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Integration of acquisitions the focus at Redcentric

A flurry of deals in the past fiscal year need to be integrated, but don’t count out the chances of more targets being picked up

Redcentric was in the news last month thanks to its move to snap up the remaining assets and contracts from Sungard Availability Services, but going forward, headlines are more likely to be generated by organic growth activities.

The Sungard deal is just one of a few that the firm has struck in the past fiscal year, coming on the back of some momentum in the buy and build strategy the firm has been following. In a preliminary results update to investors, it was made clear that the focus would now be on the integration of those acquisitions.

“In the last 12 months, we have delivered on the acquisition strategy as outlined in last year’s annual report and accounts,” said Peter Brotherton, CEO of Redcentric.

“During this period, five acquisitions were completed which have transformed the company. The Piksel, 7 Elements and Sungard consultancy business acquisitions have all added significant capability in the high market growth areas of hyper-cloud and cyber security. The Sungard DC and 4D acquisitions bring considerable additional scale, with a clear path to significantly increased scale over the next two years.

“Our focus will now switch to fully integrating the recently acquired businesses and exploiting the meaningful cross-sell opportunities and synergies that these acquisitions bring to Redcentric,” he added. “At the same time, we will continue to monitor potential targets, and should a suitable opportunity arise, our solid balance sheet, strong cash generation and access to £66m of undrawn bank facilities will enable us to react swiftly.”

Preliminary results for the 12 months ended 31 March showed a 2.1% increase in revenues to £93.3m, with the portion of recurring revenue improving by 1.3% to £83m. Adjusted operating profit improved by 2.2% from £15.6m to £15.9m.

The firm has also been working to introduce a fresh divisional operating structure that will be focused around cloud, networks and collaboration products, with the aim of driving more growth.

Full integration

The update also shared progress on how some of the acquisitions had gone, indicating that Piksel, which was picked up in September 2021, was now fully integrated into the Redcentric business, and as a result, around £1.5m of annualised costs had already been eliminated, with a further £500,000 of synergies anticipated to be realised in FY23.

Although 7 Elements, which was acquired in March this year, is being run as a standalone business, the back office functions had largely been fully integrated into Redcentric systems.

Everyone is having to cope with cost of living issues, and Redcentric’s update included a pointer to the additional £500,000 that had been added to electricity costs due to energy price increases.

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