Redcentric’s FY26 trading update is a bit of a mixed bag at first glance, but the market is likely to focus on two things: profits came in ahead of expectations, and the balance sheet has been dramatically strengthened after the data centre sale. For retail investors, that is the heart of this announcement.
The managed services business – MSP stands for managed services provider, essentially outsourced IT support and infrastructure – delivered c.£17.5 million of adjusted EBITDA for FY26. Adjusted EBITDA is a profit measure that strips out interest, tax, depreciation, amortisation and certain one-off or non-cash items. That was ahead of market expectations of £17.2 million, which is a small beat, but a beat nonetheless.
The catch is that revenue was lower year-on-year, and margins were a touch softer too. So this is not a full-throttle growth story just yet. It is more a case of Redcentric showing decent operational discipline while reshaping the business around a stronger cash position.
Redcentric FY26 key numbers: EBITDA beat, revenue dip and a big swing to net cash
| Metric | FY26 | FY25 | What it tells us |
|---|---|---|---|
| MSP revenue | c.£132.1 million | £135.1 million | Revenue fell year-on-year |
| Recurring revenue | c.88% | Not disclosed | High visibility and stickier income |
| Gross profit margin | c.61.0% | 61.6% | Slight margin softening |
| Adjusted EBITDA | c.£17.5 million | Not disclosed in this update | Ahead of £17.2 million market expectations |
| Adjusted net debt at 31 March 2026 | c.£36.8 million | £41.9 million | Debt reduced before disposal proceeds |
| Initial cash receipt from data centre sale | £115.4 million | Not applicable | Major balance sheet boost |
| Net cash at 29 May 2026 | £77.9 million | Not disclosed | Strong post-sale financial position |
One important point: these FY26 numbers are draft and unaudited. Also, the revenue, margin and earnings figures discussed here exclude the data centre business, because that operation was treated as a discontinued operation under IFRS before it was sold on 30 April 2026.
Redcentric MSP revenue fell in FY26, but recurring revenue stayed high
The MSP business generated c.£132.1 million of revenue in FY26, down from £135.1 million in FY25. That is a decline of c.£3.0 million, so investors should not ignore the fact that the top line moved backwards.
Still, there is a more reassuring detail tucked into the statement. Recurring revenue remained high at c.88%, which matters because recurring income is generally more predictable than one-off project work. In plain English, Redcentric still has a large chunk of revenue that tends to repeat, giving management better visibility over future trading.
The gross profit margin edged down to c.61.0% from 61.6%. That is not a collapse, but it does suggest the company is operating in a competitive market where pricing and mix still matter. Management said the sector remains highly competitive, which is honest and worth noting.
Adjusted EBITDA ahead of expectations is the headline positive
The standout line in this update is adjusted EBITDA of c.£17.5 million, ahead of market expectations of £17.2 million. A £0.3 million beat will not change the world, but it does tell investors that Redcentric managed the business a bit better than the market expected.
The company credits strong traction in the second half and continued cost discipline. That fits with the broader tone of the update – this was not a revenue-led win, it was an execution-led win. In a tough market, that still counts.
There is also a forward-looking angle here. Redcentric said it made certain strategic investments in the second half aimed at accelerating revenue growth and improving earnings from H2 FY27 and beyond. That is encouraging, but it comes with a timing warning: the payoff is not expected immediately.
Redcentric data centre disposal transforms the balance sheet
This is where the story gets much more interesting. Adjusted net debt fell to c.£36.8 million at 31 March 2026 from £41.9 million a year earlier, which already showed decent cash generation. Then came the big step change.
After selling the data centre business to Stellanor Datacenters Group Limited on 30 April 2026, Redcentric received an initial cash payment of £115.4 million. As a result, by 29 May 2026 the group had moved to a net cash position of £77.9 million, net of borrowings but excluding IFRS lease liabilities.
That is a serious improvement in financial flexibility. A company sitting on net cash rather than net debt usually has more room to invest, absorb pressure, and potentially create value over time. It does not guarantee success, but it gives management a much stronger hand than before.
Why Redcentric’s stronger cash position matters for FY27 and beyond
The board is now leaning into a simpler model built around managed IT services, recurring revenue, lower capital expenditure and better cash conversion. Capital expenditure, or capex, is money spent on assets and infrastructure. Lower capex usually means more cash can flow through the business rather than being tied up.
That matters because Redcentric is effectively telling investors this is now a cleaner, more cash-generative MSP story after the disposal of the data centre arm. If management executes well, the market may eventually reward that with a better rating. But it still needs to prove it can turn the stronger balance sheet into sustained growth.
The company sounds confident about the medium to long-term outlook, and the logic is reasonable based on what is disclosed here. The stronger cash position is real, and the recurring revenue profile is helpful. The missing piece is clearer evidence that revenue can consistently grow again.
What retail investors should watch after this Redcentric FY26 trading update
- Revenue momentum: FY26 MSP revenue fell year-on-year, so investors should watch whether strategic investments actually lift growth from H2 FY27.
- Margin quality: Gross margin slipped slightly. The business says it is targeting higher-margin, long-term contracts, and that needs to show up in future numbers.
- Use of cash: The move to £77.9 million of net cash is a major shift. The obvious question now is how that capital will be used.
- Final results detail: This update is brief and unaudited. The final results should give a fuller picture on profitability, cash flow and outlook.
My take on the Redcentric RNS: positive overall, but not spotless
I would call this update broadly positive. Beating EBITDA expectations and moving into a strong net cash position are both meaningful wins, especially in a competitive market.
That said, it is not a flawless release. Revenue went backwards, margins dipped a little, and some of the growth benefits from strategic investments are still being promised rather than delivered. So the bull case is strengthening, but it is not fully proven yet.
For now, the key takeaway is simple: Redcentric has bought itself breathing room and optionality. If the MSP business can convert that stronger financial position into sustainable revenue growth and solid margins, this update could end up looking like an important turning point.
