managed Services and Security Services. During FY24 the Security Services business,
being the 7 Elements acquisition, was further integrated into Redcentric infrastructure and operations. At the year end
management no longer believe it capable of generating independent cash flows from the Group.
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. Consideration for any impacts of climate-
related risks to impairment is not deemed to affect the overall conclusions in the medium to long-term.
The value in use has been calculated using a Board approved five-year forecast cash flow projections to the period of
31 March 2029 comprising the detailed Group budget for FY25 and latest detailed forecast for FY26, with higher level
assumptions applied for the outer years. A terminal value based on a perpetuity calculation using a 2.0% real growth rate
was then added (FY23: 2.0% growth).
The key assumptions used in the impairment testing were as follows:
•
New order intake consistent with that achieved in H2-FY24;
•
Price increases in line with CPI;
•
Overall gross margin percentage of c. 70% in line with historic trends;
•
Electricity costs driven by near-term contracted prices and medium-term 3rd party price forecasts for energy;
•
Operating costs (depending on nature) to increase in line with either revenue growth or CPI, factoring in any near-term
licence inflation;
•
Pre-tax discount rate of 10.87% (FY23: 11.2%) (post tax rate of 10.51% (FY23: 10.84%)) 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 is consistent with the market the entity operates in for real growth.
The Group has also considered that any cost implications of achieving net zero would not have a material impact on the
assessment period.
A reasonably possible adverse movement to any of the above key assumptions made would not give rise to impairment.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
16 Property, plant and equipment
Leasehold
improvements
Office
fixtures and
fittings
Vehicles and
computer
equipment
Assets under
construction
Total
£000
£000
£000
£000
£000
Cost
At 1 April 2022
8,341
1,182
23,264
-
32,787
Additions
700
1,787
2,838
180
5,505
Additions on acquisition (Note 32)
3,330
6,725
1,665
-
11,720
Disposals
-
-
(909)
-
(909)
Exchange differences
-
4
4
-
8
At 31 March 2023
12,371
9,698
26,862
180
49,111
Additions
4,952
95
4,271
-
9,318
Disposals
(1,201)
(447)
(8,367)
-
(10,015)
Transfer to intangible assets
-
(261)
-
-
(261)
Transfer from right-of-use assets
-
-
1,618
-
1,618
Reclassification
180
-
-
(180)
-
Exchange differences
(8)
-
-
-
(8)
At 31 March 2024
16,294
9,085
24,384
-
49,763
Accumulated depreciation
At 1 April 2022
5,449
622
21,344
-
27,415
Charged in year
1,107
1,450
2,079
-
4,636
On disposals
-
-
(71)
-
(71)
At 31 March 2023
6,556
2,072
23,352
-
31,980
Charged in year
1,715
2,051
2,323
-
6,089
On disposals
(1,201)
(447)
(8,365)
-
(10,013)
Transfer to intangible assets
-
(64)
-
-
(64)
Transfer from right-of-use assets
-
-
351
-
351
Exchange differences
-
(2)
-
-
(2)
At 31 March 2024
7,070
3,610
17,661
-
28,341
Net book value
At 31 March 2024
9,224
5,475
6,723
-
21,422
At 31 March 2023
5,815
7,626
3,510
180
17,131
Vehicles and computer equipment includes additions of £2.8m (FY23: £2.6m) relating to customer capital expenditure.
Included within property, plant and equipment additions is £3.1m (FY23: £nil) of assets financed under the Group’s Asset
Financing Facility. The Directors have exercised judgement in determining that there has been no sale of these assets under
IFRS15 and therefore the assets are financed rather than representing a sale and leaseback arrangement.
Similar arrangements previously accounted for as a sale and leaseback arrangement in the prior periods have been adjusted
accordingly in the current year. Included within vehicles and computer equipment is a reclassification of £1.6m relating to
financed assets that were incorrectly included in Note 17 as a right-of-use asset on the prior period Statement of Financial
Position. A corresponding asset financing liability has also been recognised following a reclassification from a lease liability in the
current period, as disclosed within Note 24. As the Directors do not consider the effect on the prior period Financial Statements
to be material, this has been corrected in the current period.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
110
111
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
17 Right of use assets
Most of the Group’s right-of-use assets are associated with our leased property portfolio.
Land and
buildings
Vehicles &
computer
equipment
Total
£000
£000
£000
Cost
At 1 April 2022
26,974
11,936
38,910
Additions
36,189
391
36,580
Additions on acquisition (Note 32)
3,911
-
3,911
Disposals
(629)
-
(629)
Exchange differences
(1)
-
(1)
At 31 March 2023
66,444
12,327
78,771
Additions
699
3,541
4,240
Transfer to property, plant and equipment
-
(1,618)
(1,618)
At 31 March 2024
67,143
14,250
81,393
Accumulated depreciation
At 1 April 2022
13,620
8,252
21,872
Charged in year
8,676
1,941
10,617
At 31 March 2023
22,296
10,193
32,489
Charged in year
10,231
1,546
11,777
Transfer to property, plant and equipment
-
(351)
(351)
At 31 March 2024
32,527
11,388
43,915
Net book value
At 31 March 2024
34,616
2,862
37,478
At 31 March 2023
44,148
2,134
46,282
Of the £4.2m right-of-use assets acquired in the year, £nil was funded using leases that would have previously been
classified as finance leases under IAS17 (FY23: £nil).
Included in the net book value of land and buildings at 31 March 2024 is £8.2m right-of-use assets for dilapidations
(FY23: £9.8m).
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (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:
Year ended
31 March 2024
Year ended
31 March 2023
Restated*
£000
£000
Deferred tax liabilities
(6,083)
(7,648)
Deferred tax assets
8,586
8,724
2,503
1,076
*The prior year restatement is a result of the change in accounting policy following the IAS 12 amendment that was applicable for periods commencing
from 1 January 2023. As a result, the Group have restated the prior year comparative above and in notes 18.1 and 18.2 below for the purpose of the
disclosure only. There is no impact on the Statement of Financial Position.
