Q4 2026 Redcentric PLC Earnings Call

September 30, 2026

Speaker #2: Let's begin with the introduction. Good morning, ladies and gentlemen, and welcome to the Redcentric PLC Final Results Investor Presentation. Questions are encouraged and can be submitted at any time via the Q&A tab.

Moderator: Good morning, ladies and gentlemen, and welcome to the Redcentric plc Final Results Investor Presentation. Questions are encouraged. They can be submitted at any time via the Q&A tab that is just situated on the right-hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish responses where it is appropriate to do so on the Investor Meet Company platform. Before we begin, we would just like to submit the following poll, and if you could give that your kind attention, I am sure the company would be most grateful. I would now like to hand you over to the executive management team from Redcentric plc. Michelle, good morning.

Operator: Good morning, ladies and gentlemen. Welcome to the Redcentric plc Final Results Investor Presentation. Questions are encouraged. They can be submitted at any time via the Q&A tab that is just situated on the right-hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish responses where it is appropriate to do so on the Investor Meet Company platform. Before we begin, we would just like to submit the following poll, and if you could give that your kind attention, I am sure the company would be most grateful. I would now like to hand you over to the executive management team from Redcentric plc. Michelle, good morning.

Speaker #2: It's situated on the right-hand corner of your screen. Please simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself.

Speaker #2: However, the company can review all questions submitted today and will publish our responses where it's appropriate to do so on the Investor Meet Company platform.

Speaker #2: Before we begin, we would just like to submit the following poll, and if you could give that your kind attention, I'm sure the company would be most grateful.

Speaker #2: And I'd now like to hand you over to the executive management team from Redcentric PLC. Michelle, good morning.

Speaker #3: Thank you, Jake. We appreciate that. And a warm welcome to everybody from our headquarters here in Harrogate. I'm Michelle Senical Day from SECA, the CEO of Redcentric.

Michelle Senecal De Fonseca: Thank you, Jake. We appreciate that. A warm welcome to everybody from our headquarters here in Harrogate. I am Michelle Senecal De Fonseca, the CEO of Redcentric, having just completed my first year here in the chair after having been the NED the year before. As you will recall, I think some of you were with us last year when we tried this. My partner in crime at that time was Tony Ratcliffe, who has now completed his assignment with the sale of the data center, and we now have a new CFO, excuse me, that I would like to hand over to. Tim, why don't you introduce yourself?

Speaker #3: Having just completed my first year here in the chair, after having been the NED the year before. And as you'll recall, I think some of you were with us last year when we tried this.

Speaker #3: My partner in crime at that time was Tony Radcliffe, who has now completed his assignment with the sale of the data center, and we now have a new CFO, excuse me, that I'd like to hand over to and wanted to introduce yourself.

Speaker #4: Yeah, true. Morning, everyone. So my name's Tim Sykes. I've been working with listed companies since 2006, when I was part of the float for Avacta Group PLC and Proactis Holdings PLC at that time.

Tim Sykes: Yeah, sure. Morning, everyone. My name is Tim Sykes. I have been working with AIM-listed companies since 2006, when I was part of the float for Actiph Water and Proactis Holdings PLC at that time. I do not know if anybody followed Proactis, but it was very relevant to Redcentric's position right now, as Michelle will describe later on in the presentation. I helped support the team as CFO for a business that grew from GBP 2 million to north of GBP 50 million over the time involved, before as Chief Executive, taking it private in 2021. So looking forward to joining the team. Feel really lucky to be part of that opportunity. I will let Michelle take you through the rest of the story from here.

Speaker #4: I don't know if anybody followed Proactis, but it was very relevant to Redcentric's position right now, as Michelle will describe later on in the presentation.

Speaker #4: I helped support the team as CFO for a business that grew from $2 million to north of $50 million over the time involved, before, as chief executive, taking it private in 2021.

Speaker #4: So, looking forward to joining the team. I really feel lucky to be part of that opportunity. And I'll let Michelle take you through the rest of the story from here.

Speaker #3: Great, thanks, Tim. Go to the next slide. Well, all I can say is FY26 was a transformative year for the company. A lot of effort went into the final separation of the data center business from the MSP business.

Michelle Senecal De Fonseca: Well, all I can say is FY26 was a transformative year for the company. A lot of effort went into the final separation of the data center business from the MSP business. With the successful going through that process, it is disruptive, but in parallel, we were able to come up with a new strategic plan. We undertook increasing our service capabilities and capacity. We changed things around quite a bit, which I am going to go through. In the end of the day, we delivered in line with market expectations in terms of the financials through all of that. We are still maintaining a very high level of recurring revenues. Our customers are not churning out.

Speaker #3: And with the successful, you know, going through that process, it is disruptive, but in parallel we were able to come up with a new strategic plan.

Speaker #3: We undertook increasing our service capabilities and capacity. We changed things around quite a bit, which I'm going to go through. And at the end of the day, we delivered in line with market expectations in terms of the financials through all of that.

Speaker #3: We're still maintaining a very high level of recurring revenues. Our customers are not churning out, and so we are very excited now to be able to look forward to a more simplified business, being able to scale and continue to deliver shareholder value.

Michelle Senecal De Fonseca: We are very excited now to be able to look forward in a more simplified business and being able to scale and continue to deliver shareholder value. So, Tim.

Speaker #3: So Tim.

Speaker #4: Okay, so just a little bit about the corporate island. It's something slightly posterior end, really, but dominated by the finalization of the sale of the data center business for £125 million, with a bit before costs of about £5 million.

Tim Sykes: Okay, so just a little bit about the corporate highlights. Some slightly post-year-end really, but dominated by the finalization of the sale of the data center business for GBP 125 million with a bit before costs of about 5. That was slightly more than the market was expecting. We had initially estimated at 122 and a half, but took a couple of extra million on the completion accounts, which was super. We are not quite through with the data center business though, because we have a transition services agreement which runs to the end of April 2027. So 1 year of support to the new business, Stellanor, that took the company from us. As Michelle described, Tony finished his contract up and I have been with the company since the 1st of June, which is fantastic start to the career here, which is super.

