Redcentric Regulatory News (RCN)

15 June 2015

Redcentric plc

("Redcentric", the "Company" or the "Group")

Audited results for the year ended 31 March 2015

Redcentric plc (AIM:RCN), a leading UK IT managed services provider, today announces its audited results for the year ended 31 March 2015.

Highlights

· Revenue £94.3m (2014: £58.3); organic growth* of 8%

o Recurring revenue of £76.8m; organic growth of 13%

o Recurring revenue 81% of total (2014: 71%)

· Profitability improved: adjusted EBITDA** £21.4m (2014: £10.5m); pro-forma growth of 32%

o Adjusted EBITDA margin 23% (2014: 18%)

· Adjusted EPS*** up 33% to 8.47p (2014: 6.38p)

· Net bank debt at year end £4.8m (2014: £12.3m) after payment of £2.9m of dividends

· Proposed final dividend of 2.5p per share, making 3.5p in total for the year

Post year end highlights

· Acquisition of Calyx Managed Services Ltd for £12.0m in April

· New five year £50m bank facilities signed, providing the Group with significant further financing to explore future opportunities

Chris Cole, Chairman of Redcentric, commented:

"I am very pleased with these results. We have created a powerful platform which is producing significant levels of recurring revenue and organic growth. The post year-end acquisition of Calyx is another step in our growth ambitions and our determination to deliver value to our shareholders."

Tony Weaver, Chief Executive of Redcentric, commented:

"We focus on partnering with our customers to deliver them business building outcomes through our wide range of solutions: the growth in our recurring revenue demonstrates the strength of that partnership. We are progressing well in our aim to become the preferred IT managed services provider to the UK mid-market. We have considerable momentum in the business and I look to the future with confidence."

\* Throughout this document organic growth is calculated by comparing the performance in the current year with the performance in the prior year as if acquisitions made part-way through the prior year had been included for a full year.

*\* Throughout this document reference to "Adjusted EBITDA" is defined as earnings before interest, tax, depreciation and amortisation and excludes transaction and integration costs and charges for share-based payments. The Board regards Adjusted EBITDA as the key measure of underlying profitability.

***Adjusted EPS is calculated by removing the effect of amortisation of acquired intangibles, share-based payments, non-recurring transaction and integration costs and by replacing the reported tax credit with a notional tax charge at the full rate of corporation tax.

Enquiries:

Redcentric plc Tel. +44 (0)845 034 1111

Tony Weaver, Chief Executive

Fraser Fisher, Chief Operating Officer

Tim Coleman, Chief Financial Officer

finnCap - NOMAD & Broker Tel. +44 (0)20 7220 0500

Stuart Andrew / Simon Hicks

MXC Capital Advisory LLP - Financial Adviser Tel: +44 (0)20 7965 8149

Marc Young / Charlotte Stranner

Newgate Tel: +44 (0)20 7653 9850

Tim Thompson / Bob Huxford / Jasper Randall / Helena Bogle

Chairman's Statement

In my first year as Chairman, I am delighted to present the annual results for Redcentric plc for the year to 31 March 2015. This is the first full year of trading for the Group in its current form, with no acquisitions or disposals during the year.

It has been a year of impressive achievement for Redcentric - financial performance has been strong, a significant number and variety of new customers have been won, and investment has continued to strengthen the business for the future.

Summary trading results

Revenue for the year was £94.3m (2014: £58.3m), which represents organic growth of 8% on a like for like basis. Recurring revenue grew organically by 13% to £76.8m (2014: £41.3m), representing 81% of total revenues (2014: 71%). This high level of recurring revenue provides a stable and profitable core to the business, and gives the Board confidence in the underlying financial strength of the Company.

