Revenues soar at IT group but energy costs bite
Managed IT services business, Redcentric, says it is confident in its outlook despite being hit by higher than expected electricity costs of about £1.7m, as it releases its provisional results for the year ended 31 March 2023.
The Harrogate-based company has reported revenues of £141.8m (FY22: £93.3m) and adjusted EBITDA of £24.8m (FY22: £23.7m).
These results reflect the contribution from five acquisitions completed by the business over the last two financial years.
Peter Brotherton, chief executive officer, said: “The last two years have been transformational for the company.
“The five acquisitions, together with a return to organic growth, has seen Redcentric’s revenues grow by 75% in the last two years from £91.4m in FY21 to a current annualised run rate of around £160m.
“Due to the very significant and complex nature of the synergy programmes, which were reflected in the consideration paid for the acquisitions, the boost in profitability will not be fully realised until FY25.
“However, we are confident of achieving long term EBITDA margins close to or in line with our stated target of 25% once the integration programmes have been completed and fully reflected in the cost base.”
The company explains it continues to see strong organic growth, with an increase in net new business in each of the last ten months to the end of March 2023.
But Redcentric warns it also continues to experience widespread inflationary increases across its cost base, primarily wage inflation, electricity costs and software license costs.
And it has been notified of significant increases in business rates (about 33%) across its data centre portfolio which is anticipated to add around £0.8m to the FY24 cost base.
The company operates out of eight of its own data centres and has a large (including management) presence in a third-party data centre. In seven out of nine of these data centres, Redcentric is responsible for the sourcing of electricity.
Redcentric states: “Electricity costs remain key to financial performance and we will continue to make significant investments in FY24 to further reduce electricity consumption.
“This will be achieved by deploying new cooling infrastructure at the flagship data centre in Heathrow and by installing solar panels at the Heathrow and Elland data centres.
“The company has locked in electricity prices for the whole of FY24 and so will not be subject to commodity price volatility in the current financial year.”