Speaker #4: That was slightly more than the market was expecting. We'd initially estimated that at £122.5 million, but took a couple of extra million on the completion accounts, which was super.

Speaker #4: We're not quite through with the data center business because we have a transition services agreement, which runs to the end of April 2027. So one year of support to the new business, still another took the company from this.

Speaker #4: As Michelle described, Tony finished his contract open. I've been with the company since the 1st of June, which is fantastic. It's a great start to the career here, which is super.

Speaker #4: The new strategic vision and the roadmap for that are defined. Michelle will take us through that later on in the presentation. And with all of the change that Michelle has described and will describe, the company was voted one of the best 100 places to work in the UK.

Tim Sykes: The new strategic vision, the roadmap for that is defined. Michelle will take us through that later on in the presentation. With all of that change that Michelle has described and will describe, the company was voted one of the best 100 places to work in the UK. So lots of change, lots of challenge for the people, but the people really enjoy working here at Redcentric, which is a fantastic testament to the culture that Michelle is building here as Chief Executive.

Speaker #4: So, lots of change, and lots of challenge for the people, but the people really enjoy working here at Redcentric, which is a fantastic testimony to the culture that Michelle is building here as Chief Executive.

Speaker #3: Well, I think that's really important, because when you're going through a high volume of change and transition, it can be a very unsettling period.

Michelle Senecal De Fonseca: Well, I think that is really important because when you are going through these high volume of change and transition, it can be a very unsettling period. The fact that people are engaged, moving forward, excited about where it is, I hope that you will also be excited by the story. What were all those people doing in FY26? When I came on board, it became pretty clear that through the history of the business, a lot of the focus had been on M&A, mainly around the data center business. MSP was a little bit of a lost child, and they did a good job of maintaining it, but that is what they were doing. It was account management, but we were not going out and scaling and bringing in new business.

Speaker #3: And the fact that people are engaged, moving forward, excited about where it is—I hope that you'll also be excited by the story. But what were all those people doing at FY26?

Speaker #3: Well, when we came and when I came on board, it became pretty clear that through the history of the business, a lot of the focus had been on M&A, mainly around the data center business.

Speaker #3: And MSP was sort of a little bit of a lost child, and they did a good job of maintaining it, but that's what they were doing.

Speaker #3: It was account management, but we weren't going out and scaling and bringing in new business. So my fundamental remit is that we need to start having new sales and expanding our customer set.

Michelle Senecal De Fonseca: My fundamental remit is we need to start having new sales and expanding our customer set. I changed out the Chief Marketing Officer, the Chief Revenue Officer, restructured marketing so it is less about brand development and more about field sales, getting that pipeline and driving that to allow the sales then to be able to convert it. We also needed to take a look at how do we bring in new customers. We built a new business pursuits team in Q2 and started delivering results throughout the rest of the year. 11% of the FY26 sales came from new logos, which is fantastic. What I would like to get to over the next couple of years is driving that to a 15% annual reoccurring event where new customers are coming in, refreshing our customer base.

Speaker #3: So, I changed out the Chief Marketing Officer and the Chief Revenue Officer, restructured marketing so it's less about brand development and more about field sales—getting that pipeline and driving it to allow the sales team to be able to convert it.

Speaker #3: We also needed to take a look at how we bring in new customers. So, we built a new business pursuits team in Q2 and started delivering results throughout the rest of the year.

Speaker #3: 11% of the FY26 sales came from new logos, which is fantastic. What I'd like to get to over the next couple of years is driving that to a 15% annual recurring event, where new customers are coming in and refreshing our customer base.

Speaker #3: One of the things that I noticed is we didn't have many routes to market other than our direct sales force. And you can't scale a business that way.

Michelle Senecal De Fonseca: One of the things that I noticed is we did not have many routes to market other than our direct sales force, and you cannot scale a business that way. One of our key areas, of course, was the public sector, with about 45% of revenues derived from the public sector, and most of that comes through public frameworks. Given some financial issues that the company had in its history, these frameworks are not available every year. They come over like the Olympics every four or five years, and we missed out on a couple of the frameworks due to our financial situation. That is not the case anymore. We reinvested in a bid in the frameworks team, making sure that we are culminating and looking through the market through AI and helping us drive and expand as much as possible.

Speaker #3: So one of our key areas, of course, is the public sector. About 45% of our revenues are derived from the public sector, and most of that comes through public frameworks.

Speaker #3: And, given some financial issues that the company had in its history, these frameworks aren't available every year. They come over sort of like the Olympics, every four or five years.

Speaker #3: And we missed out on a couple of the frameworks due to our financial situation. That's not the case anymore, and so we reinvested in a bit in a frameworks team, making sure that we're cultivating and looking through the market through AI and, you know, helping us drive and expand as much as possible.

Speaker #3: So we were able to get onto the Telecommunications Services Framework Number Four. We're now on G-Cloud 15. We have three other big procurements.

Michelle Senecal De Fonseca: We were able to get onto the Telecommunications Services Framework 4. We are now on G-Cloud 15. We have three other big procurements, the biggest one being Network Services 4 that will come out in February of next year. All of this prep work, it takes about a year to deliver it, is quite important, specifically for our connectivity business, because a lot of the business comes through these particular frameworks. You also might know in the public sector, we are very deep into the healthcare sector, and NHS England had a major reorganization last year. They had 47, 49 ICBs, Integrated Care Boards, that consolidated down to 26. There is a real delay as three different divisions came together. Who is going to be in charge? How do you get a procurement or a purchase order through the system? Where are the budgets?

Speaker #3: The biggest one being network services, which will come out in February of next year. So all of this prep work—it takes about a year to deliver—is quite important.

Speaker #3: Specifically for our connectivity business, a lot of the business comes through these particular frameworks. You might also know that, in the public sector, we're very deep into the healthcare sector, and NHS England had a major reorganization last year.

