Redstone returns to stability

published 4 July 2012

Managed services provider Redstone impressed investors on Wednesday with its return to stability following a period of difficulty, as losses for the full year narrowed significantly.

The operating loss for the 12 months to the end of March was £0.22m, versus a loss of £5.3m the year before, while the loss on ordinary activities before tax narrowed from £6.6m to £1.6m year-on-year (y/y) on stable revenues of £67.1m (2011: £67.1m).

The improvement was largely achieved in the area of administrative expenses, which declined £5.2m to £26.9m y/y as a result of last year's comprehensive restructuring and focus on cutting costs. Basic loss per share fell from 0.38p to 0.02p y/y.

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Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the year were positive at £5.2m, an increase of £4.1m from EBITDA of £1.1m in the preceding year.

Tony Weaver, Chief Executive, said: "The business has performed creditably in a very difficult market, and with a predominately new sales team and strategy.

"The company is successfully building an attractive and resilient recurring revenue base while improving its competitive offering including establishing a dedicated cloud services team to further leverage the investment in the core network and shared service platform.

"We also continue to win material and targeted project work which plays to Redstone's strengths.

"While the general economic outlook and consequently the marketplace for ICT [information and communication technology] spending remains uncertain the board is encouraged by the growing market traction achieved in the period under the new strategy and which has continued into Q1 of FY2013 [first quarter of fiscal 2013]."

Divisionally, Project revenue in the year was boosted by early commencement of the first two phases of the £21.9m project for a mission critical data centre for a leading UK bank, representing around 50% of the total project.

In contrast, the Campus managed service business suffered a 17.6% fall in revenues as a result of reduced levels of discretionary activity witnessed across multiple clients as banks reined in internal operating costs, which particularly affected activity in Q3 FY2012.

Network connectivity and cloud services increased revenue by 16.9% in the year and continue to perform strongly and remain a priority growth engine for the business.

The share price rose 6.2% to 0.85p by 09:30.