IT services firm makes progress as it moves on from accounting errors

IT services firm Redcentric said it is on a strong footing to deliver the next stage of its growth as it moves past the accounting scandal which rocked the company in 2016, leading to a major restructure of its senior management team.

The Harrogate company, which employs around 500 across the UK and India, was hit by the announcement of financial misstatements in November 2016 and an investigation by the Financial Conduct Authority (FCA) , which led to the resignation of its chief financial officer Tim Coleman.

Since then, the company made significant investment in its financial department and appointed Peter Brotherton as CFO, while Chris Jagusz took over from Fraser Fisher as CEO.

Chris Cole, non-executive chairman, said this morning that while the company’s report last year was dominated by the accounting misstatements, at the time he had “every confidence” that the group would put “this difficult period” behind it.

Reporting on the company’s results for the financial year to the end of March 2018, Cole said: “I am pleased to say that this confidence was not misplaced, and I am happy to present a more positive report along with details of the considerable progress that has been made during the financial year. The business is now in a much stronger position and importantly we have maintained our principal customer base. ”

He said Redcentric’s focus had been to rebuild the finance function and transform the financial control environment, address the historical billing and collection issues, reduce the cost base of the group and to grow both revenues and profitability.

Revenue declined by 4.4% to £100m and adjusted EBITDA increased from £17.3m to £18.1m, with the increase in profitability reflecting reduced adjusted operating costs.

Cash flows were strong, with £22.6m of adjusted operating cash flow, representing 125.5% of adjusted EBITDA, while net debt fell from £39.5m to £27.7m, a decrease of £11.8m in the year.

During the year, Redcentric spent £672,000 on the FCA investigation, reduced from £1.2m in 2017. Restructuring costs during 2017 stood at £868,000.

Cole said: “During the year we have taken decisive action to allow Redcentric to take advantage of the many opportunities presented to it.

“The finance team and infrastructure have been materially strengthened, clearly demonstrated by the significant reduction in net debt, the resolution of billing and collection issues and a strong focus on the cost base.

“During the year, we also strengthened the board and the senior management team who have identified and started to implement the initiatives required to build upon a solid base and deliver the next stage of Redcentric’s development.”

Chief executive Chris Jagusz added: “I am pleased to have joined Redcentric at this time of change and opportunity. In my first nine months as chief executive, it has become very clear to me that this is a company with industry leading assets, technical skills and personnel.

“Whilst our industry continues to evolve rapidly, I believe the actions we are taking, combined with the quality of our assets, customer relationships and expertise, leave us well placed to benefit from these shifts and position us well to continue to be trusted and relied upon to transform, operate and evolve our customers’ IT infrastructures.

“Being awarded the Yorkshire and Humber Public Sector Network agreement, Redcentric’s largest contract to date, serves as testament to the strength of the company’s offering in a core sector.”

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