18.1 Deferred tax liabilities
Acquisitions
Property, plant and
equipment
Total
£’000
£’000
£’000
Cost
At 1 April 2022 (restated*)
3,114
291
3,405
Recognised in Statement of Comprehensive Income
(1,409)
1,896
487
Movements arising from acquisitions
1,625
-
1,625
Adjustments in relation to prior year recognised in
Statement of Comprehensive Income
-
282
282
Transfer from deferred tax assets 1
-
1,849
1,849
At 31 March 2023 (restated*)
3,330
4,318
7,648
Recognised in Statement of Comprehensive Income
(1,107)
469
(638)
Adjustments in relation to prior year recognised in
Statement of Comprehensive Income
(83)
(844)
(927)
At 31 March 2024
2,140
3,943
6,083
1 This is moving a deferred tax liability position from the deferred tax asset table (18.2) to the deferred tax liability table.
Deferred tax liabilities include intangible assets from business acquisitions.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
112
113
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
18 Deferred tax (continued)
18.2 Deferred tax assets
India
Share-
based
payments
Tax
losses
Property,
plant and
equipment
Other
timing
differences
Total
£000
£000
£000
£000
£000
£000
Cost
At 1 April 2022 (restated*)
47
521
1,978
3,561
1,297
7,404
Deferred tax acquired (Note 32)
-
-
-
(4,678)
154
(4,524)
Recognised in Statement of Comprehensive
Income
-
120
2,114
(752)
2,115
3,597
Recognised in other comprehensive income
-
47
-
-
-
47
Adjustment in relation to prior year
-
-
78
20
253
351
Transfer to deferred tax liabilities 1
-
-
-
1,849
-
1,849
At 31 March 2023 (restated*)
47
688
4,170
-
3,819
8,724
Recognised in Statement of Comprehensive
Income
3
134
544
-
(467)
214
Recognised in equity
-
78
-
-
-
78
Adjustments in relation to prior year
recognised in Statement of Comprehensive
Income
-
(15)
156
-
(542)
(401)
Adjustment in relation to prior year
recognised in equity
-
(29)
-
-
-
(29)
At 31 March 2024
50
856
4,870
-
2,810
8,586
1This is moving a deferred tax liability position from the deferred tax asset table to the deferred tax liability table (18.1).
Deferred tax assets have been recognised based on the ability of future offset against deferred tax liabilities or against
future taxable profits. The assessment of future taxable profits is based on forecasts and assumptions consistent with those
used for our going concern basis of preparation, as set out in Note 1.1. The Group is expected to return to profitability
following the integration of the acquired businesses as the growth strategies and cost mitigations, as described in Note 1.1
are delivered.
19 Inventories
Year ended
31 March 2024
Year ended
31 March 2023
£000
£000
Goods for resale
4,187
3,716
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 (FY23: £6.0m).
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
20 Trade and other receivables
Year ended
31 March 2024
Year ended
31 March 2023
£000
£000
Trade receivables
19,390
21,456
Less: provision for impairment of trade receivables and credit notes
(1,200)
(1,251)
Trade receivables – net
18,190
20,205
Other receivables
1,084
2,363
Prepayments
8,245
9,180
Contract acquisition asset
4,137
2,938
Accrued income
5,194
4,568
36,850
39,254
Current
33,543
39,254
Non-current
3,307
-
36,850
39,254
During the year, the contract acquisition asset was amortised by £1.7m (FY23: £1.5m).
Trade debtor days were 36 at 31 March 2024 compared to 46 at 31 March 2023. Trade debtor days are calculated as gross
trade debtors divided by revenue (incl. VAT) multiplied by 365.
Non-current assets of £3.3m are comprised of a prepayment balance totalling £1.6m and a contract acquisition asset
balance totalling £1.7m. Both are expected to be recovered over a period of greater than one year from the balance
sheet date.
21 Credit quality of financial assets
The amounts of the maximum exposure to credit risk at the reporting date are as follows:
Year ended
31 March 2024
Year ended
31 March 2023
£000
£000
Trade receivables
18,190
20,205
Other receivables
1,084
2,363
Cash and cash equivalents
3,130
1,366
22,404
23,934
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
114
115
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
21 Credit quality of financial assets (continued)
21.1 Credit quality of trade receivables
The credit quality of trade receivables is reviewed at each reporting date using a provision matrix to measure expected
credit loss (ECL). 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 noted below. The Group does not hold any collateral
as security.
The following table provides information about the exposure to credit risk and ECL’s for trade receivables from individual
customers as at 31 March 2024. For the purpose of calculating the provision, any credit balances within the aging categories
have been excluded when applying the loss rate.
