Redcentric says its 'looking for scale acquisitions' through new £100m loan
MSP says it has up to £100m to spend on M&A as it looks to add scale and new capability to the business
Redcentric claims it is looking to make acquisitions to scale the business after securing up to £100m from a syndicate of banks.
The MSP today gave a trading update for its year ending 31 March 2022, in which revenues grew year-on-year by two per cent to £93.1m.
Adjusted EBITDA however sank by two per cent year on year to £24m, but adjusted earnings were almost four per cent higher year on year at £11.5m.
Redcentric says that sales orders significantly improved in the second half of its financial year and are now returning to pre-pandemic levels, with large-scale projects also resuming.
It did, however, incur additional costs of £0.5m during the year due to electricity price increases, and commented that supply chain issues have stunted its revenue growth.
The MSP claims that it has secured a new banking facility which will give "additional firepower" to its M&A strategy.
The loan, which was raised through a syndicate of four banks, will give Redcentric £80m in committed funds as well as an additional £20m "should we need it".
Bolt-on acquisitions for specific capabilities will continue to be sought after, but Redcentric also said that it is looking for acquisitions to add scale to the business.
The firm made two acquisitions in its last financial year in the shape of AWS and Microsoft Azure partner Piksel and security testing firm 7 Elements.
Piksel is now fully integrated into the Redcentric business, with the firm realising £1.5m in annualised cost synergies - surpassing its target of £1.1m set at the time of the acquisition. The firm believes it can see a further £0.5m in synergies by the end of its next financial year ending 31 March 2023.
7 Elements has meanwhile continued as a standalone business, Redcentric claims, although most back-office functions such as finance and HR have been integrated into the group.
CEO Peter Brotherton said that the results reflect the resilient nature of the Redcentric business.
"[They] are more impressive given the challenges associated with high electricity prices, equipment shortages, a tight labour market and difficult trading conditions during the Covid-19 pandemic.
"After several years of repositioning the business, we are now totally focused on both organic and inorganic growth. We have demonstrated that we can make highly accretive acquisitions both in terms of profitability and capability and our new £100m bank facility, supported by our strong cash generation, will enable us to continue to invest in our business."