Adjusted EBITDA* was £21.4m (2014: £10.5m), representing an adjusted EBITDA margin of 23% (2014: 18%), and showing underlying growth of 32%. The impressive growth in profitability has been driven by synergies arising from the integration with InTechnology Managed Services Ltd ("IMS"), which was acquired in December 2013, as well as an improved revenue mix and the benefits of increased scale in delivering service to customers efficiently.

The business has delivered significant levels of cash-flow, with free cash-flow of £9.8m (£1.7m) generated during the year. Dividends totalling £2.9m (2014: £nil) were paid to shareholders, with the remaining free cash-flow used to reduce net bank debt. At the year-end, Redcentric had net bank debt of £4.8m (2014: £12.3m).

The statutory retained profit for the period was £8.0m (2014: £1.8m). The difference between adjusted EBITDA and the statutory profit is shown on the face of the Consolidated Income Statement.

Business Development

Whilst these results demonstrate the underlying strength of Redcentric's business, the Board has been mindful of the opportunities available to leverage the business platform through appropriate acquisitions. Calyx Managed Services Ltd ("Calyx") was acquired for £12.0m on 10 April 2015, and is currently being integrated into the core Redcentric operations. We are delighted to welcome the Calyx customers, and are confident that they will benefit from being a part of Redcentric.

The Calyx acquisition was financed by a new, long-term bank facility, which provides us with the flexibility to consider further acquisitions in the future. However, our current focus is on integrating Calyx and ensuring its customers gain benefit from the enlarged Group, along with the continued drive to maximise organic growth.

Dividend

The Board has previously committed to returning value to shareholders through the establishment of a progressive dividend policy, and is pleased to have initiated this in 2014. A maiden dividend of 1.0p per share was paid in September 2014 in respect of the year to 31 March 2014, with an interim dividend of a further 1.0p per share being paid in February 2015. Having considered the strong financial performance of the Company in 2015, the Board are recommending a final dividend of 2.5p per share, which, if approved, will be paid in September 2015, making a total of 3.5p per share for the year.

The Board considers it important to return a meaningful proportion of sustainable free cash-flow to investors through the dividend policy, and will be looking to grow the dividend over time in line with performance whilst retaining appropriate levels of cash and reserves in the business to support future investment.

Board and employees

During the past year, the Board has continued to evolve, with two independent Non-Executive Directors joining the Company. I replaced Richard Ramsay as Non-Executive Chairman in August 2014, and Stephen Puckett replaced Ian Smith in November 2014. The Board continues to be well balanced, comprising three independent Non-Executive Directors and three Executive Directors. David Payne and Stephen Puckett chair the Remuneration and Audit Committees respectively.

These financial results demonstrate the significant level of progress made by Redcentric over the past twelve months. The management and employees have created a business which compares very favourably with its competitors both in terms of revenue growth and margin, and have built a robust and stable platform capable of delivering valuable services to its customers. This has been achieved through significant amounts of hard work and commitment, and the Board is very thankful to each and every employee for the part they have played over the last year.

Outlook

Our sales pipeline has continued to grow, as more potential customers identify the role Redcentric can play in helping them achieve their business objectives. Sales activity and resource levels have increased which, combined with the growth in underlying recurring revenue, has accelerated momentum in the business. The Board's primary focus is to continue to grow the business organically and integrate Calyx whilst considering further appropriate acquisition opportunities that will augment the overall growth and performance of the business. The Board is confident of the future prospects for Redcentric and for increasing shareholder return.

Chris Cole

Non-Executive Chairman

15 June 2015

Operational Review

Overview

This year has seen Redcentric transform fully into one of the UK's leading providers of IT managed services to mid-market organisations. The integration of IMS, acquired on 6 December 2013 has been achieved on plan, and has delivered benefits in excess of those expected at the time. The resultant business has the financial strength, scale and flexibility to provide our customers with best-in-class services, delivered over our own managed infrastructure to exacting levels of quality.