Year ended
31 March
2024
Weighted
average
loss rate
Loss
Allowance
Credit
impaired
Year ended
31 March
2023
£000
£000
£000
Current
14,008
0.5%
(72)
No
18,450
1 to 30 days overdue
2,928
1.0%
(25)
No
2,212
31 to 60 days overdue
1,794
2.0%
(30)
No
557
61 to 90 days overdue
383
5.0%
(24)
No
283
91 to 180 days overdue
320
18.0%
(79)
No
194
> 180 days overdue
(43)
25.0%
(78)
No
(240)
Gross trade debtors
19,390
(308)
21,456
Provision
(1,200)
(1,251)
Net trade debtors
18,190
20,205
At 31 March 2024 a total ECL provision of £1.2m (FY23: £1.3m) was recognised. This provision consisted of £0.3m (FY23:
£0.1m) in relation to trade receivables, £0.4m (FY23: £0.3m) provided for within the credit note provisions and £0.6m (FY23:
£0.8m) regarding inaccurate billing. No provision has been made against accrued income in the year ended 31 March 2024
(FY23: £nil) as it is considered immaterial.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
21 Credit quality of financial assets (continued)
21.1 Credit quality of trade receivables (continued)
Movements on the Group bad debt and credit note provisions were as follows:
Provision in
relation to
FY19
and earlier
Provision
in relation
to FY20
Provision
in relation
to FY21
Provision
in relation
to FY22
Provision in
relation to
FY23
Provision in
relation to
FY24
Total
Provision
£000
£000
£000
£000
£000
£000
£000
At 1 April 2022
28
34
290
532
-
-
884
Creation of provision
-
-
-
1
2,122
-
2,123
Utilisation of provision
(28)
(34)
(290)
(528)
(876)
-
(1,756)
At 31 March 2023
-
-
-
5
1,246
-
1,251
Creation of provision
-
-
-
-
1
2,236
2,237
Utilisation of provision
-
-
-
(5)
(987)
(1,296)
(2,288)
At 31 March 2024
-
-
-
-
260
940
1,200
21.2 Credit quality of cash and cash equivalents
The Group’s cash is held at accounts with Barclays Bank PLC which have a Standard and Poor’s rating of A.
22 Trade and other payables
Year ended
31 March 2024
Year ended
31 March 2023
£000
£000
Trade payables
16,287
16,520
Other payables
612
1,892
Taxation and social security
3,085
5,076
Accruals
12,187
11,759
Deferred income
9,983
8,331
42,154
43,578
Trade payable days were 36 at 31 March 2024 compared to 42 as at 31 March 2023. Trade payable days are calculated as
trade payables divided by total purchases (cost of sales and operating expenditure) multiplied by 365.
Of the deferred income balance of £8.3m at 31 March 2023, £6.9m has been recognised as revenue in the year ended
31 March 2024.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
117
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
116
23 Contingent consideration
Year ended
31 March 2024
Year ended
31 March 2023
£000
£000
Contingent consideration due on acquisitions within one year:
- 7 Elements Limited
-
450
- Sungard DCs
-
2,540
-
2,990
Contingent consideration is based on the Directors’ best estimate of future payments due at 31 March 2024. Contingent
consideration is level 3 within the fair value hierarchy.
During FY24, the contingent consideration for the 7 Elements and Sungard acquisitions were finalised, and the final
settlements totalled £0.5m and £0.4m respectively. Consequently, a £2.1m credit has been recognised as a gain on
settlement of contingent consideration in exceptional items (see Note 9 for further details) within the Statement of
Comprehensive Income.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
I have seen many data centres and
Redcentric showed an attention to detail
which we could see in the infrastructure.
When our engineers have been on-site, the
Redcentric staff have always been very helpful.
This level of support has made a significant
difference to our business operations.
“
”
24 Borrowings
Year ended
31 March 2024
Year ended
31 March 2023
£000
£000
Current
Lease liabilities
8,903
10,804
Term loans
21
475
Asset financing liabilities
1,128
-
10,052
11,279
Non-current
Lease liabilities
23,077
29,400
Term loans
-
20
Asset financing liabilities
2,481
-
Bank loans
39,885
33,631
65,443
63,051
At 31 March 2024, the Group was party to £87.0m of bank facilities with an original maturity date of 25 April 2025. In March
2024 these debt facilities were extended at the Group’s request, with a new maturity date of 26 April 2026. As part of this
extension of the Revolving Credit Facility and Asset Financing Facility term, there were no material changes to the financial
debt covenants or to other terms and conditions of the agreements. The facilities comprise a Revolving Credit Facility
(“RCF”) of £80.0m (net £40.0m utilised at 31 March 2024) and a £7.0m Asset Financing Facility (“AFF”) (£3.6m utilised at
31 March 2024). The AFF is provided by Lombard North Central plc who are party to the overall banking facilities. Certain
intangible assets (see Note 15) and property plant and equipment (Note 16) are financed under this arrangement. Term
loans constitute financing arrangements for services and include a supplier loan of £21k for an unsecured three-year
maintenance contract. Whilst not linked to the bank facilities, it contributes toward permitted indebtedness within this
agreement, which cannot exceed £2.5m at any given time.
The RCF is provided by a four-bank group of NatWest, Barclays, Bank of Ireland and Silicon Valley Bank (now part of HSBC
UK Group), with Lombard Technology Services Ltd providing the Asset Financing Facility. The borrowing cost of the facility
is determined by the level of the Group’s leverage and has a borrowing cost of 235 basis points over SONIA at the Group’s
current leverage levels. The Group is required to comply with financial covenants for adjusted leverage (net debt to adjusted
EBITDA), cashflow cover (adjusted cashflow to debt service, where adjusted cashflow is defined as adjusted EBITDA 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
EBITDA. Covenants are tested quarterly each year. No security has been provided.
The RCF is drawn in short to medium-term tranches of debt that are repayable within 12 months of draw-down. These
tranches of debt can be rolled over provided certain conditions are met, including compliance with all loan terms. The Group
considers that it is unlikely it would not be in compliance and therefore, be unable to exercise its right to roll over the debt.
The Board therefore believe the Group has the ability and the intent to roll over the drawn RCF amounts when due and
consequently has presented the RCF as a non-current liability. In addition to the financial covenants, the facility requires the
Group to file audited financial accounts within 120 days of the year end date alongside an audited compliance certificate.
On the 14 August 2024 a modification to the bank facilities was agreed to increase the Asset Financing Facility to £10.0m to
ensure adequate credit availability for future investment relating to new customer contracts. All other elements of the facility
remained the same.
Lease liabilities are comprised of secured and unsecured agreements. Secured lease liabilities of £0.8m and secured term
loans are secured against assets included within right-of-use assets with a carrying value of £0.8m (FY23: £1.8m).