Speaker #3: They had 4,749 ICBs—Integrated Care Boards—that consolidated down to 26. And so there's a real delay as three different divisions came together.

Speaker #3: Who's going to be in charge? How do you get a procurement or a purchase order through the system? Where are the budgets? So that's been naturally moving to the right.

Michelle Senecal De Fonseca: So that's been naturally moving to the right. We've reorganized our public sector team to be territorially based around these new ICB territories. That allows us to be better aligned with the decision makers in each of these territories, and I think that's going to bode us well moving into FY27. Meanwhile, as we're starting to ramp up the commercial side and being able to scale, we have to take out cost from the business. From all of those former previous M&A, we have a lot of tech debt, as you can imagine. So we did about GBP 1.6 million in savings in year on platform and infrastructure rationalizations. Almost 3% of our original IT systems estates, well over 1,000 we've decommissioned. That also helps us reduce our complexity. Importantly, we're taking that money and we're reinvesting it in our customer experience.

Speaker #3: What we've done is reorganize our public sector team to be territory-based around these new ICB territories. So that allows us to be better aligned with the decision-makers in each of these territories.

Speaker #3: And I think that's going to bode us well moving into FY27. Meanwhile, as we're starting to ramp up the commercial side and being able to scale, we have to take out cost from the business from all of those former previous M&A, where we have a lot of debt—debt, as you can imagine.

Speaker #3: So, we did about $1.6 million in savings in the year on platform and infrastructure rationalizations. Almost 3% of our original IT systems estate—well over a thousand—we have decommissioned.

Speaker #3: That also helps us reduce our complexity. Importantly, we're taking that money and we're reinvesting it in our customer experience. And just with the things that we did last year, we were able to raise our customer NPS by almost 60%.

Michelle Senecal De Fonseca: With the things that we did last year, we were able to raise our customer NPS by almost 60%. I think also making sure that we are changing the leadership, that we're going to be fit for purpose moving forward, was a really big effort for this past year. Okay.

Speaker #3: And I think also making sure that we are changing the leadership so that we're going to be fit for purpose moving forward was a really big effort for this past year.

Speaker #3: Okay.

Speaker #4: Okay, so a bit more on the detail of the numbers and on the outturn for FY26. Overall revenue reduced by 2.3%, and that was matched in the recurring revenue.

Tim Sykes: Okay. So a bit more on the detail of the numbers then on the outturn for FY26. So overall revenue reduced by 2.3%, and that was matched in the recurring revenue. There's really interesting statistics in behind that which are important to understand as the reason why that reduction happened. So there are three key factors as to why that reduction is there for us. We refer to these in the RNS as the drag factors, but essentially they're headwinds that we're facing for the next year or so, and has covered us with difficulty for the last few years. So the first three factors are as follows.

Speaker #4: Now, there are really interesting statistics behind that, which are important to understand as the reason why that reduction happened. So there are three key factors as to why that reduction is there for us.

Speaker #4: So, we call — we refer to these in the RNS as the drag factors. But essentially, they're headwinds that we're facing for the next year or so.

Speaker #4: And it's covered as with difficulty for the last few years. So the first three factors are the factors are as follows. Number one, when we acquired or went through the acquisition spree maybe two or three or four years ago, we've particular the SunGuard acquisition, which was a company that that was bought out of administration.

Tim Sykes: Number one, when we went through the acquisition spree maybe two or three or four years ago, in particular the Sungard acquisition, which was a company that was bought out by administration, many of its customers had already taken the contractual decision to not renew with Sungard at the time. These systems take quite a long number of years to unwind, and therefore, we faced this drag on ARR throughout that period, and it still remains a little bit today. But we expect that to flow out during the course of FY27. The second factor was that we had an unprofitable contract with a specific customer, which we determined we should not renew. So that was a drag on revenue, but earnings enhancing. So we took that decision over a year ago, but the impact of that reduced revenue has come through into FY26.

Speaker #4: Many of its customers had already taken the contractual decision not to renew with SunGuard at the time. And therefore, we've had this, and these systems, take quite a long number of years to unwind.

Speaker #4: And therefore, we faced this drag on ARR throughout that period. It still remains a little bit today, but we expect that to flow out during the course of FY27.

Speaker #4: The second factor was that we had an unprofitable contract with a specific customer, which we determined we should not renew. So that was a drag on revenue, but earnings-enhancing.

Speaker #4: So we took that decision over a year ago, and the impact of that reduced revenue has come through into FY26.

Speaker #4: And then finally, and Michelle will talk about this in more detail later, there's a market moment through the acquisition by Broadcom of VMware, which led to some very short-term revenue increases.

Tim Sykes: Finally, Michelle will talk about this in more detail later. There is a market moment through the acquisition by Broadcom of VMware, which led to some very short-term revenue increases in 2025, which have unwound in FY26. Therefore, those three factors, actually, when we extract the ARR impact of those, we see a marginal growth in ARR. Our statement here is that whilst our headline revenue and ARR has reduced, there are known key factors which will not recur for the long term, and indeed, we expect them to close out in 2027, maybe a little bit into 2028. They are certainly diminishing factors, and underlying that we have growth. Other than that, margins remain reasonably constant.

Speaker #4: Number in '25, which have unwound in FY26. And therefore, those three factors, actually, when we extract the ARR impact of those, we see a marginal growth in ARR.

Speaker #4: So our statement here is that, while our headline revenue and ARR have reduced, there are known key factors which won't recur for the long term.

Speaker #4: And indeed, we expect them to close out in '27, maybe a little bit into '28, but they're certainly diminishing factors. And underlying that, we have growth.

Speaker #4: Other than that, margins remain reasonably constant. So, as Michelle described, we were able to adjust the opex costs, or cost base, through the course of the year to get in-year savings, which matched the reduction in revenues, allowing us to report EBITDA, which is a pretty consistent margin.