Redcentric's proposition

Redcentric operates state-of-the-art data centres in Reading, Harrogate, London and Cambridge from which services are delivered. These are our own dedicated facilities, held on long leases, and have been fully resourced with highly qualified staff and technology to deliver critical services to our customers. The data centres are connected to our own fully resilient MPLS network, providing coverage and access across the UK, along with metropolitan fibre networks in Cambridge and Portsmouth. From this strong base of owned managed infrastructure we are able to offer a wide range of managed services including;

· Network Services. We are a significant ISP with a core MPLS network, metro networks and extensive experience in delivering networks for a broad range of organisations.

· Collaboration Services. Through IP telephony, messaging and video conferencing we help organisations enable their staff to communicate more effectively.

· Infrastructure. As a leading provider of infrastructure services, Redcentric offers a suite of Cloud services, including IaaS, SaaS and DRaaS, as well as colocation, data management and virtualisation services.

· Applications Services. We provide packaged solutions for many sectors as well as application management services from legacy to current architecture.

· Security. We help protect customers from deliberate DDoS attacks, or unintentional security threats from unauthorised devices and a range of other threats.

· Mobile. We provide a fully managed mobile service with flexibility, reliability and security.

The Company is headquartered in Harrogate, with additional offices in London, Reading, Theale, Cambridge and Hyderabad. The Hyderabad office operates as a fully integrated part of Redcentric, with highly skilled second and third line technical engineers complementing the support teams in the UK as well as providing back office services. The Hyderabad office provides access to one of the world's largest sources of highly skilled technical staff, and provides flexibility in delivering service to our customers.

Trading results & key metrics

Redcentric's financial performance is covered in more detail elsewhere in this report, however the Company delivered a very strong performance on all of the key metrics that the Board focuses on:

* pro-forma comparatives are shown to illustrate underlying organic progress as if IMS had been part of Redcentric for a complete financial year.

The strength of the recurring revenue base has been a particular highlight of the year's performance, with the resultant stability and visibility that it generates. Customer churn has been low, which has led to strong levels of organic growth as the contract base has steadily increased. Our customers typically sign three year contracts, although we have a significant number of customers who we have been serving in various forms for much longer periods.

As Redcentric has increased in both scale and capability, we have been able to win larger and more complex contracts. Since the year-end, we have signed a number of significant contracts with government agencies with contracts rolling out through 2015 and 2016. It is a testament to how the business has grown and developed as well as the strength of it proposition that we were selected to partner with these customers.

We have continued to strengthen our sales teams, which had a record year for new order intake in FY15. The sales pipeline has grown further, with the current pipeline of qualified opportunities standing at £71m, an increase of 18% over the past six months. Momentum is strong as we start the new financial year, providing confidence that we will be able to win new customers as well as developing relationships further with existing ones.

Strategy

The market for IT managed services in the UK is highly fragmented, and is served by a broad spectrum of businesses from global telecommunication companies through to hardware and software providers, system integrators and a range of independent managed service providers of varying sizes as well as companies providing individual elements of the IT managed services spectrum. The market is growing, driven by the continued move towards off-premise solutions and mobile access to secure services.

Redcentric positions itself in the market as being able to combine the benefits of proprietary network and data centres with a flexible and technically skilled workforce able to deliver and support critical services and solutions in a highly secure environment.

We seek to differentiate ourselves in three distinct ways:

· Innovation - innovation in the design and delivery of services;

· Reliability - the right technical skills, organised in the right way, to give predictable high quality results; and

· Value - service offerings that are designed to offer value for money to mid-market customers.

We believe that Redcentric's position between the very large system integrators and network operators and the smaller competitors that lack delivery structure, reliability and financial strength is a very compelling one. We are progressing well in our aim to be the supplier of choice to the UK mid-market. We have a strong and reliable set of core infrastructure and have developed a delivery model that provides certainty for customers, combined with a focus on identified business outcomes for them: this platform is the core strength of the Company. We will continue to consider augmenting our pace of growth through acquisitions that leverage this platform, should there be a compelling strategic and financial case.