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
118
119
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
24 Borrowings (continued)
24.1 Reconciliation of net debt
Year ended
31 March 2024
Year ended
31 March 2023
£000
£000
Revolving Credit Facility
Drawdown on facility
16,500
55,500
Repayment of facility
(10,500)
(21,500)
Finance costs in relation to RCF (non-cash)
3,333
1,804
Interest paid
(3,288)
(1,751)
Loan arrangement fees paid
-
(713)
Release of deferred arrangement fees (non-cash)
209
291
Movement in Revolving Credit Facility
6,254
33,631
Opening balance
33,631
-
Closing balance
39,885
33,631
Lease liabilities
New leases entered into (non-cash)
4,238
28,314
Transferred to asset financing liabilities (non-cash)
(1,825)
-
Leases acquired
-
1,976
IFRS16 leases modifications
-
(629)
Principal element of lease payments
(10,638)
(6,901)
Interest element of lease payments (non-cash)
1,328
1,218
Interest paid
(1,328)
(1,218)
Movement in lease liabilities
(8,225)
22,760
Opening balance
40,205
17,445
Closing balance
31,980
40,205
Term loans
Repayment of loans
(474)
(508)
Finance costs in relation to term loans (non-cash)
4
23
Interest paid
(4)
(24)
Movement in term loans
(474)
(509)
Opening balance
495
1,004
Closing balance
21
495
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
24 Borrowings (continued)
24.1 Reconciliation of net debt (continued)
Year ended
31 March 2024
Year ended
31 March 2023
£000
£000
Asset financing liabilities
Transferred from lease liabilities (non-cash)
1,825
-
Drawdown on facility
2,419
-
Repayment of loans
(635)
-
Finance costs (non-cash)
267
-
Interest paid
(267)
-
Movement in asset financing liabilities
3,609
-
Opening balance
-
-
Closing balance
3,609
-
Cash
3,130
1,366
Net debt
72,365
72,965
All lines included above are cash unless otherwise stated.
24.2 Terms and repayment schedule
Currency
Nominal
interest rate
Year of
maturity
RCF
GBP
SONIA + 2.35%
2026
Term Loans
GBP
1.85%
2025
Leases
GBP
4.0% - 7.2%
2024-2040
AFF
GBP
6.5% - 7.64%
2024-2029
24.3 Lease liabilities
Present
value as at
31 March
2024
Finance
charges
Future lease
payments as
at 31 March
2024
Present
value as at
31 March
2023
Finance
charges
Future lease
payments as
at 31 March
2023
£000
£000
£000
£000
£000
£000
Not later than 1 year
8,903
1,133
10,036
10,804
1,420
12,224
After 1 year but not more than 5 years
17,560
2,292
19,852
20,565
2,973
23,538
After more than 5 years
5,517
240
5,757
8,833
553
9,386
31,980
3,665
35,645
40,202
4,946
45,148
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
120
121
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
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.
Less than 1 year
1 - 5 years
More than 5 years
Total
£000
£000
£000
£000
At 31 March 2024
Bank loans
3,392
43,625
-
47,017
Leases
10,036
19,852
5,757
35,645
Asset financing liabilities
1,199
2,581
-
3,780
Term loans
21
-
-
21
Trade payables
16,287
-
-
16,287
Other payables
612
-
-
612
31,547
66,058
5,757
103,362
At 31 March 2023
Bank loans
2,755
35,700
-
38,455
Leases
12,224
23,538
9,386
45,148
Term loans
475
20
-
495
Trade payables
16,520
-
-
16,520
Other payables
1,892
-
-
1,892
33,866
59,258
9,386
102,510
The interest accrual for the future forecasted borrowings in each category is dependent on the expected level of funding
required each month, with an applied interest rate of SONIA (forecast to be 5.5%) above the margin (which is a fixed
percentage depending on the Group’s adjusted leverage in line with the facility agreement).
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
26 Provisions
Dilapidations provision
£000
At 1 April 2022
3,883
Additional provisions created during the period
8,426
Provisions acquired from business combination
692
At 31 March 2023
13,001
Additional provisions created during the period
351
Utilised during the period
(978)
At 31 March 2024
12,374
FY24 Analysed as:
Current
892
Non-current
11,482
12,374
FY23 Analysed as:
Current
1,841
Non-current
11,160
13,001
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. This is not considered to be a critical
estimate as it is not expected to be subject to material reversal in future periods given the specialist input used to inform
the estimate, and the nature of the estimate.
Dilapidation provisions have maturity dates from 2024 to 2040 and are therefore discounted to present value using a
risk-free interest rate (UK Government Bond rates) at the year end, depending on the length of the related lease. The
discount rates used to calculate the initial provision ranges from 1.85% to 2.63%. 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 increase of £0.4m through additional
provisions created has resulted from the net financing movement in the year.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
122
123
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
27 Share capital
Ordinary shares of 0.1p each
Share premium
Number
£000
£000
At 1 April 2022 and 31 March 2023
156,991,982
157
73,267
New shares issued
1,892,937
2
2,382
At 31 March 2024
158,884,919
159
75,649
On 19 January 2024, 1,892,937 new ordinary shares were issued in part satisfaction of the final dividend for the year ended
31 March 2023 of 2.4 pence per share for certain shareholders representing 63.4% of the Company’s total voting rights. The
shares were issued at 125.8961 pence per ordinary share being the five-day volume weighted average price of an ordinary
share at the close of business on 18 January 2024 (the last business day prior to the dividend payment date). The dividend
shares represented in aggregate 1.19% of the enlarged issued share capital of the Company.
The total shares held in treasury at 31 March 2024 was 632,703 at an average cost of £1.23 per share therefore, at a value of
£779,224 (FY23: 728,722 shares at an average cost of £1.23, for a total value of £897,479).
