Mixed bag for RedstoneConnect in half-year results
Smart building software and managed services businesses grow, while SI activity plummets
RedstoneConnect is witnessing mixed fortunes across the business as it dramatically evolves its business model.
The firm saw significant revenue growth for its smart building software which was up 194 per cent to £1.7m; and managed services businesses, up 18 per cent to £9.1m, in the first six months of FY18.
However, those successes failed to offset a 26 per cent decline in turnover from its systems integration activity, down to £9.2m from £12.5m in the period.
Martin Courtney, principal analyst at TechMarketView, said RedstoneConnect attributed the fall in SI turnover to the timing of income from some of its larger contracts, and does not believe the business is in terminal decline.
"Rather, chief executive Mark Braund sees designing infrastructure for smart buildings as a core part of the business going forwards, one that enables the software and services entities to accelerate their growth in tandem," said Courtney.
"Overall group revenue slipped three per cent year on year to £20m, with adjusted EBITDA up 12 per cent to £1m. The company's net loss widened to £867,000 from £485,000, with acquisition and integration costs associated with the Anders+Kern buy for £1.4m in cash and the ongoing expenses related to the development of the software division taking their toll."
Courtney said acquisitions underpinned RedstoneConnect's FY17 revenue, and unless it can sign more big deals that could be the case for its FY18 performance too.
"There are signs the company is doing that, with contracts for the deployment of in-building cellular (IBC) and distributed antennae system (DAS) infrastructure and services at two major London banks set to boost its 2H18 and 1H19 turnover, while management remain confident that similar deals are in the pipeline," added Courtney.
Mark Braund, CEO of RedstoneConnect, said the firm has performed well in the first half of the year, with trading momentum weighted towards the second half.
"We continue to see good traction for our software solutions alongside our infrastructure and managed services capabilities, which is improving both the predictability and quality of our earnings," he said.
"The integration of A+K is now complete and is contributing positively to the business, not only through the addition of services to the group, but also the diversification of our routes to market for our existing products and IP.
"Coupled with our continued investment in product development across our software solutions division, we anticipate the next 12 months will be an exciting time for RedstoneConnect."