Calyx Managed Services

Subsequent to the year-end, on 13 April 2015, Redcentric acquired Calyx Managed Services Ltd ("Calyx") for £12.0m. Calyx had previously disposed of its Break-Fix and Carrier Services divisions, and the remaining business delivers managed services to a very similar, and complementary, customer base. We are progressing with the integration of Calyx using a similar methodology to the IMS integration, albeit on a smaller scale, and are confident that the Calyx customers will benefit significantly from the exposure to the greater range of services Redcentric can provide. We expect the integration to be completed by 31 September 2015, and the acquisition to be earnings enhancing in FY16.

Outlook

In the past year Redcentric has established itself as one of the leading IT managed services companies in the UK. We have the scale, expertise and flexibility to continue to grow the business through working closely with our customers to help them achieve their goals. The business has momentum and ambition, and the Board and management team have every confidence that we will be able to continue to grow the Company and deliver increasing shareholder value in future years.

Tony Weaver Fraser Fisher

Chief Executive Chief Operating Officer

15 June 2015 15 June 2015

Financial Review

General

These results reflect a twelve month trading period, with no acquisitions or disposals taking place. Comparatives from the prior year contain the results of InTechnology Managed Services Ltd ("IMS"), from its acquisition on 6 December 2013. Where relevant, references to unaudited pro-forma comparisons have been included in order to highlight comparative performance on an organic like-for-like basis.

Financial results

Revenue for the year was £94.3m (2014: £58.3m), representing 8% organic growth. The following table summarises the breakdown of revenue for the year:

Recurring revenue continued the strong organic growth pattern established in the first half of the year, with low levels of churn supporting a steadily growing base of recurring contracted revenue on multi-year contracts. Recurring revenues are predominantly billed monthly, which provides a steady and predictable cash-flow stream. Service revenue grew significantly in the year, driven by increased implementation work on a number of new customer projects. Product revenue, which attracts much lower margins, declined in the year partly as a result of actively managing the revenue mix and partly due to customer demand for cloud based services rather than traditional on-premise solutions.

Adjusted EBITDA was £21.4m (2014: £10.5m) representing an adjusted EBITDA margin of 22.7% (2014: 18.0%). Adjusted EBITDA growth on a pro-forma basis was 32%, driven by a combination of overall revenue growth, improved revenue mix, synergies from the IMS acquisition and tight management of an effective business model. The synergies identified at the time of the IMS acquisition in December 2013 have been delivered and the integration programme will continue to deliver further savings as it completes.

Transaction and integration costs in the year were £0.6m (2014: £5.5m). The integration costs relate to a discrete team of contractors engaged to complete the integration programme.

Interest expense in the year was £0.8m (2014: £0.4m), which consists of £0.6m of interest payments on bank facilities and finance leases, and £0.2m of amortisation of loan arrangement fees.

The Group has recorded a charge for share-based payments of £1.6m (2014: £1.4m) in its income statement. This comprises a charge of £1.1m in respect of options issued in prior years, £0.3m in respect of options issued in FY15 and an accrual for potential tax liabilities of £0.2m. During the year the Group launched an HMRC approved Redcentric plc Save-As-You-Earn Option Plan 2014 (the "Plan"), under which eligible employees commit to contributing monthly savings to buy shares in the Company. The Plan was widely supported by employees, with over half of those eligible committing to contributing.

The statutory earnings per share ("EPS") in the year was 5.53p (2014: 2.04p). On a fully diluted basis, EPS was 5.32p (2014: 1.99p). The Group has also calculated an adjusted EPS figure to measure underlying performance, which excludes the effect of amortisation of acquired intangibles, share option charges and transaction and integration costs, and applies a normalised** tax charge. Adjusted EPS grew by 33% in the year to 8.47p (2014: 6.38p), with fully diluted adjusted EPS growing 31% to 8.15p (2014: 6.22p).