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 2024, 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.
Performance related bonus
On 4 March 2024 the Executive Directors were awarded a cash-settled share-share based bonus scheme which will pay
out in the event of a change of control of the Company within 12 months, subject to the discretion of the Remuneration
Committee. A Stochastic model has been used to measure the fair value of this cash-settled share-based payment
transaction. No expense has been recognised at the year end as the fair value of the scheme (£6k impact for FY24) is not
considered material.
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.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
28 Share-based payments (continued)
The Group recognised the following expense for its share-based payments:
Year ended
31 March 2024
Year ended
31 March 2023
£000
£000
Equity-settled share-based charge on LTIP scheme
935
861
Equity-settled share-based charge on SAYE plan
118
182
1,053
1,046
National Insurance arising on share options
85
213
1,138
1,256
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 2022
3,681,300
1,394,731
5,076,031
26.1p
Issued in the period
2,116,726
562,199
2,678,925
20.2p
Forfeited in the period
(159,379)
-
(159,379)
0.1p
Cancelled in the period
(264,670)
(338,974)
(603,644)
59.1p
Exercised in the year
(1,080,567)
(360,914)
(1,441,481)
15.9p
Lapsed in the year
-
(48,832)
(48,832)
102.7p
Balance at 31 March 2023
4,293,410
1,208,210
5,501,620
22.3p
Issued in the period
2,040,861
352,068
2,392,929
15.0p
Forfeited in the period
(459,384)
-
(459,384)
0.1p
Cancelled in the period
(737,708)
(189,084)
(926,792)
20.4p
Exercised in the year
-
(96,019)
(96,019)
119.6p
Balance at 31 March 2024
5,137,179
1,275,175
6,412,354
19.9p
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
124
125
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
28 Share-based payments (continued)
The weighted average remaining contractual life for the share options outstanding at 31 March 2024 is 7 years and 5 months
(31 March 2023: 7 years and 6 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 (pence)
Number,
year ended
31 March 2024
Life at
31 March 2024
Number,
year ended
31 March 2023
Life at
31 March 2023
0.10
5,137,179
8 years 10 months
4,293,410
8 years 11 months
119.60
34,013
-
143,577
1 year 0 months
108.33
91,412
-
93,238
2 year 0 months
99.87
434,155
1 year 4 months
496,873
2 years 4 months
96.07
375,973
1 year 11 months
474,522
2 years 11 months
101.33
339,622
3 years 0 months
-
-
6,412,354
7 years 5 months
5,501,620
7 years 6 months
The following table illustrates the status of the options outstanding at the end of the year:
31 March 2024
Number of
options
31 March 2024
WAEP
31 March 2023
Number of
options
31 March 2023
WAEP
Performance conditions satisfied
25,000
0.1p
25,000
0.1p
Subject to performance conditions
5,112,179
0.1p
4,268,410
0.1p
Save-As-You-Earn
1,275,175
1.0p
1,208,210
101.4p
Outstanding at the end of the year
6,412,354
19.9p
5,501,620
22.3p
29 Capital commitments
At 31 March 2024, the Group entered into contracts to purchase property plant and equipment totalling £147k (FY23: £nil).
30 Pensions
The Group operates a defined contribution pension scheme for eligible employees. The charge for the year ended 31 March
2024 was £1.4m (FY23: £1.2m). At the year end, there was a pension creditor of £0.3m (FY23: £0.3m).
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
31 Subsidiaries
The undertakings whose results and financial position are consolidated within the Group Financial Statements at
31 March 2024 are as follows:
Principal activity
Country of
incorporation
% of ordinary
share capital
owned
Held directly by Redcentric plc
Redcentric Solutions Limited
Managed Services
England and Wales
100%
Held indirectly
Redcentric Solutions Private Limited
Support Services
India
100%
Redcentric Support Services Private Limited
Support Services
India
100%
Piksel Industry Solutions Limited
Dormant
England and Wales
100%
7 Elements Limited
Dormant
Scotland
100%
Hotchilli Internet Limited
Dormant
England and Wales
100%
4D Data Centres Limited
Dormant
England and Wales
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 of 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, Scotland, EH12 9DT.
On 31 January 2024, the trade, assets and liabilities of 7 Elements Limited were hived into the Group’s trading subsidiary
Redcentric Solutions Limited. The company was therefore dormant at the year end.
32 Business combinations in prior period
4D Data Centres
On 27 June 2022, the Group’s trading subsidiary Redcentric Solutions Limited acquired 100% of the share capital of 4D
Data Centres Limited (“4D”) for £10.1m consideration paid in cash. The business provides colocation, cloud and connectivity
services to mid-market customers. The primary purpose of the business combination was to scale the Group’s existing
revenues in this area with significant synergies expected as the acquisition was integrated into the Group. Management
considered signing of the share purchase agreement (SPA) on the 27 June 2022 as the change of control and therefore,
acquisition date for the transaction.
The following table summarises the acquisition date fair value of each major class of consideration transferred:
£000s
Cash
9,842
Deferred consideration 1
162
True up payment (deferred) 2
119
10,123
1 The deferred consideration was a delayed R&D claim refund due from HMRC which was to be paid to the Shareholders on receipt.
2 The true up payment was the additional amount due following the update to fair values at the time of completion, when the original cash transfer was based
on estimates.
