H1 Trading Update

Redcentric posts higher margins but flat EBITDA and falling revenue in H1 FY27 update.

What the company is saying

Redcentric plc positions its H1 FY27 trading update as a demonstration of improved earnings quality, emphasizing a gross margin increase to 63.1% and an adjusted EBITDA margin rise to 14.3%. The company highlights its continued focus on attracting and maintaining higher-margin business and tight expense control as drivers for these margin improvements. Management frames the revenue decline to £63.7 million (from £66.8 million in H1 FY26) as consistent with expectations and attributes it to customer cancellations and timing of new business conversion. The Board expresses confidence in achieving full-year FY27 adjusted EBITDA of £18.4 million, aligning with market expectations. The announcement stresses the exclusion of the recently sold Data Centre business from these results, clarifying that all figures reflect continuing operations. The company signals a likely resumption of the interim dividend, pending confirmation in the December interim results. CEO Michelle Senecal de Fonseca and CFO Tim Sykes are named as key executives overseeing this period.

What the data suggests

The update shows Redcentric's H1 FY27 revenue is expected to fall to £63.7 million from £66.8 million a year earlier, a 4.6% decline. Adjusted EBITDA is flat at £9.1 million for both periods, indicating no absolute profit growth. However, the adjusted EBITDA margin improved to 14.3% from 13.6%, and gross margin rose to 63.1% from 61.6%, suggesting better cost control or a shift to higher-margin contracts. The company reports net debt of £5.0 million as of 30 September 2026, but does not provide a prior period comparison for leverage trends. The figures exclude the Data Centre business, which was sold with final proceeds announced on 18 September 2026, and is now treated as a discontinued operation. Management's explanation for the revenue dip centers on customer cancellations and delayed new business, while margin gains are credited to disciplined expense management and business mix. The Board's full-year adjusted EBITDA target of £18.4 million is a forward-looking statement, not yet achieved. The anticipated resumption of the interim dividend is not confirmed, only expected in the December results. All H1 FY27 numbers are unaudited management estimates, so minor adjustments are possible in the final report.

Analysis

The announcement adopts a positive tone, highlighting improved margins and the Board's confidence in meeting full-year EBITDA targets. However, the actual financial performance is mixed: revenue has declined year-on-year, and adjusted EBITDA is flat, with improvements only in margin percentages. Most key figures for H1 FY27 are 'expected' rather than realised, and the full-year EBITDA target is a forward-looking statement. The anticipated resumption of the interim dividend is also not yet confirmed. While the disposal of the Data Centre business is a realised event, the update does not disclose any large new capital outlay or immediate earnings impact from this transaction. The narrative inflates the signal by focusing on margin improvements and future confidence, despite declining revenues and stagnant EBITDA. The data supports a weak_positive signal due to the transparency of headline metrics and some operational progress, but the overall financial direction is deteriorating.

Risk flags

• ●Revenue decline of 4.6% year-on-year signals potential challenges in customer retention or new business conversion, which could pressure future earnings if not reversed.
• ●The company's reliance on margin improvement to offset flat EBITDA and falling revenue may not be sustainable if cost-cutting opportunities diminish or if competitive pressures increase.
• ●All H1 FY27 figures are unaudited management estimates, introducing the risk that final audited results may differ, potentially affecting investor expectations and the anticipated dividend resumption.

Bottom line

Redcentric's H1 FY27 trading update reveals a mixed picture: revenues are down 4.6% year-on-year to £63.7 million, while adjusted EBITDA remains flat at £9.1 million. Margins have improved, with gross margin at 63.1% and EBITDA margin at 14.3%, reflecting tighter expense control and a focus on higher-margin business. The company has completed the sale of its Data Centre business, and all reported figures exclude this discontinued operation. Net debt stands at £5.0 million, but the absence of a prior comparison limits leverage analysis. The Board's confidence in meeting the full-year adjusted EBITDA target of £18.4 million and the anticipated resumption of the interim dividend are both forward-looking and not yet realised. Investors should watch for the formal interim results in December, which will confirm whether these expectations are met. The most important takeaway is that while margin quality is improving, top-line growth remains a concern and the company's ability to convert margin gains into sustainable profit growth will be tested in the coming periods.

Announcement summary

(LSE:RCN) Redcentric plc provided a trading update for the six months ended 30 September 2026 (H1 FY27). Revenues for H1 FY27 are expected to be approximately £63.7 million, compared to approximately £66.8 million in H1 FY26. Adjusted EBITDA for H1 FY27 is expected to be approximately £9.1 million, matching the figure for H1 FY26, with an Adjusted EBITDA margin of 14.3% for H1 FY27, up from 13.6% in H1 FY26. Gross margin for the period improved to 63.1%, compared to 61.6% in H1 FY26. The company attributes these results to a continued focus on attracting and maintaining higher-margin business, the impact of customer cancellations, the timing of new business conversion, and tight expense control. The Board is confident in delivering full-year FY27 Adjusted EBITDA of £18.4 million, in line with market expectations. As of 30 September 2026, the Group’s balance sheet shows approximately £5.0 million net debt. The financial results for H1 FY27 and H1 FY26 exclude revenues and earnings from the Data Centre ('DC') business, which was disposed of with final proceeds announced on 18 September 2026 and will be shown as a discontinued operation under IFRS. The company expects to report its Interim Results for the six months ended 30 September 2026 in the week commencing 7 December 2026. It is anticipated that these results will confirm the resumption of an interim dividend. Michelle Senecal de Fonseca is CEO and Tim Sykes is CFO of Redcentric plc.

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