FY25 at a glance: steady MSP growth, DC sale in play
Redcentric has delivered a solid set of FY25 numbers while reshaping the business. The Group split into two autonomous units during the year – Managed Services Provider (MSP, the continuing business) and Data Centres (DC, now treated as a discontinued operation under IFRS 5). The Board has appointed advisers and is in advanced negotiations to sell the DC unit. There is no certainty of completion, but management expects – if successful – a significant return of capital to shareholders and a leaner, growth-focused MSP.
On the continuing MSP business, revenue rose organically by 8.3% to £135.1m, with recurring revenue up 9.0% to £120.7m and now 89.3% of the mix. Adjusted EBITDA was £18.8m with a flat margin of 13.9%. Reported profit before tax more than doubled to £4.4m as exceptional costs eased. Group net debt reduced to £65.5m and adjusted net debt (the banking metric that strips out certain leases) was £41.9m.
Key numbers investors should know
| Metric (continuing MSP) | FY25 | FY24 | Change |
|---|---|---|---|
| Total revenue | £135.1m | £124.8m | +8.3% |
| Recurring revenue | £120.7m (89.3%) | £110.7m (88.7%) | +9.0% |
| Gross profit / margin | £83.3m / 61.6% | £78.2m / 62.7% | -1.1 percentage points |
| Adjusted EBITDA (margin) | £18.8m (13.9%) | £17.4m (13.9%) | +8.1% |
| Reported operating profit | £8.4m | £5.7m | +47.5% |
| Reported profit before tax | £4.4m | £1.8m | +139.3% |
| Adjusted basic EPS | 3.82p | 3.74p | +2.3% |
| Reported basic EPS (continuing) | 1.70p | 1.10p | +54.5% |
| Group net debt | £65.5m | £72.4m | -9.5% |
| Group adjusted net debt | £41.9m | £42.0m | +0.3% |
For completeness, total Group (MSP + DC) revenue was £169.9m with adjusted EBITDA of £35.4m.
What changed: separating MSP and DC
The FY25 story is as much about structure as it is about numbers. Management completed the MSP/DC split on 1 February 2025. Under IFRS 5, the DC business is shown as a discontinued operation and its assets and liabilities are classified as held for sale. That makes the continuing MSP results cleaner and easier to value in future.
Why sell DC? The Board argues MSP and DC serve different markets and need different operating models. DC is capital intensive; MSP is services-led with a high recurring revenue base. The DC unit actually traded well in FY25 – adjusted EBITDA rose to £16.6m helped by lower power costs and prior consolidation – which helps the sale narrative.
Trading drivers: VMware boost, margin pinch
MSP growth was driven by Cloud, Connectivity and Communication, with a notable tailwind from Broadcom’s overhaul of VMware’s partner model. Redcentric became a retained Pinnacle Partner, capturing roughly £7.2m of additional VMware licence revenue. That came at lower margin, which, together with general cost inflation, nudged gross margin down 1.1 percentage points to 61.6%.
There was also good housekeeping: eight legacy cloud platforms were removed and the overall platform count cut from 56 to 21, simplifying operations and trimming costs.
Cash, debt and dividends: preparing for a capital return
Operating cash generation stepped up, with net cash from operating activities at £29.8m (FY24: £23.0m). Group net debt fell to £65.5m. After the year end, the Revolving Credit Facility was renewed to April 2027 at £60.0m (from £80.0m at year end), reflecting a tighter but adequate facility ahead of the expected DC sale and de-leveraging. Borrowing costs are 205 basis points over SONIA at current leverage.
Dividend-wise, the Board paid a 1.2p interim (£1.9m) but has suspended the final dividend pending the potential DC disposal. Historically the annual dividend was 3.6p. Management signals that, if the sale completes, a “material return of capital” is anticipated, while keeping sufficient cash to grow MSP and reduce debt. If a deal does not complete, the Board will revisit dividends in the usual way. Importantly, the RNS is clear: there is no certainty of a transaction.
Outlook and guidance: flat FY26, rebuild for FY27
The near-term playbook is disciplined. For FY26, management guides to stable MSP revenue, a focus on recurring revenue, and tight cost control to protect margin and cash flow. A refreshed MSP strategy will be set out at the interim results. The new CEO, Michelle Senecal de Fonseca, expects the Group to return to revenue and earnings growth from FY27.
Operationally, expect continued cross-sell into the enlarged customer base, VMware-related opportunities (still lower margin), and further simplification of legacy platforms. Public sector price pressure, cost inflation and renewal dynamics remain watch-outs.
Jargon buster
- Recurring revenue: income that repeats contractually or by predictable customer habit.
- Adjusted EBITDA: earnings before interest, tax, depreciation and amortisation, excluding exceptional items and share-based payments.
- Adjusted net debt: net debt excluding certain leases and supplier loans used for banking covenants.
- Discontinued operation (IFRS 5): a business held for sale that is reported separately from continuing operations.
What I like, and what I don’t
Positives
- All growth in MSP was organic: revenue +8.3% with recurring revenue up to 89.3% – that’s a resilient base.
- Adjusted EBITDA up and margin held at 13.9% despite mix headwinds – good cost discipline.
- Operating cash flow improved; Group net debt reduced by £6.9m.
- DC performance rebounded (power savings, consolidation), strengthening the sale case and potential capital return.
Negatives
- Gross margin slipped 1.1 percentage points, and VMware gains are lower margin by nature.
- Final dividend suspended – sensible capital management, but income investors will notice.
- FY26 revenue guidance is “stable” rather than growing; management also flags distraction from the sale process.
- There is explicit transaction risk: the DC sale may not complete.
My take: why this matters for shareholders
This is a cleaner, simpler Redcentric emerging. If the DC sale completes anywhere near management expectations, shareholders may see a meaningful return of capital and a de-levered, service-led MSP with high visibility of earnings. Even without a sale, the MSP unit is demonstrating organic momentum and healthy cash conversion, albeit with some margin pressure from mix and renewals.
Near term, think execution: hold the margin line in FY26, land the DC deal on acceptable terms, and present a credible MSP growth plan at interims. Medium term, think focus: more cross-sell into public sector and enterprise accounts, continued platform rationalisation, and selective partnerships like VMware to win wallet share – while being mindful of the lower-margin profile of some resale activity.
Overall, a constructive update. The investment case now pivots on two things: transaction outcome and MSP execution. Deliver those, and the FY27 growth ambition starts to look very achievable.