The Group incurred acquisition related costs of £0.2m on legal fees, due diligence costs and direct integration costs in
FY23. These costs have been included in exceptional items within the prior year column in Note 9.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
126
127
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
32 Business combinations in prior period (continued)
The following table summarises the recognised amounts of assets and liabilities assumed as at the date of acquisition:
Fair value
£000s
Property, plant and equipment
2,089
Customer relationships
6,300
Brand
200
Right-of-use assets
1,287
Trade and other receivables
920
Cash and cash equivalents
1,053
Deferred tax
(1,787)
Trade and other payables
(1,647)
Deferred income
(764)
IFRS 16 leases
(1,976)
Provisions
(692)
Corporation tax receivable
186
Total identifiable net assets acquired
5,169
Goodwill
4,954
Total consideration
10,123
The goodwill arising on acquisition represented the future income from new customers, the potential to cross-sell existing
Group products to the existing 4D customer base, as well as the assembled workforce which was expected to increase the
Group’s competence in key growth areas of the Security Services sector.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
32 Business combinations in prior period (continued)
The fair value of the acquired customer relationships was £6.3m. To estimate the fair value of the customer relationships
intangible asset, a multi-period excess earnings “MEEM” approach was adopted. This approach considered the present
value of cash flows expected to be generated by the customer relationships, excluding any cash flows related to
contributory assets.
On 28 February 2023, the trade, assets and liabilities of 4D were hived into the Group’s trading subsidiary Redcentric
Solutions Limited. For the 8 months ended 28 February 2023, 4D contributed revenue of £5.3m and profits, before
allocation of group overheads, share based payments and tax, of £1.1m to the Group’s results in FY23.
Sungard
Consulting
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 paid 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 considered signing of the Agreement
for the sale of assets as the change of control and therefore, acquisition date for the transaction. No assets were acquired or
liabilities assumed from the Consulting business transaction.
Data Centres
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 paid in cash and a cash prepayment of £3.4m for a payment made to the administrators in advance for a license to
occupy on the three DCs, and contingent consideration with a maximum potential value of £19.0m depending on customer
retention and certain performance criteria.
The DCs and Consulting acquisitions were treated as a single transaction. The resulting change due to this treatment as a
single transaction was that the goodwill from the acquisitions was considered in aggregate rather than separately.
The following table summarises the acquisition date fair value of each major class of consideration transferred for the
combined transaction:
£000s
Cash
14,320
Prepayment (paid in cash)
3,369
Contingent consideration3
2,540
20,229
3 The contingent consideration was an additional amount based on an agreed sliding scale threshold of customers committing to long-term contracts
with the business post-acquisition, determined by the recurring monthly revenue value by customer and by each of the three data centres. This amount
was the Board’s best estimate as at the acquisition date of the amount due as contingent consideration, discounted to present value.
The Group incurred acquisition related costs of £0.3m on legal fees, due diligence costs and direct integration costs in
FY23. These costs have been included in exceptional items within the prior year column in Note 9.
During FY24, the contingent consideration was finalised, and the final settlement totalling £0.4m was paid. Consequently,
a £2.1m credit has been recognised as a fair value adjustment to contingent consideration in exceptional items (Note 9).
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
128
129
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
32 Business combinations in prior period (continued)
The following table summarises the recognised amounts of assets and liabilities assumed as at the date of acquisition:
Fair value
£000s
Property, plant and equipment
9,630
Customer relationships
8,800
Right-of-use assets
2,624
Prepayments
745
Deferred tax
(4,362)
Accruals
(185)
Other creditors
(293)
Total identifiable net assets acquired
16,959
Goodwill
3,270
Total consideration
20,229
The goodwill arising on acquisition represented the future income from new customers and the potential to cross-sell existing
Group products to the existing Sungard customer base, which was expected to increase the Group’s competence in key
growth areas of the Security Services sector.
The fair value of the acquired customer relationships was £8.8m. To estimate fair value of the customer relationships intangible
asset, a multi-period excess earnings “MEEM” approach was adopted, and this approach considered the present value of cash
flows expected to be generated by the customer relationships, excluding any cash flows related to contributory assets.
The DCs earned revenue of £36.3m and profits, before allocation of group overheads, share based payments and tax, of £2.5m
in the period since acquisition in FY23.
The consulting business earned revenue of £0.6m and profits, before allocation of group overheads, share-based payments
and tax, of £0.2m in the period since acquisition in FY23.
The net cash flow for the acquisitions were as follows:
£000s
Cash paid for 4D
10,123
Cash paid for Sungard, including prepayment
17,689
Less: cash acquired
(1,053)
Less: Piksel deferred consideration
(153)
26,606
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
33 Related parties
Directors’ emoluments are disclosed in the Annual Remuneration Report on page 65 and compensation of key management
personnel is disclosed in Note 11.
Oliver Scott (non-independent Non-Executive Director) is a beneficial owner of Kestrel Opportunities, who held 16,715,305
ordinary shares in the Company as at 31 March 2024.
Nick Bate (independent Non-Executive Chairman) is a Director of and investor in Europa Communications Limited.
During FY24 Redcentric Solutions Limited incurred costs of £21,360 (FY23: £nil) in respect of trading with Europa
Communications Limited, and at the year end there was an outstanding balance due to this supplier of £5,385 (FY23: £nil).
The balance at the year end is included in accruals, within trade and other payables.
There were no other transactions with related parties in the year to 31 March 2024. In the previous year to 31 March 2023, the
only related party transactions were in respect of Directors’ emoluments and compensation of key management personnel.
34 Subsequent events
On the 14 August 2024 a modification to the bank facilities was agreed to increase the Asset Financing Facility to £10.0m to
ensure adequate credit availability for future investment relating to new customer contracts. All other elements of the facility
remained the same.
Notes to the Consolidated Financial Statements
for the year ended 31 March 2024 (continued)
What we were looking for was like for like –
we wanted to switch over to a predictable
plug and play service. But what Redcentric
provided was much more for less.
“
”
130
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
131
Redcentric is a name we
can trust and a name that
our NHS customers will
trust. You bring in a great
service, and a great team
behind that as well.
