Settlement with FCA removes significant barrier to sales growth, says Redcentric

YORKSHIRE-based Redcentric today said a settlement reached with the Financial Conduct Authority over historical accounting misstatements has removed a "significant" barrier to sales growth.
Redcentric's results have been released to the stock exchange.Redcentric's results have been released to the stock exchange.
Redcentric's results have been released to the stock exchange.

The deal with the FCA includes the implementation of a restitution scheme with an estimated exceptional cost of £11.4m.

In a statement, Redcentric said: "Following the end of FY20, we reached a settlement with the Financial Conduct Authority in respect of the historical accounting misstatements uncovered by the company in November 2016. The FCA's investigation into the company lasted over three years and its conclusion is hugely significant for the group as it removes a significant barrier and uncertainty for all of our stakeholders and will allow the management team to focus solely on running and growing the business."

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Redcentric, which is an IT managed services provider, has announced its full year results for the year ended March 31 2020.

Revenue of £87.5m was 6 per cent below the previous year, although the revenue figure for the second half of the year was higher than the first half.

The adjusted EBITDA of £20.6m, was below the £16.7m recorded the year before.

Redcentric said there were high levels of recurring revenues and it was in a strong financial position. The business is well-placed to react to the many challenges arising from Covid-19, Redcentric said.

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Redcentric said it has had a good start to the new financial year with all key business metrics showing positive trends.

The majority of employees have been working remotely since March 17 2020. It has not been necessary to furlough any employees, Redcentric said.

Peter Brotherton, the group's CEO, commented: "We have had a very productive year with many of the initiatives undertaken giving rise to long term benefits. After three years of decline, recurring revenues are now growing and account for 89% of total revenues.

"The efficiency and integration initiatives undertaken during the year have resulted in annualised savings of £3.5m, which will boost future profitability. Our network and operational platforms have all been upgraded, resulting in modern, resilient and scalable infrastructure to support future growth.

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"The settlement with the FCA means that the company's management team is now free to focus solely on the business and able to sell to all markets, including those regulated by the FCA."

In a note, analysts from Finncap said: "Finals for the year to March demonstrate rude health and opportunities despite lockdown – and after nearly four years, the..spectre of the FCA investigation has been dealt with.

"The organisational efficiency which CEO Peter Brotherton has delivered over those four years has not just included cost savings, but also an upgraded and rationalised network and infrastructure, a single ERP (from October), and opportunities for private and public sector revenue growth. The group is now primed to play an active part in the consolidation of the mid-market managed services sector, as predator or prey, with a healthy balance sheet."

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