Tim Sykes: As Michelle described, we were able to adjust the Opex costs or cost base through the course of a year to get in-year savings, which matched the reduction in revenues, allowing us to report EBITDA, which is a pretty consistent margin and operating profit on the next page at exactly equivalent margins of just north of 6%. That bodes well for the future, of course, because we have a part year saving FY26, but we will get a full year impact of saving in FY27, which points us towards higher margins going forward. In terms of the interest charge, a slightly reduced level of borrowing at a reduced borrowing rate led to a lower interest charge and a normalized tax charge in that case.

Speaker #4: And operating profit on the next page at exactly equivalent margins of just north of 6%. Now, that bodes well for the future, of course, because we've got a part-year saving in FY26, but we'll get the full-year impact of savings in FY27, which points us towards higher margins going forward.

Speaker #4: And then, in terms of the interest charge, a slightly reduced level of borrowing at a reduced borrowing rate led to a lower interest charge.

Speaker #4: And a normalized tax charge in that case. So let's talk a little bit more about net debt after the processes and the corporate activity that's gone through over the last six months.

Tim Sykes: Let us talk a little bit more about net debt after the processes and the corporate activity that has gone through over the last six months. We completed the transaction with RDC on 30 April, and there was a down payment of GBP 115.5 million or so at that time. We completed the completion accounts process during September and received the final installment to take us to GBP 125 million. We have paid down our bank debt of GBP 21 million and returned GBP 90 million of cash to shareholders, plus a little top-up through the share buyback program that is completing today. We had spent GBP 1.2 million of that by Friday last week at the date of this presentation was created, and we are expecting to have completed with the GBP 1.5 million by the end of today.

Speaker #4: So, we completed the transaction with RDC on the 30th of April, and there was a down payment of $150.5 million or so at that time.

Speaker #4: We completed the completion accounts process during September and received the final installment, taking us to £125 million. We've paid down our bank debt of £21 million and returned £90 million of cash to shareholders, plus a little top-up through the share buyback program that's completing today.

Speaker #4: We'd spent 1.2 million pounds of that by Friday last week at the date of this presentation was created. And we're expecting to have completed with the 1.5 million by the end of end of end of today.

Speaker #4: And indeed, we also tidied the shareholder register, which was very difficult to manage, more expensive than it ought to be, and had 7,000 shareholders with fewer than 20 shares.

Tim Sykes: Indeed, we also tidied the shareholder register, which was very difficult to manage, more expensive than it ought to be, and had 7,000 shareholders with less than 20 shares. We allowed them to exit that elegantly at GBP 1.60, the same price as the tender offer. After all of that, as at Friday, which I should report is 25 September, not 30 September, we have net debt of only GBP 2.8 million. The analyst note is predicting a net debt position at the end of March next year, so our financial year end of just GBP 6 million, which is less than a third of our LTM EBITDA. This gives us a very powerful balance sheet compared with the competition. It is a commercial positive for us, which is well recognized in the market.

Speaker #4: And we allowed them to exit that elegantly at 1.60 the same price as the as the tender offer. And after all of that, as at Friday, which I should report is the 25th of September, not the 30th of September, we have net debt of only 2.8 million pounds.

Speaker #4: And the analysts note is predicting a a net debt position at the end of March next year. So they're financial year end of of just 6 million pounds.

Speaker #4: Which is less than a third of our LTM EBITDA. So this gives us a very powerful balance sheet compared with the competition. So it's a commercial positive for us, which is well well recognized in the in the market.

Speaker #4: And, allied to that, we've also created new bank facilities. I'll—I've made arrangements for new bank facilities. So we have a three-year term plus a one-year extension, at our discretion, rather.

Tim Sykes: Allied to that, we've also created new bank facilities or made arrangements for new bank facilities. We have a 3-year term plus a 1-year discretion, at our discretion, rather. Long-term facilities, we would say GBP 30 million. We'll be drawing GBP 10 million of that come tomorrow. Under-utilized facility, which gives us room to breathe and flexibility, which is excellent. The bank is seeing this as a low-risk lend because the margin is only stability that we have, and our covenants are relaxed. That really means there's lots of headroom inside of those covenants for us. We have no financial pressures at all at this point, and we're looking forward to be able to use that power, that financial power, in our commercial growth.

Speaker #4: So, a long-term facility, we would say £30 million will be drawn, and £10 million of that comes tomorrow. So, it's an underutilized facility, which gives us room to breathe and flexibility, which is excellent.

Speaker #4: The bank is seeing this as a low-risk lend because the margin is only—stability that we have and our covenants. I put 'relaxed,' but that really means there's lots of headroom inside of those covenants for us.

Speaker #4: So, we have no financial pressures at all at this point. And we're looking forward to being able to use that financial power in our commercial growth.

Speaker #1: So exiting FY26 as a stronger financial organization, more simplified. Where are we going to put our focus on? And essentially, we would like to be the UK's preferred provider of sovereign compliant and or regulated IT services.

Michelle Senecal De Fonseca: Exiting FY26 as a stronger financial organization, more simplified, where are we going to put our focus on? Essentially, we would like to be the UK's preferred provider of sovereign, compliant, and/or regulated IT services. We sort of think we're already there, but we need to be able to demonstrate to the market in a grander way that we're able to scale and to have more visibility on what we actually deliver for this country. Our portfolio hasn't changed. We're still providing network connectivity, voice and data services, private cloud. We run a national, dedicated government cloud. It's private. We also then help all of our customers move into hyperscalers and use public cloud services. The portfolio hasn't changed, but it's where we need to be able to make our differentiation, and that's really around our sovereign and our compliance stories.

Speaker #1: We sort of think we're already there, but we need to be able to demonstrate to the market, in a grander way, that we're able to scale and have more visibility on what we actually deliver for this country.

Speaker #1: Our portfolio hasn't changed. We're still providing network connectivity, voice and data services, and private cloud. We run a national, dedicated government cloud—it's private. We also help all of our customers move into hyperscalers and use public cloud services.