“
”
Redcentric plc
Company Balance Sheet as at 31 March 2024
31 March
2024
31 March
2023
Note
£000
£000
Fixed assets
Investments
2
106,149
105,096
Debtors
3
562
406
106,711
105,502
Current liabilities
Creditors – amounts falling due within one year
4
(19,359)
(21,607)
Net current liabilities
(19,359)
(21,607)
Net assets
87,352
83,895
Capital and reserves
Called up share capital
5
159
157
Share premium account
5
75,649
73,267
Share option reserve
9,940
8,887
Own shares held in treasury
(779)
(898)
Retained earnings:
At the beginning of the year
2,482
9,621
Profit for the year
3,656
-
Other changes in retained earnings
(3,755)
(7,139)
2,383
2,482
Total shareholders’ funds
87,352
83,895
The Notes on pages 135 to 141 are an integral part of these Financial Statements.
The Financial Statements of Redcentric Plc (Registration Number 08397584) on pages 133 to 134, and the Notes to these
Financial Statements on pages 135 to 141 were approved by the Board on 15 August 2024 and are signed on its behalf by:
David Senior
Chief Financial Officer
132
133
Annual Report and Accounts 2024
Financial Statements
132
Company Statement of Changes in Equity
for the year ended 31 March 2024
Called
up Share
Capital
Share
Premium
Share
option
reserve
Own shares
held in
treasury
Retained
Earnings
Total
shareholders’
funds
£000
£000
£000
£000
£000
£000
Balance at 1 April 2022
157
73,267
7,843
(2,673)
9,621
88,215
Transactions with owners
Dividend paid to shareholders
-
-
-
-
(5,593)
(5,593)
Share option exercises
-
-
-
1,775
(1,546)
229
Share-based payments
-
-
1,044
-
-
1,044
At 31 March 2023
157
73,267
8,887
(898)
2,482
83,895
Profit for the period
-
-
-
-
3,656
3,656
Transactions with owners
Dividend paid to shareholders
(Note 5)
-
-
-
-
(3,752)
(3,752)
Issue of new shares (Note 5)
2
2,382
-
-
-
2,384
Share option exercises
-
-
-
119
(3)
116
Share-based payments (Note 2)
-
-
1,053
-
-
1,053
At 31 March 2024
159
75,649
9,940
(779)
2,383
87,352
The Notes on pages 135 to 141 are an integral part of these Financial Statements.
Notes to the company Financial Statements
for the year ended 31 March 2024
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 prior periods; 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.
134
135
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
Notes to the company Financial Statements
for the year ended 31 March 2024 (continued)
1 Accounting policies (continued)
1.2 Taxation
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 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.
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.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.
Unrecognised deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has
become probable that future taxable profits will allow the deferred tax asset to be recovered.
In assessing the recoverability of deferred tax assets, the Company relies on the same forecast assumptions used elsewhere
in the Financial Statements and in other management reports, which, among other things, reflect the potential impact of
climate-related development on the business.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply when the related asset is
realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the
reporting date.
Deferred tax is charged or credited in the Consolidated Statement of Comprehensive Income, except where the underlying
transaction relates directly to equity.
The Company offsets deferred tax assets and deferred tax liabilities if and only if it has a legally enforceable right to set off
current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes
levied by the same taxation authority and the Company intends to settle current tax liabilities and assets on a net basis.
Notes to the company Financial Statements
for the year ended 31 March 2024 (continued)
1 Accounting policies (continued)
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 share premium. No gain or loss is recognised in the Company Income
Statement on the purchase, sale, issue or cancellation of equity shares.
1.6 Share-based payments
Equity-settled transactions
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 Company 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
Company Income Statement.
136
137
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
Notes to the company Financial Statements
for the year ended 31 March 2024 (continued)
1 Accounting policies (continued)
1.6 Share-based payments (continued)
In respect of equity-settled transactions with employees, the Company grants rights to its equity instruments to employees
of the wider Group. The Group’s subsidiaries are the receiving entities for such arrangements as they receive the related
services from employees, however such awards are ultimately settled by the parent Company. As the Company receives
services indirectly through its subsidiaries (with such services increasing the value of the subsidiary and hence the
Company’s investment in the subsidiary), the Company recognises in equity the equity-settled shared-based payment
amount, with a corresponding increase in the cost of the Company’s investment in the subsidiary.
1.7 Subsidiaries
For the year ended 31 March 2024 the following companies are exempt from audit under s479A of the Companies Act 2006
(the Act) as Redcentric plc will provide a guarantee under s479C of the Act and their results are included in its Consolidated
Financial Statements.
•
Piksel Industry Solutions Limited (03048367)
•
7 Elements Limited (SC382475)
•
4D Data Centres Limited (04592242)
1.8 Intra-group financial guarantee contracts
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within
its group, the Company considers these to be in the scope of IFRS 9 and accounts for them as such. Financial guarantee
contracts issued are initially measured at fair value. Subsequently, they are measured at the higher of the loss allowance
determined in accordance with IFRS 9 and the amount initially recognised less, when appropriate, the cumulative amount
of income recognised in accordance with the principles of IFRS 15.
1.9 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.
1.10 Parent company profit and loss account
As permitted by Section 408 of the Companies Act 2006, the Parent Company has not presented its own profit and
loss account.
Notes to the company Financial Statements
for the year ended 31 March 2024 (continued)
2 Investments held as fixed assets
Year ended
31 March
2024
Year ended
31 March
2023
£000
£000
Investments in subsidiaries
96,062
96,062
Capital contribution related to share-based payments for subsidiaries
10,087
9,034
106,149
105,096
All of the Company’s investments are unlisted. Details of subsidiary undertakings are included in Note 31 of the Group
Financial Statements.
During the year investments increased by £1,053k in respect of the capital contribution to Redcentric Solutions Limited
relating to the share-based payment transaction. The Company settled the share-based payment transaction on behalf of
Redcentric Solutions Limited. There is no recharge arrangement in place for share-based payments settled by the Company
on half of Redcentric Solutions Limited. For further details see Note 28 to the Group accounts.