** The normalised tax charge applies a full rate of UK corporation tax (21%) to adjusted earnings, ignoring the effect of tax losses and movements in deferred tax balances.

Taxation

Redcentric has the benefit of significant tax trading losses, which are being offset against corporation tax liabilities wherever possible. As at 31 March 2015 the losses totalled approximately £29.4m, and a deferred tax asset of £5.9m has been recognised in respect of them. The tax credit in the income statement of £0.2m (2014: credit of £4.4m) comprises an estimated corporation tax liability of £1.9m offset by a deferred tax movement of £2.1m. The Group has adopted a prudent position in its accounts with respect to tax and is expecting to benefit from the historic tax losses for the next two to three years.

Cash flow

The business continued to generate significant levels of cash-flow as the table below summarises.

Operating cash conversion in the year was 89% (2014: 86%), underlining the inherent cash generative characteristics of the Group offset by the working capital requirements of a business demonstrating strong organic growth levels.

A further £2.3m of integration costs were paid in the year (2014: £2.3m), most of which were provided for in the prior year. These costs relate primarily to property closure and redundancy costs.

Capital expenditure grew significantly to £6.1m (2014: £4.6m) reflecting the full year effect of the IMS acquisition, and growth in customer-related capital expenditure through new contract wins.

Bank facilities

Subsequent to the year-end, on 2 April 2015, the Group entered into new long-term bank facilities (the "New Facilities"). The New Facilities were established to re-finance the Company's previous bank facility, and provide cost effective and long-term funding stability for Redcentric.

The New Facilities comprise a five-year £40m Revolving Credit Facility ("RCF"), along with a £5m Asset Financing Facility and a £5m Overdraft Facility, providing Redcentric with £50m of immediately available financing. In addition, the RCF has a £20m accordion feature, with the potential to extend the RCF by a further £20m on the same terms, subject to lender approval. The RCF has been provided jointly by Barclays Bank PLC and The Royal Bank of Scotland PLC, with Lombard Technology Services Ltd providing the Asset Financing Facility and Barclays the Overdraft Facility. The structure of the facilities provides the Group with very flexible, cost effective credit facilities, which will support a range of potential future expansion opportunities.

Dividend

In 2014, the Company announced that it intended to return cash to shareholders via a progressive dividend policy. Following a maiden dividend of 1.0p per share, which was paid to shareholders on 5 September 2014, the Company paid an Interim dividend of 1.0p per share to shareholders on 18 February 2015. With the results announced today, the Board is proposing a final dividend of 2.5p per share, making 3.5p for the year in total. If approved by shareholders at the AGM on 1 September 2015, the Company intends to pay the final dividend on 28 September 2015 with an associated record date of 4 September 2015.

Tim Coleman

Chief Financial Officer

15 June 2015

Consolidated Income Statement

*Whilst the comparative period covers the period from incorporation on 11 February 2013 to 31 March 2014, the trading results of the business for the comparative period comprise the period of ownership since the managed services business was effectively demerged from Redstone plc on 8th April 2013.

**Earnings before interest, tax, depreciation, amortisation, transaction and integration costs and share-based payments

The above consolidated income statement should be read in conjunction with the accompanying notes.

Consolidated Statement of Comprehensive Income

*Whilst the comparative period covers the period from incorporation on 11 February 2013 to 31 March 2014, the trading results of the business for the comparative period comprise the period of ownership since the managed services business was effectively demerged from Redstone plc on 8th April 2013.

Consolidated Statement of Changes in Equity

Notes

(a) Business Combinations under Common Control

Where an acquisition represents a business combination under common control, the difference between the consideration paid for the acquisition and the amounts at which the acquired entity's assets and liabilities are recorded, is recognised as a common control reserve (see accounting policy note 1). The reserve of (£9,454,000) arose on the acquisition of Redcentric Holdings Limited, which was demerged from Redstone plc on 8 April 2013.