Speaker #1: So, the portfolio hasn't changed, but it's where we need to be able to make our differentiation. And that's really around our sovereign and our compliant stories.

Speaker #1: Most of our customer base is in verticals such as healthcare, defense, blue light services, local authorities, and then the private sector that actually sells into that.

Michelle Senecal De Fonseca: Most of our customer base are in verticals such as healthcare, defense, blue light services, local authorities, and then the private sector that actually sells into that. It would be life sciences, pharmaceuticals, GPs and surgeries, pharmacies and the like. Those people need the same level of regulated and compliant services that match who their end customers are at. All of this is really important because customers are signing up for 3, 5, and 7 years. They want to make sure that their partner who's going to help support them is going to be there for the long term. As Tim had just talked about, at the moment, we're probably very unparalleled in having a balance sheet, our cash position, low debt, our stability. It's one of the key things in talking with our customer base that's setting us apart from the competition.

Speaker #1: So it'd be, you know, life sciences, pharmaceuticals, GPs, and surgeries, pharmacies, the like. And, you know, those people need the same level of regulated and compliant services that match who their end customers are at.

Speaker #1: And all of this is really important because customers are signing up for three, five, and seven years. They want to make sure that their partner, who's going to help support them, is going to be there for the long term.

Speaker #1: And as Tim had just talked about, at the moment we're probably very unparalleled in having a balance sheet, our cash position, low debt, and our stability.

Speaker #1: It's one of the key things in talking with our customer base that's kind of setting us apart from the competition. So, moving forward, one of the best ways that we're going to be able to scale is, as I talked about earlier, moving away from just simply direct sales to a partner ecosystem.

Michelle Senecal De Fonseca: Moving forward, one of the best ways that we're going to be able to scale is, as I talked about earlier, moving away from just simply direct sales to a partner ecosystem. One of the biggest partner ecosystems that we are placing our bets on is our work with Broadcom VMware. Go to the next slide. I guess that's a little bit further down. Sorry. Thank you. For those of you who may not be aware, Broadcom purchased VMware a couple of years ago, and they have been reducing their partner program. They are now having a small set of what they call pinnacle partners around the world. In the UK, there are 7 of them, of which Redcentric is one.

Speaker #1: And one of the biggest partner ecosystems that we are placing our bets on is our work with Broadcom VMware. Go to the next slide.

Speaker #1: Oh, I guess that's a little bit further down. Sorry. Thank you. For those of you who may not be aware, Broadcom purchased VMware a couple of years ago.

Speaker #1: And they have been reducing their partner programs, so they now have a small set of what they call Pinnacle Partners around the world.

Speaker #1: And in the UK, there are seven of them, of which Redcentric is one. What they're doing is, for any customer—an end customer, meaning a business, or if you're a communication service provider who has your own platform that you sell on to end customers—they can no longer go directly to VMware.

Michelle Senecal De Fonseca: What they are doing is for any customer, an end customer, meaning a business, or if you are a communication service provider who has your own platform that you sell on to end customers, they can no longer go directly to VMware. You are going to have to come through one of these seven businesses, and the deadline is 31 March 2027. When Tim was talking about a market moment, the market is shifting and trying to decide what they want to do. When you look at those who have used VMware in the past, we can honestly say about 40% of those customers will move away from VMware. They do not want to be vendor locked in, so they are looking for alternatives on hyperscalers, or they will try to find an alternative hypervisor like Nutanix to move to.

Speaker #1: You're going to have to come through one of these seven businesses, and the deadline is March 31, 2027. So, when Tim was talking about a market moment, the market is shifting and trying to decide what they want to do.

Speaker #1: And when you look at those who have used VMware in the past, we can honestly say about 40% of those customers will move away from VMware.

Speaker #1: They don't want to be vendor locked-in, so they're looking for alternatives on hyperscalers, or they will try to find an alternative hypervisor like Nutanix to move to.

Speaker #1: And when we started this motion in FY26, a lot of people came and said, "We're leaving. We don't need your services." But, interestingly enough, they're coming back because the features and functionalities of the alternatives weren't what they were looking for.

Michelle Senecal De Fonseca: When we started this motion in FY26, a lot of people came and said, "We are leaving. We do not need your services." Interestingly enough, they are coming back because the features and functionalities of the alternatives were not what they were looking for. They started too late, so they are going to have to remain with VMware. There is 60% of the market that really want to maintain being with the market leader. Therefore, we have many different ways to onboard these customers, whether we help them with their licensing and a little bit of light management until they run out their platform and it has to be refreshed, then they have to come into ours. We have been taking some of the cost savings that we had last year and investing in the frontier AI platform that VMware is developing, VCF 9.

Speaker #1: They started too late, and so they're going to have to remain with VMware. But there's 60% of the market that really want to maintain being with the market leader.

Speaker #1: And so, therefore, we have many different ways to onboard these customers. Whether we help them with their licensing and a little bit of light management, until they run out their platform and it has to be refreshed—then they have to come into ours.

Speaker #1: We have been taking some of the cost savings that we had last year and investing in the Frontier AI platform that VMware is developing.

Speaker #1: VCF9—we're one of their beta entities. And if you want to be able to scale with the market leader, you're going to have to come through one of these seven Pinnacle partners.

Michelle Senecal De Fonseca: We are one of their beta entities. If you want to be able to scale with the market leader, you are going to have to come through one of these seven pinnacle partners. Today, if you had seven divided by what is available, everybody would have 12%. We already have 15% of the addressable market. Our pipeline is another 12. I am pushing the team to try to take 30% market share, and this is where we think a little bit more of the scale is going to come from the business, and that is quite critical. I am sorry. If you could flip back to the one before, Tim. Besides expanding our roots to market, our cloud modernization is where we are investing in along with our security and compliance story. The cloud modernization really is for our private sector customers.

Speaker #1: And today, if you had seven divided by what's available, everybody would have 12%. We already have 15% of the addressable market. Our pipeline is another 12%.

