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Redcentric ends sale discussions without deal

MSP Redcentric reveals that discussions with potential suitors have terminated without a sale

Managed services provider (MSP) Redcentric has announced that it has ended a search for a potential buyer without sealing the deal for a sale after concluding talks that have been running over the past few months.

The firm had indicated in September that it was exploring a sale as it looked to ensure that it could continue to deliver value to shareholders.

In the statement issued to investors at the time, Redcentric confirmed that it was in discussions with Macquarie Principal Finance, UK branch and Six Degrees Holdings.

Those discussions have come to naught with the channel player updating investors on the occasion of its first-half (H1) of numbers for 2020.

“The board has held constructive discussions with a significant number of interested parties. However, these discussions did not materialise into any fully funded offers. Redcentric therefore announces that the board has decided to terminate the formal sale process with immediate effect,” the firm stated.

“The board is focused on building on the existing strong momentum within the business and, as noted in its announcement on 2 September 2020, will continue to evaluate potential options in relation to organic growth and/or potential acquisitions that might be made by the company to achieve maximum value for shareholders in the medium term,” it added.

At the same time, the firm was able to share H1 numbers for the six months to 30 September, which saw a 7% increase in revenue to £46.2m and a 19% increase in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to £12.3m.

Recurring revenues now account for 89% of the total revenues, improving by 6% on the previous year.

“I am pleased to report that the business is performing very well with revenues growing, strong profit margins and excellent cash generation,” said Ian Johnson, non-executive chairman at Redcentric.

“Our very significant presence in the public and private healthcare sectors, highly relevant products and high levels of recurring revenues combine to put us in an excellent position to withstand the current challenges associated with Covid-19 and the downturn in the wider economy.

“The outlook for the remainder of the year remains positive, although the board remains cautious in respect of the longer-term economic uncertainty posed by a prolonged Covid-19 pandemic,” he added.

He commented on the termination of the sale process and hinted that the firm could well turn into a buyer in the future.

“With the business performing well and low levels of net debt, we are in a strong position to consider a number of other strategic options for improving shareholder value, including appropriate acquisitions to add scale and capability,” he said.

The firm has been going through the process of a strategic review, which had included exploring the possibility of a sale, and Johnson indicated that the process was close to coming to its conclusion and would be wrapped up by the time it can share its preliminary results for financial year 2021.

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