(b) Capital Reduction

In April 2013 the company reduced its capital by way of a Court approved capital reduction. Under SI2008/1915 Companies (Reduction of Share Capital) Order 2008 the profit created on a reduction of capital is distributable.

Consolidated Balance Sheet

Consolidated Cash Flow Statement

*Whilst the comparative period covers the period from incorporation on 11 February 2013 to 31 March 2014, the trading results of the business for the comparative period comprise the period of ownership since the managed services business was effectively demerged from Redstone plc on 8th April 2013.

Selected notes to the Consolidated Financial Statements

Year ended 31 March 2015

1 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting to the Chief Operating Decision Maker ('CODM'). The CODM has been identified as the Group Chief Executive, The Chief Operating Officer and the Chief Financial Officer. The CODM are jointly responsible for resources allocation and assessing the performance of the operating segments. The operating segments are defined by distinctly separate product offerings or markets. All of the revenue derives from customers located in the United Kingdom. No single customer accounted for more than 10% of the revenue of any operating segment. All segment revenue is derived from external customers, and all segment results are derived from the United Kingdom.

Recurring revenue is derived from the provision of the Group's services to customers under long-term agreements, including data, connectivity, hosting, cloud, and support services. Services revenue is derived from the provision of consultancy, or installation services regarding the provision and set-up of a new service. Product revenues are derived from the sale of third party products, which comprises mostly hardware.

Results for the year ended 31 March 2015

Results for the period ended 31 March 2014

* Operating costs excluding amortisation and transaction and integration costs

** Earnings before interest, tax, depreciation, amortisation, Transaction and integration costs and share-based payments.

All of the depreciation, amortisation and capital expenditure has been allocated to the recurring revenue stream as this is the primary element of the business within which investment is focused. The Services and Product revenue streams have no capital expenditure, depreciation or acquired intangibles associated with them.

All of the acquired goodwill has also been allocated to the recurring revenue segment as this was the segment that was expected to benefit from the synergies of the combination.

2 Transaction and integration costs

In accordance with the Group's policy of separately identifying transaction and integration costs, the following charges were recognised in the year/period:

In the above table, the 2014 items relate predominantly to costs associated with the IMS acquisition and demerger from Redstone plc. The 2015 costs relate to the integration of IMS with Redcentric.

3 Tax on profit/(loss) on ordinary activities

(a) Tax on profit/(loss) on ordinary activities

(b) Reconciliation of the total income tax charge/(credit)

The tax on the Group's loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to losses of the consolidated entities as follows:

(c) Deferred tax

The rate of income tax for the year beginning 1 April 2014 is 21% and the rate from 1 April 2015 is 20%.

Deferred Tax

 (d) Deferred tax liability

Deferred tax liabilities arose in respect of the amortisation of intangible assets recognised on acquisitions made.

(e) Deferred tax assets

Deferred tax assets have been recognised where it is the view of the Directors that it is probable that there will be future sustainable taxable profits from which prior tax losses can be offset. This is based on projections of future taxable profits and indicators such as the level of orders that support the Directors' projections.

Deferred tax assets have been netted off with deferred tax liabilities on the face of the Balance sheet. This is because the Group has a legally enforceable right to set off current tax assets against current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority, being the UK's HMRC. The Group operates as one tax group and settles its tax liabilities on a net basis. This is not expected to change in the foreseeable future.

4 Earnings per share 

Basic earnings per share has been calculated using profit after tax for the year of £7,977,000 (2014: £1,813,000) and a weighted average number of shares of 144,225,164 (2014: 89,050,125). The dilutive effect of share options at 31 March 2015 increased the weighted average number of shares to 149,887,342 (2014: 91,236,738).