Speaker #1: I'm pushing the team to try to take 30% market share, and this is where we think a little bit more of the scale is going to come from the business.

Speaker #1: And that's quite critical. I'm sorry, if you could flip back to the one before, Tim. So, besides expanding our routes to market, our cloud modernization is where we're investing, along with our security and compliance story.

Speaker #1: So, the cloud modernization really is for our private sector customers. It will be the VMware AI platform, and for our private sector customers who need to be off of public clouds, we already run the largest UK sovereign cloud.

Michelle Senecal De Fonseca: It will be the VMware AI platform, and for our private sector customers who need to be off of public clouds, we already run the largest UK sovereign cloud. People like home office and police forces and stuff are utilizing it. With a bit more investment over FY27, we know that we are going to be able to expand into other areas of the defense market. These are the critical areas that we are putting our effort into moving forward. A year, but very transformative, and is allowing us to now come out into FY27 as a pure play, very focused, and with a business that has been right-sized and optimized. There is still more to play for. At the moment, we are 13% to 14% in our adjusted EBITDA.

Speaker #1: People like Home Office and police forces and stuff are utilizing it. And with a bit more investment over FY27, we know that we're going to be able to expand into other areas of the defense market.

Speaker #1: So these are the critical areas that we're putting our effort into moving forward. All right. A year, but very transformative, and it's allowing us to now come out into FY27 as a pure play, very focused, and with a business that's been right-sized and optimized.

Speaker #1: There's still more to play for. At the moment, we're, you know, at 13–14% in our adjusted EBITDA. We're intending to get that up to 20% over the next couple of years, which would be, you know, market-leading.

Michelle Senecal De Fonseca: We're intending to get that up to 20% over the next couple of years, which would be market leading, trying to get back to double-digit growth. Top line is going to take a little bit longer than we'd like, that's why we're moving the company to understanding what ARR is. Tim talked about that earlier, but that has definitely not been a motion within Redcentric, understanding, motivating, compensating people about this motion is a key one moving forward. We have a lot of efficiency gains still yet to go. Our investment in automation and AI is an ongoing process. But overall, the company's solid. It's financially set. We have a good plan in place, we've got a really motivated team.

Speaker #1: And we're trying to get back to double-digit growth. The top line is going to take a little bit longer than we'd like, and so that's why we're moving the company toward understanding what ARR is.

Speaker #1: Tim talked about that earlier, but that has definitely not been a motion within Redcentric. So, understanding how to motivate and compensate people regarding this motion is a key one moving forward.

Speaker #1: Obviously, we have a lot of efficiency gains still yet to go. Our investment in automation and AI is an ongoing process. But overall, company is solid.

Speaker #1: It's financially set. We have a good plan in place. And we've got a really motivated team. So even whatever comes out in the October budget, hopefully we're going to be here and ready to deal with the consequences moving forward.

Michelle Senecal De Fonseca: Even whatever comes out in the October budget, hopefully we're going to be here and ready to deal with the consequences moving forward. With that, I think we'll open up the lines, if you have questions, we'd be more than happy to answer them. If you don't have a question now, but it comes back, please make sure to reach out to both Tim and I. We'd be more than happy to answer them. Jake?

Speaker #1: And with that, I think we'll open up the lines. If you have questions, we'd be more than happy to answer them. If you don't have a question now but it comes to you later, please make sure to reach out to both Tim and me.

Speaker #1: We'd be more than happy to answer them. So, Jake,

Speaker #2: Absolutely, guys, if I may just jump back in there. And thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions.

Moderator: Absolutely, guys. If I may just jump back in there. Thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that's situated on the right-hand corner of your screen. Just while the company take a few moments to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can all be accessed via your investor dashboard. Guys, as you can see there, we have received a number of questions, thank you to all of those on the call for taking the time to submit their questions.

Operator: Absolutely, guys. If I may just jump back in there. Thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that's situated on the right-hand corner of your screen. Just while the company take a few moments to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can all be accessed via your investor dashboard. Guys, as you can see there, we have received a number of questions, thank you to all of those on the call for taking the time to submit their questions.

Speaker #2: You can submit questions using the Q&A tab located in the right-hand corner of your screen. While the company takes a few moments to review the questions that have already been submitted, I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can all be accessed via your investor dashboard.

Speaker #2: Guys, as you can see there, we have received a number of questions. And thank you to all of those on the call for taking the time to submit their questions.

Speaker #2: But Michelle, Tim, if I may, I'll just hand back to you to address those questions where appropriate. And if I pick up from you at the end, that would be great.

Moderator: Michelle, Tim, if I may just hand back to you to address those questions where appropriate, if I pick up from you at the end, that'd be great. Thank you.

Operator: Michelle, Tim, if I may just hand back to you to address those questions where appropriate, if I pick up from you at the end, that'd be great. Thank you.

Speaker #2: Thank you.

Speaker #3: Yeah, thanks, Jake. So the first question comes from Richard, who's asking about the Broadcom pipeline and how we might see that in a timeframe contract moving to contractor's ARR.

Tim Sykes: Thanks, Jake. The first question comes through from Richard, who is asking about the Broadcom pipeline and how we might see that in a timeframe moving to contracted ARR. I know that we have a dedicated slide on Broadcom, and there may be little more to add, but I do not know if you want to just repopulate the highlights of the Broadcom and how that might convert to ARR over the next period.

Speaker #3: Now, I know that we had a dedicated slide on Broadcom, and there may be no more to add. But I don't know if you want to just repopulate the highlights of Broadcom, and how that might convert to ARR over the next period.

Speaker #1: Well, we were already converted 15%. But I can't necessarily give you what the strip out of the ARR compared to the rest of the revenue.

Michelle Senecal De Fonseca: Well, we have already converted 15%, but I cannot necessarily give you what the strip out of the ARR compared to the rest of the revenue. I think that would be something that we will probably talk about in the interims a little bit more, because we are just now completing today, is still end of quarter. Where are our customers in that conversion process? It has been a very interesting road to hoe in that the emotion in the market is very anti-VMware when this all happens. Admittedly, I worked for Citrix before I came to Redcentric, and Tom Krause used to be the CEO over at VMware Broadcom, and then he rinsed and repeat the same thing at Citrix. I know firsthand how antagonistic is, you have built a business around a certain business model, and that gets pulled out from you.