The Company's investments have been assessed for potential indicators of impairment. No indicators of impairment have
been identified. In informing their assessment as to whether an impairment indicator exists, the Directors compare the
carrying value of the investments to the value in use of the subsidiaries.
The value in use of the subsidiary has been calculated using a Board approved five-year forecast cash flow projections to the
period of 31 March 2029 comprising the detailed Group budget for FY25 and latest detailed forecast for FY26, with higher
level assumptions applied for the outer years. A terminal value based on a perpetuity calculation using a 2.0% real growth
rate was then added (FY23: 2.0% growth).
The key assumptions used in the value in use calculations for the subsidiary cashflows were as follows:
•
New order intake consistent with that achieved in H2-FY24;
•
Price increases in line with CPI;
•
Overall gross margin percentage of c. 70% in line with historic trends;
•
Electricity costs driven by near-term contracted prices and medium-term 3rd party price forecasts for energy;
•
Operating costs (depending on nature) to increase in line with either revenue growth or CPI, factoring in any near-term
licence inflation;
•
Pre-tax discount rate of 10.87% (FY23: 11.2%) (post tax rate of 10.51% (FY23: 10.84%)) 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 is consistent with the market the entity operates in for real growth.
The value in use has also considered that any cost implications of achieving net zero would not have a material impact on the
assessment period.
A reasonably possible adverse movement to any of the above key assumptions made would not give rise to impairment,
therefore supporting the assessment made that there are no impairment triggers in respect of the carrying amount of the
Company's investment in subsidiaries.
138
139
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Annual Report and Accounts 2024
Financial Statements
Financial Statements
Notes to the company Financial Statements
for the year ended 31 March 2024 (continued)
3 Debtors
Year ended
31 March
2024
Year ended
31 March
2023
£000
£000
Deferred tax asset on tax losses
562
406
Deferred tax assets have been recognised based on the ability of future offset against deferred tax liabilities or against
future surrendered losses to profitable trading subsidiaries in turn for consideration. The assessment of future taxable profits
in trading subsidiaries is based on forecasts and assumptions consistent with those used for our going concern basis of
preparation, as set out in Note 1.1 of the Group Consolidated Financial Statements.
4 Creditors – amounts falling due within one year
Year ended
31 March
2024
Year ended
31 March
2023
£000
£000
Amounts owed to subsidiaries
19,359
21,607
Amounts due to Group undertakings are unsecured, interest-free and have no fixed payment terms.
5 Share capital
Ordinary shares of 0.1p each
Share premium
Number
£000
£000
At 1 April 2022 and 31 March 2023
156,991,982
157
73,267
New shares issued
1,892,937
2
2,382
At 31 March 2024
158,884,919
159
75,649
On 19 January 2024, 1,892,937 new ordinary shares were issued in part satisfaction of the final dividend for the year ended
31 March 2023 of 2.4 pence per share for certain shareholders representing 63.4% of the Company’s total voting rights. The
shares were issued at 125.8961 pence per ordinary share being the five-day volume weighted average price of an ordinary
share at the close of business on 18 January 2024 (the last business day prior to the dividend payment date). The dividend
shares represented in aggregate 1.19% of the enlarged issued share capital of the Company. The FY23 final dividend therefore
constituted of £2.4m dividend shares plus £1.4m cash.
During FY24, 96,019 treasury shares have been utilised for various share option exercises, leaving 632,703 shares held in
treasury at 31 March 2024 (31 March 2023: 728,722).
Notes to the company Financial Statements
for the year ended 31 March 2024 (continued)
6 Auditor’s remuneration
The Company audit fee is £50,000 (FY23: £45,000). This fee was borne by another Group company.
7 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 65.
Oliver Scott (non-independent Non-Executive Director) is a beneficial owner of Kestrel Opportunities, who held 16,715,305
ordinary shares in the Company as at 31 March 2024.
There were no other transactions with related parties in the year to 31 March 2024.
8 Guarantees
The Company has committed to be a financial guarantor under the Group’s banking facilities, and is also party to the
Group’s cross banking guarantees. These arrangements represent financial guarantee contracts which have been accounted
for in line with IFRS 9, as explained in the Company’s accounting policies. The fair value of these financial guarantee
contracts has been assessed to be immaterial.
140
141
Annual Report and Accounts 2024
Annual Report and Accounts 2024
Financial Statements
Financial Statements
Directors
Executive
Peter Brotherton – Chief Executive Officer
David Senior – Chief Financial Officer
Non-executive
Nick Bate
Alan Aubrey
Oliver Scott
Michelle Senecal De Fonseca
Company Secretary
David Senior
Company Number
08397584
Registered Office
Central House
Beckwith Knowle
Harrogate
HG3 1UG
Auditor
KPMG LLP
Quayside House
110 Quayside
Newcastle upon Tyne
Tyne and Wear
NE1 3DX
Nominated Adviser and Broker
Cavendish Capital Markets Limited
1 Bartholomew Close
London
EC1A 7BL
Registrars
Link Group
Central Square
29 Wellington Street
Leeds
LS1 4DL
Legal Advisers to the Group
Travers Smith
10 Snow Hill
London
EC1A 2AL
Clarion Solicitors
Elizabeth House
13-19 Queen Street
Leeds
LS1 2TW
Directors and advisers
Annual Report and Accounts 2024
Financial Statements
142
WYCA now has
a future-proof solution
which will allow further
communication channels
to be rolled out in line with
its development plans.
“
”
142
Head office
Central House
Beckwith Knowle
Harrogate
HG3 1UG
T 0800 983 2522
E sayhello@redcentricplc.com
W www.redcentricplc.com