In addition the board uses adjusted earnings per share figure, which has been calculated to reflect the underlying performance of the business. This measure is derived as follows:

5 Trade and other receivables

As at 31 March 2015, trade receivables of £0.1m (2014: £1.4m) were impaired and fully provided for. The directors monitor the quality of the receivables not impaired and believe them to be recoverable. There were no trade receivables that would otherwise be past due or impaired had their terms not been re-negotiated. The non-impaired receivables are fully performing and relate to independent customers with no history of default. The individually impaired receivables relate to receivables over 365 days, customers in financial difficulty, customer acceptance issues and cancelled contracts.

As at 31 March 2015, trade receivables of £1.3m (2014: £1.6m) were past due but not impaired. In the table below, these comprise the receivables over 30 days, which relate to a number of independent customers for whom there is no recent history of default. The ageing analysis of net trade receivables is as follows:

The provision is calculated by management on a specific basis based on their best estimate of recoverability taking into account the age and specific circumstances relating to the debtor. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The Group does not hold any collateral as security. The carrying amounts of the Group's trade and other receivables are denominated in pounds.

Movements on the Group provision for impairment of trade receivables are as follows:

The creation and release of a provision for impaired receivables has been included in 'administrative expenses' in the income statement. Amounts charged to the allowance account are generally written-off, when there is no expectation of recovering additional cash.

The other asset classes within trade and other receivables do not contain impaired assets.

6 Trade and other payables

On 26 February 2015 Redcentric plc redeemed 50,000 redeemable preference shares of £1 each using available distributable reserves.

7 Borrowings

As at 31 March 2015, unamortised arrangement fees of £nil (2014: £206,000) were netted off within borrowings. At31 March 2015 the Group was party to a £23.2m bank facility with Barclays Bank PLC with a termination date of 15 November 2016. This facility comprised a Revolving Credit Facility ("RCF") of £18.2m, with a structured reduction profile, and a committed £5.0m overdraft facility.

On 2 April 2015 the Group entered into new long-term bank funding facilities (the "New Facilities"). The New Facilities were established to re-finance the Company's previous bank facility, and provide cost effective and long-term funding stability.

The New Facilities comprise a five-year £40 million RCF, with a £20 million accordion, along with a £5 million Asset Financing Facility and a £5 million Overdraft Facility. The RCF has been provided jointly by Barclays Bank PLC and The Royal Bank of Scotland PLC, with Lombard Technology Services Ltd providing the Asset Financing Facility and Barclays Bank PLC the Overdraft Facility.

Fair value of non-current borrowings

The carrying amounts and fair value of the non-current borrowings are as follows:

Fair values are based on discounted cash flows, using an effective interest rate based on the borrowing rates at 31 March 2015 of 3.23% (2014: 3.25%).

8 Called up share capital

The number of share authorised is the same as the number of shares issued. Ordinary shareholders have the right to attend, vote and speak at meetings, receive dividends, and receive a return on assets in the case of a winding up.

Share issues

During the year/period the following shares were issued:

The shares issued on the exercise of warrants relate to 1,381,055 warrants to certain shareholders ("Cornerstone Investors") on 6 December 2013 in connection with early stage commitment to raise equity to fund the acquisition of IMS. The warrants can be exercised any time within two years of the issue date.

As at 31 March 2015, the Company has in issue the following warrants which can be converted into ordinary shares in the Company;

The 350,000 warrants issued to Barclays Bank PLC were issued on demerger in exchange for warrants previously held in Redstone Plc. The warrants can be converted to shares at any time before the sale of the entire share capital of the company.

9 Provisions

The provisions have been discounted to present value using a risk free discount rate. The remaining terms of these property leases range from 1 to 7 years.

Current and non-current analysis of provisions:

10  Net Cash flows from continuing operating activities

11 Related parties

The Group has taken exemption not to disclose transactions with entities wholly-owned by the Group.

Directors' emoluments are disclosed in Note 7 of the Financial Statements.