Speaker #1: I think that would be something that we'll probably talk about in the interims a little bit more, because we're just now completing—today is still, you know, end of quarter.

Speaker #1: And where our customers are in that conversion process, it's been a very interesting road to hoe. The emotion in the market has been very anti-VMware when all this happened.

Speaker #1: And, admittedly, I worked for Citrix before I came to Redcentric. Tom Kraus used to be the CEO over at VMware, Broadcom, and then he rinsed and repeated the same thing at Citrix.

Speaker #1: I know firsthand how antagonistic it is when you've built a business around a certain business model and that gets pulled out from under you. So I have a lot of sympathy with the market players today.

Michelle Senecal De Fonseca: I have a lot of sympathy with the market players today, and it has taken them a long time to figure out what they are going to change their business models moving forward. The process, what I thought we would have landed in Q4 last year is really now being migrated to Q3 and Q4 of this year. We will see it in contracted ARR, but we are not going to see that revenue flowing through until FY28, to be fair. I think at the moment, what is important is people make decisions on where they are going to make their investments, and hopefully Redcentric will be the top of that.

Speaker #1: And it's taken them a long time to figure out how they're going to change their business models moving forward. So the process, which I thought we would have landed in Q4 last year, is really now being migrated to Q3 and Q4 of this year.

Speaker #1: So we will see it in contracted ARR, but we're not going to see that revenue flowing through until FY28, to be fair. But I think at the moment, what's important is people make decisions on where they're going to make their investments, and hopefully Redcentric will be at the top of that.

Speaker #3: Fantastic. Thanks, Michelle. And Richard, I'll ask a question around sustainable EBITDA margin. Now, I know you did touch on that and mentioned it on a like-for-like basis. Maybe I can pick this one up, on a like-for-like basis, we're presenting the results this time around.

Tim Sykes: Fantastic. Thanks, Michelle. Richard also asked a question around sustainable EBITDA margin. I know you did touch on that and mentioned that on a like-for-like basis with the, and maybe I can pick this one up. On a like-for-like basis, we are presenting the results this time around. We have a midterm expectation of achieving 20% EBITDA margin, so there has a lot of savings have already been made. The business process automation opportunity that I have come into is very, very high. The tech stack in behind the systems that we provide is also heavy still, and there is still rationalizations within that. There is lots of opportunity inside of the business to achieve much stronger margins than we have been able to, certainly report in 2026, and beyond what we are expecting to see in 2027.

Speaker #3: We have a midterm expectation of achieving a 20% EBITDA margin. So, there have been a lot of savings already made. But the business process automation opportunity that I've come into is very, very high.

Speaker #3: The tech stack behind the systems that we provide is still heavy, and there's still rationalization—we're doing that. So, there's lots of opportunity inside the business to achieve much stronger margins than we've been able to.

Speaker #3: Certain reports in '26, and beyond, what we're expecting to see in '27.

Speaker #1: I think we could also add to that other areas for optimization, such as our Transition Service Agreement with the company who bought our data centers. We're still having to run that out until the end of April next year.

Michelle Senecal De Fonseca: I think we could also add to that other areas that for optimization is that our transition service agreement with the company who bought our data centers, we are still having to run that out until the end of April next year. Therefore, we are not able to take out additional cost as you have people who are bifurcated still in two different camps. As well as we have a team in Hyderabad, India, which we have not maximized to its greatest advantage. We have got great talent down there. But now that we have changed the business, as I should indicate, when I inherited the company, it was tower-based, so product towers, and that probably made sense 5 years ago when maybe the cloud services were not as developed, and you needed to have more specializations.

Speaker #1: And therefore, we're not able to take out additional cost as you have people who are bifurcated, still in two different camps. As well, we have a team in Hyderabad, India, which we haven't maximized to its greatest advantage.

Speaker #1: We've got great talent down there. But now that we have changed the business, as I should indicate, when I inherited the company, it was tower-based.

Speaker #1: So, product towers. And that probably made sense five years ago, when maybe the cloud services were not as developed, and you needed to have more specialization.

Speaker #1: But now that we're at parity with connectivity, you don't need two delivery teams to product development teams. And so, in the first half of this year, we've shifted the operating model of the company to being functionally oriented.

Michelle Senecal De Fonseca: But now that we are at parity with connectivity, you do not need two delivery teams, two product development teams. In the first half of this year, we have shifted the operating model of the company to being functionally oriented. As such, we also then need to reevaluate within those functions which ones can live more effectively in India. So that should also give us another bucket to go after to get to our targets.

Speaker #1: And as such, we also then need to reevaluate within those functions which ones can live more effectively in India. So that should also give us another bucket to go after to get to our targets.

Speaker #3: Fantastic. And then, would you need to ask—and is it something that we haven't mentioned specifically in the discussion so far—around the strength and balance sheet?

Tim Sykes: Fantastic. Rajiva asks, and it is something that we have not mentioned specifically in the discussion so far, is around would a strengthened balance sheet. This compared with a threshold for returning capital to shareholders. So if I cover the latter point first, and then maybe Michelle Senecal De Fonseca will talk about M&A in a bit more detail. We see a clear line of sight now on revenue growth and ARR growth coming through. We see the opportunity for improving EBITDA margins and cash margins and free cash flow coming through. We have reported in the RNS that we will reinstate the dividend policy, which will start against the FY27 year-end. So we will do an interim dividend declared against the H1 of 2027's result, probably payable in calendar year Q1 of calendar 2027.

Speaker #3: This is compared with a threshold for return to capital shareholders. So, if I cover the latter point first, and then maybe Michelle can talk about M&A in a bit more detail.

