Redcentric narrows losses, bouncing back from accounting misstatement drama

AIM-listed IT management services group Redcentric narrowed losses in its first half despite a slight downturn in revenue.

Pre-tax losses came in at just £28,000 in the six months leading to 30 September, a marked improvement on the £2.5m loss recorded a year earlier.

Group revenue remained mostly flat, down just 0.8% to £51.4m, and recurring monthly revenue, the company's prime focus, slipped £38,000 to £44,644 per month.

One-off service revenue fell 35.9% to £2.6m; however, a 33.2% increase in product sales to £4.12m softened the blow.

Results for the half ended in line with the same period a year earlier, with good progress shown in Redcentric's plan to improve cash flow, reduce net debt, and "right-sizing" its cost base.

Net debt was reduced by £6.2m to £33.3m with the company holding cash and equivalents of £4.69m at the end of the half.

In November 2016, Redcentric published an overstatement of its net assets and profit of £20.8m and the hole in its finances led to the departure of its chief financial officer, Tim Coleman.

The FCA announced it would be investigating "the conduct of a member" in July, the probe would cover the company's accountancy scheme in relation to its 2015 and 2016 financial reports.

New chief executive Chris Jagusz, who joined the firm in October, said, "Despite the significant problems encountered as a result of the accounting misstatements, the business is fundamentally strong. Its product offering is well aligned to the demands of customers, it has a strong and loyal recurring revenue customer base and the business is cash generative."

"The issues surrounding the accounting misstatements have been addressed and so my focus is on providing the business with a clear strategy to enable the business to grow," he added.

Losses per share narrowed to 0.04p from 1.17p twelve months earlier.

As of 1345 GMT, shares had slid 5.14% to 83.00p.