On 18 April 2013 the Group engaged MXC Advisory LLP to provide corporate finance advice and consultancy. MXC Advisory LLP is owned by MXC Capital Limited ("MXC"), which is an AIM quoted merchant bank specialising in investing in technology companies. MXC is a significant shareholder in Redcentric plc and has options over the ordinary shares of Redcentric plc (as disclosed below and in note 23) and therefore its interests are aligned with Redcentric plc's other shareholders. Tony Weaver, a director of Redcentric plc, has an interest in MXC. Under the terms of that agreement, a fee representing a maximum of 2.5 per cent. of the enterprise value of successful transactions consulted upon is payable by the Company. During the year, fees of £224,000 were paid to MXC (£2014: £0.8m), which included £204,000 for Tony Weaver's director's fees, and £20,000 for the provision of corporate finance advice.

In the period ended 31 March 2014 the Company granted 7,000,000 share options to MXC Capital Limited, which are exercisable at 80p per share.

During the year ended 31 March 2015, a subsidiary of the Group was party to a lease agreement relating to Redcentric House, Banters Lane Trading Estate, Chelmsford, and paid rental and service charge payments of £124,000 to Moreland Limited, a company which Fraser Fisher is a director and shareholder of. The company terminated the lease agreement on 31 March 2015, and paid £153,000 in respect of a contractual liability for dilapidations.

The balances outstanding at 31 March 2015 in respect of related parties was £2,000 and £153,000 payable to MXC and Moreland Ltd respectively.

12 Dividends

Following a maiden dividend of 1.0p per share, which was paid to shareholders on 5 September 2014 (£1.4m), the Company paid an Interim dividend of 1.0p per share to shareholder on 18 February 2015 (£1.4m). The Company is proposing a final dividend of 2.5p per share (£3.6m). If approved by shareholders at the AGM on 1 September 2015, the Company intends to pay the dividend on 28 September 2015 to shareholders on record on 4 September 2015.

13 Subsequent events

Acquisition of Calyx Managed Services

On 13 April 2015 the Group announced that it had acquired Calyx Managed Services Ltd for cash consideration of £12.0m ("the Acquisition"). Redcentric acquired Calyx from MXC Capital Limited ("MXC ") following a period of significant restructuring, which included the disposals of the Break Fix and Carrier Services divisions. Calyx is now a focused IT managed services and professional and infrastructure services business. Calyx's portfolio of services and its range of customers are an excellent strategic addition for Redcentric, which will provide these new customers with high levels of service and exposure to a broader suite of solutions.

The Acquisition is considered a related party transaction under the AIM Rules for Companies on the basis that MXC is a substantial shareholder in the Company and Tony Weaver, CEO of Redcentric, is a substantial shareholder of MXC. In addition, Redcentric agreed a corporate finance advisory fee of £300,000 to MXC for advisory services in relation to the Acquisition under an existing engagement with MXC, which is retained as corporate finance adviser to the Company (further details are in note 27 to the financial statements). The payment of the advisory fee is considered to be a related party transaction under the AIM Rules for Companies.

New bank facilities

Following the year-end, on 2 April 2015 the Group entered into new long-term bank funding facilities (the "New Facilities"). The New Facilities were established to re-finance the Company's previous bank facility, and provide cost effective and long-term funding stability for Redcentric.

The New Facilities comprise a five-year £40 million Revolving Credit Facility ("RCF"), along with a £5 million Asset Financing Facility and a £5 million Overdraft Facility, providing Redcentric with £50 million of immediately available financing. In addition, the RCF has a £20 million accordion feature, with the potential to extend the RCF by a further £20 million on the same terms, subject to lender approval. The RCF has been provided jointly by Barclays Bank PLC and The Royal Bank of Scotland PLC, with Lombard Technology Services Ltd providing the Asset Financing Facility and Barclays the Overdraft Facility. The structure of the facilities provides the Group with very flexible, cost effective credit facilities, which will support a range of potential future expansion opportunities.