Speaker #3: So, I mean, we see a clear line of sight now on revenue growth and ARR growth coming through. We see the opportunity for improving EBITDA margins, cash margins, and free cash flow coming through.

Speaker #3: We have reported in the RNS that we will reinstate the dividend policy, which will start against the FY27 year-end. So we'll do an interim dividend declared against the first half of 2027's results, probably payable in calendar year quarter one of 2027.

Speaker #3: And then six monthly thereafter, with opportunistic share buybacks mirroring what we've done over the last month and a half or so. So we're committed to returning capital, or continuing to return capital to shareholders.

Tim Sykes: Then six-monthly thereafterwards with opportunistic share buybacks mirroring what we have done over the last month and a half or so. So we are committed to returning capital or continuing returning capital to shareholders. But there is still firepower if we require it for M&A, but I will leave that to Michelle Senecal De Fonseca to comment on.

Speaker #3: But there is still firepower if we're requiring it for M&A. But I'll leave that to Michelle for once.

Speaker #1: Well, I promised my board no M&A in FY27, because really, we need to have stronger foundations so that if you did M&A in the future, you have something appropriate to lay it on top of.

Michelle Senecal De Fonseca: Well, I promised my board no M&A in FY27, because really we need to have stronger foundations so that if you did M&A in the future, you have something appropriate to lay it on top of. We are having to sort of clean up from the previous buying sprees over the last few years. But in reality, I think organic growth at the moment is the important thing to be driving, and then opportunistically, we might be able to pick up something. But we need to be very specific about where are the gaps. Is it a technology piece that we need, or is it a customer set or whatnot? But at the moment, I am not seeing that. Our portfolio has what we need at the moment. We just need to do better in scaling it.

Speaker #1: And we're having to sort of clean up from the previous buying sprees over the last few years. But in reality, I think organic growth, at the moment, is the important thing to be driving.

Speaker #1: And then, opportunistically, we might be able to pick up something, but we need to be very specific about where the gaps are. Is it a technology piece that we need?

Speaker #1: Or is it a customer set, or whatnot? But at the moment, I'm not seeing that. Our portfolio has what we need at the moment.

Speaker #1: We just need to do better in scaling it. But you have to leave the opportunity, and Tim's done a great job of giving us enough firepower that we can manage that post this year.

Michelle Senecal De Fonseca: But you have to leave the opportunity, and Tim's done a great job of giving us enough firepower that we can manage that post this year.

Speaker #3: Okay, thank you. So I think that's all of the questions that we've received. We have had a very nice comment from Tony, who was on the line.

Tim Sykes: Okay. Thank you. I think that is all of the questions that we have received. But we have had a very nice comment from Tony, who is on the line. Thank you for that, Tony. So yeah, I think that that then ends the questions that we have posted up so far.

Speaker #3: Thank you for that, Tony. So, yeah, I think that then ends the questions that we have posted so far.

Speaker #2: Perfect, guys. If I may just jump back in there, thank you very much indeed for addressing all of those questions. And, of course, if there are any further questions that do come through, we'll make these available to you afterwards.

Moderator: Perfect, guys. If I may just jump back in there. Thank you very much indeed for addressing all of those questions. And of course, if there are any further questions that do come through, we will make these available to you afterwards, just for you to review to then add any additional responses where appropriate. But Michelle, perhaps before we leave now, just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company.

Operator: Perfect, guys. If I may just jump back in there. Thank you very much indeed for addressing all of those questions. And of course, if there are any further questions that do come through, we will make these available to you afterwards, just for you to review to then add any additional responses where appropriate. But Michelle, perhaps before we leave now, just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company.

Speaker #2: Just for you to review and then add any additional responses where appropriate. But Michelle, perhaps before really now, I'm just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to you and the company.

Speaker #2: If I could, please, just ask you for a few closing comments to wrap up with, that'd be great.

Michelle Senecal De Fonseca: Thank you.

Moderator: If I could please just ask you for a few closing comments just to wrap up with, that would be great.

Operator: If I could please just ask you for a few closing comments just to wrap up with, that would be great.

Speaker #1: Thanks, Jake. Overall, just thank you for taking the time today to listen to Tim and me. We know it's a very busy day, with 17 companies—we're all doing this.

Michelle Senecal De Fonseca: Well, overall, just thank you for taking the time today to listen to Tim and I. We know it is a very busy day, and with 17 companies all doing this, that you took the time to listen to Redcentric, it is great. I hope that you are going to be a bit more excited about our focus, the momentum that we are building, the financial strength that is behind us, and a very targeted way of how we want to deliver more value to our shareholders, both in the short term with dividends and in the long term with an increased, robust business. If you would ever want to discuss anything deeper with the business, Tim and I are always here for you and really appreciate you taking the time with us today.

Speaker #1: So, thank you for taking the time to listen to Redcentric. It's great, and I hope you'll be a bit more excited about our focus.

Speaker #1: The momentum that we're building, the financial strength behind us, and a very targeted approach to how we want to deliver more value to our shareholders.

Speaker #1: Both in the short term with dividends, and in the long term with an increasingly robust business. So if you would ever want to discuss anything deeper with the business, Tim and I are always here for you.

Speaker #1: And I really appreciate you taking the time with us today.

Speaker #2: That's great. Michelle, Tim, thank you once again for updating investors this morning. Could I please ask investors not to close this session, as you'll now be automatically redirected for the opportunity to provide your feedback, which will help the management team better understand your views and expectations.

Moderator: That is great. Michelle, Tim, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback, which will help the management team better understand your views and expectations. This will only take a few moments to complete, but I am sure it will be greatly valued by the company.

Operator: That is great. Michelle, Tim, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback, which will help the management team better understand your views and expectations. This will only take a few moments to complete, but I am sure it will be greatly valued by the company.

Speaker #2: This won't take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of.

Michelle Senecal De Fonseca: Thank you.

Moderator: On behalf of the management team of

Operator: On behalf of the management team of

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Q4 2026 Redcentric PLC Earnings Call

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